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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant as specified in its charter)
| Maryland | 23-2715194 | |
| (State of incorporation) | (I.R.S. employer identification no.) |
1311 Mamaroneck Avenue, Suite 260
White Plains, NY 10605
(Address of principal executive offices)
(914) 288-8100
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.001 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
YES þ NO o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15 (d) of the Securities Act.
YES o NO þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
YES þ NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller Reporting Company o |
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
YES o NO þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the
registrant as of the last business day of the registrant’s most recently completed second fiscal
quarter was $835.8 million, based on a price of $25.98 per share, the average sales price for the
registrant’s shares of beneficial interest on the New York Stock Exchange on that date.
The number of shares of the registrant’s Common Shares of Beneficial Interest outstanding on
February 29, 2008 was 32,184,462.
DOCUMENTS INCORPORATED BY REFERENCE
Part III – Portions of the registrant’s definitive proxy statement relating to its 2008 Annual
Meeting of Shareholders presently scheduled to be held May 14, 2008 to be filed pursuant to
Regulation 14A.
TABLE OF CONTENTS
Form 10-K Report
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or achievements to be materially
different from future results, performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements, which are based on certain assumptions and
describe our future plans, strategies and expectations are generally identifiable by use of the
words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project”
or the negative thereof or other variations thereon or comparable terminology. Factors which could
have a material adverse effect on our operations and future prospects include, but are not limited
to those set forth under the heading “Item 1A. Risk Factors” in this Form 10-K. These risks and
uncertainties should be considered in evaluating any forward-looking statements contained or
incorporated by reference herein.
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PART I
ITEM 1. BUSINESS
GENERAL
Acadia Realty Trust (the “Trust”) was formed on March 4, 1993 as a Maryland real estate investment
trust (“REIT”). All references to “Acadia,” “we,” “us,” ”our,” and “Company” refer to Acadia Realty
Trust and its consolidated subsidiaries. We are a fully integrated, self-managed and
self-administered equity REIT focused primarily on the ownership, acquisition, redevelopment and
management of retail properties, including neighborhood and community shopping centers and
mixed-use properties with retail components. We currently operate 76 properties, which we own or
have an ownership interest in. These assets are located primarily in the Northeast, Mid-Atlantic
and Midwestern regions of the United States, which, in total, comprise approximately eight million
square feet. We also have private equity investments in other retail real estate related
opportunities including investments for which we provide operational support to the operating
ventures in which we have a minority equity interest.
All of our investments are held by, and all of our operations are conducted through, Acadia Realty
Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership
owns a controlling interest. As of December 31, 2007, the Trust controlled 98% of the Operating
Partnership as the sole general partner. As the general partner, the Trust is entitled to share, in
proportion to its percentage interest, in the cash distributions and profits and losses of the
Operating Partnership. The limited partners represent entities or individuals, which contributed
their interests in certain properties or entities to the Operating Partnership in exchange for
common or preferred units of limited partnership interest (“Common OP Units” or “Preferred OP
Units”). Limited partners holding Common OP Units are generally entitled to exchange their units on
a one-for-one basis for our common shares of beneficial interest (“Common Shares”). This structure
is referred to as an umbrella partnership REIT or “UPREIT”.
BUSINESS OBJECTIVES AND STRATEGIES
Our primary business objective is to acquire, develop and manage commercial retail properties that
will provide cash for distributions to shareholders while also creating the potential for capital
appreciation to enhance investor returns. We focus on the following fundamentals to achieve this
objective:
| – | Own and operate a portfolio of community and neighborhood shopping centers and mixed-use properties with a retail component located in markets with strong demographics | ||
| – | Generate internal growth within the portfolio through aggressive redevelopment, re-anchoring and leasing activities | ||
| – | Generate external growth through an opportunistic yet disciplined acquisition program. The emphasis is on targeting transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions | ||
| – | Partner with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets | ||
| – | Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth |
Investment Strategy — External Growth through Opportunistic Acquisition Platforms
The requirements that acquisitions be accretive on a long-term basis based on our cost of capital,
as well as increase the overall portfolio quality and value, are core to our acquisition program.
As such, we constantly evaluate the blended cost of equity and debt and adjust the amount of
acquisition activity to align the level of investment activity with capital flows. We may also
engage in discussions with public and private entities regarding business combinations. In addition
to our direct investments in real estate assets, we have also capitalized on our expertise in the
acquisition, redevelopment, leasing and management of retail real estate by establishing
discretionary opportunity fund joint ventures in which we earn, in addition to a return on our
equity interest and carried interest (“Promote”), fees and priority distributions for our services.
To date, we have launched three discretionary opportunity fund joint ventures, Acadia Strategic
Opportunity Fund, LP (“Fund I”), Acadia Strategic Opportunity Fund II, LLC (“Fund II”) and Acadia
Strategic Opportunity Fund III, LLC (“Fund III”). Due to our control, we consolidate these funds.
Fund I
During September of 2001, we and four of our institutional shareholders formed a joint venture,
Fund I, and during August of 2004 formed a limited liability company, Acadia Mervyn Investors I,
LLC (“Mervyns I”), whereby the investors committed $70.0 million for the purpose of acquiring real
estate assets. The Operating Partnership committed an additional $20.0 million in the aggregate to
Fund I and Mervyns I, as the general partner with a 22% interest. In addition to a pro-rata return
on its invested equity, the Operating Partnership is entitled to a Promote based upon certain
investment return thresholds. Cash flow is distributed pro-rata to the partners (including the
Operating Partnership) until they have received a 9% cumulative return (“Preferred Return”) on, and
a return of all capital contributions.
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Thereafter, remaining cash flow is distributed 80% to the partners (including the Operating
Partnership) and 20% to the Operating Partnership as a Promote. The Operating Partnership also
earns fees and/or priority distributions for asset management services equal to 1.5% of the
allocated invested equity, as well as for property management, leasing and construction services.
All such fees and priority distributions are reflected as a reduction
in the minority interest share in income from opportunity funds in
the Consolidated Financial Statements beginning on page F-1 of this Form 10-K.
Our acquisition program was executed primarily through Fund I through June 2004. Fund I focused on
targeting assets for acquisition that had superior in-fill locations, restricted competition due to
high barriers of entry and in-place below-market anchor leases with the potential to create
significant additional value through re-tenanting, timely capital improvements and property
redevelopment.
On January 4, 2006, Fund I recapitalized a one million square foot retail portfolio located in
Wilmington Delaware (“Brandywine Portfolio”) through a merger of interests with affiliates of GDC
Properties (“GDC”). The Brandywine Portfolio was recapitalized through a “cash-out” merger of the
77.8% interest, which was previously held by the institutional investors in Fund I, to GDC at a
valuation of $164.0 million. The Operating Partnership, through a subsidiary, retained its existing
22.2% interest and continues to operate the Brandywine Portfolio and earn fees for such services.
At the closing of the merger, the Fund I investors received a return of all of their capital
invested in Fund I and their unpaid preferred return, thus triggering the payment to the Operating
Partnership of its additional 20% Promote in all future Fund I distributions. During June 2006, the
Fund I investors received $36.0 million of additional proceeds from this transaction following the
replacement of bridge financing which they provided, with permanent mortgage financing, triggering
$7.2 million in additional Promote due the Operating Partnership, which was paid from the Fund I
investor’s share of the remaining assets in Fund I.
As of December 31, 2007, there were 29 assets comprising approximately 1.5 million square feet
remaining in Fund I in which the Operating Partnership’s interest in cash flow and income has
increased from 22.2% to 37.8% as a result of the Promote.
Fund II
Following our success with Fund I, during June of 2004 we formed a second, larger acquisition joint
venture, Fund II, and during August of 2004, formed Acadia Mervyn Investors II, LLC (“Mervyns II”),
with the investors from Fund I as well as two additional institutional investors. With
$300.0 million of committed discretionary capital, Fund II and Mervyns II, combined, expect to be
able to acquire up to $900.0 million of real estate assets on a leveraged basis. The Operating
Partnership is the managing member with a 20% interest in Fund II and Mervyns II. The terms and
structure of Fund II and Mervyns II are substantially the same as Fund I and Mervyns I with the
exception that the Preferred Return is 8%. As of December 31,
2007, $182.0 million of Fund II’s
capital was invested and the balance of $118.0 million was committed to existing investments.
As the demand for retail real estate has significantly increased in recent years, there has been a
commensurate increase in selling prices. In an effort to generate superior risk-adjusted returns
for our shareholders and fund investors, we have channeled our acquisition efforts through
Fund II in two opportunistic strategies described below – the Retailer Controlled Property Venture
and the New York Urban Infill Redevelopment Initiative.
Retailer Controlled Property Venture (the “RCP Venture”)
On January 27, 2004, through Funds I and II, we entered into the RCP Venture with Klaff Realty,
L.P. (“Klaff”) and Lubert-Adler Management, Inc. (“Lubert-Adler”) for the purpose of making
investments in surplus or underutilized properties owned by retailers. The expected size of the RCP
Venture is approximately $300 million in equity, of which our share is $60 million, based on
anticipated investments of approximately $1 billion. Each participant in the RCP Venture has the
right to opt out of any potential investment. Affiliates of Mervyns I and II and Fund II have
invested $55.4 million in the RCP Venture to date on a non-recourse basis. While we are not
required to invest any additional capital into any of these investments, should additional capital
be required and we elect not to contribute our share, our proportionate share in the investment
will be reduced. As Fund I is fully invested, Fund II and Fund III will provide the remaining
portion of our original share of the equity in future RCP Venture
investments. Cash flow from any RCP investment is to be distributed to
the partners until they have received a 10% cumulative return and a full return of all
contributions. Thereafter, remaining cash flow is to be distributed 20% to Klaff (“Klaff’s
Promote”) and 80% to the participants (including Klaff). The Operating Partnership may also earn
market-rate fees for property management, leasing and construction services on behalf of the RCP
Venture. While we are primarily a passive partner in the investments made through the RCP Venture,
historically we have provided our support on reviewing potential acquisitions and operating and
redevelopment assistance in areas where we have both a presence and expertise. We seek to invest
opportunistically with the RCP Venture primarily in the following four ways:
| – | Invest in operating retailers through private equity joint ventures | ||
| – | Work with financially healthy retailers to create value from their surplus real estate | ||
| – | Acquire properties, designation rights or other control of real estate or leases associated with retailers in bankruptcy | ||
| – | Complete sale leasebacks with retailers in need of capital |
During 2004, we made our first RCP Venture investment with our participation in the acquisition of
Mervyns. During 2006 and 2007, we made additional investments as further discussed in “—PROPERTY
ACQUISITIONS” below.
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New York Urban/Infill Redevelopment Initiative
During September of 2004, through Fund II, we launched our New York Urban Infill Redevelopment
initiative. As retailers continue to recognize that many of the nation’s urban markets are
underserved from a retail standpoint, we are poised to capitalize on this trend by investing in
redevelopment projects in dense urban areas where retail tenant demand has effectively surpassed
the supply of available sites. During 2004, Fund II, together with an unaffiliated partner, P/A
Associates, LLC (“P/A”), formed Acadia-P/A Holding Company, LLC (“Acadia-P/A”) for the purpose of
acquiring, constructing, developing, owning, operating, leasing and managing certain retail or
mixed-use real estate properties in the New York City metropolitan area. P/A agreed to invest 10%
of required capital up to a maximum of $2.2 million and Fund II, the managing member, agreed to
invest the balance to acquire assets in which Acadia-P/A agrees to invest. See Item 7 of this
Form 10K for further information on the Acadia P/A Joint Venture as detailed in “Liquidity and
Capital Resources”. To date, Fund II has invested in nine projects, eight of which are in
conjunction with P/A, as discussed further in “—PROPERTY ACQUISITIONS” below.
Fund III
Following the success of Fund I and the full investment of Fund II, we formed a third discretionary
opportunity fund, Acadia Strategic Opportunity Fund III, LLC (“Fund III”) during 2007, with
fourteen institutional investors, including a majority of the investors from Fund I and Fund II.
With $503.0 million of committed discretionary capital, Fund III expects to be able to acquire or
develop approximately $1.5 billion of assets on a leveraged basis. The Operating Partnership’s
share of the committed capital is $100.0 million and it is the sole managing member with a 19.9%
interest in Fund III. The terms and structure of Fund III are substantially the same as the
previous Funds, including the Promote structure, with the exception that the Preferred Return is
6%. To date, Fund III has invested in two projects, one of which is under our New York Urban Infill
Redevelopment Program, as discussed further in “PROPERTY ACQUISITIONS” in this Item 1 of this Form
10-K.
Other Investments
We may also invest in preferred equity investments, mortgage loans, other real estate interests and
other investments. The mortgage loans in which we invest may be either first or second mortgages,
where we believe the underlying value of the real estate collateral is in excess of its loan
balance. As of December 31, 2007 our investments in first mortgages and mezzanine debt aggregated
$57.7 million.
Capital Strategy — Balance Sheet Focus and Access to Capital
Our primary capital objective is to maintain a strong and flexible balance sheet through
conservative financial practices while ensuring access to sufficient capital to fund future growth.
We intend to continue financing acquisitions and property redevelopment with sources of capital
determined by management to be the most appropriate based on, among other factors, availability,
pricing and other commercial and financial terms. The sources of capital may include the issuance
of public equity, unsecured debt, mortgage and construction loans, and other capital alternatives
including the issuance of Operating Partnership Units. We manage our interest rate risk primarily
through the use of fixed rate-debt and, where we use variable rate debt, we use certain derivative
instruments, including LIBOR swap agreements and interest rate caps as discussed further in Item 7A
of this Form 10-K.
During December of 2006 and January of 2007, we issued $115.0 million of 3.75% unsecured
Convertible Notes (the “Notes”). Interest on the Notes is payable semi-annually. The Notes have an
initial conversion rate of 32.4002 of our Common Shares for each $1,000 principal amount,
representing a conversion price of approximately $30.86 per Common Share, or a conversion premium
of approximately 20.0% based upon our Common Share price on the date of the issuance of the Notes.
The Notes are redeemable for cash up to their principal amount plus accrued interest and, at our
option, cash, our Common Shares, or a combination thereof with respect to the remainder, if any, of
the conversion value in excess of the principal amount. The Notes mature December 15, 2026,
although the holders of the Notes may require the Company to repurchase their Notes, in whole or in
part, on December 20, 2011, December 15, 2016, and December 15, 2021. After December 20, 2011, we
have the right to redeem the Notes in whole or in part at any time. The $112.1 million in proceeds,
net of related costs, were used to retire variable rate debt, provide for future Fund capital
commitments and for general working capital purposes.
During January 2007, we filed a shelf registration on Form S-3 providing for offerings of up to a
total of $300.0 million of Common Shares, Preferred Shares and debt securities. To date, we have
not issued any securities pursuant to this shelf registration.
Common and Preferred OP Unit Transactions
On January 27, 2004, we issued 4,000 Series B Preferred OP Units to Klaff in connection with the
acquisition from Klaff of its rights to provide asset management, leasing, disposition, development
and construction services for an existing portfolio of retail properties. These units have a stated
value of $1,000 each and are entitled to a quarterly preferred distribution of the greater of (i)
$13.00 (5.2% annually) per Preferred OP Unit or (ii) the quarterly distribution attributable to a
Preferred OP Unit if such unit were converted into a Common OP Unit. The Preferred OP Units are
convertible into Common OP Units based on the stated value of $1,000 divided by 12.82 at any time.
Klaff may redeem them at par for either cash or Common OP Units (at our option). In 2007, Klaff
converted all 4,000 Series B Preferred OP Units into 312,013 Common OP Units and ultimately into
Common Shares.
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Effective February 15, 2005, we acquired the balance of Klaff’s rights to provide the above
services as well as certain potential future revenue streams. The consideration for this
acquisition was $4.0 million in the form of 250,000 restricted Common OP Units, valued at $16 per
unit, which are convertible into our Common Shares on a one-for-one basis after a five-year lock-up
period. As part of this transaction we also assumed all operational and redevelopment
responsibility for the Klaff Properties a year earlier than was contemplated in the January 2004
transaction.
Operating Strategy — Experienced Management Team with Proven Track Record
Our senior management team has decades of experience in the real estate industry. We believe our
management team has demonstrated the ability to create value internally through anchor recycling,
property redevelopment and strategic non-core dispositions. Our team has built several successful
acquisition platforms including our New York Urban Infill Redevelopment Initiative and RCP Venture.
We have also capitalized on our expertise in the acquisition, redevelopment, leasing and management
of retail real estate by establishing joint ventures, such as Funds I, II and III, in which we
earn, in addition to a return on our equity interest and Promote, fees and priority distributions.
Operating functions such as leasing, property management, construction, finance and legal
(collectively, the “Operating Departments”) are provided by our personnel, providing for fully
integrated property management and development. By incorporating the Operating Departments in the
acquisition process, acquisitions are appropriately priced giving effect to each asset’s specific
risks and returns. Also, because of the Operating Departments involvement with, and corresponding
understanding of, the acquisition process, transition time is minimized and management can
immediately execute on its strategic plan for each asset.
We typically hold our core properties for long-term investment. As such, we continuously review the
existing portfolio and implement programs to renovate and modernize targeted centers to enhance the
property’s market position. This in turn strengthens the competitive position of the leasing
program to attract and retain quality tenants, increasing cash flow and consequently property
value. We also periodically identify certain properties for disposition and redeploy the capital to
existing centers or acquisitions with greater potential for capital appreciation. Our core
portfolio consists primarily of neighborhood and community shopping centers, which are generally
dominant centers in high barrier-to-entry markets. The anchors at these centers typically pay
market or below-market rents. Furthermore, supermarket and necessity-based retailers anchor the
majority of our core portfolio. These attributes enable our properties to better withstand a
weakening economy while also creating opportunities to increase rental income.
During 2007, 2006 and 2005 we sold seven non-core properties and redeployed the capital to acquire
seven retail properties as further discussed in “—ASSET SALES AND CAPITAL/ASSET RECYCLING” below.
PROPERTY ACQUISITIONS
RCP Venture
Albertson’s
In June 2006, the RCP Venture made its second major investment with its participation in the
acquisition of 699 stores from Albertson’s, the nation’s 2nd largest grocery and drug
chain and 26 Cub Food stores. The total price paid by the investment consortium, which included
Cerberus, Schottenstein and Kimco Realty, to Albertson’s for the portfolio was $1.9 billion, which
was funded with $0.3 billion of equity and $1.6 billion of financing. Mervyns II’s share of equity
invested totaled $20.7 million. The Operating Partnership’s share was $4.2 million. As with the
Mervyns investment (see below), we anticipate investing in Albertsons add-on real estate
opportunities.
During February of 2007, Mervyns II received cash distributions totaling approximately
$44.4 million from its ownership position in Albertsons. The Operating Partnership’s share of this
distribution amounted to approximately $8.9 million. The distributions primarily resulted from
proceeds received by Albertsons in connection with its disposition of certain stores, refinancing
of the remaining assets held in the entity and excess cash from operations. Mervyns II received
additional distributions from this investment totaling $8.8 million during the balance of the year
ended December 31, 2007. The Operating Partnership’s share of these distributions was $1.0 million.
For the years ended December 31, 2007 and 2006, Mervyns II made additional add-on investments in
Albertson’s totaling $2.8 million and received distributions totaling $0.8 million in the aggregate
from these add-on investments. The Operating Partnership’s share of such amounts was $0.4 million
and $0.1 million, respectively.
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Mervyns Department Stores
In September 2004, we made our first RCP Venture investment with our participation in the
acquisition of Mervyns. Through Mervyns I and Mervyns II, we invested in the acquisition of
Mervyns as part of an investment consortium of Sun Capital and Cerberus that acquired Mervyns
from Target Corporation. As of the date of acquisition, Mervyns was a 257-store discount retailer
with a very strong West Coast concentration. The total acquisition price was approximately
$1.2 billion which was financed with $800 million of debt and $400 million of equity. Mervyns I and
Mervyns II share of equity invested aggregated $23.9 million on a non-recourse basis and was
divided equally between them. The Operating Partnership’s share was $4.9 million. During November
2007, Mervyns II made an additional investment of $2.2 million in Mervyns.
For the year ended December 31, 2005, Mervyns I and Mervyns II made add-on investments in Mervyns
properties totaling $1.3 million. The Operating Partnerships share of this amount was $0.3 million.
During 2005, Mervyns made a distribution to the investors from the proceeds from the sale of a
portion of the portfolio and the refinancing of existing debt, of which a total of $42.7 million
was distributed to Mervyns I and Mervyns II. The Operating Partnership’s share of this distribution
amounted to $10.2 million. In addition, during 2006, Mervyns distributed additional cash totaling
$4.6 million. The Operating Partnership’s share of this distribution totaled $1.4 million.
Other Investments
During 2006, Fund II invested $1.1 million in Shopko, a regional multi-department retailer with 358
stores located throughout the Midwest, Mountain and Pacific Northwest and $0.7 million in Marsh, a
regional supermarket chain operating 271 stores in central Indiana, Illinois and western Ohio. The
Operating Partnership’s share of these investments totaled $0.2 million. For the year ended
December 31, 2007, Fund II received a $1.1 million distribution from the Shopko investment, of
which the Operating Partnership’s share was $0.2 million.
During July 2007, Mervyns II invested $2.7 million in REX Stores Corporation which is comprised of
electronic retail stores located in 27 states. The Operating Partnership’s share was $0.5 million.
The following table summarizes the RCP Venture investments from inception through December 31,
2007:
| Operating Partnership Share | ||||||||||||||||||||
| (dollars in millions) | Year | Invested | Invested | |||||||||||||||||
| Investor | Investment | acquired | capital | Distributions | capital | Distributions | ||||||||||||||
Mervyns I and Mervyns II |
Mervyns | 2004 | $ | 26.1 | $ | 46.0 | $ | 4.9 | $ | 11.3 | ||||||||||
Mervyns I and Mervyns II |
Mervyns add-on investments | 2005 | 1.3 | 1.3 | 0.3 | 0.3 | ||||||||||||||
Mervyns II |
Albertson’s | 2006 | 20.7 | 53.2 | 4.2 | 9.8 | ||||||||||||||
Mervyns II |
Albertson’s add-on investments | 2006/2007 | 2.8 | 0.8 | 0.4 | 0.1 | ||||||||||||||
Fund II |
Shopko | 2006 | 1.1 | 1.1 | 0.2 | 0.2 | ||||||||||||||
Fund II |
Marsh | 2006 | 0.7 | ¾ | 0.1 | ¾ | ||||||||||||||
Mervyns II |
Rex | 2007 | 2.7 | ¾ | 0.5 | ¾ | ||||||||||||||
Total |
$ | 55.4 | $ | 102.4 | $ | 10.6 | $ | 21.7 | ||||||||||||
New York Urban/Infill Redevelopment Initiative
Sheepshead Bay - During November of 2007, Fund III acquired a property in Sheepshead Bay,
Brooklyn for approximately $20.0 million. Our redevelopment plan includes the demolition of the
existing structures and the construction of a 240,000 square foot shopping center on the site. The
total cost of the redevelopment, including acquisition costs, is expected to be approximately
$109.0 million.
Canarsie — During October of 2007, Acadia P/A acquired a 530,000 square foot warehouse
building in Canarsie, Brooklyn for approximately $21.0 million. The development plan for this
property includes the demolition of a portion of the warehouse and the construction of a 320,000
square foot mixed-use project consisting of retail, office, cold-storage and self-storage. The
total cost of the redevelopment, including acquisition costs, is expected to be approximately
$70.0 million.
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CityPoint – During February of 2007, Acadia-P/A entered into an agreement for the purchase
of the leasehold interest in The Gallery at Fulton Street in downtown Brooklyn. The fee position in
the property is owned by the City of New York and the agreement includes an option to purchase this
fee position at a later date. Acadia P/A has partnered with MacFarlane Partners (“MacFarlane”) to
co-develop the project. On June 13, 2007, Acadia P/A and MacFarlane acquired the leasehold interest
for approximately $115.0 million. Redevelopment plans for the property, renamed as CityPoint,
include the demolition of the existing structure and the development of a 1.6 million square foot
mixed-use complex. The proposed development calls for the construction of a combination of retail,
office and residential components, all of which are currently allowed as of right. Acadia P/A,
together with MacFarlane, will develop and operate the retail component, which is anticipated to
total 475,000 square feet of retail space. Acadia P/A will also participate in the development of
the office component with MacFarlane, which is expected to include at least 125,000 square feet of
office space. MacFarlane plans to develop and operate up to 1,000 residential units with
underground parking. Acadia P/A does not plan on participating in the development of, or have an
ownership interest in, the residential component of the project.
Atlantic Avenue – During May 2007, we, through Fund II and in partnership with a
self-storage partner at several of the other New York urban projects, acquired a property on
Atlantic Avenue in Brooklyn, New York for $5.0 million. Redevelopment plans for the property call
for the demolition of the existing structure and the construction of a modern climate controlled
self-storage facility consisting of approximately 110,000 square feet.
Liberty Avenue — On December 20, 2005, Acadia-P/A acquired the remaining 40-year term of a
leasehold interest in land located at Liberty Avenue and 98th Street in Queens (Ozone
Park). Development of this project is complete and includes approximately 30,000 square feet of
retail anchored by a CVS drug store, which is open and operating. The project also includes a
95,000 square foot self-storage facility, which is open and currently operated by Storage Post.
Storage Post is a partner in the self-storage complex, and is anticipated to be a partner in future
retail projects in New York City where self-storage will be a potential component of the
redevelopment. The total cost to Acadia P/A of the redevelopment was approximately $15 million.
216th Street — On December 1, 2005, Acadia-P/A acquired a 65,000 square foot
parking garage located at 10th Avenue and 216th Street in the Inwood section
of Manhattan for $7.0 million. During 2007, construction of the 60,000 square foot office building
was completed and we relocated an agency of the City of New York, which was a tenant at another of
our Urban/Infill Redevelopment projects. Inclusive of acquisition costs, total costs to Acadia P/A
for the project, which also includes a 100-space rooftop parking deck, was approximately $27
million.
161st Street — On August 5, 2005, Acadia-P/A purchased 244-268 161st
Street located in the Bronx for $49.3 million, inclusive of closing costs. The ultimate
redevelopment plan for the property, a 100% occupied, 10-story office building, is to reconfigure
the property so that approximately 50% of the income from the building will eventually be derived
from retail tenants. Additional redevelopment costs to Acadia P/A are anticipated to be
approximately $16 million.
4650 Broadway — On April 6, 2005, Acadia-P/A acquired 4650 Broadway located in the
Washington Heights/Inwood section of Manhattan. The property, a 140,000 square foot building, which
was occupied by an agency of the City of New York and a commercial parking garage, was acquired for
a purchase price of $25.0 million. During 2007 we relocated the office tenant to Acadia P/A’s
216th St. redevelopment as discussed above. We are currently reviewing various
alternatives to redevelop the site to include retail and office components totaling over 216,000
square feet. Expected costs for Acadia P/A to complete the redevelopment are estimated at
$30.0 million.
Pelham Manor — On October 1, 2004, Acadia-P/A entered into a 95-year, inclusive of
extension options, ground lease to redevelop a 16-acre site in Pelham Manor, Westchester County,
New York. We have demolished the existing industrial and warehouse buildings, and are constructing
a multi-anchor community retail center at a total estimated cost of $45.0 million.
Fordham Road — On September 29, 2004, Acadia-P/A purchased 400 East Fordham Road, Bronx,
New York. Sears, a former tenant that operated on four levels at this property, has signed a new
lease to occupy only the concourse level after redevelopment. We have commenced redevelopment at
this site, which is expected to include four levels of retail and office space totaling 285,000
square feet when completed. The total cost of the project to Acadia P/A, including the acquisition
cost of $30 million, is expected to be $120.0 million.
Other investments
In addition to the New York Urban/Infill projects discussed above, through Fund II and Fund III, we
also acquired the following:
During November 2007, Fund III acquired 125 Main Street, Westport, Connecticut for approximately
$17.0 million. Our plan is to redevelop the existing building into 30,000 square feet of retail,
office and residential use.
During November 2005, Fund II acquired a ground lease interest in a 112,000 square foot building
occupied by Neiman Marcus. The property is located at Oakbrook Center, a super-regional Class A
mall located in the Chicago Metro area. The ground lease was acquired for $6.9 million, including
closing and other acquisition costs.
During July 2005, Fund II acquired for $1.0 million, a 50% equity interest in an entity which has a
leasehold interest in a former Levitz Furniture store located in Rockville, Maryland.
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Fund I
To date, through Fund I we have purchased a total of 35 assets totaling approximately 3.0 million
square feet. During January 2006, we recapitalized the Brandywine Portfolio as discussed further in
“—BUSINESS OBJECTIVES AND STRATEGIES”. Following the recapitalization of the Brandywine Portfolio
and the sale of Amherst Marketplace and Sheffield Crossing as discussed below, there are 29 assets
comprising 1.5 million square feet remaining in Fund I, (in which the Operating Partnership’s
interest in cash flow and income has increased from 22.2% to 37.8% as a result of the Promote) as
follows:
| Year | ||||||||||||
| Shopping Center | Location | acquired | GLA | |||||||||
New York Region New York Tarrytown Centre |
Westchester | 2004 | 35,291 | |||||||||
Mid-Atlantic Region Virginia Haygood Shopping Center |
Virginia Beach | 2004 | 178,533 | |||||||||
Midwest Region Ohio Granville Centre |
Columbus | 2002 | 134,997 | |||||||||
Michigan
|
||||||||||||
Sterling Heights Shopping Center |
Detroit | 2004 | 154,835 | |||||||||
Various Regions Kroger/Safeway Portfolio |
Various | 2003 | 1,018,100 | |||||||||
Total |
1,521,756 | |||||||||||
During November 2007, Fund I sold Amherst Marketplace and Sheffield Crossing, community shopping
centers in Ohio, for $26.0 million, resulting in a $7.5 million gain.
In November 2006, Fund I acquired the remaining 50% interest from our unaffiliated partner in the
Tarrytown Centre for $3.5 million.
During February 2006, Fund I finalized an agreement with our unaffiliated partner in the Hitchcock
Plaza whereby we converted our common equity interest in the properties to a preferred equity
position with a 15% preferred return payable currently and a 20% profit interest after all invested
capital and preferred returns are paid. In connection with this agreement, our partner assumed all
operational, redevelopment and leasing responsibilities. In August 2007, the Operating Partnership
provided a $5.6 million loan to the third party investor in Hitchcock Plaza who invested the
proceeds into the partnership and were used to liquidate Fund I’s preferred equity investment and
cumulative preferred return. Fund I retains a 20% profits interest, behind the return of our
partner’s equity and cumulative preferred return.
Core Portfolio
During March of 2007, the Operating Partnership purchased a 52,000 square foot single-tenant
building located at 1545 East Service Road in Staten Island, New York for $17.0 million.
During March of 2007, the Operating Partnership purchased a retail commercial condominium at 200
West 54th Street located in Manhattan, New York. The 10,000 square foot property was acquired for
$36.4 million.
During September of 2006, the Operating Partnership purchased 2914 Third Avenue in the Bronx, New
York for $18.5 million. The 41,305 square foot property is 100% leased and is located in a densely
populated, high barrier-to-entry, infill area.
During June of 2006, the Operating Partnership purchased 8400 and 8625 Germantown Road in
Philadelphia, Pennsylvania for $16.0 million.
During January of 2006, the Operating Partnership closed on a 20,000 square foot retail building in
the Lincoln Park district in Chicago. The property was acquired from an affiliate of Klaff for
$9.9 million.
During January of 2006, the Operating Partnership acquired a 60% interest in the A&P Shopping Plaza
located in Boonton, New Jersey. The property, located in northeastern New Jersey, is a 63,000
square foot shopping center anchored by a 49,000 square foot A&P Supermarket. The remaining 40%
interest is owned by a principal of P/A. The interest was acquired for $3.2 million.
During July 2005 the Operating Partnership purchased 4343 Amboy Road located in Staten Island, New
York for $16.6 million in cash and $0.2 million in Common OP Units. The property, a 60,000 square
foot neighborhood shopping center, is anchored by a Waldbaum’s supermarket and a Duane Reade drug
store, and is subject to a 23-year ground lease.
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Other Investments
During March of 2005 the Operating Partnership invested $20.0 million in a preferred equity
position (“Preferred Equity Investment”) in Levitz SL, L.L.C. (“Levitz SL”), the owner of fee and
leasehold interests in 30 current or former Levitz Furniture Store locations (the “Levitz
Properties”), totaling 2.5 million square feet.
During June 2006, the Operating Partnership converted the Preferred Equity Investment to a first
mortgage loan and advanced additional proceeds bringing the total outstanding amount to
$31.3 million. The loan matures on May 31, 2008 and bears interest at a rate of 10.5%. During 2006,
Levitz SL sold one of the Levitz Properties located in Northridge, California and used
$20.4 million of the proceeds to pay down the loan. During 2007, Levitz SL sold an additional
Levitz Property located in St. Paul Minnesota and used $4.8 million of the proceeds to pay down the
first mortgage loan. As of December 31, 2007, the loan balance amounted to $6.1 million and was
secured by fee and leasehold mortgages as well as a pledge of the entities owning 13 of the
remaining Levitz Properties totaling 1.3 million square feet. Although Levitz Furniture filed for
Chapter 7 bankruptcy protection during November 2007, we believe the underlying value of the real
estate is sufficient to recover the principal and interest due under the mortgage.
ASSET SALES AND CAPITAL/ASSET RECYCLING
We periodically identify certain properties for disposition and redeploy the capital to existing
centers or acquisitions with greater potential for capital appreciation. Since January 1, 2005, we
have sold the following core portfolio assets:
| Sales price | |||||||||||||||||
| (dollars in | |||||||||||||||||
| Shopping Center | Location | Date sold | GLA | thousands) | |||||||||||||
Colony and GHT Apartments |
Columbia, Missouri | December 2007 | 625,545 | $ | 15,512 | ||||||||||||
Soundview Marketplace |
Long Island, New York | December 2006 | 183,815 | 24,000 | |||||||||||||
Bradford Towne Centre |
Towanda, Pennsylvania | November 2006 | 257,123 | 16,000 | |||||||||||||
Greenridge Plaza |
Scranton, Pennsylvania | November 2006 | 191,767 | 10,600 | |||||||||||||
Pittston Plaza |
Pittston, Pennsylvania | November 2006 | 79,498 | 6,000 | |||||||||||||
Luzerne Street Shopping Center |
Scranton, Pennsylvania | November 2006 | 58,035 | 3,600 | |||||||||||||
Berlin Shopping Center |
Central New Jersey | July 2005 | 188,688 | 4,000 | |||||||||||||
Total |
1,584,471 | $ | 79,712 | ||||||||||||||
Proceeds from these sales in part have been used to fund the core portfolio acquisitions as
discussed in “—PROPERTY ACQUISITIONS” above.
PROPERTY REDEVELOPMENT AND EXPANSION
Our redevelopment program focuses on selecting well-located neighborhood and community shopping
centers within our core portfolio and creating significant value through re-tenanting and property
redevelopment.
During 2006, we commenced the redevelopment and re-tenanting of the Bloomfield Town Square, located
in Bloomfield Hills, Michigan. A former out-parcel building was demolished and replaced with a
17,500 square foot building now occupied by Drexel Heritage and Panera Bread. The new tenants
opened and commenced paying rent during 2006, and are paying a combined base rent at a 127%
increase over that of the former tenant. In addition, we have leased approximately 26,000 square
feet to Circuit City, which opened and commenced paying rent during September of 2007 at a 79%
increase over that of the former tenants. Total costs for this project were $4.6 million.
COMPETITION
There are numerous entities that compete with us in seeking properties for acquisition and tenants
who will lease space in our properties. Our competitors include other REIT’s, financial
institutions, insurance companies, pension funds, private companies and individuals. Our properties
compete for tenants with similar properties primarily on the basis of location, total occupancy
costs (including base rent and operating expenses), services provided, and the design and condition
of the improvements.
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FINANCIAL INFORMATION ABOUT MARKET SEGMENTS
We have three reportable segments: core portfolio, opportunity funds and other, which primarily
consists of management fee income and interest income. We evaluate property performance primarily
based on net operating income before depreciation, amortization and certain non-recurring items.
Investments in our core portfolio are typically held long-term. Given the finite life of the
opportunity funds, these investments are typically held for shorter terms. Fees earned by us as
general partner/member of the opportunity funds are eliminated in our consolidated financial
statements. We do not have any foreign operations. We previously reported two reportable segments,
retail properties and multi-family properties. During December of 2007, we sold the majority of our
multi-family properties and realigned our segments to reflect the way we now manage our business.
See Note 3 to our consolidated financial statements, which begin on page F-1 of this Form 10-K for
certain information regarding each of our segments.
CORPORATE HEADQUARTERS AND EMPLOYEES
Our executive offices are located at 1311 Mamaroneck Avenue, Suite 260, White Plains, New York
10605, and our telephone number is (914) 288-8100. As of December 31, 2007, we had 142 employees,
of which 120 were located at our executive office, six at the Pennsylvania regional office and the
remaining property management personnel were located on-site at our properties.
COMPANY WEBSITE
All of our filings with the Securities and Exchange Commission, including our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, are available free of charge at our website at www.acadiarealty.com, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and
Exchange Commission. These filings can also be accessed through the Securities and Exchange
Commission’s website at www.sec.gov. Alternatively, we will provide paper copies of our filings
free of charge upon request. Information included or referred to on our website is not incorporated
by reference in or otherwise a part of this Form 10-K.
CODE OF ETHICS AND WHISTLEBLOWER POLICIES
The Board of Trustees adopted a Code of Ethics for Senior Financial Officers that applies to our
Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, Director of
Financial Reporting, Director of Taxation and Assistant Controllers. The Board also adopted a Code
of Business Conduct and Ethics applicable to all employees, as well as a “Whistleblower Policy”.
Copies of these documents are available in the Investor Information section of our website.
ITEM 1A. RISK FACTORS
If any of the following risks actually occur, our business, results of operations and financial
condition would likely suffer. This section includes or refers to certain forward-looking
statements. Refer to the explanation of the qualifications and limitations on such forward-looking
statements discussed in the beginning of this Form 10-K.
We rely on revenues derived from major tenants.
We derive significant revenues from certain anchor tenants that occupy space in more than one
center. We could be adversely affected in the event of the bankruptcy or insolvency of, or a
downturn in the business of, any of our major tenants, or in the event that any such tenant does
not renew its leases as they expire or renews at lower rental rates. Vacated anchor space not only
would reduce rental revenues if not re-tenanted at the same rental rates but also could adversely
affect the entire shopping center because of the loss of the departed anchor tenant’s customer
drawing power. Loss of customer drawing power also can occur through the exercise of the right that
most anchors have to vacate and prevent re-tenanting by paying rent for the balance of the lease
term, or the departure of an anchor tenant that owns its own property. In addition, in the event
that certain major tenants cease to occupy a property, such an action may result in a significant
number of other tenants having the right to terminate their leases, or pay a reduced rent based on
a percentage of the tenant’s sales, at the affected property, which could adversely affect the
future income from such property. See “Item 2. Properties—Major Tenants” for quantified
information with respect the percentage of our minimum rents received from major tenants.
Tenants may seek the protection of the bankruptcy laws, which could result in the rejection and
termination of their leases and thereby cause a reduction in the cash flow available for
distribution by us. Such reduction could be material if a major tenant files bankruptcy. See the
risk factor titled, “The bankruptcy of, or a downturn in the business of, any of our major tenants
may adversely affect our cash flows and property values” below.
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Limited control over joint venture investments.
Our opportunity fund investments may involve risks not otherwise present for investments made
solely by us, including the possibility that our joint venture partner might have different
interests or goals than we do. Other risks of joint venture investments include impasse on
decisions, such as a sale, because neither we nor a joint venture partner would have full control
over the joint venture. Also, there is no limitation under our organizational documents as to the
amount of funds that may be invested in joint ventures.
Through our investments in joint ventures we have also invested in operating businesses that have
operational risk in addition to the risks associated with real estate investments, including among
other risks, human capital issues, adequate supply of product and material, and merchandising
issues.
During 2007 and 2006, our joint ventures provided Promote income. There can be no assurance that
the joint ventures will continue to operate profitably and thus provide additional Promote income
in the future.
Under the terms of our Fund III joint ventures, we are required to first offer to Fund III all of
our opportunities to acquire retail shopping centers. Only if (i) our joint venture partner elects
not to approve Fund III’s pursuit of an acquisition opportunity; (ii) the ownership of the
acquisition opportunity by Fund III would create a material conflict of interest for us; (iii) we
require the acquisition opportunity for a “like-kind” exchange; or (iv) the consideration payable
for the acquisition opportunity is our Common Shares, OP Units or other securities, may we pursue
the opportunity directly. As a result, we may not be able to make attractive acquisitions directly
and may only receive a minority interest in such acquisitions through Fund III.
We operate through a partnership structure, which could have an adverse effect on our ability to
manage our assets.
Our primary property-owning vehicle is the Operating Partnership, of which we are the general
partner. Our acquisition of properties through the Operating Partnership in exchange for interests
in the Operating Partnership may permit certain tax deferral advantages to limited partners who
contribute properties to the Operating Partnership. Since properties contributed to the Operating
Partnership may have unrealized gain attributable to the difference between the fair market value
and adjusted tax basis in such properties prior to contribution, the sale of such properties could
cause adverse tax consequences to the limited partners who contributed such properties. Although
we, as the general partner of the Operating Partnership, generally have no obligation to consider
the tax consequences of our actions to any limited partner, there can be no assurance that the
Operating Partnership will not acquire properties in the future subject to material restrictions
designed to minimize the adverse tax consequences to the limited partners who contribute such
properties. Such restrictions could result in significantly reduced flexibility to manage our
assets.
There are risks relating to investments in real estate.
Real property investments are subject to varying degrees of risk. Real estate values are affected
by a number of factors, including: changes in the general economic climate, local conditions (such
as an oversupply of space or a reduction in demand for real estate in an area), the quality and
philosophy of management, competition from other available space, the ability of the owner to
provide adequate maintenance and insurance and to control variable operating costs. Shopping
centers, in particular, may be affected by changing perceptions of retailers or shoppers regarding
the safety, convenience and attractiveness of the shopping center and by the overall climate for
the retail industry generally. Real estate values are also affected by such factors as government
regulations, interest rate levels, the availability of financing and potential liability under, and
changes in, environmental, zoning, tax and other laws. A significant portion of our income is
derived from rental income from real property, our income and cash flow would be adversely affected
if a significant number of our tenants were unable to meet their obligations, or if we were unable
to lease on economically favorable terms a significant amount of space in our properties. In the
event of default by a tenant, we may experience delays in enforcing, and incur substantial costs to
enforce, our rights as a landlord. In addition, certain significant expenditures associated with
each equity investment (such as mortgage payments, real estate taxes and maintenance costs) are
generally not reduced when circumstances cause a reduction in income from the investment.
The bankruptcy of, or a downturn in the business of, any of our major tenants may adversely affect
our cash flows and property values.
The bankruptcy of, or a downturn in the business of, any of our major tenants causing them to
reject their leases, or not renew their leases as they expire, or renew at lower rental rates may
adversely affect our cash flows and property values. Furthermore, the impact of vacated anchor
space and the potential reduction in customer traffic may adversely impact the balance of tenants
at the center.
Certain of our tenants have experienced financial difficulties and have filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code (“Chapter 11 Bankruptcy”). Pursuant to bankruptcy
law, tenants have the right to reject their leases. In the event the tenant exercises this right,
the landlord generally has the right to file a claim for lost rent equal to the greater of either
one year’s rent (including tenant expense reimbursements) for remaining terms greater than one
year, or 15% of the rent remaining under the balance of the lease term, but not to exceed three
years rent. Actual amounts to be received in satisfaction of those claims will be subject to the
tenant’s final plan of reorganization and the availability of funds to pay its creditors.
Since January 1, 2004, there have been three significant tenant bankruptcies within our portfolio:
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On January 14, 2004, KB Toys (“KB”) filed for protection under Chapter 11 Bankruptcy. KB operated
in five locations in our core portfolio totaling approximately 41,000 square feet. Rental revenues
from KB at these locations aggregated $0.3 million for each of the years ended December 31, 2007,
2006 and 2005, respectively. KB rejected the lease at three of these locations and continues to
operate in two of our core portfolio locations but has neither assumed nor rejected these two
leases.
On September 27, 2007, the Bombay Company, Inc. (“Bombay”) filed for protection under Chapter 11
Bankruptcy. Bombay operated in one of our core portfolio locations, leasing 8,965 square feet.
Rental revenues from Bombay totaled $0.2 million for the years ended December 31, 2007, 2006 and
2005, respectively. Bombay has rejected the lease at this location.
On June 11, 2007, Tweeter Home Entertainment Group, Inc. (“Tweeter”) filed for protection under
Chapter 11 Bankruptcy. Tweeter is operating in one of our core portfolio locations, leasing 12,799
square feet. Rental revenues from Tweeter totaled $0.3 million, $0.1 million and $0.0 million for
the years ended December 31, 2007, 2006 and 2005, respectively. Tweeter has neither assumed or
rejected the lease.
We could be adversely affected by poor market conditions where properties are geographically
concentrated.
Our performance depends on the economic conditions in markets in which our properties are
concentrated. We have significant exposure to the New York region, from which we derive 35% of the
annual base rents within our Core portfolio. Our operating results could be adversely affected if
market conditions, such as an oversupply of space or a reduction in demand for real estate, in this
area become more competitive relative to other geographic areas.
Our ability to change our portfolio is limited because real estate investments are illiquid.
Equity investments in real estate are relatively illiquid and, therefore, our ability to change our
portfolio promptly in response to changed conditions will be limited. Our board of trustees may
establish investment criteria or limitations as it deems appropriate, but currently does not limit
the number of properties in which we may seek to invest or on the concentration of investments in
any one geographic region. We could change our investment, disposition and financing policies
without a vote of our shareholders.
Market interest rates could have an adverse effect on our share price.
One of the factors that may influence the trading price of our Common Shares is the annual dividend
rate on our Common Shares as a percentage of its market price. An increase in market interest rates
may lead purchasers of our Common Shares to seek a higher annual dividend rate, which could
adversely affect the market price of our Common Shares and our ability to raise additional equity
in the public markets.
Recent disruptions in the financial markets could affect our ability to obtain debt financing on
reasonable terms and have other adverse effects on us.
The United States credit markets have recently experienced significant dislocations and liquidity
disruptions which have caused the spreads on prospective debt financings to widen considerably.
These circumstances have materially impacted liquidity in the debt markets, making financing terms
for borrowers less attractive, and in certain cases have resulted in the unavailability of certain
types of debt financing. Continued uncertainty in the credit markets may negatively impact our
ability to access additional debt financing at reasonable terms, which may negatively affect our
ability to make acquisitions. A prolonged downturn in the credit markets may cause us to seek
alternative sources of potentially less attractive financing, and may require us to adjust our
business plan accordingly. In addition, these factors may make it more difficult for us to sell
properties or may adversely affect the price we receive for properties that we do sell, as
prospective buyers may experience increased costs of debt financing or difficulties in obtaining
debt financing. These events in the credit markets have also had an adverse effect on other
financial markets in the United States, which may make it more difficult or costly for us to raise
capital through the issuance of our equity securities. These disruptions in the financial markets
may have other adverse effects on us or the economy generally.
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We could become highly leveraged, resulting in increased risk of default on our obligations and in
an increase in debt service requirements, which could adversely affect our financial condition and
results of operations and our ability to pay distributions.
We have incurred, and expect to continue to incur, indebtedness in furtherance of our activities.
Neither our Declaration of Trust nor any policy statement formally adopted by our board of trustees
limits either the total amount of indebtedness or the specified percentage of indebtedness that we
may incur. Accordingly, we could become more highly leveraged, resulting in increased risk of
default on our obligations and in an increase in debt service requirements which could adversely
affect our financial condition and results of operations and our ability to make distributions.
Our loan agreements contain customary representations, covenants and events of default. Certain
loan agreements require us to comply with certain affirmative and negative covenants, including the
maintenance of certain debt service coverage and leverage ratios.
Interest expense on our variable debt as of December 31, 2007 would increase by $1.2 million
annually for a 100 basis point increase in interest rates. We may seek additional variable-rate
financing if and when pricing and other commercial and financial terms warrant. As such, we would
consider hedging against the interest rate risk related to such additional variable-rate debt
through interest rate swaps and protection agreements, or other means.
We enter into interest-rate hedging transactions, including interest rate swaps and cap agreements,
with counterparties. There can be no guarantee that the financial condition of these counterparties
will enable them to fulfill their obligations under these agreements.
We may not be able to renew current leases and the terms of re-letting (including the cost of
concessions to tenants) may be less favorable to us than current lease terms.
Upon the expiration of current leases for space located in our properties, we may not be able to
re-let all or a portion of that space, or the terms of re-letting (including the cost of
concessions to tenants) may be less favorable to us than current lease terms. If we are unable to
re-let promptly all or a substantial portion of the space located in our properties or if the
rental rates we receive upon re-letting are significantly lower than current rates, our net income
and ability to make expected distributions to our shareholders will be adversely affected due to
the resulting reduction in rent receipts. There can be no assurance that we will be able to retain
tenants in any of our properties upon the expiration of their leases. See “Item 2. Properties –
Lease Expirations” in this Annual Report on Form 10-K for additional information as to the
scheduled lease expirations in our portfolio.
Possible liability relating to environmental matters.
Under various federal, state and local environmental laws, statutes, ordinances, rules and
regulations, as an owner of real property, we may be liable for the costs of removal or remediation
of certain hazardous or toxic substances at, on, in or under our property, as well as certain other
potential costs relating to hazardous or toxic substances (including government fines and penalties
and damages for injuries to persons and adjacent property). These laws may impose liability without
regard to whether we knew of, or were responsible for, the presence or disposal of those
substances. This liability may be imposed on us in connection with the activities of an operator
of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or
property damages and our liability therefore could exceed the value of the property and/or our
aggregate assets. In addition, the presence of those substances, or the failure to properly dispose
of or remove those substances, may adversely affect our ability to sell or rent that property or to
borrow using that property as collateral, which, in turn, would reduce our revenues and ability to
make distributions.
A property can also be adversely affected either through physical contamination or by virtue of an
adverse effect upon value attributable to the migration of hazardous or toxic substances, or other
contaminants that have or may have emanated from other properties. Although our tenants are
primarily responsible for any environmental damages and claims related to the leased premises, in
the event of the bankruptcy or inability of any of our tenants to satisfy any obligations with
respect to the property leased to that tenant, we may be required to satisfy such obligations. In
addition, we may be held directly liable for any such damages or claims irrespective of the
provisions of any lease.
From time to time, in connection with the conduct of our business, and prior to the acquisition of
any property from a third party or as required by our financing sources, we authorize the
preparation of Phase I environmental reports and, when necessary, Phase II environmental reports,
with respect to our properties. Based upon these environmental reports and our ongoing review of
our properties, as of the date of this prospectus supplement, we are not aware of any environmental
condition with respect to any of our properties that we believe would be reasonably likely to have
a material adverse effect on us. There can be no assurance, however, that the environmental reports
will reveal all environmental conditions at our properties or that the following will not expose us
to material liability in the future:
| – The discovery of previously unknown environmental conditions; | ||
| – Changes in law; | ||
| – Activities of tenants; and | ||
| – Activities relating to properties in the vicinity of our properties. |
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Changes in laws increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions may result in
significant unanticipated expenditures or may otherwise adversely affect the operations of our
tenants, which could adversely affect our financial condition or results of operations.
Competition may adversely affect our ability to purchase properties and to attract and retain
tenants.
There are numerous commercial developers, real estate companies, financial institutions and other
investors with greater financial resources than we have that compete with us in seeking properties
for acquisition and tenants who will lease space in our properties. Our competitors include other
REIT’s, financial institutions, insurance companies, pension funds, private companies and
individuals. This competition may result in a higher cost for properties that we wish to purchase.
In addition, retailers at our properties face increasing competition from outlet malls, discount
shopping clubs, internet commerce, direct mail and telemarketing, which could (i) reduce rents
payable to us; (ii) reduce our ability to attract and retain tenants at our properties; and (iii)
lead to increased vacancy rates at our properties.
We have pursued, and may in the future continue to pursue extensive growth opportunities, which may
result in significant demands on our operational, administrative and financial resources.
We have pursued extensive growth opportunities. This expansion has placed significant demands on
our operational, administrative and financial resources. The continued growth of our real estate
portfolio can be expected to continue to place a significant strain on our resources. Our future
performance will depend in part on our ability to successfully attract and retain qualified
management personnel to manage the growth and operations of our business and to finance such
acquisitions. In addition, acquired properties may fail to operate at expected levels due to the
numerous factors that may affect the value of real estate. There can be no assurance that we will
have sufficient resources to identify and manage acquired properties or otherwise be able to
maintain our historic rate of growth.
Our inability to carry out our growth strategy could adversely affect our financial condition and
results of operations.
Our earnings growth strategy is based on the acquisition and development of additional properties,
including acquisitions through co-investment programs such as joint ventures. In the context of our
business plan, “development” generally means an expansion or renovation of an existing property.
The consummation of any future acquisitions will be subject to satisfactory completion of our
extensive valuation analysis and due diligence review and to the negotiation of definitive
documentation. We cannot be sure that we will be able to implement our strategy because we may have
difficulty finding new properties, negotiating with new or existing tenants or securing acceptable
financing.
Acquisitions of additional properties entail the risk that investments will fail to perform in
accordance with expectations, including operating and leasing expectations. Redevelopment is
subject to numerous risks, including risks of construction delays, cost overruns or uncontrollable
events that may increase project costs, new project commencement risks such as the receipt of
zoning, occupancy and other required governmental approvals and permits, and the incurrence of
development costs in connection with projects that are not pursued to completion.
A component of our growth strategy is through private-equity type investments made through our RCP
Venture. These include investments in operating retailers. The inability of the retailers to
operate profitably would have an adverse impact on income realized from these investments.
Our board of trustees may change our investment policy without shareholder approval.
Our board of trustees will determine our investment and financing policies, our growth strategy and
our debt, capitalization, distribution, acquisition, disposition and operating policies. Our board
of trustees may establish investment criteria or limitations as it deems appropriate, but currently
does not limit the number of properties in which we may seek to invest or on the concentration of
investments in any one geographic region. Although our board of trustees has no present intention
to revise or amend our strategies and policies, it may do so at any time without a vote by our
shareholders. Accordingly, our shareholders’ control over changes in our strategies and policies is
limited to the election of trustees, and changes made by our board of trustees may not serve the
interests of all of our shareholders and could adversely affect our financial condition or results
of operations, including our ability to distribute cash to shareholders or qualify as a REIT.
16
Table of Contents
There can be no assurance we have qualified or will remain qualified as a REIT for federal income
tax purposes.
We believe that we have met the requirements for qualification as a REIT for federal income tax
purposes beginning with our taxable year ended December 31, 1993, and we intend to continue to meet
these requirements in the future. However, qualification as a REIT involves the application of
highly technical and complex provisions of the Internal Revenue Code, for which there are only
limited judicial or administrative interpretations. No assurance can be given that we have
qualified or will remain qualified as a REIT. The Internal Revenue Code provisions and income tax
regulations applicable to REIT’s are more complex than those applicable to corporations. The
determination of various factual matters and circumstances not entirely within our control may
affect our ability to continue to qualify as a REIT. In addition, no assurance can be given that
legislation, regulations, administrative interpretations or court decisions will not significantly
change the requirements for qualification as a REIT or the federal income tax consequences of such
qualification. If we do not qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our net taxable income. In addition, our income would be
subject to tax at the regular corporate rates. We also could be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification was lost. Cash
available for distribution to our shareholders would be significantly reduced for each year in
which we do not qualify as a REIT. In that event, we would not be required to continue to make
distributions. Although we currently intend to continue to qualify as a REIT, it is possible that
future economic, market, legal, tax or other considerations may cause us, without the consent of
the shareholders, to revoke the REIT election or to otherwise take action that would result in
disqualification.
Distribution requirements imposed by law limit our operating flexibility.
To maintain our status as a REIT for federal income tax purposes, we are generally required to
distribute to our shareholders at least 90% of our taxable income for that calendar year. Our
taxable income is determined without regard to any deduction for dividends paid and by excluding
net capital gains. To the extent that we satisfy the distribution requirement, but distribute less
than 100% of our taxable income, we will be subject to federal corporate income tax on our
undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if
any, by which our distributions in any year are less than the sum of (i) 85% of our ordinary income
for that year; (ii) 95% of our capital gain net income for that year and; (iii) 100% of our
undistributed taxable income from prior years. We intend to continue to make distributions to our
shareholders to comply with the distribution requirements of the Internal Revenue Code and to
reduce exposure to federal income and nondeductible excise taxes. Differences in timing between the
receipt of income and the payment of expenses in determining our income and the effect of required
debt amortization payments could require us to borrow funds on a short-term basis to meet the
distribution requirements that are necessary to achieve the tax benefits associated with qualifying
as a REIT.
Uninsured losses or a loss in excess of insured limits could adversely affect our financial
condition.
We carry comprehensive liability, fire, extended coverage and rent loss insurance on most of our
properties, with policy specifications and insured limits customarily carried for similar
properties. However, with respect to those properties where the leases do not provide for abatement
of rent under any circumstances, we generally do not maintain rent loss insurance. In addition,
there are certain types of losses, such as losses resulting from wars, terrorism or acts of God
that generally are not insured because they are either uninsurable or not economically insurable.
Should an uninsured loss or a loss in excess of insured limits occur, we could lose capital
invested in a property, as well as the anticipated future revenues from a property, while remaining
obligated for any mortgage indebtedness or other financial obligations related to the property. Any
loss of these types would adversely affect our financial condition.
Limits on ownership of our capital shares.
For the Company to qualify as a REIT for federal income tax purposes, among other requirements, not
more than 50% of the value of our capital shares may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the
last half of each taxable year after 1993, and such capital shares must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year (in each case, other than the first such year). Our
Declaration of Trust includes certain restrictions regarding transfers of our capital shares and
ownership limits that are intended to assist us in satisfying these limitations. These restrictions
and limits may not be adequate in all cases, however, to prevent the transfer of our capital shares
in violation of the ownership limitations. The ownership limit discussed above may have the effect
of delaying, deferring or preventing someone from taking control of us.
Actual or constructive ownership of our capital shares in excess of the share ownership limits
contained in our Declaration of Trust would cause the violative transfer or ownership to be null
and void from the beginning and subject to purchase by us at a price equal to the lesser of (i) the
price stipulated in the challenged transaction; and (ii) the fair market value of such shares
(determined in accordance with the rules set forth in our declaration of trust). As a result, if a
violative transfer were made, the recipient of the shares would not acquire any economic or voting
rights attributable to the transferred shares. Additionally, the constructive ownership rules for
these limits are complex and groups of related individuals or entities may be deemed a single owner
and consequently in violation of the share ownership limits.
17
Table of Contents
Adverse legislative or regulatory tax changes could have an adverse effect on us.
There are a number of issues associated with an investment in a REIT that are related to the
federal income tax laws, including, but not limited to, the consequences of failing to continue to
qualify as a REIT. At any time, the federal income tax laws governing REIT’s or the administrative
interpretations of those laws may be amended. Any of those new laws or interpretations may take
effect retroactively and could adversely affect us or our shareholders. Recently enacted
legislation reduces tax rates applicable to certain corporate dividends paid to most domestic
noncorporate shareholders. REIT dividends generally are not eligible for reduced rates because a
REIT’s income generally is not subject to corporate level tax. As a result, investment in non-REIT
corporations may be viewed as relatively more attractive than investment in REIT’s by domestic
noncorporate investors. This could adversely affect the market price of the Company’s shares.
Concentration of ownership by certain investors.
Ten institutional shareholders own 5% or more individually, and 67.9% in the aggregate, of our
Common Shares. A significant concentration of ownership may allow an investor to exert a greater
influence over our management and affairs and may have the effect of delaying, deferring or
preventing a change in control of us.
Restrictions on a potential change of control.
Our Board of Trustees is authorized by our Declaration of Trust to establish and issue one or more
series of preferred shares without shareholder approval. We have not established any series of
preferred shares. However, the establishment and issuance of a series of preferred shares could
make more difficult a change of control of us that could be in the best interest of the
shareholders.
In addition, we have entered into an employment agreement with our Chief Executive Officer and
severance agreements are in place with our senior vice presidents which provide that, upon the
occurrence of a change in control of us and either the termination of their employment without
cause (as defined) or their resignation for good reason (as defined), those executive officers
would be entitled to certain termination or severance payments made by us (which may include a lump
sum payment equal to defined percentages of annual salary and prior years’ average bonuses, paid in
accordance with the terms and conditions of the respective agreement), which could deter a change
of control of us that could be in our best interest.
The loss of a key executive officer could have an adverse effect on us.
Our success depends on the contribution of key management members. The loss of the services of
Kenneth F. Bernstein, President and Chief Executive Officer, or other key executive-level employees
could have a material adverse effect on our results of operations. We have entered into an
employment agreement with Mr. Bernstein; however, it could be terminated by Mr. Bernstein. We have
not entered into employment agreements with other key executive level employees.
18
Table of Contents
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES.
SHOPPING CENTER PROPERTIES
The discussion and tables in this Item 2 include properties held through consolidated and
unconsolidated joint ventures in which we own a partial interest (“Consolidated Joint Venture
Portfolio” and Unconsolidated Joint Venture Portfolio”, respectively). Except where noted, it does
not include our partial interest in 25 anchor-only leases with Kroger and Safeway supermarkets.
These are detailed separately within this Item 2 as the majority of these properties are
free-standing and all are triple-net leases.
As of December 31, 2007, we owned and operated 51 commercial properties as part of our core
portfolio and opportunity fund portfolios. The properties are primarily neighborhood and community
shopping centers, mixed-use centers and one multi-family property. Ten of these properties are
currently under redevelopment. Our shopping centers, which total approximately 7.5 million square
feet of gross leaseable area (“GLA”), are located in 13 states and are generally well-established,
anchored community and neighborhood shopping centers. The operating properties are diverse in size,
ranging from approximately 10,000 to 875,000 square feet with an average size of 150,000 square
feet. As of December 31, 2007, our core portfolio and the opportunity fund portfolios (excluding
properties under redevelopment) were 94.9% and 93.7% occupied, respectively. Our shopping centers
are typically anchored by supermarkets or value-oriented retail.
We had 545 leases as of December 31, 2007. A majority of our rental revenues were from national
tenants. A majority of the income from the properties consists of rent received under long-term
leases. These leases generally provide for the payment of fixed minimum rent monthly in advance and
for the payment by tenants of a pro-rata share of the real estate taxes, insurance, utilities and
common area maintenance of the shopping centers. Minimum rents and expense reimbursements accounted
for approximately 84% of our total revenues for the year ended December 31, 2007.
As of December 31, 2007, approximately 35% of our existing leases also provided for the payment of
percentage rents either in addition to, or in place of, minimum rents. These arrangements generally
provide for payment to us of a certain percentage of a tenant’s gross sales in excess of a
stipulated annual amount. Percentage rents accounted for approximately 1% of the total 2007
revenues of the Company.
Seven of our shopping center properties are subject to long-term ground leases in which a third
party owns and has leased the underlying land to us. We pay rent for the use of the land at seven
locations and are responsible for all costs and expenses associated with the building and
improvements at all seven locations.
No individual property contributed in excess of 10% of our total revenues for the years ended
December 31, 2007, 2006 and 2005. Reference is made to our consolidated financial statements
beginning on page F-1 of this Annual Report on form 10-K for information on the mortgage debt
pertaining to our properties. The following sets forth more specific information with respect to
each of our shopping centers at December 31, 2007:
19
Table of Contents
| Year | Occupancy (1) | Anchor Tenants | ||||||||||
| Constructed (C) | Ownership | % | Current Lease Expiration/ | |||||||||
| Shopping Center | Location | Acquired (A) | Interest | GLA | 12/31/07 | Lease Option Expiration | ||||||
Core Portfolio |
||||||||||||
New York Region |
||||||||||||
Connecticut |
||||||||||||
239 Greenwich Avenue |
Greenwich | 1998 (A) | Fee | 16,834(3) | 100% | Restoration Hardware 2014/2024 | ||||||
| Coach 2016/2021 | ||||||||||||
New Jersey |
||||||||||||
Elmwood Park Shopping |
Elmwood Park | 1998 (A) | Fee | 149,491 | 100% | A&P 2017/2052 | ||||||
Center |
Walgreen’s 2022/2062 | |||||||||||
A&P Shopping Plaza |
Boonton | 2006 (A) | Fee | 62,908 | 100% | A&P 2024/2069 | ||||||
New York |
||||||||||||
Village Commons Shopping |
Smithtown | 1998 (A) | Fee | 87,169 | 98% | Daffy’s 2008/2028 | ||||||
Center |
||||||||||||
Branch Shopping Plaza |
Smithtown | 1998 (A) | LI (4) | 125,751 | 99% | A&P 2013/2028 | ||||||
| CVS 2010/— | ||||||||||||
Amboy Road |
Staten Island | 2005 (A) | LI (4) | 60,090 | 100% | A&P/Waldbaum’s 2028/— | ||||||
| Duane Reade 2008/2018 | ||||||||||||
Bartow Avenue |
Bronx | 2005 (C) | Fee | 14,676 | 87% | Sleepy’s 2009/2014 | ||||||
Pacesetter Park Shopping |
Pomona | 1999 (A) | Fee | 96,698 | 93% | Stop & Shop 2020/2040 | ||||||
Center |
||||||||||||
2914 Third Avenue |
Bronx | 2006 (A) | Fee | 42,400 | 79% | Dr. J’s 2021/— | ||||||
West Shore Expressway |
Staten Island | 2007 (A) | Fee | 55,000 | 100% | LA Fitness 2021/— | ||||||
West 54th Street |
Manhattan | 2007 (A) | Fee | 9,945 | 82% | Stage Deli 2011/— | ||||||
Crossroads Shopping |
White Plains | 1998 (A) | JV (7) | 310,624 | 97% | A&P/Waldbaum’s 2012/2032 | ||||||
Center |
Kmart 2012/2032 | |||||||||||
| B. Dalton 2012/2022 | ||||||||||||
| Modell’s 2009/2019 | ||||||||||||
| Pier 1 2012/— | ||||||||||||
| Pay Half 2007/— | ||||||||||||
Total New York Region |
1,031,586 | 97% | ||||||||||
New England |
||||||||||||
Connecticut |
||||||||||||
Town Line Plaza |
Rocky Hill | 1998 (A) | Fee | 206,356(2) | 99% | Stop & Shop 2023/2063 | ||||||
| Wal-Mart(2) | ||||||||||||
Massachusetts |
||||||||||||
Methuen Shopping |
Methuen | 1998 (A) | LI/Fee (4) | 130,021 | 100% | DeMoulas Market 2015/2020 | ||||||
Center |
Wal-Mart 2012/2052 | |||||||||||
Crescent Plaza |
Brockton | 1984 (A) | Fee | 218,141 | 99% | Shaw’s 2012/2042 | ||||||
| Home Depot 2021/2056 | ||||||||||||
New York |
||||||||||||
New Loudon Center |
Latham | 1982 (A) | Fee | 255,826 | 100% | Price Chopper 2015/2035 | ||||||
| Marshall’s 2014/2029 | ||||||||||||
| Bon Ton 2014/2034 | ||||||||||||
| Raymour and Flanigan 2019/2034 | ||||||||||||
| AC Moore 2009/2024 | ||||||||||||
Rhode Island |
||||||||||||
Walnut Hill Plaza |
Woonsocket | 1998 (A) | Fee | 284,717 | 89% | Shaw’s 2013/2028 | ||||||
| Sears 2008/2033 | ||||||||||||
| CVS 2009/2014 | ||||||||||||
Vermont |
||||||||||||
The Gateway Shopping |
South | 1999 (A) | Fee | 101,784 | 96% | Shaw’s 2024/2053 | ||||||
Center |
Burlington | |||||||||||
Total New England Region |
1,196,845 | 97% | ||||||||||
20
Table of Contents
| Year | Occupancy (1) | Anchor Tenants | ||||||||||
| Constructed (C) | Ownership | % | Current Lease Expiration/ | |||||||||
| Shopping Center | Location | Acquired (A) | Interest | GLA | 12/31/07 | Lease Option Expiration | ||||||
Midwest |
||||||||||||
Illinois |
||||||||||||
Hobson West Plaza |
Naperville | 1998 (A) | Fee | 98,908 | 98% | Bobak’s Market & Restaurant 2012/2032 |
||||||
Clark Diversey |
Chicago | 2006 (A) | Fee | 19,265 | 100% | Papyrus 2010/2015 | ||||||
| Starbucks 2010/2015 | ||||||||||||
| Nine West 2009/— | ||||||||||||
| The Vitamin Shoppe 2014/2024 | ||||||||||||
Indiana |
||||||||||||
Merrillville Plaza |
Merrillville | 1998 (A) | Fee | 235,685 | 96% | TJ Maxx 2009/2014 | ||||||
| JC Penney 2008/2018 | ||||||||||||
| Office Max 2008/2028 | ||||||||||||
| K&G 2017/2027 | ||||||||||||
| Pier 1 2009/— | ||||||||||||
| David’s Bridal 2010/2020 | ||||||||||||
Michigan |
||||||||||||
Bloomfield Town Square |
Bloomfield Hills | 1998 (A) | Fee | 232,181 | 98% | TJ Maxx 2009/2014 | ||||||
| Marshalls 2011/2026 | ||||||||||||
| Home Goods 2010/2020 | ||||||||||||
| Circuit City 2023/2038 | ||||||||||||
| Office Max 2010/2025 | ||||||||||||
Ohio |
||||||||||||
Mad River Station |
Dayton | 1999 (A) | Fee | 155,838(6) | 81% | Babies ‘R’ Us 2010/2020 | ||||||
| Office Depot 2010/— | ||||||||||||
| Pier 1 2010/— | ||||||||||||
Total Midwest Region |
741,877 | 94% | ||||||||||
Mid-Atlantic |
||||||||||||
New Jersey |
||||||||||||
Marketplace of Absecon |
Absecon | 1998 (A) | Fee | 105,135 | 95% | Acme 2015/2055 | ||||||
| Eckerd Drug 2020/2040 | ||||||||||||
Ledgewood Mall |
Ledgewood | 1983 (A) | Fee | 517,151 | 89% | Wal-Mart 2019/2049 | ||||||
| Macy’s 2010/2025 | ||||||||||||
| The Sport’s Authority 2012/2037 | ||||||||||||
| Circuit City 2020/2040 | ||||||||||||
| Marshalls 2014/2034 | ||||||||||||
| Ashley Furniture 2010/2020 | ||||||||||||
| Barnes and Noble 2010/2035 | ||||||||||||
Delaware |
||||||||||||
Brandywine Town Center |
Wilmington | 2003(A) | JV (10) | 874,908 | 98% | Drexel Heritage 2016/2026 | ||||||
| Michaels 2011/2026 | ||||||||||||
| Old Navy (The Gap) 2011/2016 | ||||||||||||
| PetSmart 2017/2042 | ||||||||||||
| Thomasville Furniture 2011/2021 | ||||||||||||
| Access Group 2015/2025 | ||||||||||||
| Bed, Bath & Beyond 2014/2029 | ||||||||||||
| Dick’s Sporting Goods 2013/2028 | ||||||||||||
| Lowe’s Home Centers 2018/2048 | ||||||||||||
| Regal Cinemas 2017/2037 | ||||||||||||
| Target 2018/2058 | ||||||||||||
| TransUnion Settlement 2013/2018 | ||||||||||||
| Lane Home Furnishings 2015/2030 | ||||||||||||
| MJM Designer 2015/2030 | ||||||||||||
| World Market 2015/— | ||||||||||||
| Christmas Tree Shops 2028/2048 | ||||||||||||
| Target Expansion 2011/2363 | ||||||||||||
Market Square Shopping |
TJ Maxx 2011/2016 | |||||||||||
Center |
Wilmington | 2003(A) | JV (10) | 102,662 | 89% | Trader Joe’s 2013/2028 | ||||||
Naamans Road |
Wilmington | 2006 (C) | LI/JV (10) (4) | 19,970 | 100% | Tweeters 2026/2046 | ||||||
Pennsylvania |
||||||||||||
Blackman Plaza |
Wilkes-Barre | 1968 (C) | Fee | 125,264 | 93% | Kmart 2009/2049 | ||||||
| Eckerd 2016/— | ||||||||||||
Mark Plaza |
Edwardsville | 1968 (C) | LI/Fee (4) | 216,401 | 93% | Redner’s Markets 2018/2028 | ||||||
| Kmart 2009/2049 |
21
Table of Contents
| Year | Anchor Tenants | |||||||||||
| Constructed (C) | Ownership | Occupancy (1)% | Current Lease Expiration/ | |||||||||
| Shopping Center | Location | Acquired (A) | Interest | GLA | 12/31/07 | Lease Option Expiration | ||||||
Plaza 422 |
Lebanon | 1972 (C) | Fee | 155,149 | 69% | Home Depot 2028/2058 | ||||||
Route 6 Mall |
Honesdale | 1994 (C) | Fee | 175,505 | 100% | Kmart 2020/2070 | ||||||
| Eckerd 2011/2026 | ||||||||||||
| Fashion Bug 2016/— | ||||||||||||
Chestnut Hill (13) |
Philadelphia | 2006 (A) | Fee | 40,570 | 100% | Borders 2010/2020 | ||||||
| Express 2009/— | ||||||||||||
| TJ Maxx 2010/2020 | ||||||||||||
Abington Towne Center |
Abington | 1998 (A) | Fee | 216,355(5) | 99% | Target (5) | ||||||
Total Mid-Atlantic Region |
2,549,070 | 94% | ||||||||||
Total Core Properties |
5,519,378 | 95% | ||||||||||
Opportunity Fund Portfolio |
||||||||||||
Fund I Properties |
||||||||||||
Ohio |
||||||||||||
Granville Centre |
Columbus | 2002(A) | JV (8) | 134,997 | 41% | Lifestyle Family Fitness 2017/2027 | ||||||
Virginia |
||||||||||||
Haygood Shopping |
Virginia Beach | 2004(A) | JV (8) | 178,533 | 93% | Eckerd Drug 2009/— | ||||||
Center |
Farm Fresh 2026/2101 | |||||||||||
| Marshalls 2017/— | ||||||||||||
New York |
||||||||||||
Tarrytown Shopping Center |
Westchester | 2004 (A) | JV (8) | 35,291 | 85% | Walgreen’s 2080/— | ||||||
VARIOUS REGIONS |
||||||||||||
Kroger/Safeway Portfolio |
Various | 2003 (A) | JV (8) | 1,018,100 | 100% | 25 Kroger/Safeway Supermarkets 2009/— | ||||||
Total Fund I Properties |
1,366,921 | 93% | ||||||||||
Fund II Properties |
||||||||||||
Illinois |
||||||||||||
Oakbrook |
Oakbrook | 2005 (A) | JV (4) (9) | 112,000 | 100% | Neiman Marcus 2011/2036 | ||||||
New York |
||||||||||||
Liberty Avenue |
New York | 2005 (A) | JV (4) (9) | 17,088 | 100% | CVS 2032/2052 | ||||||
216th Street |
New York | 2005 (A) | JV (9) | 60,000 | 100% | NY Dept. of Citywide Admin Svcs 2027/2042 | ||||||
Total Fund II Properties |
189,088 | 100% | ||||||||||
Total Opportunity Fund Operating
Properties |
1,556,009 | 94% | ||||||||||
Properties under Redevelopment |
||||||||||||
Sterling Heights Shopping |
Detroit | 2004(A) | JV (8) | 154,835 | 69% | Burlington Coat Factory 2024/— | ||||||
Center |
Rite-Aid 2026/2046 | |||||||||||
161st Street |
Bronx | 2005(A) | JV (9) | 223,521 | 87% | City of New York 2011/— | ||||||
400 E. Fordham Road |
Bronx | 2004(A) | JV (9) | -(11) | -(11) | |||||||
Pelham Manor Shopping |
LI/JV | |||||||||||
Plaza |
Westchester | 2004(A) | (4) (9) | -(11) | -(11) | |||||||
Sherman Avenue |
New York | 2005(A) | JV (9) | -(11) | -(11) | |||||||
CityPoint |
Brooklyn | 2007(A) | JV (9) | -(11) | -(11) | |||||||
Atlantic Ave |
Brooklyn | 2007(A) | JV (9) | -(11) | -(11) | |||||||
Canarsie Plaza |
Brooklyn | 2007(A) | JV (9) | -(11) | -(11) | |||||||
Westport |
Westport | 2007(A) | JV (12) | -(11) | -(11) | |||||||
Sheepshead Bay |
Brooklyn | 2007(A) | JV (12) | -(11) | -(11) | |||||||
Total Redevelopment Properties |
378,356 | 80% | ||||||||||
22
Table of Contents
| Notes: | ||
| (1) | Does not include space leased for which rent had not yet commenced as of December 31, 2007. | |
| (2) | Includes a 97,300 square foot Wal-Mart which is not owned us. | |
| (3) | In addition to the 16,834 square feet of retail GLA, this property also has 21 apartments comprising 14,434 square feet. | |
| (4) | We are a ground lessee under a long-term ground lease. | |
| (5) | Includes a 157,616 square foot Target Store that is not owned by the Company. | |
| (6) | The GLA for this property includes 28,205 square feet of office space. | |
| (7) | We have a 49% investment in this property. | |
| (8) | We have invested in this asset through Fund I. | |
| (9) | We have invested in this asset through Fund II. | |
| (10) | We have invested in this asset with Ginsburg Development Corp. (GDC). | |
| (11) | Under redevelopment. | |
| (12) | We have invested in this asset through Fund III. | |
| (13) | Property consists of two buildings. |
23
Table of Contents
MAJOR TENANTS
No individual retail tenant accounted for more than 6.3% of minimum rents for the year ended
December 31, 2007 or 8.7% of total leased GLA as of December 31, 2007. The following table sets
forth certain information for the 20 largest retail tenants based upon minimum rents in place as of
December 31, 2007. The table includes leases related to our partial interest in 25 anchor-only
leases with Kroger and Safeway supermarkets. The amounts below include our pro-rata share of GLA
and annualized base rent for our partial ownership interest in properties (GLA and rent in
thousands):
| Percentage of Total | ||||||||||||||||||||
| Number of | Represented by Retail Tenant | |||||||||||||||||||
| Stores in | Annualized Base | Total Portfolio | Annualized Base | |||||||||||||||||
| Retail Tenant | Portfolio | Total GLA | Rent (1) | GLA (2) | Rent (2) | |||||||||||||||
A&P (Waldbaum’s) |
5 | 216 | $ | 3,769 | 4.3 | % | 6.3 | % | ||||||||||||
Albertson’s (Shaw’s, Acme) |
4 | 220 | 3,013 | 4.4 | % | 5.0 | % | |||||||||||||
T.J. Maxx (T.J. Maxx, Marshalls, Homegoods) |
8 | 237 | 1,853 | 4.7 | % | 3.1 | % | |||||||||||||
Sears (Sears, Kmart) |
5 | 440 | 1,633 | 8.7 | % | 2.7 | % | |||||||||||||
Wal-Mart |
2 | 210 | 1,515 | 4.1 | % | 2.5 | % | |||||||||||||
Ahold (Stop & Shop) |
2 | 118 | 1,299 | 2.3 | % | 2.2 | % | |||||||||||||
Kroger (3) |
12 | 156 | 1,046 | 3.1 | % | 1.8 | % | |||||||||||||
Safeway (4) |
13 | 132 | 1,040 | 2.6 | % | 1.7 | % | |||||||||||||
Home Depot |
2 | 211 | 1,010 | 4.2 | % | 1.7 | % | |||||||||||||
Circuit City |
2 | 60 | 950 | 1.2 | % | 1.6 | % | |||||||||||||
Price Chopper |
1 | 77 | 804 | 1.5 | % | 1.3 | % | |||||||||||||
Restoration Hardware |
1 | 9 | 781 | 0.2 | % | 1.3 | % | |||||||||||||
Sleepy’s |
5 | 36 | 683 | 0.7 | % | 1.1 | % | |||||||||||||
Federated (Macy’s) |
1 | 73 | 651 | 1.4 | % | 1.1 | % | |||||||||||||
Walgreens |
2 | 21 | 615 | 0.4 | % | 1.0 | % | |||||||||||||
CVS |
4 | 31 | 562 | 0.6 | % | 0.9 | % | |||||||||||||
Payless Shoesource |
9 | 29 | 552 | 0.6 | % | 0.9 | % | |||||||||||||
Limited Brands |
1 | 13 | 510 | 0.3 | % | 0.9 | % | |||||||||||||
JC Penney |
1 | 50 | 495 | 1.0 | % | 0.8 | % | |||||||||||||
Borders |
1 | 19 | 482 | 0.4 | % | 0.8 | % | |||||||||||||
Total |
81 | 2,358 | $ | 23,263 | 46.7 | % | 38.7 | % | ||||||||||||
Notes:
| (1) | Base rents do not include percentage rents (except where noted), additional rents for property expense reimbursements, and contractual rent escalations due after December 31, 2007. | |
| (2) | Represents total GLA and annualized base rent for our retail properties including our pro-rata share of joint venture properties. | |
| (3) | Kroger has sub-leased four of these locations to supermarket tenants, two locations to a non-supermarket tenant and ceased operations at one other location. Kroger is obligated to pay rent through the full term of these leases, which expire in 2009. | |
| (4) | Safeway has sub-leased seven of these locations to supermarket tenants, one location to a non-supermarket tenant and ceased operations at one other location. Safeway is obligated to pay rent through the full term of all these leases, which expire in 2009. |
24
Table of Contents
LEASE EXPIRATIONS
The following table shows scheduled lease expirations for retail tenants in place as of December
31, 2007, assuming that none of the tenants exercise renewal options. (GLA and Annualized Base Rent
in thousands):
Core Portfolio:
| Annualized Base Rent (1) | GLA | |||||||||||||||||||
| Number of | Current Annual | Percentage of | Square | Percentage | ||||||||||||||||
| Leases maturing in | Leases | Rent | Total | Feet | of Total | |||||||||||||||
2008 |
106 | $ | 8,134 | 11 | % | 476 | 10 | % | ||||||||||||
2009 |
78 | 6,176 | 9 | % | 550 | 11 | % | |||||||||||||
2010 |
65 | 6,259 | 9 | % | 526 | 11 | % | |||||||||||||
2011 |
52 | 7,416 | 10 | % | 330 | 7 | % | |||||||||||||
2012 |
42 | 5,534 | 8 | % | 505 | 10 | % | |||||||||||||
2013 |
20 | 4,463 | 6 | % | 266 | 5 | % | |||||||||||||
2014 |
24 | 4,806 | 7 | % | 288 | 6 | % | |||||||||||||
2015 |
20 | 5,558 | 8 | % | 336 | 7 | % | |||||||||||||
2016 |
12 | 1,762 | 2 | % | 82 | 2 | % | |||||||||||||
2017 |
20 | 4,701 | 7 | % | 212 | 4 | % | |||||||||||||
Thereafter |
39 | 16,377 | 23 | % | 1,414 | 27 | % | |||||||||||||
Total |
478 | $ | 71,186 | 100 | % | 4,985 | 100 | % | ||||||||||||
Opportunity Fund Portfolios:
| Annualized Base Rent (1) | GLA | |||||||||||||||||||
| Number of | Current Annual | Percentage of | Square | Percentage | ||||||||||||||||
| Leases maturing in | Leases | Rent | Total | Feet | of Total | |||||||||||||||
2008 |
23 | $ | 523 | 3 | % | 47 | 2 | % | ||||||||||||
2009 |
28 | 7,480 | 37 | % | 1,036 | 60 | % | |||||||||||||
2010 |
4 | 190 | 1 | % | 9 | 1 | % | |||||||||||||
2011 |
11 | 5,037 | 25 | % | 290 | 16 | % | |||||||||||||
2012 |
8 | 748 | 4 | % | 44 | 2 | % | |||||||||||||
2014 |
6 | 341 | 2 | % | 14 | 1 | % | |||||||||||||
2015 |
2 | 47 | 0 | % | 3 | 0 | % | |||||||||||||
2016 |
1 | 111 | 1 | % | 8 | 0 | % | |||||||||||||
2017 |
3 | 741 | 4 | % | 66 | 4 | % | |||||||||||||
Thereafter |
9 | 4,668 | 23 | % | 242 | 14 | % | |||||||||||||
Total |
95 | $ | 19,886 | 100 | % | 1,759 | 100 | % | ||||||||||||
Note:
| (1) | Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent escalations due after December 31, 2007. |
25
Table of Contents
GEOGRAPHIC CONCENTRATIONS
The following table summarizes our retail properties by region as of December 31, 2007. (GLA and
Annualized Base Rent in thousands):
| Percentage of Total | ||||||||||||||||||||||||
| Annualized Base | Represented by | |||||||||||||||||||||||
| Rent per | Region | |||||||||||||||||||||||
| Occupied % | Annualized Base | Occupied Square | Annualized | |||||||||||||||||||||
| Region | GLA (1) | (2) | Rent (2) | Foot | GLA | Base Rent | ||||||||||||||||||
Core Properties: |
||||||||||||||||||||||||
New York Region (3) |
1,032 | 97 | % | $ | 24,654 | $ | 24.67 | 19 | % | 35 | % | |||||||||||||
New England |
1,197 | 97 | % | 10,167 | 9.60 | 22 | % | 14 | % | |||||||||||||||
Midwest |
742 | 94 | % | 9,455 | 13.57 | 13 | % | 13 | % | |||||||||||||||
Mid-Atlantic |
2,549 | 94 | % | 26,910 | 12.07 | 46 | % | 38 | % | |||||||||||||||
Total core properties |
5,520 | 95 | % | $ | 71,186 | $ | 14.28 | 100 | % | 100 | % | |||||||||||||
Opportunity Fund Properties: |
||||||||||||||||||||||||
Midwest (4) |
247 | 68 | % | $ | 1,488 | $ | 8.86 | 16 | % | 10 | % | |||||||||||||
Mid-Atlantic (5) |
179 | 93 | % | 1,768 | 10.69 | 12 | % | 12 | % | |||||||||||||||
New York Region (6) |
112 | 95 | % | 4,095 | 38.23 | 7 | % | 28 | % | |||||||||||||||
Various (Kroger/Safeway Portfolio) (7) |
1,018 | 100 | % | 7,363 | 7.23 | 65 | % | 50 | % | |||||||||||||||
Total operating opportunity fund properties |
1,556 | 94 | % | $ | 14,714 | $ | 10.09 | 100 | % | 100 | % | |||||||||||||
Fund Redevelopment Properties: |
||||||||||||||||||||||||
Midwest (8) |
155 | 69 | % | $ | 641 | $ | 6.02 | 40 | % | 12 | % | |||||||||||||
New York Region (9) |
224 | 87 | % | 4,531 | 23.27 | 60 | % | 88 | % | |||||||||||||||
Total Fund redevelopment properties |
379 | 80 | % | $ | 5,172 | $ | 17.16 | 100 | % | 100 | % | |||||||||||||
Notes:
| (1) | Property GLA includes a total of 255,000 square feet, which is not owned by us. This square footage has been excluded for calculating annualized base rent per square foot. | |
| (2) | The above occupancy and rent amounts do not include space which is currently leased, but for which rent payment had not yet commenced as of December 31, 2007. | |
| (3) | We have a 49% interest in two partnerships, which together, own the Crossroads Shopping Center. | |
| (4) | We have a 37.78% interest in future earnings and distributions from Fund I, which owns one property, and a 20% interest in Fund II, which owns one property. | |
| (5) | We have a 37.78% interest in future earnings and distributions from Fund I, which has a 50% interest in a property. | |
| (6) | We have a 37.78% interest in future earnings and distributions from Fund I, which owns one property, and a 20% interest in Fund II, which has a 98.6% interest in two properties. | |
| (7) | Fund I portfolio of 25 triple-net, anchor-only leases with Kroger and Safeway supermarkets. | |
| (8) | We have a 37.78% interest in future earnings and distributions from Fund I, which has a 50% interest in one property. | |
| (9) | We have a 20% interest in Fund II, which has a 98.6% interest in one property. |
26
Table of Contents
KROGER/SAFEWAY PORTFOLIO
In January of 2003, Fund I formed a joint venture (the “Kroger/Safeway JV”) with an affiliate of
real estate developer and investor AmCap Incorporated (“AmCap”) for the purpose of acquiring a
portfolio of twenty-five supermarket leases for $48.9 million inclusive of the closing and other
related acquisition costs. The portfolio, which aggregates approximately 1.0 million square feet,
consists of 25 anchor-only leases with Kroger (12 leases) and Safeway supermarkets (13 leases). The
majority of the properties are free-standing and all are triple-net leases. The Kroger/Safeway JV
acquired the portfolio subject to long-term ground leases with terms, including renewal options,
averaging in excess of 80 years, which are master leased to a non-affiliated entity. The primary
lease terms end during 2009 (“Primary Term”). Rental options for the supermarket leases at the end
of their Primary Term are at an average rent of $5.13 per square foot and for ten year increments
through 2049. Although there is no obligation for the Kroger/Safeway JV to pay ground rent during
the Primary Term, to the extent it exercises an option to renew a ground lease for a property at
the end of the Primary Term, it will be obligated to pay an average ground rent of $1.55 per square
foot.
The following table sets forth more specific information with respect to the 25 supermarket leases:
| Gross leasable | Rent upon | |||||||||||||||||
| area | initial option | |||||||||||||||||
| Location | Tenant | Notes | (“GLA”) | Current rent | commencement | |||||||||||||
Great Bend, KS |
Kroger Co. | (1 | )(5) | 48,000 | $ | 3.07 | $ | 2.40 | ||||||||||
Cincinnati, OH |
Kroger Co. | (7) | 32,200 | 6.90 | 5.36 | |||||||||||||
Conroe, TX |
Kroger Co. | (2 | )(6) | 75,000 | 5.92 | 4.60 | ||||||||||||
Harahan, LA |
Kroger Co. | (2 | )(5) | 60,000 | 5.90 | 4.61 | ||||||||||||
Indianapolis, IN |
Kroger Co. | (7) | 34,000 | 4.99 | 3.87 | |||||||||||||
Irving, TX |
Kroger Co. | (4) | 43,900 | 5.57 | 4.32 | |||||||||||||
Pratt, KS |
Kroger Co. | (1 | )(5) | 38,000 | 4.84 | 3.78 | ||||||||||||
Roanoke, VA |
Kroger Co. | (5) | 36,700 | 11.09 | 8.62 | |||||||||||||
Shreveport, LA |
Kroger Co. | (5) | 45,000 | 8.97 | 6.96 | |||||||||||||
Wichita, KS |
Kroger Co. | (1 | )(5) | 50,000 | 9.57 | 7.48 | ||||||||||||
Wichita, KS |
Kroger Co. | (1 | )(6) | 40,000 | 8.92 | 6.97 | ||||||||||||
Atlanta, TX |
Safeway | (3 | )(5) | 31,000 | 6.23 | 3.98 | ||||||||||||
Batesville, AR |
Safeway | (1 | )(7) | 29,000 | 8.94 | 5.72 | ||||||||||||
Benton, AR |
Safeway | (1 | )(7) | 33,500 | 7.36 | 4.71 | ||||||||||||
Carthage, TX |
Safeway | (1 | )(4) | 27,700 | 6.43 | 4.12 | ||||||||||||
Little Rock, AR |
Safeway | (1 | )(7) | 36,000 | 10.29 | 6.58 | ||||||||||||
Longview, WA |
Safeway | (4) | 48,700 | 7.01 | 4.48 | |||||||||||||
Mustang, OK |
Safeway | (1 | )(4) | 30,200 | 6.49 | 4.15 | ||||||||||||
Roswell, NM |
Safeway | (2 | )(6) | 36,300 | 9.29 | 5.94 | ||||||||||||
Ruidoso, NM |
Safeway | (1 | )(4) | 38,600 | 9.33 | 5.97 | ||||||||||||
San Ramon, CA |
Safeway | (7) | 54,000 | 7.76 | 4.96 | |||||||||||||
Springerville, AZ |
Safeway | (4) | 30,500 | 7.56 | 4.83 | |||||||||||||
Tucson, AZ |
Safeway | (4) | 41,800 | 7.32 | 4.68 | |||||||||||||
Tulsa, OK |
Safeway | (1 | )(6) | 30,000 | 7.75 | 4.96 | ||||||||||||
Cary, NC |
Kroger Co. | (3 | )(4) | 48,000 | 5.86 | 4.55 | ||||||||||||
| Total | 1,018,100 | |||||||||||||||||
Notes:
| (1) | The tenant is obligated to pay rent pursuant to the lease and has sub-leased this location to a supermarket sub-tenant. | |
| (2) | The tenant is obligated to pay rent pursuant to the lease and has sub-leased this location to a non-supermarket sub-tenant. | |
| (3) | The tenant is currently not operating at this location although they continue to pay rent in accordance with the lease. | |
| (4) | The tenant has exercised its option to renew its lease. | |
| (5) | The tenant has exercised its option to purchase the fee to this property during 2009. | |
| (6) | The tenant has not exercised its option to renew the lease. | |
| (7) | Renewal status pending |
ITEM 3. LEGAL PROCEEDINGS:
We are involved in other various matters of litigation arising in the normal course of business.
While we are unable to predict with any certainty the amounts involved, management is of the
opinion that, when such litigation is resolved, our resulting net liability, if any, will not have
a significant effect on our consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matter was submitted to a vote of security holders through the solicitation of proxies or
otherwise during the fourth quarter of 2007.
27
Table of Contents
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
(a) Market Information
The following table shows, for the period indicated, the high and low sales price for our Common
Shares as reported on the New York Stock Exchange, and cash dividends declared during the two years
ended December 31, 2007 and 2006:
| Dividend | ||||||||||||
| Quarter Ended | High | Low | Per Share | |||||||||
2007 |
||||||||||||
March 31, 2007
|
$ | 28.14 | $ | 24.12 | $ | 0.2000 | ||||||
June 30, 2007
|
28.75 | 25.43 | 0.2000 | |||||||||
September 30, 2007
|
27.93 | 21.19 | 0.2000 | |||||||||
December 31, 2007
|
29.00 | 24.03 | 0.4325 | |||||||||
2006 |
||||||||||||
March 31, 2006
|
$ | 24.21 | $ | 19.79 | $ | 0.1850 | ||||||
June 30, 2006
|
23.94 | 19.51 | 0.1850 | |||||||||
September 30, 2006
|
26.70 | 22.70 | 0.1850 | |||||||||
December 31, 2006
|
27.13 | 23.81 | 0.2000 | |||||||||
At February 29, 2008, there were 321 holders of record of our Common Shares.
(b) Dividends
We have determined that for 2007, 51% of the total dividends distributed to shareholders
represented ordinary income, 15% represented unrecaptured Section 1250 gain and 34% represented
Section 1231 gain. Our cash flow is affected by a number of factors, including the revenues
received from rental properties, our operating expenses, the interest expense on our borrowings,
the ability of lessees to meet their obligations to us and unanticipated capital expenditures.
Future dividends paid by us will be at the discretion of the Trustees and will depend on our actual
cash flows, our financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the Code and such other factors as the Trustees deem relevant.
(c) Issuer purchases of equity securities
We have an existing share repurchase program that authorizes management, at its discretion, to
repurchase up to $20.0 million of our outstanding Common Shares. Through February 29, 2008, we had
repurchased 2.1 million Common Shares at a total cost of $11.7 million. All of these Common Shares
have been subsequently reissued. The program may be discontinued or extended at any time and there
is no assurance that we will purchase the full amount authorized. There were no Common Shares
repurchased by us during the fiscal year ended December 31, 2007.
(d) Securities authorized for issuance under equity compensation plans
The following table provides information related to our 1999 Share Incentive Plan (the “1999
Plan”), 2003 Share Incentive Plan (the “2003 Plan”) and the 2006 Share Incentive Plan (the “2006
Plan”) as of December 31, 2007:
| Equity Compensation Plan Information | ||||||||||||
| (a) | (b) | (c) | ||||||||||
| Number of securities | ||||||||||||
| remaining available | ||||||||||||
| Number of securities to | Weighted- average | for future issuance under | ||||||||||
| be issued upon exercise | exercise price of | equity compensation plans | ||||||||||
| of outstanding options, | outstanding options, | (excluding securities | ||||||||||
| warrants and rights | warrants and rights | reflected in column a) | ||||||||||
Equity compensation plans
approved by security holders |
531,738 | $ | 9.99 | 618,041 | (1) | |||||||
Equity compensation plans
not approved by security holders |
— | — | — | |||||||||
Total |
531,738 | $ | 9.99 | 618,041 | (1) | |||||||
Notes:
| (1) | The 1999 Plan authorizes the issuance of options equal to up to 8% of the total Common Shares outstanding from time to time on a fully diluted basis. However, not more than 4,000,000 of the Common Shares in the aggregate may be issued pursuant to the exercise of options and no participant may receive more than 5,000,000 Common Shares during the term of the 1999 Plan. The 2003 Plan authorizes the issuance of options equal to up to 4% of the total Common Shares outstanding from time to time on a fully diluted basis. However, no participant may receive more than 1,000,000 Common Shares during the term of the 2003 Plan. The 2006 Plan authorizes the issuance of a maximum number of 500,000 Common Shares. No participant may receive more than 500,000 Common Shares during the term of the 2006 Plan. |
28
Table of Contents
Remaining Common Shares available is as follows:
Outstanding Common Shares as of December 31, 2007 |
32,184,462 | |||
Outstanding OP Units as of December 31, 2007 |
642,272 | |||
Total Outstanding Common Shares and OP Units |
32,826,734 | |||
12% of Common Shares pursuant to the 1999 and 2003 Plans |
3,939,208 | |||
Common Shares pursuant to the 2006 Plan |
500,000 | |||
Total Common Shares available under equity compensation plans |
4,439,208 | |||
Less: Issuance of Restricted Shares Granted |
(1,042,005 | ) | ||
Issuance of Options Granted |
(2,779,162 | ) | ||
Number of Common Shares remaining available |
618,041 | |||
| (e) | Share Price Performance Graph (1) |
The following graph compares the cumulative total shareholder return for our Common Shares for the
period commencing December 31, 2002 through December 31, 2007 with the cumulative total return on
the Russell 2000 Index (“Russell 2000”), the NAREIT All Equity REIT Index (the “NAREIT”) and the
SNL Shopping Center REITs (the “SNL”) over the same period. Total return values for the Russell
2000, the NAREIT, the SNL and the Common Shares were calculated based upon cumulative total return
assuming the investment of $100.00 in each of the Russell 2000, the NAREIT, the SNL and our Common
Shares on December 31, 2002, and assuming reinvestment of such dividends. The shareholder return as
set forth in the table below is not necessarily indicative of future performance.
Comparison of 5 Year Cumulative Total Return among Acadia Realty Trust, the Russell 2000, the
NAREIT and the SNL:
| Period Ending | ||||||||||||||||||||||||
| Index | 12/31/02 | 12/31/03 | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | ||||||||||||||||||
Acadia Realty Trust |
100.00 | 178.76 | 243.71 | 311.77 | 401.39 | 427.32 | ||||||||||||||||||
Russell 2000 |
100.00 | 147.25 | 174.24 | 182.18 | 215.64 | 212.26 | ||||||||||||||||||
NAREIT All Equity REIT Index |
100.00 | 137.13 | 180.44 | 202.38 | 273.34 | 230.45 | ||||||||||||||||||
SNL REIT Retail Shopping Ctr Index |
100.00 | 141.78 | 192.62 | 210.19 | 282.93 | 232.94 | ||||||||||||||||||
| (1) | The information is this section is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Trust under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing. |
29
Table of Contents
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, on a historical basis, our selected financial data. This
information should be read in conjunction with our audited consolidated financial statements and
Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing
elsewhere in this Form 10-K. Funds from operations (“FFO”) amounts for the year ended December 31,
2007 have been adjusted as set forth in “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Reconciliation of Net Income to Funds from Operations and
Adjusted Funds From Operations.”
| Years ended December 31, | ||||||||||||||||||||
| (dollars in thousands except per share amounts) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
OPERATING DATA: |
||||||||||||||||||||
Revenues |
$ | 101,569 | $ | 95,800 | $ | 93,965 | $ | 80,283 | $ | 76,072 | ||||||||||
Operating expenses |
48,617 | 42,734 | 38,453 | 32,884 | 31,521 | |||||||||||||||
Interest expense |
22,775 | 20,377 | 16,689 | 14,525 | 13,389 | |||||||||||||||
Depreciation and amortization |
27,506 | 25,361 | 24,697 | 21,607 | 22,537 | |||||||||||||||
Equity in earnings of unconsolidated partnerships |
6,619 | 2,559 | 21,280 | 513 | 985 | |||||||||||||||
Minority interest |
9,063 | 5,227 | (13,946 | ) | (1,462 | ) | (4,892 | ) | ||||||||||||
Income tax provision (benefit) |
297 | (508 | ) | 2,140 | — | — | ||||||||||||||
Income from continuing operations |
18,056 | 15,622 | 19,320 | 10,318 | 4,718 | |||||||||||||||
Income from discontinued operations |
5,537 | 23,391 | 1,306 | 9,267 | 3,135 | |||||||||||||||
Income from extraordinary item (1) |
3,677 | — | — | — | — | |||||||||||||||
Net income |
$ | 27,270 | $ | 39,013 | $ | 20,626 | $ | 19,585 | $ | 7,853 | ||||||||||
Basic earnings per share: |
||||||||||||||||||||
Income from continuing operations |
$ | 0.55 | $ | 0.48 | $ | 0.61 | $ | 0.35 | $ | 0.18 | ||||||||||
Income from discontinued operations |
0.17 | 0.72 | 0.04 | 0.32 | 0.12 | |||||||||||||||
Income from extraordinary item |
0.11 | — | — | — | — | |||||||||||||||
Basic earnings per share |
$ | 0.83 | $ | 1.20 | $ | 0.65 | $ | 0.67 | $ | 0.30 | ||||||||||
Diluted earnings per share: |
||||||||||||||||||||
Income from continuing operations |
$ | 0.54 | $ | 0.48 | $ | 0.60 | $ | 0.34 | $ | 0.18 | ||||||||||
Income from discontinued operations |
0.17 | 0.70 | 0.04 | 0.31 | 0.11 | |||||||||||||||
Income from extraordinary item |
0.11 | — | — | — | — | |||||||||||||||
Diluted earnings per share |
$ | 0.82 | $ | 1.18 | $ | 0.64 | $ | 0.65 | $ | 0.29 | ||||||||||
Weighted average number of Common
Shares outstanding |
||||||||||||||||||||
- basic |
32,907 | 32,502 | 31,949 | 29,341 | 26,640 | |||||||||||||||
- diluted |
33,309 | 33,153 | 32,214 | 29,912 | 27,232 | |||||||||||||||
Cash dividends declared per Common Share |
$ | 1.0325 | $ | 0.755 | $ | 0.7025 | $ | 0.6525 | $ | 0.595 | ||||||||||
BALANCE SHEET DATA: |
||||||||||||||||||||
Real estate before accumulated
depreciation |
$ | 854,074 | $ | 650,051 | $ | 670,817 | $ | 561,370 | $ | 504,355 | ||||||||||
Total assets |
999,012 | 851,692 | 841,204 | 599,724 | 518,914 | |||||||||||||||
Total mortgage indebtedness |
402,903 | 319,507 | 382,510 | 242,527 | 248,180 | |||||||||||||||
Total convertible notes payable |
115,000 | 100,000 | — | — | — | |||||||||||||||
Minority interest in Operating Partnership |
4,595 | 8,673 | 9,204 | 6,893 | 7,875 | |||||||||||||||
Minority interests in partially-owned affiliates |
166,516 | 105,064 | 137,086 | 75,244 | 37,681 | |||||||||||||||
Total equity |
240,736 | 241,119 | 220,576 | 216,924 | 169,734 | |||||||||||||||
OTHER: |
||||||||||||||||||||
Funds from Operations, adjusted for
extraordinary item (1) (2) |
$ | 44,018 | $ | 39,953 | $ | 35,842 | $ | 30,004 | $ | 27,664 | ||||||||||
Cash flows provided by (used in): |
||||||||||||||||||||
Operating activities |
105,165 | 39,627 | 50,239 | 33,885 | 31,031 | |||||||||||||||
Investing activities |
(208,869 | ) | (58,890 | ) | (135,470 | ) | (72,860 | ) | (76,552 | ) | ||||||||||
Financing activities |
87,476 | 68,359 | 159,425 | 40,050 | 15,454 | |||||||||||||||
Notes:
| (1) | The extraordinary item represents the Company’s share of estimated extraordinary gain related to its private-equity investment in Albertson’s. The Albertson’s entity has recorded an extraordinary gain in connection with the allocation of purchase price to assets acquired. The Company considers its private-equity investments to be investments in operating businesses as opposed to real estate. Accordingly, all gains and losses from private-equity investments are included in FFO, which management believes provides a more accurate reflection of the operating performance of the Company. | |
| (2) | The Company considers funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing the performance of the Company. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property and depreciation and amortization. However, the Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REIT’s. FFO does not represent cash generated from operations as defined by generally accepted |
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| accounting principles (“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating the Company’s performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, the Company defines FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. |
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
As of December 31, 2007, we operated 76 properties, which we own or have an ownership interest in,
within our Core Portfolio or within our Opportunity Funds I, II and III. These properties consist
of 75 commercial properties, primarily neighborhood and community shopping centers and mixed-use
developments, which are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of
the United States and one multi-family property located in Southeast region of the United States.
Our Core Portfolio consists of 34 properties comprising approximately 5.5 million square feet. Fund
I has 29 properties comprising approximately 1.5 million square feet. Fund II has ten properties,
the majority of which are undergoing redevelopment and will have approximately two million square
feet upon completion of redevelopment activities. The newly created Fund III has two properties,
which are undergoing redevelopment and will have approximately 0.3 million square feet upon
completion of redevelopment activities. The majority of our operating income derives from the
rental revenues from these properties, including recoveries from tenants, offset by operating and
overhead expenses. As our RCP Venture invests in operating companies, we consider these investments
to be private-equity, as opposed to real estate investments. Since these are not traditional
investments in operating rental real estate, the Operating Partnership invests in these through a
taxable REIT subsidiary (“TRS”).
Our primary business objective is to acquire and manage commercial retail properties that will
provide cash for distributions to shareholders while also creating the potential for capital
appreciation to enhance investor returns. We focus on the following fundamentals to achieve this
objective:
| – | Own and operate a portfolio of community and neighborhood shopping centers and mixed-use properties with a retail component located in markets with strong demographics. | ||
| – | Generate internal growth within the portfolio through aggressive redevelopment, re-anchoring and leasing activities. | ||
| – | Generate external growth through an opportunistic yet disciplined acquisition program. The emphasis is on targeting transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions. | ||
| – | Partner with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets. | ||
| – | Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth. |
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 2007 (“2007”) to the year ended December 31, 2006
(“2006”)
Revenues
| Change | ||||||||||||||||
| (dollars in millions) | 2007 | 2006 | $ | % | ||||||||||||
Minimum rents |
$ | 72.1 | $ | 63.6 | $ | 8.5 | 13 | % | ||||||||
Percentage rents |
0.6 | 1.2 | (0.6 | ) | (50) | % | ||||||||||
Expense reimbursements |
13.3 | 14.5 | (1.2 | ) | (8) | % | ||||||||||
Other property income |
1.0 | 0.9 | 0.1 | 11 | % | |||||||||||
Management fee income |
4.1 | 5.6 | (1.5 | ) | (27) | % | ||||||||||
Interest income |
10.3 | 8.3 | 2.0 | 24 | % | |||||||||||
Other |
0.2 | 1.7 | (1.5 | ) | (88) | % | ||||||||||
Total revenues |
$ | 101.6 | $ | 95.8 | $ | 5.8 | 6 | % | ||||||||
The increase in minimum rents was primarily attributable to additional rents following our
acquisition of 200 West 54th Street, 145
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East Service Road, 2914 Third Avenue and Chestnut Hill (“2006/2007 Acquisitions”) as well as
Liberty Avenue and 216th Street being placed in service January 1, 2007 and October 1,
2007, respectively. In addition, minimum rents increased as a result of re-tenanting activities
across our portfolio.
Percentage rents decreased primarily as a result of the temporary closing of an anchor tenant at
Fordham Place during the construction period in 2007.
Expense reimbursements for common area maintenance (“CAM”) decreased $0.2 million. During 2007, we
completed our multi-year review of CAM billings and resolved the majority of all outstanding CAM
billing issues with our tenants. As a result, 2007 was adversely impacted by charges related to
settlements and related adjustments totaling $1.0 million. This was partially offset by higher CAM
recovery resulting from increased snow removal costs in 2007. Real estate tax reimbursements
decreased $1.0 million, primarily as a result of lower real estate tax expense in 2007 and a $0.4
million real estate tax charge to an anchor tenant for previous years billed during 2006.
Management fee income decreased $1.5 million primarily as a result of lower fees earned in
connection with Klaff management contracts following the disposition of certain assets in 2006 and
2007 and lower management fees from our investments in unconsolidated affiliates.
The increase in interest income was attributable to interest income on notes and other advances
receivable originated in the second half of 2006 and 2007 as well as higher balances in interest
earning assets in 2007.
The decrease in other income was primarily attributable to a $1.1 million reimbursement of certain
fees by the institutional investors of Fund I for the Brandywine Portfolio in 2006 as well as $0.5
million of additional income related to termination of interest rate swap agreements.
Operating Expenses
| Change | ||||||||||||||||
| (dollars in millions) | 2007 | 2006 | $ | % | ||||||||||||
Property operating |
$ | 15.9 | $ | 12.8 | $ | 3.1 | 24 | % | ||||||||
Real estate taxes |
9.7 | 10.1 | (0.4 | ) | (4) | % | ||||||||||
General and administrative |
23.0 | 19.8 | 3.2 | 16 | % | |||||||||||
Depreciation and amortization |
27.5 | 25.4 | 2.1 | 8 | % | |||||||||||
Total operating expenses |
$ | 76.1 | $ | 68.1 | $ | 8.0 | 12 | % | ||||||||
The increase in property operating expenses was primarily the result of the 2006/2007 Acquisitions,
Liberty Avenue being placed in service January 1, 2007 and higher snow removal costs of $1.0
million in 2007.
The decrease in real estate taxes was due to tax refunds and adjustments of estimates of $0.6
million recorded in 2007 and $0.6 million related to the capitalization of construction period real
estate taxes at a property that was operating in 2006. These decreases were offset by increased
real estate tax expense of $0.8 million following the 2006/2007 Acquisitions as well as general
increases across the portfolio.
The variance in general and administrative expense was attributable to increased compensation
expense, including share based compensation of $4.7 million for additional personnel hired in the
second half of 2006 and in 2007 as well as increases in existing employee salaries. In addition,
there was an increase of $0.7 million for other overhead expenses following the expansion of our
infrastructure related to increased fund investments and asset management services. These factors
were partially offset by an increase in capitalized construction salaries due to higher
redevelopment activities in 2007.
Depreciation expense increased $1.3 million in 2007. This was principally a result of increased
depreciation expense following the 2006/2007 Acquisitions and Liberty Avenue and 216th
Street being placed in service during 2007. Amortization expense increased $0.8 million in 2007.
This was primarily attributable to increased amortization of loan costs following our convertible
debt issuances in December 2006 and January 2007 as well as increased amortization of loan costs
from financing activity in late 2006 and 2007.
Other
| Change | ||||||||||||||||
| (dollars in millions) | 2007 | 2006 | $ | % | ||||||||||||
Equity in earnings of unconsolidated affiliates |
$ | 6.6 | $ | 2.6 | $ | 4.0 | 153 | % | ||||||||
Interest expense |
(22.8 | ) | (20.4 | ) | (2.4 | ) | (12 | )% | ||||||||
Minority interest |
9.1 | 5.2 | 3.9 | 75 | % | |||||||||||
Income taxes |
0.3 | (0.5 | ) | (0.8 | ) | (160 | )% | |||||||||
Income from discontinued operations |
5.5 | 23.4 | (17.9 | ) | (76 | )% | ||||||||||
Extraordinary item |
3.7 | — | 3.7 | 100 | % | |||||||||||
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Equity in earnings of unconsolidated affiliates increased as a result of our distributions in
excess of our invested capital from both our Albertson’s investment of $2.4 million and our
investment in Hitchcock Plaza of $2.4 million. These increases were offset by a decrease in our pro
rata share of earnings from our Mervyns investment of $1.3 million.
Interest expense increased $2.4 million in 2007. This was the result of a $4.9 million increase
attributable to higher average outstanding borrowings in 2007 and $0.4 million of costs associated
with a loan payoff in 2007. These increases were offset by a $2.9 million decrease resulting from a
lower average interest rate on the portfolio mortgage debt in 2007.
The variance in minority interest is primarily attributable to the minority partners’ share of
increased fund level fees partially offset by $2.6 million representing the minority partners’
share of the income reported from the equity in earnings of unconsolidated affiliates.
The variance in income tax expense primarily relates to income tax on our share of income and
losses from Albertson’s and Mervyns.
Income from discontinued operations represents activity related to properties sold in 2007 and
2006.
The extraordinary gain in 2007 relates to our share of the extraordinary gain, net of income taxes
and minority interest, from our Albertson’s investment. This gain was characterized as
extraordinary consistent with the accounting treatment by Albertson’s which reflected the excess of
fair value of net assets acquired over the purchase price as an extraordinary gain.
Comparison of the year ended December 31, 2006 (“2006”) to the year ended December 31, 2005
(“2005”)
The Brandywine Portfolio operations were consolidated as part of Fund I for the year ended December
31, 2005. Subsequent to the recapitalization and conversion of interests from Fund I to GDC in
January 2006, the Brandywine Portfolio is accounted for under the equity method of accounting for
the year ended December 31, 2006. In the following tables, we have excluded the Brandywine
Portfolio operations for the year ended December 31, 2005 for purposes of comparability with the
year ended December 31, 2006.
| Revenues | Change from | |||||||||||||||||||||||
| 2005 As | Brandywine | 2005 | 2005 Adjusted | |||||||||||||||||||||
| (dollars in millions) | 2006 | Reported | Portfolio | Adjusted | $ | % | ||||||||||||||||||
Minimum rents |
$ | 63.6 | $ | 69.4 | $ | (14.0 | ) | $ | 55.4 | $ | 8.2 | 15 | % | |||||||||||
Percentage rents |
1.2 | 1.3 | (0.6 | ) | 0.7 | 0.5 | 71 | % | ||||||||||||||||
Expense reimbursements |
14.5 | 14.4 | (2.2 | ) | 12.2 | 2.3 | 19 | % | ||||||||||||||||
Other property income |
0.9 | 2.0 | (0.2 | ) | 1.8 | (0.9 | ) | (50 | )% | |||||||||||||||
Management fee income |
5.6 | 3.6 | 0.5 | 4.1 | 1.5 | 37 | % | |||||||||||||||||
Interest income |
8.3 | 3.3 | — | 3.3 | 5.0 | 152 | % | |||||||||||||||||
Other |
1.7 | — | — | — | 1.7 | 100 | % | |||||||||||||||||
Total revenues |
$ | 95.8 | $ | 94.0 | $ | (16.5 | ) | $ | 77.5 | $ | 18.3 | 24 | % | |||||||||||
The increase in minimum rents was attributable to additional rents following our acquisition of
Chestnut Hill, Clark Diversey, A&P Shopping Plaza, 2914 Third Avenue and Boonton Shopping Center
(60% owned) as well as Fund II acquisitions of Sherman Avenue and 161st Street in New York and a
leasehold interest in Chicago (“2005/2006 Acquisitions”).
Expense reimbursements for both CAM and real estate taxes increased in 2006. CAM expense
reimbursements increased $0.5 million as a result of higher tenant reimbursements following the
2005/2006 Acquisitions, offset by a decrease in tenant reimbursements as a result of lower snow
removal costs in 2006. Real estate tax reimbursements increased $1.8 million, primarily as a result
of the 2005/2006 Acquisitions, as well as general increases in real estate taxes across the
portfolio.
The decrease in other property income was the result of receipt of a bankruptcy claim settlement
against a former tenant in 2005.
Management fee income increased primarily as a result of fees earned in connection with the
acquisition of the Klaff management contract rights in February 2005 and additional management fees
earned from our investments in unconsolidated affiliates.
The increase in interest income was attributable to interest income on our advances and notes
receivable originated in 2005 and 2006, as well as higher balances in interest earning assets in
2006.
Other income increased as a result of a $1.1 million reimbursement of the Company’s share of
certain fees incurred by the institutional investors of Fund I for the Brandywine Portfolio, as
well as $0.5 million related to the termination of an interest rate swap in 2006.
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| Operating Expenses | Change from | |||||||||||||||||||||||
| 2005 As | Brandywine | 2005 | 2005 Adjusted | |||||||||||||||||||||
| (dollars in millions) | 2006 | Reported | Portfolio | Adjusted | $ | % | ||||||||||||||||||
Property operating |
$ | 12.8 | $ | 13.3 | $ | (3.4 | ) | $ | 9.9 | $ | 2.9 | 29 | % | |||||||||||
Real estate taxes |
10.1 | 9.0 | (0.8 | ) | 8.2 | 1.9 | 23 | % | ||||||||||||||||
General and administrative |
19.8 | 16.2 | — | 16.2 | 3.6 | 22 | % | |||||||||||||||||
Depreciation and amortization |
25.4 | 24.7 | (2.6 | ) | 22.1 | 3.3 | 15 | % | ||||||||||||||||
| % | ||||||||||||||||||||||||
Total operating expenses |
$ | 68.1 | $ | 63.2 | $ | (6.8 | ) | $ | 56.4 | $ | 11.7 | $ | 21 | % | ||||||||||
The increase in property operating expenses was primarily the result of the recovery of
approximately $0.5 million related to the settlement of our insurance claim in connection with the
flood damage incurred at the Mark Plaza in 2005, increased property operating expenses related to
the 2005/2006 Acquisitions and higher bad debt expense in 2006. These increases were offset by
lower snow removal costs during 2006.
The increase in real estate taxes was due to general increases in real estate taxes experienced
across the portfolio, as well as increased real estate tax expense related to the 2005/2006
Acquisitions.
The increase in general and administrative expense was primarily attributable to increased
compensation expense of $2.7 million, including stock-based compensation of $0.9 million, and $0.9
million of other overhead expenses following the expansion of our infrastructure related to
increased investment in development-intensive projects in Fund assets and asset management
services.
Depreciation expense increased $1.4 million in 2006. This was principally a result of increased
depreciation expense related to the 2005/2006 Acquisitions. Amortization expense increased $1.9
million, which was primarily the combination of an increase in amortization related to the
2005/2006 Acquisitions, specifically, amortization of tenant installation costs of $1.0 million,
amortization of leasehold interest of $0.5 million and amortization of loan costs of $0.2 million.
In addition, amortization expense increased $0.2 million related to the write off of certain Klaff
management contracts following the disposition of certain related assets in 2006.
| Other | Change from | |||||||||||||||||||||||
| 2005 As | Brandywine | 2005 | 2005 Adjusted | |||||||||||||||||||||
| (dollars in millions) | 2006 | Reported | Portfolio | Adjusted | $ | % | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
$ | 2.6 | $ | 21.3 | $ | 0.9 | $ | 22.2 | $ | (19.6 | ) | (88 | )% | |||||||||||
Interest expense |
(20.4 | ) | (16.7 | ) | 3.7 | (13.0 | ) | (7.4 | ) | (57 | )% | |||||||||||||
Minority interest |
5.2 | (13.9 | ) | 5.1 | (8.8 | ) | 14.0 | 159 | % | |||||||||||||||
Income taxes |
(0.5 | ) | 2.1 | — | 2.1 | 2.6 | 124 | % | ||||||||||||||||
Income from discontinued operations |
$ | 23.4 | 1.3 | — | 1.3 | 22.1 | 1700 | % | ||||||||||||||||
Equity in earnings of unconsolidated affiliates decreased during 2006 primarily as a result of the
gains recognized from the sale of Mervyns assets in 2005.
Interest expense increased $7.4 million as a result of higher average outstanding borrowings in
2006.
Minority interest variance is attributable to the minority partner’s share of gains from the sale
of Mervyns assets in 2005.
The variance in income tax expense relates to taxes at the taxable REIT subsidiary (“TRS”) level on
our share of gains from the sale of Mervyns locations during 2005.
Income from discontinued operations represents activity related to properties sold in 2007, 2006
and 2005.
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RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
| For the Years Ended December 31, | ||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net income |
$ | 27,270 | $ | 39,013 | $ | 20,626 | $ | 19,585 | $ | 7,853 | ||||||||||
Depreciation of real estate and amortization of leasing costs: |
||||||||||||||||||||
Consolidated affiliates, net of minority interests’ share |
19,669 | 20,206 | 16,676 | 16,026 | 18,421 | |||||||||||||||
Unconsolidated affiliates |
1,736 | 1,806 | 746 | 714 | 643 | |||||||||||||||
Income attributable to minority interest in operating
partnership (1) |
614 | 803 | 416 | 375 | 747 | |||||||||||||||
Gain on sale of properties |
(5,271 | ) | (21,875 | ) | (2,622 | ) | (6,696 | ) | — | |||||||||||
Extraordinary item (net of minority interests’ share and
income taxes) (3) |
(3,677 | ) | — | — | — | — | ||||||||||||||
Funds from operations (2) |
40,341 | 39,953 | 35,842 | 30,004 | 27,664 | |||||||||||||||
Add back:
Extraordinary item, net (3) |
3,677 | — | — | — | — | |||||||||||||||
Funds from operations, adjusted for extraordinary item |
$ | 44,018 | $ | 39,953 | $ | 35,842 | $ | 30,004 | $ | 27,664 | ||||||||||
| Notes: | ||
| (1) | Represents income attributable to Common Operating Partnership Units and does not include distributions paid to Series A and B Preferred OP Unitholders. | |
| (2) | The Company considers funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing the performance of the Company. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property and depreciation and amortization. However, the Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REIT’s. FFO does not represent cash generated from operations as defined by generally accepted accounting principles (“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating the Company’s performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, the Company defines FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. | |
| (3) | The extraordinary item represents the Company’s share of estimated extraordinary gain related to its private-equity investment in Albertson’s. The Albertson’s entity has recorded an extraordinary gain in connection with the allocation of purchase price to assets acquired. The Company considers its private-equity investments to be investments in operating businesses as opposed to real estate. Accordingly, all gains and losses from private-equity investments are included in FFO, which management believes provides a more accurate reflection of the operating performance of the Company. |
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity
Our principal uses of liquidity are expected to be for (i) distributions to our shareholders and OP
unit holders, (ii) investments which include the funding of our capital committed to our
opportunity funds, property acquisitions and redevelopment/re-tenanting activities within our
existing portfolio and (iii) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at
least 90% of our taxable income to our shareholders. For the first three quarters during 2007, we
paid a quarterly dividend of $0.20 per Common Share and Common OP Unit. In December of 2007, our
Board of Trustees approved and declared an 5.0% increase in our quarterly dividend to $0.21 per
Common Share and Common OP Unit for the fourth quarter of 2007, which was paid January 15, 2008. In
addition, in December of 2007, our Board of Trustees approved a special dividend of $0.2225 per
Common Share in connection with taxable gains arising from property dispositions that was paid on
January 15, 2008 to the shareholders of record as of December 31, 2007.
Fund I and Mervyns I
In September 2001, the Operating Partnership committed $20.0 million to a newly formed opportunity
fund with four of our institutional shareholders, who committed $70.0 million, for the purpose of
acquiring a total of approximately $300.0 million of community and neighborhood shopping centers on
a leveraged basis.
On January 4, 2006, we recapitalized a one million square foot retail portfolio located in
Wilmington, Delaware (“Brandywine Portfolio”) through a merger of interests with affiliates of GDC
Properties (“GDC”). The Brandywine Portfolio was recapitalized through a “cash out” merger of the
77.8% interest, which was previously held by the institutional investors in Fund I (the
“Investors”) to affiliates of GDC at a valuation of $164.0 million. The Operating Partnership,
through a subsidiary, retained our existing 22.2%
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interest and continues to operate the Brandywine Portfolio and earn fees for such services. At the
closing, the Investors, excluding the Operating Partnership, received a return of all their capital
invested in Fund I and preferred return, thus triggering the Operating Partnership’s Promote
distribution in all future Fund I distributions and increasing the Operating Partnership’s interest
in cash flow and income from 22.2% to 37.8% as a result of the Promote. In June 2006, the Investors
received $36.0 million of additional proceeds from this transaction following the replacement of
bridge financing provided by them with permanent mortgage financing.
As of December 31, 2007, Fund I has a total of 29 properties totaling 1.5 million square feet as
further discussed in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K.
Fund II and Mervyns II
On June 15, 2004, we closed our second opportunity fund, Fund II, and during August 2004, formed
Mervyns II with the investors from Fund I as well as two additional institutional investors. With
$300.0 million of committed discretionary capital, Fund II and Mervyns II combined expect to be
able to acquire up to $900.0 million of real estate assets on a leveraged basis. The Operating
Partnership is the managing member with a 20% interest in the joint venture. The terms and
structure of Fund II are substantially the same as Fund I with the exceptions that the preferred
return is 8%. As of December 31, 2007, $182.0 million had been contributed to Fund II, of which the
Operating Partnership’s share is $36.4 million.
Fund II has invested in the RCP Venture and the New York Urban/Infill Redevelopment initiatives and
other investments as further discussed in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K .
RCP Venture
The following table summarizes the RCP Venture investments from inception through December 31,
2007:
| Operating Partnership Share | ||||||||||||||||||||
| (dollars in millions) | Year | Invested | Invested | |||||||||||||||||
| Investor | Investment | acquired | capital | Distributions | capital | Distributions | ||||||||||||||
Mervyns I and Mervyns II |
Mervyns | 2004 | $ | 26.1 | $ | 46.0 | $ | 4.9 | $ | 11.3 | ||||||||||
Mervyns I and Mervyns II |
Mervyns add-on investments |
2005 | 1.3 | 1.3 | 0.3 | 0.3 | ||||||||||||||
Mervyns II |
Albertson’s | 2006 | 20.7 | 53.2 | 4.2 | 9.8 | ||||||||||||||
Mervyns II |
Albertson’s add-on investments |
2006/2007 | 2.8 | 0.8 | 0.4 | 0.1 | ||||||||||||||
Fund II |
Shopko | 2006 | 1.1 | 1.1 | 0.2 | 0.2 | ||||||||||||||
Fund II |
Marsh | 2006 | 0.7 | ¾ | 0.1 | ¾ | ||||||||||||||
Mervyns II |
Rex | 2007 | 2.7 | ¾ | 0.5 | ¾ | ||||||||||||||
Total |
$ | 55.4 | $ | 102.4 | $ | 10.6 | $ | 21.7 | ||||||||||||
New York Urban/ Infill Redevelopment Initiative
In September 2004, we, through Fund II, launched our New York Urban Infill Redevelopment
initiative. During 2004, Fund II, together with an unaffiliated partner, P/A, formed Acadia P/A
(“Acadia P/A”) for the purpose of acquiring, constructing, developing, owning, operating, leasing
and managing certain retail real estate properties in the New York City metropolitan area. P/A has
agreed to invest 10% of required capital up to a maximum of $2.2 million and Fund II, the managing
member, has agreed to invest the balance to acquire assets in which Acadia P/A agrees to invest.
Operating cash flow is generally to be distributed pro-rata to Fund II and P/A until each has
received a 10% cumulative return and then 60% to Fund II and 40% to P/A. Distributions of net
refinancing and net sales proceeds, as defined, follow the distribution of operating cash flow
except that unpaid original capital is returned before the 60%/40% split between Fund II and P/A,
respectively. Upon the liquidation of the last property investment of Acadia P/A, to the extent
that Fund II has not received an 18% internal rate of return (“IRR”) on all of its capital
contributions, P/A is obligated to return a portion of its previous distributions, as defined,
until Fund II has received an 18% IRR. To date, Fund II has invested in nine projects, eight of
which are in conjunction with P/A, as follows:
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| Redevelopment (dollars in millions) | ||||||||||||||||||
| Anticipated | Square | |||||||||||||||||
| Year | Purchase | additional | Estimated | feet upon | ||||||||||||||
| Property | Location | acquired | price | costs | completion | completion | ||||||||||||
Liberty Avenue (1) (2) |
Queens | 2005 | $ | 14.5 | $ | — | Completed | 125,000 | ||||||||||
216th Street(3) |
Manhattan | 2005 | 27.5 | — | Completed | 60,000 | ||||||||||||
Pelham Manor Shopping Center (1) |
Westchester | 2004 | — | 45.0 | 2nd half 2008 | 320,000 | ||||||||||||
161st Street |
Bronx | 2005 | 49.0 | 16.0 | 1st half 2009 | 232,000 | ||||||||||||
400 East Fordham Road |
Bronx | 2004 | 30.0 | 90.0 | 1st half 2009 | 285,000 | ||||||||||||
Canarsie Plaza |
Brooklyn | 2007 | 21.0 | 49.0 | 1st half 2009 | 323,000 | ||||||||||||
4650 Broadway |
Manhattan | 2005 | 25.0 | 30.0 | 2nd half 2009 | 216,000 | ||||||||||||
CityPoint (1) |
Brooklyn | 2007 | 29.0 | 296.0 | (4) | 600,000 | ||||||||||||
Atlantic Avenue |
Brooklyn | 2007 | 5.0 | 18.0 | 2nd half 2009 | 110,000 | ||||||||||||
Total |
$ | 201.0 | $ | 544.0 | 2,271,000 | |||||||||||||
| (1 | ||||||||||||||||||
| Notes: | ||
| (1) | Fund II acquired a ground lease interest at this property. | |
| (2) | Liberty Avenue redevelopment is complete. The purchase price includes redevelopment costs of $14.5 million. | |
| (3) | 216th Street redevelopment is complete. The purchase price includes redevelopment costs of $20.5 million. | |
| (4) | To be determined. |
Fund III
In May 2007, we closed on our third opportunity fund, Fund III with fourteen institutional
investors, including a majority of the investors from Fund I and Fund II. With $503.0 million of
committed discretionary capital, Fund III expects to be able to acquire or develop approximately
$1.5 billion of assets on a leveraged basis. The Operating Partnership’s share of the committed
capital is $100.0 million and it is the sole managing member with a 19.9% interest in Fund III. The
terms and structure of Fund III are substantially the same as the previous Funds, including the
Promote structure, with the exception that the Preferred Return is 6%.
Fund III has invested in the New York Urban/Infill Redevelopment initiatives and another investment
as further discussed in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K . The projects are as
follows:
| Redevelopment (dollars in millions) | ||||||||||||||||||||||||
| Anticipated | Square | |||||||||||||||||||||||
| Year | Purchase | additional | Estimated | feet upon | ||||||||||||||||||||
| Property | Location | acquired | price | costs | completion | completion | ||||||||||||||||||
Sheepshead Bay |
Brooklyn | 2007 | $ | 20.0 | $ | 89.0 | (1 | ) | 240,000 | |||||||||||||||
Main Street |
Westport CT | 2007 | 17.0 | 6.0 | (1 | ) | 30,000 | |||||||||||||||||
Total |
$ | 37.0 | $ | 95.0 | 270,000 | |||||||||||||||||||
| (1) | To be determined. |
Other Investments
During 2005, 2006 and 2007, we made the following other core portfolio investments as further
discussed in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K:
(i) $16.8 million in Amboy Road
(ii) $9.8 million for Clark/Diversey
(iii) $3.2 million for Boonton Shopping Center
(iv) $16.0 million for Chestnut Hill and
(v) $18.5 million for 2914 Third Avenue
(vi) $36.4 million for West 54th Street
(vii) $17.0 million for East Service Road
(ii) $9.8 million for Clark/Diversey
(iii) $3.2 million for Boonton Shopping Center
(iv) $16.0 million for Chestnut Hill and
(v) $18.5 million for 2914 Third Avenue
(vi) $36.4 million for West 54th Street
(vii) $17.0 million for East Service Road
Property Development, Redevelopment and Expansion
Our redevelopment program focuses on selecting well-located neighborhood and community shopping
centers and creating significant value through re-tenanting and property redevelopment.
During 2006, we commenced the redevelopment and re-tenanting of the Bloomfield Town Square, located
in Bloomfield Hills, Michigan. A former outparcel building, occupied by Chrysler Dodge, was
demolished and replaced with a 17,500 square foot building
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occupied by Drexel Heritage and Panera Bread. The new tenants opened and commenced paying rent
during the third and fourth quarters of 2006, and are paying base rent at a 127% increase over that
of Chrysler Dodge. In addition, we have re-tenanted approximately 26,000 square feet to Circuit
City, which commenced paying rent in September of 2007 at a 79% increase over that of the former
tenants. Total costs for this project was $4.6 million.
Additionally, for the year ended December 31, 2007, we currently estimate that capital outlays of
approximately $2.5 million to $3.5 million will be required for tenant improvements, related
renovations and other property improvements.
Share Repurchase
Repurchases of our Common Shares is an additional use of liquidity as discussed in Item 5 of this
Form 10-K.
SOURCES OF LIQUIDITY
We intend on using Fund II and Fund III as well as new funds that we may establish in the future,
as the primary vehicles for our future acquisitions, including investments in the RCP Venture and
New York Urban/Infill Redevelopment initiative. Additional sources of capital for funding property
acquisitions, development, redevelopment, expansion, re-tenanting, tenanting, RCP investments and
New York Urban/Infill are expected to be obtained primarily from (i) the issuance of public equity
or debt instruments, (ii) cash on hand, (iii) additional debt financings, (iv) unrelated member
capital contributions and (v) future sales of existing properties. As of December 31, 2007, we had
a total of approximately $202.3 million of additional capacity under existing debt facilities, cash
and cash equivalents on hand of $123.3 million, and ten properties that are unencumbered and
available as potential collateral for future borrowings. In addition, during 2007, we, through our
RCP Venture, received cash distributions totaling approximately $53.2 million from our ownership
position in Albertsons. The Operating Partnership’s share of these distributions amounted to
approximately $10.0 million. We anticipate that cash flow from operating activities will continue
to provide adequate capital for all of our debt service payments, recurring capital expenditures
and REIT distribution requirements. On January 5, 2006, we made a distribution of $42.7 million
utilizing a $42.7 million distribution we received from an unconsolidated affiliate on December 29,
2005.
Issuance of Convertible Notes
During December of 2006 and January of 2007, we issued $115.0 million of 3.75% Convertible Notes.
These notes were issued at par and are due in 2026. The $112.1 million in proceeds, net of related
costs, were used to retire variable rate debt, fund capital commitments and general company
purposes.
Shelf Registration Statements and Issuance of Equity
During January 2007, we filed a shelf registration on Form S-3 providing offerings for up to a
total of $300.0 million of Common Shares, Preferred Shares and debt securities. To date, we have
not issued any securities pursuant to this shelf registration.
In addition, we have $46.7 million of remaining capacity to issue equity under the shelf
registration statement we filed in November 2004.
Financing and Debt
At December 31, 2007, mortgage and convertible notes payable aggregated $517.0 million, net of
unamortized premium of $0.9 million, and were collateralized by 49 properties and related tenant
leases. Interest rates on our outstanding indebtedness ranged from 3.75% to 8.5% with maturities
that ranged from March 2008 to November 2032. Taking into consideration $34.3 million of notional
principal under variable to fixed-rate swap agreements currently in effect, as of December 31, 2007
$401.4 million of the portfolio, or 78%, was fixed at a 5.2% weighted average interest rate and
$115.6 million, or 22% was floating at a 6.0% weighted average interest rate. There is $92.2
million of debt maturing in 2008 at weighted average interest rates of 5.8%. We intend to refinance
the indebtedness or select other alternatives based on market conditions at that time.
Reference is made to Note 7 and Note 8 in the Notes to Consolidated Financial Statements included
in this Form 10-K for a summary of the financing and refinancing transactions since December 31,
2006.
Asset Sales
Asset sales are an additional source of liquidity for us. During December of 2007, we sold an
apartment complex in Columbia Missouri and during November and December of 2006, we sold the
Soundview Marketplace, Bradford Towne Center, Greenridge Plaza, Luzerne Street Shopping Center and
Pittston Plaza. During 2005 we sold the Berlin Shopping Center. These sales are discussed in “ASSET
SALES AND CAPITAL/ASSET RECYCLING” in Item 1 of this Form 10-K.
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CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
At December 31, 2007, maturities on our mortgage notes ranged from March 2008 to November 2032. In
addition, we have non-cancelable ground leases at seven of our shopping centers. We lease space for
our White Plains corporate office for a term expiring in 2015. The following table summarizes our
debt maturities and obligations under non-cancelable operating leases of December 31, 2007:
| Payments due by period | ||||||||||||||||||||
| Less than | 1 to 3 | 3 to 5 | More than | |||||||||||||||||
| Contractual obligation: | Total | 1 year | years | years | 5 years | |||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Future debt maturities |
$ | 517.0 | $ | 92.2 | $ | 64.9 | $ | 143.1 | $ | 216.8 | ||||||||||
Interest obligations on debt |
146.1 | 23.7 | 40.0 | 31.4 | 51.0 | |||||||||||||||
Operating lease obligations |
126.7 | 3.9 | 10.2 | 11.2 | 101.4 | |||||||||||||||
Total |
$ | 789.8 | $ | 119.8 | $ | 115.1 | $ | 185.7 | $ | 369.2 | ||||||||||
During May of 2007, we closed on our third opportunity fund, Fund III. The Operating Partnership’s
share of Fund III’s $503.0 million committed capital is $100.0 million.
In conjunction with the redevelopment of our core portfolio and opportunity fund properties, we
have entered into construction commitments aggregating approximately $47.8 million with general
contractors as of December 31, 2007.
OFF BALANCE SHEET ARRANGEMENTS
We have investments in the following joint ventures for the purpose of investing in operating
properties. We account for these investments using the equity method of accounting as we have a
non-controlling interest. As such, our financial statements reflect our share of income from but
not the assets and liabilities of these joint ventures.
| – | The Operating Partnership owns a 49% interest in two partnerships which own the Crossroads Shopping Center (“Crossroads”). The Operating Partnership’s pro rata share of Crossroads mortgage debt was $31.4 million as of December 31, 2007. This fixed-rate debt bears interest at 5.4% and matures in December 2014. | ||
| – | The Operating Partnership owns a 22.2% investment in various entities which own the Brandywine Portfolio. The Operating Partnership’s pro-rata share of Brandywine debt was $36.9 million as of December 31, 2007 with a fixed interest rate of 5.99%. These loans mature on July 1, 2016. | ||
| – | The Operating Partnership has a 4.9% interest in CityPoint, a Fund II investment, of which the Operating Partnership’s pro-rata share of mortgage debt (net of Fund II minority interest share), was $1.7 million as of December 31, 2007. This loan bears interest at LIBOR plus 120 basis points and matures on June 13, 2008. | ||
| – | The Operating Partnership has an 18.9% interest in two Fund I investments of which the Operating Partnership’s pro-rata share of mortgage debt (net of the Fund I minority interest share), was $3.2 million as of December 31, 2007. These loans carry a weighted average interest rate of 6.21% and both loans mature during August 2010. |
In addition, we have arranged for the provision of five separate letters of credit in connection
with certain leases and investments. As of December 31, 2007, there were no outstanding balances
under any of the letters of credit. If the letters of credit were fully drawn, the combined maximum
amount of exposure would be $12.2 million.
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the year ended December 31, 2007 (“2007”)
with the cash flow for the year ended December 31, 2006 (“2006”).
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | Variance | ||||||||||
| (dollars in millions) | ||||||||||||
Net cash provided by operating activities |
$ | 105.2 | $ | 39.6 | $ | 64.5 | ||||||
Net cash used in investing activities |
(208.9 | ) | (58.9 | ) | (150.0 | ) | ||||||
Net cash provided by financing activities |
87.5 | 68.4 | 20.2 | |||||||||
Totals |
$ | (16.2 | ) | $ | 49.1 | $ | (65.3 | ) | ||||
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A discussion of the significant changes in cash flow for 2007 versus 2006 is as follows:
The variance in net cash provided by operating activities resulted from an increase of $23.5 million in operating income before non-cash expenses in 2007, which was primarily due to the increase of $33.4 million in distributions of operating income from unconsolidated affiliates as a result of the distributions from Albertson’s in 2007 as well as those factors discussed in this Item 7. In addition, a net increase in cash of $42.1 million resulted from changes in operating assets and liabilities, primarily other assets, that was the result of the repayment of notes relating to certain transactions in 2007 as well as an increase in accrued expenses and other liabilities.
The variance in net cash provided by operating activities resulted from an increase of $23.5 million in operating income before non-cash expenses in 2007, which was primarily due to the increase of $33.4 million in distributions of operating income from unconsolidated affiliates as a result of the distributions from Albertson’s in 2007 as well as those factors discussed in this Item 7. In addition, a net increase in cash of $42.1 million resulted from changes in operating assets and liabilities, primarily other assets, that was the result of the repayment of notes relating to certain transactions in 2007 as well as an increase in accrued expenses and other liabilities.
The increase in net cash used in investing activities resulted from $118.0 million of additional
expenditures for real estate acquisitions, development and tenant installations in 2007, $12.1
million of additional investments in unconsolidated affiliates, primarily CityPoint, in 2007, $9.9
million of additional collections of notes receivable in 2006 as well as an additional $18.8
million of proceeds from sales in 2006 and the repayment of $19.0 million of our preferred equity
investment in 2006. These net increases were offset by $29.6 million of additional notes receivable
originated in 2006.
The increase in net cash provided by financing activities resulted from an increase of $65.8
million of contributions from partners and members and minority interests in partially-owned
affiliates in 2007, as well as additional cash of $62.6 million from borrowings in 2007. These
increases were offset by an additional $85.0 million in cash received from the issuance of
convertible debt in 2006 and an additional $27.3 million of distributions to partners and members
in 2007
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon
our consolidated financial statements, which have been prepared in accordance with U.S, GAAP. The
preparation of these consolidated financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base
our estimates on historical experience and assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions. We believe the following critical
accounting policies affect the significant judgments and estimates used by us in the preparation of
our consolidated financial statements.
Valuation of Property Held for Use and Sale
On a quarterly basis, we review the carrying value of both properties held for use and for sale. We
perform the impairment analysis by calculating and reviewing net operating income on a
property-by-property basis, we evaluate leasing projections and perform other analyses to conclude
whether an asset is impaired. We record impairment losses and reduce the carrying value of
properties when indicators of impairment are present and the expected undiscounted cash flows
related to those properties are less than their carrying amounts. In cases where we do not expect
to recover our carrying costs on properties held for use, we reduce our carrying cost to fair
value. For properties held for sale, we reduce our carrying value to the fair value less costs to
sell. For the years ended December 31, 2007 and 2006, no impairment losses were recognized. For the
year ended December 31, 2005, an impairment loss of $0.8 million was recognized related to a
property that was sold in July of 2005. Management does not believe that the value of any
properties in its portfolio was impaired as of December 31, 2007 or 2006.
Bad Debts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of
tenants to make payments on arrearages in billed rents, as well as the likelihood that tenants will
not have the ability to make payment on unbilled rents including estimated expense recoveries and
straight-line rent. As of December 31, 2007, we had recorded an allowance for doubtful accounts of
$3.1 million. If the financial condition of our tenants were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be required.
Real Estate
Real estate assets are stated at cost less accumulated depreciation. Expenditures for acquisition,
development, construction and improvement of properties, as well as significant renovations are
capitalized. Interest costs are capitalized until construction is substantially complete.
Construction in progress includes costs for significant property expansion and redevelopment.
Depreciation is computed on the straight-line basis over estimated useful lives of 30 to 40 years
for buildings, the shorter of the useful life or lease term for tenant improvements and five years
for furniture, fixtures and equipment. Expenditures for maintenance and repairs are charged to
operations as incurred.
Upon acquisitions of real estate, we assess the fair value of acquired assets (including land,
buildings and improvements, and identified intangibles such as above and below market leases and
acquired in-place leases and customer relationships) and acquired liabilities in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No.
142, “Goodwill and Other Intangible Assets”, and allocate purchase price based on these
assessments. We assess fair value based on estimated cash flow projections that utilize appropriate
discount and capitalization rates and available market information. Estimates of future cash flows
are based on a number of factors including the historical operating results, known trends, and
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market/economic conditions that may affect the property.
Revenue Recognition and Accounts and Notes Receivable
Leases with tenants are accounted for as operating leases. Minimum rents are recognized on a
straight-line basis over the term of the respective leases, beginning when the tenant takes
possession of the space. Certain of these leases also provide for percentage rents based upon the
level of sales achieved by the tenant. Percentage rent is recognized in the period when the
tenants’ sales breakpoint is met. In addition, leases typically provide for the reimbursement to
the Company of real estate taxes, insurance and other property operating expenses. These
reimbursements are recognized as revenue in the period the expenses are incurred.
The Company makes estimates of the uncollectability of its accounts receivable related to tenant
revenues. An allowance for doubtful accounts has been provided against certain tenant accounts
receivable that are estimated to be uncollectible. Once the amount is ultimately deemed to be
uncollectible, it is written off.
Interest income from notes receivable is recognized on an accrual basis based on the contractual
terms of the notes. The Company reviews notes receivable on a quarterly basis to determine
collectability.
INFLATION
Our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our
net income. Such provisions include clauses enabling us to receive percentage rents based on
tenants’ gross sales, which generally increase as prices rise, and/or, in certain cases, escalation
clauses, which generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar inflation indexes. In
addition, many of our leases are for terms of less than ten years, which permits us to seek to
increase rents upon re-rental at market rates if current rents are below the then existing market
rates. Most of our leases require the tenants to pay their share of operating expenses, including
common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure
to increases in costs and operating expenses resulting from inflation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Reference is made to the Notes to Consolidated Financial Statements which begins on page F-1 of
this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our primary market risk exposure is to changes in interest rates related to our mortgage debt. See
the consolidated financial statements and notes thereto included in this Annual Report on Form 10-K
for certain quantitative details related to our mortgage debt.
Currently, we manage our exposure to fluctuations in interest rates primarily through the use of
fixed-rate debt and interest rate swap agreements. As of December 31, 2007, we had total mortgage
debt of $517.0 million of which $401.4 million, or 78%, was fixed-rate, inclusive of interest rate
swaps, and $115.6 million, or 22%, was variable-rate based upon LIBOR plus certain spreads. As of
December 31, 2007, we were a party to four interest rate swap transactions and one interest rate
cap transaction to hedge our exposure to changes in interest rates with respect to $34.3 million
and $30.0 million of LIBOR-based variable-rate debt, respectively.
The following table sets forth information as of December 31, 2007 concerning our long-term debt
obligations, including principal cash flows by scheduled maturity and weighted average interest
rates of maturing amounts (dollars in millions):
Consolidated mortgage debt:
| Scheduled | Weighted average | |||||||||||||||
| Year | amortization | Maturities | Total | interest rate | ||||||||||||
| 2008 | $ | 6.0 | $ | 86.2 | $ | 92.2 | 5.8 | % | ||||||||
| 2009 | 6.1 | 47.3 | 53.4 | 6.3 | % | |||||||||||
| 2010 | 1.7 | 9.8 | 11.5 | 6.1 | % | |||||||||||
| 2011 | 2.1 | 129.8 | 131.9 | 4.0 | % | |||||||||||
| 2012 | 2.2 | 9.0 | 11.2 | 5.9 | % | |||||||||||
| Thereafter | 16.4 | 200.4 | 216.8 | 5.6 | % | |||||||||||
| $ | 34.5 | $ | 482.5 | $ | 517.0 | |||||||||||
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Mortgage debt in unconsolidated partnerships (at our pro rata share):
| Scheduled | Weighted average | |||||||||||||||
| Year | amortization | Maturities | Total | interest rate | ||||||||||||
| 2008 | $ | 0.4 | $ | 1.7 | $ | 2.1 | 5.8 | % | ||||||||
| 2009 | 0.5 | — | 0.5 | 5.4 | % | |||||||||||
| 2010 | 0.5 | 3.1 | 3.6 | 6.1 | % | |||||||||||
| 2011 | 0.5 | — | 0.5 | 5.4 | % | |||||||||||
| 2012 | 0.5 | — | 0.5 | 5.4 | % | |||||||||||
| Thereafter | 1.6 | 64.3 | 65.9 | 5.7 | % | |||||||||||
| $ | 4.0 | $ | 69.1 | $ | 73.1 | |||||||||||
Of our total consolidated and our pro-rata share of unconsolidated outstanding debt, $94.3 million
and $53.9 million will become due in 2008 and 2009, respectively. As we intend on refinancing some
or all of such debt at the then-existing market interest rates which may be greater than the
current interest rate, our interest expense would increase by approximately $1.4 million annually
if the interest rate on the refinanced debt increased by 100 basis points. Interest expense on our
variable debt of $115.6 million as of December 31, 2007 would increase $1.2 million if LIBOR
increased by 100 basis points. We may seek additional variable-rate financing if and when pricing
and other commercial and financial terms warrant. As such, we would consider hedging against the
interest rate risk related to such additional variable-rate debt through interest rate swaps and
protection agreements, or other means.
Based on our outstanding debt balances as of December 31, 2007, the fair value of our total
outstanding debt would decrease by approximately $19.0 million if interest rates increase by 1%.
Conversely, if interest rates decrease by 1%, the fair value of our total outstanding debt would
increase by approximately $20.4 million.
As of December 31, 2007 and 2006, we had notes receivable of $57.7 million and $36.0 million,
respectively. Given the short term nature of the notes and the fact that several of the notes are
demand notes, we have determined that the carrying value of the notes receivable approximates fair
value.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements beginning on page F-1 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
(i) Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of management
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective as of
December 31, 2007 to provide reasonable assurance that information required to be disclosed by us
in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in SEC rules and forms, and is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
(ii) Internal Control Over Financial Reporting
(a) Management’s Annual Report on Internal Control Over Financial Reporting
Management of Acadia Realty Trust is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in the Securities Exchange Act of 1934
Rule 13a-15(f). Under the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2007 as required
by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the
criteria set forth in the framework in Internal Control–Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the
framework in Internal Control–Integrated Framework, our management concluded that our internal
control over financial reporting was effective as of December 31, 2007 to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with U.S. generally accepted accounting
principles.
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BDO Seidman, LLP, an independent registered public accounting firm that audited our Financial
Statements included in this Annual Report, has issued an attestation report on our internal control
over financial reporting as of December 31, 2007, which appears in
paragraph (b) of this Item 9A.
Acadia Realty Trust
White Plains, New York
February 29, 2008
White Plains, New York
February 29, 2008
(b) Attestation report of the independent registered public accounting firm
The Shareholders and Trustees of
Acadia Realty Trust
Acadia Realty Trust
We have audited Acadia Realty Trust and subsidiaries’ internal control over financial reporting as
of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Acadia
Realty Trust and subsidiaries’ management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control, based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Acadia Realty Trust and subsidiaries maintained in all material respects effective
internal control over financial reporting as of December 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Acadia Realty Trust and subsidiaries as
of December 31, 2007 and 2006 and the related consolidated statements of income, shareholders’
equity, and cash flows for each of the three years in the period ended December 31, 2007 and our
report dated February 29, 2008 expressed an unqualified opinion thereon.
/s/ BDO Seidman, LLP
New York, New York
February 29, 2008
New York, New York
February 29, 2008
(c) Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting during our fourth fiscal
quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None
43
Table of Contents
PART III
In accordance with the rules of the SEC, certain information required by Part III is omitted and is
incorporated by reference into this Form 10-K from our definitive proxy statement relating to our
2008 annual meeting of stockholders (our “2008 Proxy Statement”) that we intend to file with the
SEC no later than April 29, 2008.
ITEM 10. DIRECTORS; EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information under the following headings in the 2008 Proxy Statement is incorporated herein by
reference:
| • | “PROPOSAL 1 — ELECTION OF TRUSTEES” | ||
| • | “MANAGEMENT” | ||
| • | “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” |
ITEM 11. EXECUTIVE COMPENSATION.
The information under the following headings in the 2008 Proxy Statement is incorporated herein by
reference:
| • | “ACADIA REALTY TRUST COMPENSATION COMMITTEE REPORT” | ||
| • | “COMPENSATION DISCUSSION AND ANALYSIS” | ||
| • | “EXECUTIVE AND TRUSTEE COMPENSATION” | ||
| • | “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION” |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the heading “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT”
in the 2008 Proxy Statement is incorporated herein by reference.
The information under Item 5 under the heading “(d) Securities authorized for issuance under equity compensation plans” is incorporated herein by reference.
The information under Item 5 under the heading “(d) Securities authorized for issuance under equity compensation plans” is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information under the following headings in the 2008 Proxy Statement is incorporated herein by
reference:
| • | “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS” | ||
| • | “PROPOSAL 1 — ELECTION OF TRUSTEES—Trustee Independence” |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information under the heading “AUDIT COMMITTEE INFORMATION” in the 2008 Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
| 1. | Financial Statements: See “Index to Financial Statements” at page F-1 below. | |
| 2. | Financial Statement Schedule: See “Schedule III—Real Estate and Accumulated Depreciation” at page F-38 below. | |
| 3. | Exhibits: |
44
Table of Contents
| Exhibit No. | Description | |
3.1
|
Declaration of Trust of the Company, as amended (1) | |
3.2
|
Fourth Amendment to Declaration of Trust (4) | |
3.3
|
Amended and Restated By-Laws of the Company (22) | |
4.1
|
Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (14) | |
10.1
|
1999 Share Option Plan (8) (21) | |
10.2
|
2003 Share Option Plan (16) (21) | |
10.3
|
Form of Share Award Agreement (17) (21) | |
10.4
|
Form of Registration Rights Agreement and Lock-Up Agreement (18) | |
10.5
|
Registration Rights and Lock-Up Agreement (RD Capital Transaction) (11) | |
10.6
|
Registration Rights and Lock-Up Agreement (Pacesetter Transaction) (11) | |
10.7
|
Contribution and Share Purchase Agreement dated as of April 15, 1998 among Mark Centers Trust, Mark Centers Limited Partnership, the Contributing Owners and Contributing Entities named therein, RD Properties, L.P. VI, RD Properties, L.P. VIA and RD Properties, L.P. VIB (9) | |
10.8
|
Agreement of Contribution among Acadia Realty Limited Partnership, Acadia Realty Trust and Klaff Realty, LP and Klaff Realty, Limited (18) | |
10.9
|
Employment agreement between the Company and Kenneth F. Bernstein dated October 1998 (6) (21) | |
10.11
|
Amendment to employment agreement between the Company and Kenneth F. Bernstein dated January 19, 2007 (26) (21) | |
10.12
|
First Amendment to Employment Agreement between the Company and Kenneth Bernstein dated as of January 1, 2001 (12) (21) | |
10.14
|
Letter of employment offer between the Company and Michael Nelsen, Sr. Vice President and Chief Financial Officer dated February 19, 2003 (15) (21) | |
10.15
|
Severance Agreement between the Company and Joel Braun, Sr. Vice President, dated April 6, 2001 (13) (21) | |
10.16
|
Severance Agreement between the Company and Joseph Hogan, Sr. Vice President, dated April 6, 2001 (13) (21) | |
10.17
|
Severance Agreement between the Company and Joseph Napolitano, Sr. Vice President dated April 6, 2001 (18) (21) | |
10.18
|
Severance Agreement between the Company and Robert Masters, Sr. Vice President and General Counsel dated January 2001 (18) (21) | |
10.19
|
Severance Agreement between the Company and Michael Nelsen, Sr. Vice President and Chief Financial Officer dated February 19, 2003 (15) (21) | |
10.20
|
Secured Promissory Note between RD Absecon Associates, L.P. and Fleet Bank, N.A. dated February 8, 2000 (7) | |
10.21
|
Promissory Note between 239 Greenwich Associates, L.P. and Greenwich Capital Financial Products, Inc. dated May 30, 2003 (18) |
45
Table of Contents
| Exhibit No. | Description | |
10.22
|
Open-End Mortgage, Assignment of Leases and Rents, and Security Agreement between 239 Greenwich Associates, L.P. and Greenwich Capital Financial Products, Inc. dated May 30, 2003 (18) | |
10.23
|
Promissory Note between Merrillville Realty, L.P. and Sun America Life Insurance Company dated July 7, 1999 (7) | |
10.24
|
Secured Promissory Note between Acadia Town Line, LLC and Fleet Bank, N.A. dated March 21, 1999 (7) | |
10.25
|
Promissory Note between RD Village Associates Limited Partnership and Sun America Life Insurance Company Dated September 21, 1999 (7) | |
10.26
|
First Amendment to Severance Agreements between the Company and Joel Braun Executive Vice President and Chief Investment Officer, Michael Nelsen, Senior Vice President and Chief Financial Officer, Robert Masters, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary and Joseph Hogan, Senior Vice President and Director of Construction dated January 19, 2007 (21) (26) | |
10.33
|
Term Loan Agreement between Acadia Realty L.P. and The Dime Savings Bank of New York, dated March 30, 2000 (10) | |
10.34
|
Mortgage Agreement between Acadia Realty L.P. and The Dime Savings Bank of New York, dated March 30, 2000 (10) | |
10.44
|
Prospectus Supplement Regarding Options Issued under the Acadia Realty Trust 1999 Share Incentive Plan and 2003 Share Incentive Plan (19) (21) | |
10.45
|
Acadia Realty Trust 1999 Share Incentive Plan and 2003 Share Incentive Plan Deferral and Distribution Election Form (19) (21) | |
10.46
|
Amended, Restated And Consolidated Promissory Note between Acadia New Loudon, LLC and Greenwich Capital Financial Products, Inc. dated August 13, 2004 (19) | |
10.47
|
Amended, Restated And Consolidated Mortgage, Assignment Of Leases And Rents And Security Agreement between Acadia New Loudon, LLC and Greenwich Capital Financial Products, Inc. dated August 13, 2004 (19) | |
10.51
|
Mortgage, Assignment of Leases and Rents and Security Agreement between Acadia Crescent Plaza, LLC and Greenwich Capital Financial Products, Inc. dated August 31, 2005 (22) | |
10.52
|
Mortgage, Assignment of Leases and Rents and Security Agreement between Pacesetter/Ramapo Associates and Greenwich Capital Financial Products, Inc. dated October 17, 2005 (22) | |
10.53
|
Loan Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated December 9, 2005 (22) | |
10.54
|
Mortgage and Security Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated December 9, 2005 (22) | |
10.55
|
Agreement and Plan Of Merger Dated as of December 22, 2005 by and among Acadia Realty Acquisition I, LLC, Ara Btc LLC, ARA MS LLC, ARA BS LLC, ARA BC LLC and ARA BH LLC, Acadia Investors, Inc., AII BTC LLC, AII MS LLC, AII BS LLC, AII BC LLC And AII BH LLC, Samuel Ginsburg 2000 Trust Agreement #1, Martin Ginsburg 2000 Trust Agreement #1, Martin Ginsburg, Samuel Ginsburg and Adam Ginsburg, and GDC SMG, LLC, GDC Beechwood, LLC, Aspen Cove Apartments, LLC and SMG Celebration, LLC (23) |
46
Table of Contents
| Exhibit No. | Description | |
10.56
|
Amended and Restated Loan Agreement between Acadia Realty Limited Partnership, as lender, and Levitz SL Woodbridge, L.L.C., Levitz SL St. Paul, L.L.C., Levitz SL La Puente, L.L.C., Levitz SL Oxnard, L.L.C., Levitz SL Willowbrook, L.L.C., Levitz SL Northridge, L.L.C., Levitz SL San Leandro, L.L.C., Levitz SL Sacramento, L.L.C., HL Brea, L.L.C., HL Deptford, L.L.C., HL Hayward, L.L.C., HL San Jose, L.L.C., HL Scottsdale, L.L.C., HL Torrance, L.L.C., HL Irvine 1, L.L.C., HL West Covina, L.L.C., HL Glendale, L.L.C. and HL Northridge, L.L.C., each a Delaware limited liability company, Levitz SL Langhorne, L.P. and HL Fairless Hills, L.P., each a Delaware limited partnership (each, together with its permitted successors and assigns, a “Borrower” , and collectively, together with their respective permitted successors and assigns, “ Borrowers ”), dated June 1, 2006 (24) | |
10.57
|
Consent and Assumption Agreement between Thor Chestnut Hill, LP, Thor Chestnut Hill II, LP, Acadia Chestnut, LLC, Acadia Realty Limited Partnership and Wells Fargo Bank, N.A. dated June 9, 2006, original Mortgage and Security Agreement between Thor Chestnut Hill, LP and Thor Chestnut Hill II, LP and Column Financial, Inc. dated June 5, 2003 and original Assignment of Leases and Rents from Thor Chestnut Hill, LP and Thor Chestnut Hill II, LP to Column Financial, Inc. dated June 2003. (24) | |
10.58
|
Loan Agreement and Promissory Note between RD Woonsocket Associates, L.P. and Merrill Lynch Mortgage Lending, Inc. dated September 8, 2006 (25) | |
10.59
|
Amended and Restated Revolving Loan Agreement dated as of December 19, 2006 by and among RD Abington Associates LP, Acadia Town Line, LLC, RD Methuen Associates LP, RD Absecon Associates, LP, RD Bloomfield Associates, LP, RD Hobson Associates, LP, and RD Village Associates LP, and Bank of America, N.A. and the First Amendment to Amended and Restated Revolving Loan Agreement dated February, 2007. (26) | |
10.60
|
Loan Agreement between Bank of America, N.A. and RD Branch Associates, LP dated December 19, 2006. (26) | |
10.61
|
Loan Agreement between 239 Greenwich Associates Limited Partnership and Wachovia Bank, National Association dated January 25, 2007. (28) | |
10.62
|
Revolving Credit Agreement between Acadia Realty Limited Partnership and Washington Mutual Bank dated March 29, 2007. (28) | |
10.63
|
Loan Agreement between Acadia Merrillville Realty, L.P. and Bear Stearns Commercial Mortgage, Inc dated July 2, 2007. (29) | |
10.64
|
Promissory Note between Acadia Merrillville Realty, L.P. and Bear Stearns Commercial Mortgage, Inc dated July 2, 2007. (29) | |
10.65
|
Loan Agreement Note between APA 216th Street and Bank of America, N.A. dated September 11, 2007. (29) | |
10.66
|
Promissory Note between APA 216th Street and Bank of America, N.A. dated September 11, 2007. (29) | |
10.67
|
Acquisition and Project Loan agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated October 5, 2007 (30) | |
10.68
|
Building Loan Agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated October 5, 2007 (30) | |
10.69
|
Revolving credit agreement between Acadia Strategic Opportunity Fund III, LLC. and Bank of America, N.A. dated October 10, 2007 (30) | |
10.70
|
Mortgage Consolidation and Modification Agreement between Acadia Tarrytown LLC and Anglo Irish Bank Corporation, PLC dated October 30, 2007 (30) | |
10.71
|
Project Loan Agreement between P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 10, 2007 (30) |
47
Table of Contents
| Exhibit No. | Description | |
10.72
|
Building Loan Agreement P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 10, 2007 (30) | |
10.73
|
Project Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 26, 2007 (30) | |
10.74
|
Building Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 26, 2007 (30) | |
10.75
|
Certain information regarding the compensation arrangements with certain officers of registrant (Incorporated by reference to Item 5.02 of the registrant’s Form 8-K filed with the SEC on February 4, 2008) | |
21
|
List of Subsidiaries of Acadia Realty Trust (30) | |
23.1
|
Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms S-8 (30) | |
31.1
|
Certification of Chief Executive Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (26) | |
31.2
|
Certification of Chief Financial Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (26) | |
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (26) | |
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (26) | |
99.1
|
Amended and Restated Agreement of Limited Partnership of the Operating Partnership (11) | |
99.2
|
First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (11) | |
99.3
|
Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (18) | |
99.4
|
Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (18) | |
99.5
|
Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (2) | |
99.6
|
Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (18) |
Notes:
| (1) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal Year ended December 31, 1994 | |
| (2) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended June 30, 1997 | |
| (3) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998 | |
| (4) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998 |
48
Table of Contents
Notes, continued
| (5) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-11 (File No.33-60008) | |
| (6) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form10-K filed for the fiscal year ended December 31, 1998 | |
| (7) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form10-K filed for the fiscal year ended December 31, 1999 | |
| (8) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-8 filed September 28, 1999 | |
| (9) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 8-K filed on April 20, 1998 | |
| (10) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 10-K filed for the fiscal year ended December 31, 2000 | |
| (11) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-3 filed on March 3, 2000 | |
| (12) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 2001 | |
| (13) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2001 | |
| (14) | Incorporated by reference to the copy thereof filed as an Exhibit to Yale University’s Schedule 13D filed on September 25, 2002 | |
| (15) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2002 | |
| (16) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Definitive Proxy Statement on Schedule 14A filed April 29, 2003. | |
| (17) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on July 2, 2003 | |
| (18) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003 | |
| (19) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2004. | |
| (20) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2004. | |
| (21) | Management contract or compensatory plan or arrangement. | |
| (22) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2005. | |
| (23) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on January 4, 2006 | |
| (24) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended June 30, 2006 | |
| (25) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 2006 | |
| (26) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on January 19, 2007 | |
| (27) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2006. | |
| (28) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2007. | |
| (29) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 2007. | |
| (30) | Filed herewith. |
49
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
| ACADIA REALTY TRUST | ||||||
| (Registrant) | ||||||
| By: | /s/ Kenneth F. Bernstein | |||||
| Kenneth F. Bernstein | ||||||
| Chief Executive Officer, | ||||||
| President and Trustee | ||||||
| By: | /s/ Michael Nelsen | |||||
| Michael Nelsen | ||||||
| Senior Vice President and | ||||||
| Chief Financial Officer | ||||||
| By: | /s/ Jonathan W. Grisham | |||||
| Jonathan W. Grisham | ||||||
| Senior Vice President and | ||||||
| Chief Accounting Officer |
Dated: February 29, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
| Signature | Title | Date | ||
/s/ Kenneth F. Bernstein (Kenneth F. Bernstein) |
Chief Executive Officer, President and Trustee (Principal Executive Officer) |
February 29, 2008 | ||
/s/ Michael Nelsen
(Michael Nelsen) |
Senior Vice President
and Chief Financial Officer (Principal Financial Officer) |
February 29, 2008 | ||
/s/ Jonathan W. Grisham
(Jonathan W. Grisham) |
Senior Vice President
and Chief Accounting Officer |
February 29, 2008 | ||
| (Principal Accounting Officer) | ||||
/s/ Douglas Crocker II
(Douglas Crocker II) |
Trustee | February 29, 2008 | ||
/s/ Alan S. Forman
(Alan S. Forman) |
Trustee | February 29, 2008 | ||
/s/ Suzanne Hopgood
(Suzanne Hopgood) |
Trustee | February 29, 2008 | ||
/s/ Lorrence T. Kellar
(Lorrence T. Kellar) |
Trustee | February 29, 2008 | ||
/s/ Wendy Luscombe
(Wendy Luscombe) |
Trustee | February 29, 2008 | ||
/s/ William T. Spitz
(William T. Spitz) |
Trustee | February 29, 2008 | ||
/s/ Lee S. Wielansky
(Lee S. Wielansky) |
Trustee | February 29, 2008 |
50
Table of Contents
EXHIBIT INDEX
The following is an index to all exhibits filed with the Annual Report on Form 10-K other than
those incorporated by reference herein:
| Exhibit No. | Description | |
10.67
|
Acquisition and Project Loan agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated October 5, 2007 | |
10.68
|
Building Loan Agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated October 5, 2007 | |
10.69
|
Revolving credit agreement between Acadia Strategic Opportunity Fund III, LLC. and Bank of America, N.A. dated October 10, 2007 | |
10.70
|
Mortgage Consolidation and Modification Agreement between Acadia Tarrytown LLC and Anglo Irish Bank Corporation, PLC dated October 30, 2007 | |
10.71
|
Project Loan Agreement between P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 10, 2007 | |
10.72
|
Building Loan Agreement P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 10, 2007 (30) | |
10.73
|
Project Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 26, 2007 (30) | |
10.74
|
Building Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 26, 2007 | |
21
|
List of Subsidiaries of Acadia Realty Trust | |
23.1
|
Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms S-8 | |
31.1
|
Certification of Chief Executive Officer pursuant to rule 13a – 14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2
|
Certification of Chief Financial Officer pursuant to rule 13a – 14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
51
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
|
F-2 | |
Consolidated Balance Sheets as of December 31, 2007 and 2006
|
F-3 | |
Consolidated Statements of Income for the years ended December 31, 2007, 2006 and 2005
|
F-4 | |
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 and 2005
|
F-5 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
|
F-6 | |
Notes to Consolidated Financial Statements
|
F-8 | |
Schedule III – Real Estate and Accumulated Depreciation
|
F-38 |
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
The Shareholders and Trustees of
Acadia Realty Trust
Acadia Realty Trust
We have audited the accompanying consolidated balance sheets of Acadia Realty Trust and
subsidiaries (the “Company”) as of December 31, 2007 and 2006 and the related consolidated
statements of income, stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2007. In connection with our audits of the financial statements we have
also audited the accompanying financial statement schedule listed on page F-1. These financial
statements and schedule are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements and
schedules. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Acadia Realty Trust and subsidiaries at December 31,
2007, and 2006 and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2007, in conformity with generally accepted accounting principles in
the United States of America.
Also, in our opinion, the financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set
forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Acadia Realty Trust and subsidiaries’ internal control over financial
reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and
our report dated February 29, 2008 expressed an unqualified opinion thereon.
As explained in Note 1 to the financial statements, effective January 1, 2006, Acadia Realty Trust
and subsidiaries adopted the provisions of Staff Accounting Bulletin 108, Considering the Effects
of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements.
| /s/ BDO Seidman, LLP | ||
New York, New York
February 29, 2008
February 29, 2008
F-2
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||
| 2007 | 2006 | |||||||
| (dollars in thousands) | ||||||||
ASSETS |
||||||||
Real estate: |
||||||||
Land |
$ | 235,550 | $ | 145,916 | ||||
Buildings and improvements |
540,760 | 465,050 | ||||||
Construction in progress |
77,764 | 39,085 | ||||||
| 854,074 | 650,051 | |||||||
Less: accumulated depreciation |
155,480 | 135,085 | ||||||
Net real estate |
698,594 | 514,966 | ||||||
Cash and cash equivalents |
123,343 | 139,571 | ||||||
Cash in escrow |
6,637 | 5,321 | ||||||
Investments in and advances to unconsolidated affiliates |
44,654 | 33,333 | ||||||
Rents receivable, net |
13,449 | 11,869 | ||||||
Notes receivable |
57,662 | 36,038 | ||||||
Deferred charges, net |
21,825 | 20,749 | ||||||
Acquired lease intangibles |
16,103 | 11,653 | ||||||
Prepaid expenses and other assets, net |
16,745 | 41,959 | ||||||
Assets of discontinued operations |
— | 36,233 | ||||||
| $ | 999,012 | $ | 851,692 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Mortgage notes payable |
$ | 402,903 | $ | 319,507 | ||||
Convertible notes payable |
115,000 | 100,000 | ||||||
Acquired lease intangibles |
5,651 | 4,919 | ||||||
Accounts payable and accrued expenses |
15,289 | 9,882 | ||||||
Dividends and distributions payable |
14,420 | 6,661 | ||||||
Share of distributions in excess of share of income and investment
in unconsolidated affiliates |
20,007 | 21,728 | ||||||
Other liabilities |
13,895 | 5,379 | ||||||
Liabilities of discontinued operations |
— | 28,760 | ||||||
Total liabilities |
587,165 | 496,836 | ||||||
Minority interest in operating partnership |
4,595 | 8,673 | ||||||
Minority interests in partially-owned affiliates |
166,516 | 105,064 | ||||||
Total minority interests |
171,111 | 113,737 | ||||||
Shareholders’ equity: |
||||||||
Common shares, $.001 par value, authorized 100,000,000 shares,
issued
and outstanding 32,184,462 and 31,772,952 shares, respectively |
32 | 31 | ||||||
Additional paid-in capital |
227,890 | 227,555 | ||||||
Accumulated other comprehensive loss |
(953 | ) | (234 | ) | ||||
Retained earnings |
13,767 | 13,767 | ||||||
Total shareholders’ equity |
240,736 | 241,119 | ||||||
| $ | 999,012 | $ | 851,692 | |||||
The accompanying notes are an integral part of these consolidated financial statements
F-3
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF INCOME
| Years ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (dollars in thousands except per share amounts) | ||||||||||||
Revenues |
||||||||||||
Minimum rents |
$ | 72,051 | $ | 63,629 | $ | 69,401 | ||||||
Percentage rents |
625 | 1,192 | 1,272 | |||||||||
Expense reimbursements |
13,318 | 14,538 | 14,440 | |||||||||
Other property income |
1,031 | 857 | 1,972 | |||||||||
Management fee income from related parties, net |
4,064 | 5,625 | 3,564 | |||||||||
Interest income |
10,315 | 8,311 | 3,316 | |||||||||
Other income |
165 | 1,648 | — | |||||||||
Total revenues |
101,569 | 95,800 | 93,965 | |||||||||
Operating Expenses |
||||||||||||
Property operating |
15,881 | 12,857 | 13,348 | |||||||||
Real estate taxes |
9,678 | 10,095 | 8,952 | |||||||||
General and administrative |
23,058 | 19,782 | 16,153 | |||||||||
Depreciation and amortization |
27,506 | 25,361 | 24,697 | |||||||||
Total operating expenses |
76,123 | 68,095 | 63,150 | |||||||||
Operating income |
25,446 | 27,705 | 30,815 | |||||||||
Equity in earnings of unconsolidated affiliates |
6,619 | 2,559 | 21,280 | |||||||||
Interest expense |
(22,775 | ) | (20,377 | ) | (16,689 | ) | ||||||
Minority interest |
9,063 | 5,227 | (13,946 | ) | ||||||||
Income from continuing operations before
income taxes |
18,353 | 15,114 | 21,460 | |||||||||
Income tax provision (benefit) |
297 | (508 | ) | 2,140 | ||||||||
Income from continuing operations |
18,056 | 15,622 | 19,320 | |||||||||
Discontinued operations |
||||||||||||
Operating income from discontinued operations |
377 | 2,879 | 2,152 | |||||||||
Impairment of real estate |
— | — | (770 | ) | ||||||||
Gain
(loss) on sale of properties, net |
5,271 | 20,974 | (50 | ) | ||||||||
Minority interest |
(111 | ) | (462 | ) | (26 | ) | ||||||
Income from discontinued operations |
5,537 | 23,391 | 1,306 | |||||||||
Extraordinary item |
||||||||||||
Share of extraordinary gain from investment in
unconsolidated affiliate |
30,200 | — | — | |||||||||
Minority Interest |
(24,167 | ) | — | — | ||||||||
Income tax provision |
(2,356 | ) | — | — | ||||||||
Income from extraordinary item |
3,677 | — | — | |||||||||
Net income |
$ | 27,270 | $ | 39,013 | $ | 20,626 | ||||||
Basic earnings per share |
||||||||||||
Income from continuing operations |
$ | 0.55 | $ | 0.48 | $ | 0.61 | ||||||
Income from discontinued operations |
0.17 | 0.72 | 0.04 | |||||||||
Income from extraordinary item |
0.11 | — | — | |||||||||
Basic earnings per share |
$ | 0.83 | $ | 1.20 | $ | 0.65 | ||||||
Diluted earnings per share |
||||||||||||
Income from continuing operations |
$ | 0.54 | $ | 0.48 | $ | 0.60 | ||||||
Income from discontinued operations |
0.17 | 0.70 | 0.04 | |||||||||
Income from extraordinary item |
0.11 | — | — | |||||||||
Diluted earnings per share |
$ | 0.82 | $ | 1.18 | $ | 0.64 | ||||||
The accompanying notes are an integral part of these consolidated financial statements
F-4
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||
| Common Shares | Paid-in | Comprehensive | Retained | Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Loss | Earnings | Equity | |||||||||||||||||||
| (dollars in thousands, except per share amounts) | ||||||||||||||||||||||||
Balance at December 31, 2004 |
31,341 | $ | 31 | $ | 222,715 | $ | (3,180 | ) | $ | (2,642 | ) | $ | 216,924 | |||||||||||
Conversion of 796 Series A Preferred OP Units
to Common Shares by limited partners of the
Operating Partnership |
92 | — | 696 | — | — | 696 | ||||||||||||||||||
Employee Restricted Share awards |
52 | — | 1,030 | — | — | 1,030 | ||||||||||||||||||
Dividends declared ($0.7025 per Common Share) |
— | — | (1,691 | ) | — | (20,626 | ) | (22,317 | ) | |||||||||||||||
Employee and trustee exercise of 51,200 options |
51 | — | 345 | — | — | 345 | ||||||||||||||||||
Common Shares issued under Employee Share
Purchase Plan |
7 | — | 104 | — | — | 104 | ||||||||||||||||||
Unrealized gain on valuation of swap agreements |
— | — | — | 2,708 | — | 2,708 | ||||||||||||||||||
Amortization of derivative instrument |
460 | 460 | ||||||||||||||||||||||
Net income |
— | — | — | — | 20,626 | 20,626 | ||||||||||||||||||
Total comprehensive income |
— | — | — | — | — | 23,794 | ||||||||||||||||||
Balance at December 31, 2005 |
31,543 | 31 | 223,199 | (12 | ) | (2,642 | ) | 220,576 | ||||||||||||||||
Cumulative effect of straight-line rent
Adjustment |
— | — | — | — | 1,796 | 1,796 | ||||||||||||||||||
Conversion of 696 Series A Preferred OP Units
to Common Shares by limited partners of the
Operating Partnership |
93 | — | 696 | — | — | 696 | ||||||||||||||||||
Employee Restricted Share awards |
122 | — | 3,530 | — | — | 3,530 | ||||||||||||||||||
Dividends declared ($0.755 per Common Share) |
— | — | — | — | (24,400 | ) | (24,400 | ) | ||||||||||||||||
Employee exercise of 7,500 options to purchase
Common Shares |
8 | — | 43 | — | — | 43 | ||||||||||||||||||
Common Shares issued under Employee Share
Purchase Plan |
4 | — | 112 | — | — | 112 | ||||||||||||||||||
Redemption of 11,105 restricted Common OP
Units |
— | — | (101 | ) | — | — | (101 | ) | ||||||||||||||||
Issuance of Common Shares to Trustees |
3 | — | 76 | — | — | 76 | ||||||||||||||||||
Unrealized loss on valuation of swap agreements |
— | — | — | (662 | ) | — | (662 | ) | ||||||||||||||||
Amortization of derivative instrument |
440 | 440 | ||||||||||||||||||||||
Net income |
— | — | — | — | 39,013 | 39,013 | ||||||||||||||||||
Total comprehensive income |
— | — | — | — | — | 38,791 | ||||||||||||||||||
Balance at December 31, 2006 |
31,773 | 31 | 227,555 | (234 | ) | 13,767 | 241,119 | |||||||||||||||||
Conversion of 4,000 Series B Preferred OP Units
to Common Shares by limited partners of the
Operating Partnership |
312 | — | 4,000 | — | — | 4,000 | ||||||||||||||||||
Employee Restricted Share awards |
103 | 1 | 3,151 | — | — | 3,152 | ||||||||||||||||||
Dividends declared ($1.0325 per Common Share) |
— | — | (6,425 | ) | — | (27,270 | ) | (33,695 | ) | |||||||||||||||
Employee exercise of 17,474 options to
purchase Common Shares |
17 | — | 174 | — | — | 174 | ||||||||||||||||||
Common Shares issued under Employee Share
Purchase Plan |
7 | — | 183 | — | — | 183 | ||||||||||||||||||
Issuance of Common Shares to Trustees |
13 | — | 346 | — | — | 346 | ||||||||||||||||||
Employee Restricted Shares cancelled |
(41 | ) | — | (1,094 | ) | — | — | (1,094 | ) | |||||||||||||||
Unrealized loss on valuation of swap agreements |
— | — | — | (921 | ) | — | (921 | ) | ||||||||||||||||
Amortization of derivative instrument |
— | — | — | 202 | — | 202 | ||||||||||||||||||
Net income |
— | — | — | — | 27,270 | 27,270 | ||||||||||||||||||
Total comprehensive income |
— | — | — | — | — | 26,551 | ||||||||||||||||||
Balance at December 31, 2007 |
32,184 | $ | 32 | $ | 227,890 | $ | (953 | ) | $ | 13,767 | $ | 240,736 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (dollars in thousands) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net income |
$ | 27,270 | $ | 39,013 | $ | 20,626 | ||||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||||||
Depreciation and amortization |
28,428 | 27,178 | 27,747 | |||||||||
(Gain) loss on sale of property |
(5,271 | ) | (20,974 | ) | 50 | |||||||
Impairment of real estate |
— | — | 770 | |||||||||
Minority interests |
15,215 | (4,765 | ) | 13,972 | ||||||||
Amortization of lease intangibles |
722 | 1,080 | 980 | |||||||||
Amortization of mortgage note premium |
(111 | ) | (144 | ) | (530 | ) | ||||||
Share compensation expense |
3,285 | 3,531 | 1,029 | |||||||||
Equity in earnings of unconsolidated affiliates |
(36,819 | ) | (2,559 | ) | (21,280 | ) | ||||||
Distributions of operating income from unconsolidated affiliates |
36,666 | 3,277 | 21,498 | |||||||||
Amortization of derivative settlement included in interest expense |
202 | 440 | 460 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Funding of escrows, net |
667 | (1,389 | ) | (1,827 | ) | |||||||
Rents receivable |
(1,180 | ) | 260 | (3,004 | ) | |||||||
Prepaid expenses and other assets, net |
23,926 | 967 | (8,867 | ) | ||||||||
Accounts payable and accrued expenses |
4,962 | (5,200 | ) | (3,855 | ) | |||||||
Other liabilities |
7,203 | (1,088 | ) | 2,470 | ||||||||
Net cash provided by operating activities |
105,165 | 39,627 | 50,239 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Investment
in real estate and improvements |
(210,227 | ) | (87,009 | ) | (131,077 | ) | ||||||
Deferred
acquisition and leasing costs |
(1,746 | ) | (6,941 | ) | (5,670 | ) | ||||||
Investments in and advances to unconsolidated affiliates |
(39,712 | ) | (27,626 | ) | (455 | ) | ||||||
Return of capital from unconsolidated affiliates |
26,625 | 28,423 | 22,847 | |||||||||
Collections of notes receivable |
11,071 | 20,948 | 1,868 | |||||||||
Advances of notes receivable |
(14,548 | ) | (44,162 | ) | (7,914 | ) | ||||||
Preferred equity investment |
— | 19,000 | (19,000 | ) | ||||||||
Proceeds from sale of property |
19,668 | 38,477 | 3,931 | |||||||||
Net cash used in investing activities |
(208,869 | ) | (58,890 | ) | (135,470 | ) | ||||||
F-6
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (dollars in thousands) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Principal payments on mortgage notes |
$ | (165,451 | ) | $ | (168,082 | ) | $ | (44,784 | ) | |||
Proceeds received on mortgage notes |
222,218 | 159,617 | 184,466 | |||||||||
Proceeds received on convertible notes |
15,000 | 100,000 | — | |||||||||
Payment of deferred financing and other costs |
(4,128 | ) | (7,026 | ) | (2,801 | ) | ||||||
Capital contributions from partners and members |
105,520 | 44,481 | 44,122 | |||||||||
Distributions to partners and members |
(61,050 | ) | (36,120 | ) | — | |||||||
Dividends paid to Common Shareholders |
(26,039 | ) | (23,823 | ) | (21,869 | ) | ||||||
Distributions to minority interests in Operating Partnership |
(527 | ) | (487 | ) | (380 | ) | ||||||
Distributions on preferred Operating Partnership Units to minority interests |
(86 | ) | (254 | ) | (342 | ) | ||||||
Distributions to minority interests in partially-owned affiliates |
(2,612 | ) | (232 | ) | (436 | ) | ||||||
Repurchase
and cancellation of shares |
(1,094 | ) | — | — | ||||||||
Contributions from minority interests in partially -owned affiliates |
5,022 | 300 | 1,000 | |||||||||
Redemption of Operating Partnership Units |
— | (246 | ) | — | ||||||||
Common Shares issued under Employee Stock Purchase Plan |
529 | 188 | 104 | |||||||||
Exercise of options to purchase Common Shares |
174 | 43 | 345 | |||||||||
Net cash provided by financing activities |
87,476 | 68,359 | 159,425 | |||||||||
(Decrease) increase in cash and cash equivalents |
(16,228 | ) | 49,096 | 74,194 | ||||||||
Cash and cash equivalents, beginning of period |
139,571 | 90,475 | 16,281 | |||||||||
Cash and cash equivalents, end of period |
$ | 123,343 | $ | 139,571 | $ | 90,475 | ||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Cash paid during the period for interest, including capitalized interest of $34,
$79, and $260, respectively |
$ | 23,709 | $ | 22,843 | $ | 18,799 | ||||||
Cash paid for income taxes |
$ | 348 | $ | 1,039 | $ | 1,512 | ||||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||||||
Acquisition of management contract rights through issuance of Common and
Preferred Operating Partnership Units |
$ | — | $ | — | $ | 4,000 | ||||||
Acquisition of real estate through assumption of debt |
$ | — | $ | 22,583 | $ | — | ||||||
Issuance of
notes receivable in connection with sale of real estate |
$ | (18,000 | ) | $ | — | $ | — | |||||
Acquisition of property through issuance of Preferred Operating Partnership
Units |
$ | — | $ | — | $ | 200 | ||||||
Conversion of common equity interest into preferred equity interest in
investments |
$ | — | $ | — | $ | 3,255 | ||||||
Recapitalization and deconsolidation of investment: |
||||||||||||
Real estate, net |
$ | — | $ | 124,962 | $ | — | ||||||
Other assets and liabilities |
— | (11,413 | ) | — | ||||||||
Mortgage debt |
— | (66,984 | ) | — | ||||||||
Minority interests |
— | (36,504 | ) | — | ||||||||
Investment in unconsolidated affiliates |
— | (10,428 | ) | — | ||||||||
Cash included in investments and advances to unconsolidated affiliates |
$ | — | $ | (367 | ) | — | ||||||
Acquisition of interest in investment from unaffiliated investor: |
||||||||||||
Real estate, net |
$ | — | $ | (9,260 | ) | $ | — | |||||
Other assets and liabilities |
— | 5,901 | — | |||||||||
Investment in unconsolidated affiliates |
— | 3,469 | — | |||||||||
Cash included in expenditures for real estate and improvements |
$ | — | $ | 110 | $ | — | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Acadia Realty Trust (the “Trust”) and subsidiaries (collectively, the “Company”) is a fully
integrated, self-managed and self-administered equity real estate investment trust (“REIT”) focused
primarily on the ownership, acquisition, redevelopment and management of retail properties,
including neighborhood and community shopping centers and mixed-use properties with retail
components.
As of December 31, 2007, the Company operated 76 properties, which it owns or has an ownership
interest in, principally located in the Northeast, Mid-Atlantic and Midwest regions of the United
States.
All of the Company’s assets are held by, and all of its operations are conducted through, Acadia
Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating
Partnership owns a controlling interest. As of December 31, 2007, the Trust controlled 98% of the
Operating Partnership as the sole general partner. As the general partner, the Trust is entitled to
share, in proportion to its percentage interest, in the cash distributions and profits and losses
of the Operating Partnership. The limited partners represent entities or individuals who
contributed their interests in certain properties or entities to the Operating Partnership in
exchange for common or preferred units of limited partnership interest (“Common or Preferred OP
Units”). Limited partners holding Common OP Units are generally entitled to exchange their units on
a one-for-one basis for common shares of beneficial interest of the Trust (“Common Shares”). This
structure is referred to as an umbrella partnership REIT or “UPREIT”.
During September of 2001, the Company formed a partnership, Acadia Strategic Opportunity Fund I, LP
(“Fund I”), and during August of 2004 formed a limited liability company, Acadia Mervyn Investors
I, LLC (“Mervyns I”), with four institutional investors. The Operating Partnership committed a
total of $20.0 million to Fund I and Mervyns I, and the four institutional shareholders committed a
total of $70.0 million, for the purpose of acquiring approximately $300.0 million in investments.
As of December 31, 2007, the Operating Partnership had contributed $16.5 million to Fund I and
$2.7 million to Mervyns I.
The Operating Partnership is the general partner of Fund I and sole managing member of Mervyns I,
with a 22.2% interest in both Fund I and Mervyns I and is also entitled to a profit participation
in excess of its invested capital based on certain investment return thresholds (“Promote”). Cash
flow is distributed pro-rata to the partners and members (including the Operating Partnership)
until they receive a 9% cumulative return (“Preferred Return”), and the return of all capital
contributions. Thereafter, remaining cash flow (which is net of distributions and fees to the
Operating Partnership for management, asset management, leasing, construction and legal services)
is distributed 80% to the partners (including the Operating Partnership) and 20% to the Operating
Partnership as a Promote. As all contributed capital and accumulated preferred return has been
distributed to investors, the Operating Partnership is currently entitled to a Promote on all
earnings and distributions.
During June of 2004, the Company formed Acadia Strategic Opportunity Fund II, LLC (“Fund II”), and
during August 2004 formed Acadia Mervyn Investors II, LLC (“Mervyns II”), with the investors from
Fund I as well as two additional institutional investors. With $300.0 million of committed
discretionary capital, Fund II and Mervyns II combined expect to be able to acquire or develop up
to $900.0 million of investments on a leveraged basis. The Operating Partnership’s share of
committed capital is $60.0 million. The Operating Partnership is the managing member with a 20%
interest in both Fund II and Mervyns II. The terms and structure of Fund II and Mervyns II are
substantially the same as Fund I and Mervyns I, including the Promote structure, with the exception
that the Preferred Return is 8%. As of December 31, 2007, the Operating Partnership had contributed
$28.8 million to Fund II and $7.6 million to Mervyns II.
During May of 2007, the Company formed Acadia Strategic Opportunity Fund III LLC (“Fund III”) with
fourteen institutional investors, including a majority of the investors from Fund I and Fund II.
With $503.0 million of committed discretionary capital, Fund III expects to be able to acquire or
develop approximately $1.5 billion of assets on a leveraged basis. The Operating Partnership’s
share of the invested capital is $100.0 million and it is the managing member with a 19.9% interest
in Fund III. The terms and structure of Fund III is substantially the same as the previous Funds I
and II, including the Promote structure, with the exception that the Preferred Return is 6%. As of
December 31, 2007, the Operating Partnership had contributed $10.5 million to Fund III.
Principles of Consolidation
The consolidated financial statements include the consolidated accounts of the Company and its
controlling investments in partnerships and limited liability companies in which the Company is
presumed to have control in accordance with Emerging Issues Task Force (“EITF”) Issue No. 04-5. The
ownership interests of other investors in these entities are recorded as minority interests. All
significant intercompany balances and transactions have been eliminated in consolidation.
Investments in entities for which the Company has the ability to exercise significant influence
over, but does not have financial or operating control, are accounted for using the equity method
of accounting. Accordingly, the Company’s share of the earnings (or loss) of these entities are
included in consolidated net income.
F-8
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
Principles of Consolidation, continued
Variable interest entities within the scope of Financial Accounting Statements Board (“FASB”)
Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46-R”) are required to
be consolidated by their primary beneficiary. The primary beneficiary of a variable interest entity
is determined to be the party that bears a majority of the entity’s expected losses, receives a
majority of its expected returns, or both. Management has evaluated the applicability of FIN 46-R
to its investments in certain joint ventures and determined that these joint ventures do not meet
the requirements of a variable interest entity or the Company is not
the primary beneficiary and, therefore, consolidation of these ventures is
not required. Accordingly, these investments are accounted for using the equity method.
On January 4, 2006, Fund I recapitalized its investment in a one million square foot shopping
center portfolio located in Wilmington, Delaware (“Brandywine Portfolio”). The recapitalization was
effected through the conversion of the 77.8% interest which was previously held by the
institutional investors in Fund I to affiliates of GDC Properties (“GDC”) through a merger of
interests in exchange for cash. The Operating Partnership has retained its existing 22.2% interest
in the Brandywine Portfolio in partnership with GDC and continues to operate the portfolio and earn
fees for such services. Following the January 2006 recapitalization of the Brandywine Portfolio,
the Company no longer has a controlling interest in this investment and, accordingly, accounts for
this investment under the equity method of accounting.
Investments in and Advances to Unconsolidated Joint Ventures
The Company accounts for its investments in unconsolidated joint ventures using the equity method
as it does not exercise control over significant asset decisions such as buying, selling or
financing nor is it the primary beneficiary under FIN 46R, as discussed above. Under the equity
method, the Company increases its investment for its proportionate share of net income and
contributions to the joint venture and decreases its investment balance by recording its
proportionate share of net loss and distributions. The Company recognizes income for distributions
in excess of its investment where there is no recourse to the Company. For investments in which
there is recourse to the Company, distributions in excess of the investment are recorded as a
liability. Although the Company accounts for its investment in Albertson’s (Note 4), using the
equity method of accounting, the Company adopted the policy of not recording its equity in earnings
or losses of this unconsolidated affiliate until the Company receives the audited financial
statements of Albertson’s to support the equity earnings or losses in accordance with paragraph 19
of Accounting Principles Board (“APB”) 18 “Equity Method of Accounting for Investments in Common
Stock.”
The Company periodically reviews its investment in unconsolidated joint ventures for other than
temporary declines in market value. Any decline that is not expected to be recovered in the next
twelve months is considered other than temporary and an impairment charge is recorded as a
reduction in the carrying value of the investment. No impairment charges were recognized for the
years ended December 31, 2007, 2006 and 2005.
Use of Estimates
Accounting principles generally accepted in the United States of America (“GAAP”) require the
Company’s management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The most significant assumptions and estimates relate
to the valuation of real estate, depreciable lives, revenue recognition and the collectability of
trade accounts receivable. Application of these assumptions requires the exercise of judgment as to
future uncertainties and, as a result, actual results could differ from these estimates.
Real Estate
Real estate assets are stated at cost less accumulated depreciation. Expenditures for acquisition,
development, construction and improvement of properties, as well as significant renovations are
capitalized. Interest costs are capitalized until construction is substantially complete.
Construction in progress includes costs for significant property expansion and redevelopment.
Depreciation is computed on the straight-line basis over estimated useful lives of 30 to 40 years
for buildings, the shorter of the useful life or lease term for tenant improvements and five years
for furniture, fixtures and equipment. Expenditures for maintenance and repairs are charged to
operations as incurred.
Upon acquisitions of real estate, the Company assesses the fair value of acquired assets (including
land, buildings and improvements, and identified intangibles such as above and below market leases
and acquired in-place leases and customer relationships) and acquired liabilities in accordance
with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and
F-9
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
Real Estate, continued
SFAS No. 142, “Goodwill and Other Intangible Assets”, and allocates purchase price based on these
assessments. The Company assesses fair value based on estimated cash flow projections that utilize
appropriate discount and capitalization rates and available market information. Estimates of future
cash flows are based on a number of factors including the historical operating results, known
trends, and market/economic conditions that may affect the property.
The Company reviews its long-lived assets used in operations for impairment when there is an event,
or change in circumstances that indicates impairment in value. The Company records impairment
losses and reduces the carrying value of properties when indicators of impairment are present and
the expected undiscounted cash flows related to those properties are less than their carrying
amounts. In cases where the Company does not expect to recover its carrying costs on properties
held for use, the Company reduces its carrying cost to fair value, and for properties held for
sale, the Company reduces its carrying value to the fair value less costs to sell. During the years
ended December 31, 2007 and 2006, no impairment losses were recognized. During the year ended
December 31, 2005, an impairment loss of $0.8 million was recognized related to a property that was
sold during July of 2005. Management does not believe that the values of its properties within the
portfolio are impaired as of December 31, 2007.
Sale of Real Estate
The Company recognizes property sales in accordance with SFAS No. 66, “Accounting for Sales of Real
Estate.” The Company generally records the sales of operating properties and outparcels using the
full accrual method at closing when the earnings process is deemed to be complete. Sales not
qualifying for full recognition at the time of sale are accounted for under other appropriate
deferral methods.
Real Estate Held-for Sale
The Company evaluates the held-for-sale classification of its real estate each quarter. Assets that
are classified as held-for-sale are recorded at the lower of their carrying amount or fair value
less cost to sell. Assets are generally classified as held-for-sale once management has initiated
an active program to market them for sale and has received a firm purchase commitment. The results
of operations of these real estate properties are reflected as discontinued operations in all
periods reported.
On occasion, the Company will receive unsolicited offers from third parties to buy individual
Company properties. Under these circumstances, the Company will classify the properties as
held-for-sale when a sales contract is executed with no contingencies and the prospective buyer has
funds at risk to ensure performance.
Deferred Costs
Fees and costs paid in the successful negotiation of leases have been deferred and are being
amortized on a straight-line basis over the terms of the respective leases. Fees and costs incurred
in connection with obtaining financing have been deferred and are being amortized over the term of
the related debt obligation.
Management Contracts
Income from management contracts is recognized on an accrual basis as such fees are earned. The
initial acquisition cost of the management contracts is being amortized over the estimated lives of
the contracts acquired. Income from management contracts for the year ended December 31, 2005 is
net of sub-management fees of $0.3 million.
Revenue Recognition and Accounts and Notes Receivable
Leases with tenants are accounted for as operating leases. Minimum rents are recognized on a
straight-line basis over the term of the respective leases, beginning when the tenant takes
possession of the space. As of December 31, 2007 and 2006, included in rents receivable, net on the
accompanying consolidated balance sheet, unbilled rents receivable relating to straight-lining of
rents were $8.4 million and $5.6 million, respectively. Certain of these leases also provide for
percentage rents based upon the level of sales achieved by the tenant. Percentage rent is
recognized in the period when the tenants’ sales breakpoint is met. In addition, leases typically
provide for the reimbursement to the Company of real estate taxes, insurance and other property
operating expenses. These reimbursements are recognized as revenue in the period the expenses are
incurred.
The Company makes estimates of the uncollectability of its accounts receivable related to tenant
revenues. An allowance for doubtful accounts has been provided against certain tenant accounts
receivable that are estimated to be uncollectible. Once the amount is ultimately deemed to be
uncollectible, it is written off. Rents receivable at December 31, 2007 and 2006 are shown net of
an allowance for doubtful accounts of $3.1 million and $3.2 million, respectively.
F-10
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
Revenue Recognition and Accounts and Notes Receivable, continued
Interest income from notes receivable is recognized on an accrual basis based on the contractual
terms of the notes. The Company reviews notes receivable on a quarterly basis and determined that
all notes receivable are deemed to be collectible as of December 31, 2007.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or
less when purchased to be cash equivalents.
Restricted Cash and Cash in Escrow
Restricted cash and cash in escrow consist principally of cash held for real estate taxes, property
maintenance, insurance, minimum occupancy and property operating income requirements at specific
properties as required by certain loan agreements.
Income Taxes
The Company has made an election to be taxed, and believes it qualifies as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). To maintain REIT
status for Federal income tax purposes, the Company is generally required to distribute at least
90% of its REIT taxable income to its stockholders as well as comply with certain other
requirements as defined by the Code. Accordingly, the Company is not subject to federal corporate
income tax to the extent that it distributes 100% of its REIT taxable income each year.
Although it may qualify for REIT status for Federal income tax purposes, the Company is subject to
state income or franchise taxes in certain states in which some of its properties are located. In
addition, taxable income from non-REIT activities managed through the Company’s taxable REIT
subsidiaries (“TRS”) are subject to Federal, state and local income taxes.
TRS income taxes are accounted for under the asset and liability method as required by SFAS
No. 109, “Accounting for Income Taxes.” Under the asset and liability method, deferred income taxes
are recognized for the temporary differences between the financial reporting basis and the tax
basis of the TRS assets and liabilities.
The
Company adopted the provisions of the FASB financial Interpretation
No. 48, “ Accounting for Uncertainty in Income Taxes – an
interpretation of SFAS No. 109” as of January 1, 2007. The
Company believes that it has appropriate support for the income tax
positions taken and, as such, does not have any uncertain tax
positions that result in a material impact on the Company’s
financial position or results of operation. The prior three years
income tax returns are subject to review by the Internal Revenue
Service. The Company’s policy relating to interest and penalties
is to recognize them as a component of the provision for income
taxes.
Stock-based Compensation
The Company accounts for stock options pursuant to SFAS No. 123R “Accounting for Stock-Based
Compensation”. As such, all stock options are reflected as compensation expense in the Company’s
consolidated financial statements over their vesting period based on the fair value at the date the
stock option was granted.
Recent Accounting Pronouncements
In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108 “Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.”
This Bulletin provides guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality assessment. The guidance in
this Bulletin must be applied to financial reports covering the first fiscal year ending after
November 15, 2006. As a result of the adoption of SAB No. 108, the Company recorded a $1.8 million
cumulative effect of straight-line rent adjustment for prior years effective January 1, 2006. This
adjustment was the result of changing the calculation of tenants straight-line rent from rent
commencement date to the date the tenant took possession of the space. This adjustment is reflected
in the Company’s balance sheet as an increase to both rents receivable, net and retained earnings.
During September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157
“Fair Value Measurements.” This SFAS defines fair value, establishes a framework for measuring fair
value in GAAP, and expands disclosures about fair value measurements. This statement applies to
accounting pronouncements that require or permit fair value measurements, except for share-based
payment transactions under SFAS No. 123. SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007. As SFAS No. 157 does not require any new fair value
measurements or remeasurements of previously computed fair values, the Company does not believe
adoption of SFAS No. 157 will have a material effect on its financial statements.
F-11
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
Recent Accounting Pronouncements, continued
On February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities”. This statement permits companies and not-for-profit organizations to make a
one-time election to carry eligible types of financial assets and liabilities at fair value, even
if fair value measurement is not required under GAAP. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The Company is currently evaluating the effect of the adoption
of SFAS No. 159.
On August 31, 2007, the FASB issued a proposed FASB Staff Position (the “Proposed FSP”) that
affects the accounting for the Company’s convertible notes payable. The Proposed FSP requires the
initial debt proceeds from the sale of the Company’s convertible notes to be allocated between a
liability component and an equity component. The resulting debt discount must be amortized over the
period the debt is expected to remain outstanding as additional interest expense. The Proposed FSP,
if adopted, would be effective for fiscal years beginning after December 15, 2007 and would require
retroactive application. The Company is currently evaluating the impact that this Proposed FSP
would have on its financial statements if adopted.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements,” which, among other things, provides guidance and establishes amended accounting and
reporting standards for a parent company’s noncontrolling or minority interest in a
subsidiary. The Company is currently evaluating the impact of adopting the Statement, which is
effective for fiscal years beginning on or after December 15, 2008.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” which replaces SFAS No.
141 Business Combinations. SFAS No. 141R, among other things, establishes principles and
requirements for how an acquirer entity recognizes and measures in its financial statements the
identifiable assets acquired (including intangibles), the liabilities assumed and any
noncontrolling interest in the acquired entity. The Company is currently evaluating the impact of
adopting the Statement, which is effective for fiscal years beginning on or after December 15,
2008.
Comprehensive income
The following table sets forth comprehensive income for the years ended December 31, 2007, 2006 and
2005:
| Years ended December 31, | ||||||||||||
| (dollars in thousands) | 2007 | 2006 | 2005 | |||||||||
Net income |
$ | 27,270 | $ | 39,013 | $ | 20,626 | ||||||
Other comprehensive (loss) income |
(719 | ) | (222 | ) | 3,168 | |||||||
Comprehensive income |
$ | 26,551 | $ | 38,791 | $ | 23,794 | ||||||
Other comprehensive income relates to the changes in the fair value of derivative
instruments accounted for as cash flow hedges and
the amortization, which is included in interest expense, of derivative instruments.
The following table sets forth the change in accumulated other comprehensive loss for the years
ended December 31, 2007 and 2006:
Accumulated other comprehensive loss
| Years ended December 31, | ||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||
Beginning balance |
$ | (234 | ) | $ | (12 | ) | ||
Unrealized (loss) gain on
valuation of derivative
instruments and amortization of
derivative |
(719 | ) | (222 | ) | ||||
Ending balance |
$ | (953 | ) | $ | (234 | ) | ||
F-12
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations
A. Acquisition and Disposition of Properties
Currently the primary vehicles for the Company’s acquisitions are Funds I, II and III (Note 1).
Acquisitions
On March 20, 2007, the Company purchased a retail commercial condominium at 200 West 54th Street
located in Manhattan, New York. The 10,000 square foot property was acquired for $36.4 million.
Additionally, on March 20, 2007, the Company purchased a single-tenant building located at 1545
East Service Road in Staten Island, New York for $17.0 million.
On May 31, 2007, the Company purchased a property located on Atlantic Avenue in Brooklyn, New York
for $5.0 million. Redevelopment plans for the property call for the demolition of the existing
structure and the construction of a 110,000 square foot self-storage facility.
On June 13, 2007, the Company (approximately 25%), along with an unaffiliated partner
(approximately 75%), acquired a leasehold interest in The Gallery at Fulton Street and adjacent
parking garage located in downtown Brooklyn, New York for $115.0 million. The redevelopment plans
include the demolition of the existing improvements and the construction of a mixed-use project to
be called CityPoint.
On October 31, 2007, the Company, in conjunction with an unaffiliated partner, P/A Associates, LLC
(“Acadia P/A”) acquired a 530,000 square foot warehouse building in Canarsie, Brooklyn for
approximately $21.0 million. The development plan for this property includes the demolition of a
portion of the warehouse and the construction of a 320,000 square foot mixed-use project consisting
of retail, office, cold-storage and self-storage.
On November 1, 2007, the Company, and an unaffiliated partner acquired a property in Westport,
Connecticut for approximately $17.0 million. The plan is to redevelop the existing building into
30,000 square feet of retail and residential use.
On November 5, 2007, the Company, through Acadia P/A, acquired a property in Sheepshead Bay,
Brooklyn for approximately $20.0 million. The redevelopment plan includes the demolition of the
existing structures and the construction of a 240,000 square foot shopping center.
On January 12, 2006, the Company closed on a 19,265 square foot retail building in the Lincoln Park
district in Chicago. The property was acquired from an affiliate of Klaff for a purchase
price of $9.9 million, including the assumption of existing mortgage debt in the principal amount
of $3.8 million.
On January 24, 2006, the Company acquired a 60% interest in the entity which owns the A&P Shopping
Plaza located in Boonton, New Jersey. The property is a 63,000 square foot shopping center anchored
by a 49,000 square foot A&P Supermarket. A portion of the remaining 40% interest is owned by a
principal of P/A Associates, LLC. The interest was acquired for $3.2 million.
On June 16, 2006, the Company purchased 8400 and 8625 Germantown Road, totaling 40,570 square feet,
in Philadelphia, Pennsylvania for $16.0 million. The Company assumed a $10.1 million first mortgage
loan which has a maturity date of June 11, 2013.
On September 21, 2006, the Company purchased 2914 Third Avenue, a 41,305 square foot building
located in the Bronx, New York for $18.5 million.
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ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations, continued
Dispositions
On November 15, 2007, the Company sold the Amherst Marketplace and Sheffield Crossing, shopping
centers located in Ohio, for $26.0 million, which resulted in a $7.5 million gain on sale.
On December 13, 2007, the Company sold a residential complex in Columbia, Missouri for $15.5
million, which resulted in a $2.0 million loss on sale.
On November 3, 2006, the Company sold the Bradford Towne Centre, a 257,123 square foot shopping
center located in Towanda, Pennsylvania, for $16.0 million, which resulted in a $5.6 million gain
on sale.
On November 28, 2006, the Company sold three properties located in northeastern Pennsylvania as
follows:
| (dollars in thousands) | Sales Price | Gain | GLA | |||||||||
Property |
||||||||||||
Greenridge Plaza |
$ | 10,600 | $ | 4,753 | 191,767 | |||||||
Luzerne Street Center |
3,600 | 2,521 | 58,035 | |||||||||
Pittston Plaza |
6,000 | 487 | 79,498 | |||||||||
Total |
$ | 20,200 | $ | 7,761 | 329,300 | |||||||
On December 14, 2006, the Company sold the Soundview Marketplace, a 183,815 square foot shopping
center in Port Washington, New York, for $24.0 million which resulted in a $7.9 million gain on the
sale.
On July 7, 2005, the Company sold the Berlin Shopping Center for $4.0 million. An impairment loss
of $0.8 million was recognized for the year ended December 31, 2005 to reduce the carrying value of
this asset to fair value less costs to sell.
B. Discontinued Operations
SFAS No. 144 requires discontinued operations presentation for disposals of a “component” of an
entity. In accordance with SFAS No. 144, for all periods presented, the Company has reclassified
its consolidated statements of income to reflect income and expenses for sold properties (Note 2A),
as discontinued operations and reclassified its consolidated balance sheets to reflect assets and
liabilities related to such properties as assets and liabilities related to discontinued
operations. Interest expense specific to a discontinued operation property is reflected in
discontinued operations.
The combined results of operations of sold properties are reported separately as discontinued
operations for the years ended December 31, 2007, 2006 and 2005.
The combined assets and liabilities and results of operations of the properties classified as
discontinued operations are summarized as follows:
| December 31, | ||||
| (dollars in thousands) | 2006 | |||
ASSETS |
||||
Net real estate |
$ | 32,616 | ||
Rent receivable, net |
1,080 | |||
Other assets |
2,537 | |||
Total assets of discontinued operations |
$ | 36,233 | ||
LIABILITIES |
||||
Mortgage notes payable |
$ | 26,955 | ||
Accounts payable and accrued expenses |
665 | |||
Other liabilities |
1,140 | |||
Total liabilities of discontinued operations |
$ | 28,760 | ||
F-14
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations, continued
B. Discontinued Operations, continued
| Years ended December 31, | ||||||||||||
| (dollars in thousands) | 2007 | 2006 | 2005 | |||||||||
Revenues |
$ | 6,471 | $ | 15,359 | $ | 16,278 | ||||||
Operating expenses |
4,460 | 9,590 | 11.338 | |||||||||
Interest expense |
1,634 | 2,890 | 2.788 | |||||||||
Operating Income |
377 | 2,879 | 2,152 | |||||||||
Impairment of real estate |
¾ | ¾ | (770 | ) | ||||||||
Gain (loss) on sale of properties |
5,271 | 20,974 | (50 | ) | ||||||||
Minority interest |
(111 | ) | (462 | ) | (26 | ) | ||||||
Income from discontinued operations |
$ | 5,537 | $ | 23,391 | $ | 1,306 | ||||||
3. Segment Reporting
The Company has three reportable segments: core portfolio, opportunity funds and other which,
primarily consists of management fee and interest income. The accounting policies of the segments
are the same as those described in the summary of significant accounting policies. The Company
evaluates property performance primarily based on net operating income before depreciation,
amortization and certain nonrecurring items. Investments in the core portfolio are typically held
long-term. Given the finite life of the opportunity funds, these investments are typically held for
shorter terms. Fees earned by the Company as general partner/member of the opportunity funds are
eliminated in the Company’s consolidated financial statements. The Company previously reported two
reportable segments, retail properties and multi-family properties. During December of 2007, the
Company sold the majority of its multi-family properties and realigned the segments to reflect the
way the Company now manages the business. The following table sets forth certain segment
information for the Company, reclassified for discontinued operations, as of and for the years
ended December 31, 2007, 2006, and 2005 (does not include unconsolidated affiliates):
2007
| Core | Opportunity | |||||||||||||||||||
| (dollars in thousands) | Portfolio | Funds | Other | Elimination | Total | |||||||||||||||
Revenues |
$ | 62,970 | $ | 20,672 | $ | 38,294 | $ | (20,367 | ) | $ | 101,569 | |||||||||
Property operating expenses and real estate
taxes |
18,770 | 5,069 | 2,000 | (280 | ) | 25,559 | ||||||||||||||
Other expenses |
25,239 | 13,032 | ¾ | (15,213 | ) | 23,058 | ||||||||||||||
Net income before depreciation and amortization |
$ | 18,961 | $ | 2,571 | $ | 36,294 | $ | (4,874 | ) | $ | 52,952 | |||||||||
Depreciation and amortization |
$ | 17,510 | $ | 9,381 | $ | 615 | $ | ¾ | $ | 27,506 | ||||||||||
Interest expense |
$ | 17,439 | $ | 5,852 | $ | ¾ | $ | (516 | ) | $ | 22,775 | |||||||||
Real estate at cost |
$ | 460,591 | $ | 377,461 | $ | 20,380 | $ | (4,358 | ) | $ | 854,074 | |||||||||
Total assets |
$ | 569,538 | $ | 419,045 | $ | 14,787 | $ | (4,358 | ) | $ | 999,012 | |||||||||
Expenditures for real estate and improvements |
$ | 58,124 | $ | 151,652 | $ | 451 | $ | ¾ | $ | 210,227 | ||||||||||
Reconciliation to net income |
||||||||||||||||||||
Net property income before depreciation and
amortization |
$ | 52,952 | ||||||||||||||||||
Depreciation and amortization |
(27,506 | ) | ||||||||||||||||||
Equity in earnings of unconsolidated
partnerships |
6,619 | |||||||||||||||||||
Interest expense |
(22,775 | ) | ||||||||||||||||||
Income tax provision |
297 | |||||||||||||||||||
Minority interest |
9,063 | |||||||||||||||||||
Income from discontinued operations |
5,537 | |||||||||||||||||||
Extraordinary item |
3,677 | |||||||||||||||||||
Net income |
$ | 27,270 | ||||||||||||||||||
F-15
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Segment Reporting, continued
2006
| Core | Opportunity | |||||||||||||||||||
| (dollars in thousands) | Portfolio | Funds | Other | Elimination | Total | |||||||||||||||
Revenues |
$ | 58,450 | $ | 19,291 | $ | 26,654 | $ | (8,595 | ) | $ | 95,800 | |||||||||
Property operating expenses and real estate
taxes |
16,655 | 4,710 | 1,916 | (329 | ) | 22,952 | ||||||||||||||
Other expenses |
21,610 | 4,410 | ¾ | (6,238 | ) | 19,782 | ||||||||||||||
Net income before depreciation and amortization |
$ | 20,185 | $ | 10,171 | $ | 24,738 | $ | (2,028 | ) | $ | 53,066 | |||||||||
Depreciation and amortization |
$ | 15,212 | $ | 9,517 | $ | 632 | $ | ¾ | $ | 25,361 | ||||||||||
Interest expense |
$ | 14,160 | $ | 6,298 | $ | 243 | $ | (324 | ) | $ | 20,377 | |||||||||
Real estate at cost |
$ | 407,858 | $ | 223,748 | $ | 20,149 | $ | (1,704 | ) | $ | 650,051 | |||||||||
Total assets |
$ | 584,544 | $ | 254,586 | $ | 14,266 | $ | (1,704 | ) | $ | 851,692 | |||||||||
Expenditures for real estate and improvements |
$ | 62,725 | $ | 24,092 | $ | 192 | $ | ¾ | $ | 87,009 | ||||||||||
Reconciliation to net income |
||||||||||||||||||||
Net property income before depreciation and
amortization |
$ | 53,066 | ||||||||||||||||||
Depreciation and amortization |
(25,361 | ) | ||||||||||||||||||
Equity in earnings of unconsolidated
partnerships |
2,559 | |||||||||||||||||||
Interest expense |
(20,377 | ) | ||||||||||||||||||
Income tax (benefit) |
(508 | ) | ||||||||||||||||||
Minority interest |
5,227 | |||||||||||||||||||
Income from discontinued operations |
23,391 | |||||||||||||||||||
Net income |
$ | 39,013 | ||||||||||||||||||
2005
| Core | Opportunity | |||||||||||||||||||
| (dollars in thousands) | Portfolio | Funds | Other | Elimination | Total | |||||||||||||||
Revenues |
$ | 52,996 | $ | 32,045 | $ | 18,555 | $ | (9,631 | ) | $ | 93,965 | |||||||||
Property operating expenses and real estate
taxes |
14,713 | 5,754 | 1,833 | ¾ | 22,300 | |||||||||||||||
Other expenses |
15,382 | 8,888 | ¾ | (8,117 | ) | 16,153 | ||||||||||||||
Net income before depreciation and amortization |
$ | 22,901 | $ | 17,403 | $ | 16,722 | $ | (1,514 | ) | $ | 55,512 | |||||||||
Depreciation and amortization |
$ | 13,546 | $ | 10,540 | $ | 611 | $ | ¾ | $ | 24,697 | ||||||||||
Interest expense |
$ | 9,394 | $ | 7,503 | $ | 134 | $ | (342 | ) | $ | 16,689 | |||||||||
Real estate at cost |
$ | 337,344 | $ | 314,773 | $ | 19,872 | $ | (1,172 | ) | $ | 670,817 | |||||||||
Total assets |
$ | 436,136 | $ | 389,456 | $ | 16,784 | $ | (1,172 | ) | $ | 841,204 | |||||||||
Expenditures for real estate and improvements |
$ | 25,355 | $ | 105,448 | $ | 274 | $ | ¾ | $ | 131,077 | ||||||||||
Reconciliation to net income |
||||||||||||||||||||
Net property income before depreciation and
amortization |
$ | 55,512 | ||||||||||||||||||
Depreciation and amortization |
(24,697 | ) | ||||||||||||||||||
Equity in earnings of unconsolidated
partnerships |
21,280 | |||||||||||||||||||
Interest expense |
(16,689 | ) | ||||||||||||||||||
Income tax provision |
2,140 | |||||||||||||||||||
Minority interest |
(13,946 | ) | ||||||||||||||||||
Income from discontinued operations |
1,306 | |||||||||||||||||||
Net income |
$ | 20,626 | ||||||||||||||||||
F-16
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments
A. Investments In and Advances to Unconsolidated Affiliates
Retailer Controlled Property Venture (“RCP Venture”)
During January of 2004, the Company entered into the RCP Venture with Klaff Realty, L.P. (“Klaff”)
and Lubert-Adler Management, Inc. for the purpose of making investments in surplus or underutilized
properties owned by retailers. Through December 31, 2007, the Company has invested $55.4 million
through the RCP Venture on a non-recourse basis. Cash flow is to be distributed to the RCP Venture
partners in accordance with their ownership interests until they have received a 10% cumulative
return and a full return of all contributions. Thereafter, remaining cash flow is to be distributed
20% to Klaff and 80% to the partners (including Klaff).
Mervyns Department Stores
During September of 2004, the RCP Venture invested in a consortium to acquire the Mervyns
Department Store chain from Target Corporation. The gross acquisition price of $1.2 billion was
financed with $800 million of debt and $400 million of equity. The Company’s share of this
investment was $23.9 million. For the year ended December 31, 2007, the Company made an additional
investment of $2.2 million in Mervyns through the RCP Venture.
For the year ended December 31, 2005, the Company made add-on investments in Mervyns totaling $1.3
million. The Company accounts for these add-on investments using the cost method due to the minor
ownership interest and the inability to exert influence over the partnership’s operating and
financial policies.
Albertson’s
During June of 2006, the RCP Venture made its second investment as part of an investment
consortium, acquiring Albertson’s and Cub Foods, of which the Company’s share was $20.7 million.
During February of 2007, the Company received a cash distribution of $44.4 million from this
investment which was sourced from the disposition of certain operating stores and a refinancing of
the remaining assets held by Albertson’s. The distribution in excess of the Company’s invested
capital was reflected as an extraordinary gain of $30.2 million. This gain was characterized as
extraordinary consistent with the accounting treatment by Albertson’s which reflected the excess of
fair value of net assets acquired over the purchase price as an extraordinary gain. The Company
received additional distributions from this investment totaling $8.8 million for the year ended
December 31, 2007.
For the years ended December 31, 2007 and 2006, the Company made add-on investments in Albertson’s
totaling $2.8 million and received distributions totaling $0.8 million. The Company accounts for
these add-on investments using the cost method due to the minor ownership interest and the
inability to exert influence over the partnership’s operating and financial policies.
Other Investments
During 2006, the Company made additional investments of $1.1 million in Shopko and $0.7 million in
Marsh through the RCP Venture. For the year ended December 31, 2007, the Company received a $1.1
million cash distribution from the Shopko investment representing 100% of its invested capital.
During July of 2007, the RCP Venture acquired a portfolio of 87 retail properties from Rex Stores
Corporation. The Company’s share of this investment was $2.7 million.
The Company accounts for the two above investments using the cost method due to its minor ownership
interest and the inability to exert influence over the partnership’s operating and financial
policies.
The following table summarizes the RCP Venture investments from inception through December 31,
2007:
| Operating Partnership Share | ||||||||||||||||||||
| Year | Invested | Invested | ||||||||||||||||||
| Investor | Investment | acquired | capital | Distributions | capital | Distributions | ||||||||||||||
| Mervyns I and Mervyns II | Mervyns | 2004 | $ | 26,072 | $ | 45,966 | $ | 4,901 | $ | 11,251 | ||||||||||
| Mervyns add-on | ||||||||||||||||||||
| Mervyns I and Mervyns II | investments | 2005 | 1,342 | 1,342 | 283 | 283 | ||||||||||||||
| Mervyns II | Albertson’s | 2006 | 20,717 | 53,206 | 4,239 | 9,847 | ||||||||||||||
| Albertson’s add-on | ||||||||||||||||||||
| Mervyns II | investments | 2006/2007 | 2,765 | 833 | 386 | 93 | ||||||||||||||
| Fund II | Shopko | 2006 | 1,100 | 1,100 | 220 | 220 | ||||||||||||||
| Fund II | Marsh | 2006 | 667 | ¾ | 133 | ¾ | ||||||||||||||
| Mervyns II | Rex | 2007 | 2,701 | ¾ | 535 | ¾ | ||||||||||||||
| Total | $ | 55,364 | $ | 102,447 | $ | 10,697 | $ | 21,694 | ||||||||||||
F-17
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments, continued
Brandywine Portfolio
The Company owns a 22.2% interest in a one million square foot retail portfolio located in
Wilmington, Delaware (the “Brandywine Portfolio”) which is accounted for using the equity method.
Crossroads
The Company owns a 49% interest in the Crossroads Joint Venture and Crossroads II (collectively,
“Crossroads”), which collectively own a 311,000 square foot shopping center located in White
Plains, New York which is accounted for using the equity method.
Other Investments
Fund I Investments
Fund I has joint ventures with unaffiliated third-party investors in the ownership and operation of the following shopping centers, which are accounted for using the equity method of accounting.
Fund I has joint ventures with unaffiliated third-party investors in the ownership and operation of the following shopping centers, which are accounted for using the equity method of accounting.
| Gross Leasable | ||||||||
| Shopping Center | Location | Year Acquired | Area | |||||
Haygood Shopping Center |
Virginia Beach, VA | 2004 | 178,533 | |||||
Sterling Heights Shopping Center |
Detroit, MI | 2004 | 154,835 | |||||
Total |
333,368 | |||||||
In November 2006, Fund I completed the purchase of the remaining 50% interest in the Tarrytown
Centre, a 35,000 square foot center located in Westchester, New York, from its unaffiliated
partner. This investment, which had previously been accounted for using the equity method, is now
consolidated.
Fund II Investments
Fund II has invested $1.2 million as a 50% owner in an entity which has a leasehold interest in a
former Levitz Furniture store located in Rockville, Maryland, which is accounted for using the
equity method.
Fund II’s approximately 25% investment in CityPoint (Note 2) is accounted for using the equity
method. This investment is a variable interest entity of which the
Company is not the primary beneficiary. The Company’s maximum
exposure is its current investment balance of $28.9 million.
In addition to these investments, the Company made advances to unconsolidated affiliates. At
December 31, 2007 and 2006, advances to unconsolidated affiliates totaled $4.0 million and $2.3
million, respectively.
F-18
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments, continued
A. Investments In and Advances to Unconsolidated Affiliates, continued
The following tables summarize the Company’s investment in unconsolidated subsidiaries as of
December 31, 2007, December 31, 2006 and December 31, 2005.
| December 31, 2007 | ||||||||||||||||||||||||
| RCP | Brandywine | Other | ||||||||||||||||||||||
| (dollars in thousands) | Venture | CityPoint | Portfolio | Crossroads | Investments | Total | ||||||||||||||||||
Balance Sheets |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Rental property, net |
$ | — | $ | 145,775 | $ | 136,942 | $ | 5,552 | $ | 38,137 | $ | 326,406 | ||||||||||||
Investment in unconsolidated affiliates |
195,672 | — | — | — | — | 195,672 | ||||||||||||||||||
Other assets |
— | 3,046 | 10,631 | 4,372 | 6,650 | 24,699 | ||||||||||||||||||
Total assets |
$ | 195,672 | $ | 148,821 | $ | 147,573 | $ | 9,924 | $ | 44,787 | $ | 546,777 | ||||||||||||
Liabilities and partners’ equity |
||||||||||||||||||||||||
Mortgage note payable |
$ | — | $ | 34,000 | $ | 166,200 | $ | 64,000 | $ | 33,084 | $ | 297,284 | ||||||||||||
Other liabilities |
— | 2,213 | 9,629 | 1,112 | 2,307 | 15,261 | ||||||||||||||||||
Partners equity (deficit) |
195,672 | 112,608 | (28,256 | ) | (55,188 | ) | 9,396 | 234,232 | ||||||||||||||||
Total liabilities and partners’ equity |
$ | 195,672 | $ | 148,821 | $ | 147,573 | $ | 9,924 | $ | 44,787 | $ | 546,777 | ||||||||||||
Company’s
investment in and advances to unconsolidated
affiliates |
$ | 9,813 | $ | 28,890 | $ | — | $ | — | $ | 5,951 | $ | 44,654 | ||||||||||||
Share of distributions in excess of
share of income and investment in
unconsolidated affiliates |
$ | — | $ | — | $ | (7,822 | ) | $ | (12,185 | ) | $ | — | $ | (20,007 | ) | |||||||||
| December 31, 2006 | ||||||||||||||||||||
| RCP | Brandywine | Other | ||||||||||||||||||
| (dollars in thousands) | Venture | Portfolio | Crossroads | Investments | Total | |||||||||||||||
Balance Sheets |
||||||||||||||||||||
Assets |
||||||||||||||||||||
Rental property, net |
$ | — | $ | 127,146 | $ | 6,017 | $ | 43,660 | $ | 176,823 | ||||||||||
Investment in unconsolidated affiliates |
385,444 | — | — | — | 385,444 | |||||||||||||||
Other assets |
— | 6,747 | 4,511 | 6,632 | 17,890 | |||||||||||||||
Total assets |
$ | 385,444 | $ | 133,893 | $ | 10,528 | $ | 50,292 | $ | 580,157 | ||||||||||
Liabilities and partners’ equity |
||||||||||||||||||||
Mortgage note payable |
$ | — | $ | 166,200 | $ | 64,000 | $ | 28,558 | $ | 258,758 | ||||||||||
Other liabilities |
— | 12,709 | 1,858 | 8,862 | 23,429 | |||||||||||||||
Partners equity (deficit) |
385,444 | (45,016 | ) | (55,330 | ) | 12,872 | 297,970 | |||||||||||||
Total liabilities and partners’ equity |
$ | 385,444 | $ | 133,893 | $ | 10,528 | $ | 50,292 | $ | 580,157 | ||||||||||
Company’s investment in and advances to unconsolidated
affiliates |
$ | 24,894 | $ | — | $ | — | $ | 8,439 | $ | 33,333 | ||||||||||
Share of distributions in excess of
share of income and investment in
unconsolidated affiliates |
$ | — | $ | (10,541 | ) | $ | (11,187 | ) | $ | — | $ | (21,728 | ) | |||||||
F-19
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments, continued
A. Investments In and Advances to Unconsolidated Affiliates, continued
| Year ended December 31, 2007 | ||||||||||||||||||||
| RCP | Brandywine | Other | ||||||||||||||||||
| (dollars in thousands) | Venture | Portfolio | Crossroads | Investments | Total | |||||||||||||||
Statements of Operations |
||||||||||||||||||||
Total revenue |
$ | — | $ | 20,252 | $ | 8,518 | $ | 5,862 | $ | 34,632 | ||||||||||
Operating and other expenses |
— | 5,620 | 3,095 | 1,396 | 10,111 | |||||||||||||||
Interest expense |
— | 10,102 | 3,485 | 2,333 | 15,920 | |||||||||||||||
Equity in earnings of affiliates |
46,416 | — | — | — | 46,416 | |||||||||||||||
Equity in earning of unconsolidated affiliates extraordinary
gain |
151,000 | — | — | — | 151,000 | |||||||||||||||
Depreciation and amortization |
— | 3,269 | 475 | 4,439 | 8,183 | |||||||||||||||
Net income (loss) |
$ | 197,416 | $ | 1,261 | $ | 1,463 | $ | (2,306 | ) | $ | 197,834 | |||||||||
Company’s share of net income |
$ | 3,312 | $ | 232 | $ | 717 | $ | 2,750 | $ | 7,011 | ||||||||||
Amortization of excess investment |
— | — | 392 | — | 392 | |||||||||||||||
Company’s share of net income before extraordinary gain |
$ | 3,312 | $ | 232 | $ | 325 | $ | 2,750 | $ | 6,619 | ||||||||||
Company’s share of extraordinary gain |
$ | 30,200 | $ | — | $ | — | $ | — | $ | 30,200 | ||||||||||
| Year ended December 31, 2006 | ||||||||||||||||||||
| Brandywine | Other | |||||||||||||||||||
| (dollars in thousands) | RCP Venture | Portfolio | Crossroads | Investments | Total | |||||||||||||||
Statements of Operations |
||||||||||||||||||||
Total revenue |
$ | — | $ | 18,324 | $ | 9,208 | $ | 3,707 | $ | 31,239 | ||||||||||
Operating and other expenses |
— | 4,800 | 3,121 | 2,295 | 10,216 | |||||||||||||||
Interest expense |
— | 12,066 | 3,485 | 1,448 | 16,999 | |||||||||||||||
Equity in (losses) of affiliates |
(4,554 | ) | — | — | — | (4,554 | ) | |||||||||||||
Depreciation and amortization |
— | 2,947 | 580 | 1,416 | 4,943 | |||||||||||||||
Net (loss) income |
$ | (4,554 | ) | $ | (1,489 | ) | $ | 2,022 | $ | (1,452 | ) | $ | (5,473 | ) | ||||||
Company’s share of net income |
$ | 2,212 | $ | (31 | ) | $ | 991 | $ | (221 | ) | $ | 2,951 | ||||||||
Amortization of excess investment |
— | — | 392 | — | 392 | |||||||||||||||
Company’s share of net income (loss) |
$ | 2,212 | $ | (31 | ) | $ | 599 | $ | (221 | ) | $ | 2,559 | ||||||||
F-20
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments, continued
A. Investments In and Advances to Unconsolidated Affiliates, continued
| Year ended December 31, 2005 | ||||||||||||||||
| Other | ||||||||||||||||
| (dollars in thousands) | RCP Venture | Crossroads | Investments | Total | ||||||||||||
Statements of Operations |
||||||||||||||||
Total revenue |
$ | — | $ | 8,772 | $ | 3,778 | $ | 12,550 | ||||||||
Operating and other expenses |
— | 2,581 | 2,206 | 4,787 | ||||||||||||
Interest expense |
— | 3,632 | 906 | 4,538 | ||||||||||||
Equity in earnings of affiliates |
181,543 | — | — | 181,543 | ||||||||||||
Depreciation and amortization |
— | 654 | 927 | 1,581 | ||||||||||||
Net income (loss) |
$ | 181,543 | $ | 1,905 | $ | (261 | ) | $ | 183,187 | |||||||
Company’s share of net income |
20,902 | 988 | (218 | ) | 21,672 | |||||||||||
Amortization of excess investment |
— | 392 | — | 392 | ||||||||||||
Company’s share of net income (loss) |
$ | 20,902 | $ | 596 | $ | (218 | ) | $ | 21,280 | |||||||
B. Notes Receivable and Preferred Equity Investment
During March of 2005, the Company made a $20.0 million preferred equity investment (“Preferred
Equity Investment”) in Levitz SL, L.L.C. (“Levitz SL”), the owner of fee and leasehold interests in
30 current or former Levitz Furniture Store locations (the “Levitz Properties”), totaling
2.5 million square feet.
During June 2006, the Company converted the Preferred Equity Investment to a first mortgage loan
and made an additional advance bringing the total outstanding amount to $31.3 million. The loan
matures on May 31, 2008 and bears interest at a rate of 10.5%. During 2006, Levitz SL sold one of
the Levitz Properties located in Northridge, California and used $20.4 million of the proceeds to
pay down the loan. During 2007, Levitz SL sold an additional Levitz Property located in St. Paul
Minnesota and used $4.8 million of the proceeds to pay down the first mortgage loan. As of
December 31, 2007 and 2006, the loan balance amounted to $6.1 million and $10.9 million,
respectively, and was secured by fee and leasehold mortgages as well as a pledge of the entities
owning 13 of the remaining Levitz Properties totaling 1.3 million square feet. Although Levitz
Furniture filed for Chapter 7 bankruptcy protection during November 2007, the Company believes the
underlying value of the real estate is sufficient to recover the principal and interest due under
the mortgage.
5. Deferred Charges
Deferred charges consist of the following as of December 31, 2007 and 2006:
| December 31, | ||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||
Deferred financing costs |
$ | 18,756 | $ | 15,684 | ||||
Deferred leasing and other costs |
20,399 | 19,342 | ||||||
| 39,155 | 35,026 | |||||||
Accumulated amortization |
(17,330 | ) | (14,277 | ) | ||||
| $ | 21,825 | $ | 20,749 | |||||
F-21
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6 Acquired Lease Intangibles
Upon acquisitions of real estate, the Company assesses the fair value of acquired assets (including
land, buildings and improvements, and identified intangibles such as above and below market leases,
acquired in-place leases and customer relationships) and acquired liabilities in accordance with
SFAS No. 141. The intangibles are amortized over the remaining non-cancelable terms of the
respective leases
The scheduled amortization of acquired lease intangible assets as of December 31, 2007 is as
follows:
| (dollars in thousands) | ||||
2008 |
$ | 2,744 | ||
2009 |
2,222 | |||
2010 |
1,782 | |||
2011 |
1,258 | |||
2012 |
777 | |||
Thereafter |
7,320 | |||
| $ | 16,103 | |||
The scheduled amortization of acquired lease intangible liabilities as of December 31, 2007 is as
follows:
| (dollars in thousands) | ||||
2008 |
$ | (827 | ) | |
2009 |
(694 | ) | ||
2010 |
(631 | ) | ||
2011 |
(634 | ) | ||
2012 |
(588 | ) | ||
Thereafter |
(2,277 | ) | ||
| $ | (5,651 | ) | ||
7. Mortgage Loans
At December 31, 2007 and 2006, mortgage notes payable, excluding the net valuation premium on the
assumption of debt, aggregated $402.0 million and $318.3 million, respectively, and were
collateralized by 49 and 52 properties and related tenant leases, respectively. Interest rates on
the Company’s outstanding mortgage indebtedness ranged from 4.75% to 8.5% with maturities that
ranged from March 2008 to November 2032. Certain loans are cross-collateralized and
cross-defaulted. The loan agreements contain customary representations, covenants and events of
default. Certain loan agreements require the Company to comply with certain affirmative and
negative covenants, including the maintenance of certain debt service coverage and leverage ratios.
The following reflects mortgage loan activity for the year ended December 31, 2007:
During 2007, the Company drew an additional $17.4 million on two existing construction loans.
During September 2007, the Company paid off the remaining $19.2 million balance of one of these
loans. As of December 31, 2007, the outstanding balance on the remaining construction loan was
$10.0 million.
During January 2007, the Company paid off a $21.5 million loan.
During January 2007, the Company closed on a $26.0 million loan secured by a property, which bears
interest at a fixed rate of 5.4% and matures on February 11, 2017. A portion of the proceeds was
used to pay off an existing $15.7 million loan.
F-22
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Mortgage Loans, continued
During March 2007, the Company closed on a $30.0 million revolving facility which bears interest at
LIBOR plus 125 basis points and matures on March 29, 2010. As of December 31, 2007, this line of
credit was fully available.
During 2007, the Company borrowed $34.5 million on an existing credit facility.
During July 2007, the Company closed on a new $26.3 million mortgage loan secured by a property.
The loan bears interest at a fixed rate of 5.9% and matures on August 1, 2017. A portion of the
proceeds were used to pay down an existing $12.5 million loan.
During September 2007, the Company extended a $19.0 million loan that bears fixed interest at 5.8%
to a new maturity date of March 1, 2008 and also extended a $2.9 million loan that bears interest
at LIBOR plus 200 basis points to a new maturity date of October 5, 2008.
On September 12, 2007, the Company closed on a $25.5 million loan secured by a property, which
bears interest at a fixed rate of 5.8% and matures on October 1, 2017. A portion of the proceeds
were used to pay down an existing $19.2 million construction loan.
During October 2007, the Company closed on a $75.0 million revolving facility, which bears interest
at the commercial paper rate plus 50 basis points and matures on October 10, 2011. As of December
31, 2007, this facility was fully available.
On October 30, 2007, the Company closed on a $9.8 million loan secured by a property, which bears
interest at LIBOR plus 165 basis points and matures on October 30, 2010.
During October 2007, the Company closed on a construction loan for a property for $95.3 million.
This loan bears interest at LIBOR plus 175 basis points and matures on October 4, 2009. A portion
of the proceeds were used to pay down an existing $18.0 million loan. As of December 31, 2007, the
amount outstanding on this loan was $37.3 million.
During November and December 2007, in conjunction with the sale of four properties, the Company
paid off $26.5 million of debt.
During December 2007, the Company closed on a construction loan for a property for $35.7 million.
This loan bears interest at a fixed rate of 7.2%. Based upon meeting certain conditions, this loan
will become permanent after a 2-year period and the interest rate will be adjusted. This loan
matures on January 1, 2020. As of December 31, 2007, there was no outstanding balance on this
loan.
During December 2007, the Company closed on a construction loan for a property for $16.2 million.
This loan bears interest at a fixed rate of 7.1%. Based upon meeting certain conditions, this loan
will become permanent after a 2-year period and the interest rate will be adjusted. This loan
matures on January 1, 2020. As of December 31, 2007, there was no outstanding balance on this
loan.
F-23
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Mortgage Loans, continued
The following table summarizes our mortgage indebtedness as of December 31, 2007 and December 31,
2006:
| December 31, | December 31, | Interest Rate at | Properties | Payment | ||||||||||||||||||||
| 2007 | 2006 | December 31, 2007 | Maturity | Encumbered | Terms | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
Mortgage notes payable – variable-rate |
||||||||||||||||||||||||
Washington Mutual Bank, FA |
$ | — | $ | 21,524 | 6.10% (LIBOR + 1.50%) | 4/1/2011 | (1 | ) | (29 | ) | ||||||||||||||
Bank of America, N.A. |
9,781 | 9,925 | 6.00% (LIBOR + 1.40%) | 6/29/2012 | (2 | ) | (29 | ) | ||||||||||||||||
RBS Greenwich Capital |
30,000 | 30,000 | 6.00% (LIBOR + 1.40%) | 4/1/2008 | (3 | ) | (30 | ) | ||||||||||||||||
Bank of America, N.A. |
— | 6,424 | 5.85% (LIBOR + 1.25%) | 12/31/2008 | (4 | ) | (30 | ) | ||||||||||||||||
PNC Bank, National Association |
9,990 | 5,363 | 6.25% (LIBOR + 1.65%) | 5/18/2009 | (5 | ) | (36 | ) | ||||||||||||||||
Bank One, N.A. |
2,818 | 2,939 | 6.60% (LIBOR + 2.00%) | 10/5/2008 | (6 | ) | (35 | ) | ||||||||||||||||
Bank of China, New York Branch |
— | 18,000 | 6.35% (LIBOR + 1.75%) | 11/1/2007 | (7 | ) | (30 | ) | ||||||||||||||||
Bank of America, N.A. |
15,773 | 16,000 | 5.90% (LIBOR + 1.30%) | 12/1/2011 | (8 | ) | (29 | ) | ||||||||||||||||
Bank of America, N.A. |
— | — | 5.85% (LIBOR + 1.25%) | 12/1/2010 | (9 | ) | (31 | ) | ||||||||||||||||
Anglo Irish Bank Corporation |
9,800 | — | 6.25% (LIBOR + 1.65%) | 10/30/2010 | (10 | ) | (30 | ) | ||||||||||||||||
Eurohypo AG |
37,263 | — | 6.35% (LIBOR + 1.75%) | 10/4/2009 | (7 | ) | (36 | ) | ||||||||||||||||
Bank of America, N.A./Bank of New York |
34,500 | — | 5.35% (LIBOR + 0.75%) | 3/1/2008 | (11 | ) | (30 | ) | ||||||||||||||||
Bank of America, N.A. |
— | — | 4.75% (Commercial Paper + 0.50%) | 10/9/2011 | (12 | ) | (30 | ) | ||||||||||||||||
Interest rate swaps (41) |
(34,284 | ) | (16,002 | ) | ||||||||||||||||||||
Total variable-rate debt |
115,641 | 94,173 | ||||||||||||||||||||||
Mortgage notes payable – fixed-rate |
||||||||||||||||||||||||
Sun America Life Insurance Company |
$ | — | $ | 12,665 | 6.46% | 7/1/2007 | (13 | ) | (29 | ) | ||||||||||||||
RBS Greenwich Capital |
— | 15,672 | 5.19% | 6/1/2013 | (14 | ) | (29 | ) | ||||||||||||||||
RBS Greenwich Capital |
14,752 | 14,940 | 5.64% | 9/6/2014 | (15 | ) | (29 | ) | ||||||||||||||||
RBS Greenwich Capital |
17,600 | 17,600 | 4.98% | 9/6/2015 | (16 | ) | (32 | ) | ||||||||||||||||
RBS Greenwich Capital |
12,500 | 12,500 | 5.12% | 11/6/2015 | (17 | ) | (33 | ) | ||||||||||||||||
Bear Stearns Commercial |
34,600 | 34,600 | 5.53% | 1/1/2016 | (18 | ) | (34 | ) | ||||||||||||||||
Bear Stearns Commercial |
20,500 | 20,500 | 5.44% | 3/1/2016 | (19 | ) | (30 | ) | ||||||||||||||||
LaSalle Bank, N.A. |
3,727 | 3,782 | 8.50% | 4/11/2028 | (20 | ) | (29 | ) | ||||||||||||||||
GMAC Commercial |
8,451 | 8,565 | 6.40% | 11/1/2032 | (21 | ) | (29 | ) | ||||||||||||||||
Column Financial, Inc. |
9,834 | 9,997 | 5.45% | 6/11/2013 | (22 | ) | (29 | ) | ||||||||||||||||
Merrill Lynch Mortgage Lending, Inc. |
23,500 | 23,500 | 6.06% | 8/29/2016 | (23 | ) | (37 | ) | ||||||||||||||||
Bank of China |
19,000 | 19,000 | 5.83% | 3/1/2008 | (24 | ) | (30 | ) | ||||||||||||||||
Cortlandt Deposit Corp |
4,950 | 7,425 | 6.62% | 2/1/2009 | (25 | ) | (35 | ) | ||||||||||||||||
Cortlandt Deposit Corp |
4,893 | 7,339 | 6.51% | 1/15/2009 | (26 | ) | (35 | ) | ||||||||||||||||
Bank of America, N.A. |
25,500 | — | 5.80% | 10/1/2017 | (4 | ) | (30 | ) | ||||||||||||||||
Bear Stearns Commercial |
26,250 | — | 5.88% | 8/1/2017 | (13 | ) | (38 | ) | ||||||||||||||||
Wachovia |
26,000 | — | 5.42% | 2/11/2017 | (14 | ) | (30 | ) | ||||||||||||||||
Bear Stearns Commercial |
— | — | 7.18% | 1/1/2020 | (27 | ) | (36 | ) | ||||||||||||||||
Bear Stearns Commercial |
— | — | 7.14% | 1/1/2020 | (28 | ) | (36 | ) | ||||||||||||||||
Interest rate swaps (41) |
34,284 | 16,002 | 6.18% | (39 | ) | |||||||||||||||||||
Total fixed-rate debt |
286,341 | 224,087 | ||||||||||||||||||||||
Total fixed and variable debt |
401,982 | 318,260 | ||||||||||||||||||||||
Valuation premium on assumption of
debt net of amortization (40) |
921 | 1,247 | ||||||||||||||||||||||
Total |
$ | 402,903 | $ | 319,507 | ||||||||||||||||||||
F-24
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Mortgage Loans, continued
Notes:
| (1) | Ledgewood Mall | |
| (2) | Village Commons Shopping Center | |
| (3) | 161st Street | |
| (4) | 216th Street | |
| (5) | Liberty Avenue | |
| (6) | Granville Center | |
| (7) | Fordham Place | |
| (8) | Branch Shopping Center | |
| (9) | Marketplace of Absecon | |
| Bloomfield Town Square | ||
| Hobson West Plaza | ||
| Village Apartments | ||
| Town Line Plaza | ||
| Methuen Shopping Center | ||
| Abington Towne Center | ||
| (10) | Tarrytown Center | |
| (11) | Acadia Strategic Opportunity Fund II, LLC | |
| (12) | Acadia Strategic Opportunity Fund III, LLC | |
| (13) | Merrillville Plaza | |
| (14) | 239 Greenwich Avenue | |
| (15) | New Loudon Center | |
| (16) | Crescent Plaza | |
| (17) | Pacesetter Park Shopping Center | |
| (18) | Elmwood Park Shopping Center | |
| (19) | Gateway Shopping Center | |
| (20) | Clark-Diversey | |
| (21) | Boonton Shopping Center | |
| (22) | Chestnut Hill | |
| (23) | Walnut Hill | |
| (24) | Sherman Avenue | |
| (25) | Kroger Portfolio | |
| (26) | Safeway Portfolio | |
| (27) | Pelham Manor | |
| (28) | Atlantic Avenue Self-Storage | |
| (29) | Monthly principal and interest. | |
| (30) | Interest only monthly. | |
| (31) | Annual principal and monthly interest. | |
| (32) | Interest only monthly until 9/10; monthly principal and interest thereafter. | |
| (33) | Interest only monthly until 12/08; monthly principal and interest thereafter. | |
| (34) | Interest only monthly until 1/10; monthly principal and interest thereafter. | |
| (35) | Annual principal and semi-annual interest payments. | |
| (36) | Interest only upon draw down on construction loan. | |
| (37) | Interest only until 10/11, monthly principal and interest thereafter | |
| (38) | Interest only until 7/12, monthly principal and interest thereafter | |
| (39) | Maturing between 1/1/10 and 3/1/12. | |
| (40) | In connection with the assumption of debt in accordance with the requirements of SFAS No. 141, the Company has recorded a valuation premium which is being amortized to interest expense over the remaining terms of the underlying mortgage loans. | |
| (41) | Represents the amount of the company’s variable-rate debt that has been fixed through certain cash flow hedge transactions (Note 18). |
F-25
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Convertible Notes Payable
In December 2006, the Company issued $100.0 million of convertible notes with a fixed interest rate
of 3.75% due 2026 (the “Convertible Notes”). The Convertible Notes were issued at par and require
interest payments semi-annually in arrears on June 15th and December 15th of each year. The
Convertible Notes are unsecured unsubordinated obligations and rank equally with all other
unsecured and unsubordinated indebtedness. On January 8, 2007, the option to increase the issuance
of the Convertible Notes by an additional $15.0 million, was exercised, resulting in additional
proceeds of $14.7 million. The Convertible Notes had an initial conversion price of $30.86 per
share. Upon conversion of the Convertible Notes, the Company will deliver cash and, in some
circumstances, Common Shares, as specified in the indenture relating to the Convertible Notes. The
Convertible Notes may only be converted prior to maturity: (i) during any calendar quarter
beginning after December 31, 2006 (and only during such calendar quarter), if, and only if, the
closing sale price of the Company’s Common Shares for at least 20 trading days (whether consecutive
or not) in the period of 30 consecutive trading days ending on the last trading day of the
preceding calendar quarter is greater than 130% of the conversion price per common share in effect
on the applicable trading day; or (ii) during the five consecutive trading-day period following any
five consecutive trading-day period in which the trading price of the notes was less than 98% of
the product of the closing sale price of the Company’s Common Shares multiplied by the applicable
conversion rate; or (iii) if those notes have been called for redemption, at any time prior to the
close of business on the second business day prior to the redemption date; or (iv) if the Company’s
Common Shares are not listed on a United States national or regional securities exchange for 30
consecutive trading days. Prior to December 20, 2011, the Company will not have the right to redeem
Convertible Notes, except to preserve its status as a REIT. After December 20, 2011, the Company
will have the right to redeem the notes, in whole or in part, at any time and from time to time,
for cash equal to 100% of the principal amount of the notes plus any accrued and unpaid interest
to, but not including, the redemption date. The Holders of notes may require the Company to
repurchase their notes, in whole or in part, on December 20, 2011, December 15, 2016, and December
15, 2021 for cash equal to 100% of the principal amount of the notes to be repurchased plus any
accrued and unpaid interest to, but not including, the repurchase date.
If certain change of control transactions occur prior to December 20, 2011 and a holder elects to
convert the Convertible Notes in connection with any such transaction, the Company will increase
the conversion rate in connection with such conversion by a number of additional common shares
based on the date such transaction becomes effective and the price paid per common share in such
transaction. The conversion rate may also be adjusted under certain other circumstances, including
the payment of cash dividends in excess of our current regular quarterly cash dividend of $0.21 per
Common Share, but will be not adjusted for accrued and unpaid interest on the notes.
Upon a conversion of notes, the Company will deliver cash and, at the Company’s election, its
Common Shares, with an aggregate value, which the Company refers to as the “conversion value”,
equal to the conversion rate multiplied by the average price of the Company’s Common Shares as
follows: (i) an amount in cash which the Company refers to as the “principal return”, equal to the
lesser of (a) the principal amount of the converted notes and (b) the conversion value; and (ii) if
the conversion value is greater than the principal return, an amount with a value equal to the
difference between the conversion value and the principal return, which the Company refers to as
the “new amount”. The net amount may be paid, at the Company’s option, in cash, its Common Shares
or a combination of cash and its Common Shares.
The scheduled principal repayments of all indebtedness as of December 31, 2007 are as follows:
| (dollars in thousands) | ||||
2008 |
$ | 92,199 | ||
2009 |
53,356 | |||
2010 |
11,515 | |||
2011 |
131,870 | |||
2012 |
11,239 | |||
Thereafter |
216,803 | |||
| $ | 516,982 | (1) | ||
| Note: | ||
| (1) | Does not include $921 net valuation premium on assumption of debt. |
F-26
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Shareholders’ Equity and Minority Interests
Common Shares
Through December 31, 2007, the Company had repurchased 2,051,605 Common Shares at a total cost of
$11.7 million (all of these Common Shares have been subsequently reissued) under its share
repurchase program that allows for the repurchase of up to $20.0 million of its outstanding Common
Shares. The repurchased shares are reflected as a reduction of Common Shares at par value and
additional paid-in capital.
During the first quarter of 2007, 43,865 employee Restricted Shares were cancelled to pay the
employees’ income taxes due on the value of the portion of the Restricted Shares which vested.
During the year ended December 31, 2007, the Company recognized accrued Common Share and Common OP
Unit-based compensation totaling $3.3 million in connection with the vesting of Restricted Shares
and Units. (Note 13).
Minority Interests
The following table summarizes the change in the minority interests since December 31, 2006:
| Minority | ||||||||
| Minority | Interest in | |||||||
| Interest in | partially- | |||||||
| Operating | owned | |||||||
| Partnership | Affiliates | |||||||
| (dollars in thousands) | ||||||||
Balance at December 31, 2006 |
$ | 8,673 | $ | 105,064 | ||||
Distributions declared of $1.033 per Common OP Unit |
(690 | ) | — | |||||
Net income for the period January 1 through December 31, 2007 |
615 | 14,601 | ||||||
Distributions paid |
— | (63,691 | ) | |||||
Conversion of Series B Preferred OP Units |
(4,000 | ) | — | |||||
Other comprehensive income – unrealized loss on valuation of swap agreements |
(136 | ) | — | |||||
Minority Interest contributions |
— | 110,542 | ||||||
Employee Long-term Incentive Plan Unit Awards |
133 | — | ||||||
Balance at December 31, 2007 |
$ | 4,595 | $ | 166,516 | ||||
Minority interest in the Operating Partnership represents (i) the limited partners’ 642,272 Common
OP Units at both December 31, 2007 and 2006, (ii) 188 Series A Preferred OP Units at both
December 31, 2007 and 2006, with a stated value of $1,000 per unit, which are entitled to a
preferred quarterly distribution of the greater of (a) $22.50 (9% annually) per Series A Preferred
OP Unit or (b) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit
were converted into a Common OP Unit, and (iii) 0 and 4,000 Series B Preferred OP Units at
December 31, 2007 and December 31, 2006, respectively, with a stated value of $1,000 per unit,
which are entitled to a preferred quarterly distribution of the greater of (a) $13.00 (5.2%
annually) per unit or (b) the quarterly distribution attributable to a Series B Preferred OP Unit
if such unit were converted into a Common OP Unit.
During February 2007, Klaff (Note 10) converted 3,800 Series B Preferred Units into 296,412 Common
OP Units and ultimately into the same number of Common Shares. During June 2007 Klaff converted its
remaining 200 Series B Preferred Units into 15,601 Common OP Units and ultimately into the same
number of Common Shares.
Minority interests in partially-owned affiliates include third-party interests in Fund I, II and
III, and Mervyns I and II and three other entities.
During July 2005, the Company issued to a third party 11,105 Restricted Common OP Units valued at
$18.01 per unit in connection with the purchase of 4343 Amboy Road. The holder of the Common OP
Units was restricted from selling these for six months from the date of the transaction. During
June 2006, the Company redeemed for cash the 11,105 Restricted Common OP Units.
During January 2006, the Company acquired a 60% interest in the A&P Shopping Plaza located in
Boonton, New Jersey, (Note 2). The remaining 40% interest is owned by a third party and is
reflected as minority interest in the accompanying Consolidated Balance Sheets at December 31, 2007
and December 31, 2006.
F-27
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Shareholders’ Equity and Minority Interests, continued
Minority Interests, continued
The following table summarizes the minority interest contributions and distributions in 2007:
| Contributions | Distributions | |||||||
| (dollars in thousands) | ||||||||
Partially-owned affiliates |
$ | — | $ | (2,641 | ) | |||
Fund I |
— | (3,658 | ) | |||||
Fund II |
66,050 | (17,628 | ) | |||||
Mervyns II |
2,139 | (39,764 | ) | |||||
Fund III |
42,353 | — | ||||||
| $ | 110,542 | $ | (63,691 | ) | ||||
In February 2005, the Company issued $4.0 million (250,000 Restricted Common OP Units valued at
$16.00 each) of Restricted Common OP Units to Klaff in consideration for the remaining 25% interest
in certain management contract rights previously acquired from Klaff as well as the rights to
certain potential future revenue streams. This followed the acquisition of 75% of the management
contract rights from Klaff in January 2004 as reflected below. The Restricted Common OP Units are
convertible into the Company’s Common Shares on a one-for-one basis after a five-year lock-up
period. $1.1 million of the purchase price was allocated to investment in management contracts in
the consolidated balance sheet and is being amortized over the estimated remaining life of the
contracts.
The Series A Preferred OP Units were issued on November 16, 1999 in connection with the acquisition
of all the partnership interests of the limited partnership which owns the Pacesetter Park Shopping
Center. Through December 31, 2007, 696 Series A Preferred OP Units were converted into 92,800
Common OP Units and then into Common Shares. The Series A Preferred OP Units are currently
convertible into Common OP Units based on the stated value divided by $7.50. Either the Company or
the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser
of $7.50 or the market price of the Common Shares as of the conversion date.
4,000 Series B Preferred OP Units were issued to Klaff during January of 2004 in consideration for
the acquisition of 75% of certain management contract rights. The Preferred OP Units are
convertible into Common OP Units based on the stated value of $1,000 divided by $12.82 at any time.
Additionally, Klaff may currently redeem them at par for either cash or Common OP Units. After the
fifth anniversary of the issuance, the Company may redeem the Preferred OP Units and convert them
into Common OP Units at market value as of the redemption date. The $4.0 million purchase price is
reflected in the investment in management contracts in the consolidated balance sheet and is being
amortized over the estimated life of the contracts. For the years ended December 31, 2006 and 2005,
$0.5 million of these Klaff management contracts were written off following the disposition of
these assets. During 2007, Klaff converted all 4,000 Series B Preferred Units into 312,013 Common
OP Units and ultimately into Common Shares.
10. Related Party Transactions
During January 2004, the Operating Partnership issued 4000 Restricted Preferred OP Units to Klaff
for certain management contract rights and the rights to certain potential future revenue streams.
During 2007, Klaff converted all of these units into 312,013 Common Shares (Note 9).
During February 2005, the Operating Partnership issued $4.0 million of Restricted Common OP Units
to Klaff for the balance of certain management contract rights as well as the rights to certain
potential future revenue streams (Note 9).
During March 2005, the Company completed $20.0 million Preferred Equity Investment with Levitz SL,
of which Klaff is the managing member. In June 2006, the Company converted its Preferred Equity
Investment with Levitz SL, into a mortgage loan, (Note 4).
F-28
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Related Party Transactions, continued
The Company earns asset management, leasing, disposition, development and construction fees for
providing services to an existing portfolio of retail properties and/or leasehold interests in
which Klaff has an interest. Fees earned by the Company in connection with this portfolio were $2.1
million, $3.5 million and $3.6 million for the years ended December 31, 2007, 2006 and 2005
respectively.
Lee Wielansky, the Lead Trustee of the Company, was paid a consulting fee of $0.1 million for each
of the years ended December 31, 2007, 2006, and 2005.
11. Tenant Leases
Space in the shopping centers and other retail properties is leased to various tenants under
operating leases that usually grant tenants renewal options and generally provide for additional
rents based on certain operating expenses as well as tenants’ sales volume.
Minimum future rentals to be received under non-cancelable leases for shopping centers and other
retail properties as of December 31, 2007 are summarized as follows:
| (dollars in thousands) | ||||
2008 |
$ | 84,482 | ||
2009 |
81,036 | |||
2010 |
71,734 | |||
2011 |
58,538 | |||
2012 |
49,778 | |||
Thereafter |
326,286 | |||
| $ | 671,854 | |||
Minimum future rentals above include a total of $7.5 million for three tenants, totaling three
leases, which have filed for bankruptcy protection. Two tenant’s leases have not been rejected nor
affirmed. One tenant has filed a notice of rejection dated January 18, 2008. During the years ended
December 31, 2007, 2006 and 2005, no single tenant collectively accounted for more than 10% of the
Company’s total revenues.
12. Lease Obligations
The Company leases land at seven of its shopping centers, which are accounted for as operating
leases and generally provide the Company with renewal options. Ground rent expense was $4.1
million, $4.5 million, and $3.5 million (including capitalized ground rent at properties under
development of $2.7 million, $3.4 million and $2.7 million) for the years ended December 31, 2007,
2006 and 2005, respectively. The leases terminate at various dates between 2008 and 2066. These
leases provide the Company with options to renew for additional terms aggregating from 20 to
60 years. The Company leases space for its White Plains corporate office for a term expiring in
2015. Office rent expense under this lease was $0.8 million, $0.6 million and $0.4 million for the
years ended December 31, 2007, 2006 and 2005, respectively. Future minimum rental payments required
for leases having remaining non-cancelable lease terms are as follows:
| (dollars in thousands) | ||||
2008 |
$ | 3,904 | ||
2009 |
4,656 | |||
2010 |
5,538 | |||
2011 |
5,575 | |||
2013 |
5,642 | |||
Thereafter |
101,360 | |||
| $ | 126,675 | |||
F-29
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Share Incentive Plan
During 2003, the Company adopted the 2003 Share Incentive Plan (the “2003 Plan. The 2003 Plan
authorizes the issuance of options, share appreciation rights, restricted shares (“Restricted
Shares”), restricted OP units (“LTIP Units”) and performance units (collectively, “Awards”) to
officers, employees and trustees of the Company and consultants to the Company equal to up to four
percent of the total Common Shares of the Company outstanding from time to time on a fully diluted
basis. However, no participant may receive more than the equivalent of 1,000,000 Common Shares
during the term of the 2003 Plan with respect to Awards. Options are granted by the Compensation
Committee (the “Committee”), which currently consists of two non-employee Trustees, and will not
have an exercise price less than 100% of the fair market value of the Common Shares and a term of
greater than ten years at the grant date. Vesting of options is at the discretion of the Committee.
Share appreciation rights provide for the participant to receive, upon exercise, cash and/or Common
Shares, at the discretion of the Committee, equal to the excess of the market value of the Common
Shares at the exercise date over the market value of the Common Shares at the grant date. The
Committee determines the restrictions placed on Awards, including the dividends or distributions
thereon and the term of such restrictions. The Committee also determines the award and vesting of
performance units and performance shares based on the attainment of specified performance
objectives of the Company within a specified performance period. Through December 31, 2007, no
share appreciation rights or performance units/shares had been awarded.
During 2006, the Company adopted the 2006 Share Incentive Plan (the “2006 Plan”). The 2006 Plan is
substantially similar to the 2003 Plan, except that the maximum number of Common Shares equivalents
that the Company may issue pursuant to the 2006 Plan is 500,000
On January 15, 2007 (the “Grant Date”), the Company issued 108,823 Restricted Common Shares
(“Restricted Shares”) to officers and 20,735 Restricted Shares to employees of the Company. The
Restricted Shares do not carry the rights of Common Shares, including voting rights, until vesting
and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable
right to such shares. All Restricted Shares are subject to the recipients’ continued employment
with the Company through the applicable vesting dates. Vesting with respect to 61,940 of the
Restricted Shares issued to officers is over four years with 25% vesting on each of the next four
anniversaries of the Grant Date. In addition, vesting on 50% of the Restricted Shares issued to
officers is also subject to certain Company performance targets. Vesting with respect to 46,883 of
the Restricted Shares issued to officers is over three years with 30% vesting on the first
anniversary and 35% vesting on the following two anniversaries of the Grant Date. Vesting with
respect to the 20,735 Restricted Shares issued to employees is over four years with 25% vesting on
each of the next four anniversaries of the Grant Date. In addition, vesting on 25% of the
Restricted Shares issued to employees is also subject to certain total shareholder returns on the
Company’s Common Shares.
On the Grant Date, the Company also issued 50,000 Restricted Shares to an officer in connection
with his promotion to Executive Vice President. Vesting with respect to these Restricted Shares, is
over five years with 20% vesting on each of the next five anniversaries of the Grant Date.
Dividends on 46,883 of the Restricted Shares, issued to officers are paid currently on both
unvested and vested shares. Dividends on 132,675 of these Restricted Shares will not be paid until
such Restricted Shares vest. There will be a cumulative dividend payment upon vesting from the
Grant Date to the applicable vesting date.
The total value of the above Restricted Share awards on the date of grant was $4.5 million.
Compensation expense of $1.1 million has been recognized in the accompanying consolidated financial
statements related to these Restricted Shares for the year ended
December 31, 2007. The weighted average fair value for shares
granted for the years ended December 31, 2007, 2006 and 2005
were $24.91, $20.46 and $16.30, respectively.
On the Grant Date, the Company also issued 20,322 LTIP Units to officers and 1,214 LTIP Units to
employees of the Company. LTIP Units are similar to Restricted Shares but provide for a quarterly
partnership distribution in a like amount as paid to Common OP Units. This distribution is paid on
both unvested and vested LTIP Units. The LTIP Units are convertible into Common OP Units and Common
Shares upon vesting and a revaluation of the book capital accounts. Vesting with respect to the
LTIP Units is over four years with 25% vesting on each of the next four anniversaries of the Grant
Date. In addition, vesting on 50% of the officers LTIP Units and 25% of the employees LTIP Units
are also subject to certain Company performance targets.
F-30
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Share Incentive Plan, continued
The total value of these LTIP Units on the Grant Date was $0.5 million. Compensation expense of
$0.1 million has been recognized in the accompanying financial statements related to these LTIP
Units for the year ended December 31, 2007.
On May 15, 2007, the Company issued 10,831 Common Shares and the equivalent of 5,096 Common Shares
through a deferred compensation plan to Trustees of the Company. In addition, on August 23, 2007,
the Company issued an additional 1,918 unrestricted Common Shares to a newly elected Trustee.
Trustee fee expense of $0.5 million for the year ended December 31, 2007 has been recognized in the
accompanying consolidated financial statements related to these issuances.
As of December 31, 2007, the Company had 473,738 options outstanding to officers and employees of
which 454,106 are vested. These options are for ten-year terms from the grant date and vest in
three equal annual installments, which began on the Grant Date. In addition, 58,000 options have
been issued, of which all are vested, to non-employee Trustees as of December 31, 2007.
For the years ended December 31, 2007, 2006 and 2005, $3.3 million, $2.7 million, and $1.0 million,
respectively, were recognized in compensation expense related to Restricted Share and LTIP Unit
grants.
The Company has used the Binomial method for purposes of estimating the fair value in determining
compensation expense for options granted for the years ended December 31, 2006 and 2005. No
options were issued during 2007. The fair value for the options issued by the Company was estimated
at the date of the grant using the following weighted-average assumptions resulting in:
| Years ended December 31, | ||||||||
| 2006 | 2005 | |||||||
Weighted-average volatility |
18.0 | % | 18.0 | % | ||||
Expected dividends |
3.6 | % | 4.2 | % | ||||
Expected life (in years) |
7.5 | 7.5 | ||||||
Risk-free interest rate |
4.4 | % | 4.0 | % | ||||
Fair value at date of grant (per option) |
$ | 3.03 | $ | 2.57 | ||||
A summary of option activity under all option arrangements as of December 31, 2007, and changes
during the year then ended is presented below:
| Weighted | Weighted Average | Aggregate Intrinsic | ||||||||||||||
| Average | Remaining | Value | ||||||||||||||
| Options | Shares | Exercise Price | Contractual Term | (dollars in thousands) | ||||||||||||
Outstanding at January 1, 2007 |
550,372 | $ | 10.01 | |||||||||||||
Granted |
— | — | ||||||||||||||
Exercised |
(17,474 | ) | 9.94 | |||||||||||||
Forfeited or Expired |
(1,160 | ) | 20.65 | |||||||||||||
Outstanding at December 31, 2007 |
531,738 | $ | 9.99 | 4.0 | $ | 8,305 | ||||||||||
Exercisable at December 31, 2007 |
512,106 | $ | 9.58 | 3.9 | $ | 8,207 | ||||||||||
The weighted average Grant Date fair value of options granted during the years 2006 and 2005 was
$3.03 and $2.57, respectively. The total intrinsic value of options exercised during the years
ended December 31, 2007, 2006 and 2005 was $0.3 million, $0.1 million and $0.6 million,
respectively.
A summary
of the status of the Company’s unvested Restricted Shares and
LTIP Units as of December 31, 2007 and
changes during the year ended December 31, 2007, is presented below:
| Restricted | Weighted | Weighted | ||||||||||||||
| Shares | Grant-Date | LTIP Units | Grant-Date | |||||||||||||
| Unvested Shares and LTIP Units | (in thousands) | Fair Value | (in thousands) | Fair Value | ||||||||||||
Unvested at January 1, 2007 |
550 | $ | 17.27 | — | $ | — | ||||||||||
Granted |
180 | 24.91 | 22 | 24.91 | ||||||||||||
Vested |
(105 | ) | 14.89 | — | — | |||||||||||
Forfeited |
(30 | ) | 19.41 | — | — | |||||||||||
Unvested at December 31, 2007 |
595 | $ | 20.51 | 22 | $ | 24.91 | ||||||||||
F-31
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Share Incentive Plan, continued
As of December 31, 2007, there was $8.5 million of total unrecognized compensation cost related to
unvested share-based compensation arrangements granted under share incentive plans. That cost is
expected to be recognized over a weighted-average period of 2.3 years. The total fair value of
Restricted Shares that vested during the years ended December 31, 2007, 2006 and 2005, was $1.6
million, $2.5 million and $1.0 million, respectively.
14. Employee Share Purchase and Deferred Share Plan
The Acadia Realty Trust Employee Share Purchase Plan (the “Purchase Plan”), allows eligible
employees of the Company to purchase Common Shares through payroll deductions. The Purchase Plan
provides for employees to purchase Common Shares on a quarterly basis at a 15% discount to the
closing price of the Company’s Common Shares on either the first day or the last day of the
quarter, whichever is lower. The amount of the payroll deductions will not exceed a percentage of
the participant’s annual compensation that the Committee establishes from time to time, and a
participant may not purchase more than 1,000 Common Shares per quarter. Compensation expense will
be recognized by the Company to the extent of the above discount to the average closing price of
the Common Shares with respect to the applicable quarter. During 2007, 2006 and 2005, 7,123,
5,307 and 6,412 Common Shares, respectively, were purchased by Employees under the Purchase Plan.
Associated compensation expense of $0.03 million was recorded in 2007 and $0.02 million was
recorded in 2006 and 2005.
During August of 2004, the Company adopted a Deferral and Distribution Election pursuant to the
1999 Share Incentive Plan and 2003 Share Incentive Plan, whereby the participants elected to defer
receipt of 190,487 Common Shares (“Share Units”) that would otherwise would have been issued upon
the exercise of certain options. The payment of the option exercise price was made by tendering
Common Shares that the participants owned for at least six months prior to the option exercise
date. The Share Units are equivalent to a Common Share on a one-for-one basis and carry a dividend
equivalent right equal to the dividend rate for the Company’s Common shares. The deferral period is
determined by each of the participants and generally terminates after the cessation of the
participants continuous service with the Company, as defined in the agreement. In December 2004,
optionees exercised 346,000 options pursuant to the Deferred Share Election and tendered 155,513
Common Shares in consideration of the option exercise price. In 2004 the Company issued 155,513
Common Shares to optionees and 190,487 Share Units. During 2007, 2006 and 2005 there were no
additional Share Units contributed to the plan.
15. Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of
a plan participant’s contribution up to 6% of the employee’s annual salary. A plan participant may
contribute up to a maximum of 15% of their compensation but not in excess of $15,500 for the year
ended December 31, 2007. The Company contributed $0.2 million, $0.2 million and $0.1 million for
the years ended December 31, 2007, 2006 and 2005, respectively.
16. Dividends and Distributions Payable
On December 6, 2007, the Company declared a cash dividend for the quarter ended December 31, 2007
of $0.21 per Common Share. The dividend was paid on January 15, 2008 to shareholders of record as
of December 31, 2007. In addition, on December 21, 2007, the Company announced the successful
completion of its 2007 disposition initiatives. In connection with the taxable gains arising from
these and earlier property dispositions, the Company’s Board of Trustees approved a special
dividend totaling $7.4 million, or $0.2225 per Common Share, which was paid on January 15, 2008 to
the shareholders of record as of December 31, 2007.
17. Federal Income Taxes
The Company has elected to qualify as a REIT in accordance with the Internal Revenue Code (the
“Code”) and intends at all times to qualify as a REIT under Sections 856 through 860 of the Code of
1986, as amended. To qualify as a REIT, the Company must meet a number of organizational and
operational requirements, including a requirement that it currently distribute at least 90% of its
annual REIT taxable income to its shareholders. As a REIT, the Company generally will not be
subject to corporate Federal income tax, provided that distributions to its shareholders equal at
least the amount of its REIT taxable income as defined under the Code. As the Company distributed
sufficient taxable income for the years ended December 31, 2007, 2006 and 2005, no U.S. Federal
income or excise taxes were incurred. If the Company fails to qualify as a REIT in any taxable
year, it will be subject to Federal income taxes at the regular corporate rates (including any
applicable alternative minimum tax) and may not be able to qualify as a REIT for the four
subsequent taxable years. Even though the Company qualifies for taxation as a REIT, the Company is
subject to certain state and local taxes on its income and property and Federal income and excise
taxes on any undistributed taxable income. In addition, taxable income from non-REIT activities
managed through the Company’s TRS are subject to Federal, state and local income taxes.
F-32
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Federal Income Taxes, continued
The primary difference between the GAAP and tax reported amounts of the Company’s assets and
liabilities are a higher GAAP basis in its real estate properties. This is primarily the result of
assets acquired as a result of property contributions in exchange for OP Units and the utilization
of Code Section 1031 deferred exchanges.
Reconciliation between GAAP net income and Federal taxable income
The following unaudited table reconciles GAAP net income to taxable income for the years ended
December 31, 2007, 2006 and 2005:
| 2007 | 2006 | 2005 | ||||||||||
| (dollars in thousands) | (Estimated) | (Actual) | (Actual) | |||||||||
Net income |
$ | 27,270 | $ | 39,013 | $ | 20,626 | ||||||
Net income attributable to TRS |
2,514 | 405 | 1,349 | |||||||||
Net income attributable to REIT |
24,756 | 38,608 | 19,277 | |||||||||
Book/tax difference in depreciation and amortization |
4,155 | 4,906 | 2,817 | |||||||||
Book/tax difference on exercise of stock options
and vesting of restricted shares |
(689 | ) | (397 | ) | (405 | ) | ||||||
Book/tax difference on capital transactions (1) |
8,300 | (16,709 | ) | (465 | ) | |||||||
Other book/tax differences, net |
494 | 2,963 | (2,065 | ) | ||||||||
REIT taxable income before dividends paid deduction |
$ | 37,016 | $ | 29,371 | $ | 19,159 | ||||||
| Notes: | ||
| (1) | Principally the result of the deferral of the gain from the sale of properties for income tax purposes. |
Characterization of Distributions:
The Company has determined that the cash distributed to the shareholders is characterized as
follows for Federal income tax purposes:
| For the years ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
Ordinary income |
51 | % | 100 | % | 95 | % | ||||||
Capital gain |
49 | % | — | 3 | % | |||||||
Return of capital |
— | — | 2 | % | ||||||||
| 100 | % | 100 | % | 100 | % | |||||||
Taxable REIT Subsidiaries (“TRS”)
Income taxes have been provided for using the asset and liability method as required by SFAS No.
109. The Company’s combined TRS income (loss) and provision (benefit) for income taxes for the
years ended December 31, 2007, 2006 and 2005 are summarized as follows:
| 2007 | 2006 | 2005 | ||||||||||
| (dollars in thousands) | (Estimated) | (Actual) | (Actual) | |||||||||
TRS income (loss) before income taxes |
$ | 5,077 | $ | (296 | ) | $ | 3,458 | |||||
Provision (benefit) for income taxes: |
||||||||||||
Federal |
2,097 | (590 | ) | 1,601 | ||||||||
State and local |
466 | (111 | ) | 508 | ||||||||
TRS net income |
$ | 2,514 | $ | 405 | $ | 1,349 | ||||||
F-33
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Federal Income Taxes, continued
Characterization of Distributions, continued
The income tax provision (benefit) differs from the amount computed by applying the statutory
federal income tax rate to taxable income (loss) before income taxes as follows:
| (dollars in thousands) | 2007 | 2006 | 2005 | |||||||||
Federal provision (benefit) at statutory tax rate |
$ | 1,726 | (100 | ) | $ | 1,210 | ||||||
State and local taxes, net of federal benefit |
255 | (15 | ) | 330 | ||||||||
Tax effect of: |
||||||||||||
Valuation allowance against deferred tax
liability asset |
— | — | 208 | |||||||||
Utilization of loss and deduction carry forwards |
— | — | (115 | ) | ||||||||
Change in estimate |
605 | (586 | ) | — | ||||||||
REIT state, local and franchise taxes |
67 | 193 | 507 | |||||||||
Total provision (benefit) for income taxes |
$ | 2,653 | $ | (508 | ) | $ | 2,140 | |||||
18. Financial Instruments
Fair Value of Financial Instruments:
SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” requires disclosure on the
fair value of financial instruments. Certain of the Company’s assets and liabilities are considered
financial instruments. Fair value estimates, methods and assumptions are set forth below.
Cash and Cash Equivalents, Restricted Cash, Cash in Escrow, Rents Receivable, Prepaid Expenses,
Other Assets, Accounts Payable and Accrued Expenses, Dividends and Distributions Payable, Due to
Related Parties and Other Liabilities. The carrying amount of these assets and liabilities
approximates fair value due to the short-term nature of such accounts.
Notes Receivable — as of December 31, 2007 and 2006, the Company had notes receivable of $57.7
million and $36.0 million, respectively. Given the short-term nature of the notes and the fact
that several of the notes are demand notes, the Company has determined that the carrying value of
the notes receivable approximates fair value.
Derivative Instruments — the fair value of these instruments is based upon the estimated amounts
the Company would receive or pay to terminate the contracts as of December 31, 2007 and 2006 and is
determined using interest rate market pricing models.
Mortgage Notes Payable and Notes Payable — As of December 31, 2007 and 2006, the Company has
determined the estimated fair value of its mortgage notes payable, including those relating to
discontinued operations, were $519.4 million and $439.1 million, respectively, by discounting
future cash payments utilizing a discount rate equivalent to the rate at which similar mortgage
notes payable would be originated under conditions then existing.
Derivative Financial Instruments:
SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended and
interpreted, establishes accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities. As required
by SFAS 133, the Company records all derivatives on the balance sheet at fair value. The accounting
for changes in the fair value of derivatives depends on the intended use of the derivative and the
resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an
asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk,
are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected
future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
For derivatives designated as fair value hedges, changes in the fair value of the derivative and
the hedged item related to the hedged risk are recognized in earnings. For derivatives designated
as cash flow hedges, the effective portion of changes in the fair value of the derivative is
initially reported in other comprehensive income (outside of earnings) and subsequently
reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion
of changes in the fair value of the derivative is recognized directly in earnings. The Company
assesses the effectiveness of each hedging relationship by comparing the changes in fair value or
cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the
designated hedged item or transaction. For derivatives not designated as hedges, changes in fair
value are recognized in earnings.
As of December 31, 2007 and 2006, no derivatives were designated as fair value hedges or hedges of
net investments in foreign operations. Additionally, the Company does not use derivatives for
trading or speculative purposes and currently does not have any derivatives that are not designated
as hedges.
F-34
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Financial Instruments, continued
Derivative Financial Instruments, continued
The following table summarizes the notional values and fair values of the Company’s derivative
financial instruments as of December 31, 2007. The notional value does not represent exposure to
credit, interest rate or market risks:
| Hedge Type | Notional Value | Rate | Maturity | Fair Value | ||||||||||||
| (dollars in thousands) | ||||||||||||||||
Interest rate swaps |
||||||||||||||||
LIBOR Swap |
$ | 4,640 | 4.71 | % | 01/01/10 | $ | (93 | ) | ||||||||
LIBOR Swap |
11,410 | 4.90 | % | 10/01/11 | (395 | ) | ||||||||||
LIBOR Swap |
8,434 | 5.14 | % | 03/01/12 | (383 | ) | ||||||||||
LIBOR Swap |
9,800 | 4.47 | % | 10/29/10 | (195 | ) | ||||||||||
Interest rate swaps |
$ | 34,284 | (1,066 | ) | ||||||||||||
Interest rate LIBOR Cap |
$ | 30,000 | 6.0 | % | 04/01/08 | (28 | ) | |||||||||
Net Derivative instrument liability |
$ | (1,094 | ) | |||||||||||||
The above derivative instruments have been designated as cash flow hedges and hedge the future cash
outflows on mortgage debt. Such instruments are reported at the fair values reflected above. As of
December 31, 2007 and 2006, unrealized losses totaling $1.1 and $0.2 million, respectively were
reflected in accumulated other comprehensive loss.
19. Earnings Per Common Share
Basic earnings per share was determined by dividing the applicable net income to common
shareholders for the year by the weighted average number of Common Shares outstanding during each
year consistent with SFAS No. 128. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue Common Shares were exercised or converted
into Common Shares or resulted in the issuance of Common Shares that then shared in the earnings of
the Company. The following table sets forth the computation of basic and diluted earnings per share
from continuing operations for the periods indicated:
| Years ended December 31, | ||||||||||||
| (dollars in thousands, except per share amounts) | 2007 | 2006 | 2005 | |||||||||
Numerator: |
||||||||||||
Income from continuing operations – basic earnings per share |
$ | 18,056 | $ | 15,622 | $ | 19,320 | ||||||
Effect of dilutive securities: |
||||||||||||
Preferred OP Unit distributions |
23 | 254 | — | |||||||||
Numerator for diluted earnings per share |
18,079 | 15,876 | 19,320 | |||||||||
Denominator: |
||||||||||||
Weighted average shares – basic earnings per share |
32,907 | 32,502 | 31,949 | |||||||||
Effect of dilutive securities: |
||||||||||||
Employee share options |
335 | 314 | 265 | |||||||||
Convertible Preferred OP Units |
67 | 337 | — | |||||||||
Dilutive potential Common Shares |
402 | 651 | 265 | |||||||||
Denominator for diluted earnings per share |
33,309 | 33,153 | 32,214 | |||||||||
Basic earnings per share from continuing operations |
$ | 0.55 | $ | 0.48 | $ | 0.61 | ||||||
Diluted earnings per share from continuing operations |
$ | 0.54 | $ | 0.48 | $ | 0.60 | ||||||
F-35
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Earnings Per Common Share, continued
The weighted average shares used in the computation of basic earnings per share include unvested
restricted shares (Note 13) and Share Units (Note 14) that are entitled to receive dividend
equivalent payments. The effect of the conversion of Common OP Units is not reflected in the above
table, as they are exchangeable for Common Shares on a one-for-one basis. The income allocable to
such units is allocated on this same basis and reflected as minority interest in the accompanying
consolidated financial statements. As such, the assumed conversion of these units would have no net
impact on the determination of diluted earnings per share. The
conversion of the convertible notes payable (Note 8) is not reflected
in the table above as such conversion would be anti- dilutive.
20. Summary of Quarterly Financial Information (unaudited)
The quarterly results of operations of the Company for the years ended December 31, 2007 and 2006
are as follows:
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
| (dollars in thousands, except per share amounts) | 2007 | 2007 | 2007 | 2007 | ||||||||||||
Revenue |
$ | 24,989 | $ | 23,481 | $ | 26,282 | $ | 26,817 | ||||||||
Income from continuing operations |
$ | 3,670 | $ | 3,028 | $ | 8,117 | $ | 3,241 | ||||||||
Income (loss) from discontinued operations |
$ | 166 | $ | 6 | $ | (421 | ) | $ | 5,786 | |||||||
Income from extraordinary item |
$ | 2,883 | $ | ¾ | $ | 794 | $ | ¾ | ||||||||
Net income |
$ | 6,719 | $ | 3,034 | $ | 8,490 | $ | 9,027 | ||||||||
Net income per Common Share — basic: |
||||||||||||||||
Income from continuing operations |
$ | 0.11 | $ | 0.09 | $ | 0.25 | $ | 0.10 | ||||||||
Income (loss) from discontinued operations |
0.01 | ¾ | (0.01 | ) | 0.17 | |||||||||||
Income from extraordinary item |
0.09 | ¾ | 0.02 | ¾ | ||||||||||||
Net income |
$ | 0.21 | $ | 0.09 | $ | 0.26 | $ | 0.27 | ||||||||
Net income per Common Share — diluted: |
||||||||||||||||
Income from continuing operations |
$ | 0.11 | $ | 0.09 | $ | 0.24 | $ | 0.10 | ||||||||
Income (loss) from discontinued operations |
0.01 | ¾ | (0.01 | ) | 0.17 | |||||||||||
Income from extraordinary item |
0.08 | ¾ | 0.02 | ¾ | ||||||||||||
Net income |
$ | 0.20 | $ | 0.09 | $ | 0.25 | $ | 0.27 | ||||||||
Cash dividends declared per Common Share |
$ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.4325 | ||||||||
Weighted average Common Shares
outstanding: |
||||||||||||||||
Basic |
32,753,337 | 32,934,843 | 32,965,619 | 32,972,503 | ||||||||||||
Diluted |
33,274,066 | 33,290,845 | 33,315,524 | 33,327,965 | ||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
| (dollars in thousands, except per share amounts) | 2006 | 2006 | 2006 | 2006 | ||||||||||||
Revenue |
$ | 23,906 | $ | 22,303 | $ | 24,260 | $ | 25,331 | ||||||||
Income from continuing operations |
$ | 3,667 | $ | 4,366 | $ | 3,722 | $ | 3,867 | ||||||||
Income from discontinued operations |
$ | 686 | $ | 482 | $ | 400 | $ | 21,823 | ||||||||
Net income |
$ | 4,353 | $ | 4,848 | $ | 4,122 | $ | 25,690 | ||||||||
Net income per Common Share – basic: |
||||||||||||||||
Income from continuing operations |
$ | 0.11 | $ | 0.13 | $ | 0.12 | $ | 0.12 | ||||||||
Income from discontinued operations |
0.02 | 0.02 | 0.01 | 0.67 | ||||||||||||
Net income |
$ | 0.13 | $ | 0.15 | $ | 0.13 | $ | 0.79 | ||||||||
Net income per Common Share – diluted: |
||||||||||||||||
Income from continuing operations |
$ | 0.11 | $ | 0.13 | $ | 0.12 | $ | 0.12 | ||||||||
Income from discontinued operations |
0.02 | 0.01 | 0.01 | 0.66 | ||||||||||||
Net income |
$ | 0.13 | $ | 0.14 | $ | 0.13 | $ | 0.78 | ||||||||
Cash dividends declared per Common Share |
$ | 0.185 | $ | 0.185 | $ | 0.185 | $ | 0.20 | ||||||||
Weighted average Common Shares
outstanding: |
||||||||||||||||
Basic |
32,468,204 | 32,509,360 | 32,513,398 | 32,514,803 | ||||||||||||
Diluted |
32,766,119 | 32,810,794 | 32,836,473 | 33,186,718 | ||||||||||||
F-36
Table of Contents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. Commitments and Contingencies
Under various Federal, state and local laws, ordinances and regulations relating to the protection
of the environment, a current or previous owner or operator of real estate may be liable for the
cost of removal or remediation of certain hazardous or toxic substances disposed, stored,
generated, released, manufactured or discharged from, on, at, under, or in a property. As such, the
Company may be potentially liable for costs associated with any potential environmental remediation
at any of its formerly or currently owned properties.
The Company conducts Phase I environmental reviews with respect to properties it acquires. These
reviews include an investigation for the presence of asbestos, underground storage tanks and
polychlorinated biphenyls (PCBs). Although such reviews are intended to evaluate the environmental
condition of the subject property as well as surrounding properties, there can be no assurance that
the review conducted by the Company will be adequate to identify environmental or other problems
that may exist. Where a Phase II assessment is so recommended, a Phase II assessment is conducted
to further determine the extent of possible environmental contamination. In all instances where a
Phase I or II assessment has resulted in specific recommendations for remedial actions, the Company
has either taken or scheduled the recommended remedial action. To mitigate unknown risks, the
Company has obtained environmental insurance for most of its properties, which covers only unknown
environmental risks.
The Company believes that it is in compliance in all material respects with all Federal, state and
local ordinances and regulations regarding hazardous or toxic substances. Management is not aware
of any environmental liability that it believes would have a material adverse impact on the
Company’s financial position or results of operations. Management is unaware of any instances in
which the Company would incur significant environmental costs if any or all properties were sold,
disposed of or abandoned. However, there can be no assurance that any such non-compliance,
liability, claim or expenditure will not arise in the future.
The Company is involved in various matters of litigation arising in the normal course of business.
While the Company is unable to predict with certainty the amounts involved, the Company’s
management and counsel are of the opinion that, when such litigation is resolved, the Company’s
resulting liability, if any, will not have a significant effect on the Company’s consolidated
financial position or results of operations.
22. Subsequent Events
On February 11, 2008, the Company entered into contract to sell the Ledgewood Mall for $55 million.
Ledgewood Mall is a 517,000 square foot enclosed mall in Ledgewood, New Jersey. The Company expects
to close on this transaction in the second quarter of 2008.
During the fiscal year ending December 31, 2008, the investment consortium which owns Mervyns (Note
4), sold 41 Mervyns Store locations. The Operating Partnership’s share of the gain amounted to
approximately $1.9 million, net of taxes.
During December 2007, the Company, through Fund III, and in conjunction with its current
self-storage partner, Storage Post, entered into an agreement to acquire a portfolio of ten
self-storage properties from Storage Post’s existing institutional investors for approximately $160
million. During January 2008, the Company, through Fund III, entered into an agreement to acquire
an additional Storage Post self-storage project currently under construction for approximately $11
million. These transactions are expected to close in the first quarter of 2008.
F-37
Table of Contents
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2007
| Costs Capitalized | Date of | |||||||||||||||||||||||||||||||||||
| Buildings & | Subsequent | Buildings & | Accumulated | Acquisition (a) | ||||||||||||||||||||||||||||||||
| Description | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation | Construction(c) | |||||||||||||||||||||||||||
Shopping Centers |
||||||||||||||||||||||||||||||||||||
Crescent Plaza |
$ | 17,600 | $ | 1,147 | $ | 7,425 | $ | 1,099 | $ | 1,147 | $ | 8,524 | $ | 9,671 | $ | 4,898 | 1984 | (a) | ||||||||||||||||||
Brockton, MA |
||||||||||||||||||||||||||||||||||||
New Loudon Center |
14,752 | 505 | 4,161 | 10,839 | 505 | 15,000 | 15,505 | 9,170 | 1982 | (a) | ||||||||||||||||||||||||||
Latham, NY |
||||||||||||||||||||||||||||||||||||
Ledgewood Mall |
— | 619 | 5,434 | 33,200 | 619 | 38,634 | 39,253 | 28,450 | 1983 | (a) | ||||||||||||||||||||||||||
Ledgewood, NJ |
||||||||||||||||||||||||||||||||||||
Mark Plaza |
— | — | 4,268 | 4,690 | — | 8,958 | 8,958 | 6,177 | 1968 | (c) | ||||||||||||||||||||||||||
Edwardsville, PA |
||||||||||||||||||||||||||||||||||||
Blackman Plaza |
— | 120 | — | 1,599 | 120 | 1,599 | 1,719 | 687 | 1968 | (c) | ||||||||||||||||||||||||||
Wilkes-Barre, PA |
||||||||||||||||||||||||||||||||||||
Plaza 422 |
— | 190 | 3,004 | 730 | 190 | 3,734 | 3,924 | 2,938 | 1972 | (c) | ||||||||||||||||||||||||||
Lebanon, PA |
||||||||||||||||||||||||||||||||||||
Route 6 Mall |
— | — | — | 12,695 | 1,664 | 11,031 | 12,695 | 4,964 | 1995 | (c) | ||||||||||||||||||||||||||
Honesdale, PA |
||||||||||||||||||||||||||||||||||||
Bartow Avenue |
— | 1,691 | 5,803 | 481 | 1,691 | 6,284 | 7,975 | 637 | 2002 | (c) | ||||||||||||||||||||||||||
Bronx, NY |
||||||||||||||||||||||||||||||||||||
Amboy Rd. Shopping Ctr. |
— | — | 11,909 | 1,496 | — | 13,405 | 13,405 | 830 | 2005 | (a) | ||||||||||||||||||||||||||
Staten Island, NY |
||||||||||||||||||||||||||||||||||||
Abington Towne Center |
— | 799 | 3,197 | 1,994 | 799 | 5,191 | 5,990 | 1,646 | 1998 | (a) | ||||||||||||||||||||||||||
Abington, PA |
||||||||||||||||||||||||||||||||||||
Bloomfield Town Square |
— | 3,443 | 13,774 | 8,960 | 3,443 | 22,734 | 26,177 | 5,173 | 1998 | (a) | ||||||||||||||||||||||||||
Bloomfield Hills, MI |
||||||||||||||||||||||||||||||||||||
Walnut Hill Plaza |
23,500 | 3,122 | 12,488 | 1,523 | 3,122 | 14,011 | 17,133 | 3,718 | 1998 | (a) | ||||||||||||||||||||||||||
Woonsocket, RI |
||||||||||||||||||||||||||||||||||||
Elmwood Park Plaza |
34,600 | 3,248 | 12,992 | 14,764 | 3,798 | 27,206 | 31,004 | 7,549 | 1998 | (a) | ||||||||||||||||||||||||||
Elmwood Park, NJ |
||||||||||||||||||||||||||||||||||||
Merrillville Plaza |
26,250 | 4,288 | 17,152 | 1,516 | 4,288 | 18,668 | 22,956 | 4,838 | 1998 | (a) | ||||||||||||||||||||||||||
Hobart, IN |
||||||||||||||||||||||||||||||||||||
Marketplace of Absecon |
— | 2,573 | 10,294 | 2,479 | 2,577 | 12,769 | 15,346 | 3,220 | 1998 | (a) | ||||||||||||||||||||||||||
Absecon, NJ |
||||||||||||||||||||||||||||||||||||
Clark Diversey |
3,727 | 11,303 | 2,903 | (1,372 | ) | 10,061 | 2,773 | 12,834 | 139 | 2006 | (a) | |||||||||||||||||||||||||
Boonton |
8,451 | 3,297 | 7,611 | (2,392 | ) | 1,328 | 7,188 | 8,516 | 344 | 2006 | (a) | |||||||||||||||||||||||||
Chestnut Hill |
9,834 | 8,978 | 5,568 | (515 | ) | 8,289 | 5,742 | 14,031 | 214 | 2006 | (a) | |||||||||||||||||||||||||
Third Avenue |
— | 11,108 | 8,038 | 894 | 11,855 | 8,185 | 20,040 | 256 | 2006 | (a) | ||||||||||||||||||||||||||
Liberty Avenue |
9,990 | — | 12,627 | — | — | 12,627 | 12,627 | 316 | 2005 | (a) | ||||||||||||||||||||||||||
Tarrytown Centre |
9,800 | 2,323 | 7,396 | 224 | 2,323 | 7,620 | 9,943 | 651 | 2004 | (a) | ||||||||||||||||||||||||||
Acadia Realty L.P. |
— | — | 1,455 | 153 | 1,608 | 1,608 | 1,348 | |||||||||||||||||||||||||||||
Pelham Manor |
— | 905 | — | — | 905 | — | 905 | 2004 | (a) | |||||||||||||||||||||||||||
Hobson West Plaza |
— | 1,793 | 7,172 | 718 | 1,793 | 7,890 | 9,683 | 2,136 | 1998 | (a) | ||||||||||||||||||||||||||
Naperville, IL |
||||||||||||||||||||||||||||||||||||
Village Commons/
Smithtown Shopping Center |
9,781 | 3,229 | 12,917 | 1,866 | 3,229 | 14,783 | 18,012 | 4,143 | 1998 | (a) | ||||||||||||||||||||||||||
Smithtown, NY |
||||||||||||||||||||||||||||||||||||
Town Line Plaza |
— | 878 | 3,510 | 7,257 | 907 | 10,738 | 11,645 | 6,849 | 1998 | (a) | ||||||||||||||||||||||||||
Rocky Hill, CT |
||||||||||||||||||||||||||||||||||||
Branch Shopping Center |
15,773 | 3,156 | 12,545 | 777 | 3,156 | 13,322 | 16,478 | 3,273 | 1998 | (a) | ||||||||||||||||||||||||||
Village of the Branch,
NY |
||||||||||||||||||||||||||||||||||||
F-38
Table of Contents
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2007
| Costs Capitalized | Date of | |||||||||||||||||||||||||||||||||||
| Buildings & | Subsequent | Buildings & | Accumulated | Acquisition (a) | ||||||||||||||||||||||||||||||||
| Description | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation | Construction(c) | |||||||||||||||||||||||||||
The Methuen Shopping
Center |
— | 956 | 3,826 | 594 | 961 | 4,415 | 5,376 | 972 | 1998 | (a) | ||||||||||||||||||||||||||
Methuen, MA |
||||||||||||||||||||||||||||||||||||
Gateway Shopping Center |
20,500 | 1,273 | 5,091 | 11,536 | 1,273 | 16,627 | 17,900 | 3,101 | 1999 | (a) | ||||||||||||||||||||||||||
Burlington, VT |
||||||||||||||||||||||||||||||||||||
Mad River Station |
— | 2,350 | 9,404 | 591 | 2,350 | 9,995 | 12,345 | 2,329 | 1999 | (a) | ||||||||||||||||||||||||||
Dayton, OH |
||||||||||||||||||||||||||||||||||||
Pacesetter Park Shopping
Center |
12,500 | 1,475 | 5,899 | 1,108 | 1,475 | 7,007 | 8,482 | 1,791 | 1999 | (a) | ||||||||||||||||||||||||||
Ramapo, NY |
||||||||||||||||||||||||||||||||||||
239 Greenwich |
26,000 | 1,817 | 15,846 | 502 | 1,817 | 16,348 | 18,165 | 3,590 | 1999 | (c) | ||||||||||||||||||||||||||
Greenwich, CT |
||||||||||||||||||||||||||||||||||||
Residential Property
Winston Salem, NC |
— | 3,429 | 13,716 | 3,237 | 3,429 | 16,953 | 20,382 | 4,989 | 1998 | (a) | ||||||||||||||||||||||||||
Granville Center |
2,818 | 2,186 | 8,744 | 59 | 2,186 | 8,803 | 10,989 | 1,206 | 2002 | (a) | ||||||||||||||||||||||||||
Kroger/Safeway |
9,843 | — | 48,988 | (48 | ) | — | 48,940 | 48,940 | 28,127 | 2003 | (a) | |||||||||||||||||||||||||
Various |
||||||||||||||||||||||||||||||||||||
400 E. Fordham Road |
37,263 | 11,144 | 18,010 | 2,240 | 13,351 | 18,043 | 31,394 | 1,018 | 2004 | (a) | ||||||||||||||||||||||||||
Bronx, NY |
||||||||||||||||||||||||||||||||||||
4650 Broadway/Sherman Avenue |
19,000 | 25,267 | — | — | 25,267 | — | 25,267 | — | 2005 | (a) | ||||||||||||||||||||||||||
New York, NY |
||||||||||||||||||||||||||||||||||||
216th Street |
25,500 | 7,313 | — | 19,286 | 7,261 | 19,338 | 26,599 | 146 | 2005 | (a) | ||||||||||||||||||||||||||
New York, NY |
||||||||||||||||||||||||||||||||||||
161st Street |
30,000 | 16,679 | 28,410 | 261 | 16,679 | 28,671 | 45,350 | 1,731 | 2005 | (a) | ||||||||||||||||||||||||||
Bronx, NY |
||||||||||||||||||||||||||||||||||||
Oakbrook |
— | — | 6,906 | 17 | — | 6,923 | 6,923 | 1,268 | 2005 | (a) | ||||||||||||||||||||||||||
Oakbrook, IL |
||||||||||||||||||||||||||||||||||||
West Shore Expressway |
— | 3,380 | 13,554 | — | 3,380 | 13,554 | 16,934 | 265 | 2007 | (a) | ||||||||||||||||||||||||||
West 54th Street |
— | 16,699 | 18,704 | — | 16,699 | 18,704 | 35,403 | 340 | 2007 | (a) | ||||||||||||||||||||||||||
Atlantic Avenue |
— | 5,322 | — | — | 5,322 | — | 5,322 | — | 2007 | (a) | ||||||||||||||||||||||||||
Canarsie Plaza |
— | 32,656 | — | — | 32,656 | — | 32,656 | — | 2007 | (a) | ||||||||||||||||||||||||||
125 Main Street Assoc. |
— | 12,994 | 4,316 | — | 12,994 | 4,316 | 17,310 | 19 | 2007 | (a) | ||||||||||||||||||||||||||
Sheepshead Bay |
— | 20,391 | — | — | 20,391 | — | 20,391 | — | 2007 | (a) | ||||||||||||||||||||||||||
ASOF II, LLC |
34,500 | — | 1,899 | — | — | 1,899 | 1,899 | 24 | ||||||||||||||||||||||||||||
Underdeveloped land |
— | 250 | — | — | 250 | — | 250 | — | ||||||||||||||||||||||||||||
Properties under
development |
— | — | — | 77,764 | — | 77,764 | 77,764 | — | ||||||||||||||||||||||||||||
| — | ||||||||||||||||||||||||||||||||||||
| $ | 401,982 | $ | 234,296 | $ | 396,956 | $ | 222,822 | $ | 235,550 | $ | 618,524 | $ | 854,074 | $ | 155,480 | |||||||||||||||||||||
F-39
Table of Contents
ACADIA REALTY TRUST
NOTES TO SCHEDULE III
NOTES TO SCHEDULE III
December 31, 2007
1. Depreciation and investments in buildings and improvements reflected in the statements of income
is calculated over the estimated useful life of the assets as follows:
Buildings: 30 to 40 years
Improvements: Shorter of lease term or useful life
Improvements: Shorter of lease term or useful life
| 2. | The aggregate gross cost of property included above for Federal income tax purposes was $407.4 million as of December 31, 2007 | |
| 3. | (a) Reconciliation of Real Estate Properties: |
The following table reconciles the real estate properties from January 1, 2005 to December 31,
2007:
| For the year ended December 31, | ||||||||||||
| (dollars in thousands) | 2007 | 2006 | 2005 | |||||||||
Balance at beginning of year |
$ | 650,051 | $ | 670,817 | $ | 561,370 | ||||||
Transfers (1) |
— | (131,341 | ) | — | ||||||||
Other improvements |
76,007 | 40,800 | 11,599 | |||||||||
Reclassification of tenant improvement activities |
— | — | — | |||||||||
Property Acquired |
128,016 | 69,775 | 97,848 | |||||||||
Balance at end of year |
$ | 854,074 | $ | 650,051 | $ | 670,817 | ||||||
| Notes: | ||
| (1) | Reflects the change in accounting for the Brandywine Portfolio following the recapitalization of the investment in January 2006 (Note 1). | |
| 3. (b) | Reconciliation of Accumulated Depreciation: |
The following table reconciles accumulated depreciation from January 1, 2005 to December 31, 2007:
| For the year ended December 31, | ||||||||||||
| (dollars in thousands) | 2007 | 2006 | 2005 | |||||||||
Balance at beginning of year |
$ | 135,085 | $ | 122,077 | $ | 102,315 | ||||||
Reclassification of tenant improvement activities |
— | — | — | |||||||||
Depreciation related to real estate |
20,395 | 13,008 | 19,762 | |||||||||
Balance at end of year |
$ | 155,480 | $ | 135,085 | $ | 122,077 | ||||||
F-40
Exhibit 10.67
ACQUISITION AND PROJECT LOAN
AGREEMENT
AGREEMENT
among
ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC,
a Delaware limited liability company
as Lead Borrower
a Delaware limited liability company
as Lead Borrower
and
ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC,
a Delaware limited liability company
FORDHAM PLACE OFFICE, LLC
a Delaware limited liability company
as Borrower,
a Delaware limited liability company
FORDHAM PLACE OFFICE, LLC
a Delaware limited liability company
as Borrower,
and
The LENDERS Party Hereto,
as Lenders
as Lenders
and
EUROHYPO AG, NEW YORK BRANCH
as Administrative Agent
as Administrative Agent
Date: As of October 5, 2007
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE 1 CERTAIN DEFINITIONS | 2 | |||||||
| Section 1.1 | Certain Definitions | 2 | ||||||
| ARTICLE 2 LOAN TERMS | 29 | |||||||
| Section 2.1 | The Commitments, Loans and Notes | 29 | ||||||
| Section 2.2 | Conversions or Continuations of Loans | 30 | ||||||
| Section 2.3 | Interest Rate; Late Charge | 31 | ||||||
| Section 2.4 | Terms of Payment | 32 | ||||||
| Section 2.5 | Extension of Maturity Date | 34 | ||||||
| Section 2.6 | Pro Rata Treatment of Payments; Etc. | 38 | ||||||
| Section 2.7 | Yield Protection; Etc. | 41 | ||||||
| Section 2.8 | Agency Fee | 46 | ||||||
| Section 2.9 | Exit Fee | 46 | ||||||
| ARTICLE 3 INSURANCE, CONDEMNATION, AND IMPOUNDS | 46 | |||||||
| Section 3.1 | Insurance | 46 | ||||||
| Section 3.2 | Condemnation Awards | 51 | ||||||
| Section 3.3 | Use and Application of Insurance Proceeds | 52 | ||||||
| Section 3.4 | Disbursement of Proceeds | 52 | ||||||
| ARTICLE 4 DISBURSEMENTS OF THE LOANS | 54 | |||||||
| Section 4.1 | General Conditions | 54 | ||||||
| Section 4.2 | Procedure for Making Disbursements of Loan Proceeds | 55 | ||||||
| Section 4.3 | Loan Balancing | 55 | ||||||
| Section 4.4 | Budget Contingencies | 57 | ||||||
| Section 4.5 | Budget Line Items | 58 | ||||||
| Section 4.6 | Interest; Fees; and Expenses | 58 | ||||||
| Section 4.7 | Reserved | 59 | ||||||
| Section 4.8 | Tenant Improvement Allowances | 59 | ||||||
| Section 4.9 | Direct Loan Advances by Administrative Agent | 61 | ||||||
| Section 4.10 | No Waiver or Approval by Reason of Loan Advances | 61 | ||||||
| Section 4.11 | Authorization to Make Loan Advances to Cure Borrower’s Defaults | 61 | ||||||
| Section 4.12 | Designation of Lead Borrower as Agent for Borrower | 61 | ||||||
| Section 4.13 | Administrative Agent’s Right to Make Loan Advances in Compliance | |||||||
| with the Guaranty of Completion | 62 | |||||||
| Section 4.14 | No Third-Party Benefit | 62 | ||||||
| ARTICLE 5 ENVIRONMENTAL MATTERS | 63 | |||||||
| Section 5.1 | Certain Definitions | 63 | ||||||
| Section 5.2 | Representations and Warranties on Environmental Matters | 64 | ||||||
| Section 5.3 | Covenants on Environmental Matters | 64 | ||||||
| Section 5.4 | Allocation of Risks and Indemnity | 65 | ||||||
i
| Page | ||||||||
| Section 5.5 | No Waiver | 66 | ||||||
| ARTICLE 6 LEASING MATTERS | 66 | |||||||
| Section 6.1 | Representations and Warranties on Leases | 66 | ||||||
| Section 6.2 | Standard Lease Form; Approval Rights | 67 | ||||||
| Section 6.3 | Covenants | 67 | ||||||
| Section 6.4 | Tenant Estoppels | 68 | ||||||
| ARTICLE 7 REPRESENTATIONS AND WARRANTIES | 68 | |||||||
| Section 7.1 | Organization and Power | 68 | ||||||
| Section 7.2 | Validity of Loan Documents | 68 | ||||||
| Section 7.3 | Liabilities; Litigation | 68 | ||||||
| Section 7.4 | Taxes and Assessments | 69 | ||||||
| Section 7.5 | Other Agreements; Defaults | 69 | ||||||
| Section 7.6 | Compliance with Law; Government Approvals | 69 | ||||||
| Section 7.7 | Location of Borrower | 70 | ||||||
| Section 7.8 | ERISA | 70 | ||||||
| Section 7.9 | Margin Stock | 70 | ||||||
| Section 7.10 | Tax Filings | 70 | ||||||
| Section 7.11 | Solvency | 70 | ||||||
| Section 7.12 | Full and Accurate Disclosure | 71 | ||||||
| Section 7.13 | Single Purpose Entity | 71 | ||||||
| Section 7.14 | Property Management Agreement; Construction Management | |||||||
| Agreement; Development Agreement | 71 | |||||||
| Section 7.15 | No Conflicts | 71 | ||||||
| Section 7.16 | Title | 72 | ||||||
| Section 7.17 | Use of Project | 72 | ||||||
| Section 7.18 | Flood Zone | 72 | ||||||
| Section 7.19 | Insurance | 72 | ||||||
| Section 7.20 | Condemnation | 72 | ||||||
| Section 7.21 | Utilities; Access | 72 | ||||||
| Section 7.22 | Boundaries | 73 | ||||||
| Section 7.23 | Separate Lots | 73 | ||||||
| Section 7.24 | Filing and Recording Taxes | 73 | ||||||
| Section 7.25 | Investment Company Act | 73 | ||||||
| Section 7.26 | Foreign Assets Control Regulations, Etc. | 73 | ||||||
| Section 7.27 | Organizational Structure | 73 | ||||||
| Section 7.28 | Project Documents | 74 | ||||||
| Section 7.29 | Budget | 74 | ||||||
| Section 7.30 | Interim Disbursements | 74 | ||||||
| Section 7.31 | Reserved | 74 | ||||||
| Section 7.32 | Tenant Improvement Allowances | 74 | ||||||
| Section 7.33 | Reserved | 74 | ||||||
| ARTICLE 8 FINANCIAL REPORTING | 74 | |||||||
| Section 8.1 | Financial Statements | 74 | ||||||
| Section 8.2 | Accounting Principles | 76 | ||||||
ii
| Page | ||||||||
| Section 8.3 | Other Information | 76 | ||||||
| Section 8.4 | Audits | 76 | ||||||
| ARTICLE 9 COVENANTS | 76 | |||||||
| Section 9.1 | Due on Sale and Encumbrance; Transfers of Interests | 76 | ||||||
| Section 9.2 | Maintenance of the Project; Alterations | 77 | ||||||
| Section 9.3 | Real Estate Taxes; Charges | 77 | ||||||
| Section 9.4 | Development; Management | 78 | ||||||
| Section 9.5 | Compliance with Laws; Inspection | 79 | ||||||
| Section 9.6 | Legal Existence; Name, Etc. | 81 | ||||||
| Section 9.7 | Affiliate Transactions | 81 | ||||||
| Section 9.8 | Limitation on Other Debt | 81 | ||||||
| Section 9.9 | Further Assurances | 82 | ||||||
| Section 9.10 | Loan Certificates | 82 | ||||||
| Section 9.11 | Notice of Certain Events | 82 | ||||||
| Section 9.12 | Indemnification | 82 | ||||||
| Section 9.13 | Covenants Regarding the Condominium Declaration | 83 | ||||||
| Section 9.14 | Collateral Letters of Credit | 84 | ||||||
| Section 9.15 | Hedge Agreements | 86 | ||||||
| Section 9.16 | Reserves | 87 | ||||||
| Section 9.17 | Handicapped Access | 88 | ||||||
| Section 9.18 | Zoning | 89 | ||||||
| Section 9.19 | ERISA | 89 | ||||||
| Section 9.20 | Books and Records | 89 | ||||||
| Section 9.21 | Foreign Assets Control Regulations | 90 | ||||||
| Section 9.22 | Performance of Project Documents and Easements | 90 | ||||||
| Section 9.23 | Operating Plan and Budget | 91 | ||||||
| Section 9.24 | Proceedings to Enjoin or Prevent Construction | 91 | ||||||
| Section 9.25 | Industrial and Commercial Incentive Program | 92 | ||||||
| Section 9.26 | Reserved | 92 | ||||||
| Section 9.27 | Reserved | 92 | ||||||
| Section 9.28 | Reimbursement of Expenses | 92 | ||||||
| ARTICLE 10 EVENTS OF DEFAULT | 93 | |||||||
| Section 10.1 | Payments | 93 | ||||||
| Section 10.2 | Insurance | 93 | ||||||
| Section 10.3 | Single Purpose Entity | 93 | ||||||
| Section 10.4 | Real Estate Taxes | 93 | ||||||
| Section 10.5 | Sale, Encumbrance, Etc. | 93 | ||||||
| Section 10.6 | Representations and Warranties | 94 | ||||||
| Section 10.7 | Other Encumbrances | 94 | ||||||
| Section 10.8 | Various Covenants | 94 | ||||||
| Section 10.9 | Reserved | 94 | ||||||
| Section 10.10 | Financial Covenants | 94 | ||||||
| Section 10.11 | Involuntary Bankruptcy or Other Proceeding | 94 | ||||||
| Section 10.12 | Voluntary Petitions, Etc. | 94 | ||||||
| Section 10.13 | Debt | 94 | ||||||
iii
| Page | ||||||||
| Section 10.14 | Dissolution | 95 | ||||||
| Section 10.15 | Judgments | 95 | ||||||
| Section 10.16 | Security | 95 | ||||||
| Section 10.17 | Guarantor Documents | 95 | ||||||
| Section 10.18 | Reserves | 95 | ||||||
| Section 10.19 | Co-Borrower Documents | 95 | ||||||
| Section 10.20 | Covenants | 95 | ||||||
| Section 10.21 | Deficiency Deposits | 96 | ||||||
| Section 10.22 | Reserved | 96 | ||||||
| Section 10.23 | Reserved | 96 | ||||||
| Section 10.24 | Building Loan Agreement Default | 96 | ||||||
| ARTICLE 11 REMEDIES | 96 | |||||||
| Section 11.1 | Remedies — Insolvency Events | 96 | ||||||
| Section 11.2 | Remedies — Other Events | 96 | ||||||
| Section 11.3 | Administrative Agent’s Right to Perform the Obligations | 96 | ||||||
| Section 11.4 | Administrative Agent’s Right to Complete Construction | 97 | ||||||
| Section 11.5 | Administrative Agent’s Rights under the Guaranty of Completion | 98 | ||||||
| Section 11.6 | NO OBLIGATION WITH RESPECT TO COMPLETION OF THE IMPROVEMENTS | 98 | ||||||
| ARTICLE 12 MISCELLANEOUS | 98 | |||||||
| Section 12.1 | Notices | 98 | ||||||
| Section 12.2 | Amendments, Waivers, Etc. | 99 | ||||||
| Section 12.3 | Compliance with Usury Laws | 99 | ||||||
| Section 12.4 | Invalid Provisions | 99 | ||||||
| Section 12.5 | Approvals; Third Parties; Conditions | 100 | ||||||
| Section 12.6 | Lenders and Administrative Agent Not in Control; No Partnership | 100 | ||||||
| Section 12.7 | Time of the Essence | 100 | ||||||
| Section 12.8 | Successors and Assigns | 101 | ||||||
| Section 12.9 | Renewal, Extension or Rearrangement | 101 | ||||||
| Section 12.10 | Waivers | 101 | ||||||
| Section 12.11 | Cumulative Rights | 101 | ||||||
| Section 12.12 | Singular and Plural | 101 | ||||||
| Section 12.13 | Phrases | 101 | ||||||
| Section 12.14 | Exhibits and Schedules | 101 | ||||||
| Section 12.15 | Titles of Articles, Sections and Subsections | 101 | ||||||
| Section 12.16 | Promotional Material | 101 | ||||||
| Section 12.17 | Survival | 102 | ||||||
| Section 12.18 | WAIVER OF JURY TRIAL | 102 | ||||||
| Section 12.19 | Remedies of Borrower | 102 | ||||||
| Section 12.20 | Governing Law | 103 | ||||||
| Section 12.21 | Entire Agreement | 104 | ||||||
| Section 12.22 | Counterparts | 104 | ||||||
| Section 12.23 | Assignments and Participations | 104 | ||||||
| Section 12.24 | Brokers | 106 | ||||||
| Section 12.25 | Right of Set-off | 106 | ||||||
iv
| Page | ||||||||
| Section 12.26 | Limitation on Liability of Administrative Agent’s and the Lenders’ | |||||||
| Officers, Employees, etc. | 107 | |||||||
| Section 12.27 | Cooperation with Syndication | 107 | ||||||
| Section 12.28 | Severance of Loan | 108 | ||||||
| Section 12.29 | Confidentiality | 110 | ||||||
| ARTICLE 13 RECOURSE LIABILITY | 110 | |||||||
| Section 13.1 | Recourse Liability | 110 | ||||||
| Section 13.2 | No Waiver of Certain Rights | 112 | ||||||
| ARTICLE 14 ADMINISTRATIVE AGENT | 112 | |||||||
| Section 14.1 | Appointment, Powers and Immunities | 112 | ||||||
| Section 14.2 | Reliance by Administrative Agent | 113 | ||||||
| Section 14.3 | Defaults | 113 | ||||||
| Section 14.4 | Rights as a Lender | 116 | ||||||
| Section 14.5 | Standard of Care; Indemnification | 116 | ||||||
| Section 14.6 | Non Reliance on Administrative Agent and Other Lenders | 117 | ||||||
| Section 14.7 | Failure to Act | 117 | ||||||
| Section 14.8 | Resignation of Administrative Agent | 117 | ||||||
| Section 14.9 | Consents under Loan Documents | 118 | ||||||
| Section 14.10 | Authorization | 119 | ||||||
| Section 14.11 | Agency Fee | 119 | ||||||
| Section 14.12 | Defaulting Lenders | 119 | ||||||
| Section 14.13 | Liability of Administrative Agent | 122 | ||||||
| Section 14.14 | Transfer of Agency Function | 122 | ||||||
| ARTICLE 15 CASH MANAGEMENT | 122 | |||||||
| Section 15.1 | Cash Management | 122 | ||||||
| Section 15.2 | Security Accounts Generally | 122 | ||||||
| ARTICLE 16 CONTROLLED ACCOUNTS | 124 | |||||||
| Section 16.1 | Controlled Accounts | 124 | ||||||
| ARTICLE 17 CONDOMINIUM PROVISIONS | 125 | |||||||
| Section 17.1 | Establishment; Covenants | 125 | ||||||
| Section 17.2 | Subordination of Lien to Project Condominium Declarations | 126 | ||||||
| Section 17.3 | Transfer of Collateral | 127 | ||||||
LIST OF EXHIBITS AND SCHEDULES
Exhibit A
|
Legal Description | |
Exhibit B
|
Budget | |
Exhibit C-1
|
Form of Project Loan Note | |
Exhibit C-2
|
Form of Building Loan Note | |
Exhibit C-3
|
Form of Acquisition Loan Note | |
Exhibit D
|
Form of Assignment and Assumption | |
Exhibit E
|
Notices for Conversion and Continuations |
v
Exhibit F-1
|
Form of Request for Loan Advance (Project Loans) | |
Exhibit F-2
|
Form of Request for Loan Advance (Building Loans) | |
Exhibit F-3
|
Form of Request for Loan Advance (Acquisition Loans) | |
Exhibit G
Schedule 1 |
Controlled Account Agreement Commitments |
|
Schedule 1.1(130)
|
Leasing Guidelines | |
Schedule 1.1(193)
|
Proportionate Share | |
Schedule 2.4(1)
|
Wire Instructions | |
Schedule 3.1(1)(J)
|
Insurance Requirements for Construction Managers, Major Contractors, Architects and Design Professionals | |
Schedule 4
|
Advance Conditions | |
Schedule 7.6
|
Permitting Schedules | |
Schedule 7.27
|
Organizational Chart | |
Schedule 7.32
|
Tenant Improvement Allowances |
vi
ACQUISITION AND PROJECT LOAN AGREEMENT
ACQUISITION AND PROJECT LOAN AGREEMENT is entered into as of October 5, 2007 among ACADIA-PA
EAST FORDHAM ACQUISITIONS, LLC, a limited liability company duly organized and validly existing
under the laws of the State of Delaware (“Lead Borrower”), FORDHAM PLACE OFFICE, LLC, a
limited liability company duly organized and validly existing under the laws of the State of
Delaware (“Fordham Office”, hereinafter, jointly and severally with Lead Borrower, and
singly and collectively, “Borrower”); each of the lenders that is a signatory hereto
identified under the caption “LENDERS” on the signature pages hereof and each lender that becomes a
“Lender” after the date hereof pursuant to Section 12.23(1) (individually, a
“Lender” and, collectively, the “Lenders”); and EUROHYPO AG, NEW YORK BRANCH, as
administrative agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Administrative Agent”).
RECITALS
A. Lead Borrower is the fee owner of that certain tract of land located in the County of
Bronx, State of New York and being more fully described in Exhibit A attached hereto (the
“Land”) and the improvements currently located thereon.
B. Borrower proposes to renovate, alter, improve, install and construct the Improvements (as
hereinafter defined) on the Land and, in connection therewith has requested and applied to the
Lenders for a loan in the amount of $75,339,243.00 (the “Total Building Loan Commitment”)
for the purposes of paying certain of the Cost of Improvement pertaining to the Project (as
hereinafter defined) including certain costs with respect to the construction and equipping of the
Improvements. The Lenders have agreed to make such loan pursuant to the Building Loan Agreement,
of even date herewith, entered into by Borrower, the Lenders and Administrative Agent (as the same
may be modified, amended and/or supplemented and in effect from time to time, the “Building
Loan Agreement”)
C. Borrower has also requested and applied to the Lenders for a loan in the amount of
$1,930,757.00 (the “Total Project Loan Commitment”) for the purpose of paying certain costs
pertaining to the Project, which costs do not constitute a Cost of Improvement. The Lenders are
willing to make such loan on and subject to the terms and conditions hereinafter set forth.
D. Borrower has also requested and applied to the Lenders for a loan in the amount of
$18,000,000.00 (the “Total Acquisition Loan Commitment”) for the purpose of re-financing
Borrower’s acquisition of the Land and the improvements located thereon. The Lenders are willing
to make such loan on and subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
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ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. As used herein, the following terms have the meanings
indicated:
(1) “Access Laws” has the meaning assigned to such term in Section 9.17(1).
(2) “Acquisition Loan” and “Acquisition Loans” have the respective meanings
assigned in Section 2.1(1)(b).
(3) “Acquisition Loan Commitment” means, as to each Lender, the obligation of such
Lender to make Acquisition Loans in a principal amount up to but not exceeding the amount set
opposite the name of such Lender on Schedule 1 under the caption “Acquisition Loan
Commitment” or, in the case of a Person that becomes a Lender pursuant to an assignment permitted
under Section 12.23(1), as specified in the respective instrument of assignment pursuant to
which such assignment is effected.
(4) “Acquisition Loan Mortgage” shall mean the Acquisition Loan Mortgage, Assignment
of Leases and Rents, Security Agreement and Fixture Filing in the amount of the Total Acquisition
Loan Commitment and executed, dated and delivered by Borrower to Administrative Agent (on behalf of
the Lenders) on the Closing Date, securing the Acquisition Loan Notes, as the same may be modified,
amended and/or supplemented and in effect from time to time.
(5) “Acquisition Loan Notes” shall mean, collectively, the promissory note given to
each of the Lenders, each note in principal amount equal to such Lender’s Acquisition Loan
Commitment and substantially in the form of Exhibit C-3 attached hereto, to be executed, dated and
delivered by Borrower to each of the Lenders as of the Closing Date, secured by the Acquisition
Loan Mortgage, as the same may be modified, amended and/or supplemented and in effect from time to
time.
(6) “Additional Interest” means any and all amounts which may become due and payable
by Borrower in accordance with the terms and provisions of any Hedge Agreement provided by a
Eurohypo Counterparty which is secured by the Mortgages in accordance with Section 9.15,
which amounts shall be evidenced by and payable pursuant to the Notes in favor of Eurohypo and/or
such Affiliate; provided, however, that Additional Interest shall not include any
amounts which may become due and payable pursuant to any Hedge Agreement which is not secured by
the Mortgages.
(7) “Adjusted Libor Rate” means, for any Interest Period for any LIBOR-based Loan, a
rate per annum (rounded upwards, if necessary, to the nearest 1/32 of 1%) determined by
Administrative Agent to be equal to (a) the Libor Rate for such Interest Period multiplied by (b)
the Statutory Reserve Rate.
(8) “Administrative Agent” has the meaning assigned to such term in the Preamble.
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(9) “Advance Date” has the meaning assigned to such term in Section 2.6(5).
(10) “Advanced Amount” has the meaning assigned to such term in Section
14.12(2).
(11) “Affiliate” means with respect to any Person, another Person that directly or
indirectly controls, or is under common control with, or is controlled by, such Person and, if such
Person is an individual, any member of the immediate family (including parents, spouse, children
and siblings) of such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, “control” (including, with its correlative meanings,
“controlled by” and “under common control with”) shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract or otherwise),
provided that, in any event, any Person that owns directly or indirectly securities having 10% or
more of the voting power for the election of directors or other governing body of a corporation or
10% or more of the partnership, membership or other ownership interests of any other Person (other
than as a limited partner of such other Person) will be deemed to control such corporation or other
Person. Notwithstanding the foregoing, no individual shall be an Affiliate of a Person solely by
reason of his or her being a director, officer, trustee or employee of such Person or one of its
Affiliates.
(12) “Agency Fee” means the agency fee agreed to by Borrower and Administrative Agent
pursuant to the Fee Letter.
(13) “Agreement” means this Acquisition and Project Loan Agreement, as the same may be
modified, amended and/or supplemented and in effect from time to time.
(14) “Annual Budget” has the meaning assigned to such term in Section 9.23(1).
(15) “Applicable Law” means any statute, law (including Environmental Laws),
regulation, ordinance, rule, judgment, rule of common law, order, decree, Government Approval,
approval, concession, grant, franchise, license, agreement, directive, guideline, policy,
requirement, or other governmental restriction or any similar form of decision of, or determination
by, or any interpretation or administration of any of the foregoing by, any Governmental Authority,
whether now or hereinafter in effect and, in each case, as amended (including any thereof
pertaining to land use, zoning and building ordinances and codes).
(16) “Applicable Lending Office” means, for each Lender and for each Type of Loan, the
“Lending Office” of such Lender (or of an Affiliate of such Lender) designated for such Type of
Loan on the respective signature pages hereof or such other office of such Lender (or of an
Affiliate of such Lender) as such Lender may from time to time specify to Administrative Agent and
Borrower as the office by which its Loans of such Type are to be made and maintained.
(17) “Applicable Margin” shall mean, for LIBOR-based Loans, 1.75% per annum.
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(18) “Appraisal” means an appraisal of the Project prepared by an MAI appraiser
satisfactory to Administrative Agent, which appraisal must also (a) satisfy the requirements of
Title XI of the Federal Institution Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder (including the appraiser with respect thereto) and (b) be
otherwise in form and substance satisfactory to Administrative Agent.
(19) “Appraised Value” means that certain appraised value of the Project as determined
by the Appraisal.
(20) “Approved Annual Budget” shall have the meaning assigned in Section
9.23(1).
(21) “Approved Fund” shall mean any Person (other than a natural person), including,
without limitation, any collateralized debt obligation, that is engaged in making, purchasing,
holding or investing in bank loans and similar extensions of credit in the ordinary course of its
business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender, (c) an
entity or an Affiliate of an entity that administers or manages a Lender, or (d) an Eligible
Assignee.
(22) “Approved Lease” means (a) each lease with each Existing Tenant and (b) each
lease entered into after the Closing Date in accordance with the terms and conditions contained in
Section 6.2 as such leases and related documents may be modified or amended pursuant to the
terms of this Agreement.
(23) “Approved Mezzanine Lender” means Eurohypo or its subsidiary.
(24) “Approved Mezzanine Loan” means a loan (i) from the Approved Mezzanine Lender to
the Mezzanine Borrower and secured solely by a pledge of the direct or indirect ownership interests
in the Borrower, (ii) which is evidenced and secured by the Approved Mezzanine Loan Documents,
(iii) which has a term expiring on or after the Maturity Date, and (iv) which is the subject of an
intercreditor agreement between Administrative Agent and Approved Mezzanine Lender, which shall be
in form and content acceptable to Administrative Agent.
(25) “Approved Mezzanine Loan Documents” means the documents which will evidence or
secure the Approved Mezzanine Loan which shall be subject to the approval of Administrative Agent.
(26) “Approved Mezzanine Loan Liens” means liens in favor of Approved Mezzanine Lender
created pursuant to the Approved Mezzanine Loan Documents as security for the Approved Mezzanine
Loan and approved by Administrative Agent pursuant to the terms of the subordination and
intercreditor agreement to be entered into between Administrative Agent and Approved Mezzanine
Lender.
(27) “Assignment and Assumption” means an Assignment and Assumption duly executed by
the parties thereto, in substantially the form of Exhibit D hereto and consented to by
Administrative Agent in accordance with Section 12.23(1).
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(28) “Authorized Officer” means with respect to Borrower, the President or Senior Vice
President of Borrower whose names appear on a certificate of incumbency executed by the Secretary
of the Borrower and delivered concurrently with the execution of this Agreement, as such
certificate of incumbency may be amended from time to time to identify the names of the individuals
then holding such offices and certified by the Secretary of the Borrower.
(29) “Base Rate” means, for any day, a rate per annum equal to the higher of (a) the
Federal Funds Rate for such day plus 1/2 of 1% or (b) the Prime Rate for such day. Each change in
any interest rate provided for herein based upon the Base Rate resulting from a change in the Base
Rate shall take effect at the time of such change in the Base Rate.
(30) “Base Rate Loans” means Loans that bear interest at rates based upon the Base
Rate.
(31) “Best Buy Lease” means that certain Lease, dated June 29, 2007, between Borrower
and Best Buy Stores, L.P., a Viriginia limited partnership.
(32) “Bifurcation” has the meaning assigned to such term in Section 12.28.
(33) “Bond” has the meaning assigned to such term in Section 1.1 of the Building Loan
Agreement.
(34) “Borrower” has the meaning assigned to such term in the Preamble. With respect
to the definition of “Borrower”, except where the context otherwise provides, (i) any
representations contained herein of Borrower shall be applicable to each Borrower, (ii) any
affirmative covenants contained herein shall be deemed to be covenants of each Borrower and shall
require performance by all Borrowers, (iii) any negative covenants contained herein shall be deemed
to be covenants of each Borrower, and shall be breached if any Borrower fails to comply therewith,
(iv) the occurrence of any Event of Default with respect to any Borrower shall be deemed to be an
Event of Default hereunder, and (v) any Indebtedness and/or obligations of Borrower shall be deemed
to include any Indebtedness and/or obligations of the Borrowers, or any Indebtedness and/or
obligations of any one of them.
(35) “Borrower Party” means Borrower, any Guarantor or Managing Member.
(36) “Borrower’s Architect” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
(37) “Borrower’s Architect’s Agreement” has the meaning assigned to such term in
Section 1.1 of the Building Loan Agreement.
(38) “Borrower’s Project Interest” means, from and after the establishment of the
Condominium, collectively, Borrower’s right, title and interest in and to: (a) all Units; (b) the
Improvements; (c) the Project Amenities; (d) Borrower’s rights, powers, privileges and obligations
(including, without limitation, maintenance obligations and rights to reimbursement with respect to
the Units and Project Amenities), whether as the Declarant or otherwise, under
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the Condominium
Declaration; and (e) all other right, title and interest of Borrower in and to the Project,
together with rights and appurtenances to the interests described in clause (a) through (d) above.
(39) “Budget” means the budget attached as Exhibit B hereto as the same may be
modified from time to time in accordance with the provisions of this Agreement.
(40) “Budget Line Items” has the meaning assigned to such term in Section 4.5.
(41) “Building Loan” and “Building Loans” has the meaning assigned to such
term in Section 1.1 of the Building Loan Agreement.
(42) “Building Loan Agreement” has the meaning assigned to such term in the Recitals.
(43) “Building Loan Commitment” has the meaning assigned to such term in Section 1.1
of the Building Loan Agreement.
(44) “Building Loan Mortgage” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
(45) “Building Loan Notes” shall mean, collectively, the promissory note given to each
of the Lenders, each note in principal amount equal to such Lender’s Building Loan Commitment and
substantially in the form of Exhibit C-2 attached hereto, to be executed, dated and
delivered by Borrower to each of the Lenders as of the Closing Date, secured by the Building Loan
Mortgage, as the same may be modified, amended and/or supplemented and in effect from time to time.
(46) “Business Day” means (a) any day other than a Saturday, a Sunday, or other day on
which commercial banks located in New York City are authorized or required by law to remain closed
and (b) in connection with a borrowing of, a payment or prepayment of principal of or interest on,
a Conversion of or into, or an Interest Period for, a LIBOR-based Loan or a notice by Lead Borrower
with respect to any such borrowing, payment, prepayment or Conversion, the term “Business Day”
shall also exclude a day on which banks are not open for dealings in Dollar deposits in the London
interbank market.
(47) “Cash Management Agreement” means that certain Cash Management and Security
Agreement which may be executed and delivered by Borrower, Administrative Agent (on behalf of the
Lenders) and the Depository Bank in accordance with the terms and provisions of Section
15.1, as the same may be modified, amended and/or supplemented and in effect from time to time.
(48) “Change in Law” means, to the extent that the Administrative Agent, the Lenders,
the Borrower or the Project is subject thereto or required to comply therewith, the occurrence,
after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any
law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental Authority or
6
(c) the
making or issuance of any request, guideline or directive (whether or not having the force of law)
by any Governmental Authority.
(49) “Change of Control” shall mean any transaction, transfer, admission, redemption,
withdrawal, change in organizational documents or structure, or otherwise, whether directly or
indirectly, as a result of which (a)(i) Sponsor, whether directly or indirectly, owns less than 18%
of the membership interests in and rights to distributions from Borrower, or (ii) any Person other
than Managing Member has the responsibility for managing and administering the day-to day business
and affairs of Borrower or (iii) in any other respects, any Person other than Sponsor directly or
indirectly Control Borrower, (b) (i) Sponsor no longer directly or indirectly owns at least 18% of
the membership interests in and rights to distributions from the Managing Member, or (ii) Sponsor
no longer directly or indirectly has responsibility for managing and administering the day-to day
business and affairs of the Managing Member or (iii) in any other respects, any Person other than
Sponsor directly or indirectly Controls the Managing Member, (c)(i) anyone other than Acadia
Realty Trust, whether directly or indirectly, owns less than 75% of the partnership interests in
Sponsor, or (ii) any Person other than Acadia Realty Trust has the responsibility for managing and
administering the day-to day business and affairs of Sponsor or (iii) in any other respects, any
Person other than Acadia Realty Trust directly or indirectly Controls Sponsor, or (d) a change in
the management control of Acadia Realty Trust such that Kenneth F. Bernstein is no longer the Chief
Executive Officer of Acadia Realty Trust or Kenneth F. Bernstein fails to devote a substantial
amount of his business time and attention in any consecutive six (6) month period to the affairs of
Acadia Realty Trust; provided, however, such occurrence shall not be an Event of Default if within
sixty (60) days of the occurrence thereof the Administrative Agent approves, in the exercise of its
reasonable judgment, the replacement or successor management of Acadia Realty Trust. As used in
this definition, “Control” of one Person (the “controlled Person”) by another Person (the
“controlling Person”) shall mean the possession, directly or indirectly, by the controlling
Person of the power or ability to direct or cause the direction of the management or policies of
the controlled Person, whether through the ability to exercise voting power, by contract or
otherwise (“Controlled” and “Controlling” each have the meanings correlative
thereto).
(50) “Change Order” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(51) “Closing Date” means the date of this Agreement.
(52) “Co-Borrower Documents” means collectively, the Contribution Agreement, the
Co-Borrower Guaranty (Acquisitions) and the Co-Borrower Guaranty (Office).
(53) “Co-Borrower Guaranty (Acquisitions)” means the Co-Borrower Guaranty by Lead
Borrower in favor of Administrative Agent on the Closing Date, as the same may be modified,
supplemented or amended from time to time.
(54) “Co-Borrower Guaranty (Office)” means the Co-Borrower Guaranty by Fordham Office
in favor of Administrative Agent on the Closing Date, as the same may be modified, supplemented or
amended from time to time.
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(55) “Collateral Letter of Credit” means a clean, irrevocable and unconditional
standby letter of credit that is (a) issued for the account of an applicant other than Borrower,
(b) issued in favor of Administrative Agent (on behalf of the Lenders), (c) issued by an issuer
having a paying office in the City of New York and having a rating with respect thereto of “A” or
better by S&P and an equivalent rating from Moody’s, or such other issuer as shall be approved by
the Administrative Agent in its sole and absolute discretion, (d) drawable, in whole or in part,
from time to time, by Administrative Agent upon the presentment to the issuer of a clean
sight-draft demanding such payment, (e) an “evergreen” letter of credit that initially has an
expiration date of at least one (1) year from the date of deposit and is automatically renewed from
year to year or one which does not expire until at least thirty (30) Business Days after the
Maturity Date, and (f) freely assignable upon presentation of customary documents by Administrative
Agent at no cost and expense to Administrative Agent.
(56) “Commitment” means, as to each Lender, the aggregate Acquisition Loan Commitment,
Project Loan Commitment and Building Loan Commitment.
(57) “Completion Date” means the earlier of (a) twenty (20) months after the Closing
Date, as such date may be extended due to Unavoidable Delays; provided, however,
that in no event shall the Completion Date extend beyond the date which is twenty-four (24) months
after the Closing Date, or (b) the effective date of any cancellation or termination right under
any Major Lease due to the failure to complete any portion of the Project Completion Work, unless
such cancellation or termination date is extended or waived by Tenant.
(58) “Condominium” means that certain condominium established pursuant to the
Condominium Declaration.
(59) “Condominium Act” means Article 9-B of the Real Property Law of the State of New
York (§ 339-d et seq.), and all amendments, modifications or replacements thereof
or regulations with respect thereto, now or hereafter enacted or promulgated.
(60) “Condominium Declaration” means that certain Condominium Declaration filed with
the Attorney General’s Office of the State of New York and approved by Administrative Agent after
the Closing Date for the purpose of creating the Condominium.
(61) “Condominium Documents” means the Condominium Declaration, the by-laws of any
owner’s association to be established pursuant to the Condominium Declaration to govern the affairs
of the Condominium, and any other document, instrument or agreement creating, governing or
affecting the Condominium.
(62) “Consent and Agreement” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
(63) “Construction Consultant” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
(64) “Construction, Cost and Plan Review” means a report of the Construction
Consultant, dated October 3, 2007 and in form and substance reasonably satisfactory to
Administrative Agent, as to the Budget, the Plans and Specifications, the
8
construction plan, the
Construction Schedule, and as to such other matters as Administrative Agent may reasonably request,
including, without limitation, a detailed plan and cost review.
(65) “Construction Management Agreement” has the meaning assigned to such term in
Section 1.1 of the Building Loan Agreement.
(66) “Construction Manager” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
(67) “Construction Schedule” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
(68) “Construction Work” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(69) “Consumer Price Index” means the consumer price index for the New York City area
for all Urban Consumers-All Items, published monthly by the Bureau of Labor Statistics of the
United States Department of Labor.
(70) “Contingency Fund” has the meaning assigned to such term in Section 4.4.
(71) “Continue” “Continuation” and “Continued” refer to the
continuation pursuant to Section 2.2 of (a) a LIBOR-based Loan from one Interest Period to the next
Interest Period or (b) a Base Rate Loan at the Base Rate.
(72) “Contribution Agreement” means the Indemnity, Subrogation and Contribution
Agreement among Lead Borrower, Fordham Office and Administrative Agent on the Closing Date, as the
same may be modified, supplemented or amended from time to time.
(73) “Controlled Account” means one or more deposit accounts established by
Administrative Agent (for the benefit of the Lenders) at a Depository Bank that is acceptable to
Administrative Agent, and which is established and maintained in accordance with the terms and
provisions hereof.
(74) “Controlled Account Agreement” shall have the meaning assigned to such term in
Section 16.1(1)(a).
(75) “Controlled Account Collateral” shall have the meaning assigned to such term in
Section 16.1(3)(a).
(76) “Convert” “Conversion” and “Converted” refer to a conversion
pursuant to the terms of this Agreement of one Type of Loans into another Type of Loans, which may
be accompanied by the transfer by a Lender (at its sole discretion) of a Loan from one Applicable
Lending Office to another.
(77) “Cost of Improvement” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
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(78) “Date Down Endorsement” means any date down endorsement to the Title Policies or
other evidence of date down of title acceptable to Administrative Agent in its reasonable
discretion covering (a) disbursements of loan proceeds made or to be made subsequent to the date of
the Title Policies and (b) the period subsequent to the date of the Title Policies.
(79) “Debt” means, for any Person, without duplication: (a) all indebtedness of such
Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase
price of property for which such Person or its assets is liable, (b) all unfunded amounts under a
loan agreement, letter of credit, or other credit facility for which such Person would be liable,
if such amounts were advanced under the credit facility, (c) all amounts required to be paid by
such Person as a guaranteed payment to partners, members (or other equity holders) or a preferred
or special dividend, including any mandatory redemption of shares or interests, (d) all
indebtedness guaranteed by such Person, directly or indirectly, (e) all obligations under leases
that constitute capital leases for which such Person is liable, and (f) all obligations of such
Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in
each case whether such Person is liable contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person otherwise assures a creditor against
loss.
(80) “Declarant” means Acadia-PA East Fordham Acquisitions, LLC in its capacity as the
declarant named in the Condominium Declaration.
(81) “Default Rate” means the rate per annum from time to time applicable to Base Rate
Loans plus 5%; provided, however, that in no event shall the Default Rate exceed
the maximum rate allowed by Applicable Law.
(82) “Defaulting Lender” has the meaning assigned in Section 14.12(1).
(83) “Deficiency Deposit Account” has the meaning assigned to such term in Section
4.3(1)(b).
(84) “Deficiency Deposit” has the meaning assigned in Section 4.3(1)(b).
(85) “Depository Bank” means at any time any depository bank which is party to a
Controlled Account Agreement.
(86) “Design Professional” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(87) “Dollars” and “$” means lawful money of the United States of America.
(88) “Eligible Assignee” means any of (i) a commercial bank organized under the Laws
of the United States, or any State thereof, and having (x) total assets in excess of $1,000,000,000
and (y) a combined capital and surplus of at least $250,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the
Organization of Economic Cooperation and Development (“OECD”), or a political subdivision
of any such country, and having (x) total assets in excess of $1,000,000,000 and (y) a combined
10
capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or
agency located in the country in which it is organized or another country which is also a member of
OECD; (iii) a life insurance company organized under the Laws of any State of the United States, or
organized under the Laws of any country and licensed as a life insurer by any State within the
United States and having admitted assets of at least $1,000,000,000; (iv) a nationally recognized
investment banking company or other financial institution in the business of making loans, or an
Affiliate thereof (other than any Person which is directly or indirectly a Borrower Party or
directly or indirectly an Affiliate of any Borrower Party) organized under the Laws of any State of
the United States, and licensed or qualified to conduct such business under the Laws of any such
State and having (1) total assets of at least $1,000,000,000 and (2) a net worth of at least
$250,000,000; (v) an Approved Fund; (vi) any Affiliate of Eurohypo, any other Person into which, or
with which, Eurohypo is merged, consolidated or reorganized, or which is otherwise a successor to
Eurohypo by operation of law, or which acquires all or substantially all of the assets of Eurohypo,
any other Person which is a successor to the business operations of Eurohypo and engages in
substantially the same activities, or any Affiliate of any of the foregoing; or (vii) any other
Person reasonably acceptable to Borrower (to the extent Borrower’s consent to an assignment is
required for an assignment to a Person other than those identified in clauses (i) through (vi)
above, pursuant to Section 12.23(1), and provided that all other applicable conditions to
such assignment set forth in Section 12.23(1) have been satisfied, including any applicable
consent thereto to be delivered by Administrative Agent.
(89) “Environmental Indemnity” means that certain Environmental Indemnity Agreement by
Borrower and Guarantor in favor of Administrative Agent and each of the Lenders, to be executed,
dated and delivered to Administrative Agent (on behalf of the Lenders) on the Closing Date, as the
same may be modified, amended and/or supplemented and in effect from time to time.
(90) “Equity Balancing Contribution” has the meaning assigned in Section 4.3.
(91) “Eurohypo” means Eurohypo AG, New York Branch.
(92) “Eurohypo Counterparty” means Eurohypo and or (a) any Affiliate of Eurohypo, (b)
any other Person into which, or with which, Eurohypo is merged, consolidated or reorganized, or
which is otherwise a successor to Eurohypo by operation of law, or which acquires all or
substantially all of the assets of Eurohypo, (c) any other Person which is a successor to the
business operations of Eurohypo and engages in substantially the same activities, or (d) any
Affiliate of any of the Persons described in clauses (b) and (c) of this
definition.
(93) “Event of Default” has the meaning assigned in Article 10.
(94) “Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is organized or in
11
which its principal office is located or, in the case of any Lender, in which its Applicable
Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by Borrower under Section 2.7(7),any
withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new Applicable Lending Office) or is attributable to
such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply
with Section 2.7(6)(e) except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new Applicable Lending Office (or assignment),
to receive additional amounts from Borrower with respect to such withholding tax pursuant to
Section 2.7(6)(a).
(95) “Exculpated Party” has the meaning assigned to such term in Section 13.1.
(96) “Existing Tenant” means (i) Sears, Roebuck and Co., a New York corporation (ii)
Best Buy Stores, L.P., a Virginia limited partnership, (iii) Walgreen Eastern Co., Inc., a New York
corporation and (iv) 24 Hour Fitness USA, Inc., a California corporation.
(97) “Exit Fee” has the meaning assigned to such term in Section 2.9.
(98) “Extension Period” means the First Extension Period, the Second Extension Period
and/or the Third Extension Period, as applicable.
(99) “Federal Bankruptcy Code” shall mean Title 11 of the United States Code entitled
“Bankruptcy” as amended from time to time, and any successor statutes and rules and regulations
from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy,
insolvency or creditor’s rights.
(100) “Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged by Federal funds
brokers on such day, provided that (a) if such day is not a Business Day, the Federal Funds
Rate for the immediately preceding Business Day shall be applicable, as determined by
Administrative Agent, or such other commercial bank as selected by Administrative Agent.
(101) “Fee Letter” means the letter agreement, dated the date hereof, between Borrower
and Administrative Agent with respect to certain fees payable by Borrower in connection with the
Loans, as the same may be modified or amended from time to time.
(102) “First Extension Period” has the meaning assigned to such term in Section
2.5(1).
(103) “First Extension Notice” has the meaning assigned to such term in Section
2.5(1)(a).
12
(104) “Flood Insurance Acts” has the meaning assigned to such term in Section
3.1(1)(g).
(105) “Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which Borrower is resident for tax purposes. For purposes of this
definition, the United States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.
(106) “GAAP” means accounting principles generally accepted in the United States of
America.
(107) “General Assignment” means the Assignment of Contracts, Government Approvals and
Other Project Documents, executed by Borrower in favor of Administrative Agent (on behalf of the
Lenders), as the same may be modified, supplemented and/or amended from time to time.
(108) “Government Approval” means any action, authorization, consent, approval,
license, lease, ruling, permit, tariff, certification, exemption, filing or registration by or with
any Governmental Authority, including all licenses, permits, allocations, authorizations, approvals
and certificates obtained by or in the name of, or assigned to, Borrower and used in connection
with the ownership, construction, operation, use or occupancy of the Project, including building
permits, zoning and planning approvals, business licenses, licenses to conduct business,
certificates of occupancy and all such other permits, licenses and rights.
(109) “Governmental Authority” means any governmental department, commission, board,
bureau, agency, regulatory authority, instrumentality, judicial or administrative body, federal,
state, local, or foreign having jurisdiction over the matter or matters in question.
(110) “Guaranty of Completion” means the Completion Guaranty executed by Guarantor to
Administrative Agent (on behalf of the Lenders) on the Closing Date, as the same may be modified,
supplemented or amended from time to time.
(111) “Guarantor” means Acadia Strategic Opportunity Fund II, LLC.
(112) “Guarantor Documents” means collectively, the Guaranty of Completion, the
Recourse Guaranty, and the Environmental Indemnity.
(113) “Hard Costs” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(114) “Hazardous Materials” has the meaning assigned in Section 5.1(5).
(115) “Hedge Agreement” means any interest rate hedge agreement between Borrower and
Eurohypo or one or more financial institutions providing for the transfer or mitigation of interest risks either generally or under specific contingencies, as the same may
be modified, amended and/or supplemented and in effect from time to time.
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(116) “Hedge Pledge” means that certain Pledge and Security Agreement, to be executed,
dated and delivered by Borrower to Administrative Agent at any time Borrower elects to enter into a
Hedge Agreement, as the same may be modified, amended and/or supplemented and in effect from time
to time.
(117) “Improvements” means, an approximately 285,000 square foot mixed-use
retail/office building to be comprised, following completion of the Construction Work, of (a)
approximately 125,000 square feet of retail space (the “Retail Component”), (b) an
approximately 160,000 square foot, 14-story, Class A office tower (the “Office Component”),
(c) all storage space contained therein, all signage improvements and all of the other
improvements to be constructed on the Land, as more particularly described in the Plans and
Specifications, and (d) the Tenant Improvement Work, to the extent required pursuant to Approved
Leases.
(118) “In Balance” has the meaning assigned to such term in Section 4.3.
(119) “Indebtedness” has the meaning assigned to such term in the Mortgages.
(120) “Indemnified Taxes” means all Taxes other than Excluded Taxes.
(121) “Independent Manager” means, in the case of a corporation, limited liability
company or limited partnership, a director, member or manager that is a natural person who has no
affiliation with any Borrower Party and who is approved by Administrative Agent.
(122) “Initial Equity Contribution” means the amount of unreimbursed equity
contributed by Borrower as a cash contribution to the Project including, without limitation,
acquisition cost and development costs, prior to the initial funding of the Loans and as a
condition thereto, which amount (subject to Schedule 4 — Part A, paragraph 30) shall be
not less than $24,479,400.00 as verified by Administrative Agent pursuant to Schedule 4 — Part
A.
(123) “Insurance Premiums” has the meaning assigned in Section 4.4.
(124) “Insurance Proceeds Deficiency” has the meaning assigned to such term in
Section 3.4(5).
(125) “Interest Period” means, with respect to any LIBOR-based Loan, each period
commencing on the date such LIBOR-based Loan is made or Converted from a Base Rate Loan or (in the
event of a Continuation) the last day of the immediately preceding Interest Period for such Loan
and ending on the numerically corresponding day in the first, second, third, sixth or twelfth (if
available from all Lenders) calendar month thereafter, as Lead Borrower may select as provided in
Section 2.6(4); provided that (i) each Interest Period that commences on the last Business
Day of a calendar month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month; (ii) each Interest Period that would otherwise end on a day that is not
a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the
immediately preceding Business Day); (iii) no Interest Period shall have a duration of less than
one month and, if the Interest Period for any LIBOR-based Loan would otherwise be a shorter
14
period,
such Loan shall bear interest at the Base Rate for Base Rate Loans; (iv) in no event shall any
Interest Period extend beyond the Maturity Date; and (v) there may be no more than four (4)
separate Interest Periods in respect of LIBOR-based Loans outstanding at any one time
(126) “Interest Rate Hedge Period” has the meaning assigned to such term in
Section 9.15(1)
(127) “Interest Reserve” has the meaning assigned to such term in Section 4.3.
(128) “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.
(129) “Land” has the meaning assigned in the Recitals.
(130) “Leasing Guidelines” means the Leasing Guidelines described in Schedule 1.1(130)
attached hereto.
(131) “Lender” and “Lenders” have the respective meanings assigned to such
terms in the Preamble.
(132) “Libor Rate” means, for any Interest Period for any LIBOR-based Loan, the rate
per annum appearing on Page 3750 of the Dow Jones (Telerate) Service (or on any successor or
substitute page, or any successor to or substitute for such Service, as determined by
Administrative Agent from time to time for purposes of providing quotations of interest rates
applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m. London
time on the date two (2) Business Days prior to the first day of such Interest Period as the rate
for the offering of Dollar deposits having a term comparable to such Interest Period, provided that
if such rate does not appear on such page, or if such page shall cease to be publicly available, or
if the information contained on such page, in the reasonable judgment of Administrative Agent shall
cease accurately to reflect the rate offered by leading banks in the London interbank market as
reported by any publicly available source of similar market data selected by Administrative Agent,
the Libor Rate for such Interest Period shall be determined from such substitute financial
reporting service as Administrative Agent in its reasonable discretion shall determine.
(133) “LIBOR-based Loans” means Loans that bear interest at rates based on rates
referred to in the definition of “Libor Rate.”
(134) “Lien” means any interest, or claim thereof, in the Project securing an
obligation owed to, or a claim by, any Person other than the owner of the Project, whether such
interest is based on common law, statute or contract, including the lien or security interest
arising from a deed of trust, mortgage, assignment, encumbrance, pledge, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The
term “Lien” shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances
affecting the Project.
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(135) “Lien Law” means the Lien Law of the State of New York, as amended from time to
time.
(136) “Loans” means the loans to be made by the Lenders to Borrower under this
Agreement and all other amounts evidenced or secured by the Loan Documents.
(137) “Loan Documents” means: (a) this Agreement, (b) the Building Loan Agreement,
(c) the Notes, (d) the Guarantor Documents, (e) the Security Documents, (f) the Co-Borrower
Documents, (g) each Consent and Agreement, (h) any letter of credit provided to Administrative
Agent in connection with the Loan (i) the Environmental Indemnity, (j) the Fee Letter, (k) the
Subordination of Property Management Agreement, (l) such assignments of management agreements,
contracts and other rights as may be required by Administrative Agent, (m) all other documents
evidencing, securing, governing or otherwise pertaining to the Loans, and (n) all modifications,
amendments, supplements or replacements of any of the foregoing.
(138) “Loan Transactions” has the meaning assigned to such term in Section
2.6(3).
(139) “Major Contract” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(140) “Major Contractor” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(141) “Major Lease” means any lease with an Existing Tenant and any other lease that
(a) accounts for five percent (5%) or more of the total gross rental revenue of the Project and/or
(b) is for 10,000 rentable square feet or more.
(142) “Majority Lenders” means Lenders holding at least 66
2/3% of the aggregate
outstanding principal amount of the Loans or, if the Loans shall not have been made, at least 66
2/3%
of the Commitments.
(143) “Managing Member” means Acadia-P/A Holding Company, LLC, a Delaware limited
liability company, as sole member under the organizational documents of Borrower and its successors
as permitted under the Loan Documents.
(144) “Material Adverse Effect” means a material adverse effect, as determined by
Administrative Agent, in its reasonable judgment and discretion, on (a) the Project or the
business, operations, financial condition, liabilities or capitalization of Borrower, (b) the
ability of Borrower to perform its obligations under any of the Loan Documents to which it is a
party, including the timely payment of the principal or interest on the Loans or other amounts
payable in connection therewith, (c) the ability of any Borrower Party to perform its obligations
under any of the Loan Documents to which it is a party, (d) the validity or enforceability of any
of the Loan Documents or (e) the rights and remedies of the Lenders and Administrative Agent under
any of the Loan Documents.
(145) “Maturity Date” means the earlier of (a) October 5, 2009, as such date may
extended pursuant to Section 2.5, or (b) any earlier date on which all of the Loans are
16
required to be paid in full, by acceleration or otherwise, under this Agreement or any of the other
Loan Documents.
(146) “Mezzanine Borrower(s)” has the meaning assigned in Section 12.28.
(147) “Mezzanine Option” has the meaning assigned in Section 12.28.
(148) “Minor Contract” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(149) “Minor Contractor” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(150) “Mold” has the meaning assigned to such term in Section 5.1(6).
(151) “Moody’s” means Moody’s Investor Services, Inc.
(152) “Mortgages” means, collectively, the (a) Project Loan Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing, (b) the Building Loan Mortgage, Assignment
of Leases and Rents, Security Agreement and Fixture Filing and (c) the Acquisition Loan Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing, each executed by Borrower in
favor of Administrative Agent (on behalf of the Lenders), covering the Project, as the same may be
modified, amended and/or supplemented and in effect from time to time.
(153) “Mortgage Borrower” has the meaning assigned in Section 12.28(2).
(154) “Mortgage Loan” has the meaning assigned in Section 12.28(2).
(155) “Net Operating Income” means the amount by which Operating Revenues exceed
Operating Expenses.
(156) “Notes” means, collectively, the Acquisition Loan Notes, the Project Loan Notes
and the Building Loan Notes.
(157) “Notice of Default” has the meaning assigned in Section 14.3(1).
(158) “Occupancy” or “Occupy” means (a) with respect to any tenant (other than
tenants and licensees covered by clause (b) below), such tenant shall have (i) accepted (or been
deemed to have accepted in accordance with the terms of its lease) the delivery of all or
substantially all of the space to be demised under the terms of its respective lease, including any
Tenant Improvement Work to be performed by Borrower, subject in each case to Punch List Items, and
(ii) commenced paying rent in accordance with the terms and conditions of its lease, and (b) with
respect to any licensee of the signage or antenna tenants or licensees at the Project, such
licensee or tenant, as applicable, shall have accepted the delivery of all of its respective
premises, including any Tenant Improvement Work to be performed by Borrower.
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(159) “OECD” has the meaning assigned to such term in the definition of “Eligible
Assignee” herein.
(160) “Office Component” has the meaning assigned to such term in the definition of
“Improvements” herein.
(161) “Operating Expenses” means all reasonable and necessary expenses of operating
the Project in the ordinary course of business which are paid in cash by Borrower and which are
directly associated with and fairly allocable to the Project for the applicable period, including
ad valorem real estate taxes and assessments, insurance premiums, regularly scheduled tax impounds
paid to Administrative Agent, maintenance costs (including, without limitation, costs required to
be incurred pursuant to the Condominium Declaration), property management fees and costs not to
exceed four percent (4%) of Operating Revenues, accounting, legal, and other professional fees, and
other expenses incurred by Administrative Agent and reimbursed by Borrower under this Agreement and
the other Loan Documents, deposits to any capital reserves required by Administrative Agent, wages,
salaries, personnel expenses, but excluding debt service, capital expenditures, any of the
foregoing expenses which are paid from deposits to cash reserves previously included as Operating
Expenses, any payment or expense for which Borrower was or is to be reimbursed from proceeds of the
Loans or insurance or by any third party, and any non-cash charges such as depreciation and
amortization. Any management fee or other expense payable to Borrower or to an Affiliate of
Borrower shall be included as an Operating Expense only with Administrative Agent’s prior approval.
Operating Expenses shall not include federal, state or local income taxes or legal and other
professional fees unrelated to the operation of the Project.
(162) “Operating Revenues” means all cash receipts of Borrower from operation of the
Project or otherwise arising in respect of the Project after the date hereof which are properly
allocable to the Project for the applicable period, including receipts from leases and parking
agreements, concession fees and charges and other miscellaneous operating revenues, proceeds from
rental or business interruption insurance, proceeds of any loans (other than the Loans and any
refinancing of the Loans) obtained by Borrower after the date hereof which are secured by the
Project (less reasonable and customary expenses incurred in procuring and closing such loan and
actually paid in cash to individuals or entities other than Borrower or any Affiliate of Borrower
and without implying any consent of Administrative Agent or any Lender to the granting of any
security for any such loans), withdrawals from cash reserves (except to the extent any operating
expenses paid therewith are excluded from Operating Expenses), in all cases, determined in
accordance with GAAP, but excluding (a) security deposits and earnest money deposits until they are
forfeited by the depositor, (b) advance rentals (i.e. more than thirty (30) days in advance) until
they are earned, (c) lump sum lease buy-out payments made by tenants in connection with any
surrender, cancellation or termination of their lease, except to the extent equitably spread over
the remaining months of the term of such lease, and (d) proceeds from a sale or other disposition.
(163) “Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any payment made under
any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to,
any Loan Document.
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(164) “Participant” has the meaning assigned to such term in Section 12.23(3).
(165) “Payment Date” means the first Business Day of each calendar month.
(166) “Patriot Act” means the USA PATRIOT Act of 2001, Pub. L. No. 107 56.
(167) “Payor” has the meaning assigned to such term in Section 2.6(5).
(168) “Permitted Encumbrances” means with respect to the Project, those exceptions to
title set forth in the Title Policies issued to Administrative Agent pursuant to Schedule 4.
(169) “Permitted Transfer” shall mean any of the following transfers, provided there
is no Change of Control as a result of such transfer:
(a) a transfer by devise or descent or by operation of law upon the death of a member, partner
or shareholder of Borrower or any Affiliate of Borrower, so long as Lead Borrower delivers notice
to Administrative Agent as soon as practicable thereafter and that Borrower or such Affiliate is
promptly reconstituted, if applicable, following the death of such member partner or shareholder;
(b) transfers for estate planning purposes of an individual’s interest in Borrower or any
Affiliate of Borrower to the spouse or any lineal descendant of such individual, or to a trust for
the benefit of any one or more of such individual, spouse or lineal descendant, so long as Borrower
or such Affiliate is reconstituted, if required, following such transfer;
(c) the sale or pledge, in one or a series of transactions, of the stock, limited partnership
interests or non-managing membership interests (as the case may be) in Borrower or an Affiliate of
Borrower; provided, however, that no such transfers shall result in any sale, transfer, conveyance,
mortgage, pledge, or assignment of the legal or beneficial ownership of the Project, and as a
condition to each such transfer, Administrative Agent shall receive no less than thirty (30) days
prior written notice of such proposed transfer;
(d) a transfer by P/A Associates, LLC (“P/A Associates”) of 100% of its member
interest in Managing Member to Acadia Strategic Opportunity Fund II, LLC (“Fund II”) or an
Affiliate of Fund II;
(e) the sale, transfer, or issuance of stock in Acadia Realty Trust (the “Trust”), in
the ordinary course of business, provided such stock is listed on the NYSE or other nationally
recognized stock exchange; and
(f) a transfer made pursuant to Section 17.3.
(170) “Permitting Schedule” has the meaning assigned to such term in Section
7.6.
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(171) “Person” means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, trustee, estate, limited liability company, unincorporated
organization, real estate investment trust, government or any agency or political subdivision
thereof, or any other form of entity.
(172) “Plans and Specifications” has the meaning assigned to such term in Section 1.1
of the Building Loan Agreement.
(173) “Policy” and “Policies” have the respective meanings assigned to such
terms in Section 3.1(2).
(174) “Potential Default” means the occurrence of any event or condition which, with
the giving of notice, the passage of time, or both, would constitute an Event of Default.
(175) “Prime Rate” means the rate of interest from time to time announced by Eurohypo
at its principal U.S. office as its prime commercial lending rate, it being understood that such
prime commercial rate is a reference rate and does not necessarily represent the lowest or best
rate being charged by Eurohypo to any customer.
(176) “Prohibited Person” shall mean any Person:
(a) listed in the Annex to, or otherwise subject to the provisions of, the Executive Order No.
13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the
“Executive Order”);
(b) that is owned or controlled by, or acting for or on behalf of, any person or entity that
is listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order;
(c) with whom any Lender is prohibited from dealing or otherwise engaging in any transaction
by any terrorism or money laundering law, including the Executive Order;
(d) who is known to Borrower to commit, threaten or conspire to commit or support “terrorism”,
as defined in the Executive Order;
(e) that is named as a “specially designated national and blocked person” on the most current
list published by the U.S. Treasury Department Office of Foreign Assets Control at its official
website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement
official publication of such list; or
(f) who is known to Borrower to be an Affiliate of or affiliated with a Person listed above.
(177) “Project” has the meaning assigned to such term in Section 1.1 of the Building
Loan Agreement.
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(178) “Project Amenities” means those areas or elements of, easements over, interests
in or licenses or rights to use, those portions of the Project that are granted to Units in the
Condominium Declaration.
(179) “Project Completion Work” has the meaning assigned to such term in Section 1.1
of the Building Loan Agreement.
(180) “Project Costs” means, collectively, the Project Loan Costs, the Hard Costs and
the Soft Costs.
(181) “Project Documents” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(182) “Project Loan” and “Project Loans” have the respective meaning assigned
to such terms in Section 2.1(1)(a).
(183) “Project Loan Budget” shall mean the portion of the Budget designated as the
Project Loan Budget, as the same may be modified from time to time in accordance with the
provisions of this Agreement.
(184) “Project Loan Commitment” means, as to each Lender, the obligation of such
Lender to make Project Loans in a principal amount up to but not exceeding the amount set opposite
the name of such Lender on Schedule 1 under the captions “Project Loan Commitment” or, in
the case of a Person that becomes a Lender pursuant to an assignment permitted under Section
12.23(1), as specified in the respective instrument of assignment pursuant to which such
assignment is effected.
(185) “Project Loan Costs” shall mean any costs relating to the construction of the
Project, including Tenant Improvement Allowances, which do not constitute a Cost of Improvement.
(186) “Project Loan Mortgage” shall mean the Project Loan Mortgage, Assignment of
Leases and Rents and Security Agreement in the amount of the Total Project Loan Commitment and
executed, dated and delivered by Borrower, to Administrative Agent (on behalf of the Lenders) on
the Closing Date, securing the Project Loan Notes, as the same may be modified, amended and/or
supplemented and in effect from time to time.
(187) “Project Loan Notes” shall mean, collectively, the promissory note given to each
of the Lenders, each note in principal amount equal to such Lender’s Project Loan Commitment and
substantially in the form of Exhibit C-1 attached hereto, to be executed, dated and delivered by
Borrower to each of the Lenders as of the Closing Date, secured by the Project Loan Mortgage, as
the same may be modified, amended and/or supplemented and in effect from time to time.
(188) “Project Work Substantial Completion Conditions” has the meaning assigned to
such term in Section 1.1 of the Building Loan Agreement.
21
(189) “Property Management Agreement” means that certain Property Management Agreement
dated as of August 15, 2007 between Property Manager and Borrower with respect to the management of
the Project by the Property Manager, together with any property management agreements entered into
with future Property Managers in accordance with the terms of this Agreement.
(190) “Property Manager” means Acadia-P/A Management Services, LLC, a Delaware limited
liability company, which is initially the manager of the Project under the Property Management
Agreement, together with any successor property managers appointed for the Project in accordance
with the terms of this Agreement.
(191) “Property Transfer” has the meaning assigned to such term in Section
17.3.
(192) “Property Transfer Conditions” has the meaning assigned to such term in
Section 17.3
(193) “Proportionate Share” means, with respect to each Lender, initially the
percentage set forth opposite such Lender’s name on Schedule 1.1(193) attached
hereto, as such percentage may be modified from time to time pursuant to Assignment and Acceptances
and as recorded in Administrative Agent’s register of Lenders for the Loan.
(194) “Proposed Lender” has the meaning assigned to such term in Section
2.7(7).
(195) “Punch List Items” has the meaning assigned to term in Section 1.1 of the
Building Loan Agreement.
(196) “Qualified Manager” shall mean either (x) Acadia-P/A Management Services LLC or
(y) a reputable and experienced management organization possessing experience (or having principals
possessing experience) of not less than ten (10) years managing projects which are similar in size,
scope, class, use and value to the Project and is (or has principals currently) managing at least
ten (10) properties similar in size, scope, class, use and value as the Project.
(197) “Real Estate Taxes” has the meaning assigned to such term in Section
9.3.
(198) “Recourse Guaranty” means the Recourse Guaranty executed by Guarantor to
Administrative Agent (on behalf of the Lenders) on the Closing Date, as the same may be modified,
supplemented or amended from time to time.
(199) “Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System of the United States of America (or any successor), as the same may be modified and
in effect from time to time.
(200) “Replacement Lender” has the meaning assigned to such term in Section
14.12(6).
22
(201) “Request for Loan Advance” has the meaning assigned to such term in Section
4.2.
(202) “Requesting Lender” has the meaning assigned to such term in Section
2.7(7).
(203) “Required Payment” has the meaning assigned to such term in Section
2.6(5).
(204) “Restoration Consultant” has the meaning assigned to such term in Section
3.4(2).
(205) “Retail Component” has the meaning assigned to such term in the definition of
“Improvements” herein.
(206) “Retainage” has the meaning assigned to such term in Section 1.1 of the Building
Loan Agreement.
(207) “S&P” means Standard & Poor’s Ratings Service, a division of The McGraw Hill
Companies, Inc.
(208) “Second Extension Period” has the meaning assigned to such term in Section
2.5(2).
(209) “Second Extension Notice” has the meaning assigned to such term in Section
2.5(2)(a)
(210) “Security Accounts” means, collectively, the Sweep Account and the Deficiency
Deposit Account.
(211) “Security Account Collateral” has the meaning assigned to such term in
Section 15.2(1).
(212) “Security Documents” means collectively, the Mortgages, the Construction
Manager’s Consent, the Subordination of Property Management Agreement, any Controlled Account
Agreement and all Uniform Commercial Code financing statements filed or to be filed to perfect any
security interests arising under any of the Loan Documents.
(213) “Single Purpose Entity” shall mean a corporation, limited partnership or limited
liability company which at all times on and after the date hereof, unless otherwise approved in
writing by Administrative Agent:
(a) is organized solely for the purpose of one of the following: (a) acquiring, developing,
owning, holding, selling, leasing, transferring, exchanging, managing and operating the Project,
entering into this Agreement, refinancing the Project in connection with a permitted repayment of
the Loans, and transacting any and all lawful business that is incident, necessary and appropriate
to accomplish the foregoing or (b) acting as the sole managing member of Borrower;
23
(b) is not engaged and will not engage in any business unrelated to (a) the acquisition,
development, ownership, management or operation of the Project or (b) acting as the sole managing
member of Borrower;
(c) does not have and will not have any assets other than those related to (a) the Project or
(b) its membership interest in Borrower;
(d) has not engaged, sought or consented to and will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of
its assets, transfer of partnership or membership interests in violation of this Agreement (if such
entity is a general partner in a limited partnership or a member in a limited liability company),
or any amendment of its articles of incorporation, by-laws, limited partnership certificate,
limited partnership agreement, articles of organization, certificate of formation or operating
agreement (as applicable) with respect to the matters set forth in this definition without the
prior written consent of Administrative Agent;
(e) in the case of Borrower, has and will have, as its only managing member, the Managing
Member, which shall be a limited liability company that is a Single Purpose Entity and has at least
one (1) Independent Manager;
(f) if such entity is (i) a limited liability company, has articles of organization, a
certificate of formation and/or an operating agreement, as applicable, (ii) a limited partnership,
has a certificate of limited partnership and limited partnership agreement, or (ii) a corporation,
has a certificate of incorporation or articles of incorporation, that in each case provide that
such entity shall not, without the consent without the unanimous written consent of all of its
partners or members (and, in the case of the managing member of the Managing Member, its
Independent Manager(s)): (a) dissolve, merge, liquidate or consolidate itself or any Person in
which it has a direct or indirect legal or beneficial ownership interest; (b) sell all or
substantially all of its assets or the assets of any other Person in which it has a direct or
indirect legal or beneficial ownership interest; (c) engage in any other business activity or
permit any Person in which it has a direct or indirect legal or beneficial ownership interest to
engage in any other business activity, in each case except as permitted pursuant to the Loan
Documents, (iv) file a bankruptcy or insolvency petition or otherwise institute insolvency
proceedings with respect to itself or to any other Person in which it has a direct or indirect
legal or beneficial ownership interest, or (v) amend its organizational documents with respect to
the matters set forth in this definition without the consent of Administrative Agent;
(g) if such entity is a limited partnership, has as its only general partner a Single Purpose
Entity;
(h) is and will pay its debts and liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same shall become due, and is maintaining and will
maintain adequate capital for the normal obligations reasonably foreseeable in a business of its
size and character and in light of its contemplated business operations;
(i) has not failed and will not fail to correct any known misunderstanding regarding the
separate identity of such entity;
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(j) has maintained and will maintain its accounts, books and records separate from any other
Person and will file its own tax returns, except to the extent that it is required or permitted to
file consolidated tax returns by law;
(k) has not commingled and will not commingle its funds or assets with those of any other
Person;
(l) has held and will hold its assets in its own name;
(m) has maintained and will maintain financial statements that properly and accurately show
its separate assets and liabilities and do not show the assets or liabilities of any other Person,
and has not permitted and will not permit its assets to be listed as assets on the financial
statement of any other entity other than an Affiliate (but in such case noting that such entity and
the Affiliate are separate entities);
(n) has maintained and will maintain a sufficient number of employees or has entered into
appropriate alternative arrangements for workforce services in light of its contemplated business
operations;
(o) has observed and will observe all corporate, partnership or limited liability company
formalities, as applicable;
(p) has not incurred and will not incur any Debt other than (a) with respect to Borrower, the
Loans and (b) trade and operational debt which is (i) incurred in the ordinary course of business,
(ii) not more than sixty (60) days past due, (iii) with trade creditors, (iv) with respect to
Borrower, in the aggregate, in an amount less than $1,000,000, and (v) not evidenced by a note;
(q) has not and will not assume or guarantee or become obligated for the debts of any other
Person or hold out its credit as being available to satisfy the obligations of any other Person
except as permitted pursuant to this Agreement;
(r) has not and will not acquire obligations or securities of its members or shareholders or
any other Affiliate;
(s) has allocated and will allocate fairly and reasonably any overhead expenses that are
shared with an Affiliate, including, but not limited to, paying for shared office space and
services performed by any officer or employee of an Affiliate;
(t) maintains and uses and will maintain and use separate invoices and checks bearing its
name. The stationary, invoices, and checks utilized by the Single Purpose Entity or utilized to
collect its funds or pay its expenses shall bear its own name and shall not bear the name of any
other entity unless such entity is clearly designated as being the Single Purpose Entity’s agent;
(u) except in connection with the Loans, has not pledged and will not pledge its assets for
the benefit of any other Person;
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(v) has conducted business, held itself out and identified itself and will conduct business,
hold itself out and identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by a Person other than an Affiliate of Borrower and not as a
division or part of any other Person;
(w) has not made and will not make loans to any Person or hold evidence of indebtedness issued
by any other Person (other than cash and securities issued by an entity that is not an Affiliate or
subject to common ownership with such entity);
(x) has not identified and will not identify its partners, members or shareholders, or any
Affiliate of any of them, as a division or part of it, and has not identified itself and shall not
identify itself as a division of any other Person;
(y) has not entered into or been a party to, and will not enter into or be a party to, any
transaction with its partners, members, shareholders or Affiliates except in the ordinary course of
its business and on terms which are intrinsically fair, commercially reasonable and are no less
favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated
third party;
(z) has not and will not have any obligation to indemnify its partners, officers, directors or
members, as the case may be, unless such obligation is fully subordinated to the Indebtedness and
will not constitute a claim against it in the event that, after payment of the Indebtedness, cash
flow is insufficient to pay such obligation; and
(aa) if such entity is a corporation, it is required to consider the interests of its
creditors in connection with all corporate actions.
(214) “Site Assessment” means an environmental engineering report for the Project
prepared by an engineer engaged by Administrative Agent at Borrower’s expense, and in a manner and
scope satisfactory to Administrative Agent.
(215) “Soft Costs” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(216) “Special Advance Lender” has the meaning assigned to such term in Section
14.12(1).
(217) “Sponsor” means Acadia Realty Limited Partnership.
(218) “State” means the State of New York.
(219) “Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special, emergency or
supplemental reserves) expressed as a decimal established by the Board to which Administrative
Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Eurodollar
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Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any comparable regulation.
The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
(220) “Subguard Policy” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(221) “Subordination of Property Management Agreement” means that certain
Subordination of Property Management Agreement, dated the date hereof, by the Property Manager in
favor of Administrative Agent (on behalf of the Lenders), as the same may be modified, amended
and/or supplemented and in effect from time to time.
(222) “Survey” means that certain survey delivered to Administrative Agent pursuant to
Schedule 4 — Part A, paragraph 11 as the same may be modified from time to time.
(223) “Sweep Account” has the meaning assigned to such term in Section 15.1.
(224) “Syndication” has the meaning assigned to such term in Section 12.27.
(225) “Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.
(226) “Tenant Allowance Plans” means, as to each tenant under an Approved Lease which
is receiving any Tenant Improvement Allowance, the plans received by Borrower pursuant to the
applicable Approved Lease and approved by Borrower and Borrower’s Architect covering tenant work
under Tenant Improvement Allowances, to be certified by Borrower to Administrative Agent and the
Lenders and approved by the applicable tenant, Borrower, all required Governmental Authorities, and
either (x) within the Budget or (y) approved reasonably by Administrative Agent.
(227) “Tenant Estoppel” means an estoppel in form and substance reasonably acceptable
to Administrative Agent, to be completed, executed, dated and delivered by the applicable tenant to
Administrative Agent (on behalf of the Lenders) and Borrower pursuant to the terms of this
Agreement.
(228) “Tenant Improvement Allowances” means allowances for Tenant Improvement Work.
(229) “Tenant Improvement Plans” has the meaning assigned to such term in Section 1.1
of the Building Loan Agreement.
(230) “Tenant Improvement Work” has the meaning assigned to such term in Section 1.1
of the Building Loan Agreement.
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(231) “Third Extension Period” has the meaning assigned to such term in Section
2.5(3).
(232) “Third Extension Notice” has the meaning assigned to such term in Section
2.5(3)(a).
(233) “Third-Party Counterparty” has the meaning assigned to such term in Section
9.15(3).
(234) “Third-Party Hedge Agreement” has the meaning assigned to such term in Section
9.15(3).
(235) “Threshold Amount” means $2,000,000.
(236) “Title Insurer” means, collectively, Royal Abstract of New York, LLC and NY Land
Services, as co-insurers in amounts approved by Administrative Agent, through title insurance
placed by Commonwealth Land Title Insurance Company, Stewart Title Insurance Company, and
LandAmerica, respectively.
(237) “Title Policies” has the meaning assigned in Schedule 4 — Part A,
paragraph 10.
(238) “Total Acquisition Loan Commitment” has the meaning assigned to such term in the
Recitals.
(239) “Total Building Loan Commitment” has the meaning assigned to such term in the
Recitals.
(240) “Total Project Loan Commitment” has the meaning assigned to such term in the
Recitals.
(241) “Type” means the type of Loan made hereunder, i.e. whether such Loan is a Base
Rate Loan or LIBOR-based Loan.
(242) “Unavoidable Delay” has the meaning assigned to such term in Section 1.1 of the
Building Loan Agreement.
(243) “Unit” means each unit of the Condominium, together with all rights, interests
and easements in and to the Project Amenities that are held by the owner of such unit as a result
of the operation of the terms of the Condominium Declaration.
(244) “Unit Annual Assessments” means the assessments allocated to each Unit and
collected by Declarant as set forth in the Condominium Declaration.
(245) “Unpaid Amount” has the meaning assigned to such term in Section
14.12(2).
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(246) “Unsatisfactory Work” has the meaning assigned to such term in Section 1.1 of
the Building Loan Agreement.
ARTICLE 2
LOAN TERMS
Section 2.1 The Commitments, Loans and Notes.
(1) Loans.
(a) Each Lender severally agrees, on the terms and conditions of this Agreement, to make loans
(each advance of such a loan being a “Project Loan” and collectively, the “Project
Loans”) on a non-revolving basis to Borrower in Dollars from time to time in amounts equal to
its Proportionate Share of the aggregate amount of Project Loans to be made of such time;
provided, however, that in no event shall the aggregate principal amount advanced
by each Lender exceed the amount of the Project Loan Commitment of such Lender. The Project Loans
shall be advanced for the payment of Project Loan Costs in accordance with the Project Loan Budget.
(b) Each Lender severally agrees, on the terms and conditions of this Agreement, to make loans
(each advance of such a loan being an “Acquisition Loan” and collectively, the
“Acquisition Loans”) on a non-revolving basis to Borrower in Dollars on the Closing Date in
an amount equal to its Proportionate Share of the Total Acquisition Loan Commitment. The
Acquisition Loans shall be advanced for purposes of re-financing Borrower’s cost of acquiring its
interest in the Land.
(2) Requests for Loan Advances. Advances with respect to the Acquisition Loans shall be made
on the Closing Date. With respect to the other Loans, Lead Borrower shall give Administrative
Agent (and the Construction Consultant) a Request for Loan Advance as provided in Section
4.2. Administrative Agent shall give each Lender notice of any such Request for Loan Advance
in accordance with Section 2.6(4). Not later than 12:00 noon New York time on the date
specified for each Loan, each Lender shall make available for the account of its Applicable Lending
Office to Administrative Agent as specified by Administrative Agent, in immediately available
funds, such Lender’s Proportionate Share of each Loan to be made pursuant hereto. After
Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article 4 and Schedule 4, Administrative Agent shall make such funds
available to Lead Borrower by depositing the same in an account designated by Lead Borrower by the
end of business on the applicable advance date.
(3) Changes of Commitments.
(a) The respective Commitments shall reduce pro rata automatically by reason of any prepayment
of the Loans applicable thereto in the amount of any such prepayment.
(b) If the Maturity Date is extended in accordance with Section 2.5, all of the
unfunded Commitments (other than for Tenant Improvement Allowances with respect to
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the Office Component and any remaining Retainage, which will terminate on the First Extension
Maturity Date) then remaining at the commencement of the extended loan period shall be
automatically terminated.
(4) Lending Offices. The Loans of each Lender shall be made and maintained at such Lender’s
Applicable Lending Office for Loans of such Type.
(5) Several Obligations. The failure of any Lender to make any Loan to be made by it on the
date specified therefor shall not relieve any other Lender of its obligation to make its Loan, but
neither any Lender nor Administrative Agent shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender.
(6) Notes.
(a) Project Loan Notes. The Project Loans made by each Lender shall be evidenced by a Project
Loan Note of Borrower, payable to such Lender in a principal amount equal to the amount of its
Project Loan Commitment as originally in effect and otherwise duly completed.
(b) Building Loan Notes. The Building Loans made by each Lender shall be evidenced by a
Building Loan Note of Borrower, payable to such Lender in a principal amount equal to the amount of
its Building Loan Commitment as originally in effect and otherwise duly completed.
(c) Acquisition Loan Notes. The Acquisition Loans made by each Lender shall be evidenced by
an Acquisition Loan Note of Borrower, payable to such Lender in a principal amount equal to the
amount of its Acquisition Loan Commitment as originally in effect and otherwise duly completed.
(d) Substitution, Exchange and Subdivision of Notes. No Lender shall be entitled to have its
Notes substituted or exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any portion of such
Lender’s Commitment, Loans and Notes pursuant to Section 12.9 and Section 12.23
(and, if requested by any Lender, Borrower agrees to so substitute or exchange any Notes and enter
into note splitter agreements in connection therewith).
(e) Loss, Theft, Destruction or Mutilation of Notes. In the event of the loss, theft or
destruction of any Note, upon Borrower’s receipt of a reasonably satisfactory indemnification
agreement executed in favor of Borrower by the holder of such Note, or in the event of the
mutilation of any Note, upon the surrender of such mutilated Note by the holder thereof to
Borrower, Borrower shall execute and deliver to such holder a new replacement Note in lieu of the
lost, stolen, destroyed or mutilated Note.
Section 2.2 Conversions or Continuations of Loans
(1) Subject to Section 2.6(3), Section 2.7(2) and Section 2.7(3), Lead Borrower shall have the
right to Convert Loans of one Type into Loans of another Type or Continue Loans of one Type as
Loans of the same Type, at any time or from time to time;
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provided that: (a) Lead Borrower shall give Administrative Agent notice of each such
Conversion or Continuation as provided in Section 2.6(4); (b) LIBOR-based Loans may be Converted
only on the last day of an Interest Period for such Loans unless Borrower complies with the terms
of Section 2.7(5) and (c) subject to Section 2.7(1) and Section 2.7(3), any Conversion or
Continuation of Loans shall be pro rata among the Lenders. Notwithstanding the foregoing, and
without limiting the rights and remedies of Administrative Agent and the Lenders under Article 11,
in the event that any Event of Default exists, Administrative Agent may (and at the request of the
Majority Lenders shall) suspend the right of Lead Borrower to Convert any Loan into a LIBOR-based
Loan, or to Continue any Loan as a LIBOR-based Loan for so long as such Event of Default exists, in
which event all Loans shall be Converted (on the last day(s) of the respective Interest Periods
therefor) or Continued, as the case may be, as Base Rate Loans. In connection with any such
Conversion, a Lender may (at its sole discretion) transfer a Loan from one Applicable Lending
Office to another.
(2) Notwithstanding anything to the contrary contained in this Agreement, at any time that a
Hedge Agreement is in effect, Lead Borrower shall have the right to choose only an Interest Period
with respect to the principal amount equal to the notional amount under such Hedge Agreement which
is the same as the Interest Rate Hedge Period which is the same as the Interest Rate Hedge Period.
Section 2.3 Interest Rate; Late Charge.
(1) Borrower hereby promises to pay to Administrative Agent for account of each Lender
interest on the unpaid principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be paid in full, at the
following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base Rate; and
(b) during such periods as such Loan is a LIBOR-based Loan, for each Interest Period relating
thereto, the Adjusted Libor Rate for such Loan for such Interest Period plus the Applicable
Margin.
(2) Accrued interest on each Loan shall be payable (i) monthly in arrears on each Payment Date
and (ii) in the case of any Loan, upon the payment or prepayment thereof or the Conversion of such
Loan to a Loan of another Type (but only on the principal amount so paid, prepaid or Converted),
except that interest payable at the Default Rate shall be payable from time to time on demand.
(3) Notwithstanding anything to the contrary contained herein, after the Maturity Date and
during any period when an Event of Default exists, Borrower shall pay to Administrative Agent for
the account of each Lender (i) interest at the applicable Default Rate on the outstanding principal
amount of any Loan made by such Lender, (ii) any interest payments thereon not paid when due and
(iii) interest on any other amount payable by Borrower hereunder, under the Notes and any other
Loan Documents.
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(4) Promptly after the determination of any interest rate provided for herein or any change
therein, Administrative Agent shall give notice thereof to the Lenders to which such interest is
payable and to Lead Borrower, but the failure of Administrative Agent to provide such notice shall
not affect Borrower’s obligation for the payment of interest on the Loans.
(5) In addition to any sums due under this Section 2.3, Borrower shall pay to
Administrative Agent for the account of the Lenders a late payment premium in the amount of five
percent (5)% of any payments of interest or other sums under the Loans made more than five (5) days
after the due date thereof (other than the principal balance due on the Maturity Date), which late
payment premium shall be due with any such late payment or upon demand by Administrative Agent.
Such late payment charge represents the reasonable estimate of Borrower and the Lenders of a fair
average compensation for the loss that may be sustained by the Lenders due to the failure of
Borrower to make timely payments. Such late charge shall be paid without prejudice to the right of
Administrative Agent and the Lenders to collect any other amounts provided herein or in the other
Loan Documents to be paid or to exercise any other rights or remedies under the Loan Documents.
(6) Borrower shall pay Additional Interest under the Notes in accordance with the terms of any
Hedge Agreement provided by a Eurohypo Counterparty.
Section 2.4 Terms of Payment. The Loans shall be payable as follows:
(1) Interest. Borrower shall pay interest in arrears on each Payment Date in accordance with
the wire transfer instructions set forth in Schedule 2.4(1) hereto (or such other
instructions as Administrative Agent may from time to time provide) until all amounts due under the
Loan Documents are paid in full. Subject to the provisions of Article 4 and Section
2.1, such accrued interest shall be payable from the interest reserves established pursuant to
the Budget; provided, however, that such reserves shall not limit Borrower’s
obligation to pay such accrued interest.
(2) Amounts Prepaid. No amounts paid or prepaid by the Borrower under the Loans shall be
available to be reborrowed by the Borrower.
(3) Maturity. On the Maturity Date, Borrower shall pay to Administrative Agent (on behalf of
the Lenders) all outstanding principal, accrued and unpaid interest, and any other amounts due
under the Loan Documents.
(4) Optional Prepayments. Subject to the provisions of Section 2.4(6) and Section
2.7(5), Borrower shall have the right to prepay Loans in whole or in part, without premium or
penalty; provided that: (a) Lead Borrower shall give Administrative Agent notice of each such
prepayment as provided in Section 2.6(4) (and, upon the date specified in any such notice
of prepayment, the amount to be prepaid shall become due and payable hereunder) and (b) partial
prepayments shall be in the minimum aggregate principal amounts specified in Section
2.6(3).
(5) Mandatory Prepayments. If a casualty or condemnation shall occur with respect to the
Project, Borrower, upon Borrower’s or Administrative Agent’s receipt of the applicable insurance
proceeds or condemnation award, shall prepay the Loan, if required by the
32
provisions of Article
3, on the dates and in the amounts specified therein without premium or penalty (but subject to
the provisions of Section 2.4(6) and Section 2.7(5)). Nothing in this Section
2.4(5) shall be deemed to limit any obligation of Borrower under the Mortgages or any other
Security Document, including any obligation to remit to a collateral or similar account maintained
by Administrative Agent pursuant to the Mortgages or any of the other Security Documents the
proceeds of insurance, condemnation award or other compensation received in respect of any casualty
or condemnation. Prepayments pursuant to this Section 2.4(5) shall be applied to the Loans
then outstanding pro rata in the order set forth in Section 2.4(6).
(6) Interest and Other Charges on Prepayment. If the Loans are prepaid, in whole or in part,
pursuant to Section 2.4(4) or Section 2.4(5), each such prepayment shall be made on
the prepayment date specified in the notice to Administrative Agent pursuant to Section
2.6(4), together with (a) the accrued and unpaid interest (including accrued and unpaid
Additional Interest, if applicable(which may include certain early termination payments, in
accordance with the terms of any applicable Hedge Agreement provided by a Eurohypo Counterparty))
on the principal amount prepaid, (b) any amounts payable to a Lender pursuant to Section
2.7(5) as a result of such prepayment while an Adjusted Libor Rate is in effect and (c) the
Exit Fee, if any, payable pursuant to Section 2.9.
(7) Application of Payments. Lead Borrower shall, at the time of Borrower’s making of each
payment under this Agreement or any Note for the account of any Lender, specify to Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans or other amounts payable
by Borrower hereunder to which such payment is to be applied (and in the event that Lead Borrower
fails to so specify, or if an Event of Default has occurred and is continuing, Administrative Agent
may distribute such payment to the Lenders for application in such manner as it may determine to be
appropriate, subject to Section 2.6(1) and any other agreement among Administrative Agent and the
Lenders with respect to such application).
(8) Payments by Borrower. Except to the extent otherwise provided therein, all payments to be
made by Borrower under the Loan Documents shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to Administrative Agent at an account designated by
Administrative Agent by notice to Lead Borrower, not later than 2:00 p.m., New York City time, on
the date on which such payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
(9) Forwarding of Payments by Administrative Agent. Except as otherwise agreed by
Administrative Agent and the Lenders, each payment received by Administrative Agent under this
Agreement or any Note for account of any Lender shall be paid by Administrative Agent promptly to
such Lender, in immediately available funds, for account of such Lender’s Applicable Lending Office
for the Loan or the other obligation in respect of which payment is made.
(10) Extension to Next Business Day. If the due date of any payment under this Agreement or
any Note would otherwise fall on a day that is not a Business Day, such date
33
shall be extended to
the next succeeding Business Day, and interest shall be payable for any principal so extended for
the period of such extension.
Section 2.5 Extension of Maturity Date.
(1) Borrower may, at its option, extend the term for a period of six (6) months to the six
month anniversary of the original Maturity Date (the “First Extension Maturity Date” and
the applicable period being, the “First Extension Period”), subject to the satisfaction of
the following conditions:
(a) Lead Borrower shall notify (the “First Extension Notice”) Administrative Agent of
Borrower’s exercise of such option between forty-five (45) and ninety (90) days prior to the
original Maturity Date;
(b) No Event of Default exists and is continuing as of the date of the First Extension Notice,
as of the original Maturity Date or would result from the extension of the maturity of the Loans
for the First Extension Period;
(c) With respect to the Retail Component, one-hundred percent 100% of the Approved Leases
shall be in full force and effect with tenants in Occupancy pursuant to Approved Leases who are not
in material default under their respective Approved Lease, and such Approved Leases shall provide
for an aggregate fixed minimum rent (as determined in a manner reasonably acceptable to
Administrative Agent) of no less than $5,860,000;
(d) With respect to the Office Component, the Office Component shall be fifty percent (50%)
leased with tenants pursuant to Approved Leases who are not in material default under their lease;
(e) At Administrative Agent’s request, Borrower shall use commercially reasonable efforts to
provide to Administrative Agent, written estoppels in form and substance reasonably satisfactory to
Administrative Agent, executed by tenants under any Approved Lease confirming the term, rent, and
other provisions and matters relating to such Approved Leases;
(f) The ratio of (a) the total outstanding principal balance of the Loans to (b) the value of
the Project does not exceed 70% based on a new Appraisal obtained by Administrative Agent with a
value date as of not more than sixty (60) days prior to the original Maturity Date, such Appraisal
to be at Borrower’s expense;
(g) Borrower shall have satisfied all of the Project Work Substantial Completion Conditions
prior to the Completion Date;
(h) All Government Approvals for the Improvements shall have been received to the extent then
applicable, with copies (if applicable) having been delivered to Administrative Agent;
(i) Current financial statements regarding Borrower (dated not earlier than ninety (90) days
prior to the First Extension Notice) and all other financial statements and
34
other information as
may be required under this Agreement and the Loan Documents regarding Borrower and the Project
shall have been submitted promptly to Administrative Agent;
(j) In the opinion of Administrative Agent, there shall not have occurred any Material Adverse
Effect;
(k) Whether or not the extension becomes effective, Borrower shall pay all out-of-pocket costs
and expenses incurred by Administrative Agent and the Lenders in connection with the proposed
extension (pre- and post-closing), including appraisal fees and reasonable legal fees; all such
costs and expenses shall be due and payable upon demand, and any failure to pay such amounts shall
constitute a default under this Agreement and the Loan Documents;
(l) Not later than the original Maturity Date, (i) the extension shall have been documented to
the Lenders’ reasonable satisfaction and consented to by Borrower, Administrative Agent and all the
Lenders, including the execution and delivery by Guarantor of reaffirmations of their respective
obligations under the Guarantor Documents and (ii) Administrative Agent shall have been provided
with an updated title report and judgment and lien searches, and appropriate title insurance
endorsements shall have been issued as required by Administrative Agent; and
(m) Borrower shall pay to Administrative Agent (for the benefit of the Lenders in accordance
with their Proportionate Shares) on the original Maturity Date a non-refundable extension fee equal
to 0.125% of an amount equal to the outstanding principal amount at such time.
(2) Borrower may, at its option, extend the term for a period of six (6) months to the first
anniversary of the original Maturity Date (the “Second Extension Maturity Date” and the
applicable period being, the “Second Extension Period”), subject to the satisfaction of the
following conditions:
(a) Lead Borrower shall notify (the “Second Extension Notice”) Administrative Agent of
Borrower’s exercise of such option between forty-five (45) and ninety (90) days prior to the First
Extension Maturity Date;
(b) No Event of Default exists and is continuing as of the date of the Second Extension
Notice, as of the First Extension Maturity Date or would result from the extension of the maturity
of the Loans for the Second Extension Period;
(c) With respect to the Retail Component, one-hundred percent 100% of the Approved Leases
shall be in full force and effect with tenants in Occupancy pursuant to Approved Leases who are not
in material default under their respective Approved Lease, and such Approved Leases shall provide for an aggregate fixed minimum rent (as determined in a
manner reasonably acceptable to Administrative Agent) of no less than $5,860,000;
(d) With respect to the Office Component, the Office Component shall be eighty-three percent
(83%) leased with tenants pursuant to Approved Leases who are not in material default under their
lease;
35
(e) At Administrative Agent’s request, Borrower shall use reasonable commercially reasonable
efforts to provide to Administrative Agent, written estoppels in form and substance reasonably
satisfactory to Administrative Agent, executed by tenants under any Approved Lease confirming the
term, rent, and other provisions and matters relating to such Approved Leases;
(f) All Government Approvals for the Improvements shall have been received to the extent then
applicable, with copies (if applicable) having been delivered to Administrative Agent;
(g) Current financial statements regarding Borrower (dated not earlier than ninety (90) days
prior to the Second Extension Notice) and all other financial statements and other information as
may be required under this Agreement and the Loan Documents regarding Borrower and the Project
shall have been submitted promptly to Administrative Agent;
(h) In the opinion of Administrative Agent, there shall not have occurred any Material Adverse
Effect;
(i) Whether or not the extension becomes effective, Borrower shall pay all out-of-pocket costs
and expenses incurred by Administrative Agent and the Lenders in connection with the proposed
extension (pre- and post-closing), including appraisal fees and reasonable legal fees; all such
costs and expenses shall be due and payable upon demand, and any failure to pay such amounts shall
constitute a default under this Agreement and the Loan Documents;
(j) Not later than the First Extension Maturity Date, (i) the extension shall have been
documented to the Lenders’ reasonable satisfaction and consented to by Borrower, Administrative
Agent and all the Lenders, including the execution and delivery by Guarantor of reaffirmations of
their respective obligations under the Guarantor Documents and (ii) Administrative Agent shall have
been provided with an updated title report and judgment and lien searches, and appropriate title
insurance endorsements shall have been issued as required by Administrative Agent; and
(k) Borrower shall pay to Administrative Agent (for the benefit of the Lenders in accordance
with their Proportionate Shares) on the First Extension Maturity Date a non-refundable extension
fee equal to 0.125% of an amount equal to the outstanding principal amount at such time.
(3) Borrower may, at its option, extend the term for a period of six (6) months to the first
anniversary of the First Extension Maturity Date (the “Third Extension Maturity Date” and
the applicable period being, the (“Third Extension Period”), subject to the satisfaction of
the following conditions:
(a) Lead Borrower shall notify (the “Third Extension Notice”) Administrative Agent of
Borrower’s exercise of such option between forty-five (45) and ninety (90) days prior to the Second
Extension Maturity Date;
36
(b) No Event of Default exists and is continuing as of the date of the Third Extension Notice,
as of the Second Extension Maturity Date or would result from the extension of the maturity of the
Loans for the Third Extension Period;
(c) With respect to the Retail Component, one-hundred percent 100% of the Approved Leases
shall be in full force and effect with tenants in Occupancy pursuant to Approved Leases who are not
in material default under their respective Approved Lease, and such Approved Leases shall provide
for an aggregate fixed minimum rent (as determined in a manner reasonably acceptable to
Administrative Agent) of no less than $5,860,000;
(d) With respect to the Office Component, the Office Component shall be ninety percent (90%)
leased with tenants pursuant to Approved Leases who are not in material default under their lease;
(e) At Administrative Agent’s request, Borrower shall use commercially reasonable efforts to
provide to Administrative Agent, written estoppels in form and substance reasonably satisfactory to
Administrative Agent, executed by tenants under any Approved Lease confirming the term, rent, and
other provisions and matters relating to such Approved Leases;
(f) The ratio of (a) the total outstanding principal balance of the Loans to (b) the value of
the Project does not exceed 70% based on a new Appraisal obtained by Administrative Agent with a
value date as of not more than sixty (60) days prior to the Second Extension Maturity Date, such
Appraisal to be at Borrower’s expense;
(g) All Government Approvals for the Improvements shall have been received to the extent then
applicable, with copies (if applicable) having been delivered to Administrative Agent;
(h) Current financial statements regarding Borrower (dated not earlier than ninety (90) days
prior to the Third Extension Notice) and all other financial statements and other information as
may be required under this Agreement and the Loan Documents regarding Borrower and the Project
shall have been submitted promptly to Administrative Agent;
(i) In the opinion of Administrative Agent, there shall not have occurred any Material Adverse
Effect;
(j) Whether or not the extension becomes effective, Borrower shall pay all out-of-pocket costs
and expenses incurred by Administrative Agent and the Lenders in connection with the proposed
extension (pre- and post-closing), including appraisal fees and reasonable legal fees; all such
costs and expenses shall be due and payable upon demand, and any failure to pay such amounts shall
constitute a default under this Agreement and the Loan Documents;
(k) Not later than the Second Extension Maturity Date, (i) the extension shall have been
documented to the Lenders’ reasonable satisfaction and consented to by Borrower, Administrative
Agent and all the Lenders, including the execution and delivery by Guarantor of reaffirmations of
their respective obligations under the Guarantor Documents and
37
(ii) Administrative Agent shall have been provided with an updated title report and judgment
and lien searches, and appropriate title insurance endorsements shall have been issued as required
by Administrative Agent; and
(l) Borrower shall pay to Administrative Agent (for the benefit of the Lenders in accordance
with their Proportionate Shares) on the First Extension Maturity Date a non-refundable extension
fee equal to 0.125% of an amount equal to the outstanding principal amount at such time.
Any extension pursuant to this Section 2.5 shall be otherwise subject to all of the other
terms and provisions of this Agreement, the Building Loan Agreement and the other Loan Documents.
Section 2.6 Pro Rata Treatment of Payments; Etc.
(1) Pro Rata Treatment. Except as otherwise provided in Section 2.7(4), Loans shall
be allocated pro rata among the Lenders according to the amounts of their respective Commitments
(in the case of the making of Loans) or their respective Loans (in the case of Conversions or
Continuations of Loans); (c) each payment or prepayment of principal of Loans by Borrower shall be
made for account of the Lenders pro rata in accordance with the respective unpaid principal amounts
of the Loans held by them (subject, while any Event of Default exists, to the terms of any separate
agreement among Administrative Agent and the Lenders); and (d) each payment of interest on Loans by
Borrower shall be made for account of the Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders (subject, while any Event of
Default exists, to the terms of any separate agreement among Administrative Agent and the Lenders).
(2) Computations. Interest on all Loans shall be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but excluding the last day) occurring in the
applicable period.
(3) Minimum Amounts. Except for (a) mandatory prepayments made pursuant to Section
2.4(5) and (b) Conversions or prepayments made pursuant to Section 2.7(4), and (c)
advances pursuant to Section 4.4, Section 4.5, Section 4.6, and Section
4.11, each borrowing, Conversion, Continuation and partial prepayment of principal
(collectively, “Loan Transactions”) of Loans shall be in an aggregate amount of at least
$1,000,000 and in additional increments of $100,000 (Loan Transactions of or into Loans of
different Types or Interest Periods at the same time hereunder shall each be deemed separate Loan
Transactions for purposes of the foregoing). Any Loans or borrowings of less than $1,000,000 shall
be made as Base Rate Loans. Notwithstanding the foregoing, the minimum amount of $1,000,000 shall
not apply to Conversions of lesser amounts into a tranche of Loans that has (or will have upon such
Conversion) an aggregate principal amount exceeding $1,000,000.
(4) Certain Notices. Notices by Lead Borrower to Administrative Agent regarding Loan
Transactions and the selection of Types of Loans and/or of the duration of Interest Periods shall
be irrevocable and shall be effective only if received by Administrative Agent (and, in the case of
a Request for Loan Advance, the Construction Consultant) not later
38
than 3:00 p.m., New York City time, on the number of Business Days prior to the date of the
proposed Loan Transaction or the first day of such Interest Period specified below:
| Notice | Number of Business Days Prior | |||
Request for Loan Advance |
10 | |||
Optional Prepayment |
3 | |||
Conversions into, Continuations as, or
borrowings in Base Rate Loans |
3 | |||
Conversions into, Continuations as,
borrowings in or changes in duration
of Interest Period for, LIBOR-based
Loans (subject to Section 2.4(6)) |
3 | |||
Each Loan Transaction notice shall specify the amount, Type, Interest Period and date of such
proposed Loan Transaction, and in the case of a Request for Loan Advance, shall be accompanied by
all documentation required by this Agreement as a condition precedent to the applicable Loans.
Notices for Conversions and Continuations shall be in the form of Exhibit E. Each such
notice specifying the duration of an Interest Period shall specify the portion of the Loans to
which such Interest Period is to relate. In the case of a Request for Loan Advance, Administrative
Agent shall notify the Lenders of their respective Proportionate Shares of the amount approved by
Administrative Agent and the Construction Consultant. If Lead Borrower fails to select (i) the
Type of Loan or (ii) the duration of any Interest Period for any LIBOR-based Loan within the
required time period and otherwise as provided in this Section 2.6(4), such Loan (if
outstanding as a LIBOR-based Loan) will be automatically Continued as an LIBOR-based Loan with an
Interest Period of one (1) month (based on a LIBOR-based Rate determined two (2) Business Days
prior to the first day of the next Interest Period) or, if outstanding as a Base Rate Loan, will
remain as a Base Rate Loan.
(5) Non Receipt of Funds by Administrative Agent. Unless Administrative Agent shall have been
notified by a Lender or Lead Borrower (in either case, and along with Borrower, the
“Payor”) prior to the date on which the Payor is to make payment to Administrative Agent of
(in the case of a Lender) the proceeds of a Loan to be made by such Lender hereunder or (in the
case of Borrower) a payment to Administrative Agent for account of any Lender hereunder (in either
case, such payment being herein called the “Required Payment”), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required Payment to
Administrative Agent, Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the amount thereof
available to the intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to Administrative Agent, the recipient(s) of such payment shall, on demand, repay
to Administrative Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date (the “Advance Date”) such amount was so
made available by Administrative Agent until the date Administrative Agent recovers such amount at
a rate per annum equal to (a) the Federal Funds Rate for such day in the case of payments returned
to Administrative Agent by any of the Lenders or (b) the applicable interest rate due hereunder
with respect to payments returned by Borrower to Administrative Agent and, if such recipient(s)
shall fail promptly to make such
39
payment, Administrative Agent shall be entitled to recover such amount, on demand, from the
Payor, together with interest as aforesaid; provided that if neither the recipient(s) nor
the Payor shall return the Required Payment to Administrative Agent within three (3) Business Days
of the Advance Date, then, retroactively to the Advance Date, the Payor and the recipient(s) shall
each be obligated to pay interest on the Required Payment as follows:
(a) if the Required Payment shall represent a payment to be made by Borrower to the Lenders,
Borrower and the recipient(s) shall each be obligated retroactively to the Advance Date to pay
interest in respect of the Required Payment at the Default Rate (without duplication of the
obligation of Borrower under Section 2.3 to pay interest on the Required Payment at the
Default Rate), it being understood that the return by the recipient(s) of the Required Payment to
Administrative Agent shall not limit such obligation of Borrower under Section 2.3 to pay
interest at the Default Rate in respect of the Required Payment, and
(b) if the Required Payment shall represent proceeds of a Loan to be made by the Lenders to
Borrower, the Payor and Borrower shall each be obligated retroactively to the Advance Date to pay
interest in respect of the Required Payment pursuant to whichever of the rates specified in
Section 2.3 is applicable to the Type of such Loan, it being understood that the return by
Borrower of the Required Payment to Administrative Agent shall not limit any claim Borrower may
have against the Payor in respect of such Required Payment.
(6) Sharing of Payments, Etc.
(a) Sharing. If any Lender shall obtain from Borrower payment of any principal of or interest
on any Loan owing to it or payment of any other amount under this Agreement or any other Loan
Document through the exercise (subject, as among the Lenders, to Section 12.25) of any
right of set off, banker’s lien or counterclaim or similar right or otherwise (other than from
Administrative Agent as provided herein), and, as a result of such payment, such Lender shall have
received a greater percentage of the principal of or interest on the Loans or such other amounts
then due hereunder or thereunder by Borrower to such Lender than the percentage received by any
other Lender, it shall promptly purchase from such other Lenders participations in (or, if and to
the extent specified by such Lender, direct interests in) the Loans or such other amounts,
respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with
the unpaid principal of and/or interest on the Loans or such other amounts, respectively, owing to
each of the Lenders. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored.
(b) Consent by Borrower. Borrower agrees that any Lender so purchasing such a participation
(or direct interest) may exercise (subject, as among the Lenders, to Section 12.25) all
rights of set off, banker’s lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
40
(c) Rights of Lenders; Bankruptcy. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or obligation of
Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a set off to which this Section 2.6(6) applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this Section 2.6(6) to
share in the benefits of any recovery on such secured claim.
Section 2.7 Yield Protection; Etc.
(1) Increased Costs.
(a) Increased Costs Generally with Respect to Making or Maintaining LIBOR-based Loans. If any
Change in Law shall:
(A) impose, modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for the account
of, or credit extended or participated in by, any Lender (except any reserve requirement
reflected in the Adjusted Libor Rate);
(B) subject any Lender to any tax of any kind whatsoever with respect to this Agreement
or any LIBOR-based Loan made by it, or change the basis of taxation of payments to such
Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by
Section 2.7(6) and the imposition of, or any change in the rate of, any Excluded Tax
payable by such Lender); or
(C) impose on any Lender or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Lender.
and the result of any of the foregoing shall be to increase the cost to such Lenders of making or
maintaining any LIBOR-based Loan (or of maintaining its obligation to make any such Loan) or to
reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then Borrower will promptly upon demand pay to such Lender such additional
amount or amounts as will compensate such Lender for such additional costs incurred or reduction
suffered.
(b) Capital Requirements. If any Lender reasonably determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of
this Agreement or the Loans made by such Lender to a level below that which such Lender or such
Lender’s holding company could have achieved but for such Change in Law (taking into consideration
such Lender’s policies and the policies of such Lender’s holding company with respect to capital
adequacy), then from time to time Borrower will promptly upon demand pay to such Lender, as the
case may be, such additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered; provided that such Lender would cause similarly
situated Borrowers to compensate them for such an event.
41
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or
amounts necessary to compensate such Lender or its holding company, as the case may be, as
specified in paragraph (a) or (b) of this Section 2.7(1) shall be delivered
to Lead Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender the
amount shown as due on any such certificate within ten (10) days after receipt thereof by Lead
Borrower.
(d) Delays in Requests. Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such
compensation; provided that Borrower shall not be required to compensate a Lender pursuant
to this Section for any increased costs or reductions incurred more than 270 days prior to the date
that such Lender notifies Lead Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s intention to claim compensation therefor; provided
further that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.
(2) Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, on or
prior to the determination of the Libor Rate for any Interest Period:
(a) Administrative Agent reasonably determines that quotations of interest rates for the
relevant deposits referred to in the definition of Libor Rate are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining rates of interest for
LIBOR-based Loans; or
(b) the Majority Lenders reasonably determine, and notify Administrative Agent that the
relevant rates of interest referred to in the definition of Libor Rate are not likely adequate to
cover the cost to such Lenders of making or maintaining LIBOR-based Loans for such Interest Period;
then Administrative Agent shall give Lead Borrower and each Lender prompt notice thereof and, so
long as such condition remains in effect, the Lenders shall be under no obligation to make
additional LIBOR-based Loans, to Continue LIBOR-based Loans or to Convert Loans of any other Type
into LIBOR-based Loans, and Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding LIBOR-based Loans, either prepay such Loans or such Loans shall be
automatically Converted into Base Rate Loans.
(3) Illegality. Notwithstanding any other provision of this Agreement, in the event that it
becomes unlawful for any Lender or its Applicable Lending Office to honor its obligation to make or
maintain LIBOR-based Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or would be
disadvantageous to such Lender), then such Lender shall promptly notify Lead Borrower thereof (with
a copy to Administrative Agent) and such Lender’s obligation to make or Continue, or to Convert
Loans of any other Type into, LIBOR-based Loans shall be suspended until such time as such Lender
may again make and maintain LIBOR-based Loans.
42
(4) Treatment of Affected Loans. If the obligation of any Lender to make LIBOR-based Loans or
to Continue, or to Convert Base Rate Loans into, LIBOR-based Loans shall be suspended pursuant to
Section 2.7(1)or Section 2.7(3), such Lender’s Loans shall be automatically
Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Loans
(or, in the case of a Conversion resulting from a circumstance described in Section 2.7(3),
on such earlier date as such Lender may specify to Lead Borrower with a copy to Administrative
Agent) and, unless and until such Lender gives notice as provided below that the circumstances
specified in Section 2.7(1) or Section 2.7(3) that gave rise to such Conversion no
longer exist:
(a) to the extent that such Lender’s Loans have been so Converted, all payments and
prepayments of principal that would otherwise be applied to such Lender’s Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such Lender as LIBOR-based Loans
shall be made or Continued instead as Base Rate Loans, and all Loans of such Lender that would
otherwise be Converted into LIBOR-based Loans shall remain as Base Rate Loans.
If such Lender gives notice to Lead Borrower with a copy to Administrative Agent that the
circumstances specified in Section 2.7(1) or Section 2.7(3) that gave rise to the
Conversion of such Lender’s Loans pursuant to this Section 2.7(4) no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when
LIBOR-based Loans made by other Lenders are outstanding, such Lender’s Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such
outstanding LIBOR-based Loans, to the extent necessary so that, after giving effect thereto, all
Base Rate Loans and LIBOR-based Loans are allocated among the Lenders ratably (as to principal
amounts, Types and Interest Periods) in accordance with their respective Commitments.
(5) LIBOR Breakage Costs. Borrower shall upon request pay to Administrative Agent for account
of each Lender, such amount or amounts as shall be sufficient (in the reasonable opinion of each
Lender) to compensate it for any loss, cost or expense that such Lender determines is attributable
to:
(a) any payment, prepayment or Conversion of a LIBOR-based Loan made by such Lender for any
reason (including, without limitation, the acceleration of the Loans pursuant to Administrative
Agent’s or the Lenders’ rights referred to in Article 11) on a date other than the last day
of the Interest Period for such Loan; or
(b) any failure by Borrower for any reason to borrow a LIBOR-based Loan from such Lender on
the date for such borrowing specified in any Request for Loan Advance.
Without limiting the effect of the preceding sentence, such compensation shall include an amount
equal to the excess, if any, of (i) the amount of interest that otherwise would have accrued on the
principal amount so paid, prepaid, Converted or not borrowed for the period from the date of such
payment, prepayment, Conversion or failure to borrow to the last day of the then
43
current Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period
for such Loan that would have commenced on the date specified for such borrowing) at the applicable
rate of interest for such Loan provided for herein over (ii) the amount of interest that otherwise
would have accrued on such principal amount at a rate per annum equal to the interest component of
the amount such Lender would have bid in the London interbank market for Dollar deposits of leading
banks in amounts comparable to such principal amount and with maturities comparable to such period
(as reasonably determined by such Lender), or if such Lender shall cease to make such bids, the
equivalent rate, as reasonably determined by such Lender, derived from Page 3750 of the Telerate
Service or other publicly available source as described in the definition of Libor Rate. A
certificate of any Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this section shall be delivered to Lead Borrower and shall be conclusive absent
manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate
within ten (10) days after receipt thereof.
(6) Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of
Borrower hereunder or under any other Loan Document shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section), Administrative Agent or
Lender (as the case may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the
full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) Payment of Other Taxes by Borrowers. Without limiting the provisions of paragraph
(a) above, Borrower shall pay any Other Taxes but not Excluded Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) Indemnification by Borrower. Borrower shall indemnify Administrative Agent and each
Lender, within ten (10) days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by Administrative Agent or such Lender, as the case may be, on or with
respect to any payment by or on account of any obligation of Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or
liability delivered to Lead Borrower by a Lender, or by Administrative Agent on its own behalf or
on behalf of a Lender, shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by Borrower to a Governmental Authority, Lead Borrower shall deliver to Administrative
Agent the original or a certified copy of a receipt issued by such
44
Governmental Authority evidencing such payment, a copy of the return reporting such payment or
other evidence of such payment reasonably satisfactory to Administrative Agent.
(e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which a Borrower is located, or any treaty to
which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to
the applicable Borrower (with a copy to Administrative Agent), prior to the Initial Advance, Form
W-8BEN or Form W-8ECI of the Internal Revenue Service, or such other properly completed and
executed forms, certifications, statements or documentation prescribed by applicable law or
reasonably requested by such Borrower as will permit such payments to be made without withholding
or at a reduced rate. Administrative Agent shall not be obligated to make any payments hereunder
to Lenders in respect of the Loan until such Lenders shall have furnished to Administrative Agent
the requested form, certification, statement or documentation.
(f) Refunds. If Administrative Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been indemnified by Borrower
or with respect to which Borrower has paid additional amounts pursuant to this Section
2.7(6), it shall pay over such refund to Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by such Borrower under this Section 2.7(6) with respect
to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
Administrative Agent or such Lender, as the case may be, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such refund); provided, that
Borrower, upon the request of Administrative Agent or such Lender, agrees to repay the amount paid
over to such Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to Administrative Agent or such Lender in the event Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority. This section shall
not be construed to require Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to Borrower or any
other Person..
(7) Replacement of Lenders. If any Lender requests compensation pursuant to Section
2.7(1) or Section 2.7(6), or any Lender’s obligation to Continue Loans of any Type, or
to Convert Loans of any Type into the other Type of Loan, shall be suspended pursuant to
Section 2.7(2) or Section 2.7(3) (any such Lender requesting such compensation, or
whose obligations are so suspended, being herein called a “Requesting Lender”), Lead
Borrower, upon three (3) Business Days’ notice, may require that such Requesting Lender transfer
all of its right, title and interest under this Agreement and such Requesting Lender’s Note to any
bank or other financial institution (a “Proposed Lender”) identified by Lead Borrower that
is satisfactory to Administrative Agent (i) if such Proposed Lender agrees to assume all of the
obligations of such Requesting Lender hereunder, and to purchase all of such Requesting Lender’s
Loans hereunder for consideration equal to the aggregate outstanding principal amount of such
Requesting Lender’s Loans, together with accrued interest thereon to the date of such purchase and
pay all other amounts accrued and payable hereunder to such Requesting Lender as of the date of
such transfer (including any fees accrued hereunder and any amounts that would be payable under
Section 2.7(1), Section 2.7(5) or Section 2.7(6). Subject to the
provisions of Section 12.23(1), such Proposed Lender shall be a “Lender” for all purposes
hereunder. Without prejudice to the
45
survival of any other agreement of Borrower hereunder, the agreements of Borrower contained in
Section 2.7(1) and Section 2.7(6) (without duplication of any payments made to such
Requesting Lender by Borrower or the Proposed Lender) shall survive for the benefit of such
Requesting Lender under this Section 2.7(7) with respect to the time prior to such
replacement.
Section 2.8 Agency Fee. Until payment in full of all obligations under this Agreement and the
other Loan Documents, Borrower shall pay to Administrative Agent, for its sole account, the Agency
Fee in accordance with the Fee Letter.
Section 2.9 Exit Fee. With respect to any repayment or prepayment of principal under the Loans for
any reason whatsoever (whether such repayment or prepayment of the Loans is made voluntarily or
involuntarily or as a result of the occurrence of an Event of Default pursuant to which the
Administrative Agent has accelerated the obligations of the Borrower under the Loan Documents or
otherwise), Borrower shall pay to Administrative Agent, in addition to all other amounts that may
be due hereunder, an amount equal to one quarter of one percent (0.25%) of the amount so repaid or
prepaid under the Loans (the “Exit Fee”). The Exit Fee will be automatically waived in the
event that (1) the Loans are prepaid in connection with a bona-fide arms length sale of the Project
to a third party which is not an Affiliate of Borrower, or (2) the Loans are paid in full pursuant
to a refinancing arrangement with Administrative Agent.
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 Insurance.
(1) Borrower shall obtain and maintain, or cause to be maintained, Policies providing at least
the following coverages for Borrower and the Project (at all times through the repayment of the
Loans in full):
(a) comprehensive all-risk insurance on the Improvements and the personal property, in each
case (i) in an amount equal to 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, (ii) containing an agreed amount
endorsement with respect to the improvements and personal property waiving all co insurance
provisions; (iii) providing for no deductible in excess of $50,000; (iv) providing for repairs and
alteration coverage; and (v) providing coverage for contingent liability from Operation of Building
Laws, Demolition Costs and Increased Cost of Construction Endorsements together with an “Ordinance
or Law Coverage” or “Enforcement” endorsement if any of the Improvements or the use of the Project
shall at any time constitute legal non-conforming structures or uses. The Full Replacement Cost
shall be redetermined from time to time (but not more frequently than once in any twenty-four (24)
calendar months) at the request of Administrative Agent by an appraiser or contractor designated by
Borrower and reasonably approved by Administrative Agent, or by an engineer or appraiser in the
regular employ of the insurer. The cost of such appraisal shall be paid by Administrative Agent
unless an Event of Default shall have occurred and be continuing, in which case such cost shall be
paid by Borrower. After the first appraisal, additional appraisals may be based on construction
cost
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indices customarily employed in the trade. No omission on the part of Administrative Agent to
request any such ascertainment shall relieve Borrower of any of its obligations under this
Section 3.1(1)(a);
(b) commercial general liability insurance against claims for personal injury, bodily injury,
death or property damage (including liabilities as a result of repairs and alterations) occurring
upon, in or about the Project, such insurance (i) to be on the so called “occurrence” form with a
combined single limit of not less than $1,000,000 per occurrence and $2,000,000 general aggregate;
(ii) 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 (iii) to
cover at least the following hazards: (A) premises and operations; (B) products and completed
operations on an “if any” basis and for a period of not less than five (5) years after the
completion of construction of the applicable Improvements; (C) independent contractors; (D) blanket
contractual liability for all “insured contracts” as defined in the standard general liability
policy; and (E) contractual liability covering the indemnities contained in Sections 5.4,
11.3 and 14.5 hereof, to the extent the same is available and falls within the
definition of “insured contracts”;
(c) business income/loss of rents insurance (i) with loss payable to Administrative Agent (for
the benefit of the Lenders); (ii) covering all risks required to be covered by the insurance
provided for in Section 3.1(1)(a) hereof; (iii) in an amount equal to 100% of the projected
gross income from the Project (on an actual loss sustained basis) for a period continuing until the
Restoration of the Project is completed; the amount of such business income/loss of rents insurance
shall be determined prior to the date hereof and at least once each year thereafter based on the
greater of (x) Borrower’s reasonable estimate of the gross income from the Project, and (y) the
highest gross income received during the term of the Notes for any full calendar year prior to the
date the amount of such insurance is being determined (or such lesser period as may have expired
from the date of substantial completion of the applicable Improvements to the date the amount of
such insurance is being determined), in each case for the succeeding eighteen (18) month period and
(D) containing an extended period of indemnity endorsement which provides that after the physical
loss to the improvements and the personal property has been repaired, the continued loss of income
will be insured until such income either returns to the same level it was at prior to the loss, or
the expiration of twenty-four (24) months from the date that the Project, 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. All insurance proceeds payable to Administrative Agent (for the
benefit of the Lenders) pursuant to this Section 3.1(1)(c) shall be held by Administrative
Agent and shall be applied to the obligations secured hereunder from time to time due and payable
hereunder and under the Notes and this Agreement; provided, however, that nothing
herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations
secured hereunder on the respective dates of payment provided for in the Notes and this Agreement
except to the extent such amounts are actually paid out of the proceeds of such business
income/loss of rents insurance;
(d) when required by Administrative Agent or at the discretion of Borrower, at all times prior
to the completion of construction of the Improvements, the insurance provided for in Section
3.1(1)(a) shall be written in a so called builder’s risk completed value form (i) on a non
reporting basis, (ii) against all risks insured against pursuant to Section
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3.1(1)(a),(iii) shall include permission to occupy the Project, and (4) shall contain an agreed amount
endorsement waiving co-insurance provisions, and shall also include coverage for:
(A) loss suffered with respect to materials, equipment, machinery, and supplies whether
on-site, in transit, or stored off-site and with respect to temporary structures, hoists,
sidewalks, retaining walls, and underground property;
(B) Soft Costs, plans, specifications, blueprints and models in connection with any
restoration following a casualty;
(C) demolition and increased cost of construction, including, without limitation,
increased costs arising out of changes in Applicable Law and codes;
(D) operation of building laws;
(E) collapse, transit and testing; and
(F) delayed opening coverage on an actual loss sustained basis with extended period of
indemnity endorsement consistent with Section 3.1(1)(c).
(e) workers’ compensation insurance, as required by any Governmental Authority or legal
requirement, subject to the statutory limits of the state of New York;
(f) comprehensive boiler and machinery insurance, if applicable, in amounts as shall be
reasonably required by Administrative Agent on terms consistent with the commercial property
insurance policy required under Section 3.1(1)(a);
(g) if any portion of the Improvements is at any time located in an area identified by the
Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to 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 any successor
law (the “Flood Insurance Acts”), flood hazard insurance in an amount not less than the
greater of (A) the maximum limit of coverage available with respect to the Project, under Policies
issued pursuant to the Flood Insurance Acts, subject only to customary deductibles under such
Policies, and (B) the maximum limit of coverage available with respect to the Project, under
Policies issued by private insurance carriers;
(h) earthquake insurance (based on probable maximum loss) in amounts and in form and substance
satisfactory to Administrative Agent, provided that the insurance pursuant to this Section
3.1(1)(h) hereof shall be on terms consistent with the all risk insurance policy required under
Section 3.1(1)(a) hereof;
(i) umbrella liability insurance in an amount not less than $100,000,000 per occurrence on
terms consistent with the commercial general liability insurance policy required under Section
3.1(1)(b) hereof;
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(j) insurance with respect to the Construction Manager, the Major Contractors, Borrower’s
Architect and other Design Professionals as specified in Schedule 3.1(1)(j) attached
hereto;
(k) secured creditor’s environmental insurance, insuring against unknown environmental hazards
and conditions in amounts and in form and substance satisfactory to Administrative Agent, which
shall name the Administrative Agent as a loss payee or additional insured, as applicable; and
(l) such other insurance and in such amounts as Administrative Agent from time to time may
request against such other insurable hazards which at the time are available on commercially
reasonably terms for properties located in or around the region where the Project is located and
are customarily required by institutional lenders with respect to projects similar to the Project.
(2) All insurance provided in compliance with Section 3.1(1)(a) hereof shall be
obtained under valid and enforceable policies (the “Policies” or in the singular, the
“Policy”), in such forms and, from time to time after the date hereof, in such amounts as
may be satisfactory to Administrative Agent, issued by financially sound and responsible insurance
companies permitted to do business in the state of New York and reasonably approved by
Administrative Agent. The insurance companies must have a claims paying ability/financial strength
rating of “AX” (or its equivalent) or better by A.M. Best. No Policy shall contain an exclusion
from coverage under such Policy for loss or damage incurred as a result of an act of terrorism or
similar acts of sabotage, provided that Borrower may obtain separate Terrorism Insurance coverage
subject to and in accordance with the terms of this Section 3.1(2). Borrower will be
required to maintain insurance against terrorism, terrorist acts or similar acts of sabotage
(“Terrorism Insurance”) with coverage amounts of not less than an amount equal to the full
replacement cost of the improvements and the personal property (the “Terrorism Insurance
Required Amount”). Notwithstanding the foregoing sentence, Borrower shall not be obligated to
expend in any fiscal year on Insurance Premiums for Terrorism Insurance more than two (2.0) times
the then-current annual premium paid by Borrower for the comprehensive all-risk insurance required
under subsection 3.1(1)(a) hereof (the “Terrorism Insurance Cap”) and if the cost
of the Terrorism Insurance Required Amount exceeds the Terrorism Insurance Cap, Borrower shall
purchase the maximum amount of Terrorism Insurance available with funds equal to the Terrorism
Insurance Cap; provided, however, the Terrorism Insurance Cap shall not apply or
restrict the amount of terrorism coverage required to be obtained and maintained by this subsection
(x) with respect to the Project if (a) owners and/or operators of mixed-use retail/office buildings
in the same class as the Project in Bronx, New York are generally obtaining terrorism insurance,
(b) lenders financing such mixed-use retail/office properties in the same class as the Project in
Bronx, New York are generally requiring terrorism insurance as a condition of financing, or (c)
Borrower or Sponsor or any Affiliate of Borrower or Sponsor, is obtaining terrorism insurance on
any other properties in Bronx, New York of which any of the foregoing Persons own or operate. Not
less than fifteen (15) days prior to the expiration dates of the Policies theretofore furnished to Lender pursuant to Section 3.1(1) hereof, Lead
Borrower shall deliver to Administrative Agent insurance certificates showing payment of all
premiums (the “Insurance Premiums”) for such Policies, which certificates shall be in form
and substance reasonably satisfactory to Administrative Agent. Within sixty (60) days following
the expiration
49
dates of the Policies, Lead Borrower shall deliver to Administrative Agent certified
copies of such Policies marked “premium paid” or accompanied by evidence satisfactory to
Administrative Agent of payment of the Insurance Premiums.
(3) Borrower shall not obtain (a) any umbrella or blanket liability or casualty Policy unless,
in each case, such Policy is approved in advance in writing by Administrative Agent and Lenders’
interest is included therein as provided in this Agreement, or (b) separate insurance concurrent in
form or contributing in the event of loss with that required in Section 3.1(1) to be
furnished by, or which may be required to be furnished by, Borrower. In the event Borrower obtains
separate insurance or an umbrella or a blanket policy, Lead Borrower shall notify Administrative
Agent of the same and shall cause certified copies of each Policy to be delivered as required in
Section 3.1(1).
(4) All Policies provided for or contemplated by Section 3.1(1) hereof, except for the
Policy referenced in Section 3.1(1)(e), shall name Administrative Agent (for the benefit of
the Lenders) as additional insured under liability policies and as mortgagee/loss payee under
property policies, as their respective interests may appear, and in the case of property, boiler
and machinery, and flood insurance, shall contain a so called New York standard non-contributing
mortgagee clause in favor of Administrative Agent providing that the loss thereunder shall be
payable to Administrative Agent in accordance with the terms of this Agreement.
(5) All Policies provided for in Section 3.1(1)(a) hereof shall contain clauses or
endorsements to the effect that:
(a) no willful act or negligence of Borrower, or anyone acting for Borrower, 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 Administrative Agent is concerned;
(b) the Policy shall not be materially changed (other than to increase the coverage provided
thereby) or cancelled without at least thirty (30) days’ written notice (or ten (10) days’ written
notice, in the case of non payment of premium) to Administrative Agent and any other party named
therein as an insured;
(c) each Policy shall provide that the issuers thereof shall give written notice to
Administrative Agent if the Policy has not been renewed fifteen (15) days prior to its expiration;
and
(d) Administrative Agent shall not be liable for any insurance premiums thereon or subject to
any assessments thereunder.
(6) If at any time Administrative Agent is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, Administrative Agent shall have the
right, on five (5) Business Days’ notice to Lead Borrower to take such action as Administrative Agent deems necessary to protect its interest in the Project, including,
without limitation, the obtaining of such insurance coverage as Administrative Agent in its sole
and absolute discretion deems appropriate, and all expenses incurred by Administrative Agent in
connection with such action or in obtaining such insurance and keeping it in effect shall be paid
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by Borrower to Administrative Agent upon demand and until paid shall be secured by the Security
Documents and shall bear interest at the Default Rate.
(7) In the event of a foreclosure of the Mortgages, or other transfer of title to Project in
extinguishment in whole or in part of the Loans, all right, title and interest of Borrower in and
to the Policies then in force and all proceeds payable thereunder shall thereupon vest in the
purchaser at such foreclosure or Lenders or other transferee in the event of such other transfer of
title.
(8) Lead Borrower shall give immediate written notice of any loss in excess of $100,000 to the
insurance carrier and to Administrative Agent. In connection with losses in excess of $100,000,
but less than or equal to $2,000,000, Borrower and Administrative Agent shall cooperate in all
matters related to the loss including, without limitation, making proof of loss, adjusting and
compromising any claim under the insurance policies, appearing in and prosecuting any action
arising from such insurance policies, and collecting and receiving insurance proceeds. In
connection with losses in excess of $2,000,000, Borrower hereby irrevocably authorizes and empowers
Administrative Agent, as attorney in fact for Borrower coupled with an interest, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any
action arising from such insurance policies, to collect and receive insurance proceeds, and to
deduct therefrom Administrative Agent’s expenses incurred in the collection of such proceeds.
Nothing contained in this Section 3.1(8), however, shall require Administrative Agent or
any Lender to incur any expense or take any action hereunder.
Section 3.2 Condemnation Awards. Lead Borrower shall immediately notify Administrative Agent of
the institution of any proceeding for the condemnation or other taking of the Project or any
portion thereof. Administrative Agent may participate in any such proceeding and Lead Borrower
will deliver to Administrative Agent all instruments necessary or required by Administrative Agent
to permit such participation. Without Administrative Agent’s prior consent (subject to the
approval of the Majority Lenders), Borrower (1) shall not agree to any compensation or award, and
(2) shall not take any action or fail to take any action which would cause the compensation to be
determined. All awards and compensation for the taking or purchase in lieu of condemnation of the
Project or any part thereof are hereby assigned to and shall be paid to Administrative Agent.
Borrower authorizes Administrative Agent to collect and receive such awards and compensation, to
give proper receipts and acquittances therefor, and in Administrative Agent’s sole discretion
(which Administrative Agent shall exercise at the direction of the Majority Lenders) to apply the
same toward the payment of the Loans, notwithstanding that the Loans may not then be due and
payable, or to the restoration of the Project; provided, however, if the award is
less than or equal to the Threshold Amount and Borrower requests that such proceeds be used for non
structural site improvements (such as landscape, driveway, walkway and parking area repairs)
required to be made as a result of such condemnation, Administrative Agent will apply the award to
such restoration in accordance with the terms applicable to insurance proceeds set forth in Section
3.3. Borrower, upon request by Administrative Agent, shall execute all instruments requested
to confirm the assignment of the awards and compensation to Administrative Agent, free and clear of
all liens, charges or encumbrances.
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Section 3.3 Use and Application of Insurance Proceeds. Administrative Agent shall apply insurance
proceeds to costs of restoring the Project or the Loans as follows:
(1) if the loss is less than or equal to the Threshold Amount, Administrative Agent shall
promptly apply the insurance proceeds to restoration provided (a) no Event of Default exists, and
(b) Borrower promptly commences and is diligently pursuing restoration of the Project;
(2) if the loss exceeds the Threshold Amount but is not more than ten percent (10%) of the
replacement value of the Improvements (for projects containing multiple phases or stand alone
structures, such calculation to be based on the damaged phase or structure, not the project as a
whole), Administrative Agent shall apply the insurance proceeds to restoration provided that at all
times during such restoration (a) no Event of Default exists; (b) Administrative Agent determines
that there are sufficient funds including Borrower’s equity available to restore and repair the
Project to a condition reasonably approved by Administrative Agent; (c) Administrative Agent
reasonably determines that any operating deficits, including all debt service, which will be
incurred with respect to the Project following any such loss and until the restoration has been
completed, will be covered out of (A) the insurance proceeds, (B) the proceeds of business
interruption insurance, if applicable, (C) Net Operating Income of the Project or (D) by other
funds of Borrower; (d) Administrative Agent reasonably determines that all Major Leases will remain
in effect after restoration is complete; (e) Administrative Agent determines that restoration and
repair of the Project to a condition reasonably approved by Administrative Agent will be completed
prior to the Completion Date; (f) Borrower promptly commences and is diligently pursuing
restoration of the Project; and (g) if still applicable, Administrative Agent shall have
unilaterally determined that the Guaranty of Completion shall remain in full force and effect
during the period of restoration, or Guarantor shall have executed and delivered to Administrative
Agent a guaranty of completion with respect to all restoration in substantially the same form as
the Guaranty of Completion and otherwise reasonably satisfactory to Administrative Agent;
(3) if the conditions set forth above are not satisfied or the loss exceeds the maximum amount
specified in Section 3.3(2) above, Administrative Agent may in its sole discretion (subject
to the approval of the Majority Lenders) apply any insurance proceeds it may receive to the payment
of the Loans or allow all or a portion of such proceeds to be used for the restoration of the
Project.
Section 3.4 Disbursement of Proceeds.
(1) The insurance proceeds shall be held by Administrative Agent in a Controlled Account and
shall constitute additional security for the Loans. Upon receipt of evidence reasonably satisfactory to Administrative Agent that all the conditions precedent,
including those set forth in Section 3.3(2) above, have been satisfied, the insurance
proceeds shall be disbursed by Administrative Agent to, or as directed by, Lead Borrower from time
to time during the course of the restoration in accordance with the applicable provisions of
Article 4 and Schedule 4 of this Agreement and (to the extent such disbursements are related to
construction costs) the Building Loan Agreement.
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(2) All plans and specifications required in connection with the restoration shall be subject
to prior review and reasonable approval by Administrative Agent and by an independent consulting
engineer selected by Administrative Agent (the “Restoration Consultant”); provided,
however, that if the plans and specifications are consistent with those attached to the
Building Loan Agreement, Administrative Agent shall be deemed to have approved such plans and
specifications. Administrative Agent shall have the non-exclusive 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 all Major Contracts, shall be subject to prior review and reasonable
approval by Administrative Agent and the Restoration Consultant. All reasonable costs and expenses
incurred by Administrative Agent in connection with making the insurance proceeds available for the
restoration including reasonable counsel fees and disbursements and the Restoration Consultant’s
fees, shall be paid by Borrower. Borrower shall also obtain, at its sole cost and expense, all
necessary government approvals as and when required in connection with such restoration and provide
copies thereof to Administrative Agent and Restoration Consultant.
(3) In no event shall Administrative Agent be obligated to make disbursements of the insurance
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 Restoration Consultant, minus the Retainage.
Administrative Agent shall establish, maintain and release any Retainage in accordance with the
terms of the Building Loan Agreement.
(4) Administrative Agent shall not be obligated to make disbursements of the insurance
proceeds more frequently than once per month.
(5) If at any time the insurance proceeds or the undisbursed balance thereof shall not, in the
reasonable opinion of Administrative Agent in consultation with the Restoration Consultant, be
sufficient to pay in full the balance of the costs which are estimated by the Restoration
Consultant to be incurred in connection with the completion of the restoration, Borrower shall
deposit the deficiency (the “Insurance Proceeds Deficiency”) with, or deliver a Collateral
Letter of Credit in the amount of such deficiency to, Administrative Agent within ten (10) Business
Days of Administrative Agent’s request and before any further disbursement of the insurance
proceeds shall be made. The Insurance Proceeds Deficiency shall be held in a Controlled Account
and shall be disbursed for costs actually incurred in connection with the restoration on the same
conditions applicable to the disbursement of the insurance proceeds, and, until so disbursed, shall
constitute additional security for the Loans.
(6) After the Restoration Consultant certifies to Administrative Agent that a restoration has
been substantially completed in accordance with the provisions of this Section 3.4, and the receipt by Administrative Agent of evidence satisfactory to
Administrative Agent that all costs incurred in connection with the restoration have been paid in
full, the excess, if any, of the insurance proceeds and the remaining balance, if any, of the
Insurance Proceeds Deficiency deposited with Administrative Agent shall, so long as no Potential
Default or Event of Default has occurred, be paid to Lead Borrower. If a Potential Default or
Event of Default has occurred, the remaining balance of the Insurance Proceeds Deficiency shall be
applied to repayment of the Loans.
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(7) All insurance proceeds not required (i) to be made available for the restoration or (ii)
to be returned to Lead Borrower as excess insurance proceeds pursuant to subsection (6)
above may (A) be retained and applied by Administrative Agent toward the payment of the Loans,
whether or not then due and payable, in such order, priority and proportions as Administrative
Agent in its sole discretion shall deem proper, or, (B) at the sole discretion of Administrative
Agent, the same may be paid, either in whole or in part, to Lead Borrower for such purposes and
upon such conditions as Administrative Agent shall designate.
(8) Notwithstanding any casualty, Borrower shall continue to make payments with respect to the
outstanding principal amount in the manner provided in the Notes, this Agreement and the other Loan
Documents and the outstanding principal amount shall not be reduced unless and until (i) any
insurance proceeds or condemnation award shall have been actually received by Administrative Agent,
(ii) Administrative Agent shall have deducted its reasonable expenses of collecting such proceeds
and (iii) Administrative Agent shall have applied any portion of the balance thereof to the
repayment of the outstanding principal amount in accordance with Section 4.3. The Lenders
shall not be limited to the interest paid on any condemnation award but shall continue to be
entitled to receive interest as provided in Article 2.
ARTICLE 4
DISBURSEMENTS OF THE LOANS
Section 4.1 General Conditions.
(1) Subject to (a) Borrower’s satisfaction of the applicable conditions precedent set forth in
Schedule 4 and (b) Borrower’s compliance with the applicable provisions of this Article
4, the Lenders shall disburse the proceeds of the Acquisition Loan on the Closing Date and the
proceeds of each other Loan within ten (10) Business Days after Administrative Agent’s receipt of
all of the documents and items to be delivered or received pursuant to Schedule 4 and this
Article 4; provided, however, that at no time shall the Lenders be
obligated to:
(i) advance to Lead Borrower more than the amount that Borrower has funded from its own
monies or an existing loan or is then required to fund to the party seeking payment or, in
the case of reimbursement, to the party seeking reimbursement (subject to Retainage, if
applicable),
(ii) make an advance if the Loans are not In Balance in accordance with Section
4.3,
(iii) subject to possible reallocation in accordance with Section 4.5, advance
proceeds of a Loan in an amount in excess of the Budget Line Items set forth in the Budget,
as the same may be adjusted in accordance with the terms of this Agreement, or
(iv) make any Loans to the extent any Operating Revenues have not been applied in
accordance with Section 4.6(1).
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(2) Notwithstanding anything to the contrary contained in this Agreement, the Lenders shall
have no obligation to advance any Loan unless Administrative Agent is, at all times, satisfied that
the Improvements can be constructed Lien free, substantially in accordance with the Plans and
Specifications (or the Tenant Improvement Plans in the case of Tenant Improvement Work) for the
sums set forth in the Budget (or, if more, Borrower has furnished the difference in cash or cash
equivalents, subject to the provisions of Section 4.3, Section 4.4 and Section
4.5), by the Completion Date or, with respect to Tenant Improvement Work, such date as shall be
required for the completion of the applicable Tenant Improvement Work under an Approved Lease.
Administrative Agent will endeavor to give notice to Lead Borrower of its intention not to
authorize disbursement of any Loan proceeds based on the foregoing, but neither the Lenders nor
Administrative Agent shall have any liability hereunder should Administrative Agent fail to do so,
and no failure by Administrative Agent to give such notice shall affect Administrative Agent’s or
any Lender’s rights under this subsection (2). Notwithstanding anything herein to the
contrary, if such applicable conditions precedent are not satisfied for the full required
disbursement, then, to the extent that the amounts in any Request for Loan Advance are broken down
such that Administrative Agent is satisfied that all of the above conditions are met with respect
to a portion of any Loan advance, the Lenders shall advance such portion of the requested Loan
advance.
Section 4.2 Procedure for Making Disbursements of Loan Proceeds.
(1) After the Closing Date, disbursements shall be made from time to time as construction
progresses pursuant to a request for advance in the applicable form attached hereto as Exhibit F
(each, a “Request for Loan Advance”), but no more frequently than once in each calendar
month.
(2) Each Request for Loan Advance with respect to Loans shall (a) be duly executed by an
Authorized Officer on behalf of Lead Borrower, (b) be submitted to Administrative Agent and the
Construction Consultant not less than ten (10) Business Days prior to the proposed disbursement
date for such Loans, (c) specify the items to be paid or reimbursed with the proceeds of the
requested Loans, (d) include the documentation required to be included therewith under Schedule
4 and (e) be in the minimum amounts required under Section 2.6(3).
(3) All advances of the Loans shall be made for the payment of Project Costs in accordance
with the Budget upon Borrower’s satisfaction of the applicable conditions set forth in this
Article 4 and Schedule 4 — Parts A and B, as applicable.
(4) In the event Lead Borrower does not request a disbursement within thirty (30) days after
the previous disbursement of a Loan, Borrower shall nonetheless within such thirty (30) day period and during each subsequent thirty (30) day period in which Lead
Borrower does not request a disbursement of the Loan, satisfy the conditions precedent to
disbursements set forth in this Agreement.
Section 4.3 Loan Balancing.
(1) Borrower represents that the Budget sets forth all anticipated costs to be incurred by
Borrower in connection with the ownership, development, construction, financing,
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marketing, maintenance and leasing of the Improvements, from time to time through the Maturity Date as
extended pursuant to Section 2.5 hereof. Borrower further agrees as follows:
(a) Subject to reallocations pursuant to Section 4.4 and Section 4.5, if at
any time, the projected costs anticipated to be incurred for any item of Construction Work or for
the ownership, development, financing, marketing, maintenance or leasing of the Improvements
through the Maturity Date exceed the amount set forth in the Budget for such item (as the same may
be adjusted in accordance with the terms of this Agreement), as determined by Administrative Agent
and the Construction Consultant in their reasonable discretion (including any such determination
that the undisbursed Loan proceeds allocated for the payment of future interest (the “Interest
Reserve”) is insufficient) based on factors, including, but not limited to, (1) Administrative
Agent’s projections of interest rates for period(s) up to and including the full remaining term of
the Loan (and permitted extensions); (2) the effect of any Hedge Agreement; (3) cost overruns or
Change Orders; or (4) failure of the Improvements to lease at the rate of absorption or otherwise
at rates and terms projected by Borrower, then the Loans shall be deemed not “In Balance.”
(b) If the Loans are deemed not “In Balance,” then Borrower shall, at Administrative Agent’s
option, within ten (10) Business Days after written notice from Administrative Agent either (a)
deposit with Administrative Agent an amount sufficient to cover such deficiency (a “Deficiency
Deposit”), which Deficiency Deposit shall be deposited with Administrative Agent in the
Controlled Account (the “Deficiency Deposit Account”), (b) make one or more equity
contributions to be used by Borrower to pay costs that will bring the Loans In Balance (an
“Equity Balancing Contribution”), or (c) deliver a Collateral Letter of Credit in an amount
such that the available proceeds thereunder would be sufficient to bring the Loans In Balance and
upon which Administrative Agent shall be entitled to draw in compliance with the provisions set
forth below in this Section 4.3. Administrative Agent shall not be required to authorize
any disbursement of any Loans before receiving (i) payment of any such Deficiency Deposit into the
Deficiency Deposit Account and the prior application of such Deficiency Deposit to the payment of
Project Costs so as to bring the Loans In Balance, (ii) verification that an Equity Balancing
Contribution has been made and the proceeds thereof used for the payment of Project Costs on
account of the Improvements, so as to bring the Loans In Balance or (iii) a Collateral Letter of
Credit as set forth above. Failure of Borrower to provide satisfactory verification of an Equity
Balancing Contribution or deliver a Deficiency Letter of Credit as required above shall be deemed
Borrower’s election to make a Deficiency Deposit. The Deficiency Deposit shall be allocated to the
Project Loan Budget and the Budget, as applicable, and shall be applied to the payment of Project
Costs on account of the Improvements prior to any further disbursement of the Loans.
(c) The balances of the applicable Contingency Fund from time to time shall not be considered
for purposes of determining whether the Loans are In Balance.
(2) If an Event of Default shall occur and be continuing, Administrative Agent (subject to the
provisions of Section 14.3) may, at its option, in addition to exercising any other rights
or remedies available under the Loan Documents, (A) apply any unexpended Deficiency Deposit to (or
draw on any Collateral Letter of Credit to pay) the costs of completion of the Improvements and/or
(B) apply any unexpended Deficiency Deposit to (or draw on any
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Collateral Letter of Credit for application of the sums drawn thereunder to) the immediate reduction of any amounts due under the
Notes and the other Loan Documents. With respect to any Collateral Letter of Credit that Borrower
may furnish or cause to be furnished to Administrative Agent in accordance with the terms of this
Section 4.3:
(a) Administrative Agent will be entitled, among other things, to make one or more draws
pursuant to and in accordance with this Agreement or the Building Loan Agreement, as applicable, by
presentment thereof to the issuing bank accompanied only by Administrative Agent’s clean
sight-draft, it being intended that the issuing bank shall have no right to inquire as to
Administrative Agent’s right to draw upon such Collateral Letter of Credit;
(b) Administrative Agent shall be entitled, among other things, to draw upon each Collateral
Letter of Credit pursuant to this Agreement or the Building Loan Agreement, as applicable, in
whole, or in part from time to time, to the extent (without taking into account the Collateral
Letter of Credit) the Loan is not In Balance, (i) in order to pay any costs not covered by Loan
proceeds, Equity Balancing Contributions or Deficiency Deposits or (ii) upon any Event of Default;
and
(c) Administrative Agent shall have the right to draw upon any Collateral Letter of Credit
within ten (10) Business Days prior to the expiration date of such Collateral Letter of Credit and
each renewal and extension thereof unless, prior to such expiration date of such Collateral Letter
of Credit and each renewal and extension thereof, Borrower shall have furnished a replacement,
extension or renewal Collateral Letter of Credit, acceptable to Administrative Agent, it being the
intent hereof that at no time shall the unexpired term of any Collateral Letter of Credit be less
than ten (10) Business Days. If Administrative Agent draws upon a Collateral Letter of Credit
pursuant to the terms hereof, then Administrative Agent shall hold the proceeds thereof in a
Controlled Account as a Deficiency Deposit. Administrative Agent shall also be entitled to draw
upon a Collateral Letter of Credit if the credit rating of the issuing bank no longer meets the
standard required of a Collateral Letter of Credit and Borrower does not deliver to Administrative
Agent a replacement letter of credit that otherwise conforms to the requirements for Deficiency
Letters of Credit within ten (10) days following notice of the same from Administrative Agent, or
if Administrative Agent reasonably believes that its rights to draw on such Collateral Letter of
Credit are in imminent jeopardy of not being honored.
Section 4.4 Budget Contingencies. The Budget contains line items designated for contingency for
Hard Costs and Soft Costs (collectively, the “Contingency Fund”) which represent amounts
necessary to provide reasonable assurances to Administrative Agent and the Lenders that funds are available within the
Budget if additional costs, expenses and/or delays are incurred or additional interest accrues on
the Loans, or other unanticipated events or problems occur. Upon request of Lead Borrower,
Administrative Agent may, in its reasonable discretion, re-allocate a portion of the Contingency
Fund to cover cost overruns, cost of change orders, additional interests and other anticipated
costs based upon the percentage of completion of the Construction Work (e.g. (and as an example
only) fifty percent (50%) of the Contingency Fund may be allocated when the project is fifty
percent (50%) complete). Any such re-allocation shall reduce, by the amount of such re-allocation,
the amount of the Contingency Fund available to be allocated thereafter. Subject to the foregoing,
Borrower agrees that the decisions with respect to
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utilizing any portion of the Contingency Fund shall be made by Administrative Agent in its reasonable discretion and that the Loans may not be In
Balance, and Borrower may be required to make a Deficiency Deposit or Equity Balancing
Contribution, even if funds remain in the Contingency Fund.
Section 4.5 Budget Line Items. The Budget includes as line items (collectively, “Budget
Line Items”) the cost of all labor, materials, equipment, fixtures and furnishings needed for
the completion of all Construction Work, and all other costs, fees and expenses relating in any way
whatsoever to the Construction Work and the operation of the Project. Borrower agrees that all
Loans shall be used only for the Budget Line Items for which such Loans are made (as re-allocated
from time to time in accordance with the terms of this Agreement). Borrower agrees that, while an
Event of Default exists, Administrative Agent may, at any time and from time to time without prior
written notice to Lead Borrower or Borrower, authorize the disbursement of the Budget Line Items
for the purposes for which they have been set aside, or for any other purposes related to the
Construction Work or otherwise provided for in the Budget as Administrative Agent may determine,
either by payment of such items or by reimbursement to Borrower for payments actually made by
Borrower for such items. Administrative Agent shall not be obligated to authorize the disbursement
of any amount for any category of costs set forth as a Budget Line Item which is greater than the
amount set forth for such category in the applicable Budget Line Item; provided, however, that
subject to Administrative Agent’s prior reasonable consent, Borrower may apply savings from one
Budget Line Item to cost overruns in another Budget Line Item or to the Contingency Fund, or to any
other unbudgeted Project Cost provided (a) there are no Potential Defaults or Events of Defaults
existing, (b) all costs to be paid out of the Budget Line Item from which funds are being
re-allocated have been paid or sufficient sums remain in said line item to pay such costs when the
same become due, (c) said savings are actual savings and are documented or otherwise established to
the satisfaction of Administrative Agent and the Construction Consultant in their reasonable
discretion, (d) such reallocation will not violate the provisions of the Lien Law or affect the
priority of the Mortgages on the Project and (e) Administrative Agent, at Borrower’s sole cost and
expense, obtains endorsements to the Title Policies insuring against “any statutory lien for
services, labor or materials furnished or contracted for prior to the date hereof i.e., the date of
such endorsement (or any statutory lien for services, labor or materials furnished after the date
hereof, the priority of which lien relates back to services, labor or materials furnished or
contracted for prior to the date hereof), and which has now gained or which may hereafter gain
priority over the estate or interest of the insured as shown in Schedule A of this policy,” as a
result of the reallocation of such Budget Line Item; provided, however, the Borrower shall not reallocate any portion of the Soft
Costs Budget Line Items which have been allocated to the payment of real estate taxes and the
interest reserve.
Section 4.6 Interest; Fees; and Expenses.
(1) Included in the Budget are projected amounts for (a) interest on the Loans, (b) the Agency Fee,
(c) the fees and expenses of the Construction Consultant, Administrative Agent’s counsel and the
Title Company and (d) the fees and expenses related to the recording of the Mortgages. Subject to
Borrower’s compliance with all of the conditions set forth in Schedule 4 and this
Article 4, Lead Borrower may in any Request for Loan Advance request advances for the
purpose of paying the aforesaid items due at such time, in which event Administrative Agent
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shall be authorized and is hereby directed to disburse the amount thereof to the Persons entitled to such
payments. Notwithstanding anything to the contrary contained in this Agreement or the other Loan
Documents, Lead Borrower shall not have the right to request the advance of any Loans for any items
covered by clauses (a) through (d) above to the extent Operating Revenues are
available to pay such items.
(2) Borrower hereby authorizes Administrative Agent to disburse the proceeds of any Loan to
pay (a) interest accrued on the Notes, (b) the Agency Fees, (c) the fees and expenses of the
Construction Consultant, Administrative Agent’s counsel and the Title Company, (d) any expenses
payable in accordance with Section 9.28, and (e) any Date Down Endorsements,
notwithstanding that Lead Borrower may not have requested a disbursement of such amounts.
(3) Subject to the provisions of Section 14.3, Administrative Agent in its sole and
absolute discretion may (but shall not be obligated to do so) direct the Lenders to make such Loans
for disbursements authorized under this Section 4.6 notwithstanding that the Loans are not
In Balance or that a Potential Default or Event of Default exists under the terms of this Agreement
or any other Loan Document. Such disbursements shall constitute a Loan and be added to the
principal balance of the Notes, and the Lenders shall make the applicable Loans to fund any such
disbursements. The authorization hereby granted is irrevocable, and no further direction,
authorization or Request for Loan Advance from Lead Borrower is necessary for the Lenders to make
such disbursements. Nothing contained in this Section 4.6 shall require Administrative
Agent to direct the Lenders to make Loans for payment of any of the items set forth in
subsection (2) above if the other conditions set forth in this Agreement for Loans are not
satisfied.
Section 4.7 Reserved.
Section 4.8 Tenant Improvement Allowances.
(1) Loans shall be made to Borrower in connection with Tenant Improvement Allowances as the
same shall be payable pursuant to Approved Leases.
(2) The first request for disbursement for any Tenant Improvement Allowance shall be
accompanied by the following, all of which shall be subject to the reasonable approval of the
Administrative Agent to the extent Borrower has any outstanding (i.e. unexpired) approval rights
with respect thereto pursuant to the terms of the applicable Approved Lease (any such approval or disapproval to be made by the Administrative Agent within a reasonably sufficient
time for Borrower to comply with any time limits set forth in the applicable Approved Lease for
Borrower’s response):
(a) documentation required to be delivered by the applicable tenant pursuant to its respective
Approved Lease;
(b) if not already delivered to the Administrative Agent, a fully executed lease (already
approved by the Administrative Agent) covering such leased space; and
(c) all matters set forth in subsection (3) below.
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(3) The Administrative Agent’s obligation to make disbursements of any Loans for Tenant
Improvement Allowances shall be subject to the further condition precedent that all of the
following requirements shall have been completed to the reasonable satisfaction of the
Administrative Agent to the extent Borrower has any outstanding (i.e. unexpired) approval rights
with respect thereto pursuant to the terms of the applicable Approved Lease (any such approval or
disapproval to be made by the Administrative Agent within a reasonably sufficient time for Borrower
to comply with any time limits set forth in the applicable Approved Lease for Borrower’s response):
(a) Borrower shall have promptly furnished to the Administrative Agent and the Construction
Consultant all documents and other information relating to such Tenant Improvement Allowance which
Borrower is entitled to receive pursuant to and in accordance with the applicable Approved Lease;
(b) Loans shall be made for Tenant Improvement Allowances only to the extent the applicable
tenant is then entitled to receive payments related to such Tenant Improvement Allowance pursuant
to the terms of its applicable Approved Lease;
(c) no mechanic’s liens shall have been filed against the Project in connection with the work
being performed under the applicable Approved Lease; and
(d) Borrower shall have complied with all the other applicable conditions precedent to a
disbursement of a Loan contained in Section 2.1.
(4) The obligation of the Lenders to make the final Loan to Borrower for a Tenant Improvement
Allowance for any Approved Lease is subject to the further condition precedent that all of the
following requirements shall have been completed to the reasonable satisfaction of the
Administrative Agent (in the case of clause (b) below, to the extent Borrower has any
approval rights with respect thereto pursuant to the terms of the applicable Approved Lease, any
such approval or disapproval to be made by the Administrative Agent within a reasonably sufficient
time (but in no event less than ten (10) Business Days) to enable Borrower to comply with
applicable time limits set forth in the applicable Approved Lease for Borrower’s response):
(a) The applicable work covered by a Tenant Improvement Allowance has been substantially
completed, subject to Punch List Items, free of mechanics’ liens unless such liens shall be bonded or otherwise removed of record or the Title Company shall have
provided affirmative coverage in accordance with Schedule 4 — Part A, paragraph 10;
(b) Borrower shall have promptly furnished to the Administrative Agent and the Construction
Consultant all documents and other information relating to the final advance of the applicable
Tenant Improvement Allowance which Borrower is entitled to receive in accordance with the
applicable Lease; and
(c) All of the applicable conditions precedent to any Loan contained in Section 2.1
shall have been satisfied.
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Section 4.9 Direct Loan Advances by Administrative Agent. The Lenders shall, at the option of Administrative Agent, advance all or any part of any
particular Loan either (1) to Lead Borrower for disbursement in accordance with a Request for Loan
Advance, (2) while any Event of Default exists, directly to the Construction Manager, a Major
Contractor, other contractor, subcontractor, material supplier or other party any costs payable to
such party, (3) after an Event of Default, at Borrower’s expense, to the Title Company which shall
pay said monies to the parties as so instructed by Administrative Agent or (4) as contemplated by
Section 1.01(d) of the Completion Guaranty (whether the applicable work is being performed
by Guarantor or Administrative Agent). The execution of this Agreement by Borrower shall, and
hereby does, constitute an irrevocable authorization to the Lenders to make such direct advances
provided for in clauses (2), (3) and (4) above and no further authorization from
Borrower shall be necessary to warrant such direct advances, and all such direct advances shall be
secured by the Security Documents as fully as if made directly to Borrower, regardless of the
disposition thereof by any party so paid. After an Event of Default, at Administrative Agent’s
request, any advance of Loan proceeds made by and through the Title Company may be made pursuant to
a construction escrow agreement reasonably approved by Administrative Agent. Borrower agrees to
join as a party to such escrow agreement and to comply with the requirements set forth therein
(which shall be in addition to and not in substitution for the requirements contained in this
Agreement) and to pay the fees and expenses of the Title Company charged in connection with the
performance of its duties under such construction escrow agreement.
Section 4.10 No Waiver or Approval by Reason of Loan Advances. The making of any Loans by the
Lenders shall not be deemed an acceptance or approval by Administrative Agent or the Lenders (for
the benefit of Borrower or any third party) of the Construction Work or other work theretofore done
or constructed or to the Lenders’ obligations to make further Loans, nor, in the event Borrower is
unable to satisfy any condition, shall any such failure to insist upon strict compliance have the
effect of precluding Administrative Agent or the Lenders from thereafter declaring such inability
to be an Event of Default as herein provided. Administrative Agent’s and/or the Lenders’ waiver
of, or failure to enforce, any conditions to or requirements associated with any Loans in any one
or more circumstances shall not constitute or imply a waiver of such conditions or requirements in
any other circumstances.
Section 4.11 Authorization to Make Loan Advances to Cure Borrower’s Defaults. If an Event of
Default shall occur, Administrative Agent (subject to the provisions of Section 14.3) may
(but shall not be required to) perform any of such covenants and agreements with respect to which
Borrower is in Event of Default. Any amounts expended by Administrative Agent in so doing and any
amounts expended by Administrative Agent in connection therewith shall constitute a Loan and be
added to the outstanding principal balance of the Loans, and the Lenders shall make the applicable
Loans to fund any such disbursements. The authorization hereby granted is irrevocable, and no
prior notice to or further direction or authorization from Borrower is necessary for Administrative
Agent to make such disbursements.
Section 4.12 Designation of Lead Borrower as Agent for Borrower.
(1) Each Borrower hereby irrevocably designates and appoints the Lead Borrower as that
Borrower’s agent to obtain loans and advances under the Loan, the proceeds of which shall be
available to each Borrower as set forth herein. As the disclosed principal for its
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agent, each Borrower shall be obligated to the Agent and the Lenders on account of loans and advances so made
under the Loan as if made directly by the Lenders to that Borrower, notwithstanding the manner by
which such loans and advances are recorded on the books and records of the Lead Borrower and/or of
any Borrower (including, without limitation, on account of any such treatment of said loan or
advance as an equity investment in a Borrower by Lead Borrower).
(2) Each Borrower recognizes that credit available to it under the Loan is in excess of and on
better terms than it otherwise could obtain on and for its own account and that one of the reasons
therefor is its joining in the credit facility contemplated herein with all other Borrowers.
Consequently, each Borrower, jointly and severally, hereby assumes and agrees fully, faithfully,
and punctually to discharge all obligations of all of the Borrowers under the Loan Documents.
(3) The Lead Borrower shall act as a conduit for each Borrower (including itself, as a
“Borrower”) on whose behalf the Lead Borrower has requested a loan or other advance under the Loan.
(4) The proceeds of each loan and advance provided under the Loan which is requested by the
Lead Borrower shall be deposited into an account in the name of the Lead Borrower or as otherwise
indicated by the Lead Borrower. The Lead Borrower shall cause the transfer of the proceeds thereof
to the Borrower(s) on whose behalf such loan and advance was obtained. Neither the Agent nor any
Lender shall have any obligation to see to the application of such proceeds.
(5) Each Borrower hereby irrevocably designates and appoints the Lead Borrower as that
Borrower’s attorney-in-fact to act in the Borrower’s name and stead and to do and perform all
matters, to grant to the Agent for the benefit of the Lenders a security interest in the
Collateral, transact all business, and make, execute and acknowledge all Loan Documents and other
instruments relating to this Agreement including but not limited to, this Agreement, the Note, and the Security Documents. The Borrowers hereby acknowledge and agree that the power
of attorney created hereby is coupled with an interest.
Section 4.13 Administrative Agent’s Right to Make Loan Advances in Compliance with the Guaranty of
Completion. Any Loan proceeds disbursed by Administrative Agent as contemplated by Section 1.01(b)
of the Guaranty of Completion (whether the applicable work is being performed by Guarantor or
Administrative Agent) shall constitute a Loan and be added to the outstanding principal balance of
the Loans, and the Lenders shall make the applicable Loans to fund any such disbursements. The
authorization hereby granted is irrevocable and no prior notice to or further direction or
authorization from Borrower is necessary for Administrative Agent to make such disbursements.
Section 4.14 No Third-Party Benefit. This Agreement is solely for the benefit of the Lenders,
Administrative Agent, Lead Borrower and Borrower. All conditions of the obligations of the Lenders
to make advances hereunder are imposed solely and exclusively for the benefit of the Lenders and
may be freely waived or modified in whole or in part by the Lenders at any time if in their sole
discretion they deem it advisable to do so, and no Person other than Lead
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Borrower or Borrower(provided, however, that all conditions have been satisfied) shall have standing to
require the Lenders to make any Loan advances or shall be a beneficiary of this Agreement or any
advances to be made hereunder.
ARTICLE 5
ENVIRONMENTAL MATTERS
Section 5.1 Certain Definitions. As used herein, the following terms have the meanings indicated:
(1) “Environmental Claim” means, with respect to any Person, any written request for
information by a governmental authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other written
communication by any Person or governmental authority alleging or asserting liability with respect
to Borrower or the Project, whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remediation, damages to natural
resources, personal injuries, fines or penalties arising out of, based on or resulting from (i) the
presence, use or release into the environment of any Hazardous Materials originating at or from, or
otherwise affecting, the Project, (ii) any fact, circumstance, condition or occurrence forming the
basis of any violation, or alleged violation, of any Environmental Law by Borrower or otherwise
affecting the health, safety or environmental condition of the Project or (iii) any alleged injury
or threat of injury to the environment by Borrower or otherwise affecting the Project.
(2) “Environmental Laws” means any federal, state or local law (whether imposed by
statute, or administrative or judicial order, or common law), now or hereafter enacted and
applicable to the Project, governing health, safety, industrial hygiene, the environment or natural
resources, or Hazardous Materials, including, such laws governing or regulating the use,
generation, storage, removal, recovery, treatment, handling, transport, disposal, control,
discharge of, or exposure to, Hazardous Materials.
(3) “Environmental Liens” has the meaning assigned to such term in Section 5.3(4).
(4) “Environmental Losses” means any losses, damages, costs, fees, expenses, claims,
suits, judgments, awards, liabilities (including, but not limited to, strict liabilities),
obligations, debts, diminutions in value, fines, penalties, charges, costs of remediation (whether
or not performed voluntarily), amounts paid in settlement, foreseeable and unforeseeable
consequential damages, litigation costs, reasonable attorneys’ fees and expenses, engineers’ fees,
environmental consultants’ fees, and investigation costs (including, but not limited to, costs for
sampling, testing and analysis of soil, water, air, building materials, and other materials and
substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred
in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or
awards relating to Hazardous Materials, Environmental Claims, Environmental Liens and violation of
Environmental Laws.
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(5) “Hazardous Materials” means (a) petroleum or chemical products, whether in liquid,
solid, or gaseous form, or any fraction or by product thereof, (b) asbestos or asbestos containing
materials, (c) polychlorinated biphenyls (PCBs), (d) radon gas, (e) underground storage tanks, (f)
any explosive or radioactive substances, (g) lead or lead-based paint, (h) Mold, or (i) any other
substance, material, waste or mixture which is or shall be listed, defined, or otherwise determined
by any governmental authority to be hazardous, toxic, dangerous or otherwise regulated, controlled
or giving rise to liability under any Environmental Laws.
(6) “Mold” means any microbial or fungus contamination or infestation in any Project
of a type that could reasonably be anticipated (after due inquiry and investigation) to pose a risk
to human health or the environment or could reasonably be anticipated (after due inquiry and
investigation) to negatively impact the value of the affected Property in any material respect.
Section 5.2 Representations and Warranties on Environmental Matters. Borrower represents and warrants to Administrative Agent and the Lenders that, to
Borrower’s knowledge, except as set forth in the Site Assessment, (1) no Hazardous Material is now
or was formerly used, stored, generated, manufactured, installed, treated, discharged, disposed of
or otherwise present at or about the Project or any property adjacent to the Project (except for
cleaning and other products currently used in connection with the routine maintenance or repair of
the Project and de minimus quantities used by tenants in the normal course of business in full
compliance with Environmental Laws), (2) all permits, licenses, approvals and filings required by
Environmental Laws have been obtained, and the use, operation and condition of the Project do not, and did not previously, violate any
Environmental Laws, (3) no civil, criminal or administrative action, suit, claim, hearing,
investigation or proceeding has been brought or been threatened, nor have any settlements been
reached by or with any parties or any Liens imposed in connection with the Project concerning
Hazardous Materials or Environmental Laws and (4) no underground storage tanks exist at the
Project.
Section 5.3 Covenants on Environmental Matters.
(1) Borrower shall (a) comply strictly and in all respects with applicable Environmental Laws;
(b) notify Administrative Agent immediately upon Borrower’s discovery of any spill, discharge,
release or presence of any Hazardous Material at, upon, under, within, contiguous to or otherwise
affecting the Project; (c) promptly remove such Hazardous Materials and remediate the Project in
full compliance with Environmental Laws and as reasonably recommended to preserve the value and/or
use of the Project, in accordance with the reasonable recommendations and specifications of an
independent environmental consultant approved by Administrative Agent; and (d) promptly forward to
Administrative Agent copies of all orders, notices, permits, applications or other communications
and reports in connection with any spill, discharge, release or the presence of any Hazardous
Material or any other matters relating to the Environmental Laws or any similar laws or
regulations, as they may affect the Project or Borrower.
(2) Borrower shall not cause, shall prohibit any other Person within the control of Borrower
from causing, and shall use prudent, commercially reasonable efforts to
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prohibit other Persons(including tenants) from causing (a) any spill, discharge or release, or the use, storage,
generation, manufacture, installation, or disposal, of any Hazardous Materials at, upon, under,
within or about the Project or the transportation of any Hazardous Materials to or from the Project
(except for cleaning and other products used in connection with the routine maintenance or repair
of the Project in full compliance with Environmental Laws), (b) any underground storage tanks to be
installed at the Project, or (c) any activity that requires a permit or other authorization under
Environmental Laws to be conducted at the Project.
(3) Lead Borrower shall provide to Administrative Agent, at Borrower’s expense promptly upon
the written request of Administrative Agent from time to time, a Site Assessment or, if required by
Administrative Agent, an update to any existing Site Assessment, to assess the presence or absence
of any Hazardous Materials and the potential costs in connection with abatement, cleanup or removal
of any Hazardous Materials found on, under, at or within the Project. Borrower shall pay the cost
of no more than one such Site Assessment or update in any twelve (12) month period, unless
Administrative Agent’s request for a Site Assessment is based on a reasonable suspicion of
Hazardous Materials at or near the Project, a breach of representations under Section 5.2,
or an Event of Default, in which case any such Site Assessment or update shall be at Borrower’s
expense.
(4) Environmental Notices. Lead Borrower shall promptly provide notice to Administrative
Agent of:
(a) all Environmental Claims asserted or threatened against Borrower or any other party
occupying the Project or any portion thereof or against the Project which become known to Borrower;
(b) the discovery by Borrower of any occurrence or condition on the Project or on any real
property adjoining or in the vicinity of the Project which could reasonably be expected to lead to
an Environmental Claim against Borrower, Administrative Agent or any of the Lenders;
(c) the commencement or completion of any environmental remediation at the Project; and
(d) any Lien or other encumbrance imposed pursuant to any Environmental Law
(“Environmental Liens”).
In connection therewith, Lead Borrower shall transmit to Administrative Agent copies of any
citations, orders, notices or other written communications received from any Person and any
notices, reports or other written communications submitted to any governmental authority with
respect to the matters described above.
Section 5.4 Allocation of Risks and Indemnity. As between Borrower, Administrative Agent and the Lenders, all risk of loss associated with
non-compliance with Environmental Laws, or with the presence of any Hazardous Material at, upon,
within, contiguous to or otherwise affecting the Project, shall lie solely with Borrower.
Accordingly, Borrower shall bear all risks and costs associated with any Environmental Loss, damage
or liability therefrom, including all costs of removal of Hazardous Materials or other remediation
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required hereunder or by law. Borrower shall indemnify, defend and hold Administrative Agent and
the Lenders harmless from and against all loss, liabilities, damages, claims, costs and expenses
(including reasonable costs of defense) arising out of or associated, in any way, with the
non-compliance with Environmental Laws, or the existence of Hazardous Materials in, on, or about
the Project, or a breach of any representation, warranty or covenant contained in this Article
5, whether based in contract, tort, implied or express warranty, strict liability, criminal or
civil statute or common law, including those arising from the joint, concurrent, or comparative
negligence of Administrative Agent and the Lenders; provided, however, Borrower shall not be liable
under such indemnification to the extent such loss, liability, damage, claim, cost or expense
results solely from Administrative Agent’s or any Lender’s gross negligence or willful misconduct.
Borrower’s obligations under this Section 5.4 shall arise upon the discovery of the
presence of any Hazardous Material, whether or not any governmental authority has taken or
threatened any action in connection with the presence of any Hazardous Material, and whether or not
the existence of any such Hazardous Material or potential liability on account thereof is disclosed
in the Site Assessment and shall continue notwithstanding the repayment of the Loans or any
transfer or sale of any right, title and interest in the Project (by foreclosure, deed in lieu of
foreclosure or otherwise).
Section 5.5 No Waiver. Notwithstanding any provision in this Article 5 or elsewhere in the Loan Documents,
or any rights or remedies granted by the Loan Documents, Administrative Agent and the Lenders do
not waive and expressly reserve all rights and benefits now or hereafter accruing to Administrative
Agent and/or any Lenders under the “security interest” or “secured creditor” exception under
applicable Environmental Laws, as the same may be amended. No action taken by Administrative Agent
and/or any Lender pursuant to the Loan Documents shall be deemed or construed to be a waiver or
relinquishment of any such rights or benefits under the “security interest exception.”
ARTICLE 6
LEASING MATTERS
Section 6.1 Representations and Warranties on Leases. Borrower represents and warrants to Administrative Agent and the Lenders with respect to
leases of the Project that: (1) to Borrower’s knowledge, the rent roll delivered to Administrative
Agent is true and correct, and the leases are valid and in and full force and effect; (2) the
leases (including amendments) are in writing, and there are no oral agreements with respect
thereto; (3) the copies of the leases delivered to Administrative Agent are true and complete; (4)
to Borrower’s knowledge, neither the landlord nor any tenant is in default under any of the leases;
(5) Borrower has no knowledge of any notice of termination or default with respect to any lease;
(6) Borrower has not assigned or pledged any of the leases, the rents or any interests therein
except to Administrative Agent (on behalf of the Lenders); (7) no tenant or other party has an
option to purchase all or any portion of the Project; (8) no tenant has the right to terminate its
lease prior to expiration of the stated term of such lease except in the case of a casualty or
condemnation of the Project to the extent permitted pursuant to the terms and conditions of such
lease; and (9) no tenant has prepaid more than one month’s rent in advance (except for bona fide
security deposits not in excess of an amount equal to two month’s rent). To the extent that any
part of the Land is located in the State of New York, reference is hereby made to Section 291-f of
the Real Property Law of the State of
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New York for purposes of obtaining for Administrative Agent and the Lender the benefits of said Section in connection herewith.
Section 6.2 Standard Lease Form; Approval Rights. All leases and other rental arrangements shall in all respects be approved by
Administrative Agent and shall be on a standard lease form for the Office Component, approved by
Administrative Agent with no material modifications (except as approved by Administrative Agent in
writing). Such lease form shall provide (a) that the lease is subordinate to the Mortgages, (b)
that the tenant shall attorn to Administrative Agent (on behalf of the Lenders) following an Event
of Default and (c) that any cancellation, surrender, or amendment of such lease without the prior
written consent of Administrative Agent shall be voidable by Administrative Agent. Borrower shall
hold, in trust, all tenant security deposits in a segregated account, and, to the extent required
by Applicable Law, shall not commingle any such funds with any other funds of Borrower. Within ten
(10) days after Administrative Agent’s request, Borrower shall furnish to Administrative Agent a
statement of all tenant security deposits, and copies of all leases not previously delivered to
Administrative Agent, certified by Borrower as being true and correct. Notwithstanding anything contained in the Loan Documents,
Administrative Agent’s approval shall not be required for future leases or lease extensions if the
following conditions are satisfied: (1) there exists no Potential Default or Event of Default; (2)
the lease is on the standard lease form approved by Administrative Agent with no modifications
except for commercially reasonable changes agreed to in the ordinary course of Borrower’s business,
but in any event there shall be no modifications to the subordination, attornement, estoppel and
landlord liability clause without the prior written consent of Administrative Agent; (3) the lease
does not conflict with any restrictive covenant affecting the Project or any other lease for space
in the Project; (4) the lease is not a Major Lease; (5) the lease shall provide for rental rates
and landlord concessions comparable to existing local market rates as shall be established pursuant
to the Leasing Guidelines; (6) the lease is with a third party not an Affiliate of Borrower,
Sponsor or Guarantor; (7) the lease shall not contain any options for renewal or expansion by the
tenant at rental rates which are below reasonable comparable market levels at the time the lease is
executed; (8) the lease shall be to a tenant which Borrower, in its professional and commercially
reasonable judgment, has determined is creditworthy and (9) the lease is for a term of not more
than ten (10) years (exclusive of renewal options which, together with the initial lease term shall
not exceed fifteen (15) years).
Section 6.3 Covenants. Borrower (1) shall perform the obligations which Borrower is required to perform under the
leases, including the performance of any Tenant Improvement Work with respect thereto; (2) shall
enforce the obligations to be performed by the tenants; (3) shall promptly furnish to
Administrative Agent any notice of default or termination received by Borrower from any tenant, and
any notice of default or termination given by Borrower to any tenant; (4) shall not collect any
rents for more than thirty (30) days in advance of the time when the same shall become due, except
for bona fide security deposits not in excess of an amount equal to two month’s rent; (5) shall not
enter into any ground lease or master lease of any part of the Project; (6) shall not further
assign or encumber any lease; (7) shall not, except with Administrative Agent’s prior written
consent, cancel or accept surrender or termination of any Major Lease; (8) shall not, except with
Administrative Agent’s prior written consent, modify or amend any Major Lease (except for minor
modifications and amendments entered into in the ordinary course of business, consistent with
prudent property management practices, not
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affecting the economic terms of the lease); (9) shall use its best efforts to lease the Improvements; and (10) shall not, with respect to the Best Buy
Lease, select or change the “Outside Delivery Date” (as defined in such lease) without the prior
written consent of Administrative Agent, and any action in violation of clauses (5), (6), (7), and
(8) of this Section 6.3 shall be void at the election of Administrative Agent.
Section 6.4 Tenant Estoppels. At Administrative Agent’s request, Borrower shall, within thirty (30) days, obtain and
furnish to Administrative Agent, (1) written estoppels in form and substance reasonably
satisfactory to Administrative Agent, executed by tenants under leases in the Project and
confirming the term, rent, and other provisions and matters relating to the leases and (2) written
subordination and attornment agreements, in form and substance satisfactory to Administrative
Agent, executed by tenants under leases in the Project, whereby, among other things, such tenants subordinate their interest in the Project to the Loan Documents and agree to attorn to
Administrative Agent (on behalf of the Lenders) and its successors and assigns upon foreclosure or
other transfer of the Project after an Event of Default.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and the Lenders that:
Section 7.1 Organization and Power. Borrower and each Borrower Party is duly organized, validly existing and in good standing
under the laws of the state of its formation or existence, and is in compliance with legal
requirements applicable to doing business in the State. Borrower is not a “foreign person” within
the meaning of § 1445(f)(3) of the Internal Revenue Code. Lead Borrower’s U.S. taxpayer
identification number is 20-1577239 and Fordham Office’s U.S. taxpayer identification number is
26-1094416.
Section 7.2 Validity of Loan Documents. The execution, delivery and performance by Borrower and each Borrower Party of the Loan
Documents: (1) are duly authorized and do not require the consent or approval of any other party
or governmental authority which has not been obtained; and (2) will not violate any law or result
in the imposition of any Lien upon the assets of any such party, except as contemplated by the Loan
Documents. The Loan Documents constitute the legal, valid and binding obligations of Borrower and
each Borrower Party, enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, or similar laws generally affecting the enforcement of creditors’ rights.
Section 7.3 Liabilities; Litigation.
(1) The financial statements delivered by Borrower and each Borrower Party are true and
correct with no material change since the date of preparation. Except as disclosed in such
financial statements, there are no liabilities (fixed or contingent) affecting the Project,
Borrower or any Borrower Party. Except as disclosed in such financial statements, there is no
litigation, administrative proceeding, investigation or other legal action (including any
proceeding under any state or federal bankruptcy or insolvency law) pending or, to the
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knowledge of Borrower, threatened, against the Project, Borrower or any Borrower Party which if adversely
determined could have a Material Adverse Effect.
(2) Neither Borrower nor any Borrower Party is contemplating either the filing of a petition
by it under state or federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of its assets or property, and neither Borrower nor any Borrower Party has knowledge of any
Person contemplating the filing of any such petition against it.
Section 7.4 Taxes and Assessments. The Project is comprised of one or more parcels, each of which constitutes a separate tax
lot and none of which constitutes a portion of any other tax lot. There are no pending or, to
Borrower’s best knowledge, proposed, special or other assessments for public improvements or
otherwise affecting the Project, nor are there any contemplated improvements to the Project (other
than the Construction Work) that may result in such special or other assessments.
Section 7.5 Other Agreements; Defaults. Neither Borrower nor any Borrower Party is a party to or in violation of any agreement or
instrument or subject to any court order, injunction, permit, or restriction which might have a
Material Adverse Effect.
Section 7.6 Compliance with Law; Government Approvals.
(1) Borrower and the Project, as applicable, and the contemplated use thereof and operations
thereat, comply, and upon completion of construction of the Construction Work shall comply, with
all Applicable Law, except where the failure so to comply could not reasonably be expected to have
a Material Adverse Effect.
(2) All Government Approvals necessary in connection with the construction and operation of
the Project as contemplated by the Loan Documents and the Project Documents, are set forth in
Schedule 7.6 attached hereto (the “Permitting Schedule”) and, other than those
Government Approvals to be obtained after the date hereof as expressly identified in the Permitting
Schedule, have been duly obtained, were validly issued, are in full force and effect, are not
subject to appeal, are held in the name of Borrower (in the case of the Project, are held in the
name of Borrower (in the case of the Project), are free from conditions or requirements, the
compliance with which could reasonably be expected to have a Material Adverse Effect or which
Borrower does not reasonably expect will be able to be satisfied in the ordinary course of
business, and are assignable to and assumable by the successors in interest and transferees of
Borrower and run with the land.
(3) There is no proceeding pending or, to Borrower’s Knowledge, threatened that seeks, or may
reasonably be expected, to rescind, terminate, modify or suspend any such Government Approval.
(4) The information set forth in each application and other written material submitted by
Borrower and, to Borrower’s Knowledge, to the applicable Governmental Authority in connection with
each such Government Approval is accurate and complete in all material respects.
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(5) The Government Approvals expressly described on the Permitting Schedule as those to be
obtained after the date hereof are required solely in connection with later stages of development,
construction or operation of the Improvements. Borrower has no reason to believe that any
Government Approval that has not yet been obtained by Borrower, but which will be required in the
future, will not be granted in due course, on or prior to the date when required and free from any
condition or requirement which Borrower does not reasonably expect will be able to be satisfied in
the ordinary course of business.
(6) The Project (if constructed in accordance with the Plans and Specifications and the
Project Documents) will conform to and comply with all covenants, conditions, restrictions and
reservations in the Government Approvals and all Applicable Law, except where the failure so to
comply could not reasonably be expected to have a Material Adverse Effect.
(7) Borrower has no reason to believe that Administrative Agent, acting for the benefit of the
Lenders, will not be entitled, to the benefit of each Government Approval set forth on the
Permitting Schedule hereto with respect to the Project upon the exercise of remedies under the
Security Documents.
(8) Borrower has delivered to Administrative Agent a true and complete copy of each Government
Approval heretofore obtained with respect to the Project as indicated on the Permitting Schedule,
as the same shall be supplemented during the course of obtaining additional Government Approvals as
the Construction Work proceeds.
Section 7.7 Location of Borrower. Borrower’s principal place of business and chief executive
offices are located at the address stated in Section 12.1.
Section 7.8 ERISA. Borrower has no employees and has not established any pension plan for
employees which would cause Borrower to be subject to the Employee Retirement Income Security Act
of 1974, as amended.
Section 7.9 Margin Stock. No part of proceeds of the Loans will be used for purchasing or
acquiring any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors
of the Federal Reserve System.
Section 7.10 Tax Filings. Borrower and each Borrower Party have filed (or have obtained
effective extensions for filing) all federal, state and local tax returns required to be filed and
have paid or made adequate provision for the payment of all federal, state and local taxes, charges
and assessments payable by Borrower and each Borrower Party, respectively.
Section 7.11 Solvency. Giving effect to the Loans, the fair saleable value of Borrower’s assets exceeds and will,
immediately following the making of the Loans, exceed Borrower’s total liabilities, including,
without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of Borrower’s assets is and will, immediately following the making of the Loans, be
greater than Borrower’s probable liabilities, including the maximum amount of its contingent
liabilities on its Debts as such Debts become absolute and matured. Borrower’s assets do not and,
immediately following the making of the Loans will not, constitute unreasonably small capital to
carry out its business as conducted or as proposed to be conducted. Borrower does not intend to,
and does not believe that it will, incur Debts and
70
liabilities (including contingent liabilities
and other commitments) beyond its ability to pay such Debts as they mature (taking into account the
timing and amounts of cash to be received by Borrower and the amounts to be payable on or in
respect of obligations of Borrower).
Section 7.12 Full and Accurate Disclosure. No statement of fact made by or on behalf of
Borrower or any Borrower Party in this Agreement or in any of the other Loan Documents or in any
certificate, statement or questionnaire delivered by Borrower or any Borrower Party in connection
with the Loans 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 fact
presently known to Borrower or any Borrower Party which has not been disclosed to Administrative
Agent which might have a Material Adverse Effect.
Section 7.13 Single Purpose Entity. Borrower is and has at all times since its formation been
a Single Purpose Entity.
Section 7.14 Property Management Agreement; Construction Management Agreement; Development
Agreement.
(1) The Property Management Agreement is the only property management agreement in existence
with respect to the operation or management of the Project. The copy of the Property Management
Agreement delivered to Administrative Agent is a true and correct copy, and such agreement has not
been modified. Neither party to such agreement is in default under such agreement and the Property
Manager has no defense, offset right or other right to withhold performance under or terminate such
agreement.
(2) The Construction Management Agreement is the only Construction Management Agreement in
existence with respect to the construction management of the Project. The copy of the Construction
Management Agreement delivered to Administrative Agent is a true and correct copy, and such
agreement has not been modified. Neither party to such agreement is in default under such
agreement and the Construction Manager has no defense, offset right or other right to withhold
performance under or terminate such agreement.
(3) There is no development agreement with respect to the Project.
Section 7.15 No Conflicts.
(1) The execution, delivery and performance of the Loan Documents, and the Project Documents
by Borrower do not and will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or imposition of any Lien
(other than pursuant to the Loan Documents) upon any of the property or assets of Borrower pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement, operating agreement or
other agreement or instrument to which Borrower is a party or by which any of Borrower’s property
or assets is subject, nor will such action result in any violation of the provisions of any
Applicable Law or Government Approval applicable to Borrower or the Project.
(2) Each Government Approval required for and each consent or approval required to be obtained
from, and notice required to be delivered to, any other Person in
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connection with the execution,
delivery and performance by Borrower of this Agreement, the other Loan Documents, and the Project
Documents has been obtained or delivered and is in full force and effect.
Section 7.16 Title. Borrower has good, marketable and insurable fee simple title to the
Project, free and clear of all Liens, except for the Permitted Encumbrances and such other Liens as
are permitted pursuant to the Loan Documents. The Mortgages create (and upon the recordation
thereof and of any related financing statements there will be perfected) (1) a valid Lien on the
Project, subject only to Permitted Encumbrances and (2) security interests in and to, and
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 and such other Liens as
are permitted pursuant to the Loan Documents. There are no claims for payment for work, labor or
materials affecting the Project which are or may become a Lien prior to, or of equal priority with,
the Liens created by the Loan Documents.
Section 7.17 Use of Project. The Project, upon completion of the construction of the
Improvements, will be used exclusively for retail, office and other ancillary uses permitted by
applicable zoning law, and for no other purpose or purposes.
Section 7.18 Flood Zone. No portion of the Project or the Improvements is located in an area
identified by the Secretary of Housing and Urban Development or any successor thereto as an area
having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Act of 1994, as amended, or any
successor law.
Section 7.19 Insurance. Borrower has obtained and has delivered to Administrative Agent certified copies of all of
the insurance policies for the Project reflecting the insurance coverages, amounts and other
insurance requirements set forth in this Agreement. No claims have been made under any such
policy, and no Person, including Borrower, has done, by act or omission, anything which would
impair the coverage of any such policy.
Section 7.20 Condemnation. No condemnation has been commenced or, to Borrower’s knowledge, is
contemplated with respect to all or any portion of the Project or for the relocation of roadways
providing access to the Project.
Section 7.21 Utilities; Access. The Project has adequate rights of access to public ways and
is or will, following completion of the Improvements, be served by adequate electric, gas, water,
sewer, sanitary sewer and storm drain facilities. All public utilities necessary to the full use
and enjoyment of the Project are or will be located in the public right-of-way abutting such
project, there exists sufficient capacity to support the Project and all such utilities are or
will, following the completion of the Improvements, be connected so as to serve such project
without passing over other property, except to the extent such other property is subject to a
perpetual easement for such utility benefiting such project. All roads necessary for the full
utilization of the Project for its current purpose have been or will be completed and dedicated to
public use and accepted by all Governmental Authorities. Except for on-site and off-site
infrastructure improvements to be developed pursuant to the Government Approvals by Borrower for
the Project, there are no amenities, services or facilities (including those for access,
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parking,
recreational activities and otherwise) not located or to be constructed upon the Project, pursuant
to the applicable Project Documents, which are necessary to the use or enjoyment, or intended to
benefit the owner or occupants, thereof.
Section 7.22 Boundaries. Except as shown on the Survey all of the improvements to be
developed in connection with the Project lie wholly within the boundaries and building restriction
lines of such project, and no improvements on adjoining properties encroach upon the Project.
Section 7.23 Separate Lots. The Project is comprised of one (1) or more parcels which
constitutes one (1) or more separate tax lots and does not constitute a portion of any other tax
lot not a part of the Project.
Section 7.24 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or
other amounts in the nature of transfer taxes required to be paid by any Person under applicable
legal requirements currently in effect in connection with the transfer of the Project to Borrower
or any transfer of a controlling interest in Borrower have been paid. All mortgage, mortgage
recording, stamp, intangible or other similar tax required to be paid by any Person in connection
with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the Loan Documents,
including, without limitation, the Mortgages, have been paid and, the Mortgages are enforceable in
accordance with its terms by Administrative Agent or any subsequent holder thereof (on behalf of
the Lenders), subject to applicable bankruptcy, insolvency, or similar laws generally affecting the
enforcement of creditors’ rights.
Section 7.25 Investment Company Act. Borrower is not (1) an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940,
as amended; or (2) subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
Section 7.26 Foreign Assets Control Regulations, Etc. Neither the execution and delivery of
the Notes and the other Loan Documents by Borrower Parties nor the use of the proceeds of the
Loans, will violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended), Executive Order No. 13,224,66 Fed. Reg. 49,079 (2001), issued by the President of the
United States of America (Executive Order Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism) or any enabling legislation or
executive order relating to any of the same. No Borrower Party nor any of their respective
subsidiaries or Affiliates is a Prohibited Person.
Section 7.27 Organizational Structure.
(1) Borrower has heretofore delivered to Administrative Agent a true and complete copy of the
Organizational Documents of each Borrower Party.
(2) Schedule 7.27 contains a true and accurate chart reflecting the ownership of all
of the direct and indirect equity interests in Borrower and each Borrower Party, including the
percentage of ownership interest of the Persons shown thereon.
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Section 7.28 Project Documents. Borrower has heretofore delivered to Administrative Agent a
true and complete copy of each Project Document and, subject to the terms of Section 9.7 of the
Building Loan Agreement, none of the Project Documents has been further modified. The Project
Documents are in full force and effect and Borrower is not in default under or with respect to any
Project Document. To the best of Borrower’s knowledge, no other party to a Project Document is in
default under any material covenant or obligation set forth therein.
Section 7.29 Budget. The amounts and allocations set forth in the Budget (including the
Project Costs), as it may be amended in accordance with the terms of this Agreement, present a
full, complete and good faith representation of all costs, expenses and fees anticipated to be
required to acquire and
develop the Project, complete the Construction Work, and pay interest on the Loans, the
carrying and operating costs for the Project, costs in connection with the leasing of premises
within the Project.
Section 7.30 Interim Disbursements. All Loans, if any, disbursed prior to the date hereof by
Administrative Agent to Lead Borrower have been applied to the respective items listed in the
respective Request for Loan Advance, except that in the case of any disputed items, such Loans have
been applied to other Budget Line Items with Administrative Agent’s prior approval or repaid to
Administrative Agent (on behalf of the Lenders).
Section 7.31 Reserved.
Section 7.32 Tenant Improvement Allowances. Schedule 7.32 attached hereto sets forth
a true and complete summary of all Tenant Improvement Allowances currently provided for in the
Leases; provided that Schedule 7.32 shall be subject to update as Approved Leases are
executed and/or amended in accordance with the terms hereof and as plans for Tenant Improvement
Allowances are further developed pursuant to Approved Leases.
Section 7.33 Reserved.
ARTICLE 8
FINANCIAL REPORTING
Section 8.1 Financial Statements.
(1) Monthly Reports. During the period commencing on the Closing Date and ending upon the
satisfaction of the Project Work Substantial Completion Conditions, as soon as available and in any
event within fifteen (15) Business Days after the end of each calendar month occurring during such
period, a certificate of an authorized officer of Lead Borrower, in form and substance reasonably
satisfactory to Administrative Agent, setting forth in reasonable detail (a) Borrower’s total
sources of funds and uses thereof during such month (specifically identifying any uses of
contingency funds permitted to be advanced by Administrative Agent), (b) the aggregate amounts paid
during such month to the Construction Manager and/or subcontractors and any unpaid amounts owing to
the Construction Manager and/or subcontractors which are sixty (60) days past their due date, (c)
variations from the Construction Schedule, including, without limitation, the estimated Completion
Date, and the reasons therefor, (d) if the amounts paid to the Construction Manager and/or
subcontractors during such month are
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at variance from the amounts scheduled to be paid pursuant to
the applicable Request for Loan Advance, the reasons for such variance, (e) any Liens placed on the
Project and their payment status, (f) the status of construction generally and of the Government
Approvals necessary for the construction and operation of the Project; and (g) copies of Lien
Waivers and any other reports as may reasonably be requested by Administrative Agent.
(2) Quarterly Reports. Within sixty (60) days after the end of each calendar quarter (except
for the fourth quarter ending on December 31), Lead Borrower shall furnish to Administrative Agent
(a) on and after the satisfaction the Project Work Substantial Completion Conditions, quarterly
operating statements for the Project for the most recent fiscal quarter, (b) a current rent roll
for the Project, (c) on and after the Occupancy of the first tenant in the Project for operation of
its business, a statement of all rent arrearages as of the last day of such fiscal quarter, (d) a
leasing status report, (e) quarterly financial statements (including a balance sheet, income
statement and cash flow statement) for Borrower, Guarantor and the Managing Member prepared in
accordance with GAAP (and including all appropriate and customary notes), and (f) a certificate
executed by the chief financial officer of Borrower or the Managing Member of Borrower stating that
each such quarterly statement presents fairly the financial condition and the results of operations
of Borrower and the Project and has been prepared in accordance with general accepted accounting
principles.
(3) Annual Reports. Within one hundred twenty (120) days after the end of each calendar year,
Lead Borrower will furnish to Administrative Agent a complete copy of Borrower’s annual financial
statements prepared in accordance with GAAP and otherwise in form and detail reasonably acceptable
to Administrative Agent, for such calendar year which financial statements shall contain (x) a
balance sheet and (y) on and after the Occupancy of the first tenant in the Project, a detailed
operating statement for each of Borrower and the Project. Borrower’s annual financial statements
shall be accompanied by (i) a comparison of the budgeted income and expenses and the actual income
and expenses for the prior calendar year, and (ii) a certificate executed by the chief financial
officer of Borrower or the Managing Member of Borrower (in the case of the Borrower financial
statements) stating that each such annual financial statement presents fairly the financial
condition and the results of operations of Borrower and the Project and has been prepared in
accordance with general accepted accounting principles. Together with Borrower’s annual financial
information to be delivered pursuant to this Section 8.1(3), copies, certified by an
Authorized Officer of Borrower to be true and correct, for each annual period prior to the
Completion Date, the annual audited financial statement of the Construction Manager, in each case
prepared in accordance with GAAP, and together with the opinion of the independent certified public
accountant of the Construction Manager, which opinion is not qualified as to the scope of the audit
or as to the status of the Construction Manager.
(4) Additional Reports. Upon completion of the Improvements and if the Maturity Date is
extended pursuant to Section 2.5, Lead Borrower shall deliver to Administrative Agent as
soon as reasonably available, but in no event later than thirty (30) days after such items become
available to Borrower in final form a summary report containing each of the following with respect
to the Project for the most recently completed calendar year: (A) aggregate sales by tenants under
leases or other occupants of the Project, both on an actual (or to the extent such information is
not provided by tenants, Property Manager’s or Borrower’s best estimate) and on
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a comparable store
basis, (B) rent per square foot payable by each tenant and (C) aggregate Occupancy of the Project
by anchor space and in-line store space as of December 31.
Section 8.2 Accounting Principles. All financial statements shall be prepared in accordance with sound accounting principles
applicable to commercial real estate, consistently applied from year to year. If the financial
statements are prepared on an accrual basis, such statements shall be accompanied by a
reconciliation to cash basis accounting principles.
Section 8.3 Other Information. Lead Borrower shall deliver to Administrative Agent such
additional information regarding Borrower, its subsidiaries, its business, any Borrower Party, and
the Project within thirty (30) days after Administrative Agent’s request therefor.
Section 8.4 Audits. Administrative Agent shall have the right to choose and appoint a
certified public accountant to perform financial audits as it deems necessary, at Borrower’s
expense. Borrower shall permit Administrative Agent to examine such records, books and papers of
Borrower which reflect upon its financial condition and the income and expense relative to the
Project.
ARTICLE 9
COVENANTS
Borrower covenants and agrees with Administrative Agent and the Lenders as follows:
Section 9.1 Due on Sale and Encumbrance; Transfers of Interests. Without the prior written
consent of Administrative Agent and the Lenders (to the extent required under Section
12.2),
(1) Borrower shall not allow any Change of Control to occur;
(2) neither Borrower nor any other Person having an ownership or beneficial interest in
Borrower shall (a) allow, directly or indirectly, any Transfer (other than a Permitted Transfer),
to occur; or (b) further encumber, alienate, grant a Lien or grant any other interest in the
Project or any part thereof (including any partnership, membership or other ownership interest in
Borrower), whether voluntarily or involuntarily; and
(3) Borrower shall not assign any of its rights or obligations hereunder or under the Loan
Documents.
As used in this Section 9.1, “Transfer” shall include the sale, transfer, conveyance,
mortgage, pledge, or assignment of the legal or beneficial ownership of (a) the Project (including,
following the establishment of a condominium regime with respect to the Project, any Unit), (b) any
partnership interest in any general partner in Borrower that is a partnership, (c) any membership
interest in any member in Borrower that is a limited liability company and (d) any voting stock in
any managing member in Borrower that is a corporation; “Transfer” shall not include (i) the leasing
of any space within the Project so long as Borrower complies with the
provisions of the Loan Documents relating to such leasing activity; or (ii) the transfers of
non-managing membership interests in Borrower so long as no Change of Control results therefrom.
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Section 9.2 Maintenance of the Project; Alterations.
(1) Upon the completion of construction of the Project, Borrower shall:
(a) maintain or cause to be maintained the Improvements with the facilities and amenities as
described in the definition of “Improvements,” in good condition and repair, in a manner consistent
with a class “A” mixed-use commercial property located in Bronx, New York, and make or cause to be
made all reasonably necessary repairs or replacements thereto;
(b) not remove, demolish or structurally alter, or permit or suffer the removal, demolition or
structural alteration of, any of the Improvements without the prior written consent of
Administrative Agent except to the extent required pursuant to the development of the Project and
in connection with the Construction Work or as permitted by this Agreement or required by
Applicable Law;
(c) subject to the terms of the Loan Documents (and the Condominium Declaration, if
applicable), promptly restore or cause to be restored in like manner any portion of the
Improvements which may be damaged or destroyed from any cause whatsoever;
(d) not commit, or permit, any waste of the Project; and
(e) subject to the terms of the Loan Documents (and the Condominium Declaration, if
applicable), not remove or permit the removal of any item constituting part of the Project without
replacing it with a comparable item of equal quality, value and usefulness; except that the
foregoing provisions shall not prohibit the sale or disposition, in the ordinary course of
business, of any property which is obsolete or such replacement is impracticable and not within the
sound business judgment of Borrower, all as subject to the consent of Administrative Agent, which
consent shall not be unreasonably withheld, delayed or conditioned.
(2) Upon the completion of construction of the Project, Borrower shall obtain Administrative
Agent’s prior written consent, which consent shall not be unreasonably withheld, conditioned or
delayed, to any alterations to the Improvements, other than alterations performed in connection
with the restoration of the Project after the occurrence of a casualty in accordance with the terms
and provisions of this Agreement (and the Condominium Declaration, if applicable).
Section 9.3 Real Estate Taxes; Charges(1) . Borrower shall pay before any fine, penalty,
interest or cost may be added thereto, and shall not enter into any agreement to defer, any real
estate taxes and assessments, franchise taxes and charges, and other governmental charges that may
become a Lien upon the Project or become payable during the term of the Loans (collectively, the
“Real Estate Taxes”), and will promptly furnish Administrative Agent with evidence of such
payment;
however, Borrower’s compliance with Section 9.16 of this Agreement relating to
impounds for taxes and assessments shall, with respect to payment of such taxes and assessments, be
deemed compliance with this Section 9.3. Borrower shall not suffer or permit the joint
assessment of the Project with any other real property constituting a separate tax lot or with any
other real or personal property. Borrower shall pay when due all claims and
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demands of mechanics,
materialmen, laborers and others which, if unpaid, might result in a Lien on the Project; however,
Borrower may contest the validity of such claims and demands or taxes so long as (1) Lead Borrower
notifies Administrative Agent that Borrower intends to contest such claim or demand, (2) Borrower
provides Administrative Agent with an indemnity, bond or other security satisfactory to
Administrative Agent (including an endorsement to Administrative Agent’s title insurance policy
insuring against such claim or demand) assuring the discharge of Borrower’s obligations for such
claims and demands, including interest and penalties, (3) Borrower is diligently contesting the
same by appropriate legal proceedings in good faith and at its own expense and concludes such
contest prior to the tenth (10th) day preceding the earlier to occur of the Maturity Date or the
date on which the Project is scheduled to be sold, forfeited, terminated, cancelled or lost for non
payment, (4) such proceedings shall not subject Borrower, the Administrative Agent or any Lender to
criminal or civil liability (other than civil liability as to which adequate security has been
provided pursuant to clause (2) above), and (5) Borrower shall promptly upon final determination
thereof pay the amount of such items, together with all costs, interests and penalties.
(2) Borrower shall pay all taxes, charges, filing, registration and recording fees, excises
and levies payable with respect to the Notes or the Liens created or secured by the Loan Documents,
other than income, franchise and doing business taxes imposed on Administrative Agent or any
Lender. If there shall be enacted any law (1) deducting the Loans from the value of the Project
for the purpose of taxation, (2) affecting any Lien on the Project, or (3) changing existing laws
of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or
changing the manner of collecting any such taxes, Borrower shall promptly pay to Administrative
Agent, on demand, all taxes, costs and charges for which Administrative Agent or any Lender is or
may be liable as a result thereof; however, if such payment would be prohibited by law or would
render the Loans usurious, then instead of collecting such payment, Administrative Agent may (and
on the request of the Majority Lenders shall) declare all amounts owing under the Loan Documents to
be immediately due and payable.
Section 9.4 Development; Management.
(1) Borrower shall not terminate, replace or appoint any property manager or terminate or
amend the Property Management Agreement for the Project without Administrative Agent’s prior
written approval. Any change in majority ownership or control of the Property Manager shall be
cause for Administrative Agent to reasonably re-approve such Property Manager and Property
Management Agreement. Borrower shall replace the Property Manager as the request of the
Administrative Agent (i) upon the occurrence of an Event of Default, (ii) if the Property Manager
is in default of its obligations under the Property Management Agreement, or (iii) if the Property
Manager is insolvent or is the subject of an involuntary or voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or its Debts or other
liabilities under any bankruptcy, insolvency or other similar law.
(2) If at any time Administrative Agent consents to the appointment of a new property manager,
such new property manager and Borrower shall, as a condition of Administrative Agent’s consent,
execute a Property Manager’s Consent and Subordination of Property Management Agreement in the form
then used by Administrative Agent. Each property manager shall hold and maintain all necessary
licenses, certifications and permits required by
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law. Borrower shall fully perform all of its
covenants, agreements and obligations under the Property Management Agreement.
(3) Borrower shall cause the Project to be managed by a Qualified Manager engaged by Borrower
and approved by Administrative Agent in its reasonable discretion. Acadia-P/A Management Services,
LLC is hereby approved as the initial Property Manager, pursuant to the terms set forth in the
Property Management Agreement.
(4) Subject to the terms of the Subordination of Property Management Agreement, the Property
Manager shall be entitled to receive a management fee of not more than four percent (4%) of total
operating revenues as defined in the applicable Property Management Agreement approved by the
Administrative Agent.
(5) The Property Manager shall, prior to the Closing Date, deliver an executed Subordination
of Property Management Agreement.
(6) Lead Borrower shall deliver to Administrative Agent, as and when executed, certified
copies of all maintenance, management, service, leasing and sales contracts entered into with
respect to the Project, each of which shall provide that Administrative Agent shall have the right,
upon foreclosure, to terminate such contract on thirty (30) days notice, or, if such right is not
provided in such contract, such contract shall be entered into with a party, and on terms and
conditions reasonably acceptable to Administrative Agent , and contemporaneously with entering into
each such contract, at Administrative Agent’s option, cause the service provider under each such
contract to deliver to Administrative Agent a Consent and Agreement, pursuant to which such service
provider shall undertake, inter alia, to continue performance on behalf of the Lenders following
any Event of Default without additional cost (other than sums owed pursuant to such contract for
services thereafter rendered to or for Administrative Agent).
(7) Borrower will not enter into a development agreement with respect to the Project unless:
(a) Administrative Agent has approved the developer in writing; (b) the form and substance of the
development agreement is acceptable to Administrative Agent and (c) the development agreement has
been collaterally assigned to the Administrative Agent, in accordance with a form reasonably
acceptable to the Administrative Agent, and consented to by the developer.
Section 9.5 Compliance with Laws; Inspection.
(1) Borrower shall:
(a) comply in all material respects (subject to such more stringent requirements as may be set
forth elsewhere herein) with all Applicable Laws;
(b) obtain, comply with and maintain in full force and effect all Government Approvals and
shall from time to time obtain all Government Approvals as shall now or hereafter be necessary
under Applicable Law in connection with the ownership, construction, operation or maintenance of
the Project or the execution, delivery and performance by Borrower of any of the Project Documents
to which it is a party and shall comply with all such Government Approvals and keep them in full
force and effect;
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(c) promptly furnish a true and complete copy of each such Government Approval to
Administrative Agent;
(d) unless otherwise approved by the Administrative Agent, use its reasonable efforts to
contest any proceedings before any Governmental Authority and to resist any proposed adverse
changes in Applicable Law to the extent that such proceedings or changes are directed specifically
toward the Project or could reasonably be expected to have a Material Adverse Effect; and
(e) permit Administrative Agent and the Lenders and their agents, representatives and
employees, upon reasonable prior notice to Borrower, to inspect the Project and conduct such
environmental and engineering studies and inspections of the Project as Administrative Agent may
require, provided such inspections and studies are conducted during normal business hours and do
not materially interfere with the use and operation of the Project.
(2) After prior notice by Lead Borrower to Administrative Agent, Borrower, at its own expense,
may contest by appropriate legal proceedings promptly initiated and conducted in good faith and
with due diligence, the validity or application of any Applicable Law; provided that:
(a) no Event of Default exists;
(b) Borrower shall pay any outstanding fines, penalties or other payments under protest unless
such proceeding shall suspend the collection of such items;
(c) such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower or the Project is subject and shall not
constitute a default thereunder;
(d) no part of or interest in the Project will be in danger of being sold, forfeited,
terminated, canceled or lost during the pendency of the proceeding;
(e) such proceeding shall not subject Borrower, Administrative Agent or any Lender to criminal
or civil liability (other than civil liability as to which adequate security has been provided
pursuant to clause (f) below);
(f) unless paid under protest, Borrower shall have furnished such security as may be required
in the proceeding, or as may be reasonably requested by Administrative Agent, to insure the payment
of any such items, together with all interest and penalties thereon, which shall not be less than
110% of the maximum liability of Borrower as reasonably determined by Administrative Agent; and
(g) Borrower shall promptly upon final determination thereof pay the amount of such items,
together with all costs, interest and penalties.
(3) Administrative Agent will engage an inspecting architect at Borrower’s reasonable expense,
in accordance with Administrative Agent’s standard engagement procedures, to review plans,
specifications and budgets of the Project on a monthly basis,
inspect
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the Project and provide
reports on such inspections to the Administrative Agent for the benefit of the Lenders.
Section 9.6 Legal Existence; Name, Etc.
(1) Borrower and each Managing Member in Borrower shall preserve and keep in full force and
effect their respective existence as a Single Purpose Entity, entity status, franchises, rights and
privileges under the laws of the state of its formation, and all qualifications, licenses and
permits applicable to the ownership, use and operation of the Project. Neither Borrower nor any
Managing Member of Borrower shall wind up, liquidate, dissolve, reorganize, merge, or consolidate
with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of all or
substantially all of their respective assets, or acquire all or substantially all of the assets of
the business of any Person, or permit any subsidiary or Affiliate of Borrower to do so. Borrower
and each Managing Member in Borrower shall conduct business only in its own respective name and
shall not change its respective name, identity, or organizational structure, or the location of its
chief executive office or principal place of business unless Borrower or such Managing Member (a)
shall have obtained the prior written consent of Administrative Agent to such change, and (b) shall
have taken all actions necessary or requested by Administrative Agent to file or amend any
financing statement or continuation statement to assure perfection and continuation of perfection
of security interests under the Loan Documents.
(2) Borrower shall at all times cause there to be at least one (1) duly appointed member of
the board of managers or other governing board or body of the managing member of the Managing
Member, who is an Independent Manager. Borrower shall not take any action or permit any action to
be taken which, under the terms of this Agreement, or the limited partnership agreement or limited
liability company operating agreement of Borrower, the Managing Member, or the managing member of
the Managing Member, requires the consent of such Independent Manager(s), unless such Independent
Manager(s) shall have consented in writing to such action.
(3) Neither Borrower nor Borrower’s Managing Member shall cause or permit any modification to
be made in its organizational documents that would be inconsistent with the provisions of
Section 7.27 or this Section 9.6, that would interfere with its ability to comply
with its status as a Single Purpose Entity, as applicable, or that otherwise in any other respect
would violate this Agreement or could reasonably be expected to have a Material Adverse Effect.
Section 9.7 Affiliate Transactions(1) Without the prior written consent of Administrative
Agent, Borrower shall not engage in any transaction affecting the Project with an Affiliate of
Borrower.
Section 9.8 Limitation on Other Debt.
(1) Borrower and Managing Member shall not, without the prior written consent of
Administrative Agent and the Majority Lenders, incur any Debt other than, in the case of Borrower,
the Debt permitted by the definition of Single Purpose Entity.
(2) Borrower shall not make any loans, and no direct or indirect interest in Borrower may be
pledged as collateral for any financing or otherwise, except for the Approved
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Mezzanine Loan and as
otherwise may be permitted under this Agreement or expressly approved by Administrative Agent and
Majority Lenders in their discretion.
Section 9.9 Further Assurances. Borrower shall promptly (1) cure any defects in the execution
and delivery of the Loan Documents, and (2) execute and deliver, or cause to be executed and
delivered, all such other documents, agreements and instruments as Administrative Agent may
reasonably request to further evidence and more fully describe the collateral for the Loans, to
correct any omissions in the Loan Documents, to perfect, protect or preserve any Liens created
under any of the Loan Documents, or to make any recordings, file any notices, or obtain any
consents, as may be necessary or appropriate in connection therewith.
Section 9.10 Loan Certificates. Borrower or Administrative Agent, within ten (10) days after
request from the other party, shall furnish to the requesting party a written statement, duly
acknowledged, setting forth the amount due on the Loans, the terms of payment of the Loans, the
date to which interest has been paid, whether any offsets or defenses exist against the Loans and,
if any are alleged to exist, the nature thereof in detail, and such other matters as the requesting
party reasonably may request.
Section 9.11 Notice of Certain Events. Lead Borrower shall promptly notify Administrative
Agent of (1) any Potential Default or Event of Default, together with a detailed statement of the
steps being taken to cure such Potential Default or Event of Default; (2) any notice of default
received by Borrower or any Borrower Party under other obligations relating to the Project or
otherwise material to Borrower’s business; and (3) any threatened or pending legal, judicial or
regulatory proceedings, including any dispute between Borrower and any governmental authority,
affecting Borrower or the Project.
Section 9.12 Indemnification. Borrower shall indemnify, defend and hold Administrative Agent
and each Lender harmless from and against any and all losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or
nature whatsoever, including the reasonable fees and actual expenses of their counsel, which may be
imposed upon, asserted against or incurred by any of them relating to or arising out of (1) the
Project or (2) any of the Loan Documents or the transactions contemplated thereby, including,
without limitation,
(a) any accident, injury to or death of persons or loss of or damage to property occurring in,
on or about any of the Project or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways, (b) any inspection, review or testing of or
with respect to the Project, (c) any investigative, administrative, mediation, arbitration, or
judicial proceeding, whether or not Administrative Agent or any Lender is designated a party
thereto, commenced or threatened at any time (including after the repayment of the Loans) in any
way related to the execution, delivery or performance of any Loan Document or to the Project, (d)
any proceeding instituted by any Person claiming a Lien, and (e) any brokerage commissions or
finder’s fees claimed by any broker or other party claiming to have dealt with the Borrower in
connection with the Loans, the Project, or any of the transactions contemplated in the Loan
Documents, including those arising from the joint, concurrent, or comparative negligence of
Administrative Agent or any Lender, except to the extent any of the foregoing is caused by
Administrative Agent’s or any Lender’s gross negligence or willful misconduct, in which case the
party to whom the gross negligence or willful misconduct is attributable (but not any other party)
shall not be entitled to
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the indemnification provided for hereunder to the extent of such gross
negligence or willful misconduct, to the extent determined by a court of competent jurisdiction.
Section 9.13 Covenants Regarding the Condominium Declaration. Borrower covenants and agrees
that, from and after the establishment of any condominium regime with respect to the Project:
(1) Borrower shall pay when due and before any fine, penalty, interest or cost may be added
thereto for the late payment or non-payment thereof, all Unit Annual Assessments imposed on
Borrower’s Project Interest and all other charges mentioned in and payable by Borrower under the
Condominium Declaration (including, without limitation, all insurance and taxes applicable to
Borrower’s Project Interest), and shall comply with all of its other obligations under the
Condominium Declaration, and shall do all things necessary to preserve and to keep unimpaired
Borrower’s rights, powers and privileges (whether as the owner of the Units, as the Declarant, as
the holder of any special class of voting rights, or otherwise) thereunder. If Borrower shall fail
to do so, the Lenders shall, if required by Administrative Agent, pay such Unit Annual Assessments
or other charges. Lead Borrower shall deliver to Administrative Agent, upon request, copies of
receipts or other proof satisfactory to Administrative Agent evidencing the timely payment of such
Unit Annual Assessments and other charges.
(2) Borrower shall comply with the covenants, agreements and provisions of the Condominium
Documents, and Lead Borrower shall promptly notify Administrative Agent of (a) any failure by
Borrower to comply with the Condominium Declaration and (b) the receipt by Borrower of any notice
asserting or claiming a default by Borrower under the Condominium Declaration, and shall promptly
cause a copy of such notice to be delivered to Administrative Agent.
(3) Borrower shall not vote in favor of or otherwise approve any amendment of the Condominium
Declaration without the prior written consent of Administrative Agent, which consent shall not be
unreasonably withheld.
(4) Borrower shall not waive any material right of the Borrower (whether as the owner of the
Units, as the Declarant, as the holder of any special class of voting rights, or otherwise) under
the Condominium Declaration without the prior written consent of Administrative Agent which shall
not be unreasonably withheld.
(5) The Lien of the Mortgages shall encumber all of Borrower’s Project Interest, including all
of Borrower’s rights to vote on or approve any matter with respect to Borrower’s Project Interest.
Without the prior written consent of Administrative Agent, Borrower shall not exercise such voting
or approval rights with respect to any of the following:
(a) any partition of all or a part of the Project subject to the Condominium Declaration;
(b) the nature and amount of any insurance covering all or a part of the Project and the
disposition of any proceeds thereof;
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(c) the manner in which any condemnation or threat of condemnation of all or a part of the
Project shall be defended or settled and the disposition of any award or settlement in connection
therewith;
(d) the construction of any additions or improvements to, or any repair, rebuilding or
restoration of all or a portion of any Improvements to, the Project (to the extent that the same
would require the approval of Administrative Agent under this Agreement);
(e) the distribution of any insurance or condemnation proceeds (other than in compliance with
this Agreement); and
(f) any other material action or decision provided for in the Condominium Declaration.
(6) If required by the Administrative Agent, Lead Borrower will take all action to obtain as
promptly as possible, and forthwith upon receipt furnish to the Administrative Agent, a true and
correct copy of: (a) any statement showing the allocation of expenses and other assessments against
the Units and (b) any statements issued to Borrower calling for payment of expenses.
(7) Lead Borrower shall be, and remain through the repayment of the Loans in full, the
Declarant under the Condominium Declaration.
(8) Borrower shall at all times comply with the provisions of Section 17.2(5), hereof.
(9) Borrower shall at all times comply with the covenants contained in Section 17.1(2).
(10) Borrower acknowledges and agrees that nothing set forth in this Section or in any of the
other provisions of the Loan Documents shall impose upon Administrative Agent or any Lender any
obligation or responsibility to Borrower under the Condominium Declaration.
Section 9.14 Collateral Letters of Credit. With respect to any Collateral Letter of Credit
that Borrower may furnish or cause to be furnished to Administrative Agent in accordance with the
terms of this Agreement or any of the other Loan Documents:
(1) Administrative Agent will be entitled, among other things, to make one or more draws by
presentment thereof to the issuing bank accompanied only by Administrative Agent’s clean
sight-draft, it being intended that the issuing bank shall have no right to inquire as to
Administrative Agent’s right to draw upon such Collateral Letter of Credit;
(2) Administrative Agent shall be entitled, among other things, to draw upon each Collateral
Letter of Credit, in whole, or in part from time to time, upon the occurrence and during the
continuance of any Event of Default or under the other circumstances under which a draw shall be
permitted under the Loan Documents or the Collateral Letter of Credit;
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(3) Administrative Agent shall have the right to draw upon any Collateral Letter of Credit
within thirty (30) days prior to the expiration date of such Collateral Letter of Credit and each
renewal and extension thereof unless, prior to such expiration date of such Collateral Letter of
Credit and each renewal and extension thereof, the Borrower shall have furnished a replacement,
extension or renewal Collateral Letter of Credit, acceptable to Administrative Agent, it being the
intent hereof that at no time shall the unexpired term of any Collateral Letter of Credit be less
than thirty (30) days. If Administrative Agent draws upon a Collateral Letter of Credit pursuant
to the terms of this subsection (3), then Administrative Agent shall hold the proceeds thereof in a
Controlled Account as additional collateral for the Obligations, to be applied in accordance with
subsection (5) below;
(4) Administrative Agent shall also be entitled to draw upon a Collateral Letter of Credit if
Administrative Agent believes that its rights to draw on such Collateral Letter of Credit could be
in jeopardy. Without limiting the foregoing, Administrative Agent shall also be entitled to draw
on a Collateral Letter of Credit if the credit rating or financial condition of the issuing bank is
no longer meets the minimum rating contained in the definition of Collateral Letter of Credit.
Following a draw by Administrative Agent on a Collateral Letter of Credit solely because of the
deterioration of the creditworthiness of the issuing bank, Administrative Agent will deposit such
proceeds in a Controlled Account as security for the purposes for which such Letter of Credit was
delivered and Administrative Agent shall be entitled to draw upon such proceeds to the same extent
it would have been entitled to make a draw under the applicable Letter of Credit. Administrative
Agent shall disburse such proceeds to Lead Borrower provided (i) Borrower delivers to
Administrative Agent a replacement Collateral Letter of Credit within ten (10) days of
Administrative Agent’s draw, (ii) there exists no Event of Default or Potential Default and (iii)
Borrower pays all of Administrative Agent’s fees and expenses in connection with such draw and
disbursement;
(5) No draw by Administrative Agent on any Collateral Letter of Credit shall cure or be deemed
to cure any Event of Default or limit in any respect any of Administrative Agent’s or the Lenders’
remedies under the Loan Documents, it being understood that Administrative Agent’s and the Lenders’
rights and remedies hereunder shall be cumulative and
Administrative Agent and the Lenders shall have no obligations to apply the proceeds of any
draw to missed installments or other amounts then due and unpaid under the Loans. Proceeds of any
draw upon a Collateral Letter of Credit (after reimbursement of any costs and expenses, including
attorneys’ fees and reimbursements, incurred by Administrative Agent in connection with such draw),
other than a draw made in accordance with Section 9.14(4), may be applied by Administrative
Agent to the payment of the Obligations in such manner as Administrative Agent may determine. No
delay or omission of Administrative Agent or the Lenders in exercising any right to draw on a
Collateral Letter of Credit shall impair any such right, or shall be construed as a waiver of, or
acquiescence in, any Event of Default; and
(6) Administrative Agent shall, upon request, release its rights in any Collateral Letters of
Credit and surrender such Collateral Letters of Credit to the issuing bank upon the payment in full
of all obligations under the Loan Documents.
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Section 9.15 Hedge Agreements.
(1) At Borrower’s option, the Borrower may enter into one or more Hedge Agreements. Each Hedge
Agreement shall, at Borrower’s option, be based on Interest Periods (each, an “Interest Rate
Hedge Period”) of one, two, three months or such other Interest Periods satisfactory to
Administrative Agent in its sole discretion. The economic and other benefits of the Hedge
Agreements and all of the other rights thereunder shall be collaterally assigned to Administrative
Agent as additional security for the Loans, pursuant to a Hedge Pledge. All Hedge Pledges shall be
accompanied by (i) Uniform Commercial Code financing statements, in duplicate, with respect to such
pledges and (ii) the consent and agreement of the counterparty thereunder that it will pay all
amounts due thereunder to an account designated by Administrative Agent and will continue to
perform its obligations under such Hedge Agreement for the benefit of Administrative Agent and the
Lenders after enforcement of and/or realization on such Hedge Pledge and an acknowledgement that
Administrative Agent shall not be deemed to have assumed any of the obligations or duties of
Borrower under any such Hedge Agreement.
(2) All of Borrower’s obligations under any Hedge Agreement provided by a Eurohypo
Counterparty shall be secured by the lien of the Mortgages on a pari passu basis with the Loans and
other sums evidenced or secured by the Loan Documents.
(3) Any Hedge Agreement entered into with one or more banks or insurance companies (each a
“Third-Party Counterparty”) other than a Eurohypo Counterparty (a “Third-Party Hedge
Agreement”) shall not be secured by the Mortgage or a Lien on any portion of the collateral
under the Security Documents or on or in any direct or indirect interest in Borrower.
(4) Borrower shall cause all payments payable by a Third-Party Counterparty under the Hedge
Agreement to be deposited into an account designated by Administrative Agent. On the due date for
interest on the Loans each month, the amounts so deposited in such account shall be debited, and
applied to pay the accrued but unpaid interest on the Loans due on such date, before applying any
portion of the Loan proceeds which is allocated to the Interest Reserve for such purpose, and
before applying any Operating Revenues for such purpose.
(5) Any payment due from the counterparty under any Hedge Agreement upon a termination
thereof, shall be delivered to Administrative Agent and applied by Administrative Agent to any
amounts due under the Loan Documents.
(6) In connection with a Third-Party Hedge Agreement, Lead Borrower shall obtain and deliver
to Administrative Agent an opinion from counsel (which counsel may be in-house counsel for the
Third-Party Counterparty) for the Third-Party Counterparty (in form reasonably satisfactory to
Administrative Agent and upon which Administrative Agent, the Lenders and their respective
successors and assigns may rely) which shall provide, in relevant part, that:
(a) the Third-Party Counterparty is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation or organization and has
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the organizational
power and authority to execute and deliver, and to perform its obligations under, the Third-Party
Hedge Agreement;
(b) the execution and delivery of the Third-Party Hedge Agreement by the Third-Party
Counterparty, and any other agreement which the Third-Party Counterparty has executed and delivered
pursuant thereto, and the performance of its obligations thereunder have been and remain duly
authorized by all necessary action and do not contravene any provision of its certificate of
incorporation or by-laws (or equivalent organizational documents) or any law, regulation or
contractual restriction binding on or affecting it or its property;
(c) all consents, authorizations and approvals required for the execution and delivery by the
Third-Party Counterparty of the Third-Party Hedge Agreement, and any other agreement which the
Third-Party Counterparty has executed and delivered pursuant thereto, and the performance of its
obligations thereunder have been obtained and remain in full force and effect, all conditions
thereof have been duly complied with, and no other action by, and no notice to or filing with any
governmental authority or regulatory body is required for such execution, delivery or performance;
and
(d) the Third-Party Hedge Agreement, and any other agreement which the Third-Party
Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by
the Third-Party Counterparty and constitutes the legal, valid and binding obligation of the
Third-Party Counterparty, enforceable against the Third-Party Counterparty in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
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).
(7) For so long as a Hedge Agreement is in effect, Administrative Agent may elect to cause
advances of the Loan proceeds available for interest payments to be used to make “regular” payments
due under the Hedge Agreement (i.e., other than those payments which are due upon the termination
of such Hedge Agreement), in addition to interest payments on the Loans.
Section 9.16 Reserves. Administrative Agent may at any time after the occurrence of an Event of Default, at its
option (or at the direction of the Majority Lenders), to be exercised by written notice to Lead
Borrower, require the deposit by Borrower, on each Payment Date, of additional amounts sufficient
to discharge when due the obligations of Borrower under Section 9.3 and Section 3.1
(if applicable, and excluding all income, franchise, single business or other taxes imposed on
Borrower unless the same is in lieu of real estate taxes) when they become due. Simultaneously
with the initial deposit under this Section 9.16, Borrower shall deposit with
Administrative Agent an amount determined by Administrative Agent to be necessary to ensure that
there will be on deposit with Administrative Agent an amount which, when added to the monthly
payments subsequently required to be deposited with Administrative Agent hereunder on account of
Real Estate Taxes, insurance premiums, will result in there being on deposit with Administrative
Agent an amount sufficient to pay the next due periodic installment of Real Estate Taxes, insurance
premiums one (1) month prior to the delinquency date thereof
and the next periodic payments of
insurance premiums one (1) month prior to the due date thereof.
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Commencing on the first Business
Day of the first calendar month after the occurrence of an Event of Default and continuing
thereafter on the first Business Day of each month thereafter, Borrower shall pay to Administrative
Agent deposits in an amount equal to one-twelfth (1/12) of the yearly amount of Real Estate Taxes,
insurance premiums that will next become due and payable on the Project. The determination of the
amount to be deposited with Administrative Agent with each installment shall be made by
Administrative Agent in its reasonable discretion. Such amounts shall be held by Administrative
Agent in an account under the sole dominion and control of Administrative Agent and applied
(together with any interest earned thereon) to the payment of the obligations in respect to which
such amounts were deposited or, at the option of the Administrative Agent, to the payment of said
obligations in such order of priority as Administrative Agent shall determine, on or before the
respective dates on which the same or any of them would become delinquent. If one (1) month prior
to the due date of any of the aforementioned obligations the amounts then on deposit therefor shall
be insufficient for the payment of such obligations in full, Borrower, within five (5) days after
demand, shall deposit the amount of the deficiency with Administrative Agent. Nothing herein
contained shall be deemed to affect any right or remedy of Administrative Agent and/or the Lenders
under the provisions of this Agreement or the other Loans Documents or of any statute or rule of
law to pay any such amount and to add the amount so paid together with interest at the Default Rate
to the indebtedness secured by the Mortgages. Borrower hereby pledges to Administrative Agent (on
behalf of the Lenders) and grants to Administrative Agent (on behalf of the Lenders) a security
interest in any and all monies now or hereafter deposited in such reserves and the account
established by Administrative Agent as additional security for the payment of the Loans and agrees
to enter into an agreement with Administrative Agent and the bank where such account is established
in order to perfect Administrative Agent’s security interest therein. In making any payment from
such reserves, Administrative Agent may do so according to any bill, statement or estimate or
procured from the appropriate public office (with respect to Real Estate Taxes), insurer or agent
(with respect to insurance premiums), without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any such charge.
Section 9.17 Handicapped Access.
(1) Borrower (a) agrees that it shall use commercially reasonable efforts to ensure that the
Project shall at all times comply with the applicable requirements of the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, all state
and local laws and ordinances related to handicapped access and all rules, regulations, and orders
issued pursuant thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively, “Access Laws”) and (b)
has no actual knowledge as to the Project’s non-compliance with any Access Laws where the failure
to so comply could have a material adverse effect on the Project or on Borrower’s ability to repay
the Loans in accordance with the terms hereof.
(2) Notwithstanding any provisions set forth herein or in any other document regarding
Administrative Agent’s approval of alterations of the Project, Borrower shall not alter the Project
in any manner which would materially increase Borrower’s responsibilities for compliance with the
applicable Access Laws without the prior written approval of Administrative Agent. The foregoing
shall apply to tenant improvements constructed by Borrower or by any of its tenants.
Administrative Agent may condition any such approval upon
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receipt of a certificate of Access Law
compliance from an architect, engineer, or other person reasonably acceptable to Administrative
Agent.
(3) Lead Borrower agrees to give prompt notice to Administrative Agent of the receipt by
Borrower of any written complaints related to violation of any Access Laws with respect to the
Project and of the commencement of any proceedings or investigations which relate to compliance
with applicable Access Laws.
Section 9.18 Zoning. Borrower shall not, without Administrative Agent’s prior consent, such
consent not to be unreasonably withheld, seek, make, suffer, consent to or acquiesce in any change
or variance in any zoning or land use laws or other conditions of use of the Project or any portion
thereof. Borrower shall not use or permit the use of any portion of the Project in any manner that
could result in such use becoming a non-conforming use under any zoning or land use law or any
other applicable law or modify any agreements relating to zoning or land use matters or with the
joinder or merger of lots for zoning, land use or other purposes, without the prior written consent
of Administrative Agent. Without limiting the foregoing, in no event shall Borrower take any
action that would reduce or impair either (a) the number of parking spaces at the Improvements or
(b) access to the Project from adjacent public roads. Further, without Administrative Agent’s
prior written consent, such consent not to be unreasonably withheld, Borrower shall not file or
subject any part of the Project to any declaration of condominium or co-operative or convert any
part of the Project to a condominium, co-operative or other direct or indirect form of multiple
ownership and governance.
Section 9.19 ERISA. Borrower shall not hire any employees, and shall obtain all workforce
services required for the ownership, operation, construction or development of the Project by
contracting therefor pursuant to the Construction Management Agreement and the Project Documents.
Borrower shall not take any action, or omit to take any action, which would (a) cause Borrower’s
assets to constitute “plan assets” for purposes of ERISA or the Internal Revenue Code or (b) cause
the transactions contemplated by this Agreement and the other Loan Documents to be nonexempt
prohibited transactions (as such term is defined in Section 4975 of the Internal Revenue Code
or Section 406 of ERISA) that could subject Administrative Agent and/or the Lenders, on account of
any Loan or execution of the Loan Documents hereunder, to any tax or penalty on prohibited
transactions imposed under Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
Section 9.20 Books and Records. Borrower will, and will cause each of the other Borrower
Parties to, keep proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and activities. Borrower will,
and will cause each of the other Borrower Parties to, permit any representatives designated by
Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at such reasonable times
and as often as reasonably requested.
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Section 9.21 Foreign Assets Control Regulations.
(1) Neither Borrower nor any Borrower Party shall use the proceeds of the Loan in any manner
that will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) ,
Executive Order No. 13,224,66 Fed. Reg. 49,079 (2001), issued by the President of the United States
of America (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism), or any enabling legislation or executive order relating
to any of the same. Without limiting the foregoing, neither Borrower, nor any Borrower Party, nor
any partner or member (or other direct or indirect principal) in a Borrower Party will permit
itself nor any of its Subsidiaries to (a) become a blocked person described in Section 1 of the
above referenced Executive Order or (b) knowingly engage in any dealings or transactions or be
otherwise associated with any person who is known by such Borrower Party or who (after such inquiry
as may be required by Applicable Law) should be known by such Borrower Party to be a blocked
person.
(2) Each partner or member (or other direct or indirect principal) in Borrower shall be at all
times during the term of the Loans an entity or person which is (and whose principals shall be) a
reputable entity or person of good character and in good standing as reasonably determined by the
Lenders, and is not adverse to any of the Lenders in any pending material litigation or arbitration
in which any Lender is also a party.
Section 9.22 Performance of Project Documents and Easements.
(1) Borrower shall (a) perform and observe in all material respects all of its covenants and
agreements contained in each of the Project Documents to which it is a party, (b) take all
reasonable and necessary action to prevent the termination of any such Project Document in
accordance with the terms thereof or otherwise, (c) enforce each material covenant or obligation of
each such Project Document in accordance with its terms, (d) cause Lead Borrower to promptly give
Administrative Agent copies of any material default or other material notices
given by or on behalf of Borrower received by or on behalf of Borrower from any other Person
under the Project Documents and (e) take all such action to achieve the purposes described in
clauses (a), (b) and (c) of this Section 9.22 as may from time to time be reasonably
requested by Administrative Agent; provided, however, that Borrower shall be
permitted, upon Administrative Agent’s reasonable approval, to contest the validity or
applicability of any requirement under the Project Documents.
(2) Borrower will comply in all material respects with all restrictive covenants and easements
affecting the Project (unless the Title Company has insured against the enforcement of same in the
Title Policy). All covenants, easements, cross easements or operating agreements which may
hereafter be acquired, entered into or amended by Borrower affecting the Project shall be submitted
to Administrative Agent for reasonable approval prior to the execution thereof by Borrower,
accompanied by a drawing or survey showing the location thereof.
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Section 9.23 Operating Plan and Budget.
(1) Lead Borrower shall, no less than sixty (60) days after the satisfaction of the Project
Work Substantial Completion Conditions, and then annually thereafter not later than November 15th
of the previous calendar year, submit to Administrative Agent for Administrative Agent’s written
approval an annual operating and capital budget (each an “Annual Budget”), in form
reasonably satisfactory to Administrative Agent setting forth in detail budgeted monthly Operating
Revenues and monthly Operating Expenses and projected capital expenditures for the Project.
Administrative Agent shall have the right to reasonably approve such Annual Budget (such approval
to be in the Administration Agent’s sole discretion during an Event of Default and any period where
Administrative Agent is taking action to remove the Property Manager). If Administrative Agent
objects to the proposed Annual Budget, Administrative Agent shall advise Lead Borrower of such
objections within fifteen (15) days after receipt thereof (and deliver to Lead Borrower a
reasonably detailed description of such objections) and Lead Borrower shall within five (5) days
after receipt of notice of any such objections revise such Annual Budget and resubmit the same to
Administrative Agent such procedure to be repeated until such time as Administrative Agent shall
approve such Annual Budget. Each such Annual Budget approved by Administrative Agent in accordance
with terms hereof is referred to herein as an “Approved Annual Budget.” Until such time
that Administrative Agent has approved a proposed Annual Budget, the most recently Approved Annual
Budget shall apply, provided that such Approved Annual Budget shall be adjusted to reflect actual
increases in real estate taxes, insurance premiums and utilities expenses and shall otherwise be
adjusted to reflect any change during the preceding year in the Consumer Price Index.
(2) Lead Borrower may at any time propose an amendment to an Approved Annual Budget for the
remainder of the then current calendar year, and, when approved as provided below, such amended
Approved Annual Budget shall be deemed to be and shall be effective as the Approved Annual Budget
for such calendar year. Prior to making any expenditures not reflected in the then current
Approved Annual Budget in excess of an aggregate amount of $150,000 per annum, Lead Borrower shall
propose an amendment to the Approved Annual Budget to Administrative Agent for its reasonable
approval; provided, however, that Administrative Agent shall have no approval
rights with respect to increases in non-discretionary
items (e.g. real estate taxes and insurance premiums). Copies of any such proposed amended
Approved Annual Budget shall be furnished at least fifteen (15) days before final adoption thereof
to Administrative Agent for its approval. Administrative Agent shall have fifteen (15) days after
receipt of any proposed amendment to the Approved Annual Budget to approve or disapprove such
proposed amendment.
Section 9.24 Proceedings to Enjoin or Prevent Construction. If any proceedings are filed
seeking to enjoin or otherwise prevent or declare invalid or unlawful all or any part of the
Construction Work, Borrower, at its sole cost and expense, will cause such proceedings to be
contested in a commercially reasonable manner, and in the event of an adverse ruling or decision,
if commercially reasonable, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any temporary or permanent
injunction that may be entered, and use its best efforts to bring about a favorable and speedy
disposition of all such proceedings.
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Section 9.25 Industrial and Commercial Incentive Program
(1) On or before the Closing Date, Borrower shall deliver to Administrative Agent the
preliminary application submitted to the New York City Department of Finance (“Department of
Finance”) evidencing the Project’s eligibility for the partial tax exemption in accordance with
paragraph 24 of Schedule 4-Part A.
(2) Pursuant to Title 11, Chapter 2, Part 4 of the Administrative Code of the City of New York
City and the regulations promulgated thereunder, as amended from time to time (“Code”), Borrower
shall make a thorough and complete final application to the Department of Finance for a certificate
of eligibility for a partial exemption of real property taxes for the Improvements for a
twenty-five (25) year period (“ICIP Tax Exemption”) subsequent to commencing construction on the
Project. Borrower shall provide a copy of the said application to Administrative Agent evidencing
that same was received by the Department of Finance.
(3) Pursuant to the Code, Borrower shall submit a thorough and complete final construction
report within sixty (60) days of completing construction on the Project to the Department of
Finance for a certificate of eligibility for the ICIP Tax Exemption. Borrower shall provide a copy
of the certificate of eligibility, or if unavailable, a letter from the Department of Finance
evidencing same, to Administrative Agent promptly upon Borrower’s receipt thereof and in any event
no later than sixty (60) days after the submission of such application, or such later date to the
extent that the Borrower’s failure to receive such certificate is due to Unavoidable Delay.
(4) Before, during and after the construction of the Improvements, Borrower shall do all
things necessary and required by statute, rule and regulation to maintain the availability of the
ICIP Tax Exemption, including, but not limited to the following: (i) notify the ICIP unit of the
Department of Finance (“ICIP Unit”) and the New York City Department of Small Business
Services/Division of Labor Services (“Division of Labor Services”) in writing fifteen (15) business
days prior to commencing construction on the Project; (ii) submit construction employment reports
for the Project to the Division of Labor Services; and, if
requested by the Department of Finance, file a certificate of continuing use with the ICIP
Unit annually in each year of benefit period.
(5) Notwithstanding anything to the contrary in this Agreement, Borrower’s failure to obtain a
certificate of eligibility for a ICIP Tax Exemption pursuant to clauses (2) and (3) above shall not
constitute a default provided that (a) Borrower has otherwise complied with the provisions of this
Section 9.25, (b) is diligently proceeding to obtain such certificate and (iii) the only
cause for Borrower’s inability to obtain the applicable certificate is the Department of Finance’s
bureaucratic delay in issuing the applicable certificate and not for reasons related to Borrower’s
actions or eligibility.
Section 9.26 Reserved.
Section 9.27 Reserved.
Section 9.28 Reimbursement of Expenses. Borrower shall pay or reimburse Administrative Agent
and/or the Lenders on demand of the applicable party for: (1) all
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reasonable expenses incurred by
Administrative Agent in connection with the Loans, including reasonable fees and expenses of
Administrative Agent’s attorneys, environmental, engineering and other consultants, and fees,
charges or taxes for the negotiation, recording or filing of Loan Documents, (2) all reasonable
out-of-pocket expenses of Administrative Agent in connection with the administration of the Loans,
including audit costs, inspection fees, reasonable attorneys’ fees and disbursement, settlement of
condemnation and casualty awards, and premiums for title insurance and endorsements thereto, (3)
all of Administrative Agent’s reasonable costs and expenses (including reasonable fees and
disbursements of Administrative Agent’s external counsel) incurred in connection with the
syndication of the Loans to the Lenders, not to exceed $25,000 (excluding attorney’s fees and
internal expenses incurred by the Borrower), and (4) Administrative Agent and the Lenders for all
amounts expended, advanced or incurred by Administrative Agent and the Lenders to collect the
Notes, or to enforce the rights of Administrative Agent and the Lenders under this Agreement or any
other Loan Document, or to defend or assert the rights and claims of Administrative Agent and the
Lenders under the Loan Documents or with respect to the Project (by litigation or other
proceedings), which amounts will include all court costs, attorneys’ fees and expenses, fees of
auditors and accountants, and investigation expenses as may be incurred by Administrative Agent and
the Lenders in connection with any such matters (whether or not litigation is instituted), together
with interest at the Default Rate on each such amount from the date of disbursement until the date
of reimbursement to Administrative Agent and the Lenders, all of which shall constitute part of the
Loans and shall be secured by the Loan Documents.
ARTICLE 10
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default under the Loans:
Section 10.1 Payments. Borrower’s failure to (i) pay any regularly scheduled installment of principal, interest,
the Agency Fee or other amount due under the Loan Documents or (ii) make a deposit of cash, and/or
deliver a Collateral Letter of Credit required under the Loan Documents, within five (5) days of
(and including) the date when due, or Borrower’s failure to pay the Loans at the Maturity Date,
whether by acceleration or otherwise.
Section 10.2 Insurance. Borrower’s failure to maintain insurance as required under
Section 3.1 of this Agreement.
Section 10.3 Single Purpose Entity. If Borrower or any Borrower Party materially breaches its
covenant under Section 9.6 with respect to its status as a Single Purpose Entity.
Section 10.4 Real Estate Taxes. If any of the Real Estate Taxes are not paid when the same
are due and payable and such failure continues for ten (10) Business days after Borrower has actual
knowledge of such failure.
Section 10.5 Sale, Encumbrance, Etc. The sale, transfer, conveyance, pledge, mortgage or
assignment of any part or all of the Project, or any interest therein, or of any interest in
Borrower, in violation of Section 9.1 of this Agreement.
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Section 10.6 Representations and Warranties. Any representation or warranty made in any Loan
Document proves to be untrue in any material respect when made or deemed made.
Section 10.7 Other Encumbrances. Any material default under any document or instrument, other
than the Loan Documents, evidencing or creating a Lien on the Project or any part thereof that is
not cured within any applicable notice or cure period.
Section 10.8 Various Covenants. Borrower defaults under any of its obligations under
Section 6.2 (pertaining to lease approvals), 9.7 (transactions with Affiliates),
9.8 (limitations on debt), 9.18 (zoning and use changes) or 9.19 (ERISA),
of this Agreement.
Section 10.9 Reserved.
Section 10.10 Financial Covenants. Borrower defaults under any of its obligations under Section 9.12 and Section
9.28 of this Agreement.
Section 10.11 Involuntary Bankruptcy or Other Proceeding. Commencement of an involuntary case
or other proceeding against any Borrower Party which seeks liquidation, reorganization or other
relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any of its property, and such involuntary
case or other proceeding shall remain undismissed or unstayed for a period of sixty (60) days; or
an order for relief against a Borrower Party shall be entered in any such case under the Federal
Bankruptcy Code.
Section 10.12 Voluntary Petitions, Etc. Commencement by a Borrower Party of a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with respect to itself or
its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any
of its property, or consent by a Borrower Party to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other proceeding commenced against
it, or the making by a Borrower Party of a general assignment for the benefit of creditors, or the
failure by a Borrower Party, or the admission by a Borrower Party in writing of its inability, to
pay its debts generally as they become due, or any action by a Borrower Party to authorize or
effect any of the foregoing.
Section 10.13 Debt. The occurrence, at any time prior to Substantial Completion, of any
“Event of Default” under (and as such term is defined in) the loan agreement included within the
Approved Mezzanine Loan Documents; or Borrower or Managing Member shall default in the payment when
due of any principal of or interest on any of its other Debt aggregating $1,000,000 or more and
such default shall not be cured within any applicable notice or cure period provided with respect
to such Debt; or any event specified in any note, agreement, indenture or other document evidencing
or relating to any such Debt shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or holders of such Debt to
cause, such Debt to become due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise); prior to its stated maturity.
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Section 10.14 Dissolution. Any of Borrower Parties shall be terminated, dissolved or
liquidated (as a matter of law or otherwise) or proceedings shall be commenced by any Person
(including any Borrower Party) seeking the termination, dissolution or liquidation of any Borrower
Party, which, in the case of actions by Persons other than a Borrower Party or any of their
Affiliates, shall continue unstayed and in effect for a period of sixty (60) or more days.
Section 10.15 Judgments. One or more (i) judgments for the payment of money (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect of such judgment)
aggregating with respect to any Borrower Party (other than Guarantor) in excess of $1,000,000 shall
be rendered against such party or (ii) non-monetary judgments, orders or decrees shall be entered
against any of the Borrower Parties which have or would reasonably be expected to have a Material
Adverse Effect, and, in either case, the same shall remain undischarged for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets of such Borrower Party to
enforce any such judgment.
Section 10.16 Security. The Liens created by the Security Documents shall at any time not
constitute a valid and perfected first priority Lien (subject to the Permitted Encumbrances) on the
collateral intended to be covered thereby in favor of Administrative Agent, free and clear of all
other Liens (other than the Permitted Encumbrances), or, except for expiration in accordance with
its terms, any of the Security Documents shall for whatever reason be terminated or cease to be in
full force and effect, or the enforceability thereof shall be contested by any Borrower Party or
any of their Affiliates, provided that, as long as the security provided by the Security Documents
shall not be impaired, with respect to a Lien (other than a Permitted Encumbrance) on the
collateral, Borrower shall have ten (10) days for monetary Liens and thirty (30) days for all
non-monetary Liens within which provide Administrative Agent with evidence that such Lien has been
bonded or otherwise removed of record.
Section 10.17 Guarantor Documents. Guarantor shall (i) default under any Guarantor Document
beyond any applicable notice and grace period; or (ii) revoke or attempt to revoke, contest or
commence any action against its obligations under any Guarantor Document.
Section 10.18 Reserves. Borrower uses, or permits the use of, funds from any reserves or from
any Controlled Account required under this Agreement for any purpose other than the purpose for
which such funds were disbursed from such reserves or such Controlled Account and such default is
not cured within ten (10) days of Borrower’s knowledge of such default.
Section 10.19 Co-Borrower Documents. Either Borrower shall (i) default under any Co-Borrower
Document beyond any applicable notice and grace period; or (ii) revoke or attempt to revoke,
contest or commence any action against its obligations under any Co-Borrower Document.
Section 10.20 Covenants. Borrower’s failure to perform or observe any of the agreements and covenants contained
in this Agreement or in any of the other Loan Documents and not specified above, and, if such
failure is susceptible to being cured, the continuance of such failure for thirty (30) days
after notice by Administrative Agent to Lead Borrower; provided, however,
subject to any shorter period for curing any failure by Borrower as specified in any of the other
Loan Documents, Borrower shall have an additional ninety (90) days to cure such failure if (1) such
failure does not involve the failure to make payments on a monetary obligation; (2) such failure
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cannot reasonably be cured within thirty (30) days; (3) Borrower is diligently undertaking to cure
such default, and (4) Borrower has provided Administrative Agent with security reasonably
satisfactory to Administrative Agent against any reasonably anticipated interruption of payment or
impairment of collateral as a result of such continuing failure.
Section 10.21 Deficiency Deposits. Borrower shall fail to make a Deficiency Deposit or Equity
Balancing Contribution within the time and in the manner provided in Section 4.3.
Section 10.22 Reserved.
Section 10.23 Reserved.
Section 10.24 Building Loan Agreement Default. An Event of Default shall occur under the
Building Loan Agreement.
ARTICLE 11
REMEDIES
Section 11.1 Remedies — Insolvency Events. Upon the occurrence of any Event of Default
described in Section 10.11 or Section 10.12, the obligations of the Lenders to
advance amounts hereunder shall immediately terminate, and all amounts due under the Loan Documents
immediately shall become due and payable, all without written notice and without presentment,
demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity
thereof, notice of acceleration of the maturity thereof, or any other notice of default of any
kind, all of which are hereby expressly waived by Borrower; provided, however, if
Borrower Party under Section 10.11 or Section 10.12 is other than Borrower, then
all amounts due under the Loan Documents shall become immediately due and payable at Administrative
Agent’s election.
Section 11.2 Remedies — Other Events. Except as set forth in Section 11.1 above,
while any Event of Default exists, Administrative Agent may (1) by written notice to Lead Borrower,
declare the entire amount of the Loans to be immediately due and payable without presentment,
demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity
thereof, notice of acceleration of the maturity thereof, or other notice of default of any kind,
all of which are hereby expressly waived by Borrower, (2) terminate the obligation, if any, of the
Lenders to advance amounts
hereunder, and (3) exercise all rights and remedies therefor under the Loan Documents and at
law or in equity.
Section 11.3 Administrative Agent’s Right to Perform the Obligations. Without limiting the
provisions of Section 11.4 below, if Borrower shall fail, refuse or neglect to make any
payment or perform any act required by the Loan Documents, then while any Event of Default exists,
and without notice to or demand upon Borrower and without waiving or releasing any other right,
remedy or recourse Administrative Agent or any Lender may have because of such Event of Default,
Administrative Agent may (but shall not be obligated to) make such payment or perform such act for
the account of and at the expense of Borrower, and shall have the right to enter upon the Project
for such purpose and to take all such action thereon and with respect to the Project and the other
collateral for the Loans as it may deem necessary or appropriate. If Administrative Agent shall
elect to pay any sum due with reference to the
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Project, Administrative Agent may do so in reliance
on any bill, statement or assessment procured from the appropriate Governmental Authority or other
issuer thereof without inquiring into the accuracy or validity thereof. Similarly, in making any
payments to protect the security intended to be created by the Loan Documents, Administrative Agent
shall not be bound to inquire into the validity of any apparent or threatened adverse title, Lien,
encumbrance, claim or charge before making an advance for the purpose of preventing or removing the
same. Additionally, if any Hazardous Materials affect or threaten to affect the Project,
Administrative Agent may (but shall not be obligated to) give such notices and take such actions as
it deems necessary or advisable in order to abate the discharge of any Hazardous Materials or
remove the Hazardous Materials. Borrower shall indemnify, defend and hold Administrative Agent and
the Lenders harmless from and against any and all losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature
whatsoever, including reasonable attorneys’ fees and disbursements, incurred or accruing by reason
of any acts performed by Administrative Agent or any Lender pursuant to the provisions of this
Section 11.3, including those arising from the joint, concurrent, or comparative negligence
of Administrative Agent and any Lender, except as a result of Administrative Agent’s or any
Lender’s gross negligence or willful misconduct. All sums paid by Administrative Agent pursuant to
this Section 11.3, and all other sums expended by Administrative Agent or any Lender to
which it shall be entitled to be indemnified, together with interest thereon at the Default Rate
from the date of such payment or expenditure until paid, shall constitute additions to the Loans,
shall be secured by the Loan Documents and shall be paid by Borrower to Administrative Agent upon
demand.
Section 11.4 Administrative Agent’s Right to Complete Construction. Administrative Agent may
take possession of the Project and complete the construction and equipping of the Improvements and
do anything in its sole judgment to fulfill the obligations of Borrower hereunder, including either
the right to avail itself of and procure performance of existing contracts or enter into any
contracts with the same contractors or others and to employ watchmen to protect the Project from
injury. Without restricting the generality of the foregoing and for the purposes aforesaid,
Borrower hereby appoints and constitutes Administrative Agent its lawful attorney-in-fact with full
power of substitution in the Project to complete construction of the Improvements in the name of
Borrower; to use unadvanced funds remaining under the
Commitments or which may be reserved, or escrowed or set aside for any purposes hereunder at
any time, or to advance funds in excess of the face amount of the Notes (and all such amounts shall
be payable by Borrower together with interest at the Default Rate), to complete the Improvements;
to make changes in the Plans and Specifications which shall be necessary or desirable to complete
the Improvements in substantially the manner contemplated by the Plans and Specifications; to
retain or employ new construction managers, subcontractors, architects, engineers and inspectors as
shall be required for said purposes; to pay, settle, or compromise all existing bills and claims
and Liens against the Project and take any other steps relating to clearing title to the Project
from any Liens that are not Permitted Encumbrances, or to avoid such bills and claims becoming
Liens against the Project or security interest against fixtures or equipment, or as may be
necessary or desirable for the completion of the construction and equipping of the Improvements or
for the clearance of title; to execute all applications and certificates in the name of Borrower
which may be required by any of the contract documents; to do any and every act which Borrower
might do in its own behalf; and to prosecute and defend all actions or proceedings in connection
with the Project or fixtures or equipment; to take action and
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require such performance as it deems
necessary under any bonds furnished in connection with the construction of the Improvements and to
make settlements and compromises with surety or sureties thereunder, and in connection therewith,
to execute instruments of release and satisfaction; it being understood and agreed that this power
of attorney shall be a power coupled with an interest and cannot be revoked.
Section 11.5 Administrative Agent’s Rights under the Guaranty of Completion. Exercise the
Lenders’ rights under the Guaranty of Completion to require Guarantor to perform thereunder, in
which case Borrower hereby (1) authorizes Administrative Agent and the Lenders to make advances of
the Loans directly to Guarantor in accordance with the terms of the Guaranty of Completion and this
Agreement and (2) agrees that Borrower shall be liable to the Lenders for all such advances to
Guarantor and such advances shall be deemed Loans under this Agreement and be evidenced by the
Notes and secured by the Mortgages and the other Security Documents.
Section 11.6 NO OBLIGATION WITH RESPECT TO COMPLETION OF THE IMPROVEMENTS. WHETHER OR NOT
ADMINISTRATIVE AGENT OR THE LENDERS ELECT TO EMPLOY ANY OR ALL OF THE REMEDIES AVAILABLE UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT, NEITHER ADMINISTRATIVE AGENT NOR ANY OF THE LENDERS SHALL BE
LIABLE FOR THE CONSTRUCTION OF OR FAILURE TO CONSTRUCT, COMPLETE OR PROTECT THE IMPROVEMENTS OR FOR
PAYMENT OF ANY EXPENSES INCURRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO
ADMINISTRATIVE AGENT OR THE LENDERS OR FOR THE PERFORMANCE OR NON-PERFORMANCE OF ANY OTHER
OBLIGATION OF BORROWER.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Notices. Any notice required or permitted to be given under this Agreement shall
be in writing and either shall be (a) mailed by certified mail, postage prepaid, return receipt
requested, (b) sent by overnight air courier service, (c) personally delivered to a representative
of the receiving party, or (d) sent by telecopy (provided an identical notice is also sent
simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this
Section 12.1) to the intended recipient at the “Address for Notices” specified below its
name on the signature pages hereof. Any communication so addressed and mailed shall be deemed to
be given on the earliest of (1) when actually delivered, (2) on the first Business Day after
deposit with an overnight air courier service, or (3) on the third Business Day after deposit in
the United States mail, postage prepaid, in each case to the address of the intended addressee, and
any communication so delivered in person shall be deemed to be given when receipted for by, or
actually received by Administrative Agent, a Lender, Lead Borrower or Borrower, as the case may be.
If given by telecopy, a notice shall be deemed given and received when the telecopy is transmitted
to the party’s telecopy number specified above, and confirmation of complete receipt is received by
the transmitting party during normal business hours or on the next Business Day if not confirmed
during normal business hours, and an identical notice is also sent simultaneously by mail,
overnight courier, or personal delivery as otherwise provided in this Section 12.1. Any
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party may designate a change of address by written notice to each other party by giving at least
ten (10) days’ prior written notice of such change of address.
Section 12.2 Amendments, Waivers, Etc.. This Agreement and any other Loan Document may be
modified only by an instrument in writing signed by Borrower and Administrative Agent, subject to
Section 14.9.
Section 12.3 Compliance with Usury Laws. It is the intention of the parties hereto to conform
strictly to applicable usury laws. Accordingly, all agreements between Borrower, Administrative
Agent and the Lenders with respect to the Loans are hereby expressly limited so that in no event,
whether by reason of acceleration of maturity or otherwise, shall the amount paid or agreed to be
paid to Administrative Agent or any Lender or charged by any Lender for the use, forbearance or
detention of the money to be lent hereunder or otherwise, exceed the maximum amount allowed by law.
If the Loans would be usurious under Applicable Law (including the laws of the State and the laws
of the United States of America), then, notwithstanding anything to the contrary in the Loan
Documents: (1) the aggregate of all consideration which constitutes interest under Applicable Law
that is contracted for, taken, reserved, charged or received under the Loan Documents shall under
no circumstances exceed the maximum amount of interest allowed by Applicable Law, and any excess
shall be credited on the Notes by the holders thereof (or, if the Notes have been paid in full,
refunded to Borrower); and (2) if maturity is accelerated by reason of an election by
Administrative Agent in accordance with the terms hereof, or in the event of
any prepayment, then any consideration which constitutes interest may never include more than
the maximum amount allowed by Applicable Law. In such case, excess interest, if any, provided for
in the Loan Documents or otherwise, to the extent permitted by Applicable Law, shall be amortized,
prorated, allocated and spread from the date of advance until payment in full so that the actual
rate of interest is uniform through the term hereof. If such amortization, proration, allocation
and spreading is not permitted under Applicable Law, then such excess interest shall be cancelled
automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be
credited on the Notes (or, if the Notes have been paid in full, refunded to Borrower). The terms
and provisions of this Section 12.3 shall control and supersede every other provision of
the Loan Documents. Except as otherwise expressly provided therein, the Loan Documents are
contracts made under and shall be construed in accordance with and governed by the laws of the
State of New York, except that if at any time the laws of the United States of America permit the
Lenders to contract for, take, reserve, charge or receive a higher rate of interest than is allowed
by the laws of the State of New York (whether such federal laws directly so provide or refer to the
law of any state), then such federal laws shall to such extent govern as to the rate of interest
which the Lenders may contract for, take, reserve, charge or receive under the Loan Documents.
Section 12.4 Invalid Provisions. If any provision of any Loan Document is held to be illegal,
invalid or unenforceable, such provision shall be fully severable; the Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a
part thereof; the remaining provisions thereof shall remain in full effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance therefrom; and in
lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a
part of such Loan Document a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible to be legal, valid and enforceable.
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Section 12.5 Approvals; Third Parties; Conditions. All approval rights retained or exercised
by Administrative Agent and the Lenders with respect to leases, contracts, plans, studies and other
matters are solely to facilitate the Lenders’ credit underwriting, and shall not be deemed or
construed as a determination that the Lenders have passed on the adequacy thereof for any other
purpose and may not be relied upon by Borrower or any other Person. This Agreement is for the sole
and exclusive use of Administrative Agent, the Lenders, the Lead Borrower and Borrower and may not
be enforced, nor relied upon, by any Person other than Administrative Agent, the Lenders, the Lead
Borrower and Borrower. All conditions of the obligations of Administrative Agent and the Lenders
hereunder, including the obligation to make advances, are imposed solely and exclusively for the
benefit of Administrative Agent and the Lenders, their successors and assigns, and no other Person
shall have standing to require satisfaction of such conditions or be entitled to assume that the
Lenders will refuse to make advances in the absence of strict compliance with any or all of such
conditions, and no other Person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or in part by Administrative
Agent and the Lenders at any time in their sole discretion.
Section 12.6 Lenders and Administrative Agent Not in Control; No Partnership. None of the
covenants or other provisions contained in this Agreement shall, or shall be deemed to, give
Administrative Agent or any Lender the right or power to exercise control over the affairs or
management of Borrower, the powers of Administrative Agent and the Lenders being limited to the
rights to exercise the remedies referred to in the Loan Documents. The relationship between
Borrower and the Lenders is, and at all times shall remain, solely that of debtor and creditor. No
covenant or provision of the Loan Documents is intended, nor shall it be deemed or construed, to
create a partnership, joint venture, agency or common interest in profits or income between
Administrative Agent, the Lenders, Lead Borrower and Borrower. Administrative Agent and the
Lenders neither undertake nor assume any responsibility or duty to Borrower or to any other person
with respect to the Loans, the Project or the other collateral for the Loans, except as expressly
provided in the Loan Documents. Notwithstanding any other provision of the Loan Documents: (1)
neither Administrative Agent nor any Lender is, nor shall be construed as, a partner, joint
venturer, alter ego, manager, controlling person or other business associate or participant of any
kind of Borrower or any Borrower Party or any of their respective stockholders, members, or
partners, and neither Administrative Agent nor any Lender intends to ever assume such status; (2)
no Lender or Administrative Agent shall in any event be liable for any Debts, expenses or losses
incurred or sustained by Borrower or any Borrower Party; and (3) no Lender or Administrative Agent
shall be deemed responsible for or a participant in any acts, omissions or decisions of Borrower or
any Borrower Party or any of their respective stockholders, members, or partners. Administrative
Agent, the Lenders and Borrower disclaim any intention to create any partnership, joint venture,
agency or common interest in profits or income between Administrative Agent, the Lenders and
Borrower, or to create an equity in the Project or any other collateral for the Loan in
Administrative Agent or any Lender, or any sharing of liabilities, losses, costs or expenses.
Section 12.7 Time of the Essence. Time is of the essence with respect to this Agreement.
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Section 12.8 Successors and Assigns. Subject to the provisions of Section 12.23, this
Agreement shall be binding upon and inure to the benefit of Administrative Agent, the Lenders and
Borrower and the respective successors and permitted assigns.
Section 12.9 Renewal, Extension or Rearrangement. All provisions of the Loan Documents shall
apply with equal effect to each and all promissory notes and amendments thereof hereinafter
executed which in whole or in part represent a renewal, extension, increase or rearrangement of the
Loans.
Section 12.10 Waivers. No course of dealing on the part of Administrative Agent or any
Lender, their officers, employees, consultants or agents, nor any failure or delay by
Administrative Agent or any
Lender with respect to exercising any right, power or privilege of Administrative Agent or any
Lender under any of the Loan Documents, shall operate as a waiver thereof.
Section 12.11 Cumulative Rights. Rights and remedies of Administrative Agent and the Lenders
under the Loan Documents shall be cumulative, and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.
Section 12.12 Singular and Plural. Words used in this Agreement and the other Loan Documents
in the singular, where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular in this Agreement and the other Loan Documents
shall apply to such words when used in the plural where the context so permits and vice versa.
Section 12.13 Phrases. When used in this Agreement and the other Loan Documents, the phrase
“including” shall mean “including, but not limited to,” the phrases “satisfactory to any Lender” or
“satisfactory to Administrative Agent” shall mean in form and substance satisfactory to such Lender
or Administrative Agent, as the case may be, in all respects, the phrases “with Lender’s consent,”
“with Lender’s approval,” “with Administrative Agent’s consent” or “with Administrative Agent’s
approval” shall mean such consent or approval at Lender’s or Administrative Agent’s, as the case
may be, discretion, and the phrases “acceptable to Lender” or “acceptable to Administrative Agent”
shall mean acceptable to Lender or Administrative Agent, as the case may be, at such party’s sole
discretion.”
Section 12.14 Exhibits and Schedules. The exhibits and schedules attached to this Agreement
are incorporated herein and shall be considered a part of this Agreement for the purposes stated
herein.
Section 12.15 Titles of Articles, Sections and Subsections. All titles or headings to
articles, sections, subsections or other divisions of this Agreement and the other Loan Documents
or the exhibits hereto and thereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content of such articles,
sections, subsections or other divisions, such other content being controlling as to the agreement
between the parties hereto.
Section 12.16 Promotional Material. Borrower authorizes Administrative Agent and each of the
Lenders to issue press releases, advertisements and other promotional materials in
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connection with
Administrative Agent’s or such Lender’s own promotional and marketing activities, and describing
the Loans in general terms or in detail and Administrative Agent’s or such Lender’s participation
in the Loans. All references to Administrative Agent or any Lender contained in any press release,
advertisement or promotional material issued by Borrower shall be approved in writing by
Administrative Agent and such Lender in advance of issuance.
Section 12.17 Survival. All of the representations, warranties, covenants, and indemnities of
Borrower hereunder (including environmental matters under Article 5, the obligations under
Sections 2.7(1), 2.7(5) 2.7(6)), and under the indemnification
provisions of the other Loan Documents shall survive (a) the repayment in full of the Loans and the
release of the Liens evidencing or securing the Loans, (b) the transfer (by sale, foreclosure,
conveyance in lieu of foreclosure or otherwise) of any or all right, title and interest in and to
the Project to any party, whether or not an Affiliate of Borrower and (c) in the case of any Lender
that may assign any interest in its Commitment or Loans hereunder in accordance with the terms of
this Agreement, the making of such assignment, notwithstanding that such assigning Lender may cease
to be a “Lender” hereunder.
Section 12.18 WAIVER OF JURY TRIAL. BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN)
OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN
DOCUMENTS OR IN ANY WAY RELATING TO THE LOANS OR THE PROJECT (INCLUDING, WITHOUT LIMITATION, ANY
ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT
WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT
FOR ADMINISTRATIVE AGENT AND EACH LENDER TO ENTER THIS AGREEMENT.
Section 12.19 Remedies of Borrower. It is expressly understood and agreed that,
notwithstanding any Applicable Law or any provision of this Agreement or the other Loan Documents
to the contrary, the liability of Administrative Agent and each Lender (including their respective
successors and assigns) and any recourse of Borrower against Administrative Agent and each Lender
shall be limited solely and exclusively to their respective interests in the Loans and/or
Commitments or the Project. Without limiting the foregoing, in the event that a claim or
adjudication is made that Administrative Agent, any of the Lenders, or their agents, acted
unreasonably or unreasonably delayed acting in any case where by Applicable Law or under this
Agreement or the other Loan Documents, Administrative Agent, any Lender or any such agent, as the
case may be, has an obligation to act reasonably or promptly, or otherwise violated this Agreement
or the Loan Documents, Borrower agrees that none of Administrative Agent, the Lenders or their
agents shall be liable for any incidental, indirect, special, punitive, consequential or
speculative damages or
losses resulting from such failure to act reasonably or promptly in accordance with this
Agreement or the other Loan Documents.
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Section 12.20 Governing Law. This Agreement, the notes and the other Loan Documents shall be
governed by, and construed in accordance with the law of the State of New York, except to the
extent otherwise specified in any of the Loan Documents.
THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY ADMINISTRATIVE AGENT AND
LENDERS AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTES DELIVERED
PURSUANT HERETO SHALL BE 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 AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT
THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROJECT 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, EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE
NOTES, AND THIS AGREEMENT AND THE NOTES 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.
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ADMINISTRATIVE AGENT, ANY LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS MAY AT ADMINISTRATIVE AGENT’S OPTION (WHICH
DECISION SHALL BE MADE BY THE MAJORITY LENDERS) BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE
CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1401 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 NATIONAL REGISTERED AGENTS, INC., 875 AVENUE OF THE AMERICAS, SUITE 501, NEW
YORK, NY 10001 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,
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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 (A) SHALL GIVE PROMPT NOTICE TO ADMINISTRATIVE AGENT
OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (B) 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 (C)
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 12.21 Entire Agreement. This Agreement and the other Loan Documents embody the entire
agreement and understanding between Administrative Agent, the Lenders and Borrower and supersede
all prior agreements and understandings between such parties relating to the subject matter hereof
and thereof. Accordingly, the Loan Documents may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties. If any conflict or inconsistency exists between any term sheet,
application or commitment letter and this Agreement or any of the other Loan Documents, the terms
of this Agreement shall control.
Section 12.22 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall constitute an original, but all of which shall constitute one document.
Section 12.23 Assignments and Participations.
(1) Assignments by the Lenders. Each Lender may assign any of its Loans, its Note and its
Commitment (but only with the consent of Administrative Agent); provided that:
(a) no such consent by Administrative Agent shall be required in the case of any assignment by
any Lender to another Lender or an Affiliate of such Lender or such other Lender(provided that in
the case of an assignment to any such Affiliate, the assigning Lender will not be released from its
obligations under the Loan Documents and the Administrative Agent may continue to deal only with
such assigning Lender);
(b) except to the extent Administrative Agent shall otherwise consent, any such partial
assignment (other than to another Lender or an Affiliate of a Lender) shall be in an amount at
least equal to $10,000,000;
(c) each such assignment (including an assignment to another Lender or an Affiliate of a
Lender) by a Lender of its Loans or Commitment shall be made in such manner so that the same
portion of its Loans and Commitment is assigned to the respective assignee;
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(d) subject to the applicable Lender’s compliance with the provisions of clauses (b)
and (c) above, no consent by Borrower shall be required and Administrative Agent’s consent
shall not be unreasonably withheld, delayed or conditioned if such assignment is made to an
Eligible Assignee, and the provisions of clause (e) have been satisfied; and
(e) upon execution and delivery by the assignee (even if already a Lender) to Borrower and
Administrative Agent of an Assignment and Assumption pursuant to which such assignee agrees to
become a “Lender” hereunder (if not already a Lender) having the Commitment and Loans specified in
such instrument, and upon consent thereto by Administrative Agent to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise consented to by
Administrative Agent), the obligations, rights and benefits of a Lender hereunder holding the
Commitment and Loans (or portions thereof) assigned to it (in addition to the Commitment and Loans,
if any, theretofore held by such assignee) and the assigning Lender shall, to the extent of such
assignment, be released from the Commitment (or portion thereof) so assigned. Upon each such
assignment the assigning Lender shall pay Administrative Agent a processing and recording fee of
$3,500 and the reasonable fees and disbursements of Administrative Agent’s counsel incurred in
connection therewith.
(2) Approval by Borrower. In the event Borrower’s consent to an assignment is required under
Section 12.23(1), such consent shall not be unreasonably withheld, and shall be granted or
denied in writing delivered to Administrative Agent within five (5) Business Days from the date of
Administrative Agent’s or a Lender’s request therefor. If Administrative Agent does not receive
such consent or a denial of such consent in writing within said five (5) Business Days following
delivery of a request for such consent, Borrower’s consent shall be deemed to have been granted.
In the event Borrower withholds its consent, Lead Borrower shall, concurrently with Borrower’s
written disapproval, provide written notice to Administrative Agent and such Lender of the reasons
for Borrower’s disapproval.
(3) Participations.
(a) A Lender may sell to one or more other Persons (each a “Participant”) a
participation in all or any part of any Loans held by it, or in its Commitment, provided (A) such
Lender’s obligations under this Agreement and the other Loan Documents shall remain unchanged, (B)
such Lender shall remain solely responsible to the other parties hereto for the performance of such
obligations and (C) Borrower, Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and obligations under
this Agreement and the other Loan Documents. In no event shall a Lender that sells a participation
agree with the Participant to take or refrain from
taking any action hereunder or under any other Loan Document except that such Lender may agree
with the Participant that it will not, without the consent of the Participant, agree to (i)
increase or extend the term of such Lender’s Commitment, (ii) extend the date fixed for the payment
of principal of or interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of principal, (iv) reduce
the rate at which interest is payable thereon, or any fee hereunder payable to the Participant, to
a level below the rate at which the Participant is entitled to receive such interest or fee or (v)
consent to any modification, amendment or waiver hereof or of any of the other Loan Documents to
the extent that the same, under Section 12.2, requires the consent of each Lender.
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Borrower agrees that each Participant shall be entitled to the benefits of Section 2.7(1),
Section 2.7(5), and Section 2.7(6) to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to Section 12.23; provided,
however, that a Participant that is a non-U.S. Person that would become a Lender shall not
be entitled to the benefits of Section 2.7(6) unless Lead Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to
comply with Section 2.7(6) as though it were a Lender. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 12.23 as though it were
a Lender; provided that such Participant agrees to be subject to Section 12.23 as though it
were a Lender.
(4) Certain Pledges. In addition to the assignments and participations permitted under the
foregoing provisions of this Section 12.23 (but without being subject thereto), any Lender
may (without notice to Borrower, Administrative Agent or any other Lender and without payment of
any fee) assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank
as collateral security pursuant to Regulation A and any operating circular issued by such Federal
Reserve Bank, and such Loans and Note shall be fully transferable as provided therein. No such
assignment shall release the assigning Lender from its obligations hereunder.
(5) Provision of Information to Assignees and Participants. A Lender may furnish any
information concerning Borrower, any Borrower Party or any of their respective Affiliates or the
Project in the possession of such Lender from time to time to assignees and participants (including
prospective assignees and participants); provided that such assignee and participant agree to be
bound by the terms of Section 12.29.
(6) No Assignments to Borrower or Affiliates. Anything in this Section 12.23 to the
contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it
hereunder to Borrower or any of its Affiliates without the prior consent of each Lender.
Section 12.24 Brokers. Borrower hereby represents to Administrative Agent and each Lender
that Borrower has not dealt with any broker, underwriters, placement agent, or finder in connection
with the transactions contemplated by this Agreement and the other Loan Documents. Borrower hereby
agrees to indemnify and hold Administrative Agent and each Lender 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 Borrower in connection with the
transactions contemplated herein.
Section 12.25 Right of Set-off.
(1) Upon the occurrence and during the continuance of any Event of Default, each of the
Lenders is, subject (as between the Lenders) to the provisions of subsection (3) of this
Section 12.25, hereby authorized at any time and from time to time, without notice to
Borrower (any such notice being expressly waived by Borrower) and to the fullest extent permitted
by law, to set-off and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held, and other indebtedness at any time owing, by such Lender in any of its
offices, in Dollars or in any other currency, to or for the credit or the account of
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Borrower
against any and all of the respective obligations of Borrower now or hereafter existing under the
Loan Documents, irrespective of whether or not such Lender or any other Lender shall have made any
demand hereunder and although such obligations may be contingent or unmatured and such deposits or
indebtedness may be unmatured. Each Lender hereby acknowledges that the exercise by any Lender of
offset, set-off, banker’s lien, or similar rights against any deposit or other indebtedness of
Borrower whether or not located in New York or any other state with certain laws restricting
lenders from pursuing multiple collection methods, could result under such laws in significant
impairment of the ability of all the Lenders to recover any further amounts in respect of the Loan.
Therefore, each Lender agrees that no Lender shall exercise any such right of set-off, banker’s
lien, or otherwise, against any assets of Borrower (including all general or special, time or
demand, provisional or other deposits and other indebtedness owing by such Lender to or for the
credit or the account of Borrower) without the prior written consent of Administrative Agent.
(2) Each Lender shall promptly notify Lead Borrower and Administrative Agent after any such
set-off and application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lenders under this Section
12.25 are in addition to other rights and remedies (including other rights of set-off) which
the Lenders may have.
(3) Each Lender agrees that it shall turn over to Administrative Agent any payment (whether
voluntary or involuntary, through the exercise of any right of setoff or otherwise) on account of
the Loans held by it in excess of its ratable portion (in accordance with this agreement and any
separate agreement among Administrative Agent and the Lenders) of payments on account of the Loans
obtained by all the Lenders.
Section 12.26 Limitation on Liability of Administrative Agent’s and the Lenders’ Officers,
Employees, etc. Any obligation or liability whatsoever of Administrative Agent or any Lender which
may arise at any time under this Agreement or any other Loan Document shall be satisfied, if at
all, out of Administrative Agent’s or such Lender’s respective assets only. No such obligation or
liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to,
the property of any of Administrative Agent’s or any Lender’s shareholders, directors, officers,
employees or agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
Section 12.27 Cooperation with Syndication. Borrower acknowledges that Administrative Agent
intends to syndicate a portion of the Commitments to one or more Lenders (the
“Syndication”) and in connection therewith, Borrower shall take all actions as
Administrative Agent may reasonably request to assist Administrative Agent in its Syndication
effort. Without limiting the generality of the foregoing, Borrower shall, at the request of
Administrative Agent (i) facilitate the review of the Loans, the Project and the other collateral
for the Loans by any prospective Lender; (ii) assist Administrative Agent and otherwise cooperate
with Administrative Agent in the preparation of information offering materials (which assistance
may include reviewing and commenting on drafts of such information materials and drafting portions
thereof); (iii) deliver updated information on Borrower Parties, the Project and the other
collateral for the Loans; (iv) make representatives of Borrower available to meet with prospective
Lenders at tours of the Project and bank meetings; (v) facilitate direct contact
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between the senior
management and advisors of Borrower and any prospective Lender; and (vi) provide Administrative
Agent with all information reasonably deemed necessary by it to complete the Syndication
successfully. Subject to the provisions of Section 9.28, Borrower agrees to take such
further reasonable action, in connection with documents and amendments to the Loan Documents, as
may reasonably be required to effect such Syndication; provided, however, that notwithstanding any
other provision of this Section 12.27 or Section 12.28 to the contrary, Borrower
shall not be required to enter into any such documents and amendments which would alter any of the
material economic terms of the Loan Documents or which would create new or greater obligations or
liabilities on Borrower Parties under the Loan Documents.
Section 12.28 Severance of Loan.
(1) Loan Components. The Administrative Agent shall have the right, at any time, with respect
to all or any portion of the Loan, to (a) cause the Notes, the Mortgages and the other Security
Documents to be severed and/or split into two or more separate notes, mortgages and other security
agreements, so as to evidence and secure one or more senior and subordinate mortgage loans, (b)
create one more senior and subordinate notes (i.e., an A/B or A/B/C structure) secured by the
Mortgages and the other Security Documents, (c) create multiple components of the Notes (and
allocate or re-allocate the outstanding principal amount of the Loan among such components) or (d)
otherwise sever the Loan into two or more loans secured by the Mortgages and the other Security
Documents (each of clauses (a) through (d), together with the Mezzanine Option described below, a
“Bifurcation”); in each such case, in whatever proportions and priorities as Administrative
Agent may so direct in its discretion to Administrative Agent; provided, however, that in each such
instance (i) the outstanding principal amount of all the Notes evidencing the Loan (or components
of such Notes) immediately following such Bifurcation shall be equal to the outstanding principal
amount of the Loan immediately prior to such Bifurcation, and (ii) the weighted average Applicable
Margin and/or Base Rate, as applicable, with respect to the new notes immediately after such
Bifurcation and at all times prior to the occurrence of any Event of Default shall not exceed the
weighted average Applicable Margin and/or Base Rate, as applicable, with respect to the initial
Notes delivered
hereunder (as such interest rates are subject to being adjusted from time to time in
accordance herewith, including as a result of the accrual of interest at the Default Rate). If
requested by Administrative Agent in writing, Borrower shall execute within ten (10) days after
such request, a severance agreement, amendments to or amendments and restatements of any one or
more Loan Documents, and such documentation as Administrative Agent may reasonably request to
evidence and/or effectuate any such Bifurcation, all in form and substance reasonably satisfactory
to Administrative Agent.
(2) Mezzanine Financing. Administrative Agent shall have the right, at any time, to divide
the Loan into two or more parts (the “Mezzanine Option”): a mortgage loan (the
“Mortgage Loan”) and one or more Approved Mezzanine Loans. The principal amount of the
Mortgage Loan plus the principal amount of the Approved Mezzanine Loan(s) shall equal the
outstanding principal balance of the Loan immediately prior to the creation of the Mortgage Loan
and the Approved Mezzanine Loan(s). In effectuating the foregoing, the Approved Mezzanine Lender
will make a loan to a borrower (the “Mezzanine Borrower(s)”); Mezzanine Borrower(s) will
contribute the amount of the Approved Mezzanine Loan(s) to Borrower (in its capacity as Borrower
under the Mortgage Loan, “Mortgage Borrower”) and Mortgage
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Borrower will apply the
contribution to pay down the Loan to its Mortgage Loan amount (without prepayment premium). The
Mortgage Loan and the Approved Mezzanine Loan(s) shall be on the same terms and subject to the same
conditions set forth in this Agreement, the Notes, the Mortgages and the other Loan Documents
except as follows:
(a) The Administrative Agent shall have the right, at any time, to establish different
interest rates and debt service payments for the Mortgage Loan(s) and the Approved Mezzanine Loan
and to require the payment of the Mortgage Loan and the Approved Mezzanine Loan(s) in such order of
priority as may be designated by Administrative Agent; provided that (i) the total of the loan
amounts for the Mortgage Loan and the Approved Mezzanine Loan(s) immediately following the creation
of such Approved Mezzanine Loan(s) shall equal the amount of the Loan immediately prior to the
creation of the Mortgage Loan and the Approved Mezzanine Loan(s), (ii) the weighted average
Applicable Margin and/or Base Rate, as applicable, with respect to the Mortgage Loans and the
Approved Mezzanine Loan immediately after such Bifurcation and at all times prior to the occurrence
of any Event of Default shall not exceed the weighted average prior to such bifurcation, and (iii)
there shall be no acceleration of amortization and the initial debt service payments on the
Mortgage Loan note and the Approved Mezzanine Loan note(s) shall initially on the date created
equal the debt service payment which was due under the Loan immediately prior to such bifurcation.
The Approved Mezzanine Loan(s) shall be subordinate to the Mortgage Loan and shall be governed by
the terms of an intercreditor agreement between the holders of the Mortgage Loan and the Approved
Mezzanine Loan(s).
(b) Mezzanine Borrower(s) shall be a newly-formed special purpose, bankruptcy remote entity
satisfactory to Administrative Agent, and shall own directly or indirectly one hundred percent
(100%) of Mortgage Borrower. The security for the Approved Mezzanine Loan shall be a pledge of one
hundred percent (100%) of the direct and indirect ownership interests in Mortgage Borrower.
(c) Mezzanine Borrower and Mortgage Borrower shall cooperate with all reasonable requests of
Administrative Agent in order to convert the Loan into a Mortgage Loan and one or more Approved
Mezzanine Loan(s) and shall execute and deliver such documents as shall reasonably be required by
Administrative Agent in connection therewith, including, without limitation, (i) the modification
of organizational documents and loan documents, (ii) documents authorizing Administrative Agent to
file any UCC 1 Financing Statements reasonably required by Administrative Agent to perfect the
security interest in the collateral for the Approved Mezzanine Loan(s), (iii) execution of such
other documents reasonably required by Administrative Agent in connection with the creation of the
Approved Mezzanine Loan(s), including, without limitation, an environmental indemnity substantially
similar in form and substance to the Environmental Indemnity Agreement delivered on the date hereof
in connection with the Loan, (iv) delivery of appropriate authorization and enforceability opinions
with respect to the Approved Mezzanine Loan(s), and (v) delivery of an “Eagle 9” or equivalent UCC
title insurance policy, satisfactory to Administrative Agent, insuring the perfection and priority
of the lien on the Approved Mezzanine Loan collateral; provided, however, that notwithstanding any
other provision of Section 12.27 or this Section 12.28(2) to the contrary, Borrower
shall not be required to enter into any such documents and amendments which would alter any of the
material economic terms of the Loan Documents or which would
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create new or greater obligations or
liabilities Borrower or Borrower Parties under the Loan Documents
Section 12.29 Confidentiality. Each of Administrative Agent and the Lenders and Borrower
Parties and Sponsor agrees to maintain the confidentiality of the Confidential Information, except
that Confidential Information may be disclosed (a) to it and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made shall be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to the extent requested
by any Governmental Authority, (c) to the extent required by Applicable Law or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) to any assignee or pledgee of or Participant in, or any prospective
assignee or pledgee of or Participant in, any of its rights or obligations under this Agreement or
any actual or prospective counterparty (or its advisors) to any swap or derivative transaction
relating to Borrower and its obligations, (g) with the consent of Borrower or Administrative Agent,
as applicable, or (h) to the extent such Confidential Information (i) becomes publicly available
other than as a result of a breach of this Section 12.29 or of arrangements entered into
pursuant hereto or (ii) becomes available to such party from a source other than Borrower or its
Affiliates or the Administrative Agent or the Lender or their Affiliates, as applicable; provided,
however, the obligation to maintain the confidentiality of the Confidential Information provided
hereunder shall expire twelve (12) months after the date upon which the Loans hereunder are
indefeasibly paid in full. Administrative Agent and each Lender, to the extent required to
maintain the confidentiality of Information as provided in this Section 12.29, shall be
considered to have complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Confidential Information as a commercial
banker exercising
reasonable and customary business practices would accord to its own confidential information.
Notwithstanding anything herein to the contrary, the information subject to this Section
12.29 shall not include, and Administrative Agent and each Lender may disclose without
limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in
each case, within the meaning of Treasury Regulation Section 1.6011 4) of the transactions
contemplated hereby and all materials of any kind (including opinions or other tax analyses) that
are provided to Administrative Agent or such Lender relating to such tax treatment and tax
structure. For purposes of this Section 12.29, the information that shall be treated as
Confidential Information shall mean, in the case of Administrative Agent and the Lenders, written
non-public information concerning the Project and, in the case of Borrower, information concerning
the terms and conditions set forth in the Loan Documents.
ARTICLE 13
RECOURSE LIABILITY
Section 13.1 Recourse Liability(1) . No past, present or future member, or any past, present
or future shareholder, partner, member, officer, employee, servant, executive, director, agent,
authorized representative or Affiliate of Borrower or any member of Borrower, (each such
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Person, an
“Exculpated Party”) shall be personally liable for payments due hereunder or under any
other Loan Document or for the performance of any obligation, or breach of any representation or
warranty made by Borrower hereunder or thereunder. The sole recourse of the Lenders and
Administrative Agent for satisfaction of the obligations of Borrower hereunder and under any other
Loan Document shall be against Borrower and its assets and not against any assets or property of
any such Exculpated Party other than the direct or indirect ownership interest of such Exculpated
Party in Borrower. In the event that a Potential Default or Event of Default occurs in connection
with such obligations, no action shall be brought against any such Exculpated Party by virtue of
its direct or indirect ownership interest in Borrower. In the event of foreclosure or other sale
or disposition of the Project, no judgment for any deficiency upon the obligations hereunder or
under any other Loan Document shall be obtainable by the Lenders or Administrative Agent against
any such Exculpated Party. Notwithstanding the foregoing, nothing in this Section 13.1
shall affect or diminish the obligations of Borrower or Guarantors under or in respect of each Loan
Document to which it is a party, including Guarantor Documents (including the right to name any
Guarantor in any foreclosure action in connection with its obligations under the Guarantor
Documents) and the Co-Borrower Documents. Notwithstanding the foregoing provisions of this
Section 13.1, each Exculpated Party shall be personally (and on a full recourse basis)
liable for and shall indemnify and defend Administrative Agent and the Lenders from and against,
and shall hold Administrative Agent and the Lenders harmless of, from and against any deficiency,
liability, loss, damage, costs, and expenses (including legal fees and disbursements) suffered by
Administrative Agent and/or the Lenders and caused by, or arising out of or as a result of any of
the following: (i) such Person’s commission of a criminal act, (ii) such Person’s failure to
comply with the provisions of the Loan Documents prohibiting a transfer or Change of Control; (iii)
such Person’s misappropriation of any cash flow or other revenue derived from or in respect of the
Project, including security deposits, insurance proceeds, condemnation awards, or any rental, sales
or
other income derived directly or indirectly from the Project, or the misapplication of any of
the foregoing sums, in either event, in contravention of any provision of this Agreement or the
other Loan Documents; (iv) such Person’s fraud or misrepresentation or inaccurate certification
made at any time in connection with the Loan Documents or the Loans; (v) such Person’s intentional
interference with Administrative Agent’s (or the Lenders’) exercise of its rights under any of the
Loan Documents; (vi) such Person’s intentional destruction or removal of fixtures or personal
property securing the Loans unless replaced by items of equal value and utility; (vii) such
Person’s misapplication or misappropriation of funds disbursed from the Security Accounts or the
Controlled Accounts; (viii) such Person’s commissions of intentional waste to or of the Project or
any portion thereof or failure to maintain the Project in the manner required by the Loan
Documents; (ix) failure to maintain the insurance coverage required by the Loan Documents; (x)
failure to pay taxes, assessments and any other charges, including, without limitation, charges for
labor or materials, which could result in prior liens against any portion of the Project; (xi)
willful misconduct; (xii) Borrower files a voluntary petition under the Federal Bankruptcy Code or
any other Federal or state bankruptcy or insolvency law; (xiii) such Person files or joins in the
filing of, or solicits or acts in concert with, or colludes or conspires with petitioning creditors
with respect to, an involuntary petition against Borrower under the Federal Bankruptcy Code or any
other Federal or state bankruptcy or insolvency law; (xiv) Borrower files an answer consenting to
or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other
Person under the Federal Bankruptcy Code or any other Federal or
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state bankruptcy or insolvency
law; (xv) such Person consents to or acquiesces in or joins in an application for the appointment
of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Project; (xvi)
Borrower makes an assignment for the benefit of creditors, or admits, in writing or in any legal
proceeding, its insolvency or inability to pay its debts as the become due; or (xvii) Borrower
violates any of provisions set forth in the definition of Single Purpose Entity and such violation
results in a substantive consolidation of the Borrower or its assets in the bankruptcy of an
Affiliate.
Section 13.2 No Waiver of Certain Rights. Notwithstanding anything to the contrary contained
in this Agreement or the other Loan Documents, (A) neither of Administrative Agent nor the Lenders
shall be deemed to have waived any right which Administrative Agent or any Lender may have under
Sections 506(a), 506(b), 1111(b) or any other provision of the Federal Bankruptcy Code, as such
sections may be amended, to file a claim for the full amount due to Administrative Agent or such
Lender under the Loan Documents or to require that all collateral shall continue to secure the
amounts due under the Loan Documents and (B) Administrative Agent may pursue any power of sale,
bring any foreclosure action, any action for specific performance, or any other appropriate action
or proceedings against Borrower or any other Person for the purpose of enabling the Administrative
Agent and the Lenders to realize upon the collateral for the Loans (including, without limitation,
any Net Operating Income to the extent provided for in the Loan Documents) or to obtain the
appointment of a receiver.
ARTICLE 14
ADMINISTRATIVE AGENT
Section 14.1 Appointment, Powers and Immunities. Each Lender hereby appoints and authorizes
Administrative Agent to act as its agent hereunder and under the other Loan Documents with such
powers as are specifically delegated to Administrative Agent by the terms of this Agreement and of
the other Loan Documents, together with such other powers as are reasonably incidental thereto.
Administrative Agent (which term as used in this sentence and in Section 14.5 and the first
sentence of Section 14.6 shall include reference to its Affiliates and its own and its
Affiliates’ officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those expressly set forth in this
Agreement and in the other Loan Documents, and shall not by reason of this Agreement or any other
Loan Document be a trustee for any Lender except to the extent that Administrative Agent acts as an
agent with respect to the receipt or payment of funds, nor shall Administrative Agent have any
fiduciary duty to Borrower nor shall any Lender have any fiduciary duty to Borrower or any other
Lender;
(b) shall not be responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Loan Document, or in any certificate or
other document referred to or provided for in, or received by any of them under, this Agreement or
any other Loan Document, or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Loan Documents or any other document referred to or provided for therein or for
any failure by Borrower or any other Person to perform any of its obligations thereunder; and
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(c) shall not be responsible for any action taken or omitted to be taken by it under any Loan
Document or under any other document or instrument referred to or provided for therein or in
connection therewith, except to the extent any such action taken or omitted violates Administrative
Agent’s standard of care set forth in the first sentence of Section 14.5.
(d) shall not, except to the extent expressly instructed by the Majority Lenders with respect
to collateral security under the Security Documents, be required to initiate or conduct any
litigation or collection proceedings hereunder or under any other Loan Document; and
(e) shall not be required to take any action which is contrary to the Loan Documents or
Applicable Law.
The relationship between Administrative Agent and each Lender is a contractual relationship only,
and nothing herein shall be deemed to impose on Administrative Agent any obligations other than
those for which express provision is made herein or in the other Loan Documents. Administrative
Agent may employ agents and attorneys, and may delegate all or any part of its obligations
hereunder, to third parties and shall not be responsible for the negligence or
misconduct of any such agents, attorneys in fact or third parties selected by it in good faith.
Administrative Agent may deem and treat the payee of a Note as the holder thereof for all purposes
hereof unless and until a notice of the assignment or transfer thereof shall have been filed with
Administrative Agent, any such assignment or transfer to be subject to the provisions of
Section 12.23. Except to the extent expressly provided in Section 14.8, the
provisions of this Article 14 are solely for the benefit of Administrative Agent and the
Lenders, and Borrower shall not have any rights as a third-party beneficiary of any of the
provisions hereof and the Lenders may modify or waive such provisions of this Article 14 in
their sole and absolute discretion.
Section 14.2 Reliance by Administrative Agent. Administrative Agent shall be entitled to rely
upon any certification, notice or other communication (including, without limitation, any thereof
by telephone, telecopy, telegram or cable) reasonably believed by it to be genuine and correct and
to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected by Administrative
Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document,
Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority Lenders, and such
instructions of the Majority Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders.
Section 14.3 Defaults.
(1) Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of
a Potential Default or Event of Default unless Administrative Agent has received notice from a
Lender or Lead Borrower specifying such Potential Default or Event of Default and stating that such
notice is a “Notice of Default.” In the event that Administrative Agent receives such a
notice of the occurrence of a Potential Default or Event of Default, Administrative Agent shall
give prompt notice thereof to the Lenders. Within ten (10) days of
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delivery of such notice of
Potential Default or Event of Default from Administrative Agent to the Lenders (or such shorter
period of time as Administrative Agent determines is necessary), Administrative Agent and the
Lenders shall consult with each other to determine a proposed course of action. Administrative
Agent shall (subject to Section 14.7) take such action with respect to such Potential
Default or Event of Default as shall be directed by the Majority Lenders, provided that, (A) unless
and until Administrative Agent shall have received such directions, Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action, including
decisions (1) to make protective advances that Administrative Agent determines are necessary to
protect or maintain the Project and (2) to foreclose on any of the Project or exercise any other
remedy, with respect to such Potential Default or Event of Default as it shall deem advisable in
the interest of the Lenders except to the extent that this Agreement expressly requires that such
action be taken, or not be taken, only with the consent or upon the authorization of all of the
Lenders and (B) no actions approved by the Majority Lenders shall violate the Loan Documents or
Applicable Law. Each of the Lenders acknowledges and agrees that no individual Lender may
separately enforce or exercise any of the provisions of any of the Loan Documents (including the
Notes) other than through Administrative Agent. Administrative Agent shall advise the Lenders of
all material actions which Administrative
Agent takes in accordance with the provisions of this Section 14.3(1) and shall
continue to consult with the Lenders with respect to all of such actions. Notwithstanding the
foregoing, if the Majority Lenders shall at any time direct that a different or additional remedial
action be taken from that already undertaken by Administrative Agent, including the commencement of
foreclosure proceedings, such different or additional remedial action shall be taken in lieu of or
in addition to, the prosecution of such action taken by Administrative Agent; provided that all
actions already taken by Administrative Agent pursuant to this Section 14.3(1) shall be
valid and binding on each Lender. All money (other than money subject to the provisions of
Section 14.7) received from any enforcement actions, including the proceeds of a
foreclosure sale of the Project, shall be applied, first, to the payment or reimbursement of
Administrative Agent for expenses incurred in accordance with the provisions of Sections
14.3(2), (3) and (4) and 14.5 and to the payment of the Agency Fee to
the extent not paid by Borrower pursuant to Section 14.11, second, to the payment or
reimbursement of the Lenders for expenses incurred in accordance with the provisions of Section
14.3(2), (3) and (4) and 14.5; third, to the payment or reimbursement
of the Lenders for any advances made pursuant to Section 14.3(2); and fourth, to the
Lenders in accordance with their respective Proportionate Shares (and, if applicable, to Eurohypo
Counterparty under any Hedge Agreement for its Additional Interest in accordance with Section
9.15), unless an Unpaid Amount is owed pursuant to Section 14.12, in which event such
Unpaid Amount shall be deducted from the portion of such proceeds of the Defaulting Lender and be
applied to payment of such Unpaid Amount to the Special Advance Lender.
(2) All losses with respect to interest (including interest at the Default Rate) and other
sums payable pursuant to the Notes or incurred in connection with the Loans shall be borne by the
Lenders in accordance with their respective proportionate shares of the Loans. All losses incurred
in connection with the Loans, the enforcement thereof or the realization of the security therefor,
shall be borne by the Lenders in accordance with their respective proportionate shares of the Loan,
and the Lenders shall promptly, upon request, remit to Administrative Agent their respective
proportionate shares of (i) any expenses incurred by Administrative Agent in connection with any
Default to the extent any expenses have not been paid by Borrower, (ii) any advances made to pay
taxes or insurance or otherwise to preserve the Lien of the Security
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Documents or to preserve and
protect the Project, whether or not the amount necessary to be advanced for such purposes exceeds
the amount of the Mortgages, (iii) any other expenses incurred in connection with the enforcement
of the Mortgages or other Loan Documents, and (iv) any expenses incurred in connection with the
consummation of the Loans not paid or provided for by Borrower. To the extent any such advances
are recovered in connection with the enforcement of the Mortgages or the other Loan Documents, each
Lender shall be paid its proportionate share of such recovery after deduction of the expenses of
Administrative Agent and the Lenders.
(3) If, at the direction of the Majority Lenders or otherwise as provided in Section
14.3(1), any action(s) is brought to collect on the Notes or enforce the Security Documents or
any other Loan Document, such action shall (to the extent permitted under Applicable Law and the
decisions of the court in which such action is brought) be an action brought by Administrative
Agent and the Lenders, collectively, to collect on all or a portion of the Notes or enforce the
Security Documents or any other Loan Document and counsel selected by Administrative Agent shall
prosecute any such action on behalf of Administrative Agent and the Lenders, and Administrative
Agent and the Lenders shall consult and cooperate with each
other in the prosecution thereof. All decisions concerning the appointment of a receiver
while such action is pending, the conduct of such receivership, the conduct of such action, the
collection of any judgment entered in such action and the settlement of such action shall be made
by Administrative Agent. The costs and expenses of any such action shall be borne by the Lenders
in accordance with each of their respective proportionate shares.
(4) If, at the direction of the Majority Lenders or otherwise as provided in Section
14.3(1), any action(s) is brought to foreclose the Mortgages, such action shall (to the extent
permitted under Applicable Law and the decisions of the court in which such action is brought) be
an action brought by Administrative Agent and the Lenders, collectively, to foreclose all or a
portion of the Mortgages and collect on the Notes. Counsel selected by Administrative Agent shall
prosecute any such foreclosure on behalf of Administrative Agent and the Lenders and Administrative
Agent and the Lenders shall consult and cooperate with each other in the prosecution thereof. All
decisions concerning the appointment of a receiver, the conduct of such foreclosure, the acceptance
of a deed in lieu of foreclosure, the bid on behalf of Administrative Agent and the Lenders at the
foreclosure sale of the Project, the manner of taking and holding title to the Project (other than
as set forth in subsection (5) below), the sale of the Project after foreclosure, and the
commencement and conduct of any deficiency judgment proceeding shall be made by Administrative
Agent. The costs and expenses of foreclosure will be borne by the Lenders in accordance with their
respective proportionate shares.
(5) If title is acquired to the Project after a foreclosure sale or by a deed in lieu of
foreclosure, title shall be held by Administrative Agent in its own name in trust for the Lenders
or, at Administrative Agent’s election, in the name of a wholly owned subsidiary of Administrative
Agent, on behalf of the Lenders, or a subsidiary wholly owned by the Lenders and managed by the
Administrative Agent.
(6) If Administrative Agent (or its subsidiary) acquires title to the Project or is entitled
to possession of the Project during or after the foreclosure, all material decisions with respect
to the possession, ownership, development, construction, control, operation, leasing,
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management
and sale of the Project shall be made by Administrative Agent. All income or other money received
after so acquiring title to or taking possession of the Project with respect to the Project,
including income from the operation and management of the Project and the proceeds of a sale of the
Project, shall be applied (subject to the terms of any separate agreement among Administrative
Agent and the Lenders), first, to the payment or reimbursement of Administrative Agent and the
expenses incurred in accordance with the provisions of this Article 14 and to the payment
of the Agency Fee to the extent not paid by Borrower pursuant to Section 14.11, second, to
the payment of operating expenses with respect to the Project; third, to the establishment of
reasonable reserves for the operation of the Project; fourth, to the payment or reimbursement of
the Lenders for any advances made pursuant to Section 14.3(2); fifth, to fund any capital
improvement, leasing and other reserves; and sixth, to the Lenders in accordance with their
respective Proportionate Shares (and, if applicable, to Eurohypo Counterparty under any Hedge
Agreement for its Additional Interest in accordance with Section 9.15), unless an Unpaid
Amount is owed pursuant to Section 14.12, in which event such Unpaid Amount shall be
deducted from the portion of such proceeds of the Defaulting Lender and be applied to payment of
such Unpaid Amount to the Special Advance Lender.
Section 14.4 Rights as a Lender. With respect to its Commitment and the Loans made by it
Eurohypo (and any successor acting as Administrative Agent) in its capacity as a Lender hereunder
shall have the same rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as Administrative Agent, and the term “Lender” or “Lenders” shall, unless
the context otherwise indicates, include Administrative Agent in its individual capacity. Eurohypo
(and any successor acting as Administrative Agent) and its Affiliates may (without having to
account therefor to any Lender) lend money to, make investments in and generally engage in any kind
of lending, trust or other business with Borrower (and any of its Affiliates) as if it were not
acting as Administrative Agent, and Eurohypo and its Affiliates may accept fees and other
consideration from Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 14.5 Standard of Care; Indemnification. In performing its duties under the Loan
Documents, Administrative Agent will exercise the same degree of care as it normally exercises in
connection with real estate loans that it syndicates and administers, but Administrative Agent
shall have no further responsibility to any Lender except as expressly provided herein and except
for its own gross negligence or willful misconduct which resulted in actual loss to such Lender,
and, except to such extent, Administrative Agent shall have no responsibility to any Lender for the
failure by Administrative Agent to comply with any of Administrative Agent’s obligations to
Borrower under the Loan Documents or otherwise. Subject to the terms of any separate agreement
among Administrative Agent and the Lenders, the Lenders agree to indemnify Administrative Agent (to
the extent not reimbursed under Section 9.28, but without limiting the obligations of
Borrower under Section 9.28) ratably in accordance with the aggregate principal amount of
the Loans held by the Lenders (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against Administrative Agent (including
by any Lender) arising out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Loan
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Document or any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses that Borrower is obligated to pay under Section
9.28, but excluding, unless an Event of Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency duties hereunder) or
the enforcement of any of the terms hereof or thereof or of any such other documents, provided that
no Lender shall be liable for any of the foregoing to the extent they arise from Administrative
Agent’s breach of its standard of care set forth in the first sentence of this Section.
Section 14.6 Non Reliance on Administrative Agent and Other Lenders. Each Lender agrees that
it has, independently and without reliance on Administrative Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own credit analysis of
Borrower and its Affiliates and decision to enter into this Agreement and that it will,
independently and without reliance upon Administrative Agent
or any other Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not taking action under
this Agreement or under any other Loan Document. Subject to the provisions of the first sentence
of Section 14.5, Administrative Agent shall not be required to keep itself informed as to
the performance or observance by Borrower of this Agreement or any of the other Loan Documents or
any other document referred to or provided for herein or therein or to inspect the Project or the
books of Borrower or any of its Affiliates. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Administrative Agent hereunder or
as otherwise agreed by Administrative Agent and the Lenders, Administrative Agent shall not have
any duty or responsibility to provide any Lender with any credit or other information concerning
the affairs, financial condition or business of Borrower or any of its Affiliates that may come
into the possession of Administrative Agent or any of its Affiliates.
Section 14.7 Failure to Act. Except for action expressly required of Administrative Agent
hereunder, and under the other Loan Documents, Administrative Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification obligations under
Section 14.5 against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action.
Section 14.8 Resignation of Administrative Agent. Administrative Agent may resign at any time
by giving notice thereof to the Lenders and Lead Borrower. Upon any such resignation, the Majority
Lenders shall have the right to appoint a successor Administrative Agent that shall be a Person
that meets the qualifications of an Eligible Assignee. If no successor Administrative Agent shall
have been so appointed by the Majority Lenders and shall have accepted such appointment within
thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative
Agent, that shall be an institutional lender that meets the requirements of the immediately
preceding sentence. Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder (if not
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already discharged therefrom as provided above in this Section
14.8). The fees payable by Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between Borrower and such successor.
After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the
provision of this Article 14 and Section 9.28 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
Section 14.9 Consents under Loan Documents. Administrative Agent may (without any Lender’s consent) give or withhold its agreement to any
amendments of the Loan Documents or any waivers or consents in respect thereof or exercise or
refrain from exercising any other rights or remedies which Administrative Agent may have under the
Loan Documents or otherwise provided that such actions do not, in Administrative Agent’s reasonable
judgment, materially adversely affect the value of any collateral, taken as a whole, or represent a
departure from Administrative Agent’s standard of care described in Section 14.5, except
that, except as otherwise provided in any separate agreement entered into among Administrative
Agent and the Lenders, Administrative Agent shall not agree to the following (provided that no
Lender’s consent shall be required for any of the following which are otherwise required or
contemplated under the Loan Documents):
(a) increase the Commitment of any Lender without the consent of such Lender;
(b) reduce the principal amount of the Loans or reduce the interest rate thereon without the
consent of each Lender affected thereby;
(c) extend any stated payment date for principal of or interest on the Loans payable to any
Lender without the consent of each Lender affected thereby;
(d) release Borrower, any Guarantor or any other party from liability under the Loan Documents
(except for any assigning Lender pursuant to Section 12.23 and any resigning Administrative
Agent pursuant to Section 14.8) without the consent of each Lender (except that no such
consent shall be required, and Administrative Agent is hereby authorized, to release Borrower and
Guarantors (A) as expressly provided in the Loan Documents and (B) upon payment of the Obligations
in full in accordance with the terms of the Loan Documents);
(e) release or subordinate in whole or in part any material portion of the collateral given as
security for the Loans without the consent of each Lender (except that no such consent shall be
required, and Administrative Agent is hereby authorized, to release any Lien covering the
collateral under the Security Documents (A) as expressly provided in the Loan Documents and (B)
upon payment of the Obligations in full in accordance with the terms of the Loan Documents);
(f) modify any of the provisions of this Section 14.9, the definition of “Majority
Lenders” or any other provision in the Loan Documents specifying the number or percentage of
Lenders required to waive, amend or modify any rights thereunder or make any determination or grant
any consent thereunder without the consent of each Lender;
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(g) modify the terms of any Event of Default without the consent of each Lender; or
(h) consent to (i) the sale, transfer or encumbrance of any portion of the Project (or any
interest therein) or any direct or indirect ownership interest therein and (ii) the incurrence by
Borrower of any additional indebtedness secured by the Project, in each case to the extent such
consent is required under the Loan Documents (and subject to any standard of reasonability set
forth therein) without the consent of each Lender.
Notwithstanding anything to the contrary contained in this Agreement, (a) any modification or
supplement of Article 14, or of any of the rights or duties of Administrative Agent
hereunder, shall require the consent of Administrative Agent and (b) in the case of Change Orders,
the Lenders hereby authorize Administrative Agent (on behalf of the Lenders) to modify the Loan
Documents to the extent reasonably necessary to comply with the requirements of the Lien Law in
connection therewith and (y) Administrative Agent is hereby authorized to enter into modifications
or amendments to the Loan Documents which are ministerial in nature, including the preparation and
execution of Uniform Commercial Code forms, Assignments and Assumptions and subordination and
non-disturbance agreements with tenants at the Project. If Administrative Agent solicits any
consents or approvals from the Lenders under any of the Loan Documents, each Lender shall within
ten (10) Business Days of receiving such request, give Administrative Agent written notice of its
consent or approval or denial thereof; provided that, if any Lender does not respond within such
ten (10) Business Days, such Lender shall be deemed to have authorized Administrative Agent to vote
such Lender’s interest with respect to the matter which was the subject of Administrative Agent’s
solicitation as Administrative Agent elects. Any such solicitation by Administrative Agent for a
consent or approval shall be in writing and shall include a description of the matter or thing as
to which such consent or approval is requested and shall include Administrative Agent’s recommended
course of action or determination in respect thereof.
Section 14.10 Authorization. Administrative Agent is hereby authorized by the Lenders to
execute, deliver and perform in accordance with the terms of each of the Loan Documents to which
Administrative Agent is or is intended to be a party and each Lender agrees to be bound by all of
the agreements of Administrative Agent contained in such Loan Documents. Borrower shall be
entitled to rely on all written agreements, approvals and consents received from Administrative
Agent as being that also of the Lenders, without obtaining separate acknowledgment or proof of
authorization of same.
Section 14.11 Agency Fee. So long as the Commitments are in effect and until payment in full
of all obligations under this Agreement, the Notes and the other Loan Documents, Borrower shall pay
to Administrative Agent, for its sole account, the Agency Fee. The Agency Fee shall be payable
annually in advance commencing on the Closing Date pursuant to the Fee Letter.
Section 14.12 Defaulting Lenders.
(1) If any Lender (a “Defaulting Lender”) shall for any reason fail to (i) make any
respective Loan required pursuant to the terms of this Agreement or (ii) pay its
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proportionate
share of an advance or disbursement to protect the Project or the Lien of the Security Documents,
any of the other Lenders may, but shall not be obligated to, make all or a portion of the
Defaulting Lender’s Loan or proportionate share of such advance, provided that such Lender gives
the Defaulting Lender and Administrative Agent prior notice of its intention to do so. The right
to make such advances in respect of the Defaulting Lender shall be exercisable first by the Lender
holding the greatest proportionate share and thereafter to each of the Lenders
in descending order of their respective proportionate shares of the Loans or in such other
manner as the Majority Lenders (excluding the Defaulting Lender) may agree on. Any Lender making
all or any portion of the Defaulting Lender’s proportionate share of the applicable Loan or advance
in accordance with the foregoing terms and conditions shall be referred to as a “Special
Advance Lender.”
(2) In any case where a Lender becomes a Special Advance Lender (i) the Special Advance Lender
shall be deemed to have purchased, and the Defaulting Lender shall be deemed to have sold, a senior
participation in the Defaulting Lender’s respective Loan to the extent of the amount so advanced or
disbursed (the “Advanced Amount”) bearing interest (including interest at the Default Rate,
if applicable) and (ii) the Defaulting Lender shall have no voting rights under this Agreement or
any other Loan Documents so long as it is a Defaulting Lender. It is expressly understood and
agreed that each of the respective obligations under this Agreement and the other Loan Documents,
including advancing Loans, losses incurred in connection with the Loan, costs and expenses of
enforcement, advancing to preserve the Lien of the Mortgages or to preserve and protect the
Project, shall be without regard to any adjustment in the proportionate shares occasioned by the
acts of a Defaulting Lender. The Special Advance Lender shall be entitled to an amount (the
“Unpaid Amount”) equal to the applicable Advanced Amount, plus any unpaid interest due and
owing with respect thereto, less any repayments thereof made by the Defaulting Lender immediately
upon demand. The Defaulting Lender shall have the right to repurchase the senior participation in
its Loan from the Special Advance Lender at any time by the payment of the Unpaid Amount.
(3) A Special Advance Lender shall (i) give notice to the Defaulting Lender, Administrative
Agent and each of the other Lenders (provided that failure to deliver said notice to any party
other than the Defaulting Lender shall not constitute a default under this Agreement) of the
Advance Amount and the percentage of the Special Advance Lender’s senior participation in the
Defaulting Lender’s Loan and (ii) in the event of the repayment of any of the Unpaid Amount by the
Defaulting Lender, give notice to the Defaulting Lender and Administrative Agent of the fact that
the Unpaid Amount has been repaid (in whole or in part), the amount of such repayment and, if
applicable, the revised percentage of the Special Advance Lender’s senior participation. Provided
that Administrative Agent has received notice of such participation, Administrative Agent shall
have the same obligations to distribute interest, principal and other sums received by
Administrative Agent with respect to a Special Advance Lender’s senior participation as
Administrative Agent has with respect to the distribution of interest, principal and other sums
under this Agreement; and at the time of making any distributions to the Lenders, shall make
payments to the Special Advance Lender with respect to a Special Advance Lender’s senior
participation in the Defaulting Lender’s Loan out of the Defaulting Lender’s share of any such
distributions.
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(4) A Defaulting Lender shall immediately pay to a Special Advance Lender all sums of any kind
paid to or received by the Defaulting Lender from Borrower, whether pursuant to the terms of this
Agreement or the other Loan Documents or in connection with the realization of the security
therefor until the Unpaid Amount is fully repaid. Notwithstanding the fact that the Defaulting
Lender may temporarily hold such sums, the Defaulting Lender shall be deemed to hold same as a
trustee for the benefit of the Special Advance Lender, it being the
express intention of the Lenders that the Special Advance Lender shall have an ownership
interest in such sums to the extent of the Unpaid Amount.
(5) Each Defaulting Lender shall indemnify, defend and hold Administrative Agent and each of
the other Lenders harmless from and against any and all losses, damages, liabilities or expenses
(including reasonable attorneys’ fees and expenses and interest at the Default Rate) which they may
sustain or incur by reason of the Defaulting Lender’s failure or refusal to abide by its
obligations under this Agreement or the other Loan Documents, except to the extent a Defaulting
Lender became a Defaulting Lender due to the gross negligence or willful misconduct of
Administrative Agent and/or any Lender. Administrative Agent shall, after payment of any amounts
due to any Special Advance Lender pursuant to the terms of subsection (3) above, set-off
against any payments due to such Defaulting Lender for the claims of Administrative Agent and the
other Lenders pursuant to this indemnity.
(6) In the event any Lender becomes a Defaulting Lender and none of the other Lenders elects
to be a Special Advance Lender pursuant to subsection (1) above, Borrower shall have the right, at
any time prior to the Completion Date, provided that no Potential Default or Event of Default
exists, to cause another financial institution, reasonably acceptable to (x) the Majority Lenders
if such institution is not an Eligible Assignee or (y) Administrative Agent if such institution is
an Eligible Assignee, to assume Defaulting Lender’s obligations with respect to the Advance Amount
on the then-existing terms and conditions of the Loan Documents (such replacement institution, a
“Replacement Lender”). Such assumption shall be pursuant to a written instrument
reasonably satisfactory to administrative Agent. Upon such assumption, the Replacement Lender
shall become a “Lender” for all purposes hereunder, with a Commitment in an amount equal to the
Advance Amount, and the Defaulting Lender’s Commitment shall automatically be reduced by the
Advance Amount. In connection with the foregoing, Borrower shall execute and deliver to the
Replacement Lender and the Defaulting Lender substitute notes substantially in the form of
Exhibit C and stating: “This Note is a substitute note as contemplated by Section
14.12 of the Agreement; it replaces and is in lieu of that certain note made by Maker dated
[date of Note] to the order of [Defaulting Lender] in the principal sum of [Defaulting Lender’s
original Commitment].” Such substitute notes shall be in amounts equal to, in the case of the
Replacement Lender’s note, the Advance Amount and, in the case of the Defaulting Lender’s note, its
Commitment as reduced aforesaid. Such substitute notes shall constitute “Notes” and the
obligations evidenced by such substitute notes shall be secured by the Mortgages. In connection
with Borrower’s execution of substitute notes as aforesaid, Borrower shall deliver to
Administrative Agent evidence, satisfactory to Administrative Agent, of all requisite
partnership/limited liability company/corporate action to authorize Borrower’s execution and
delivery of the substitute notes and any related documents. Upon delivery of the foregoing
substitute notes, each Defaulting Lender shall return to Borrower its note which was replaced,
provided that the delivery of a substitute note to the Defaulting Lender pursuant to this
Section 14.12 shall operate to void and replace the note previously held by the Defaulting
Lender
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regardless of whether Defaulting Lender
returns the same as required hereby. Borrower,
Administrative Agent and Lenders shall execute such modifications to the Loan Documents as shall,
in the reasonable judgment of Administrative Agent, be necessary or desirable in connection with
the substitution of Lenders in accordance with the foregoing provisions of this Section. Lenders
shall reasonably cooperate with Borrower’s attempts to obtain a Replacement
Lender, but they shall not be obligated to modify the Loan Documents in connection therewith,
other than modifications pursuant to the immediately preceding sentence.
Section 14.13 Liability of Administrative Agent. Administrative Agent shall not have any
liabilities or responsibilities to Borrower on account of the failure of any Lender (other than
Administrative Agent in its capacity as a Lender) to perform its obligations hereunder or to any
Lender on account of the failure of Borrower to perform its obligations hereunder or under any
other Loan Document.
Section 14.14 Transfer of Agency Function. Without the consent of Borrower or any Lender,
Administrative Agent may at any time or from time to time transfer its functions as Administrative
Agent hereunder to any of its offices wherever located in the United States; provided that
Administrative Agent shall promptly notify Lead Borrower and the Lenders thereof.
ARTICLE 15
CASH MANAGEMENT
Section 15.1 Cash Management.
(1) Upon the occurrence of an Event of Default and continuing until the Maturity Date,
Borrower and Borrower’s Managing Member shall (a) enter into and thereafter comply with the Cash
Management Agreement and (b) continuing until ninety (90) days after the date that such Event of
Default has been cured, cause all tenants in the Improvements to remit all rental and other
payments due under their respective leases into a sweep account established in accordance with the
Cash Management Agreement (the “Sweep Account”). The insufficiency of funds on deposit in
any account established pursuant to the Cash Management Agreement shall not absolve Borrower of the
obligation to make any payments as and when due pursuant to this Agreement or the other Loan
Documents, and such obligations shall be separate and independent, and not conditioned on any event
or circumstance whatsoever.
(2) Administrative Agent, in its sole discretion, may, on a monthly basis, release from the
Sweep Account an amount equal to the monthly Operating Expenses pursuant to an Approved Annual
Budget. After such release of funds described in the preceding sentence, Administrative Agent,
may, in its sole discretion, release any remaining funds to pay for interest on the Loans and for
Project Costs.
Section 15.2 Security Accounts Generally.
(1) Grant of Security Interest. Borrower hereby grants a perfected first priority security
interest in favor of Administrative Agent for the ratable benefit of the Lenders in each Security
Account established by or for it hereunder and all financial assets and other
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property and sums at
any time held, deposited or invested therein, and all security entitlements and investment property
relating thereto, together with any interest or other earnings thereon, and all proceeds thereof,
whether accounts, general intangibles, chattel paper, deposit accounts,
instruments, documents or securities (collectively, “Security Account Collateral”),
together with all rights of a secured party with respect thereto (even if no further documentation
is requested by Administrative Agent or the Lenders or executed by Borrower).
(2) Borrower Covenants. Borrower covenants and agrees:
(a) to do all acts that may be reasonably necessary to maintain, preserve and protect Security
Account Collateral;
(b) to pay promptly when due all material taxes, assessments, charges, encumbrances and liens
now or hereafter imposed upon or affecting any Security Account Collateral;
(c) to appear in and defend any action or proceeding which may materially and adversely affect
Borrower’s title to or Administrative Agent’s interest in the Security Account Collateral;
(d) following the creation of each Security Account established by or for Borrower and the
initial funding thereof, other than to Administrative Agent pursuant to the Cash Management
Agreement or this Agreement, not to transfer, assign, sell, surrender, encumber, mortgage,
hypothecate, or otherwise dispose of any of the Security Account Collateral or rights or interests
therein, and to keep the Security Account Collateral free of all levies and security interests or
other liens or charges except the security interest in favor of Administrative Agent granted
hereunder;
(e) to account fully for and promptly deliver to Administrative Agent, in the form received,
all documents, chattel paper, instruments and agreements constituting the Security Account
Collateral hereunder, endorsed to Administrative Agent or in blank, as requested by Administrative
Agent, and accompanied by such powers as appropriate and until so delivered all such documents,
instruments, agreements and proceeds shall be held by Borrower in trust for Administrative Agent,
separate from all other property of Borrower; and
(f) from time to time upon request by Administrative Agent, to furnish such further assurances
of Borrower’s title with respect to the Security Account Collateral, execute such written
agreements, or do such other acts, all as may be reasonably necessary to effectuate the purposes of
this agreement or as may be required by law, or in order to perfect or continue the first-priority
lien and security interest of Administrative Agent in the Security Account Collateral.
(3) Rights on Event of Default. Upon the occurrence and during the continuance of an Event of
Default, Administrative Agent, at its option, may withdraw the funds in any Security Account and
apply such funds to the items for which the Security Accounts were established or to payment of the
Loans in such order, proportion and priority as Administrative Agent may determine in its
discretion. Administrative Agent’s right to withdraw and apply such
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funds shall be in addition to
all other rights and remedies provided to Administrative Agent on behalf of the Lenders under the
Cash Management Agreement and the other Loan Documents.
(4) Prohibition Against Further Encumbrance. Borrower shall not, without the prior written
consent of Administrative Agent, further pledge, assign or grant any security interest in the
Security Account Collateral or permit any Lien to attach thereto, or any levy to be made thereon,
or any Uniform Commercial Code financing statements, except those naming Administrative Agent on
behalf of the Lenders as the secured party, to be filed with respect thereto.
(5) Release of Funds in Security Accounts. Any amount remaining in the Security Accounts
after the Loans have been paid in full shall promptly be returned to the Lead Borrower.
ARTICLE 16
CONTROLLED ACCOUNTS
Section 16.1 Controlled Accounts. Borrower hereby agrees with Administrative Agent, as to any
Controlled Account into which this Agreement requires Borrower to deposit funds, as follows:
(1) Establishment and Maintenance of the Controlled Account.
(a) Each Controlled Account (i) shall be established at, and a separate and identifiable
account from all other funds held by, a Depository Bank and (ii) shall contain only funds required
to be deposited pursuant to this Agreement or any other Loan Document. Any interest which may
accrue on the amounts on deposit in a Controlled Account shall be added to and shall become part of
the balance of such Controlled Account. Borrower, Administrative Agent and the applicable
Depository Bank shall enter into an agreement (a “Controlled Account Agreement”),
substantially in the form of Exhibit G attached hereto (with such changes thereto as may be
required by such Depository Bank and satisfactory to Administrative Agent) which shall govern such
Controlled Account and the rights, duties and obligations of each party to such Controlled Account
Agreement.
(b) Each Controlled Account shall be established in the name of Administrative Agent, as agent
for the Lenders and shall be subject to the sole dominion, control and discretion of Administrative
Agent, provided, however that Administrative Agent shall act in accordance with the provisions of
this Agreement. Neither Borrower nor any other Person, including, without limitation, any Person
claiming on behalf of or through Borrower, shall have any right or authority, whether express or
implied, to make use of or withdraw, or cause the use or withdrawal of, any proceeds from any
Controlled Account or any of the other proceeds deposited therein, except as expressly provided in
this Agreement or in the applicable Controlled Account Agreement.
(2) Deposits to and Disbursements from the Controlled Account. All deposits to and
disbursements of all or any portion of the deposits to any Controlled Account shall be in
accordance with this Agreement and the applicable Controlled Account Agreement.
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Borrower shall pay
any and all fees charged by Depository Bank in connection with the
maintenance of each Controlled Account required to be established by or for it hereunder, and
the performance of the Depository Bank’s duties.
(3) Security Interest.
(a) Borrower hereby grants a perfected first priority security interest in favor of
Administrative Agent for the ratable benefit of the Lenders in each Controlled Account established
by or for it hereunder and all financial assets and other property and sums at any time held,
deposited or invested therein, and all security entitlements and investment property relating
thereto, together with any interest or other earnings thereon, and all proceeds thereof, whether
accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or
securities (collectively, “Controlled Account Collateral”), together with all rights of a
secured party with respect thereto under the Uniform Commercial Code, as security for the
obligations of Borrower under the Loan Documents.
(b) All interest earned on any Controlled Account shall be retained in such Controlled
Account. Borrower shall treat all interest earned on its Controlled Account as its income for
federal income tax purposes.
(c) While any Event of Default exists, Administrative Agent shall be entitled to exercise all
rights of a secured party under the Uniform Commercial Code with respect to each Controlled
Account, and (without limiting the foregoing) may apply the Controlled Account Collateral to the
unpaid obligations of Borrower under the Loan Documents in such order as Administrative Agent may
elect in its sole discretion, without liability for any loss, and Borrower hereby consents to any
such withdrawal and application as a commercially reasonable disposition of such funds and agrees
that such withdrawal shall not result in satisfaction of such obligations except to the extent the
proceeds are applied to such sums.
ARTICLE 17
CONDOMINIUM PROVISIONS
Section 17.1 Establishment; Covenants
(1) Subject to the terms and conditions hereof, including without limitation, Section 17.2,
Lead Borrower shall have the right, with the prior written approval of the Administrative Agent, to
establish a condominium regime with respect to its ownership of the Project.
(2) Lead Borrower covenants and agrees with the Lenders and Administrative Agent that, in the
event that it establishes a condominium regime pursuant to Section 17.1, Lead Borrower shall:
(a) Submit the Project, together with all of the Improvements constructed or to be constructed
thereon, to the provisions of the Condominium Act and satisfy all of the requirements thereof and
of any other Applicable Law necessary to create a valid condominium regime inclusive of all of the
Units; and obtain any required approval of the
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Condominium Documents from the Attorney General of
the State of New York. Any
Condominium Documents and any modifications or amendments thereto shall be reasonably approved
by Administrative Agent prior to the recording, filing or effectiveness thereof, provided that in
the case of any such amendment which shall increase the number of condominium units, in the event
that a casualty or condemnation has occurred and the provisions of Article 3 prevent
restoration in connection with such casualty or condemnation, then prior to the recording, filing
or effectiveness, as applicable, of such amendment, Lead Borrower, at Administrative Agent’s
option, shall be prohibited from recording, filing or otherwise causing the amendment to become
effective and Administrative Agent, at the Majority Lenders’ election, shall be permitted to vote,
on Lead Borrower’s behalf in accordance with the Voting Proxy delivered to Administrative Agent, or
require Lead Borrower to vote, to terminate and dissolve the Condominium. In connection with such
amendment, Lead Borrower shall provide updates of the documents and opinion provided herein in the
event that the Condominium Declaration has been modified or amended or any of the officers,
managers or directors have changed as a result of such amendment;
(b) Duly perform or cause to be duly performed, in all material respects, all obligations of
the developers or sponsors under the Condominium Documents, and do or cause to be done all things
necessary to operate and maintain the Project and the Condominium as a retail condominium project,
that are required to be done by the developers or sponsors and comply with all Applicable Laws
applicable to the Condominium, and furnish such evidence of compliance therewith as Administrative
Agent may reasonably request;
(c) Subject to Administrative Agent’s approval in its reasonable discretion, not cancel,
terminate or revoke, or modify, or in any way alter or permit the alteration of, any of the
material provisions of the Condominium Documents or grant any consents or waivers thereunder, and
not to exercise any right it may have under the Condominium Documents to cancel, terminate or
revoke the same. Any request for approval by Administrative Agent pursuant to this paragraph shall
be made to, and approved by, Administrative Agent prior to, if necessary, submitting such request
to the Attorney General of the State of New York; and
Section 17.2 Subordination of Lien to Project Condominium Declarations. Provided there exists
no Potential Default or Event of Default, Administrative Agent shall, on Lead Borrower’s written
request, subordinate the liens of the Mortgages to the Condominium Declaration and shall execute
the appropriate instruments (reasonably satisfactory to the Administrative Agent in all respects)
in recordable form to effect such subordination, upon the satisfaction of the following conditions:
(1) The Administrative Agent shall have received and approved the Condominium Documents, which
shall be in proper form for recording or filing, as necessary, in the appropriate offices, and
certified by an officer of Lead Borrower as true, correct and complete copies of the Condominium
Documents;
(2) The Title Policies insuring the Mortgages shall have been endorsed to provide a
condominium endorsement and non-impairment of lien endorsement (or equivalent affirmative coverage)
(which endorsements and affirmative coverage, if applicable, shall not extend the effective date of
the Title Policies);
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(3) The Lead Borrower shall have caused to be duly executed and delivered to Administrative
Agent (i) an Assignment of Declarant’s Rights in the form of Exhibit H, (ii) conditional
resignations of the officers and managers of the Board of Directors of the applicable condominium
association in the form of Exhibits I and J, respectively, to the extent designated
by the Lead Borrower, (iii) a proxy from the Lead Borrower and each representative of the Lead
Borrower on such Board of Directors in the form of Exhibit K and (iv) a letter from all the
members of such Board of Directors with respect to common charges substantially in the form of
Exhibit L;
(4) Administrative Agent shall have received an opinion from the Condominium’s counsel to the
effect that (i) the Condominium Documents satisfy all applicable requirements of Governmental
Authorities, (ii) all requirements of any Applicable Law have been duly satisfied with respect to
the creation of the Condominium by the Lead Borrower in New York State and (iii) the documents
referred to in this Section 17.2(4) have each been duly authorized, executed and delivered
by the respective parties thereto and are enforceable against said parties in accordance with their
respective terms subject to customary limitations; and
(5) The condominium association which shall be created by the Condominium Documents shall have
furnished to Administrative Agent at no cost or expense to Administrative Agent, insurance policies
for the insurance required hereunder and under the Condominium Documents, with extended coverage
naming Administrative Agent, said condominium association, and Borrower (as owner of the Units), as
their respective interests may appear, as the insureds, covering all of the Improvements; said
insurance shall at all times be an amount equal to 100% of the insurable value of the Improvements
and shall otherwise comply with the applicable conditions contained in the Mortgages and elsewhere
in this Agreement.
Section 17.3 Transfer of Collateral. The Lead Borrower will, upon the creation of the
condominium regime, transfer its ownership interest in the Unit containing the Office Component (a
“Property Transfer”) to Fordham Office. Lead Borrower shall only affect such a transfer
after Lead Borrower has provided written notice to Administrative Agent that each of the following
conditions precedent has been satisfied with respect to such Property Transfer (hereinafter, singly
and collectively, the “Property Transfer Conditions”):
(1) The Lead Borrower shall have provided Administrative Agent with at least ten (10) Business
Days’ notice of the intended Property Transfer;
(2) The construction of the Improvements shall have commenced and shall have proceeded in
accordance with the terms and conditions hereof to a sufficient stage of completion acceptable to
Administrative Agent, in its reasonable discretion;
(3) The Borrower shall have executed and delivered, or caused the execution and delivery of,
any and all easements and any other matters as to which the Unit is either the servient or the
dominant estate, that are necessary for the ownership, construction, use or operation of the
Improvements;
(4) The Borrower and Guarantor shall have executed and delivered to Administrative Agent such
instruments, documents, agreements, and certifications as
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Administrative Agent shall have
reasonably requested to effectuate, evidence or confirm the Property Transfer and the
Administrative Agent’s rights or remedies under the Loan Documents, including without limitation an
amendment to each of the Mortgages, but in no way expanding or modifying the obligations of such
Borrower or Guarantor hereunder or under the Loan Documents;
(5) Borrower shall have delivered to the Administrative Agent such documents, instruments,
materials and further estoppels and certifications as Administrative Agent shall have determined
are reasonably required to approve or consent to, to the extent required, the applicable Property
Transfer and any requested endorsement(s) to the Title Policies delivered to Administrative Agent
pursuant to Schedule 4 — Part A, Paragraph 10; and
(6) Borrower shall have paid all costs and expenses incurred by Administrative Agent in
connection with any Property Transfer, including, without limitation, Administrative Agent’s
reasonable attorneys’ fees and costs.
[Signature Pages Follow]
128
EXECUTED as of the date first written above.
LENDER:
|
EUROHYPO AG, NEW YORK BRANCH | |||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| Address for Notices to Eurohypo AG, New York Branch: | ||||||
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Legal Director Telecopier No.: 866 267 7680 |
||||||
| With copies to: | ||||||
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Head of Portfolio Operations Telecopier No.: 866 267 7680 |
||||||
| — and — | ||||||
| Riemer & Braunstein LLP Times Square Tower, Suite 2506 Seven Times Square New York, New York 10036 Attention: Steven J. Weinstein, Esq. Telecopier No.: (617) 692-3503 |
||||||
129
BORROWER:
|
ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company |
|||||
| By: | ||||||
| Name: Robert Masters Title: Senior Vice President |
||||||
| Address for Notices: | ||||||
| c/o Acadia Realty
Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, NY 10605 Attention: Robert Masters Telecopier No.: 914-428-3646 |
||||||
| FORDHAM PLACE OFFICE, LLC, a Delaware limited liability company |
||||||
| By: | ||||||
| Name: Robert Masters Title: Senior Vice President |
||||||
| Address for Notices: |
||||||
| c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, NY 10605 Attention: Robert Masters Telecopier No.: 914-428-3646 |
||||||
130
ADMINISTRATIVE AGENT:
|
EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
|||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| Address for Notices to Eurohypo AG, New York Branch: | ||||||
| Eurohypo AG, New York
Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Legal Director Telecopier No.: 866 267 7680 |
||||||
| With copies to: | ||||||
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Head of Portfolio Operations Telecopier No.: 866 267 7680 |
||||||
| — and — | ||||||
| Riemer & Braunstein LLP Times Square Tower, Suite 2506 Seven Times Square New York, New York 10036 Attention: Steven J. Weinstein, Esq. Telecopier No.: (617) 692-3503 |
||||||
131
EXHIBIT A
LEGAL DESCRIPTION OF PROJECT
PARCEL I — (f/k/a LOT 8, Now Part of LOT 9)
ALL THAT CERTAIN piece or parcel of land, together with any improvements thereon situate, lying and
being in the Borough of the Bronx, City and State of New York, bounded and described as follows:
BEGINNING at a point on the easterly side of Webster Avenue (100 feet in width), said point being
distant south 08 degrees 26 minutes 11 seconds west, a distance of 254.35 feet from a point formed
by the intersection of said easterly side of Webster Avenue with the southerly side of East Fordham
Road (a/k/a Pelham Avenue variable in width) and from said point of beginning
RUNNING THENCE along the common dividing line between said Lot 8 and Lot 9 south 85 degrees 39
minutes 56 seconds east, a distance of 108.97 feet to a point;
THENCE along the common dividing line between said Lot 8 and Lot 12 south 04 degrees 33 minutes 31
seconds west, a distance of 24.68 feet to a point;
THENCE along the common dividing line between said Lots 8 and Lot 4 (lands now or formerly of
Automotive Realty Corporation) north 85 degrees 39 minutes 56 seconds west, a distance of 110.65
feet to a point; on the aforementioned easterly side of Webster Avenue;
THENCE along the easterly side of said Webster Avenue, north 08 degrees 26 minutes 11 seconds east,
a distance of 24.74 feet to the point or place of BEGINNING.
PARCEL II — LOT 9:
ALL THAT CERTAIN piece or parcel of land, together with any improvements thereon situate, lying and
being in the Borough of the Bronx, City and State of New York, and as further bounded and described
as follows:
BEGINNING at a point on the easterly side of Webster Avenue (100 feet wide), said point being
distant south 08 degrees 26 minutes 11 seconds west, a distance of 228.81 feet from a point formed
by the intersection of said easterly side of Webster Avenue with the southerly side of East Fordham
Road (a/k/a Pelham Avenue, variable width) and from said point of beginning;
RUNNING THENCE the following two (2) courses along the dividing line between Lot 9 (n/f reputed
owner Acadia-PA East Fordham Acquisitions, LLC and Lot 12 (n/f reputed owner Acadia-PA East Fordham
Acquisitions, LLC), Block 3033;
1. South 85 degrees 39 minutes 56 seconds east, a distance of 115.24 feet to a point; thence
2. South 03 degrees 58 minutes 56 seconds west, a distance of 25.48 feet to a point; thence
3. Along the common dividing line between the aforementioned Lot 9 and Lots 12 & 8 (n/f Acadia-PA
East Fordham Acquisitions LLC), Block 3033 north 85 degrees 39 minutes 56 seconds west, a distance
of 117.22 feet to a point on the aforementioned easterly side of Webster Avenue; thence
4. Along said easterly side of Webster Avenue, north 08 degrees 26 minutes 11 seconds east, a
distance of 25.54 feet to the point or place of BEGINNING.
This description is prepared in accordance with a Survey made by Control Point Associates Inc.
dated 8/30/07 and last revised 9/18/07 by Gregory A. Gallas NY P.L.S. (Control Point Associates
Inc.)
PARCEL III — LOT 12:
ALL THAT CERTAIN plot, piece or parcel of land, together with any improvements thereon situate,
situate, lying and being in the Borough and County of Bronx, City and State of New York, bounded
and described as follows:
BEGINNING at a point formed by the intersection of the easterly side of Webster Avenue (100 feet
wide) with the southerly side of East Fordham Road (A.K.A. Pelham Avenue, Variable Width) and from
said point of beginning.
RUNNING THENCE the following three (3) courses along said southerly side of East Fordham Road;
1. South 84 degrees 34 minutes 46 seconds east, a distance of 43.27 feet to a point, THENCE
2. South 54 degrees 01 minute 22 seconds east, a distance of 29.77 feet to a point; THENCE;
3. South 40 degrees 09 minutes 32 seconds east, a distance of 85.32 feet to a point on the
westerly side of Park Avenue (Variable Width) THENCE
4. Along said westerly side of Park Avenue, south 00 degrees 10 minutes 48 seconds east, a
distance of 201.71 feet to a point THENCE
5. Along the dividing line between Lot 12 (Lands now or formerly of Acadia-PA East Fordham
Acquisitions LLC) and Lot 4 (Lands now or formerly of Automotive Realty Corporation), Block 3033,
North 85 degrees 39 minutes 56 seconds west, a distance of 53.59 feet to a point, THENCE
6. Along the common dividing line between the aforementioned Lot 12, Lot 8 (Land now or formerly
of Acadia-PA East Fordham Acquisitions LLC) and Lot 9 (lands now or formerly of Acadia-PA East
Fordham Acquisitions LLC) Block 3033, North 04 degrees 33 minutes 31 seconds east, a distance of
24.68 feet to a point, THENCE, The following three (3) courses along the dividing line between the
aforementioned Lots 12 and 9;
7. South 85 degrees 39 minutes 56 seconds east, a distance of 8.25 feet to a point, THENCE
8. North 03 degrees 58 minutes 56 seconds east, a distance of 25.48 feet to a point, THENCE
9. North 85 degrees 39 minutes 56 seconds west, a distance of 115.24 feet to a point on the
aforementioned easterly side of Webster Avenue, THENCE
10. Along said easterly side of Webster Avenue, north 08 degrees 26 minutes 11 seconds east, a
distance of 228.81 feet to the point and place of BEGINNING.
EXHIBIT B
BUDGET
EXHIBIT C-1
FORM OF PROJECT LOAN NOTE
PROJECT LOAN NOTE
| $____________ | _________, 200_ | |
| New York, New York |
FOR VALUE RECEIVED, ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability
company and FORDHAM PLACE OFFICE LLC (individually and collectively, jointly and severally, the
“Borrower”), hereby promises to pay to ________________________
(the “Lender”), for account
of its respective Applicable Lending Offices provided for by the Agreement referred to below, at
the principal office of EUROHYPO AG, NEW YORK BRANCH, at 1114 Avenue of the Americas, 29th Floor,
New York, New York 10036, the principal sum of ____________and ____________Dollars ($____________)
(or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by
the Lender to Borrower under the Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided in the Agreement,
and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money
and funds, for the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Agreement.
With respect to the definition of “Borrower”, except where the context otherwise provides, (i)
any representations contained herein of Borrower shall be applicable to each Borrower, (ii) any
affirmative covenants contained herein shall be deemed to be covenants of each Borrower and shall
require performance by all Borrowers, (iii) any negative covenants contained herein shall be deemed
to be covenants of each Borrower, and shall be breached if any Borrower fails to comply therewith,
(iv) the occurrence of any Event of Default with respect to any Borrower shall be deemed to be an
Event of Default hereunder, and (v) any Indebtedness and/or obligations of Borrower shall be deemed
to include any Indebtedness and/or obligations of the Borrowers, or any Indebtedness and/or
obligations of any one of them.
The date, amount, Type, interest rate and duration of Interest Period (if applicable) of each
Loan made by the Lender to Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by
the Lender on the schedule attached hereto or any continuation thereof, provided that the failure
of the Lender to make any such recordation or endorsement shall not affect the obligations of
Borrower to make a payment when due of any amount owing under the Agreement or hereunder in respect
of the Loans made by the Lender.
This Project Loan Note is one of the Notes referred to in the Acquisition and Project Loan
Agreement dated as of the date hereof (as modified, supplemented, extended and in effect from time
to time, the “Agreement”) among Borrower, the lenders party thereto (including the Lender)
and Eurohypo AG, New York Branch, as Administrative Agent, and evidences Loans
Note
1
made by the Lender thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this Note upon the occurrence
of certain events and for prepayments of Loans upon the terms and conditions specified therein.
Except as permitted by Sections 12.8 and 12.23 of the Agreement, this Note may not be assigned
by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the law of the State of New
York without regard to conflicts of laws principles other than Section 5-1401 of the General
Obligations Law of the State of New York.
As long as a Hedge Agreement with the Eurohypo Counterparty is in effect, the interest payable
under this Note shall be increased or decreased from time to time in accordance with such Hedge
Agreement. Therefore, this Note also evidences such amounts as may become due and payable by
Borrower under the Hedge Agreement with the Eurohypo Counterparty, including, without limitation,
any amount payable upon or in connection with termination of such Hedge Agreement, all of which
sums shall be deemed to constitute “Additional Interest” evidenced hereby and payable pursuant to
this Note and in accordance with the terms and provisions of the Hedge Agreement with a Eurohypo
Counterparty.
[No further text on this page]
Note
2
IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above
written.
| ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a
Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| FORDHAM PLACE OFFICE LLC, a Delaware limited
liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
Note
3
EXHIBIT C-2
FORM OF BUILDING LOAN NOTE
BUILDING LOAN NOTE
| $____________ | ____________, 2007 | |
| New York, New York |
FOR VALUE RECEIVED, ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability
company and FORDHAM PLACE OFFICE LLC (individually and collectively, jointly and severally, the
“Borrower”), hereby promises to pay to _____________________(the “Lender”), for account
of its respective Applicable Lending Offices provided for by the Agreement referred to below, at
the principal office of EUROHYPO AG, NEW YORK BRANCH, at 1114 Avenue of the Americas, 29th Floor,
New York, New York 10036, the principal sum of
____________ and ____________Dollars ($____________)
(or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by
the Lender to Borrower under the Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided in the Agreement,
and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money
and funds, for the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Agreement.
With respect to the definition of “Borrower”, except where the context otherwise provides, (i)
any representations contained herein of Borrower shall be applicable to each Borrower, (ii) any
affirmative covenants contained herein shall be deemed to be covenants of each Borrower and shall
require performance by all Borrowers, (iii) any negative covenants contained herein shall be deemed
to be covenants of each Borrower, and shall be breached if any Borrower fails to comply therewith,
(iv) the occurrence of any Event of Default with respect to any Borrower shall be deemed to be an
Event of Default hereunder, and (v) any Indebtedness and/or obligations of Borrower shall be deemed
to include any Indebtedness and/or obligations of the Borrowers, or any Indebtedness and/or
obligations of any one of them.
The date, amount, Type, interest rate and duration of Interest Period (if applicable) of each
Loan made by the Lender to Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by
the Lender on the schedule attached hereto or any continuation thereof, provided that the failure
of the Lender to make any such recordation or endorsement shall not affect the obligations of
Borrower to make a payment when due of any amount owing under the Agreement or hereunder in respect
of the Loans made by the Lender.
This Building Loan Note is one of the Notes referred to in the Acquisition and Project Loan
Agreement dated as of the date hereof (as modified, supplemented, extended and in effect from time
to time, the “Agreement”) and the Building Loan Agreement, each among Borrower, the lenders
party thereto (including the Lender) and Eurohypo AG, New York Branch, as
Note
1
Administrative Agent, and evidences Loans made by the Lender thereunder. Terms used but not
defined in this Note have the respective meanings assigned to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this Note upon the occurrence
of certain events and for prepayments of Loans upon the terms and conditions specified therein.
Except as permitted by Sections 12.8 and 12.23 of the Agreement, this Note may not be assigned
by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the law of the State of New
York without regard to conflicts of laws principles other than Section 5-1401 of the General
Obligations Law of the State of New York.
As long as a Hedge Agreement with the Eurohypo Counterparty is in effect, the interest payable
under this Note shall be increased or decreased from time to time in accordance with such Hedge
Agreement. Therefore, this Note also evidences such amounts as may become due and payable by
Borrower under the Hedge Agreement with the Eurohypo Counterparty, including, without limitation,
any amount payable upon or in connection with termination of such Hedge Agreement, all of which
sums shall be deemed to constitute “Additional Interest” evidenced hereby and payable pursuant to
this Note and in accordance with the terms and provisions of the Hedge Agreement with a Eurohypo
Counterparty.
[No further text on this page]
Note
2
IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above
written.
| ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a
Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| FORDHAM PLACE OFFICE LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
Note
3
EXHIBIT C-3
FORM OF ACQUISITION LOAN NOTE
ACQUISITION LOAN NOTE
| $____________ | ____________, 2007 | |
| New York, New York |
FOR VALUE RECEIVED, ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability
company and FORDHAM PLACE OFFICE LLC (individually and collectively, jointly and severally, the
“Borrower”), hereby promises to pay to _____________________(the “Lender”), for account of its
respective Applicable Lending Offices provided for by the Agreement referred to below, at the
principal office of EUROHYPO AG, NEW YORK BRANCH, at 1114 Avenue of the Americas, 29th Floor, New
York, New York 10036, the principal sum of _________and _________Dollars ($_________) (or
such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the
Lender to Borrower under the Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided in the Agreement,
and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money
and funds, for the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Agreement.
With respect to the definition of “Borrower”, except where the context otherwise provides, (i)
any representations contained herein of Borrower shall be applicable to each Borrower, (ii) any
affirmative covenants contained herein shall be deemed to be covenants of each Borrower and shall
require performance by all Borrowers, (iii) any negative covenants contained herein shall be deemed
to be covenants of each Borrower, and shall be breached if any Borrower fails to comply therewith,
(iv) the occurrence of any Event of Default with respect to any Borrower shall be deemed to be an
Event of Default hereunder, and (v) any Indebtedness and/or obligations of Borrower shall be deemed
to include any Indebtedness and/or obligations of the Borrowers, or any Indebtedness and/or
obligations of any one of them.
The date, amount, Type, interest rate and duration of Interest Period (if applicable) of each
Loan made by the Lender to Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by
the Lender on the schedule attached hereto or any continuation thereof, provided that the failure
of the Lender to make any such recordation or endorsement shall not affect the obligations of
Borrower to make a payment when due of any amount owing under the Agreement or hereunder in respect
of the Loans made by the Lender.
This Acquisition Loan Note is one of the Notes referred to in the Acquisition and Project Loan
Agreement dated as of the date hereof (as modified, supplemented, extended and in effect from time
to time, the “Agreement”) among Borrower, the lenders party thereto (including the
Note
4
Lender) and Eurohypo AG, New York Branch, as Administrative Agent, and evidences Loans made by
the Lender thereunder. Terms used but not defined in this Note have the respective meanings
assigned to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this Note upon the occurrence
of certain events and for prepayments of Loans upon the terms and conditions specified therein.
Except as permitted by Sections 12.8 and 12.23 of the Agreement, this Note may not be assigned
by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the law of the State of New
York without regard to conflicts of laws principles other than Section 5-1401 of the General
Obligations Law of the State of New York.
As long as a Hedge Agreement with the Eurohypo Counterparty is in effect, the interest payable
under this Note shall be increased or decreased from time to time in accordance with such Hedge
Agreement. Therefore, this Note also evidences such amounts as may become due and payable by
Borrower under the Hedge Agreement with the Eurohypo Counterparty, including, without limitation,
any amount payable upon or in connection with termination of such Hedge Agreement, all of which
sums shall be deemed to constitute “Additional Interest” evidenced hereby and payable pursuant to
this Note and in accordance with the terms and provisions of the Hedge Agreement with a Eurohypo
Counterparty.
[No further text on this page]
Note
5
IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above
written.
| ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a
Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| FORDHAM PLACE OFFICE LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
Note
6
EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the
“Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used
but not defined herein shall have the meanings given to them in the Loan Agreements identified
below (as amended, the “Loan Agreements”), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment
and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to
and in accordance with the Standard Terms and Conditions and the Loan Agreements, as of the
Effective Date inserted by Administrative Agent as contemplated below (i) all of the Assignor’s
rights and obligations in its capacity as a Lender under the Loan Agreements and any other
documents or instruments delivered pursuant thereto to the extent related to the amount and
percentage interest identified below of all of such outstanding rights and obligations of the
Assignor under the respective facilities identified below (including any letters of credit included
in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all
claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection with the Loan
Agreements, any other documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing, including contract
claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights
and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without recourse to
the Assignor and, except as expressly provided in this Assignment and Assumption, without
representation or warranty by the Assignor.
| 1. | Assignor: | |||||||
| 2. | Assignee: | |||||||
| [and is an Approved Fund or an Affiliate of [identify Lender]1] |
||||||||
| 3. | Borrower: | |||||||
| 4. | Administrative Agent: | Eurohypo, AG, New York Branch, as administrative agent under the Loan Agreements |
| 1 | Select as applicable. |
Assignment and Assumption
1
| 5. | Construction Loan Agreement: | The (i) $_________ Acquisition and Project Loan Agreement and (ii) $_________ Building Loan Agreement, each dated as of _________ ___, 200___, among Borrower, the Lenders parties thereto, and Eurohypo, AG, New York Branch, as Administrative Agent | ||||||
| 6. | Assigned Interest: |
| Aggregate Amount | Amount of | Percentage | ||||||||||||||
| of | Amount of | Unused | Assigned of | |||||||||||||
| Commitment/ | Commitment/Loans | Loans | Commitment | Commitment | ||||||||||||
| Loans Assigned | for all Lenders | Assigned | Assigned | and Loans2 | ||||||||||||
Acquisition Loan |
$ | $ | $ | % | ||||||||||||
Project Loan |
$ | $ | $ | % | ||||||||||||
Building Loan |
$ | $ | $ | % | ||||||||||||
Effective Date: _________ ______, 20___[TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
| ASSIGNOR [NAME OF ASSIGNOR] |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| ASSIGNEE [NAME OF ASSIGNEE] |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Applicable Lending Office Address for Notices: |
||||
| 2 | Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
Assignment and Assumption
2
Telephone No.: ( )
Telecopier No.: ( )
Telecopier No.: ( )
| [Consented to and]3 Accepted: EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| 3 | To be added only if the consent of Administrative Agent is required by the terms of the Loan Agreements. |
Assignment and Assumption
3
ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any
lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the Loan Agreements or any
other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective obligations under any
Loan Document.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power
and authority, and has taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby and to become a Lender under the
Loan Agreements, (ii) it satisfies the requirements, if any, specified in the Loan Agreements that
are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Agreements
as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a
Lender thereunder, (iv) it has received a copy of the Loan Agreements, together with copies of the
most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and
such other documents and information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on
the basis of which it has made such analysis and decision independently and without reliance on
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the
Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms
of the Loan Agreements, duly completed and executed by the Assignee; and (b) agrees that (i) it
will, independently and without reliance on Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it
will perform in accordance with their terms all of the obligations which by the terms of the Loan
Documents are required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, Administrative Agent shall make all
payments in respect of the Assigned Interest (including payments of principal, interest, fees and
other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date
and to the Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and assigns. This Assignment
and Assumption may be executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this Assignment and
Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this
Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in
accordance with, the law of the State of New York.
EXHIBIT E
FORM OF NOTICE OF CONVERSION/CONTINUATION
____________, 200_
Eurohypo AG, New York Branch, as Administrative Agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attn: ________________________
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attn: ________________________
| Re: | (i) Acquisition and Project Loan Agreement dated as of October ___, 2007 (as the same may be amended, modified or supplemented from time to time, the “Agreement”) and (ii) Building Loan Agreement, dated as of October ___, 2007, each by and among ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company and FORDHAM PLACE OFFICE LLC, a Delaware limited liability company (jointly and severally, individually and collectively the “Borrower”), the lenders from time to time party to the Agreement (the “Lenders”), and EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent on behalf of the Lenders (the “Administrative Agent”) |
Ladies and Gentlemen:
Reference is made to the Agreement. Capitalized terms used in this Notice of
Conversion/Continuation without definition have the meanings specified in the Agreement.
Pursuant to Section 2.2 of the Agreement, Borrower hereby elects to convert or
continue the loans described in attached Schedule 1 (the “Loans”). In connection
therewith, Borrower and the undersigned authorized officer of Borrower hereby certify that:
(1) Representations and Warranties. All representations and warranties of Borrower
contained in the Loan Documents, including those contained in Article 7 of the Agreement, are true
and correct as of the date hereof and shall be true and correct on the date of the
continuation/conversion of the Loans, both before and after giving effect to such
continuation/conversion; and
(2) No Event of Default. No Event of Default exists as of the date hereof or will
result from the continuation/conversion of the Loans.
| ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a
Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Schedule 1
to Notice of Conversion/Continuation
to Notice of Conversion/Continuation
LOAN(S) TO BE CONVERTED OR CONTINUED
| A. | All conversions and continuations must be of a Loan, or portion thereof, in a principal amount of $1,000,000 or a multiple of $100,000 in excess thereof. |
| B. | Conversions/continuations to a Eurodollar Loan under paragraphs C(1) and (2) below are not permitted if, after giving effect to thereto, (a) there would be more than four (4) different Eurodollar Loans in effect, or (b) the aggregate outstanding principal amount of all Eurodollar Loans would be reduced to be less than $1,000,000. |
| C. | Pursuant to Section 2.2 of the Agreement, Borrower elects to Continue or Convert Loans as follows: |
| (1) | Effective Date of Election: _________ ___, 200_ | ||
| (2) | Amount, Type and Interest Period of Eurodollar Loans to be Continued as Eurodollar Loans: |
| (i) | Eurodollar Loans in the aggregate amount of $_________ to be Continued as Eurodollar Loans with an Interest Period of _____ months, such Eurodollar Loans consisting of the following Loans: | ||
| Project Loans: $_________ | |||
| Building Loans: $_________ | |||
| Acquisition Loans: $_________ |
| (3) | Amount, Type and Interest Period of Alternate Base Rate Loans to be Converted to Eurodollar Loans: |
| (i) | Alternate Base Rate Loans in the aggregate amount of $_________ to be Converted to Eurodollar Loans with an Interest period of ___ months, such Alternate Base Rate Loans consisting of the following Loans: | ||
| Project Loans: $_________ | |||
| Building Loans: $_________ | |||
| Acquisition Loans: $_________ |
| (4) | Amount and Type of Eurodollar Loans to be Converted to Alternate Base Rate Loans: |
| (i) | Eurodollar Loans in the aggregate amount of $_________ to be Converted to Alternate Base Rate Loans, such Eurodollar Loans consisting of the following Loans: | ||
| Project Loans: $_________ | |||
| Building Loans: $_________ | |||
| Acquisition Loans: $_________ |
1
EXHIBIT F-1
FORM OF REQUEST FOR LOAN ADVANCE (PROJECT LOANS)
REQUEST FOR LOAN ADVANCE (PROJECT LOANS)
_______________, 200_
Eurohypo AG, New York Branch, as Administrative Agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attn: ________________________
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attn: ________________________
| Re: | Eurohypo AG, New York Branch, as Administrative Agent, Loans in the aggregate amount of $_________ to _______________ | |
| Project: |
Ladies and Gentlemen:
Reference is made to that certain (i) Acquisition and Project Loan Agreement dated October
___, 2007 among Eurohypo AG, New York Branch, as Administrative Agent, certain lenders thereto,
Fordham Place Office LLC and the undersigned (the “Loan Agreement”) and (ii) Building Loan
Agreement, dated October ___, 2007 among Eurohypo AG, New York Branch, as Administrative Agent,
certain lenders thereto, Fordham Place Office LLC and the undersigned (the “Building Loan
Agreement”). Terms not defined in this Request for Loan Advance shall have the same meaning as
in the Loan Agreement.
This Request for Loan Advance (Project Loans) (i) is request No. _________ under the Loan
Agreement with respect to Project Loans, (ii) constitutes Borrower’s request to borrow Project
Loans in the amounts and in the manner set forth below and (iii) is otherwise subject to the terms
of the Loan Agreement. The information relating to the proposed Project Loans is as follows:
| 1. | The date of the proposed Project Loans is _________, ______. | |||||||
| 2. | The aggregate amount of the proposed Project Loans (after deducting an aggregate Retainage of $_________) is | $_________. | ||||||
| 3. | The aggregate amount of the proposed Project Loans which are to bear interest as Base Rate Loans is | $_________. | ||||||
| 4. | The aggregate amount of the proposed Project Loans which are to bear interest as Eurodollar Loans is | $_________. | ||||||
| 5. | The Interest Periods and the aggregate amount of the proposed Eurodollar Loans with respect to each such Interest Period are as follows: |
1
| — 1 month | $_________. | |||
| — 2 month | $_________. | |||
| — 3 month | $_________. | |||
| — 6 month | $_________. | |||
| — 9 month | $_________. | |||
| — 12 month | $_________. |
6. The aggregate amount of Project Loans requested hereunder, when added to prior (if any)
Project Loans funded under the Loan Agreement, will result in total Project Loans outstanding under
the Loan Agreement of $_________. Funds undrawn under the aggregate Project Loan Commitments after
giving effect to the Project Loans requested hereunder will then be $_________.
Attached to this Request for Loan Advance are the following items:
| A. | To the extent not previously delivered to Administrative Agent, for funds due under the Construction Management Agreement, copies of the Construction Manager’s invoices relating to payments requested under this Request for Loan Advance, together with paid invoices evidencing payment of funds previously advanced to the Construction Manager pursuant to Project Loans; | ||
| B. | To the extent not previously delivered to Administrative Agent, for funds paid directly by Borrower, copies of all invoices relating to payments requested under this Request for Loan Advance, together with paid invoices evidencing payment of funds previously advanced to Borrower pursuant to Project Loans; | ||
| C. | Copy of the Budget attached as Schedule 1 hereto, showing the portion of each budget line item comprising the aggregate Project Loans subject to this request and any Retainage with respect thereto, and the total of all Project Loans to date, inclusive of the Project Loans subject to this request; | ||
| D. | If this Request for Loan Advance covers any stored materials under Section 4.8 of the Building Loan Agreement, a Stored Materials Statement in the form of Schedule 2 attached thereto. | ||
| E. | Copies of sworn unconditional lien wavers from each trade contractor, subcontractor, materialman, supplier and vendor who is to be paid from the proceeds of this Advance, to the extent not previously delivered to Administrative Agent; | ||
| F. | Borrower’s Architect’s Certificate for Payment in accordance with AIA Document G 702; | ||
| G. | Requisition form duly executed by the Construction Manager; and | ||
| H. | Copies of all other documents required pursuant to Article IV and Schedule 4 of the Loan Agreement. |
2
In connection with this advance, Borrower hereby certifies that the following are true and
correct:
| I. | To the best of its knowledge, the facts set forth in the Construction Manager’s invoices and in Schedule 1 and Schedule 2; | ||
| II. | Except for contractors, subcontractors, materialmen, suppliers or vendors who are to be paid from proceeds of the Project Loans requested hereunder, there is no outstanding Indebtedness of the undersigned for labor, wages or materials in connection with the construction of the Improvements which is currently due, excluding work that is being contested in good faith, and which could become the basis of a Lien on the Project; | ||
| III. | All sums previously requisitioned have been applied to the payment of the Hard Costs and the Soft Costs, excluding work that is being contested in good faith, heretofore incurred; | ||
| IV. | All Change Orders have been submitted to Administrative Agent and the Construction Consultant and all Change Orders for which a Project Loan is requested hereby have been approved by Administrative Agent and the Construction Consultant to the extent required by the Loan Agreement; | ||
| V. | In the judgment of Borrower, the Improvements are ______% complete; and | ||
| VI. | To the best of its knowledge, Borrower is not in Potential Default or Event of Default under any of the terms and conditions of the Loan Documents; | ||
| VII. | After giving effect to this advance, the Loans will remain In Balance, in accordance with Section 4.3 of the Loan Agreement, and all conditions to this advance have been satisfied in accordance with Section 4.1 of the Loan Agreement; | ||
| VIII. | Each representation and warranty of Borrower set forth in the Loan Agreement remains true and correct in all material respects as of the date of this Request for Loan Advance and will be so on the date of disbursement of the requested Loan, except with respect to (a) matters which have been disclosed in writing to and approved by Administrative Agent (subject, however, to the terms of the Loan Agreement) or (b) liens of mechanics and materialmen (subject to Schedule 4 — Part A, [paragraph 3]) and matters addressed in Section 3.1 of the Loan Agreement, which would not, if adversely decided, have a Material Adverse Effect; | ||
| IX. | No litigation or arbitral proceedings are pending or, to the best of Borrower’s knowledge, threatened against Borrower, Guarantor or the Property Manager, which is likely to (1) affect the validity or priority of the liens of the Mortgages or (2) or, if adversely decided, have a Material Adverse Effect; and |
3
| X. | All Government Approvals, to the extent then required for the construction of the Construction Work, have been obtained and that all Applicable Laws relating to the construction and operation of the Project have been and will continue to be complied with. |
The undersigned requests that the requested Project Loans be advanced by depositing the same into
Borrower’s account to be designated by Borrower (Account No. _________). The person signing this
Request for Loan Advance (Project Loans) on behalf of Borrower represents and warrants to you that
such person is authorized to execute this letter on behalf of Borrower.
[Signature Page Follows]
4
| ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC,
a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| RECEIVED: EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| cc: | [CONSTRUCTION CONSULTANT] (with attachments) |
5
SCHEDULE 1 — to Request for Loan Advance
[Attach form of Budget Outline to be Used]
Page _____ of _____ Pages
SCHEDULE 2 — to Request for Loan Advance
STORED MATERIALS STATEMENT NO.
| Borrower: ____________ | Period Covered (PC): From ______ To ______ | |
| Project: ____________ | Date: ____________ | |
| Address: ____________ |
| DESCRIPTION OF MATERIALS | |||||||||||||||||||||||
| STORED (ATTACH INVOICES, | RETAINED | ||||||||||||||||||||||
| LISTINGS AND/OR OTHER | LOCATION | NAME OF SUB- | ADDITIONS | AMOUNT | |||||||||||||||||||
| PRICE SUPPORTING | WHERE | CONTRACTOR | OPENING | TO | USAGE OF | CLOSING | NOT YET | ||||||||||||||||
| ITEM NO. | DOCUMENTATION | STORED | /SUPPLIER | INVENTORY | INVENTORY | INVENTORY | INVENTORY | DUE | |||||||||||||||
TOTALS OR SUBTOTALS
EXHIBIT F-2
FORM OF REQUEST FOR LOAN ADVANCE (BUILDING LOANS)
REQUEST FOR LOAN ADVANCE (BUILDING LOANS)
_______________, 200_
Eurohypo AG, New York Branch, as Administrative Agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attn: ______________________
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attn: ______________________
| Re: | Eurohypo AG, New York Branch, as Administrative Agent, Loans in the aggregate amount of $_________ to Acadia-PA East Fordham Acquisitions, LLC and Fordham Place Office LLC |
Project:
Ladies and Gentlemen:
Reference is made to that certain (i) Acquisition and Project Loan Agreement dated October
___, 2007 among Eurohypo AG, New York Branch, as Administrative Agent, certain lenders thereto,
Fordham Place Office LLC and the undersigned (the “Loan Agreement”) and (ii) Building Loan
Agreement, dated October ___, 2007 among Eurohypo AG, New York Branch, as Administrative Agent,
certain lenders thereto, Fordham Place Office LLC and the undersigned (the “Building Loan
Agreement”). Terms not defined in this Request for Loan Advance shall have the same meaning as
in the Loan Agreement.
This Request for Loan Advance (Building Loans) (i) is request No. ___________ under the Loan
Agreement with respect to Building Loans, (ii) constitutes Borrower’s request to borrow Building
Loans in the amounts and in the manner set forth below and (iii) is otherwise subject to the terms
of the Loan Agreement and the Building Loan Agreement. The information relating to the proposed
Building Loans is as follows:
| 1. | The date of the proposed Building Loans is _________, ___. | |||||||
| 2. | The aggregate amount of the proposed Building Loans (after deducting an aggregate Retainage of $_________) is | $_________. | ||||||
| 3. | The aggregate amount of the proposed Building Loans which are to bear interest as Base Rate Loans is | $_________. | ||||||
| 4. | The aggregate amount of the proposed Building Loans which are to bear interest as Eurodollar Loans is | $_________. |
1
| 5. | The Interest Periods and the aggregate amount of the proposed Eurodollar Loans with respect to each such Interest Period are as follows: |
| — 1 month | $_________. | |||
| — 2 month | $_________. | |||
| — 3 month | $_________. | |||
| — 6 month | $_________. | |||
| — 9 month | $_________. | |||
| — 12 month | $_________. |
| 6. | The aggregate amount of Building Loans requested hereunder, when added to prior (if any) Building Loans funded under the Building Loan Agreement, will result in total Building Loans outstanding under the Building Loan Agreement of $_________. Funds undrawn under the aggregate Building Loan Commitments after giving effect to the Building Loans requested hereunder will then be $_________. |
Attached to this Request for Loan Advance (Building Loans) are the following items:
| A. | To the extent not previously delivered to Administrative Agent, for funds due under the Construction Management Agreement, copies of the Construction Manager’s invoices relating to payments requested under this Request for Loan Advance (Building Loans), together with paid invoices evidencing payment of funds previously advanced to the Construction Manager pursuant to Building Loans; | ||
| B. | To the extent not previously delivered to Administrative Agent, for funds paid directly by Borrower, copies of all invoices relating to payments requested under this Request for Loan Advance (Building Loans), together with paid invoices evidencing payment of funds previously advanced to Borrower pursuant to Building Loans; | ||
| C. | Copy of the Budget attached as Schedule 1 hereto, showing the portion of each budget line item comprising the aggregate Building Loans subject to this request and any Retainage with respect thereto, and the total of all Building Loans to date, inclusive of the Building Loans subject to this request; | ||
| D. | If this Request for Loan Advance (Building Loans) covers any stored materials under Section 4.8 of the Building Loan Agreement, a Stored Materials Statement in the form of Schedule 2 attached thereto. | ||
| E. | Copies of sworn unconditional lien wavers from each trade contractor, subcontractor, materialman, supplier and vendor who is to be paid from the proceeds of this Advance, to the extent not previously delivered to Administrative Agent; |
2
| F. | Borrower’s Architect’s Certificate for Payment in accordance with AIA Document G 702; | ||
| G. | Requisition form duly executed by the Construction Manager; and | ||
| H. | Copies of all other documents required pursuant to Article IV and Schedule 4 of the Loan Agreement. |
In connection with this advance, Borrower hereby certifies that the following are true and
correct:
| I. | To the best of its knowledge, the facts set forth in the Construction Manager’s invoices and in Schedule 1 and Schedule 2; | ||
| II. | Except for contractors, subcontractors, materialmen, suppliers or vendors who are to be paid from proceeds of the Building Loans requested hereunder, there is no outstanding Indebtedness of the undersigned for labor, wages or materials in connection with the construction of the Improvements which is currently due, excluding work that is being contested in good faith, and which could become the basis of a Lien on the Project; | ||
| III. | All sums previously requisitioned have been applied to the payment of the Hard Costs and the Soft Costs, excluding work that is being contested in good faith, heretofore incurred; | ||
| IV. | All Change Orders have been submitted to Administrative Agent and the Construction Consultant and all Change Orders for which a Building Loan is requested hereby have been approved by Administrative Agent and the Construction Consultant to the extent required by the Loan Agreement; | ||
| V. | In the judgment of Borrower, the Improvements are ___% complete; and | ||
| VI. | To the best of its knowledge, Borrower is not in Potential Default or Event of Default under any of the terms and conditions of the Loan Documents; | ||
| VII. | After giving effect to this advance, the Loans will remain In Balance, in accordance with Section 4.3 of the Loan Agreement, and all conditions to this advance have been satisfied in accordance with Section 4.1 of the Loan Agreement; | ||
| VIII. | Each representation and warranty of Borrower set forth in the Loan Agreement remains true and correct in all material respects as of the date of this Request for Loan Advance and will be so on the date of disbursement of the requested Loan, except with respect to (a) matters which have been disclosed in writing to and approved by Administrative Agent (subject, however, to the terms of the Loan Agreement) or (b) liens of mechanics and materialmen (subject to Schedule 4 — Part A, [paragraph 3]) and matters addressed in Section 3.1 of the Loan |
3
| Agreement, which would not, if adversely decided, have a Material Adverse Effect; | |||
| IX. | No litigation or arbitral proceedings are pending or, to the best of Borrower’s knowledge, threatened against Borrower, Guarantor or the Property Manager, which is likely to (1) affect the validity or priority of the liens of the Mortgages or (2) or, if adversely decided, have a Material Adverse Effect; and | ||
| X. | All Government Approvals, to the extent then required for the construction of the Construction Work, have been obtained and that all Applicable Laws relating to the construction and operation of the Project have been and will continue to be complied with. |
The undersigned requests that the requested Building Loans be advanced by depositing the same into
Borrower’s account to be designated by Borrower (Account No. _________). The person signing this
Request for Loan Advance (Building Loans) on behalf of Borrower represents and warrants to you that
such person is authorized to execute this letter on behalf of Borrower.
[Signature Page Follows]
4
| ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| RECEIVED: EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| cc: | [CONSTRUCTION CONSULTANT] (with attachments) |
5
SCHEDULE 1 — to Request for Loan Advance
[Attach form of Budget Outline to be Used]
Page _____ of _____ Pages
SCHEDULE 2 — to Request for Loan Advance
STORED MATERIALS STATEMENT NO.
| Borrower: ____________ | Period Covered (PC): From ________ To ________ | |
| Project: ____________ | Date: ____________ | |
| Address: ____________ |
| DESCRIPTION OF MATERIALS | |||||||||||||||||||||||
| STORED (ATTACH INVOICES, | RETAINED | ||||||||||||||||||||||
| LISTINGS AND/OR OTHER | LOCATION | NAME OF SUB- | ADDITIONS | AMOUNT | |||||||||||||||||||
| PRICE SUPPORTING | WHERE | CONTRACTOR | OPENING | TO | USAGE OF | CLOSING | NOT YET | ||||||||||||||||
| ITEM NO. | DOCUMENTATION | STORED | /SUPPLIER | INVENTORY | INVENTORY | INVENTORY | INVENTORY | DUE | |||||||||||||||
TOTALS OR SUBTOTALS
1
EXHIBIT G
CONTROLLED ACCOUNT AGREEMENT
See Attached
EXHIBIT H
ASSIGNMENT OF DECLARANT’S RIGHTS
Acadia PA East Fordham Acquisitions, LLC, a Delaware limited liability company, and Fordham
Place Office, LLC, a Delaware limited liability company, each having an address c/o Acadia Realty
Trust, 1311 Mamoroneck Avenue, Suite 260, White Plains, New York (collectively the
“Assignor”), for Ten Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, does hereby grant, assign, transfer and
set over unto EUROHYPO AG, NEW YORK BRANCH (“Administrative Agent”), all of Assignor’s
right and privileges (the “Declarant’s Rights”) arising under (i) the Declaration (as
defined below), and (ii) the by-laws and articles of incorporation relating to the condominium (the
“Condominium”) created by the Declaration (said by-laws and articles of incorporation,
together with the Declaration, collectively called the “Condominium Documents”).
So long as no Default or Event of Default shall exist under the Mortgages (as defined below),
Assignor may exercise the Declarant’s Rights and Administrative Agent may not exercise the
Declarant’s Rights, except that Assignor may not (i) transfer or encumber any of the Declarant’s
Rights, except as permitted in the Mortgages, (ii) except as permitted under the Loan Agreement (as
defined below) cause or allow any of the Condominium Documents that require the consent or approval
of declarant to amend or which Assignor has the right to amend independently to be modified without
Administrative Agent’s prior written consent or (iii) allow any of the officers or managers of the
association of the Condominium which Assignor has appointed to resign or be removed from office,
unless Assignor shall have caused to be delivered to Administrative Agent (A) duly executed letter
of resignation from each such officer or director being added to said association in the form
attached as Exhibits I and J, respectively, to the Acquisition and Project Loan Agreement, dated as
of October ___, 2007, among Administrative Agent, certain lenders and Assignor, as borrower (the
“Loan Agreement”) and (B) a proxy from each director in the form attached as Exhibit K to
the Loan Agreement.
Upon the full payment and performance of all obligations secured by the Mortgage, the
Declarant’s Rights shall automatically be reassigned to Assignor by Administrative Agent and this
Assignment shall terminate.
For the purposes of this Assignment, “Declaration” shall mean the Declaration of
Condominium for , a condominium, dated , 200___, and recorded on
, 200___, in the Public Records of County, in Book ___, page
___, together with all amendments thereto, if any; “Mortgages” shall mean, collectively,
the mortgages dated October ___, 2007 from Assignor to Administrative Agent which secure a
$ acquisition loan, a $ project loan and a $ building loan and which
were recorded on , 2007 in the aforesaid Public Records in Book , page ___.
This Assignment shall be construed and enforced in accordance with the laws of the State of
New York.
The rights and privileges of Administrative Agent hereunder shall inure to the benefit of its
successors and assigns.
IN WITNESS WHEREOF, Assignor and Administrative Agent have each duly executed and delivered
this Assignment this day of , 200___.
| ACADIA PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| FORDHAM PLACE OFFICE LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
[add acknowledgements]
EXHIBIT I
CONDITIONAL RESIGNATION OF OFFICERS
CONDOMINIUM
(Resignation of Officers)
(Resignation of Officers)
, 200___
Eurohypo AG, New York Branch
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
Re: Condominium
Ladies and Gentlemen:
The undersigned ,
,
,
and , being all of the officers of the Owner’s Association of the referenced Condominium
which were appointed by
, hereby tender their respective resignations as
officers hereof. Said resignations may not be rescinded or revoked by any of the undersigned so
long as you are the holder of any mortgage or deed of trust encumbering any of the unsold
condominium units of said Condominium. Said resignations shall be effective upon your acceptance
thereof, without notice to the undersigned, at any time during the existence of an Event of Default
under any such mortgage or deed of trust.
| Very truly yours, | ||||||
EXHIBIT J
CONDITIONAL RESIGNATION OF MANAGERS
CONDOMINIUM
(Resignation of Managers)
(Resignation of Managers)
, 200___
Eurohypo AG, New York Branch
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
Re: Condominium
Ladies and Gentlemen:
The undersigned ,
,
,
and
, being all of the managers of the Board of Managers of the Owner’s Association of
the referenced Condominium which were appointed by
, hereby tender their
respective resignations as managers thereof. Said resignations may not be rescinded or revoked by
any of the undersigned so long as you are the holder of any mortgage or deed of trust encumbering
any of the unsold condominium units of said Condominium. Said resignations shall be effective upon
your acceptance thereof, without notice to the undersigned, at any time during the existence of an
Event of Default under any such mortgage or deed of trust.
| Very truly yours, | ||||||
EXHIBIT K
VOTING PROXY
CONDOMINIUM
(Proxy)
(Proxy)
, 200___
Eurohypo AG, New York Branch
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
Re: Condominium
Ladies and Gentlemen:
Reference is made to that certain (i) Acquisition and Project Loan Agreement, dated as of
October ___, 2007 (as same may hereafter be amended, modified or supplemented, the
“Agreement”) and (ii) Building Loan Agreement, dated as of October ___, 2007, each among
Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC, both as borrowers
(collectively the “Borrower”), the lenders party thereto (collectively, together with their
successors and assigns, “Lenders”) and Eurohypo AG, New York Branch, as administrative
agent (in such capacity, together with its successors and assigns, “Administrative Agent”)
relating to the development of the above referenced Condominium. All capitalized terms used herein
and not defined herein shall have the meanings ascribed thereto in the Agreement.
Each of (a) Borrower, being the owner of the Units under the Condominium Documents, and (b)
the undersigned representatives of Borrower on the board of managers of the Condominium
(collectively, the “Board Members”), hereby grants to Administrative Agent (on behalf of
the Lenders) this proxy to take all actions and to exercise all rights and privileges of Borrower
and the Board Members pursuant to the Condominium Documents, or any of them, but only if and for so
long as an Event of Default shall occur and be continuing. Borrower and each Board Member hereby
irrevocably appoints Administrative Agent as its true and lawful attorney-in-fact, which
appointment is together with an interest, to execute all documents and take all actions necessary
to effectuate such proxy, provided that such appointment is being made on the understanding that
Administrative Agent shall only exercise the rights and powers provided in this proxy following the
occurrence and during the continuance of an Event of Default.
This proxy may be executed in one or more counterparts, each of which shall be an original and
all of which when taken together shall constitute one and the same proxy. Nothing contained in
this proxy shall impose or subject Lender to any liability or obligations or shall obligate
Administrative Agent to take any actions with the powers conveyed by this proxy. This proxy shall,
notwithstanding anything to the contrary in the Condominium Documents, be irrevocable prior to the
repayment in full of all of the Indebtedness.
1
| ACADIA PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| FORDHAM PLACE OFFICE LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Name: | ||||
| Name: | ||||
| Name: | ||||
This Proxy and the powers granted and designation made hereby are acknowledged by the
undersigned.
| CONDOMINIUM |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
[add acknowledgements]
2
EXHIBIT L
COMMON CHARGES LETTER
CONDOMINIUM
(Condominium Charges)
(Condominium Charges)
, 200___
Eurohypo AG, New York Branch
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
as administrative agent
1114 Avenue of the Americas, 29th Floor
New York, New York 10036
Attention:
Re: Condominium
Ladies and Gentlemen:
Reference is made to that certain (i) Acquisition and Project Loan Agreement, dated as of
October , 2007 (as same may hereafter be amended, modified or supplemented, the
“Agreement”) and (ii) Building Loan Agreement, dated as of October , 2007, each among
Acadia PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC, both as borrowers
(collectively, the “Borrower”), the lenders party thereto (collectively, together with
their successors and assigns, “Lenders”) and Eurohypo AG, New York Branch, as
administrative agent (in such capacity, together with its successors and assigns,
“Administrative Agent”) relating to the development of the above referenced Condominium.
All capitalized terms used herein and not defined herein shall have the meanings ascribed thereto
in the Agreement.
In connection with the Loans, recognizing that Lenders and Administrative Agent will rely on
the matters set forth herein in making the Loans to Borrowers, hereby represent,
warrant, certify and agree as follows:
1. All initially capitalized terms used herein without definition and which are defined in
that certain [DESCRIBE DECLARATION] (the “Declaration”), or in the By-Laws referred to
therein, shall have the meanings set forth for such terms in the Declaration, or in such By-Laws
(as applicable)1. A true, correct and complete copy of the Declaration (including the
By-Laws attached thereto) and all rules and regulations adopted by the Board pursuant to Section
___of the By-Laws or otherwise (all such items being collectively referred to herein as the
“Condominium Documents”) are attached hereto as Exhibit A. Except as indicated in
Exhibit A, the Condominium Documents have not been modified, altered or amended and are in
full force and effect.
2. The Board hereby recognizes Administrative Agent (on behalf of the Lenders) as, and
Administrative Agent shall be deemed to be, a [Recognized Mortgagee] of Unit Nos. ___, and
(collectively, the “Units”) and that the lien of Administrative Agent’s [Registered
| 1 | Definitions must be amended accordingly. |
Mortgage(s)] are first priority liens for purposes of the Condominium Documents.
Administrative Agent’s current address is as set forth above.
3. All [Common Charges] and all other charges and assessments, if any, assessed against any of
the Units or otherwise payable under any of the Condominium Documents by the Unit Owners have been
paid in full through the date hereof. No special assessments have been levied or assessed by the
Board which are payable.
4. No Unit, Unit Owner or Occupant is in violation or breach of, or in default under, any of
the Condominium Documents, and the Board knows of no (a) event or condition which, with the passage
of time or the giving of notice or both, would constitute such a violation, breach or default by
any Unit, Unit Owner or Occupant or (b) claims, demands, causes of action or proceedings, pending
or threatened, against the Board or any Unit Owner or Occupant which would entitle the Board or any
Unit Owner or Occupant to indemnification by any other Unit Owner or Occupant pursuant to any of
the Condominium Documents (including, without limitation, pursuant to Section of the
Declaration).
5. There are no mortgages, deed of trust, liens or other security interests encumbering any
Unit (including liens for unpaid Common Charges), except those in favor of Administrative Agent.
6. The Board has not engaged or employed any managing agent or employees pursuant to Section
of the By-Laws.
7. A budget has not yet been adopted by the Board. The Board will deliver a true, correct and
complete copy of each budget (and any amendments thereto) to Administrative Agent promptly
following the date on which each of such items is adopted pursuant to Section of the
By-Laws.
8. The officers of the Condominium are as follows:
President:
Vice President/Treasurer:
Vice President/Secretary:
9. In addition to the Board’s obligations under Section ___of the By-Laws, the Board agrees
to execute and deliver to Administrative Agent, as soon as is reasonably practical, and in any
event within ten (10) days after Administrative Agent’s written request, a letter dated as of the
then current date, in the form of this letter (with such changes as may be necessary due to changes
in the applicable facts and circumstances) and addressing any other facts and circumstances
pertaining to the Condominium Documents and the operation of the Project as may reasonably be
requested by Administrative Agent at such time.
10. The Board hereby acknowledges and consents to the powers granted and the designation made
by [ ] and the officers of the Condominium to Administrative
Agent pursuant to that certain Proxy given by [ ] and the officers of the Condominium
to the Lenders in connection with the Loans.
This letter may be executed in one or more counterparts, each of which shall be an original
and all of which when taken together shall constitute one and the same letter.
| Name: | ||||
| Name: | ||||
| Name: | ||||
The undersigned, being the Unit Owner of the Units hereby consents to, acknowledges and agrees
with the foregoing with the same force and effect as if it were the Board.
| ACADIA PA EAST FORDHAM ACQUISITIONS,
LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| FORDHAM PLACE OFFICE LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Exhibit A
Condominium Documents
SCHEDULE 1
COMMITMENTS
Project Loan Commitments:
| Lender | Commitment | |||
Eurohypo AG, New York Branch |
$ | 1,930,757.00 | ||
| $ | ||||
| $ | ||||
| $ | ||||
Total |
$ | 1,930,757.00 | ||
Building Loan Commitments:
| Lender | Commitment | |||
Eurohypo AG, New York Branch |
$ | 75,339,243.00 | ||
| $ | ||||
| $ | ||||
| $ | ||||
Total |
$ | 75,339,243.00 | ||
Acquisition Loan Commitments:
| Lender | Commitment | |||
Eurohypo AG, New York Branch |
$ | 18,000,000.00 | ||
| $ | ||||
| $ | ||||
| $ | ||||
Total |
$ | 18,000,000.00 | ||
SCHEDULE 1.1(130)
LEASING GUIDELINES
SCHEDULE 1.1(193)
PROPORTIONATE SHARE
| Lender | Percentage | |||
Eurohypo AG, New York Branch |
100% | |||
Total |
100% | |||
SCHEDULE 2.4(1)
WIRE INSTRUCTIONS
Bank of New York, NY
ABA 021 000 018
Account No.: 8900513497
Account Name: Eurohypo AG, NY
Ref: 400 E. Fordham Road
SCHEDULE 3.1(1)(J)
INSURANCE REQUIREMENTS FOR CONSTRUCTION MANAGERS,
MAJOR CONTRACTORS, ARCHITECTS AND DESIGN PROFESSIONALS
MAJOR CONTRACTORS, ARCHITECTS AND DESIGN PROFESSIONALS
| A. | Minimum Insurance Requirements For Contractors |
| 1. | Workers Compensation and Employers Liability Coverage. |
| • | Statutory Workers Compensation coverage | ||
| • | Employers Liability — $1 million policy limit | ||
| • | Thirty (30) days notice of cancellation |
| 2. | General Liability Coverage | ||
| Limits of Liability: $1 million combined single limit for bodily injury, personal injury or property damage per occurrence/$2 million aggregate per project or location. General Liability Insurance shall also include an endorsement providing that the insurance afforded under the contractor’s policy is primary insurance and without contribution from any other insurance maintained by Borrower. | |||
| “Occurrence” form, including: |
| • | Premises/Operations Liability | ||
| • | Blanket Contractual Liability, including coverage for all liability assumed under this contract | ||
| • | Products & Completed Operations | ||
| • | Pollution coverage for losses arising out of a hostile fire | ||
| • | “XCU” Hazards must be covered | ||
| • | Thirty (30) days notice of cancellation to Borrower as a condition of cancellation |
| 3. | Business Automobile Coverage |
| • | Limit of Liability: $1 million combined single limit per accident for bodily injury or property damage | ||
| • | Business Auto policy form, including: — coverage for “any auto” which includes autos owned, hired, and non-owned autos — Thirty (30) days notice of cancellation |
| 4. | Umbrella Liability Coverage |
| • | Limit of Liability: Not less than $100 million. |
| 5. | Property Insurance | ||
| All contractors and subcontractors shall be responsible for all loss or damage to contractors’ tools, equipment sheds, and any other materials or supplies which do not become part of the finished project. Borrower and its agents take no responsibility for said equipment. |
| Additional Requirements |
| • | Insurances specified in items 2, 3, and 4 shall name Borrower and Administrative Agent (on behalf of the Lenders) as additional insureds, binders or endorsements to insurance policies may be required. | ||
| • | All insurances shall contain a provision allowing insured to waive subrogation rights against other parties prior to loss except workers’ compensation. | ||
| • | All insurances shall be secured from financially responsible insurance carriers qualified to do business in the state in which this operation is located. | ||
| • | Certificates of insurance in form and substance acceptable to Borrower and Administrative Agent and evidencing all insurances must be presented to Borrower prior to the commencement of any work of operations at the project and upon request. Such certificates shall provide that the insurer shall not cancel or terminate coverage without thirty (30) days’ prior written notice to Borrower and Administrative Agent. | ||
| • | All notices will be received by the following: | ||
| For Administrative Agent: | |||
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Legal Director Facsimile No.: 866 267 7680 |
|||
| With copies to: | |||
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Head of Portfolio Operations Facsimile No.: 866 267 7680 |
— and —
| Riemer & Braunstein LLP Times Square Tower, Suite 2506 Seven Times Square New York, New York 10036 Attention: Steven J. Weinstein, Esq. Telecopier No.: (617) 692-3503 |
| B. | Minimum Insurance Requirements For Major Contractors |
| 1. | Workers Compensation and Employer-Liability Coverage |
| • | Statutory Workers Compensation coverage | ||
| • | Employers Liability — $1 million policy limit | ||
| • | Thirty (30) days notice of cancellation |
| 2. | General Liability Coverage | ||
| Limits of Liability: $1 million combined single limit for bodily injury, personal injury or property damage per occurrence, $2 million aggregate per project or location, $2 million Products & Completed Operations |
| “Occurrence” form, including: |
| • | Premises/Operations Liability | ||
| • | Blanket Contractual Liability, including coverage for all liability assumed under this contract | ||
| • | Products & Completed Operations | ||
| • | Pollution coverage for losses arising out of a hostile fire | ||
| • | “XCU” Hazards must be covered | ||
| • | Thirty (30) days notice of cancellation to Borrower and Administrative Agent as a condition of cancellation |
| 3. | Business Automobile Coverage |
| • | Limit of Liability-. $1 million combined single limit per accident for bodily injury or property damage | ||
| • | Business Auto policy form, including: — coverage for “any auto” which includes autos owned, hired, and non- |
| owned autos | |||
| — Thirty (30) days notice of cancellation |
| 4. | Umbrella Liability Coverage |
| • | Limit of Liability: Not less than $5 million, except steel erectors, crane operators, and other high hazard operations, not less than $20 million. |
| 5. | Property Insurance | ||
| All contractors and subcontractors shall be responsible for all loss or damage to contractors’ tools, equipment sheds, and any other materials or supplies which do not become part of the finished project. |
| Additional Requirements |
| • | Insurances specified in items 2, 3, and 4 shall name Borrower and Administrative Agent (on behalf of the Lenders) as additional insureds. | ||
| • | All insurances shall contain a provision allowing insured to waive subrogation rights against other parties prior to loss. | ||
| • | All insurances shall be secured from financially responsible insurance carriers qualified to do business in the state in which this operation is located. | ||
| • | Certificates of insurance in form and substance acceptable to Borrower and Administrative Agent and evidencing all insurances must be presented to the owner prior to the commencement of any work of operations at the project and upon request. Such certificates shall provide that the insurer shall not cancel or terminate coverage without thirty (30) days’ prior written notice to the owner and lender. |
| All notices will be received by the following: |
| For Administrative Agent: |
| Address for Notices to |
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Legal Director Facsimile No.: 866 267 7680 |
|||
| With copies to: |
| Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Facsimile No.: 866 267 7680 |
— and —
| Riemer & Braunstein LLP Times Square Tower, Suite 2506 Seven Times Square New York, New York 10036 Attention: Steven J. Weinstein, Esq. Telecopier No.: (617) 692-3503 |
| C. | Owner Controlled Insurance Program (“OCIP”) or Wrap-Up Program |
Borrower may satisfy the on site Commercial General Liability Workers Compensation and
Umbrella Liability insurance requirements of Section 3.1(1) and this Schedule for Borrower,
Construction Manager and Major Contractors by and through placement of a Wrap Up or OCIP Insurance
Program.
If this type of Liability insurance program is selected by Borrower, it shall meet all of the
requirements of coverage as set forth elsewhere in Section 3.1(1) and this Schedule.
The overall limits of insurance required under this form of insurance program shall include
Umbrella Liability insurance with a $100 million per occurrence and Annual Aggregate Minimum Limit,
and shall contain Products and Completed Operations liability discovery period of not less than 24
months.
This Wrap-Up Program shall contain Cross Suits coverage and allow for separation of insured.
All other coverage required of contractors shall continue to be required.
| D. | Minimum Insurance Requirements For Architects & Engineers |
| 1. | Workers Compensation and Employers Liability Coverage | ||
| *Statutory Workers Compensation coverage | |||
| *Employers Liability — $1 million policy limit | |||
| *Thirty (30) days notice of cancellation |
| 2. | General Liability Coverage |
| Limits of Liability: $1 million combined single limit for bodily injury, personal injury or property damage per occurrence, $2 million aggregate per project or location, $2 million Products & Completed Operations | |||
| “Occurrence” form, including: |
| • | Premises/Operations Liability | ||
| • | Blanket Contractual Liability, including coverage for all liability assumed under this contract | ||
| • | Products & Completed Operations | ||
| • | Pollution coverage for losses arising out of a hostile fire | ||
| • | “XCU” Hazards must be covered | ||
| • | Thirty (30) days notice of cancellation to owner and lender as a condition of cancellation |
| 3. | Business Automobile Coverage |
| • | Limit of Liability: $1 million combined single limit per accident for bodily injury or property damage | ||
| • | Business Auto policy form, including: — coverage for “any auto” which includes autos owned, hired, and non-owned autos — Thirty (30) days notice of cancellation |
| 4. | Professional Liability |
| • | Architects & Engineers Professional Liability covering errors and/or omissions in the performance of professional services in conjunction with this project. | ||
| • | Limits of $20 million each claim and annual aggregate are required. Coverage must continue throughout the term of the job and continue until the project is accepted by the owner. The coverage shall provide for a five (5)-year discovery period after acceptance in which claims can be made. coverage may be provided through an Owner Protective Policy. |
SCHEDULE 4
ADVANCE CONDITIONS
Part A — Initial Advance
Part B — General Conditions
| PART A. | CONDITIONS PRECEDENT TO EFFECTIVENESS OF ACQUISITION LOAN COMMITMENTS AND PROJECT LOAN COMMITMENTS AND TO INITIAL ACQUISITION LOANS AND PROJECT LOANS. |
The effectiveness of the Commitments and the obligation of the Lenders to make the initial
Loans are subject the Administrative Agent’s receipt, review, approval and/or confirmation of the
following, at Borrower’s cost and expense, each in form and content satisfactory to the
Administrative Agent in its sole discretion (such conditions not to be duplicative to the extent
they are the same matters required as conditions precedent to the effectiveness of the Building
Loans that are being advanced concurrently therewith under the Building Loan Agreement):
ORGANIZATIONAL AND AUTHORIZATION DOCUMENTS; OPINIONS; OTHER DOCUMENTATION RELATING TO BORROWER,
BORROWER PARTIES AND OTHER PERSONS
1. All documents evidencing the formation, organization, valid existence, good standing of and
for Borrower and each Borrower Party, and the authorization, execution, delivery and performance of
the Loan Documents and Project Documents by Borrower and each Borrower Party, including a certified
organizational chart for Borrower and Borrower Parties.
2. Legal opinions issued by counsel for Borrower and each Borrower Party, opining as to the
due organization, valid existence and good standing of Borrower and each Borrower Party; as to the
due authorization, execution, delivery, enforceability and validity of the Loan Documents with
respect to Borrower and each Borrower Party (and including opinions with respect to
non-contravention, perfection, choice of law and usury); and as to such matters concerning the
zoning and entitlements for the Project, compliance with Applicable Law (including the Affordable
Housing Requirements) and such other matters as Administrative Agent and Administrative Agent’s
counsel reasonably may specify.
3. Current Uniform Commercial Code searches, and litigation, bankruptcy and judgment reports,
as requested by Administrative Agent, with respect to Borrower and Borrower Parties.
4. Copies of the most recent financial statements of Borrower certified by an officer of the
Borrower and each Borrower Party, if applicable, and copies of the most recent audited annual
financial statement of Guarantor, and certificates dated the Closing Date and signed by an
Authorized Officer of Borrower and each Borrower Party stating that (i) such financial statements
are true, complete and correct and (ii) no change shall have occurred in the financial condition of
Borrower or any Borrower Party which would have a Material Adverse Effect on the Project, or on
Borrower’s or any Borrower Party’s ability to repay the Loans or otherwise perform its obligations
under the Loan Documents. Further, there shall not exist any material default by Borrower or any
Borrower Party under any loan, financing or similar arrangement with any lender.
5. Satisfactory financial review and background checks (including such background checks as
deemed necessary by Administrative Agent and Lenders to comply with the Patriot Act) of Borrower
and Borrower Parties.
6. Opening balance sheet for Borrower.
LOAN DOCUMENTS; CLOSING CERTIFICATES; APPRAISAL
7. The Loan Documents, executed by Borrower and, as applicable, each Borrower Party.
8. A certificate of an Authorized Officer of Borrower, dated as of the Closing Date,
certifying that: (i) the representations and warranties of Borrower and each Borrower Party
contained in the Loan Documents are true and correct in all material respects on and as of such
date as if made on and as of such date (or, if stated to have been made solely as of an earlier
date, were true and correct in all material respects as of such date), and (ii) no Potential
Default or Event of Default has occurred and is continuing on such date.
9. An Appraisal, such that the aggregate amount of the Commitments shall not exceed seventy
percent (70%) of the aggregate value of the Project. The Appraisal shall run in favor of “Eurohypo
AG, New York Branch or its designee, as Administrative Agent on behalf of the lenders in its
lending syndicate from time to time, and the successors and assigns of each of the foregoing, all
of whom may rely thereon.”
TITLE; SURVEY
10. An ALTA policy or policies of title insurance satisfactory to Administrative Agent with
respect to the Acquisition Loans, the Project Loans and the Building Loans (collectively, the
“Title Policies”), issued by the Title Insurer together with evidence of the payment of all
premiums due thereon, (a) insuring Administrative Agent for the benefit of the Lenders, in an
amount equal to the aggregate amount of the Commitments, that Borrower is lawfully seized and
possessed of a valid and subsisting fee simple interest in the Land and Improvements and that the
Mortgages constitute valid fee simple mortgages or deeds of trust liens on the Land and
Improvements subject to no Liens other than the Permitted Encumbrances applicable thereto and (b)
providing (i) affirmative insurance or endorsements for coverage against all mechanics’ and
materialmen’s liens, (ii) a pending disbursements clause, (iii) such other affirmative insurance,
endorsements and reinsurance as Administrative Agent may require, and (iv) evidence of payment of
real estate and other municipal charges through the Closing Date. The form of the Title Policies
and all endorsements thereto shall be approved by Administrative Agent in its sole discretion. The
Title Policies shall name as the insured “Eurohypo AG, New York Branch or its designee, as
Administrative Agent on behalf of the lenders in its lending syndicate from time to time, and the
successors and assigns of each of the foregoing, all of whom may rely thereon”
11. A survey of the Project (the “Survey”) in form and content, and prepared by a
registered land surveyor, satisfactory to Administrative Agent. The Survey shall be certified to
“Eurohypo AG, New York Branch or its designee, as Administrative Agent on behalf of the lenders in
its lending syndicate from time to time, and the successors and assigns of each of the
foregoing, all of whom may rely thereon” in accordance with a surveyor’s certificate in form
and substance satisfactory to Administrative Agent.
12. Evidence that all of the land parcels required to develop the Project per the final Plans
and Specifications are owned by Borrower and are encumbered by the Mortgages and insured by the
Title Policies.
INSURANCE
13. A certified copy of, or certificates of insurance with respect to, the insurance policies
required under Section 3.1(1) of this Agreement (inclusive of the insurance policies
required under Schedule 3.1(1)(J)), together with evidence of the payment of all premiums
therefor.
GOVERNMENT APPROVALS; COMPLIANCE WITH LAW
14. Originals (or copies certified by an Authorized Officer of Borrower to be true copies) of
all Government Approvals referred to in the Permitting Schedule, other than those expressly
provided for in said Schedule to be obtained at a later time (together with, if requested by
Administrative Agent, an opportunity to review (or certified copies of) all correspondence referred
to in such Government Approvals and all applications for such Government Approvals).
15. Evidence satisfactory to Administrative Agent of final approval from Borrower’s Architect
and the New York City Department of Buildings of Project design and specifications.
16. Evidence satisfactory to Administrative Agent that the Land is and, upon completion
thereof, the Improvements will be in compliance with all Applicable Law (including zoning laws) and
any applicable covenants, conditions and restrictions affecting the Land.
17. Receipt, review and acceptance by Administrative Agent of a Phase I environmental report
and, if applicable, a Phase II environmental report for the Project.
PROJECT DOCUMENTS; CONSENTS AND AGREEMENTS; GOVERNMENT APPROVALS
18. Copies of the Construction Management Agreement, certified by Borrower as being true,
correct and complete, and in each case in form and substance satisfactory to Administrative Agent.
19. True and correct copies of each of the Project Documents (including all amendments
thereto), certified as such by an Authorized Officer of Borrower, together with evidence that (a)
each of the Project Documents has been duly executed and delivered by each Person that is a party
thereto and is in full force and effect; (b) neither Borrower nor, to the best of Borrower’s
knowledge, any other Person which is party to any of the Project Documents, is in default
thereunder beyond any applicable cure and notice periods; (c) no term or condition thereof shall
have been amended, modified or waived without the prior consent of Administrative Agent. The form
and substance of each of the Project Documents shall be satisfactory to Administrative Agent.
20. A true and correct copy of the Construction Management Agreement certified as such by an
Authorized Officer of Borrower and evidence that no term or condition of such contract shall have
been modified, amended, supplemented and/or waived without the prior consent of Administrative
Agent, together with financial statements for the Construction Manager. The form and substance of
the Construction Management Agreement, and the financial statements of the Construction Manager,
shall be satisfactory to Administrative Agent.
21. A certificate of the Construction Manager in favor of Administrative Agent (on behalf of
the Lenders) certifying that the Construction Schedule and the Budget (as its relates to Hard
Costs) are realistic and can be adhered to in completing the Construction Work for the Improvements
in accordance with the Plans and Specifications.
22. A true and correct copy of Borrower’s Architect’s Agreement certified as such by an
Authorized Officer of Borrower and evidence that no term or condition of Borrower’s Architect’s
Agreement shall have been modified, amended, supplemented and/or waived without the prior consent
of Administrative Agent. The form and substance of Borrower’s Architect’s Agreement shall be
satisfactory to Administrative Agent.
23. A schedule of the identity of the Major Contractors for the Improvements representing at
least eighty percent (80%) of the cost of the completion of the Project Completion Work for the
Improvements (including the Major Contracts for the mechanical, electrical and plumbing work and
any other Major Contractors deemed reasonably appropriate by Administrative Agent), and copies of
the executed Major Contracts entered into with such Major Contractors and all modifications,
amendments and/or supplements thereto with respect thereto, together with a certificate of an
Authorized Officer of Borrower certifying that (A) the copies of the Major Contracts attached to
such certificate are true, correct and complete in all respects; (B) such Major Contracts attached
to such certificate are in full force and effect; and (C) neither Borrower, nor the Construction
Manager nor the applicable Major Contractor is in default thereunder. The form and substance of the
Major Contracts shall be satisfactory to Administrative Agent.
24. Evidence satisfactory to the Administrative Agent that the Project is eligible to obtain
and receive a partial exemption of real property taxes for the Improvements for a twenty-five (25)
year period under the Industrial and Commercial Incentive Program, as of right.
PLANS AND SPECIFICATIONS; BUDGET; CONSTRUCTION SCHEDULE; REPORTS AND STUDIES
25. Receipt, review, and approval by Administrative Agent and the Construction Consultant of
the final Plans and Specifications for the Improvements, including any construction, architectural
and engineering drawings, sealed by the applicable Design Professionals.
26. The delivery by the Construction Consultant to Administrative Agent of the Construction,
Cost and Plan Review in form and substance satisfactory to Administrative Agent.
27. The Budget as approved by Administrative Agent, which shall include all Project Costs for
the Improvements and shall be sufficient to complete the Improvements and carry the
Project through the Maturity Date based on the final Plans and Specifications. The Budget
shall be such that the aggregate amount of the Commitments shall not exceed eighty percent (80%) of
the aggregate Project Costs for the entire Project reflected on the Budget. To the extent that the
Commitments would exceed any of the limits described in this section, they shall be automatically
reduced to an amount not in excess of the limits described in this section.
28. The Construction Schedule, together with (if any Construction Work has been commenced
prior to the Closing Date) evidence satisfactory to Administrative Agent that the development of
the Construction Work is proceeding in accordance with the Construction Schedule and the Budget.
29. Receipt, review, and acceptance by Administrative Agent of (i) Site Assessments relating
Project; (ii) seismic studies showing a probable maximum loss of less than 20% for the Project; and
(iii) soils reports, engineering reports, geotechnical reports and other reports and studies in
each case as required by Administrative Agent and prepared in accordance with Administrative
Agent’s scope and by consultants engaged by Administrative Agent or, if consented to by
Administrative Agent, engaged by Borrower with reliance rights with respect to such reports and
studies expressly granted in writing to Administrative Agent and its on behalf of the Lenders and
the respective successors and assigns of each of the foregoing. All such reports and studies shall
be in a form approved by Administrative Agent, and shall be certified to Administrative Agent (on
behalf of the Lenders and their successors and assigns) in a form reasonably requested by
Administrative Agent which may include certification to additional participants, co-lenders and/or
investors. Such reports and studies shall run in favor of “Eurohypo AG, New York Branch or its
designee, as Administrative Agent on behalf of the lenders in its lending syndicate from time to
time, and the successors and assigns of each of the foregoing, all of whom may rely thereon”.
PAYMENT OF INITIAL EQUITY CONTRIBUTION, FEES, EXPENSES AND COSTS
30. There shall have been made by Borrower unreimbursed equity contributions to the Project in
an aggregate amount equal to the Initial Equity Contribution, and Borrower shall have delivered to
Administrative Agent evidence satisfactory to it that Borrower has made such contribution,
including, without limitation, a certificate of an Authorized Officer of Borrower certifying
thereto and itemizing the uses of such contributions, such certificate to be accompanied by backup
materials documenting the amount of such contributions and the use of same; provided, however, the
Administrative may, in its sole discretion, waive this requirement for the closing of the Loan, as
long as such requirement is satisfied prior to or contemporaneously with the initial advance of
proceeds of the Loan.
31. Payment to Administrative Agent in accordance with the Fee Letters of the upfront fee and
arrangement fee described therein.
32. Payment of all fees and commissions payable to real estate brokers, mortgage brokers, or
any other brokers or agents in connection with the Loans, such evidence to be accompanied by any
waivers or indemnifications deemed necessary by Administrative Agent.
33. Payment of Administrative Agent’s costs and expenses in underwriting, documenting, and
closing the transaction, including fees and expenses of Administrative Agent’s inspecting
engineers, consultants, and outside counsel.
34. Payment of all expenses and premiums in connection with the issuance of the Title Policy
and all recording charges, mortgage taxes and filing fees payable in connection with recording the
Mortgages and the filing of the Uniform Commercial Code financing statements related thereto in the
appropriate offices.
35. Payment of any due and payable real estate taxes and assessments with respect to the
Project remaining unpaid on the Closing Date.
LEASES:
36. Receipt, review, and acceptance by Administrative Agent of (i) the leases with the
Existing Tenants, and (ii) for each of the leases with the Existing Tenants, (1) written estoppels
in form and substance reasonably satisfactory to Administrative Agent, executed by the Existing
Tenants and confirming the term, rent, and other provisions and matters relating to the leases and
(2) written subordination and attornment agreements, in form and substance satisfactory to
Administrative Agent, executed by the Existing Tenants, whereby, among other things, such tenants
subordinate their interest in the Project to the Loan Documents and agree to attorn to
Administrative Agent (on behalf of the Lenders) and its successors and assigns upon foreclosure or
other transfer of the Project after an Event of Default.
37. Evidence satisfactory to Administrative Agent that, as of the Closing Date, the aggregate
fixed minimum rent of the retail leases shall be no less than $5,150,000.
OTHER
38. Such other documents or items as Administrative Agent or its counsel reasonably may
require, including, without limitation the delivery of such documents or items as may be indicated
on a closing checklist distributed to Borrower by Administrative Agent or its counsel.
39. No material change shall have occurred in the financial markets which would have, in
Administrative Agent’s judgment, a material adverse affect on the Project or any obligor’s ability
to repay the Loans or otherwise perform its obligations under the Loan Documents. No condemnation
or adverse zoning or usage change shall have occurred or shall have been proposed with respect to
the Project; no law, regulation, ordinance, moratorium, injunctive proceeding, restriction,
litigation, action, citation or similar proceeding or matter shall have been enacted, adopted, or
threatened by any third Person or Governmental Authority, which would have, in the Administrative
Agent’s judgment, a Material Adverse Effect on the Borrower and/or the Project.
40. Evidence that the other conditions set forth in Article 4 have been satisfied.
41. Evidence that all of the conditions precedent to the effectiveness of the initial Building
Loans under the Building Loan Agreement shall have been satisfied.
| PART B. | GENERAL CONDITIONS TO ALL LOANS |
The obligation of the Lenders to make any Loans shall be subject to Administrative Agent’s
receipt, review, approval and/or confirmation of the following, each in form and content
satisfactory to Administrative Agent in its sole discretion:
1. There shall exist no Potential Default or Event of Default (both before and after giving
effect to the requested advance).
2. The representations and warranties contained in this Agreement and in all other Loan
Documents shall be true and correct in all material respects on and as of the date of the making of
such Loan with the same force and effect as if made on and as of such date.
3. Such advance shall be secured by the Mortgages and the other Security Documents, subject
only to the Permitted Encumbrances, as evidenced by a Date Down Endorsement satisfactory to
Administrative Agent.
4. Borrower shall have paid Administrative Agent’s costs and expenses in connection with such
advance (including title charges and attorneys’ fees and expenses).
5. No change shall have occurred in the financial condition of Borrower or any Borrower Party
or in the Project which would have a Material Adverse Effect.
6. No proceeding with respect to condemnation, adverse possession, zoning change or usage
change proceeding shall have occurred or shall have been threatened against the Project the Project
shall not have suffered any damage by fire or other casualty which has not been repaired or is not
being restored in accordance with this Agreement; no Applicable Law or injunctive proceeding,
restriction, litigation, action, citation or similar proceeding or matter shall have been enacted,
adopted, or threatened by any Governmental Authority, which would have, in Administrative Agent’s
judgment, a material adverse effect on the Project or Borrower’s or any Borrower Party’s ability to
perform its obligations under the Loan Documents.
7. The Construction Work (or such part thereof as may have been constructed at the time of any
borrowing) shall have been constructed substantially in accordance with the Plans and
Specifications and the Construction Schedule (as each may have been modified in accordance with
this Agreement) and all applicable Government Approvals; and there shall exist no Unsatisfactory
Work.
8. The Construction Consultant shall have reviewed and approved the disbursement requested in
the Request for Loan Advance delivered by Lead Borrower with respect to such Loan. Such Request
for Loan Advance shall include copies of all documents, contracts, invoices, bills, construction
records, lien waivers, Change Orders, and drawings, plans and specifications as the Construction
Consultant shall reasonably require, to enable the Construction Consultant to timely review each
Request for Loan Advance.
9. Borrower shall have provided the Construction Consultant, Administrative Agent and the
Lenders, or their representatives, prompt and reasonable access to the Project, in order to inspect
the Construction Work then completed.
10. Administrative Agent shall have received the following items in connection with each Loan:
(a) A Request for Loan Advance as provided in Section 2.6(4) and 4.24.2 duly
executed by an Authorized Officer of Borrower, together with the required attachments thereto;
(b) Such invoices, contracts and other supporting data as Administrative Agent may reasonably
require to evidence that all Project Costs for which disbursement is sought have been incurred and
are then due and payable;
(c) Except for Liens insured against pursuant to the Title Policies, (i) sworn unconditional
waivers of lien from contractors, subcontractors, materialmen, suppliers and vendors, covering all
work for which funds have been advanced pursuant to a prior disbursement and (ii) at Administrative
Agent’s election, sworn conditional waivers of lien from contractors, subcontractors, materialmen,
suppliers and vendors, covering all work of such Persons for which funds are being advanced
pursuant to the then current Request for Loan Advance, all in compliance with the Lien Law;
(d) Copies of any Change Orders which have not been previously furnished to Administrative
Agent and the Construction Consultant, all of which shall be subject to Administrative Agent’s
review and approval in accordance with this Agreement;
(e) Copies of all subcontracts and purchase orders which have been executed or modified,
amended and/or supplemented since the last Loan, together with (i) any Bonds or Subguard Polices
relating to such subcontracts (to the extent required under this Agreement), (ii) a certificate by
an Authorized Officer of Borrower certifying that the delivered items are true, accurate and
complete copies of the originals thereof, and (iii) Consents and Agreements in the applicable form
attached to the General Assignment from each Major Contractors who has entered into a Major
Contract but has not previously delivered a Consent and Agreement;
(f) Inventory of materials and equipment stored on the Project and evidence that Borrower has
complied with all of the requirements of Section 4.8 relating to such stored materials;
(g) Copies of all Government Approvals (to the extent required as of such date) not previously
delivered to Administrative Agent, certified by an Authorized Officer of Borrower;
(h) If any material dispute arises between or among Borrower, the Construction Manager or any
Major Contractor, a written summary of the nature of such dispute;
(i) If the Budget shall have been modified, copies of all such modifications, all of which
shall be subject to Administrative Agent’s review and approval in accordance with this Agreement;
(j) Copies of all amendments to the Construction Schedule not previously delivered to
Administrative Agent, all of which shall be subject to Administrative Agent’s review and approval
in accordance with this Agreement;
(k) Promptly after the completion of the construction of the foundation or other support
elements for the Construction Work, Borrower shall provide to Administrative Agent a current survey
of the Land showing all improvements located thereon and complying with the requirements set forth
in Part A, paragraph 11 and shall obtain a foundation endorsement to the Title
Policies in form satisfactory to Administrative Agent insuring that all foundations and other
support elements are located within applicable property and setback lines and do not encroach upon
any easements or rights of way; and
(l) To the extent not previously delivered to Administrative Agent, evidence showing
compliance with the insurance provisions of Section 3.1.
11. All of the conditions set forth in Part A above shall remain satisfied and all
applicable conditions in Article 4 shall have been satisfied, including the application of
all Operating Revenues in accordance with Section 4.6.
12. The Loans shall be In Balance, and all material actions required to have been undertaken
or obtained prior to the date of such disbursement pursuant to the Permitting Schedule and the
Marketing Plan and Schedule shall have been undertaken or obtained as applicable.
13. Operating Revenues shall have been applied in accordance with Sections 4.1(1) and
4.6(1).
14. To the extent not previously delivered to Administrative Agent, Borrower shall provide
evidence of the payment of all costs, expenses and other charges covered by previous Requests for
Loan Advances for which advances of Loans have previously been made.
15. Administrative Agent has reasonably determined withholding such disbursement in whole or
in part is not required by the Lien Law.
16. Such other documents and items as Administrative Agent may reasonably request.
SCHEDULE 7.6
PERMITTING SCHEDULES
(See Attached)
SCHEDULE 7.27
ORGANIZATIONAL CHART
SCHEDULE 7.32
TENANT IMPROVEMENT ALLOWANCES
(See Attached)
Exhibit 10.68
Section: |
11 | |
Block: |
3033 | |
Lots: |
9 and 12 | |
County: |
Bronx | |
Premises: |
2502 Webster Avenue, 2504 Webster Avenue, and 400 — 414 East Fordham Road, a/k/a | |
| 4747-4763 Park Avenue, a/k/a 2506-2526 Webster Avenue, Bronx, New York |
BUILDING LOAN AGREEMENT
Between
ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC,
a Delaware limited liability company
as Lead Borrower,
a Delaware limited liability company
as Lead Borrower,
ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC,
a Delaware limited liability company
FORDHAM PLACE OFFICE, LLC
a Delaware limited liability company
as Borrower,
a Delaware limited liability company
FORDHAM PLACE OFFICE, LLC
a Delaware limited liability company
as Borrower,
The LENDERS Party Hereto,
as Lenders
as Lenders
and
EUROHYPO AG, NEW YORK BRANCH
as Administrative Agent
Date: As of October 5, 2007
as Administrative Agent
Date: As of October 5, 2007
This Agreement was prepared by:
RIEMER & BRAUNSTEIN LLP
Times Square Tower, Suite 2506
Seven Times Square
New York, New York 10036
Attention: Steven J. Weinstein, Esq.
Times Square Tower, Suite 2506
Seven Times Square
New York, New York 10036
Attention: Steven J. Weinstein, Esq.
TABLE OF CONTENTS
Page
| ARTICLE 1 CERTAIN DEFINITIONS | 2 | |||||||
| Section 1.1 | Certain Definitions | 2 | ||||||
| ARTICLE 2 LOAN TERMS | 8 | |||||||
| Section 2.1 | The Commitments, Loans and Notes | 8 | ||||||
| Section 2.2 | Conversion or Continuations of Building Loans | 9 | ||||||
| Section 2.3 | Interest Rate; Late Charge | 9 | ||||||
| Section 2.4 | Terms of Payment | 9 | ||||||
| Section 2.5 | Extension of Maturity Date | 10 | ||||||
| Section 2.6 | Payments; Pro Rata Treatment; Etc | 10 | ||||||
| Section 2.7 | Yield Protection; Etc | 10 | ||||||
| Section 2.8 | Agency Fee | 10 | ||||||
| Section 2.9 | Exit Fee | 10 | ||||||
| ARTICLE 3 INSURANCE, CONDEMNATION, AND IMPOUNDS | 11 | |||||||
| Section 3.1 | Insurance, Condemnation, Impounds | 11 | ||||||
| ARTICLE 4 DISBURSEMENTS OF THE BUILDING LOANS | 11 | |||||||
| Section 4.1 | General Conditions | 11 | ||||||
| Section 4.2 | Procedure for Making Disbursements of Building Loan Proceeds | 12 | ||||||
| Section 4.3 | Retainage | 13 | ||||||
| Section 4.4 | Stored Materials | 14 | ||||||
| Section 4.5 | Tenant Improvement Work | 15 | ||||||
| Section 4.6 | Unsatisfactory Work | 18 | ||||||
| Section 4.7 | Direct Loan Advances by Administrative Agent | 18 | ||||||
| Section 4.8 | No Waiver or Approval by Reason of Loan Advances | 19 | ||||||
| Section 4.9 | Construction Consultant | 19 | ||||||
| Section 4.10 | Authorization to Make Loan Advances to Cure Borrower’s Defaults | 19 | ||||||
| Section 4.11 | Reserved | 20 | ||||||
| Section 4.12 | Administrative Agent’s Right to Make Loan Advances in Compliance with the Guaranty of Completion | 20 | ||||||
| Section 4.13 | No Third-Party Benefit | 20 | ||||||
| ARTICLE 5 ENVIRONMENTAL MATTERS | 20 | |||||||
| ARTICLE 6 LEASING MATTERS | 21 | |||||||
| ARTICLE 7 REPRESENTATIONS AND WARRANTIES | 21 | |||||||
| Section 7.1 | Cost of Improvement | 21 | ||||||
| Section 7.2 | Design Professionals’ Certificates | 21 | ||||||
| Section 7.3 | Tenant Improvement Work | 21 | ||||||
i
Page
| ARTICLE 8 FINANCIAL REPORTING | 21 | |||||||
| ARTICLE 9 COVENANTS | 22 | |||||||
| Section 9.1 | Payment for Labor and Materials | 22 | ||||||
| Section 9.2 | Inspection | 22 | ||||||
| Section 9.3 | Project Construction and Completion | 23 | ||||||
| Section 9.4 | Proceedings to Enjoin or Prevent Construction | 25 | ||||||
| Section 9.5 | Agent’s, Lenders’ and Construction Consultant’s Actions for their Own Protection Only | 25 | ||||||
| Section 9.6 | Sign and Publicity | 26 | ||||||
| Section 9.7 | Amendment of Project Documents and Government Approvals; Change Orders | 26 | ||||||
| Section 9.8 | Lien Law | 28 | ||||||
| Section 9.9 | Reimbursement of Expenses | 28 | ||||||
| ARTICLE 10 EVENTS OF DEFAULT | 28 | |||||||
| Section 10.1 | Project Loan Agreement | 28 | ||||||
| Section 10.2 | Access to Project | 28 | ||||||
| Section 10.3 | Termination/Bankruptcy of Construction Manager or a Major Contractor | 29 | ||||||
| Section 10.4 | Unsatisfactory Work | 29 | ||||||
| Section 10.5 | Construction Work | 29 | ||||||
| ARTICLE 11 REMEDIES | 29 | |||||||
| ARTICLE 12 MISCELLANEOUS | 30 | |||||||
| Section 12.1 | Notices | 30 | ||||||
| Section 12.2 | Amendments, Waivers, Etc | 30 | ||||||
| Section 12.3 | Compliance with Usury Laws | 30 | ||||||
| Section 12.4 | Invalid Provisions | 31 | ||||||
| Section 12.5 | Approvals; Third Parties; Conditions | 31 | ||||||
| Section 12.6 | Lenders and Administrative Agent Not in Control; No Partnership. | 31 | ||||||
| Section 12.7 | Time of the Essence | 32 | ||||||
| Section 12.8 | Successors and Assigns | 32 | ||||||
| Section 12.9 | Renewal, Extension or Rearrangement. | 32 | ||||||
| Section 12.10 | Waivers | 32 | ||||||
| Section 12.11 | Cumulative Rights | 32 | ||||||
| Section 12.12 | Singular and Plural | 33 | ||||||
| Section 12.13 | Phrases | 33 | ||||||
| Section 12.14 | Exhibits and Schedules | 33 | ||||||
| Section 12.15 | Titles of Articles, Sections and Subsections | 33 | ||||||
| Section 12.16 | Promotional Material | 33 | ||||||
| Section 12.17 | Survival | 34 | ||||||
| Section 12.18 | WAIVER OF JURY TRIAL | 34 | ||||||
| Section 12.19 | Remedies of Borrower | 34 | ||||||
| Section 12.20 | Governing Law | 35 | ||||||
| Section 12.21 | Entire Agreement | 35 | ||||||
ii
Page
| Section 12.22 | Counterparts | 35 | ||||||
| Section 12.23 | Assignments and Participations by the Lenders | 35 | ||||||
| Section 12.24 | Brokers | 35 | ||||||
| Section 12.25 | Right of Set-off | 35 | ||||||
| Section 12.26 | Limitation on Liability of Administrative Agent’s and the Lenders’ Officers, Employees, etc | 36 | ||||||
| Section 12.27 | Cooperation with Syndication | 36 | ||||||
| Section 12.28 | Severance of Loan | 36 | ||||||
| Section 12.29 | Confidentiality | 36 | ||||||
| ARTICLE 13 RECOURSE LIABILITY | 36 | |||||||
| Section 13.1 | Recourse Liability. | 36 | ||||||
| ARTICLE 14 ADMINISTRATIVE AGENT | 36 | |||||||
| Section 14.1 | Appointment, Powers and Immunities | 36 | ||||||
| ARTICLE 15 CASH MANAGEMENT | 37 | |||||||
| Section 15.1 | Cash Management | 37 | ||||||
| ARTICLE 16 CONTROLLED ACCOUNTS | 37 | |||||||
| Section 16.1 | Controlled Accounts | 37 | ||||||
iii
LIST OF EXHIBITS AND SCHEDULES
Schedule 1
|
Commitments | |
Schedule 1.1(37)
|
Plans and Specifications | |
Schedule 1.1(41)
|
Project Documents | |
Schedule 4
|
Advance Conditions | |
Schedule 7.3
|
Tenant Improvement Work | |
Exhibit A
|
Legal Description of Project | |
Exhibit B
|
Form of Section 22 Affidavit |
iv
BUILDING LOAN AGREEMENT
BUILDING LOAN AGREEMENT is entered into as of October 4, 2007 among ACADIA-PA EAST FORDHAM
ACQUISITIONS, LLC, a limited liability company duly organized and validly existing under the laws
of the State of Delaware (“Lead Borrower”); FORDHAM PLACE OFFICE, LLC, a limited liability
company duly organized and validly existing under the laws of the State of Delaware (“Fordham
Office”, hereinafter, jointly and severally with Lead Borrower, and singly and collectively,
“Borrower”) each of the lenders that is a signatory hereto identified under the caption
“LENDERS” on the signature pages hereof and each lender that becomes a “Lender” after the date
hereof pursuant to Section 12.23 (individually, a “Lender” and, collectively, the
“Lenders”); and EUROHYPO AG, NEW YORK BRANCH, as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the “Administrative Agent”).
RECITALS
A. Lead Borrower is the fee owner of that certain tract of land located in the County of
Bronx, State of New York and being more fully described in Exhibit A attached hereto (the
“Land”) and the improvement currently located thereon.
B. Borrower proposes to renovate, alter, improve, install and construct the Improvements (as
hereinafter defined) on the Land and, in connection therewith has requested and applied to the
Lenders for a loan in the amount of $75,339,243.00 (the “Total Building Loan Commitment”)
for the purposes of paying certain of the Cost of Improvement pertaining to the Project (as
hereinafter defined) including certain costs with respect to the construction and equipping of the
Improvements, all of which said costs constitute a Cost of Improvement (as hereinafter defined).
The Lenders have agreed to make such loans on and subject to the terms and conditions hereinafter
set forth.
C. Borrower has also requested and applied to the Lenders for (i) a loan in the amount of
$18,000,000.00 for the purpose of re-financing the acquisition of its interest in the Land and (ii)
a loan in the amount of $1,930,757.00 for the purpose of paying certain costs pertaining to the
Premises, which costs do not constitute a Cost of Improvement. The Lenders have agreed to make
such loans pursuant to the Acquisition and Project Loan Agreement, of even date herewith, entered
into by Borrower, the Lenders and Administrative Agent (the “Project Loan Agreement”).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions.
Unless separately defined in this Agreement, all capitalized terms used herein shall have the
meaning assigned to such terms in the Project Loan Agreement. In addition, as used herein, the
following terms have the meanings indicated:
(1) “Administrative Agent” has the meaning assigned in the Preamble.
(2) “Agreement” means this Building Loan Agreement, as the same may be modified,
amended and/or supplemented and in effect from time to time.
(3) “Borrower” has the meaning assigned in the Preamble. With respect to the
definition of “Borrower”, except where the context otherwise provides, (i) any representations
contained herein of Borrower shall be applicable to each Borrower, (ii) any affirmative covenants
contained herein shall be deemed to be covenants of each Borrower and shall require performance by
all Borrowers, (iii) any negative covenants contained herein shall be deemed to be covenants of
each Borrower, and shall be breached if any Borrower fails to comply therewith, (iv) the occurrence
of any Event of Default with respect to any Borrower shall be deemed to be an Event of Default
hereunder, and (v) any Indebtedness and/or obligations of Borrower shall be deemed to include any
Indebtedness and/or obligations of the Borrowers, or any Indebtedness and/or obligations of any one
of them.
(4) “Borrower’s Architect” means Greenberg Farrow Architects, or any replacement
thereof approved by Administrative Agent.
(5) “Borrower’s Architect’s Agreement” means that certain agreement entitled
Professional Service Fee Proposals, dated as of March 30, 2005, July 11, 2005 and August 1, 2005,
between Borrower, as owner, and Borrower’s Architect, as architect, as the same may be amended.
(6) “Building Loan” and “Building Loans” have the meanings assigned in Section
2.1(1) means the loans to be made by the Lenders to Borrower under this Agreement and all other
amounts evidenced or secured by the Loan Documents.
(7) “Building Loan Commitment” means, as to each Lender, the obligation of such Lender
to make a Building Loan in a principal amount up to but not exceeding the amount set opposite the
name of such Lender on Schedule 1 under the caption “Building Loan Commitment” or, in the
case of a Person that becomes a Lender pursuant to an assignment permitted under Section
12.23, as specified in the respective instrument of assignment pursuant to which such
assignment is effected. The original aggregate principal amount of the Building Loan Commitment is
$75,339,243.00.
2
(8) “Building Loan Mortgage” means the Building Loan Mortgage, Assignment of Leases
and Rents, Security Agreement and Fixture Filing in the amount of the Total Building Loan
Commitment and executed, dated and delivered by Borrower to Administrative Agent (on behalf of the
Lenders) on the Closing Date, securing the Building Loan Notes, as such mortgage may be modified,
amended and/or supplemented and in effect from time to time.
(9) “Building Loan Notes” has the meaning assigned to such term in Section 1.1 of the
Project Loan Agreement.
(10) “Change Order” means any modification, amendment and/or supplement to (a) the
Plans and Specifications, (b) the Budget, (c) the Construction Schedule, (d) the Construction
Management Agreement, a Major Contract or any contract, or, (e) with respect to any Tenant
Improvement Plans, any modification, amendment and/or supplement thereto which increases the cost
of Tenant Improvement Work above the budgeted cost therefor previously approved by Administrative
Agent.
(11) “Completion Date” has the meaning assigned to such term in Section 1.1 of the
Project Loan Agreement.
(12) “Consent and Agreement” means the consent and agreement executed by the parties
thereto in accordance with the General Assignment and substantially in the same form as attached
thereto.
(13) “Construction Completion” means the date that the following conditions shall be
satisfied:
(a) a valid temporary certificate of occupancy has been obtained for the entire
Project (including the entire Retail Component including improvement work required to be
completed by tenants pursuant to the Approved Leases, any Tenant Improvement Work, and
those portions of the Office Component required to have been completed by the original
Maturity Date pursuant to the Budget and the Construction Schedule approved by
Administrative Agent);
(b) all on-site and off-site work has been completed; and
(c) Administrative Agent shall have received written certification from the
Construction Consultant, acting reasonably, that (a) the Project Completion Work has been
substantially completed in accordance with the Plans and Specifications, subject to
completion of Punch List Items, (b) the deliveries required in paragraphs 1 and 2 of
Schedule 4 — Part C shall have been received and reasonably approved by Administrative
Agent.
(14) “Construction Consultant” means IVI International, Inc. and/or such other
consultant as Administrative Agent may engage on behalf of the Lenders to examine the Plans and
Specifications, changes in the Plans and Specifications and cost breakdowns and estimates, to make
periodic inspections of the work of construction of the Project on behalf of the Lenders, and to
advise and render reports to Administrative
3
Agent and the Lenders concerning the same and to provide such other advice in respect of the
Project as Administrative Agent may from time to time request.
(15) “Construction, Cost and Plan Review” has the meaning assigned to such term in
Section 1.1 of the Project Loan Agreement.
(16) “Construction Management Agreement” means the contract for construction
management services in connection with the construction of the Improvements to be entered into
between Borrower and the Construction Manager, as approved by Administrative Agent pursuant to
Schedule 4 — Part A, as the same may be modified, supplemented and/or amended from time to
time in accordance with the terms of this Agreement. The Construction Management Agreement shall
provide for a guaranteed maximum fixed price for the Construction Work consistent with the Budget,
and shall provide that the Construction Management Fee shall be disbursed based upon percentage of
completion with final payments to be made upon the issuance of all certificates of occupancy,
release of all liens by contractors, materialmen and suppliers, and the Loans being In Balance.
(17) “Construction Management Fee” means the construction management fee payable under
the Construction Management Agreement.
(18) “Construction Manager” means ACRS, Inc. or another construction manager for the
Construction Work reasonably acceptable to Administrative Agent.
(19) “Construction Schedule” means the schedule prepared and certified by Borrower and
verified by the Construction Consultant establishing a timetable for commencement and completion of
the Construction Work (other than Tenant Improvement Work), showing, on a monthly updated basis,
the anticipated and actual progress of the Construction Work and indicating that Construction
Completion will be achieved on or before the Completion Date. To the extent Borrower is performing
any Tenant Improvement Work, the Construction Schedule will be amended to include the timetable for
the completion of such Tenant Improvement Work, as the same may from time to time hereafter be
modified in accordance with the terms of this Agreement.
(20) “Construction Work” means all work and materials (including all labor, equipment
and fixtures with respect thereto and including demolition, asbestos removal and Tenant Improvement
Work) necessary to construct the Improvements, all of which shall be performed and completed in
accordance with and as contemplated by the Plans and Specifications (or Tenant Improvement Plans in
the case of Tenant Improvement Work) and all Applicable Laws.
(21) “Contracts” means, collectively, the Major Contracts and the Minor Contracts.
(22) “Cost of Improvement” shall have the meaning defined in Paragraph 5 of Section 2
of Article I of the Lien Law, as such term applies to the Improvements being financed with the
proceeds of the Building Loans.
4
(23) “Design Professional” means, collectively, Borrower’s Architect, the structural
engineer, the mechanical engineer and other design professionals relating to the Construction Work,
as reasonably approved by Administrative Agent, and any reference in this Agreement to a
certification or other document to be executed by the applicable Design Professional shall mean one
or more of such Design Professionals designated by Administrative Agent as the Design Professionals
to execute such certification or document, depending on the areas of expertise covered by such
certification or document.
(24) “Event of Default” has the meaning assigned to such term in Article 10.
(25) “General Assignment” has the meaning assigned to such term in Section 1.1 of the
Project Loan Agreement.
(26) “Hard Costs” means the aggregate costs of all labor, materials, equipment and
fixtures necessary for completion of construction of the Improvements, as more particularly set
forth in the Budget.
(27) “Improvements” has the meaning assigned to such term in Section 1.1 of the
Project Loan Agreement.
(28) “Land” has the meaning assigned to such term in the Recitals.
(29) “Lender” and “Lenders” have the meanings assigned in the Preamble.
(30) “Lien Law” shall mean the Lien Law of the State of New York, as amended from time
to time.
(31) “Major Contract” means any contract, trade contract, material agreement or supply
contract relating to the construction of the Improvements or a component thereof in the amount of
$2,000,000 or more.
(32) “Major Contractor” means any contractor or trade contractor or supplier who is a
party to a Major Contract.
(33) “Maturity Date” has the meaning assigned to such term in Section 1.1 of the
Project Loan Agreement.
(34) “Minor Contract” means, with respect to the Construction Work, any contract,
trade contract, material agreement or supply contract relating to the construction of the
Improvements or a component thereof that is not a Major Contract.
(35) “Minor Contractor” means any contractor or trade contractor or supplier who is a
party to a Minor Contract.
(36) “Mortgages” has the meaning assigned to such term in Section 1.1 of the Project
Loan Agreement.
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(37) “Plans and Specifications” means the final plans and specifications for the
construction of the Project Completion Work delivered by Borrower to Administrative Agent, prepared
by Borrower’s Design Professionals and approved by Administrative Agent, the Construction
Consultant and, to the extent then required, by any applicable Governmental Authority and such
other parties whose approval or consent may be required under any law, regulation, prior agreement,
and/or this Agreement and all modifications, amendments and/or supplements thereof made by Change
Orders permitted pursuant to the terms of this Agreement. A list of the presently existing Plans
and Specifications is attached hereto as Schedule 1.1(37).
(38) “Project” means, collectively, (a) the Land, together with any air rights and
other rights, privileges, easements, hereditaments and appurtenances thereunto relating or
appertaining to the Land, (b) the Improvements, together with all fixtures and equipment(to the
extent owned by Borrower) required for the operation of the Improvements, (c) all building
materials and personal property (to the extent owned by Borrower) related to the foregoing and (d)
all other items described in the granting clauses of the Mortgages.
(39) “Project Completion Work” means in the case of the Project, all of the work to be
performed by Borrower and/or its contractors in connection with the construction of the
Improvements as more particularly described in the Plans and Specifications.
(40) “Project Costs” means, collectively, the Project Loan Costs, the Hard Costs and
Soft Costs.
(41) “Project Documents” means the documents set forth on Schedule 1.1(41)
attached hereto, as the same may be modified, supplemented and/or amended from time to time as
permitted under the Loan Documents.
(42) “Project Loan Agreement” has the meaning assigned to such term in the Recitals.
(43) “Project Loan Costs” has the meaning assigned to such term in Section 1.1 of the
Project Loan Agreement.
(44) “Project Loan Mortgage” has the meaning assigned to such term in Section 1.1 of
the Project Loan Agreement.
(45) “Project Work Substantial Completion Conditions” means the conditions to the
completion of the Project Completion Work set forth in Schedule 4 — Part C.
(46) “Punch List Items” means minor construction items to be completed or constructed
with respect to the Project Completion Work or the Tenant Improvement Work which do not materially
interfere either with the use of the Project Completion Work or the acceptance and occupancy of any
space leased to a tenant.
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(47) “Retainage” has the meaning assigned to such term in Section 4.3(1).
(48) “Soft Costs” means interest payable on the Building Loans and all other costs in
the Budget which constitute a Cost of the Improvement, excluding Hard Costs, which relate to the
construction of the Improvements and the operation of the Project during the term of this
Agreement.
(49) “Tenant Improvement Allowances” has the meaning assigned to such term in Section
1.1 of the Project Loan Agreement.
(50) “Tenant Improvement Plans” means the plans prepared by the engineers and/or
architects for Tenant Improvement Work under each Approved Lease and approved by Borrower and
Borrower’s Architect, to be certified by Borrower to Administrative Agent and the Lenders as
approved by the applicable tenant, Borrower, all required Governmental Authorities, and within the
Budget and, to the extent any approval is required under the applicable lease, as reasonably
approved by Administrative Agent.
(51) “Tenant Improvement Work” means work to be performed and paid by Borrower, if
any, pursuant to Approved Leases.
(52) “Unavoidable Delay” means any delay due to strikes, acts of God, fire,
earthquake, floods, explosion, actions of the elements, other accidents or casualty, declared or
undeclared war, riots, mob violence, inability to procure or a general shortage of labor,
equipment, facilities, energy, materials or supplies in the open market, failure of transportation,
lockouts, tenant delays, actions of labor unions, condemnation, court orders, laws, rules,
regulations or orders of Governmental Authorities, or other cause beyond the reasonable control of
Borrower; provided that, in each of the foregoing cases, (a) such cause is not within the control
of Borrower, (b) Lead Borrower gives notice of such delay to Administrative Agent within thirty
(30) days of occurrence of the event resulting in such delay and, after the initial notification,
promptly after request of Administrative Agent or the Construction Consultant, notifies
Administrative Agent and the Construction Consultant of the status of such delay, (c) after giving
effect to the consequences of each such delay, the Loans shall remain In Balance subject to
Borrower curative payments or funding and the Budget Line Item for interest shall remain sufficient
at all times despite such delay subject to Borrower curative payments or funding, (d) such delay
shall not adversely disrupt Borrower’s ability to obtain any Government Approvals substantially in
accordance with the Permitting Schedule (e) such delay will not give rise to any tenant termination
or cancellation rights under a Major Lease, or Borrower obtains an extension from each tenant equal
to such delay so that each of the leases is at all times in full force and effect and there remains
sufficient time to complete all Tenant Improvement Work and (f) Borrower shall use all commercially
reasonable efforts to mitigate the delay caused by such event. For the purposes hereof,
Unavoidable Delays shall not include delays caused by Borrower’s lack of or inability to procure
monies to fulfill Borrower’s commitments and obligations under this Agreement or the other Loan
Documents.
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(53) “Unsatisfactory Work” means any Construction Work which Administrative Agent
and/or the Construction Consultant has reasonably determined has not been completed in a good and
workmanlike manner, and, to the extent any Construction Work is not specifically addressed in the
construction drawings and specifications, in a manner consistent with sound design principles
and/or sound construction practices, or in substantial conformity with the Plans and
Specifications, or in accordance with all Applicable Law.
ARTICLE 2
LOAN TERMS
Section 2.1 The Commitments, Loans and Notes.
(1) Building Loans. Each Lender severally agrees, on the terms and conditions of this
Agreement, to make loans (each advance of such a loan being a “Building Loan” and
collectively, the “Building Loans”) on a non-revolving basis to Borrower in Dollars from
time to time in amounts equal to its Proportionate Share of the aggregate amount of Building Loans
to be made of such time; provided, however, that in no event shall the aggregate
principal amount advanced by each Lender exceed the amount of the Building Loan Commitment of such
Lender. The Building Loans shall be advanced from time to time as provided in this Agreement for
the payment of all or part of the Cost of Improvement in connection with the construction of the
Project and shall be funded and repaid in accordance with this Agreement.
(2) Requests for Building Loan Advances. With respect to each Building Loan, Lead Borrower
shall give Administrative Agent (and the Construction Consultant) a Request for Loan Advance as
provided in Section 4.2. Administrative Agent shall give each Lender notice of any such
Request for Loan Advance in accordance with Section 2.6(4) of the Project Loan Agreement. Not
later than 12:00 noon New York time on the date specified for each Building Loan, each Lender shall
make available for the account of its Applicable Lending Office to Administrative Agent as
specified by Administrative Agent, in immediately available funds, such Lender’s Proportionate
Share of each Building Loan to be made pursuant hereto. After Administrative Agent’s receipt of
such funds and upon fulfillment of the applicable conditions referred to in Article 4 and
Schedule 4, Administrative Agent shall make such funds available to Lead Borrower by
depositing the same, in immediately available funds, in an account designated by Lead Borrower by
the end of business on the applicable advance date, to be applied in accordance with the terms of
this Agreement.
(3) Changes of Commitments.
(a) The respective Building Loan Commitments shall reduce pro rata automatically by reason of
any prepayment of the Building Loans applicable thereto in the amount of any such prepayment.
8
(b) If the Maturity Date is extended in accordance with Section 2.5, all of the unused
Building Loan Commitments then remaining at the commencement of the extended loan period shall be
automatically terminated.
(c) The Building Loan Commitments, once terminated or reduced, may not be reinstated. Each
termination or reduction of the Building Loan Commitments shall be made ratably among the Lenders
in accordance with their respective Building Loan Commitments.
(4) Lending Offices. The Building Loans of each Lender shall be made and maintained at such
Lender’s Applicable Lending Office for Building Loans of such Type.
(5) Several Obligations. The failure of any Lender to make any Building Loan to be made by it
on the date specified therefor shall not relieve any other Lender of its obligation to make its
Building Loan, but neither any Lender nor Administrative Agent shall be responsible for the failure
of any other Lender to make a Building Loan to be made by such other Lender.
(6) Notes. The Building Loans made by each Lender shall be evidenced by the Building Loan
Notes, payable to such Lender in a principal amount equal to its Proportionate Share of the
applicable Building Loans covered by such notes.
Section 2.2 Conversion or Continuations of Building Loans.
Subject to the terms of this Agreement and the Project Loan Agreement, Borrower may borrow the
Building Loans by means of Base Rate Loans and/or LIBOR-based Loans, and such Building Loans may be
prepaid, Converted or Continued pursuant to the Project Loan Agreement.
Section 2.3 Interest Rate; Late Charge.
Borrower hereby promises to pay to Administrative Agent for account of each Lender interest on
the unpaid principal amount of each Building Loan (which may be Base Rate Loans and/or LIBOR-based
Loans) made by such Lender for the period from and including the date of such Building Loan to but
excluding the date such Loan shall be paid in full, at the rates per annum and in the manner
provided in the Project Loan Agreement, including, without limitation, Section 2.3 of the Project
Loan Agreement.
Section 2.4 Terms of Payment.
Borrower hereby promises to pay to Administrative Agent for account of each Lender the
payments of principal and interest due on the Building Loans in accordance with the Building Loan
Notes and the Project Loan Agreement, which is hereby incorporated by reference. Borrower hereby
promises to pay to Administrative Agent for the account of each Lender the principal of such
Lender’s outstanding Building Loans, together with accrued and unpaid interest (including accrued
and unpaid Additional Interest, if applicable), and all other amounts due under the Loan Documents,
on the Maturity Date.
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Section 2.5 Extension of Maturity Date.
(1) Borrower may, at its option, extend the term of the then outstanding principal amount for
a period of six (6) months to the First Extension Maturity Date, subject to the satisfaction of the
conditions contained in Section 2.5(1) of the Project Loan Agreement.
(2) Borrower may, at its option, extend the term of the then outstanding principal amount for
a period of six (6) months to the Second Extension Maturity Date, subject to the satisfaction of
the conditions contained in Section 2.5(2) of the Project Loan Agreement.
(3) Borrower may, at its option, extend the term of the then outstanding principal amount for
a period of six (6) months to the Third Extension Maturity Date, subject to the satisfaction of the
conditions contained in Section 2.5(3) of the Project Loan Agreement.
Any extension pursuant to this Section 2.5 shall be otherwise subject to all of the other
terms and provisions of this Agreement and the other Loan Documents.
Section 2.6 Payments; Pro Rata Treatment; Etc.
The method of funding the Building Loans, pro rata treatment of the Building Loans among the
Lenders, computation of interest, notices, sharing of payments and other related matters shall be
subject to the terms of the Building Loan Notes and Section 2.6 of the Project Loan Agreement,
which is hereby incorporated by reference.
Section 2.7 Yield Protection; Etc.
Provisions relating to LIBOR-based Loans, including, without limitation, increased costs,
inability to determine any LIBOR Rate, illegality, treatment of affected Building Loans,
compensation for broken funding, Taxes and replacement of Lenders shall be subject to the terms of
the Building Loan Notes and Section 2.7 of the Project Loan Agreement, which is hereby incorporated
by reference.
Section 2.8 Agency Fee.
Until payment in full of all obligations under this Agreement and the other Loan Documents,
Borrower shall pay to Administrative Agent, for its sole account, the Agency Fee in accordance with
the Fee Letter.
Section 2.9 Exit Fee.
With respect to the repayment or prepayment of principal under the Loans for any reason
whatsoever (whether such repayment or prepayment of the Loans is made voluntarily or involuntarily
or as a result of the occurrence of an Event of Default pursuant to which the Administrative Agent
has accelerated the obligations of the
10
Borrower under the Loan Documents or otherwise), Borrower shall pay to Administrative Agent
the Exit Fee in accordance with Section 2.9 of the Project Loan Agreement.
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 Insurance, Condemnation, Impounds.
Provisions relating to insurance, condemnation and impounds, including, without limitation,
the use of casualty and condemnation proceeds shall be subject to the terms of Article 3 of the
Project Loan Agreement, which is hereby incorporated by reference.
ARTICLE 4
DISBURSEMENTS OF THE BUILDING LOANS
Section 4.1 General Conditions.
(1) Subject to (a) Borrower’s satisfaction of the applicable conditions precedent set forth in
Schedule 4 and (b) Borrower’s compliance with the applicable provisions of this Article
4, the Lenders shall disburse the proceeds of each Building Loan within ten (10) Business Days
after Administrative Agent’s receipt of all of the documents and items to be delivered or received
pursuant to Schedule 4 and this Article 4; provided, however, that
at no time shall the Lenders be obligated to:
(a) advance to Lead Borrower more than the amount that Borrower has funded from its
own monies or an existing loan or is then required to fund to the party seeking payment or,
in the case of reimbursement, to the party seeking reimbursement (subject to Retainage, if
applicable),
(b) make an advance if the Building Loans are not In Balance in accordance with
Section 4.3 of the Project Loan Agreement,
(c) subject to possible reallocation in accordance with this Agreement and the Project
Loan Agreement, advance proceeds of a Building Loan in an amount in excess of the Budget
Line Items set forth in the Budget, as the same may be adjusted in accordance with the
terms of this Agreement,
(d) make any Building Loans to the extent any Operating Revenues have not been applied
in accordance with Section 4.6(1) of the Project Loan Agreement,
(e) except as provided in Section 4.3 hereof, advance any portion of the
Retainage,
(f) except as provided in Section 4.4 hereof, make any Building Loans with
respect to materials not yet incorporated into the Improvements,
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(g) make an advance in connection with any Change Order for which Administrative
Agent’s approval is required under Section 9.3(2) which has not been approved by
Administrative Agent in accordance with Section 9.3(2),
(h) make any Building Loans for any Tenant Improvement Work if it relates to a lease
that is not an Approved Lease that meets the requirements of Section 4.5 hereof,
(i) make any Building Loans for any contractor until (A) in the case of a Major
Contractor, such Major Contractor has been approved by Administrative Agent and has duly
executed and delivered to Administrative Agent the applicable consent and attornment
agreement in substantially the form attached to the General Assignment and (B) in the case
of any contractor, has duly entered into a contract with the Construction Manager with
respect to its applicable portion of the Construction Work, a copy (certified by an
authorized officer of Borrower) of such contract has been delivered by Lead Borrower to
Administrative Agent; or
(j) make any Building Loans with respect to any sums due a Design Professional, until
such Design Professional has duly entered into a contract with Borrower, a copy (certified
by an Authorized Officer of Borrower) of such contract has been delivered by Lead Borrower
to Administrative Agent, and such Design Professional has duly executed and delivered to
Administrative Agent the applicable Consent and Agreement in substantially the form
attached to the General Assignment.
(2) Notwithstanding anything to the contrary contained in this Agreement, the Lenders shall
have no obligation to advance any Building Loan unless Administrative Agent is, at all times,
reasonably satisfied that the Improvements can be constructed Lien free, substantially in
accordance with the Plans and Specifications (or the Tenant Improvement Plans in the case of Tenant
Improvement Work) for the sums set forth in the Budget (or, if more, Borrower has furnished the
difference in cash or cash equivalents, subject to the provisions of Sections 4.3, 4.4 and 4.5 of
the Project Loan Agreement, by the Completion Date or, with respect to Tenant Improvement Work,
such date as shall be required for the completion of the applicable Tenant Improvement Work under
an Approved Lease. Administrative Agent will endeavor to give notice to Lead Borrower of its
intention not to authorize disbursement of any Building Loan proceeds based on the foregoing, but
neither the Lenders nor Administrative Agent shall have any liability hereunder should
Administrative Agent fail to do so, and no failure by Administrative Agent to give such notice
shall affect Administrative Agent’s or any Lender’s rights under this subsection (2).
Section 4.2 Procedure for Making Disbursements of Building Loan Proceeds.
(1) After the Closing Date, disbursements shall be made from time to time as construction
progresses pursuant to a Request for Loan Advance, but no more frequently than once in each
calendar month.
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(2) Each Request for Loan Advance shall (a) be duly executed by an Authorized Officer on
behalf of Lead Borrower, (b) be submitted to Administrative Agent and the Construction Consultant
not less than ten (10) Business Days prior to the proposed disbursement date for such Building
Loans, (c) specify the items to be paid or reimbursed with the proceeds of the requested Building
Loans, (d) include the documentation required to be included therewith under Schedule 4 and
(e) be in the minimum amounts required under Section 2.6(3) of the Project Loan Agreement.
(3) All advances of the Building Loans shall be made for the payment of Project Costs in
accordance with the Budget upon Borrower’s satisfaction of the applicable conditions set forth in
this Article 4 and Schedule 4 — Parts A, B, and C, as applicable.
(4) In the event that Lead Borrower does not request a disbursement within thirty (30) days
after the previous disbursement of a Building Loan, Borrower shall nonetheless within such thirty
(30) day period and during each subsequent thirty (30) day period in which Borrower does not
request a disbursement of the Building Loan, satisfy the conditions precedent to disbursements set
forth in this Agreement.
Section 4.3 Retainage.
(1) Disbursement of the available proceeds of each Building Loan with respect only to Hard
Costs and Tenant Improvement Work shall be limited to ninety percent (90%) of the value of the Hard
Costs and Tenant Improvement Work set forth in the applicable Request for Loan Advance until fifty
percent (50%) of the work covered by a particular contract has been completed (as determined by the
Construction Consultant, and, thereafter, the amount disbursed shall be increased to one hundred
percent (100%) of the Hard Costs and Tenant Improvement Work performed under that particular
contract), with the remainder of the sums due for the work performed under such contract to be
withheld and disbursed in compliance with Section 4.3(2) below; provided, however, that (a)
in no event shall the percentage of the sums due which is withheld be less than the retainage
percentage set forth in any contract or subcontract for such portion of the Improvements or any
applicable lease with respect to Tenant Improvement Work and (b) if Administrative Agent has, in
its sole and absolute discretion, approved a contract or lease requiring less than the above
retainage, then Administrative Agent shall disburse the proceeds of the Building Loans as if the
retainage applicable under such contract or lease were provided for in this Section. The amounts
authorized to be withheld pursuant to this paragraph (1) being collectively referred to herein as
the “Retainage.” No Retainage will apply to Soft Costs.
(2) The Lenders shall advance Building Loans pursuant to a Request for Loan Advance to pay
portions of the Retainage upon Borrower’s compliance with the following conditions to the
satisfaction of Administrative Agent:
(a) all of the work under such contract or the Tenant Improvement Work under the
respective Approved Lease, as the case may be, is finally completed in accordance with the
terms of such contract or Approved Lease and
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the applicable Plans and Specifications or Tenant Improvement Plans, as the case may
be, and Administrative Agent receives a certification to that effect from an Authorized
Officer of Borrower and Borrower’s Architect and such work has been approved by the
Construction Consultant, acting reasonably;
(b) the work performed by such contractor has been approved, to the extent such
approval is then required, by the Governmental Authorities having jurisdiction over the
same and the applicable permits with respect to such work, if any, have been issued;
(c) the contract or the Approved Lease, as the case may be, provides for such early
release of the applicable Retainage;
(d) the applicable contractor delivers to Administrative Agent a final and complete
unconditional release of Lien with respect to such work, subject to the receipt of the
Retainage;
(e) Administrative Agent shall, if requested, have received copies of any warranties,
guaranties or “as built” drawings relating to such work to the extent required to be
delivered by the contractor under the applicable contract for such work; and
(f) all other applicable requirements and conditions with respect to such advance of
Building Loan proceeds are satisfied.
Section 4.4 Stored Materials.
(1) The Lenders shall advance the proceeds of Building Loans with respect to materials and
equipment that are included in the Budget and are not yet incorporated into the Improvements as of
the date of the applicable Building Loans, but are temporarily stored either on-site or off-site so
long as Administrative Agent shall have received the following items, each in form and substance
reasonably satisfactory to Administrative Agent:
(a) evidence that Borrower has an obligation under the applicable contract,
subcontract or purchase order to pay for such materials and equipment prior to their
installation;
(b) evidence that the ownership of such materials and equipment is, or upon payment
will be, vested in Borrower free of any liens and claims of third parties, including,
without limitation, bills of sale and conditional lien waivers from the respective
contractor, contractor or vendor and that such material and equipment are clearly marked to
indicate the ownership thereof by Borrower;
(c) evidence that on-site stored materials are included within the coverages of
insurance policies carried by Borrower or proof of other insurance (which shall include a
standard mortgagee endorsement or its equivalent) which has been approved by Administrative
Agent;
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(d) evidence reasonably acceptable to Administrative Agent and the Construction
Consultant that the stored materials are reasonably protected against vandalism (casualty),
theft or damage and are stored in the U.S.A. with respect to off-site stored materials;
(e) evidence that Building Loans made by the Lenders for said materials do not, at any
one time, exceed, in the aggregate, $1,000,000 for on-site stored materials and, in the
aggregate, $1,000,000 for off-site stored materials, inclusive in each case of the amount
requested;
(f) evidence that Administrative Agent (on behalf of the Lenders) has a perfected
first security interest in such material prior to or simultaneous with the making of such
Building Loans;
(g) as to materials stored off-site only, evidence that the materials, equipment and
parts are under the control of the applicable supplier and are being kept at bonded
warehouse sites or otherwise stored in a designated and secured area satisfactory to
Administrative Agent and the Construction Consultant, in each case in the U.S.A. and
reasonably approved by Administrative Agent and the Construction Consultant; and that such
equipment and parts shall have been clearly designated, marked or tagged to indicate
ownership by Borrower and the security interest of Administrative Agent (on behalf of the
Lenders) therein;
(h) evidence that Administrative Agent (on behalf of the Lenders) has a perfected
first security interest (i.e., Uniform Commercial Code filings or other applicable filings)
in such materials, equipment and parts prior to or simultaneous with the making of such
Building Loans, which requirement shall, if requested by Administrative Agent in connection
with the first advance for property stored in the applicable state (and in connection with
any other advance in such state when Administrative Agent reasonably believes that the
collateral is substantially different from the type of collateral covered by the first
opinion), be supported by the opinion of a local counsel in the state where the applicable
equipment and parts are stored; and
(i) evidence reasonably acceptable to Administrative Agent and the Construction
Consultant as to the identity, quality and quantity of same; and
(j) evidence that all other applicable requirements and conditions with respect to
such advance of Building Loan proceeds have been satisfied.
Section 4.5 Tenant Improvement Work.
(1) Building Loans shall be made to Borrower in connection with Tenant Improvement Allowances
and Tenant Improvement Work in accordance with this Section 4.5.
(2) The first request for disbursement for any Tenant Improvement Allowance in connection with
a specific Approved Lease shall be accompanied by the following, all
15
of which shall be subject to the reasonable approval of Administrative Agent to the extent
Borrower has approval rights with respect thereto pursuant to the terms of the applicable Approved
Lease (any such approval or disapproval to be made by Administrative Agent within a reasonably
sufficient time for Borrower to comply with any time limits set forth in the applicable Approved
Lease for Borrower’s response):
(a) all documentation required to be delivered by the applicable tenant pursuant to
its respective Approved Lease;
(b) if not already delivered to Administrative Agent, a copy of the fully executed
Approved Lease (already approved by Administrative Agent) covering such leased space;
(c) copies of all contracts, if not previously delivered to Administrative Agent, for
the performance of such Tenant Improvement Work;
(d) a cost breakdown for each trade performing such Tenant Improvement Work in such
leased space, and an estimated commencement and completion date;
(e) an estimate of all costs of the Tenant Improvement Work to be performed in such
leased space;
(f) the Tenant Improvement Plans for the applicable leased space, together with a
certificate from Borrower’s Architect or the tenant’s architect that such Tenant
Improvement Plans comply with all Applicable Law affecting the Project and such leased
space; and
(g) copies of all Government Approvals required to commence such Tenant Improvement
Work.
(3) The Lender’s obligation to make disbursements of any Building Loans for Tenant Improvement
Work shall be subject to the further condition precedent that all of the following requirements
shall have been completed to the reasonable satisfaction of Administrative Agent:
(a) To the extent tenant is obligated to provide such things to Borrower, Lead
Borrower shall have furnished to Administrative Agent and the Construction Consultant
copies of all Change Orders, contracts or purchase orders relating to Tenant Improvement
Work performed pursuant to the contracts described in this Section 4.5; and
(b) loans shall be made for Tenant Improvement Allowances only to the extent the
applicable tenant is then entitled to receive such Tenant Improvement Allowance pursuant to
the terms of its applicable Approved Lease;
16
(c) no mechanic’s liens shall have been filed against the Project in connection with
the work being performed under the applicable Approved Lease; and
(d) Borrower shall have complied with all the other applicable conditions precedent to
a disbursement of a Building Loan contained in Schedule 4 and Article 4 of
this Agreement.
(4) Administrative Agent’s obligation to make disbursements of the final Building Loans to
Lead Borrower for Tenant Improvement Work for any Approved Lease is subject to the further
condition precedent that all of the following requirements shall have been completed to the
reasonable satisfaction of Administrative Agent:
(a) Construction Completion has been achieved with respect to the applicable Tenant
Improvement Work free of mechanics’ liens unless such liens shall be bonded or otherwise
removed of record or the Title Company shall have provided affirmative coverage in
accordance with Schedule 4 — Part C;
(b) Administrative Agent and the Construction Consultant shall have received the
following items in connection with each Building Loan:
(i) copies of all final waivers of lien (or conditional lien waivers) and
sworn statements from contractors, subcontractors and material suppliers relating
to the applicable Tenant Improvement Work;
(ii) a certificate from Borrower’s Architect, the tenant’s architect or
another architect satisfactory to Administrative Agent that (A) Construction
Completion has been achieved with respect to the applicable Tenant Improvement Work
in accordance with the applicable Tenant Improvement Plans therefor previously
approved by Administrative Agent and (B) the applicable Tenant Improvement Work
complies with all applicable building codes;
(iii) copies of all applicable Government Approvals required by any
Governmental Authority for the occupancy and operation of the space covered by the
applicable Approved Lease;
(iv) an estoppel certificate, in a form acceptable to Administrative Agent,
from the tenant under the applicable Approved Lease pursuant to which such Tenant
Improvement Work was constructed stating that such tenant accepts the Tenant
Improvement Work subject to Punch List Items (which, if incomplete on the date of
final disbursement for such Tenant Improvement Work, Administrative Agent may hold
back an amount equal to (x) 115% of the estimated cost of completing such items
from the final disbursement minus (y) any Retainage that Administrative
Agent is still holding with respect to the applicable Tenant Improvement Work, such
amount to be paid to Lead Borrower on the completion of such items and the
satisfaction of the requirements of
17
Section 4.3 with respect to Retainage, which Borrower shall diligently
complete);
(c) Administrative Agent shall have received written advice from the Construction
Consultant that the applicable Construction Completion has been achieved with respect to
Tenant Improvement Work in accordance with the Tenant Improvement Plans previously approved
by Administrative Agent; and
(d) All of the applicable conditions precedent to any Building Loan under Schedule
4 and Article 4 of this Agreement shall have been satisfied.
Section 4.6 Unsatisfactory Work.
If the Construction Consultant or Administrative Agent shall reasonably determine that a
portion of the Construction Work for which Loans are sought is Unsatisfactory Work, Administrative
Agent shall be entitled to withhold from such Loans amounts sufficient to pay for the
Unsatisfactory Work and shall advance only the balance of such Loan until such time as
Unsatisfactory Work has been corrected to the reasonable satisfaction of the Construction
Consultant and Administrative Agent.
Section 4.7 Direct Loan Advances by Administrative Agent.
The Lenders shall, at the option of Administrative Agent, advance all or any part of any
particular Building Loan either (1) to Lead Borrower for disbursement in accordance with a Request
for Loan Advance, (2) during an Event of Default, directly to the Construction Manager, a Major
Contractor, other contractor, subcontractor, material supplier or other party any costs payable to
such party, (3) during an Event of Default, at Borrower’s expense, to the Title Company which shall
pay said monies to the parties as so instructed by Administrative Agent or (4) as contemplated by
Section 1.01(b) of the Guaranty of Completion (whether the applicable work is being
performed by the Guarantor or Administrative Agent). The execution of this Agreement by Borrower
shall, and hereby does, constitute an irrevocable authorization to the Lenders to make such direct
advances provided for in clauses (2), (3) and (4) above and no further
authorization from Borrower shall be necessary to warrant such direct advances, and all such direct
advances shall be secured by the Security Documents as fully as if made directly to Borrower,
regardless of the disposition thereof by any party so paid. During an Event of Default, at
Administrative Agent’s request, any advance of Building Loan proceeds made by and through the Title
Company may be made pursuant to the provisions of a construction escrow agreement in the form then
in use by such company with such modifications thereto as are reasonably required by Administrative
Agent. Borrower agrees to join as a party to such escrow agreement and to comply with the
requirements set forth therein (which shall be in addition to and not in substitution for the
requirements contained in this Agreement) and to pay the fees and expenses of the Title Company
charged in connection with the performance of its duties under such construction escrow agreement.
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Section 4.8 No Waiver or Approval by Reason of Loan Advances.
The making of any Building Loans by the Lenders shall not be deemed an acceptance or approval
by Administrative Agent or the Lenders (for the benefit of Borrower or any third party) of the
Construction Work or other work theretofore done or constructed or to the Lenders’ obligations to
make further Building Loans, nor, in the event Borrower is unable to satisfy any condition, shall
any such failure to insist upon strict compliance have the effect of precluding Administrative
Agent or the Lenders from thereafter declaring such inability to be an Event of Default as herein
provided. Administrative Agent’s and/or the Lenders’ waiver of, or failure to enforce, any
conditions to or requirements associated with any Building Loans in any one or more circumstances
shall not constitute or imply a waiver of such conditions or requirements in any other
circumstances.
Section 4.9 Construction Consultant.
Administrative Agent (on behalf of the Lenders) reserves the right to employ the Construction
Consultant and any other consultants necessary, in Administrative Agent’s reasonable judgment, to
review Requests for Loan Advance and inspect all construction and the periodic progress of the
same, the reasonable cost therefor to be borne by Borrower as a loan expense. Borrower shall make
available to Administrative Agent and the Construction Consultant on reasonable notice during
business hours, all documents and other information (including, without limitation, receipts,
invoices, lien waivers and other supporting documentation to substantiate the costs to be paid with
the proceeds of any Request for Loan Advance) which any contractor or other Person entitled to
payment for Construction Work is required to deliver to Borrower and shall use its commercially
reasonable efforts to obtain any further documents or information reasonably requested by
Administrative Agent or the Construction Consultant in connection with any Loan or the
administration of this Agreement. Borrower acknowledges and agrees that the Construction
Consultant shall have no responsibilities or duties to Borrower, and shall be employed solely for
the benefit of Administrative Agent and the Lenders. No default of Borrower will be waived by an
inspection by Administrative Agent or the Construction Consultant. In no event will any inspection
by Administrative Agent or the Construction Consultant be a representation that there has been or
will be compliance with the Plans and Specifications or that the Construction Work is free from
defective materials or workmanship. Any and all provisions of this Agreement in respect of the
Construction Consultant shall be enforceable solely by, and at the option of, Administrative Agent,
and Borrower shall not be a third-party beneficiary thereof. Any and all reports, advice or other
information provided by the Construction Consultant to Administrative Agent and/or the Lenders or
otherwise produced by or in the possession of the Construction Consultant shall be confidential and
Borrower shall have no right to obtain or review same.
Section 4.10 Authorization to Make Loan Advances to Cure Borrower’s Defaults.
If an Event of Default shall occur, Administrative Agent (subject to the provisions of Section
14.3 of the Project Loan Agreement) may (but shall not be required to)
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perform any of such covenants and agreements with respect to which Borrower is in Event of
Default. Any amounts expended by Administrative Agent in so doing and any amounts expended by
Administrative Agent in connection therewith shall constitute a Building Loan and be added to the
outstanding principal balance of the Building Loans, and the Lenders shall make the applicable
Building Loans to fund any such disbursements. The authorization hereby granted is irrevocable,
and no prior notice to or further direction or authorization from Borrower is necessary for
Administrative Agent to make such disbursements.
Section 4.11 Reserved.
Section 4.12 Administrative Agent’s Right to Make Loan Advances in
Compliance with the Guaranty of Completion.
Any Building Loan proceeds disbursed by Administrative Agent as contemplated by Section
1.01(b) of the Guaranty of Completion (whether the applicable work is being performed by the
Guarantor or Administrative Agent) shall constitute a Building Loan and be added to the outstanding
principal balance of the Building Loans, and the Lenders shall make the applicable Building Loans
to fund any such disbursements. The authorization hereby granted is irrevocable and no prior
notice to or further direction or authorization from Borrower is necessary for Administrative Agent
to make such disbursements.
Section 4.13 No Third-Party Benefit.
This Agreement is solely for the benefit of the Lenders, Administrative Agent, lead Borrower
and Borrower. All conditions of the obligations of the Lenders to make advances hereunder are
imposed solely and exclusively for the benefit of the Lenders and may be freely waived or modified
in whole or in part by the Lenders at any time if in their sole discretion they deem it advisable
to do so, and no Person other than Lead Borrower or Borrower (provided, however,
that all conditions have been satisfied) shall have standing to require the Lenders to make any
Building Loan advances or shall be a beneficiary of this Agreement or any advances to be made
hereunder.
ARTICLE 5
ENVIRONMENTAL MATTERS
Borrower hereby repeats and agrees to observe all representations, warranties and covenants
contained in Article 5 of the Project Loan Agreement with the same force and effect as if set forth
herein in their entirety.
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ARTICLE 6
LEASING MATTERS
Borrower hereby repeats and agrees to observe all covenants contained in Article 6 of the
Project Loan Agreement with the same force and effect as if set forth herein in their entirety.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Borrower hereby reaffirms and ratifies the representations and warranties set forth in Article
7 of the Project Loan Agreement and elsewhere in the Project Loan Agreement with the same force and
effect as if set forth herein in their entirety. In addition, Borrower hereby represents and
warrants to Administrative Agent and the Lenders that:
Section 7.1 Cost of Improvement.
Each item included in the Budget is included within the definition of Cost of Improvement. A
true statement under oath, verified by Borrower, in full compliance with Section 22 of the Lien Law
is attached hereto as Exhibit B.
Section 7.2 Design Professionals’ Certificates.
To Borrower’s best knowledge, the certifications set forth in the certificates of the Design
Professionals which Borrower has furnished in accordance with Schedule 4— Part A,
paragraph 25 and Part C, paragraph 1(e) hereof are true and correct.
Section 7.3 Tenant Improvement Work.
Schedule 7.3 attached hereto sets forth a true and complete summary of all Tenant
Improvement Work currently provided for in the Leases; provided that Schedule 7.3 shall be
subject to update as Approved Leases are executed or amended in accordance herewith.
ARTICLE 8
FINANCIAL REPORTING
Borrower hereby reaffirms and ratifies the representations and warranties set forth in Article
8 of the Project Loan Agreement and elsewhere in the Project Loan Agreement with the same force and
effect as if set forth herein in their entirety.
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ARTICLE 9
COVENANTS
Borrower hereby repeats and agrees to observe all covenants contained in Article 9 of the
Project Loan Agreement with the same force and effect as if set forth herein in their entirety. In
addition, Borrower covenants and agrees with the Lenders and Administrative Agent that, so long as
any Commitment or Loan is outstanding and until payment in full of all amounts payable by the
Borrower hereunder:
Section 9.1 Payment for Labor and Materials.
Borrower shall promptly pay when due all invoices and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Project and never permit to exist
beyond the due date thereof in respect of the Project or any part thereof any Lien, even though
inferior to the Liens of the Loan Documents. Borrower may contest the validity or amount of such
invoices and Liens so long as (1) Lead Borrower notifies Administrative Agent that it intends to
contest such claim or demand, (2) Borrower provides Administrative Agent with an indemnity, bond or
other security reasonably satisfactory to Administrative Agent (including an endorsement to
Administrative Agent’s title insurance policy insuring against such claim or demand) assuring the
discharge of Borrower’s obligations for such claims and demands, including interest and penalties,
and (3) Borrower is diligently contesting the same by appropriate legal proceedings in good faith
and at its own expense and concludes such contest prior to the date on which the Project could be
sold, forfeited, terminated, cancelled or lost for non payment, (4) such proceeding shall not
subject Borrower, Administrative Agent or any Lender to criminal or civil liability (other than
civil liability as to which adequate security has been provided pursuant to clause (2) above), and
(5) Borrower shall promptly upon final determination thereof make payment in accordance with such
determination.
Section 9.2 Inspection.
Borrower shall permit representatives of Administrative Agent, the Construction Consultant and
the Lenders, at reasonable times and on reasonable advance notice, to examine its books of record
and account, to make copies and abstracts therefrom, and to discuss its affairs, finances and
accounts with its principal officers, engineers and independent accountants (and by this provision
Borrower authorizes said accountants to discuss with such Persons such affairs, finances and
accounts, but after prior notice to Borrower of such discussions). Without limiting the foregoing,
representatives of the Construction Consultant, Administrative Agent and the Lenders shall have the
right at reasonable times and on reasonable advance notice to (a) inspect the Project and all
materials to be used in connection with the construction of the Improvements from time to time and
to witness the construction thereof, (b) to conduct such environmental and engineering inspections
and studies as Administrative Agent may require, provided that a maximum of one (1) such inspection
or study may be conducted in any twelve month period unless (i) an Event of Default has occurred,
or (ii) Administrative Agent has a
22
reasonable suspicion of Hazardous Materials or other condition at or near the Project that
would warrant such an inspection or study, (c) to examine all detailed plans and shop drawings in
connection with the construction of the Improvements and (d) meet with the representatives of the
Design Professionals, the Construction Manager and the Major Contractors to discuss the status and
issues relating to the construction of the Improvements (and by this provision Borrower authorizes
Borrower’s Architect, the Construction Manager and the Major Contractors to cooperate and discuss
with such Persons such construction matters, but after reasonable prior notice to Borrower of such
discussions). Borrower shall at all times cause a complete set of the original plans (and all
supplements thereto) relating to the construction of the Project to be maintained at the Project or
construction office and available for inspection by such representatives.
Section 9.3 Project Construction and Completion.
(1) Borrower shall construct the Construction Work in a good and workmanlike manner in
accordance with generally accepted engineering and construction practice, and in material
conformance with the recommendations set forth in each soils report, seismic report, geotechnical
report and other engineering reports submitted to Administrative Agent and accepted by it pursuant
to Schedule 4, the Plans and Specifications, the applicable Tenant Improvement Plans, the
Construction Schedule and Applicable Law.
(2) Borrower shall timely commence the Construction Work for the Improvements on or prior to
February 16, 2007, and shall cause Construction Completion by the Completion Date (other than Punch
List Items which shall be completed by Borrower with diligence following the Completion Date, and
Tenant Improvement Work which shall be timely completed by Borrower in accordance with the
applicable Approved Lease).
(3) Construction Completion shall have occurred by the Completion Date.
(4) Borrower shall not commence construction of any Construction Work, or any particular
component thereof, nor permit any tenant so to do, until Borrower or any such tenant has obtained
all Government Approvals required under Applicable Law for the commencement of construction of such
Construction Work or such component thereof, as the case may be.
(5) Once begun, Borrower shall cause the construction of the Construction Work to be
prosecuted with diligence in accordance with the Construction Schedule, subject to Unavoidable
Delay.
(6) Lead Borrower shall deliver to Administrative Agent, on demand, copies of all contracts,
bills of sale, statements, receipted vouchers and agreements under which Borrower claims title to
any materials, fixtures or articles incorporated in the Improvements.
(7) Borrower shall, upon demand of Administrative Agent based upon the advice of the
Construction Consultant, correct any Unsatisfactory Work; and the advance
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of any proceeds of any Loan shall not constitute a waiver of Administrative Agent’s right to
require compliance with this covenant with respect to any such Unsatisfactory Work. None of
Administrative Agent, the Lenders or the Construction Consultant shall have any affirmative duty to
Borrower or any third party to inspect for Unsatisfactory Work or other defects or to call them to
the attention of Borrower or anyone else.
(8) Borrower shall (and shall cause each Affiliate of Borrower party thereto to):
(a) perform and observe in all material respects all of its covenants and agreements
contained in the Construction Management Agreement, each Major Contract, each other Project
Document and each Government Approval to which it is a party or by which the Project or any
portion thereof is bound;
(b) take all reasonable and necessary action to prevent the termination, in accordance
with the terms thereof or otherwise, of the Construction Management Agreement, any Major
Contract, any other material Project Document and any Government Approval;
(c) enforce in accordance with its terms each material covenant or obligation set
forth in the Construction Management Agreement, each Major Contract, each other Project
Document and each Government Approval;
(d) cause Lead Borrower to promptly give Administrative Agent copies of any default or
violation or other material notices given by or on behalf of Borrower received by or on
behalf of Borrower from any other Person under the Construction Management Agreement, any
Major Contract, any other material Project Document or any Government Approval;
(e) promptly replace, unless it is commercially reasonable not to do so, any
defaulting contractor, subcontractor, material supplier or surety, and Lead Borrower shall
promptly deliver all required information and documents to Administrative Agent regarding
each replacement contractor, subcontractor, material supplier or surety;
(f) if Administrative Agent in its reasonable judgment determines that one or more
elements of the Construction Work will not be completed according to the Construction
Schedule, or that the Project Completion Work will not be completed by the Completion Date,
reschedule the work of construction to permit timely completion. Within fifteen (15) days
after receiving such a request from Administrative Agent, Lead Borrower shall deliver to
Administrative Agent a revised Construction Schedule showing timely completion of such
work; and
(g) take all such commercially reasonable action to achieve the purposes described in
clauses (a), (b), (c), (d), (e) and (f) of
this Section 9.3(7) as may from time to time be reasonably requested by
Administrative Agent.
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(9) Lead Borrower shall deliver to Administrative Agent and the Construction Consultant copies
of all Major Contracts for Administrative Agent’s reasonable approval and all other Minor Contracts
for informational purposes entered into for the construction of the Improvements. Within twenty
(20) days after receiving a request from Administrative Agent, except to the extent previously
delivered, Lead Borrower shall deliver to Administrative Agent any and all of the following
information and documents that Administrative Agent may specify, all in forms reasonably acceptable
to Administrative Agent: (a) a current, complete and correct list showing the name and address of
each contractor, subcontractor and material supplier engaged in connection with the construction of
the Improvements, and the total dollar amount of each contract and subcontract (including any
changes) together with the amounts paid through the date of the list; (b) true and correct copies
of the most current versions of all executed contracts and Contracts identified in the list
described in clause (a) above, including any changes; (c) a construction progress schedule and
updated Permitting Schedule showing the progress of construction and the projected sequencing and
completion times for uncompleted work and for obtaining any outstanding Government Approvals, all
as of the date of the schedule; and (d) any update to any item described above, which Lead Borrower
has previously delivered to Administrative Agent. After the occurrence of an Event of Default,
Borrower expressly authorizes Administrative Agent to contact Borrower’s Architect, each
Construction Manager, any consulting engineer(s) or any contractor, subcontractor, material
supplier, surety or Governmental Authority to verify any information disclosed in accordance with
this Section.
(10) Administrative Agent may (and if requested by the Majority Lenders, shall) commission an
Appraisal (a) upon the satisfaction of the Project Work Substantial Completion Conditions with
respect to the Improvements and (b) at any other time if required by Applicable Law or accounting
policy. Such Appraisal shall be completed at Borrower’s expense and shall be prepared by an
appraiser satisfactory to Administrative Agent.
Section 9.4 Proceedings to Enjoin or Prevent Construction.
If any proceedings are filed seeking to enjoin or otherwise prevent or declare invalid or
unlawful all or any part of the Construction Work, Borrower, at its sole cost and expense, will
cause such proceedings to be contested in a commercially reasonable manner, and in the event of an
adverse ruling or decision, if commercially reasonable, prosecute all allowable appeals therefrom,
and will, without limiting the generality of the foregoing, resist the entry or seek the stay of
any temporary or permanent injunction that may be entered, and use its best efforts to bring about
a favorable and speedy disposition of all such proceedings.
Section 9.5 Agent’s, Lenders’ and Construction Consultant’s Actions for their Own Protection Only.
The authority herein conferred upon Administrative Agent, the Lenders and/or the Construction
Consultant and any action taken by the same, in making inspections, procuring sworn statements and
waivers of lien, approving contracts and Contracts and
25
approving Plans and Specifications will be taken by such party for its or their own protection
only, and none of Administrative Agent, the Lenders or the Construction Consultant shall be deemed
to have assumed any responsibility to Borrower or any other party with respect to any such action
herein authorized or taken by Administrative Agent, the Lenders or the Construction Consultant or
with respect to the Construction Work, performance of contracts or Contracts by any contractors or
subcontractors, or prevention of claims for mechanics’ liens. Any review, investigation or
inspection conducted by Administrative Agent, the Lenders, the Construction Consultant or any other
architectural or engineering consultants retained by Administrative Agent in order to verify
independently Borrower’s satisfaction of any conditions precedent to advances under this Agreement,
Borrower’s performance of any of the covenants, agreements and obligations of Borrower under this
Agreement, or the validity of any representations and warranties made by Borrower hereunder
(regardless of whether or not the party conducting such review, investigation or inspection should
have discovered that any of such conditions precedent were not satisfied or that any such
covenants, agreements or obligations were not performed or that any such representations or
warranties were not true), shall not affect (or constitute a waiver by Administrative Agent or the
Lenders of) (a) any of Borrower’s representations, warranties or obligations under this Agreement
or Administrative Agent’s and the Lenders’ reliance thereon or right to require the performance
thereof or (b) Administrative Agent’s or the Lenders’ reliance upon any certifications of Borrower
or the Design Professionals required under this Agreement or any other facts, information or
reports furnished to Administrative Agent and/or the Lenders by Borrower hereunder.
Section 9.6 Sign and Publicity.
If Administrative Agent requests, Borrower shall, to the extent permitted by Applicable Law,
erect a sign reasonably approved by Administrative Agent on the Project in a conspicuous location
indicating that the financing for the Project has been provided by the Lenders and that Eurohypo is
Administrative Agent for the Lenders. Borrower shall include in any public announcement or media
release concerning the general development of the Project a statement that the Lenders have
provided the financing for the Project and that Eurohypo is Administrative Agent for the Lenders.
Section 9.7 Amendment of Project Documents and Government Approvals; Change Orders.
(1) Borrower shall not, without Administrative Agent’s reasonable prior consent:
(a) take any action to cancel or terminate any material right under the Construction
Management Agreement, any Major Contract, any other Project Document or any Government
Approval to which it is a party;
(b) sell, assign, pledge, transfer, mortgage, hypothecate or otherwise dispose of (by
operation of law or otherwise) or encumber any part of its interest
26
in the Construction Management Agreement, any Major Contract, any other Project
Document or any Government Approval;
(c) except in accordance with prudent construction practice, waive any material
default under or breach of any material provisions of the Construction Management
Agreement, any Major Contract, any other Project Document or any Government Approval, or
waive, forgive, release or fail to enforce any material right, interest or entitlement,
howsoever arising, under or in respect of any of the foregoing, or vary or agree to the
variation in any material way of any of the foregoing or of the performance of any other
Person or Governmental Authority thereunder;
(d) amend or modify any material provision of, or give any consent under, the
Construction Management Agreement, any Major Contract, any other Project Document or any
Government Approval (including, without limitation, the Plans and Specifications or the
Construction Schedule), including, without limitation, any amendment or modification which,
subject to Borrower’s right to make Change Orders pursuant to the provisions of subsection
(2) below, would increase or change the Budget or any Budget Line Item; or which might
adversely affect the value of the security for the Loans; or which, regardless of cost, is
a material change in structure, design or function; or which might delay completion of any
element of the Construction Work beyond the time allotted for it in the Completion
Schedule, or satisfaction of the Project Work Substantial Completion Conditions for the
Project Completion Work beyond the applicable Completion Date therefor;
(e) petition, request or take any other legal or administrative action that seeks, or
may reasonably be expected, to rescind, terminate or suspend the Construction Management
Agreement, any Major Contract, any other Project Document or any Government Approval or
amend or modify all or any material part thereof; or
(f) enter into, or permit the Construction Manager to enter into, any new Major
Contract (which consent shall be conditioned upon the delivery by the Major Contractor
thereunder of a Consent and Agreement).
(2) Borrower shall obtain Administrative Agent’s and the Construction Consultant’s reasonable
approval for any Change Order that exceeds $500,000 with respect to any single change or related
group or series of changes. At such time as all Change Orders in the aggregate have exceeded
$3,000,000, Borrower shall obtain Administrative Agent’s and the Construction Consultant’s
reasonable approval for all subsequent Change Orders.
(3) Subject to the provisions of this Section 9.7, Lead Borrower shall from time to time
promptly deliver to Administrative Agent and the Construction Consultant all Change Orders, pending
or executed, along with evidence that all Government Approvals relating thereto have been obtained,
together with any documents related
27
thereto, and a written description of the proposed change and related working drawings, a
written estimate of the cost of the proposed change and the time necessary to complete it and a
written explanation of the reasons therefor.
Section 9.8 Lien Law.
Borrower, in compliance with Section 13 of the Lien Law covenants that it shall receive and
hold the advances of the Building Loans hereunder and the right to receive the same as a trust fund
for the purpose of first paying the “cost of the improvement”, as such quoted term is defined in
the Lien Law, before using any part thereof for any other purpose.
Section 9.9 Reimbursement of Expenses.
Borrower shall pay or reimburse Administrative Agent and/or the Lenders on demand of the
applicable party to the extent provided in Section 9.28 of the Project Loan Agreement, which
section is hereby incorporated herein by reference, all of which shall constitute part of the Loans
and shall be secured by the Loan Documents.
ARTICLE 10
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default under the Loans:
Section 10.1 Project Loan Agreement.
An Event of Default shall occur under the Project Loan Agreement.
Section 10.2 Access to Project.
If (a) Administrative Agent or any of the Lenders, or its representatives or the Construction
Consultant is not permitted, at all reasonable times, to enter upon the Project, inspect the
Improvements and the construction thereof and all materials, fixtures and articles used or to be
used in connection therewith, and to examine all detailed plans, shop drawings and specifications
which relate to the Improvements, or (b) Lead Borrower, the Construction Manager or a Major
Contractor shall fail to furnish to Administrative Agent, the Construction Consultant or their
authorized representatives, within a reasonable period of time after requested, copies of such
plans, drawings and specifications, or copies of any invoices, Contracts, or bills of sale relating
to the construction or equipping of the Improvements, and, in any of the foregoing cases such
default remains uncured for a period of ten (10) days after notice thereof from Administrative
Agent to Lead Borrower; provided, however, that if such default is caused as a
result of the Construction Manager or a Major Contractor, such ten (10) day period shall be
extended so long as Lead Borrower is diligently pursuing its rights and remedies to cause
compliance by the Construction Manager or such Major Contractor.
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Section 10.3 Termination/Bankruptcy of Construction Manager or a Major Contractor.
If for any reason the Construction Management Agreement or any Major Contract is terminated or
if the Construction Manager or a Major Contractor becomes the subject of a bankruptcy proceeding,
and Borrower does not promptly (but in no event later than thirty (30) days after any such
termination or bankruptcy) replace such Construction Management Agreement or Major Contract with a
substitute construction management agreement or Major Contract, as the case may be, in each case
reasonably acceptable to Administrative Agent and from a new construction manager or contractor, as
the case may be, reasonably approved by Administrative Agent.
Section 10.4 Unsatisfactory Work.
Borrower shall fail to cause any Unsatisfactory Work to be corrected to the reasonable
satisfaction of Administrative Agent and the Construction Consultant within ten (10) Business Days
after notice of such disapproval; provided, however, that if such Unsatisfactory
Work cannot reasonably be corrected within such ten (10) day period, then so long as Borrower shall
have commenced to cause the correction of such Unsatisfactory Work within such ten (10) day period
and thereafter diligently and expeditiously proceeds to cause the correction of the same, such ten
(10) day period shall be extended for such time as is reasonably necessary for Borrower in the
exercise of due diligence to cause the correction of such Unsatisfactory Work prior to the
Completion Date.
Section 10.5 Construction Work.
The Construction Work (a) is not completed on or before the Completion Date, or (b) shall, at
any time, be abandoned for more than ten (10) Business Days, or discontinued for more than fifteen
(15) Business days, or a delay in the Construction Work shall occur so that the same cannot, in
Construction Consultant’s sole judgment, be completed on or before the Completion Date.
ARTICLE 11
REMEDIES
Upon the occurrence of any Event of Default, Administrative Agent may (subject to, and in
accordance with, the provisions of Section 14.3 of the Project Loan Agreement) and, upon request of
the Majority Lenders shall, by written notice to Lead Borrower, pursue any one or more of the
remedies set forth in the Project Loan Agreement or the other Loan Documents, concurrently or
successively, it being the intent hereof that none of such remedies shall be to the exclusion of
any other.
WHETHER OR NOT ADMINISTRATIVE AGENT OR THE LENDERS ELECT TO EMPLOY ANY OR ALL OF THE REMEDIES
AVAILABLE TO IT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, NEITHER ADMINISTRATIVE AGENT NOR ANY OF
THE LENDERS SHALL BE LIABLE FOR THE
29
CONSTRUCTION OF OR FAILURE TO CONSTRUCT, COMPLETE OR PROTECT THE IMPROVEMENTS OR FOR PAYMENT
OF ANY EXPENSES INCURRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO ADMINISTRATIVE
AGENT OR THE LENDERS OR FOR THE CONSTRUCTION OR COMPLETION OF THE IMPROVEMENTS OR FOR THE
PERFORMANCE OR NON-PERFORMANCE OF ANY OTHER OBLIGATION OF BORROWER.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Notices.
Any notice required or permitted to be given under this Agreement shall be in writing and
either shall be (a) mailed by certified mail, postage prepaid, return receipt requested, (b) sent
by overnight air courier service, (c) personally delivered to a representative of the receiving
party, or (d) sent by telecopy (provided an identical notice is also sent simultaneously by mail,
overnight courier, or personal delivery as otherwise provided in this Section 12.1) to the
intended recipient at the “Address for Notices” specified below its name on the signature pages
hereof. Any communication so addressed and mailed shall be deemed to be given on the earliest of
(1) when actually delivered, (2) on the first Business Day after deposit with an overnight air
courier service, or (3) on the third Business Day after deposit in the United States mail, postage
prepaid, in each case to the address of the intended addressee, and any communication so delivered
in person shall be deemed to be given when receipted for by, or actually received by Administrative
Agent, a Lender, Lead Borrower or Borrower, as the case may be. If given by telecopy, a notice
shall be deemed given and received when the telecopy is transmitted to the party’s telecopy number
specified above, and confirmation of complete receipt is received by the transmitting party during
normal business hours or on the next Business Day if not confirmed during normal business hours,
and an identical notice is also sent simultaneously by mail, overnight courier, or personal
delivery as otherwise provided in this Section 12.1. Any party may designate a change of
address by written notice to each other party by giving at least ten (10) days’ prior written
notice of such change of address.
Section 12.2 Amendments, Waivers, Etc.
Any provision of this Agreement may be amended, modified supplemented or waived only in
accordance with Section 12.2 of the Project Loan Agreement.
Section 12.3 Compliance with Usury Laws.
This Agreement shall be subject to the provisions of Section 12.3 of the Project Loan
Agreement with respect to usury laws, which section is hereby incorporated herein by reference.
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Section 12.4 Invalid Provisions.
If any provision of any Loan Document is held to be illegal, invalid or unenforceable, such
provision shall be fully severable; the Loan Documents shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof; the remaining
provisions thereof shall remain in full effect and shall not be affected by the illegal, invalid,
or unenforceable provision or by its severance therefrom; and in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of such Loan Document a
provision as similar in terms to such illegal, invalid or unenforceable provision as may be
possible to be legal, valid and enforceable.
Section 12.5 Approvals; Third Parties; Conditions.
All approval rights retained or exercised by Administrative Agent and the Lenders with respect
to leases, contracts, plans, studies and other matters are solely to facilitate the Lenders’ credit
underwriting, and shall not be deemed or construed as a determination that the Lenders have passed
on the adequacy thereof for any other purpose and may not be relied upon by Borrower or any other
Person. This Agreement is for the sole and exclusive use of Administrative Agent, the Lenders, the
Lead Borrower and Borrower and may not be enforced, nor relied upon, by any Person other than
Administrative Agent, the Lenders, the Lead Borrower and Borrower. All conditions of the
obligations of Administrative Agent and the Lenders hereunder, including the obligation to make
advances, are imposed solely and exclusively for the benefit of Administrative Agent and the
Lenders, their successors and assigns, and no other Person shall have standing to require
satisfaction of such conditions or be entitled to assume that the Lenders will refuse to make
advances in the absence of strict compliance with any or all of such conditions, and no other
Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and
all of which may be freely waived in whole or in part by Administrative Agent and the Lenders at
any time in their sole discretion.
Section 12.6 Lenders and Administrative Agent Not in Control; No Partnership.
None of the covenants or other provisions contained in this Agreement shall, or shall be
deemed to, give Administrative Agent or any Lender the right or power to exercise control over the
affairs or management of Borrower, the powers of Administrative Agent and the Lenders being limited
to the rights to exercise the remedies referred to in the Loan Documents. The relationship between
Borrower and the Lenders is, and at all times shall remain, solely that of debtor and creditor. No
covenant or provision of the Loan Documents is intended, nor shall it be deemed or construed, to
create a partnership, joint venture, agency or common interest in profits or income between
Administrative Agent, the Lenders and Borrower. Administrative Agent and the Lenders neither
undertake nor assume any responsibility or duty to Borrower or to any other person with respect to
the Loans, the Project or the other collateral for the Loans, except as expressly provided in the
Loan Documents. Notwithstanding any other provision of the Loan Documents: (1) neither
Administrative Agent nor any Lender is, nor shall be construed as, a partner, joint venturer, alter
ego, manager, controlling person
31
or other business associate or participant of any kind of Borrower or any Borrower Party or
any of their respective stockholders, members, or partners, and neither Administrative Agent nor
any Lender intends to ever assume such status; (2) no Lender or Administrative Agent shall in any
event be liable for any Debts, expenses or losses incurred or sustained by Borrower or any Borrower
Party; and (3) no Lender or Administrative Agent shall be deemed responsible for or a participant
in any acts, omissions or decisions of Borrower or any Borrower Party or any of their respective
stockholders, members, or partners. Administrative Agent, the Lenders, Lead Borrower and Borrower
disclaim any intention to create any partnership, joint venture, agency or common interest in
profits or income between Administrative Agent, the Lenders, Lead Borrower and Borrower, or to
create any equity in the Project or any other collateral for the Loan in Administrative Agent or
any Lender, or any sharing of liabilities, losses, costs or expenses.
Section 12.7 Time of the Essence.
Time is of the essence with respect to this Agreement.
Section 12.8 Successors and Assigns.
Subject to the provisions of Sections 9.1 and 12.23 of the Project Loan Agreement, this
Agreement shall be binding upon and inure to the benefit of Administrative Agent, the Lenders, Lead
Borrower and Borrower and the respective successors and permitted assigns.
Section 12.9 Renewal, Extension or Rearrangement.
All provisions of the Loan Documents shall apply with equal effect to each and all promissory
notes and amendments thereof hereinafter executed which in whole or in part represent a renewal,
extension, increase or rearrangement of the Loans.
Section 12.10 Waivers.
No course of dealing on the part of Administrative Agent or any Lender, their officers,
employees, consultants or agents, nor any failure or delay by Administrative Agent or any Lender
with respect to exercising any right, power or privilege of Administrative Agent or any Lender
under any of the Loan Documents, shall operate as a waiver thereof.
Section 12.11 Cumulative Rights.
Rights and remedies of Administrative Agent and the Lenders under the Loan Documents shall be
cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
32
Section 12.12 Singular and Plural.
Words used in this Agreement and the other Loan Documents in the singular, where the context
so permits, shall be deemed to include the plural and vice versa. The definitions of words in the
singular in this Agreement and the other Loan Documents shall apply to such words when used in the
plural where the context so permits and vice versa.
Section 12.13 Phrases.
When used in this Agreement and the other Loan Documents, the phrase “including” shall mean
“including, but not limited to,” the phrases “satisfactory to any Lender” or “satisfactory to
Administrative Agent” shall mean in form and substance satisfactory to such Lender or
Administrative Agent, as the case may be, in all respects, the phrases “with Lender’s consent,”
“with Lender’s approval,” “with Administrative Agent’s consent” or “with Administrative Agent’s
approval” shall mean such consent or approval at Lender’s or Administrative Agent’s, as the case
may be, sole and absolute discretion; phrases referring to determinations or approvals to be made
“in the discretion” of Administrative Agent or any Lender shall mean such determination or approval
in the sole and absolute discretion of Administrative Agent or such Lender, and the phrases
“acceptable to Lender” or “acceptable to Administrative Agent” shall mean acceptable to Lender or
Administrative Agent, as the case may be, at such party’s sole and absolute discretion.”
Section 12.14 Exhibits and Schedules.
The exhibits and schedules attached to this Agreement are incorporated herein and shall be
considered a part of this Agreement for the purposes stated herein.
Section 12.15 Titles of Articles, Sections and Subsections.
All titles or headings to articles, sections, subsections or other divisions of this Agreement
and the other Loan Documents or the exhibits hereto and thereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect to the other content
of such articles, sections, subsections or other divisions, such other content being controlling as
to the agreement between the parties hereto.
Section 12.16 Promotional Material.
Borrower authorizes Administrative Agent and each of the Lenders to issue press releases,
advertisements and other promotional materials in connection with Administrative Agent’s or such
Lender’s own promotional and marketing activities, and describing the Loans in general terms or in
detail and Administrative Agent’s or such Lender’s participation in the Loans. All references to
Administrative Agent or any Lender contained in any press release, advertisement or promotional
material issued by Borrower shall be approved in writing by Administrative Agent and such Lender in
advance of issuance.
33
Section 12.17 Survival.
All of the representations, warranties, covenants, and indemnities of Borrower hereunder
(including environmental matters under Article 5 of the Project Loan Agreement, the obligations
under Sections 2.7(1), 2.7(5) and 2.7(6) of the Project Loan Agreement), and under the
indemnification provisions of the other Loan Documents shall survive (a) the repayment in full of
the Loans and the release of the Liens evidencing or securing the Loans, (b) the transfer (by sale,
foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all right, title and
interest in and to the Project to any party, whether or not an Affiliate of Borrower and (c) in the
case of any Lender that may assign any interest in its Commitment or Loans hereunder in accordance
with the terms of this Agreement, the making of such assignment, notwithstanding that such
assigning Lender may cease to be a “Lender” hereunder.
Section 12.18 WAIVER OF JURY TRIAL.
BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY
PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOANS OR
THE PROJECT (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY
CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR
VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR ADMINISTRATIVE AGENT AND EACH LENDER TO ENTER
THIS AGREEMENT.
Section 12.19 Remedies of Borrower.
It is expressly understood and agreed that, notwithstanding any Applicable Law or any
provision of this Agreement or the other Loan Documents to the contrary, the liability of
Administrative Agent and each Lender (including their respective successors and assigns) and any
recourse of Borrower against Administrative Agent and each Lender shall be limited solely and
exclusively to their respective interests in the Loans and/or Commitments or the Project. Without
limiting the foregoing, in the event that a claim or adjudication is made that Administrative
Agent, any of the Lenders, or their agents, acted unreasonably or unreasonably delayed acting in
any case where by Applicable Law or under this Agreement or the other Loan Documents,
Administrative Agent, any Lender or any such agent, as the case may be, has an obligation to act
reasonably or promptly, or otherwise violated this Agreement or the Loan Documents, Borrower agrees
that none of Administrative Agent, the Lenders or their agents shall be liable for any incidental,
indirect, special, punitive, consequential or speculative damages or losses resulting from
34
such failure to act reasonably or promptly in accordance with this Agreement or the other Loan
Documents.
Section 12.20 Governing Law.
This Agreement, the notes and the other Loan Documents shall be governed by, and construed in
accordance with the law of the State of New York, except to the extent otherwise specified in any
of the Loan Documents. The provisions of Section 12.20 of the Project Loan Agreement with respect
to submission to jurisdiction are hereby incorporated by reference and shall be applicable to this
Agreement.
Section 12.21 Entire Agreement.
This Agreement and the other Loan Documents embody the entire agreement and understanding
between Administrative Agent, the Lenders and Borrower and supersede all prior agreements and
understandings between such parties relating to the subject matter hereof and thereof.
Accordingly, the Loan Documents may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties. There are no unwritten oral agreements between the
parties. If any conflict or inconsistency exists between the Commitment Letter and this Agreement
or any of the other Loan Documents, the terms of this Agreement shall control.
Section 12.22 Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall constitute an
original, but all of which shall constitute one document.
Section 12.23 Assignments and Participations by the Lenders.
Each Lender may only assign any of its Loans, its Notes and its Commitment and sell interests
in the Loans to Participants in accordance with Section 12.23 of the Project Loan Agreement, which
section is hereby incorporated herein by reference.
Section 12.24 Brokers.
This Agreement shall be subject to the provisions of Section 12.24 of the Project Loan
Agreement, which section is hereby incorporated herein by reference.
Section 12.25 Right of Set-off.
Upon the occurrence and during the continuance of any Event of Default, each of the Lenders
shall have the right of set-off as provided in Section 12.25 of the Project Loan Agreement, which
section is hereby incorporated here by reference.
35
Section 12.26 Limitation on Liability of Administrative Agent’s and the Lenders’ Officers,
Employees, etc.
Any obligation or liability whatsoever of Administrative Agent or any Lender which may arise
at any time under this Agreement or any other Loan Document shall be satisfied, if at all, out of
Administrative Agent’s or such Lender’s respective assets only. No such obligation or liability
shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of Administrative Agent’s or any Lender’s shareholders, directors, officers,
employees or agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
Section 12.27 Cooperation with Syndication.
This Agreement shall be subject to the provisions of Section 12.27 of the Project Loan
Agreement with respect to usury laws, which section is hereby incorporated herein by reference.
Section 12.28 Severance of Loan.
This Agreement shall be subject to the provisions of Section 12.28 of the Project Loan
Agreement with respect to usury laws, which section is hereby incorporated herein by reference.
Section 12.29 Confidentiality.
This Agreement shall be subject to the provisions of Section 12.29 of the Project Loan
Agreement with respect to usury laws, which section is hereby incorporated herein by reference.
ARTICLE 13
RECOURSE LIABILITY
Section 13.1 Recourse Liability.
This Agreement shall be subject to the provisions of Article 13 of the Project Loan Agreement,
which section is hereby incorporated herein by reference.
ARTICLE 14
ADMINISTRATIVE AGENT
Section 14.1 Appointment, Powers and Immunities.
The provisions of Article 14 of the Project Loan Agreement are hereby incorporated by
reference, including, without limitation, Administrative Agent’s powers and immunities, reliance,
obligations with respect to Defaults, rights as a Lender, right to
36
indemnification by the Lenders, non-reliance by the Lenders, failure to act, resignation,
authorization and remedies with respect to Defaulting Lenders.
ARTICLE 15
CASH MANAGEMENT
Section 15.1 Cash Management.
This Agreement shall be subject to the provisions of Article 15 of the Project Loan Agreement,
which article is hereby incorporated herein by reference.
ARTICLE 16
CONTROLLED ACCOUNTS
Section 16.1 Controlled Accounts.
This Agreement shall be subject to the provisions of Article 15, which article is hereby
incorporated herein by reference.
[Signature Pages Follow]
37
EXECUTED as of the date first written above.
| BORROWER: | ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company |
|||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| Address for Notices: c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, NY 10605 Attention: Robert Masters Telecopier No.: 914-428-3646 FORDHAM PLACE OFFICE, LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| Address for Notices: c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, NY 10605 Attention: Robert Masters Telecopier No.: 914-428-3646 |
||||
38
| LENDER: | EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Address for Notices to Eurohypo AG, New York Branch: Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Legal Director Telecopier No.: 866 267 7680 With copies to: Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Head of Portfolio Operations Telecopier No.: 866 267 7680 — and — Riemer & Braunstein LLP Times Square Tower, Suite 2506 Seven Times Square New York, New York 10036 Attention: Steven J. Weinstein, Esq. Telecopier No.: (617) 692-3503 |
||||
39
| ADMINISTRATIVE AGENT: | EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Address for Notices to Eurohypo AG, New York Branch: Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Legal Director Telecopier No.: 866 267 7680 With copies to: Eurohypo AG, New York Branch 1114 Avenue of the Americas, 29th Floor New York, New York 10036 Attention: Head of Portfolio Operations Telecopier No.: 866 267 7680 — and — Riemer & Braunstein LLP Times Square Tower, Suite 2506 Seven Times Square New York, New York 10036 Attention: Steven J. Weinstein, Esq. Telecopier No.: (617) 692-3503 |
||||
40
STATE OF NEW YORK
|
) | |||||
| ) | ss.: | |||||
COUNTY OF NEW YORK
|
) |
On the day of in the
year 2007, before me, the undersigned, a notary
public in and for said state, personally appeared Robert Masters, personally known to me or proved
to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.
My commission expires: |
||
41
STATE OF NEW YORK
|
) | |||||
| ) | ss.: | |||||
COUNTY OF NEW YORK
|
) |
On the day of in the
year 2007, before me, the undersigned, a notary
public in and for said state, personally appeared , personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.
My commission expires: |
||
STATE OF NEW YORK
|
) | |||||
| ) | ss.: | |||||
COUNTY OF NEW YORK
|
) |
On the day of in the
year 2007, before me, the undersigned, a notary
public in and for said state, personally appeared , personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.
My commission expires: |
||
42
SCHEDULE 1
BUILDING LOAN COMMITMENTS
| Lender | Commitment | |||
Eurohypo AG, New York Branch |
$ | 75,339,243.00 | ||
| $ | ||||
Total |
$ | 75,339,243.00 | ||
SCHEDULE 1.1(37)
PLANS AND SPECIFICATIONS
General Description
| • | Base building construction drawings by Greenberg Farrow dated August 1, 2007 as follows: |
| • | Site | ||
| • | Architectural | ||
| • | Structural | ||
| • | Mechanical | ||
| • | Electrical | ||
| • | Plumbing | ||
| • | Fire Protection |
| • | Base Building specifications by Greenberg Farrow as follows: |
| • | Divisions 100 through 12000 dated January 5, 2007 | ||
| • | Division 14000 dated January 19, 2007 | ||
| • | Division 15000 dated April 16, 2007 | ||
| • | Division 16000 dated December 29, 2006 |
| • | Sears tenant construction drawings dated August 22, 2007 |
| • | Sears tenant specifications dated August 1, 2007 |
Detailed Description
See Attached
SCHEDULE 1.1(41)
PROJECT DOCUMENTS
| 1. | Plans and Specifications | |
| 2. | The Borrower’s Architect’s Agreement | |
| 3. | Construction Management Agreement | |
| 4. | Engineering Agreements. | |
| 5. | Major Contracts. | |
| 6. | Minor Contracts. | |
| 7. | Government Approvals. | |
| 8. | Construction Schedule. | |
| 9. | Consents and Acknowledgements from Construction Manager, Architect, Engineer and Major Contractors. | |
| 10. | Design Professionals’ Certificates. | |
| 11. | ALTA Survey. | |
| 12. | Site Plan. |
SCHEDULE 4
ADVANCE CONDITIONS
Part A — Initial Advance
Part B — General Conditions
Part C — Conditions to Final Loans
PART A. CONDITIONS PRECEDENT TO EFFECTIVENESS OF BUILDING LOAN COMMITMENTS AND TO INITIAL BUILDING
LOANS.
The effectiveness of the Building Loan Commitments and the obligation of the Lenders to make
the initial Building Loans are subject Administrative Agent’s receipt, review, approval and/or
confirmation of the following, at Borrower’s cost and expense, each in form and content
satisfactory to Administrative Agent in its sole discretion (such conditions not to be duplicative
to the extent they are the same matters required as conditions precedent to the effectiveness of
the Acquisition Loans and Project Loans under the Project Loan Agreement):
ORGANIZATIONAL AND AUTHORIZATION DOCUMENTS; OPINIONS; OTHER DOCUMENTATION RELATING TO BORROWER,
BORROWER PARTIES AND OTHER PERSONS
1. All documents evidencing the formation, organization, valid existence, good standing of and
for Borrower and each Borrower Party, and the authorization, execution, delivery and performance of
the Loan Documents and Project Documents by Borrower and each Borrower Party, including a certified
organizational chart for Borrower and Borrower Parties.
2. Legal opinions issued by counsel for Borrower and each Borrower Party, opining as to the
due organization, valid existence and good standing of Borrower and each Borrower Party; as to the
due authorization, execution, delivery, enforceability and validity of the Loan Documents with
respect to Borrower and each Borrower Party (and including opinions with respect to
non-contravention, perfection, choice of law, usury and non-consolidation); and as to such matters
concerning the zoning and entitlements for the Project, compliance with Applicable Law (including
the Affordable Housing Requirements) and such other matters as Administrative Agent and
Administrative Agent’s counsel reasonably may specify.
3. Current Uniform Commercial Code searches, and litigation, bankruptcy and judgment reports,
as requested by Administrative Agent, with respect to Borrower and Borrower Parties.
4. Copies of the most recent financial statements of Borrower certified by an officer of the
Borrower and each Borrower Party, if applicable, and copies of the most recent audited annual
financial statement of Guarantor, and certificates dated the Closing Date and signed by an
Authorized Officer of Borrower and each Borrower Party stating that (i) such financial statements
are true, complete and correct and (ii) no change shall have occurred in the financial condition of
Borrower or any Borrower Party which would have a Material Adverse Effect on the Project, or on
Borrower’s or any Borrower Party’s ability to repay the Loans or otherwise perform its obligations
under the Loan Documents. Further, there shall not exist any material default by Borrower or any
Borrower Party under any loan, financing or similar arrangement with any lender.
5. Satisfactory financial review and background checks (including such background checks as
deemed necessary by Administrative Agent and Lenders to comply with the Patriot Act) of Borrower
and Borrower Parties.
6. Opening balance sheet for Borrower.
LOAN DOCUMENTS; CLOSING CERTIFICATES; APPRAISAL
7. The Loan Documents, executed by Borrower and, as applicable, each Borrower Party.
8. A certificate of an Authorized Officer of Borrower, dated as of the Closing Date,
certifying that: (i) the representations and warranties of Borrower and each Borrower Party
contained in the Loan Documents are true and correct in all material respects on and as of such
date as if made on and as of such date (or, if stated to have been made solely as of an earlier
date, were true and correct in all material respects as of such date), and (ii) no Potential
Default or Event of Default has occurred and is continuing on such date.
9. An Appraisal, such that the aggregate amount of the Commitments shall not exceed seventy
percent (70%) of the aggregate value of the Project. The Appraisal shall run in favor of “Eurohypo
AG, New York Branch or its designee, as Administrative Agent on behalf of the lenders in its
lending syndicate from time to time, and the successors and assigns of each of the foregoing, all
of whom may rely thereon.”
TITLE; SURVEY
10. An ALTA policy or policies of title insurance satisfactory to Administrative Agent
(collectively, the “Building Loan Title Policy”), issued by the Title Insurer together with
evidence of the payment of all premiums due thereon, (a) insuring Administrative Agent for the
benefit of the Lenders, in an amount equal to the aggregate amount of the Building Loan
Commitments, that Borrower is lawfully seized and possessed of a valid and subsisting fee simple
interest in the Land and Improvements and that the Building Loan Mortgage constitutes a valid fee
simple mortgage on the Land and Improvements subject to no Liens other than the Permitted
Encumbrances applicable thereto and (b) providing (i) affirmative insurance or endorsements for
coverage against all mechanics’ and materialmen’s liens, (ii) a pending disbursements clause, and
(iii) such other affirmative insurance, endorsements and reinsurance as Administrative Agent may
require. The form of the Building Loan Title Policy and all endorsements thereto shall be approved
by Administrative Agent in its sole discretion. The Building Loan Title Policy shall name as the
insured “Eurohypo AG, New York Branch or its designee, as Administrative Agent on behalf of the
lenders in its lending syndicate from time to time, and the successors and assigns of each of the
foregoing, all of whom may rely thereon”.
11. A survey of the Project (the “Survey”) in form and content, and prepared by a
registered land surveyor, satisfactory to Administrative Agent. The Survey shall be certified to
“Eurohypo AG, New York Branch or its designee, as Administrative Agent on behalf of the lenders in
its lending syndicate from time to time, and the successors and assigns of each of the foregoing,
all of whom may rely thereon” in accordance with a surveyor’s certificate in form and substance
satisfactory to Administrative Agent.
12. Evidence that all of the land parcels required to develop the Project per the final Plans
and Specifications are owned by Borrower and are encumbered by the Building Loan Mortgage and
insured by the Building Loan Title Policy.
INSURANCE
13. A certified copy of, or certificates of insurance with respect to, the insurance policies
required under Section 3.1(1) of this Agreement (inclusive of the insurance policies
required under Schedule 3.1(1)(J)), together with evidence of the payment of all premiums
therefor.
GOVERNMENT APPROVALS; COMPLIANCE WITH LAW
14. Originals (or copies certified by an Authorized Officer of Borrower to be true copies) of
all Government Approvals referred to in the Permitting Schedule, other than those expressly
provided for in said Schedule to be obtained at a later time (together with, if requested by
Administrative Agent, an opportunity to review (or certified copies of) all correspondence referred
to in such Government Approvals and all applications for such Government Approvals).
15. Evidence satisfactory to Administrative Agent of final approval from Borrower’s Architect
and the New York City Department of Buildings of Project design and specifications.
16. Evidence satisfactory to Administrative Agent that the Land is and, upon completion
thereof, the Improvements will be in compliance with all Applicable Law and any applicable
covenants, conditions and restrictions affecting the Land.
17. Receipt, review and acceptance by the administrative Agent of (i) a Phase I report and
Phase II report, if applicable, for the Project.
PROJECT DOCUMENTS; CONSENTS AND AGREEMENTS; GOVERNMENT APPROVALS
19. True and correct copies of each of the Project Documents (including all amendments
thereto), certified as such by an Authorized Officer of Borrower, together with evidence that (a)
each of the Project Documents has been duly executed and delivered by each Person that is a party
thereto and is in full force and effect; (b) neither Borrower nor, to the best of Borrower’s
knowledge, any other Person which is party to any of the Project Documents, is in default
thereunder beyond any applicable cure and notice periods; (c) no term or condition thereof shall
have been amended, modified or waived without the prior consent of Administrative Agent. The form
and substance of each of the Project Documents shall be satisfactory to Administrative Agent.
20. A true and correct copy of the Construction Management Agreement certified as such by an
Authorized Officer of Borrower and evidence that no term or condition of such contract shall have
been modified and/or waived without the prior consent of Administrative Agent, together with
financial statements for the Construction Manager. The form and substance of the Construction
Management Agreement, and the financial statements of the Construction Manager, shall be
satisfactory to Administrative Agent.
21. A certificate of the Construction Manager in favor of Administrative Agent (on behalf of
the Lenders) certifying that the Construction Schedule and the Budget (as its relates to
Hard Costs) are realistic and can be adhered to in completing the Construction Work for the
Improvements in accordance with the Plans and Specifications.
22. A true and correct copy of Borrower’s Architect Agreement certified as such by an
Authorized Officer of Borrower and evidence that no term or condition of Borrower’s Architect
Agreement shall have been modified, amended, supplemented and/or waived without the prior consent
of Administrative Agent. The form and substance of Borrower’s Architect Agreement shall be
satisfactory to Administrative Agent.
23. A schedule of the identity of the Major Contractors for the Improvements representing at
least eighty percent (80%) of the cost of the completion of the Project Completion Work for the
Improvements (including the Major Contracts for the mechanical, electrical and plumbing work and
any other Major Contractors deemed reasonably appropriate by Administrative Agent), and copies of
the executed Major Contracts entered into with such Major Contractors and all modifications,
amendments and/or supplements thereto with respect thereto, together with a certificate of an
Authorized Officer of Borrower certifying that (A) the copies of the Major Contracts attached to
such certificate are true, correct and complete in all respects; (B) such Major Contracts attached
to such certificate are in full force and effect; and (C) neither Borrower, nor the Construction
Manager nor the applicable Major Contractor is in default thereunder. The form and substance of
the Major Contract shall be satisfactory to Administrative Agent.
24. Evidence satisfactory to the Administrative Agent that the Project is eligible to obtain
and receive a partial exemption of real property taxes for the Improvements for a twenty-five (25)
year period under the Industrial and Commercial Incentive Program, as of right.
25. If any Construction Work has been commenced prior to the Closing Date, (a) the most recent
Construction Manager’s progress payment request showing the percentage of completion, the amount
funded and Change Order status and (b) sworn partial waivers of liens covering all work and
materials performed or supplied prior to the Closing Date from all contractors, subcontractors,
materialmen, suppliers and other vendors.
26. Certificates of Borrower’s applicable Design Professionals (such certificates to be
limited to the portion of the Construction Work for which the respective Design Professional is
responsible) in favor of Administrative Agent (on behalf of the Lenders), or other evidence
satisfactory to Administrative Agent, that (a) the Plans and Specifications for the Improvements
are in full compliance with all Applicable Law; (b) the Plans and Specifications for the
Improvements are full and complete in all respects and contain all details necessary for
construction of the Project Completion Work for the Improvements; (c) all Government Approvals to
the extent necessary for construction of the Project Completion Work for the Improvements have been
issued; (d) the gross square footage of the Improvements as shown on a schedule attached to the
certificate of the applicable Design Professional accurately reflects the gross square footage of
the improvements contemplated by the Plans and Specifications for the Improvements; (e) there exist
with respect to the Project adequate water, storm and sanitary sewage facilities and other required
public utilities, together with a means of ingress and egress to and from the Project over public
streets; and (f) the Construction Schedule and the Budget for
the Improvements are realistic and can be adhered to in completing the Project Completion Work
for the Improvements in accordance with the Plans and Specifications therefor.
PLANS AND SPECIFICATIONS; BUDGET; CONSTRUCTION SCHEDULE; REPORTS AND STUDIES
27. Receipt, review, and approval by Administrative Agent and the Construction Consultant of
the final Plans and Specifications for the Improvements, including any Construction, architectural
and engineering drawings, sealed by the applicable Design Professionals.
28. The delivery by the Construction Consultant to Administrative Agent of the Construction,
Cost and Plan Review in form and substance satisfactory to Administrative Agent.
29. The Budget as approved by Administrative Agent, which shall include all Project Costs for
the Improvements and shall be sufficient to complete the Improvements and carry the Project through
the Maturity Date based on the final Plans and Specifications. The Budget shall be such that the
aggregate amount of the Commitments shall not exceed eighty percent (80%) of the aggregate Project
Costs for the entire Project reflected on the Budget. To the extent that the Commitments would
exceed any of the limits described in this section, they shall be automatically reduced to an
amount not in excess of the limits described in this section.
30. The Construction Schedule, together with (if any Construction Work has been commenced
prior to the Closing Date) evidence satisfactory to Administrative Agent that the development of
the Construction Work is proceeding in accordance with the Construction Schedule and the Budget.
31. Receipt, review, and acceptance by Administrative Agent of (i) Site Assessments relating
Project; (ii) seismic studies showing a probable maximum loss of less than 20% for the Project; and
(iii) soils reports, engineering reports, geotechnical reports and other reports and studies in
each case as required by Administrative Agent and prepared in accordance with Administrative
Agent’s scope and by consultants engaged by Administrative Agent or, if consented to by
Administrative Agent, engaged by Borrower with reliance rights with respect to such reports and
studies expressly granted in writing to Administrative Agent and its on behalf of the Lenders and
the respective successors and assigns of each of the foregoing. All such reports and studies shall
be in a form approved by Administrative Agent, and shall be certified to Administrative Agent (on
behalf of the Lenders and their successors and assigns) in a form reasonably requested by
Administrative Agent which may include certification to additional participants, co-lenders and/or
investors. Such reports and studies shall run in favor of “Eurohypo AG, New York Branch or its
designee, as Administrative Agent on behalf of the lenders in its lending syndicate from time to
time, and the successors and assigns of each of the foregoing, all of whom may rely thereon”.
PAYMENT OF INITIAL EQUITY CONTRIBUTION, FEES, EXPENSES AND COSTS
32. There shall have been made by Borrower unreimbursed equity contributions to the Project in
an aggregate amount equal to the Initial Equity Contribution, and Borrower shall have delivered to
Administrative Agent evidence satisfactory to it that Borrower has made such
contributions, including, without limitation, a certificate of an Authorized Officer of
Borrower certifying thereto and itemizing the uses of the such contributions, such certificate to
be accompanied by backup materials documenting the amount of such contributions and the use of
same; provided, however, the Administrative may, in its sole discretion, waive this requirement for
the closing of the Loan, as long as such requirement is satisfied prior or contemporaneously with
the initial advance of proceeds of the Loan.
33. Payment to Administrative Agent in accordance with the Fee Letters of the upfront fee and
arrangement fee described therein, together with the initial annual payment of the Agency Fee and
the final payment of the Unused Commitment Fee for the Commitments in accordance with Section
2.71(1) of this Agreement.
34. Payment of all fees and commissions payable to real estate brokers, mortgage brokers, or
any other brokers or agents in connection with the Loans, such evidence to be accompanied by any
waivers or indemnifications deemed necessary by Administrative Agent.
35. Payment of Administrative Agent’s costs and expenses in underwriting, documenting, and
closing the transaction, including fees and expenses of Administrative Agent’s inspecting
engineers, consultants, and outside counsel.
36. Payment of all expenses and premiums in connection with the issuance of the Building Loan
Title Policy and all recording charges, mortgage taxes and filing fees payable in connection with
recording the Building Loan Mortgage and the filing of the Uniform Commercial Code financing
statements related thereto in the appropriate offices.
37. Payment of any due and payable real estate taxes and assessments with respect to the
Project remaining unpaid on the Closing Date.
LEASES:
38. Receipt, review, and acceptance by Administrative Agent of (i) the leases with Existing
Tenants, and (ii) for each of the leases with Existing Tenants, (1) written estoppels in form and
substance reasonably satisfactory to Administrative Agent, executed by tenants under the leases
with Existing Tenants and confirming the term, rent, and other provisions and matters relating to
the leases and (2) written subordination and attornment agreements, in form and substance
satisfactory to Administrative Agent, executed by Existing Tenants, whereby, among other things,
such tenants subordinate their interest in the Project to the Loan Documents and agree to attorn to
Administrative Agent (on behalf of the Lenders) and its successors and assigns upon foreclosure or
other transfer of the Project after an Event of Default.
39. Evidence satisfactory to Administrative Agent that, as of the Closing Date, the aggregate
fixed minimum rent of the retail leases shall be no less than $5,150,000.
OTHER
40. Such other documents or items as Administrative Agent or its counsel reasonably may
require, including, without limitation the delivery of such documents or items as may be indicated
on a closing checklist distributed to Borrower by Administrative Agent or its counsel.
41. No material change shall have occurred in the financial markets which would have, in
Administrative Agent’s judgment, a material adverse affect on the Project or any obligor’s ability
to repay the Loans or otherwise perform its obligations under the Loan Documents.
42. Evidence that the other conditions set forth in Article 4 have been satisfied.
43. Evidence that all of the conditions precedent to the effectiveness of the initial
Acquisition Loans and Project Loans under the Project Loan Agreement shall have been satisfied.
44. Notwithstanding anything to the contrary contained herein, in no event shall the initial
disbursement of the Loans occur prior to the Closing Date.
PART B. GENERAL CONDITIONS TO ALL BUILDING LOANS
The obligation of the Lenders to make any Loans shall be subject to Administrative Agent’s
receipt, review, approval and/or confirmation of the following, each in form and content
satisfactory to Administrative Agent in its sole discretion (such conditions not to be duplicative
to the extent they are the same matters required as conditions precent to the effectiveness of the
Acquisition Loans and/or Project Loans that are being advanced concurrently therewith under the
Project Loan Agreement):
1. There shall exist no Potential Default or Event of Default (both before and after giving
effect to the requested advance).
2. The representations and warranties contained in this Agreement and in all other Loan
Documents shall be true and correct in all material respects on and as of the date of the making of
such Loan with the same force and effect as if made on and as of such date.
3. Such advance shall be secured by the Building Loan Mortgage and the other Security
Documents, subject only to the Permitted Encumbrances, as evidenced by a Date Down Endorsement
satisfactory to Administrative Agent.
4. Borrower shall have paid Administrative Agent’s costs and expenses in connection with such
advance (including title charges and attorneys’ fees and expenses).
5. No change shall have occurred in the financial condition of Borrower or any Borrower Party
or in the Project which would have a Material Adverse Effect.
6. No proceeding with respect to condemnation, adverse possession, zoning change or usage
change proceeding shall have occurred or shall have been threatened against the Project the Project
shall not have suffered any damage by fire or other casualty which has not been repaired or is not
being restored in accordance with this Agreement; no Applicable Law or injunctive proceeding,
restriction, litigation, action, citation or similar proceeding or matter shall have been enacted,
adopted, or threatened by any Governmental Authority, which would have, in Administrative Agent’s
judgment, a material adverse effect on the Project or Borrower’s or any Borrower Party’s ability to
perform its obligations under the Loan Documents.
7. The Construction Work (or such part thereof as may have been constructed at the time of any
borrowing) shall have been constructed substantially in accordance with the Plans and
Specifications and the Construction Schedule (as each may have been modified in accordance with
this Agreement) and all applicable Government Approvals; and there shall exist no Unsatisfactory
Work.
8. The Construction Consultant shall have reviewed and approved the disbursement requested in
the Request for Loan Advance delivered by Lead Borrower with respect to such Loan. Such Request
for Loan Advance shall include copies of all documents, contracts, invoices, bills, construction
records, lien waivers, Change Orders, and drawings, plans and specifications as the Construction
Consultant shall reasonably require, to enable the Construction Consultant to timely review each
Request for Loan Advance.
9. Borrower shall have provided the Construction Consultant, Administrative Agent and the
Lenders, or their representatives, prompt and reasonable access to the Project, in order to inspect
the Construction Work then completed.
10. Administrative Agent shall have received the following items in connection with each Loan:
(a) A Request for Loan Advance as provided in Section 2.1(2) and Sections
2.6(4) and 4.2 of the Project Loan Agreement duly executed by an Authorized Officer of Lead
Borrower, together with the required attachments thereto;
(b) Such invoices, contracts and other supporting data as Administrative Agent may
reasonably require to evidence that all Project Costs for which disbursement of Building
Loans is sought have been incurred and are then due and payable;
(c) Except for Liens insured against pursuant to the Building Loan Title Policy, (i)
sworn unconditional waivers of lien from contractors, subcontractors, materialmen, suppliers
and vendors, covering all work for which funds have been advanced pursuant to a prior
disbursement and (ii) at Administrative Agent’s election, sworn conditional waivers of lien
from contractors, subcontractors, materialmen, suppliers and vendors, covering all work of
such Persons for which funds are being advanced pursuant to the then current Request for
Loan Advance, all in compliance with the Lien Law;
(d) Copies of any Change Orders which have not been previously furnished to
Administrative Agent and the Construction Consultant, all of which shall be subject to
Administrative Agent’s review and approval in accordance with this Agreement;
(e) Copies of all Contracts and purchase orders which have been executed or modified,
amended and/or supplemented since the last Loan, together with (i) a certificate by an
Authorized Officer of Lead Borrower certifying that the delivered items are true, accurate
and complete copies of the originals thereof, and (ii) Consents and Agreements in the
applicable form attached to the General Assignment from each Major Contractors who has
entered into a Major Contract but has not previously delivered a Consent and Agreement;
(f) Inventory of materials and equipment stored on the Project and evidence that
Borrower has complied with all of the requirements of Section 4.8 relating to such
stored materials;
(g) Copies of all Government Approvals (to the extent required as of such date) not
previously delivered to Administrative Agent, certified by an Authorized Officer of
Borrower;
(h) If any material dispute arises between or among Borrower, the Construction Manager
or any Major Contractor, a written summary of the nature of such dispute;
(i) If the Budget shall have been modified, copies of all such modifications, all of
which shall be subject to Administrative Agent’s review and approval in accordance with this
Agreement;
(j) Copies of all amendments to the Construction Schedule not previously delivered to
Administrative Agent, all of which shall be subject to Administrative Agent’s review and
approval in accordance with this Agreement;
(k) Promptly after the completion of the construction of the foundation or other
support elements for the Construction Work, Lead Borrower shall provide to Administrative
Agent a current survey of the Land showing all improvements located thereon and complying
with the requirements set forth in Part A, paragraph 11 and shall obtain a
foundation endorsement to the Building Loan Title Policy in form satisfactory to
Administrative Agent insuring that all foundations and other support elements are located
within applicable property and setback lines and do not encroach upon any easements or
rights of way; and
(l) To the extent not previously delivered to Administrative Agent, evidence showing
compliance with the insurance provisions of Section 3.1.
11. All of the conditions set forth in Part A above shall remain satisfied and all
applicable conditions in Article 4 shall have been satisfied, including the application of
all Operating Revenues in accordance with Section 4.6.
12. Evidence that all of the conditions precedent to the effectiveness of a Project Loan under
the Project Loan Agreement shall have been satisfied; provided, however, Items 3, 10(a) and 10(b)
of Schedule 4 — Part B of the Project Loan Agreement need not be satisfied if no Project Loan is
being advanced at such time.
13. The Loans shall be In Balance, and all material actions required to have been undertaken
or obtained prior to the date of such disbursement pursuant to the Permitting Schedule and the
Marketing Plan and Schedule shall have been undertaken or obtained as applicable.
14. Operating Revenues shall have been applied in accordance with Section 4.1(1) and
Section 4.6(1) of the Project Loan Agreement.
15. To the extent not previously delivered to Administrative Agent, Lead Borrower shall
provide evidence of the payment of all costs, expenses and other charges covered by previous
Requests for Loan Advances for which advances of Loans have previously been made.
16. Administrative Agent has reasonably determined withholding such disbursement in whole or
in part is not required by the Lien Law.
17. Such other documents and items as Administrative Agent may reasonably request.
PART C. CONDITIONS TO THE FINAL BUILDING LOANS FOR PROJECT COMPLETION WORK
The obligation of the Lenders to make the final Building Loans to Borrower for Project
Completion Work with respect to the Improvements is subject to the further condition precedent that
all of the following requirements (collectively, the “Project Work Substantial Completion
Conditions”) shall have been completed to the reasonable satisfaction of Administrative Agent:
1. Administrative Agent and the Construction Consultant (except in the case of clauses
(b) and (h) below) shall have received the following items in connection with the final
Loans for such Project Completion Work:
(a) Evidence of the approval by the applicable Governmental Authorities of such Project
Completion Work to the extent any such approval is a condition of the lawful use of such
Project Completion Work, including, without limitation, valid certificates of occupancy;
(b) A final as-built survey covering such Project Completion Work and any paving,
driveways and exterior improvements and otherwise in compliance with Schedule 4 —
Part A, paragraph 11, together with endorsements to the Title Policies which are
satisfactory to Administrative Agent and which describe the Improvements located on the
Project (CLTA 116 series), insure the lien-free completion of the Improvements (CLTA 101
series, as required by Administrative Agent), insure that there are no encroachments or
violations of any recorded covenants, conditions or restrictions affecting the Project (CLTA
100 series), and amend any survey exception to reflect the final as-built survey;
(c) A full and complete certified set of “as built” Plans and Specifications for such
Work;
(d) Unconditional waivers of lien and sworn statements from all contractors,
subcontractors, materialmen, suppliers and vendors with respect to such Project Completion
Work, in each case in compliance with the Lien Law;
(e) Certificates from the applicable Design Professionals (such certificates, except in
the case of Borrower’s Architect, to be limited to the portion of such Project Completion
Work for which the respective Design Professional was responsible) stating that, to the best
of such Design Professional’s knowledge, (i) such Project Completion Work (A) has been
substantially completed in accordance with the Plans and Specifications, (B) is structurally
sound (the certification as to structural soundness to be made by the structural engineer
only) and (C) is available for occupancy, delivery to an applicable tenant for performance
of tenant work (subject to completion of Punch List Items), and (ii) such Project Completion
Work as so completed complies with all applicable building codes;
(f) Statement from the testing engineer performing construction materials testing
indicating that such Project Completion Work was performed according to the Plans and
Specifications;
(g) Violation searches, if available and reasonably requested by Administrative Agent,
with Governmental Authorities indicating no notices of violation have been issued with
respect to such Project Completion Work;
(h) Current searches of all Uniform Commercial Code financing statements filed with the
Secretary of State of the state of formation/organization of Borrower and the office of the
Recorder of Bronx County, New York, showing that no Uniform Commercial Code financing
statements are filed or recorded against Borrower in which the collateral is personal
property or fixtures located on the Project or used in connection with the Project other
than financing statements with respect to the Loans;
(i) A certificate of an Authorized Officer of Borrower certifying that:
(i) no condemnation of any portion of the Project or any action which could
result in a relocation of any roadways abutting the Project or the denial of access,
which, in Administrative Agent’s sole judgment, adversely affects the Lenders’
security or the operation of the Project, has commenced or, to the best of
Borrower’s knowledge, is contemplated by any Governmental Authority;
(ii) all fixtures, attachments and equipment necessary for the operation of the
Project Completion Work have been installed or incorporated into the Project and are
operational and in good working order, free from defects; all guarantees and
warranties have been transferred/assigned to Borrower; and Borrower is the absolute
owner of all of said property free and clear of all Liens; and
(iii) all Project Costs relating to such Project Completion Work have been paid
in full except (A) to the extent covered by the final Loans then being requested,
and (B) amounts for Hard Costs which Borrower is disputing in good faith and with
due diligence; provided that Administrative Agent may, in its sole discretion, hold
back an amount equal to (x) 150% of the disputed amount minus (y) any Retainage that
Administrative Agent is still holding with respect to the applicable Hard Costs, and
(C) amounts held by Administrative Agent with respect to Punch List Items with
respect to the applicable Hard Costs.
(j) Evidence that all of the Government Authorizations required to be obtained by such
time in accordance with the Permitting Schedule have been obtained.
(k) All on-site and off-site work has been completed.
2. At Borrower’s expense, an engineering report from a licensed professional engineer,
satisfactory in form and content to Administrative Agent, which shall (a) comment on the structural
soundness of the Project, seismic resistance, quality and remaining economic life of the roof, HVAC
and improvements and (b) verify that the Project Completion Work has been completed in accordance
with the Plans and Specifications, approved by the appropriate Governmental Authorities and that
the Project, and the Improvements constructed thereon, satisfy all Applicable Law.
3. Administrative Agent shall have received written certification from the Construction
Consultant that (a) such Project Completion Work has been substantially completed in accordance
with the Plans and Specifications, subject to completion of Punch List Items (as to which, if
incomplete on the date of the final disbursement of a Loan for Work, Administrative Agent may, in
its sole discretion, hold back an amount equal to (a) 150% of the estimated cost of completing such
Punch List Items from the final disbursement minus (b) any Retainage that Administrative Agent is
still holding with respect to the applicable Punch List Items, such amount to be advanced to Lead
Borrower on completion of such Punch List Items and the satisfaction of the requirements of
Section 4.2 with respect to Retainage, which Borrower shall diligently complete) and (b)
the deliveries required in paragraphs 1 and 2 above shall have been received and
approved by Administrative Agent.
SCHEDULE 7.3
TENANT IMPROVEMENT WORK
Best Buy — Turn Key
| • | Full buildout according to tenants plans. |
Sears — Turn Key
| • | Full buildout according to tenants plans. |
24-Hour — Cold Dark Shell
| • | Provide demising walls and all utilities not stubbed to the space. Utilities are on each floor and tenant will connect themselves. We tell them where utilities are located. |
Walgreen’s — Cold Dark Shell
| • | Provide demising walls and all utilities not stubbed to the space. Utilities are on each floor and tenant will connect themselves. We tell them where utilities are located |
Office — White Box + TI TBD
| • | Perimeter walls are sheet rocked and ready for finish. Floors are ready for finish. Ceilings and Sprinklers are in place. Basic power in demising partitions. Electric lighting in place. |
EXHIBIT A
LEGAL DESCRIPTION OF PROJECT
PARCEL I — (f/k/a LOT 8, Now Part of LOT 9)
ALL THAT CERTAIN piece or parcel of land, together with any improvements thereon situate, lying and
being in the Borough of the Bronx, City and State of New York, bounded and described as follows:
BEGINNING at a point on the easterly side of Webster Avenue (100 feet in width), said point being
distant south 08 degrees 26 minutes 11 seconds west, a distance of 254.35 feet from a point formed
by the intersection of said easterly side of Webster Avenue with the southerly side of East Fordham
Road (a/k/a Pelham Avenue variable in width) and from said point of beginning
RUNNING THENCE along the common dividing line between said Lot 8 and Lot 9 south 85 degrees 39
minutes 56 seconds east, a distance of 108.97 feet to a point;
THENCE along the common dividing line between said Lot 8 and Lot 12 south 04 degrees 33 minutes 31
seconds west, a distance of 24.68 feet to a point;
THENCE along the common dividing line between said Lots 8 and Lot 4 (lands now or formerly of
Automotive Realty Corporation) north 85 degrees 39 minutes 56 seconds west, a distance of 110.65
feet to a point; on the aforementioned easterly side of Webster Avenue;
THENCE along the easterly side of said Webster Avenue, north 08 degrees 26 minutes 11 seconds east,
a distance of 24.74 feet to the point or place of BEGINNING.
PARCEL II — LOT 9:
ALL THAT CERTAIN piece or parcel of land, together with any improvements thereon situate, lying and
being in the Borough of the Bronx, City and State of New York, and as further bounded and described
as follows:
BEGINNING at a point on the easterly side of Webster Avenue (100 feet wide), said point being
distant south 08 degrees 26 minutes 11 seconds west, a distance of 228.81 feet from a point formed
by the intersection of said easterly side of Webster Avenue with the southerly side of East Fordham
Road (a/k/a Pelham Avenue, variable width) and from said point of beginning;
RUNNING THENCE the following two (2) courses along the dividing line between Lot 9 (n/f reputed
owner Acadia-PA East Fordham Acquisitions, LLC and Lot 12 (n/f reputed owner Acadia-PA East Fordham
Acquisitions, LLC), Block 3033;
1. South 85 degrees 39 minutes 56 seconds east, a distance of 115.24 feet to a point; thence
2. South 03 degrees 58 minutes 56 seconds west, a distance of 25.48 feet to a point; thence
3. Along the common dividing line between the aforementioned Lot 9 and Lots 12 & 8 (n/f Acadia-PA
East Fordham Acquisitions LLC), Block 3033 north 85 degrees 39 minutes 56 seconds west, a distance
of 117.22 feet to a point on the aforementioned easterly side of Webster Avenue; thence
4. Along said easterly side of Webster Avenue, north 08 degrees 26 minutes 11 seconds east, a
distance of 25.54 feet to the point or place of BEGINNING.
This description is prepared in accordance with a Survey made by Control Point Associates Inc.
dated 8/30/07 and last revised 9/18/07 by Gregory A. Gallas NY P.L.S. (Control Point Associates
Inc.)
PARCEL III — LOT 12:
ALL THAT CERTAIN plot, piece or parcel of land, together with any improvements thereon situate,
situate, lying and being in the Borough and County of Bronx, City and State of New York, bounded
and described as follows:
BEGINNING at a point formed by the intersection of the easterly side of Webster Avenue (100 feet
wide) with the southerly side of East Fordham Road (A.K.A. Pelham Avenue, Variable Width) and from
said point of beginning.
RUNNING THENCE the following three (3) courses along said southerly side of East Fordham Road;
1. South 84 degrees 34 minutes 46 seconds east, a distance of 43.27 feet to a point, THENCE
2. South 54 degrees 01 minute 22 seconds east, a distance of 29.77 feet to a point; THENCE;
3. South 40 degrees 09 minutes 32 seconds east, a distance of 85.32 feet to a point on the
westerly side of Park Avenue (Variable Width) THENCE
4. Along said westerly side of Park Avenue, south 00 degrees 10 minutes 48 seconds east, a
distance of 201.71 feet to a point THENCE
5. Along the dividing line between Lot 12 (Lands now or formerly of Acadia-PA East Fordham
Acquisitions LLC) and Lot 4 (Lands now or formerly of Automotive Realty Corporation), Block 3033,
North 85 degrees 39 minutes 56 seconds west, a distance of 53.59 feet to a point, THENCE
6. Along the common dividing line between the aforementioned Lot 12, Lot 8 (Land now or formerly
of Acadia-PA East Fordham Acquisitions LLC) and Lot 9 (lands now or formerly of Acadia-PA East
Fordham Acquisitions LLC) Block 3033, North 04 degrees 33 minutes 31 seconds east, a distance of
24.68 feet to a point, THENCE, The following three (3) courses along the dividing line between the
aforementioned Lots 12 and 9;
7. South 85 degrees 39 minutes 56 seconds east, a distance of 8.25 feet to a point, THENCE
8. North 03 degrees 58 minutes 56 seconds east, a distance of 25.48 feet to a point, THENCE
9. North 85 degrees 39 minutes 56 seconds west, a distance of 115.24 feet to a point on the
aforementioned easterly side of Webster Avenue, THENCE
10. Along said easterly side of Webster Avenue, north 08 degrees 26 minutes 11 seconds east, a
distance of 228.81 feet to the point and place of BEGINNING.
EXHIBIT B
FORM OF SECTION 22 AFFIDAVIT
N.Y. LIEN LAW AFFIDAVIT
STATE OF NEW YORK
|
) | |||||
| ) | ss.: | |||||
COUNTY OF NEW YORK
|
) |
The undersigned, being duly sworn, deposes and says that:
1. He resides at the address shown at the foot hereof.
2. He is the of , the
managing member of (the
“Borrower”), a limited liability company, which is the Borrower mentioned in the Building
Loan Agreement dated as of the date hereof, between the Borrower, Wachovia Bank, N.A. (the
“Administrative Agent”), as Administrative Agent, and the Lenders which are party thereto (each, a
“Lender”).
3. The aggregate amount of the Building Loans is $ .
[4. The amount, if any, to be advanced from the Building Loans to reimburse Borrower for costs
of the Improvements expended by Borrower after the commencement of the Improvements but prior to
the date hereof are itemized as follows:
| Description of Cost of Improvements1 | Amount | |
(a) Base Building Construction
|
$ | |
(b) Architecture & Engineering
|
$ | |
(c) Leasing Commissions
|
$ | |
(d) Insurance Premiums and Expenses
|
$ | |
(e) Examination of Title
|
$ | |
(f) Ground Rents and Taxes
|
$ | |
| Total: | $ ] |
5. The consideration for the Building Loans to be paid out of the Building Loans are (or are
estimated to be) as follows:
| 1 | Complete list accordingly |
Prior existing mortgage to be
taken by assignment and consolidated
with Building Loan Mortgages:
|
$ | ||
Consideration (e.g., commitment
fees) to be paid for the Building
Loans:
|
$ | ||
| Total: | $ |
6. The estimated amount to be advanced from the Building Loans for other indirect costs of the
Improvements which may become due and payable after the date hereof and during the construction of
the Improvements (including, without limitation, payment and performance bonds, leasing commissions
for commercial space leases of more than 3 years, insurance premiums, architects, engineers and
surveyors, ground rents, taxes, assessments and water sewer rents, examination of title and
recording fees, mortgage recording taxes, fees of Administrative Agent’s counsel, and interest on
the Building Loan) is $ .
7. The net sum available to Borrower from the Building Loans to pay contractors,
subcontractors, laborers and materialmen for the Improvements is $ , subject to the
satisfaction of conditions to the advance and disbursement of such amounts contained in the
Building Loan Agreement.
8. The failure of any Lender to make any Building Loan to be made by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its Building Loan on such
date, but neither any Lender nor Administrative Agent shall be responsible for the failure of any
other Lender to make a Building Loan to be made by such other Lender. If a Building Loan is not
funded, the amounts referred to in this affidavit may not be advanced. The amounts payable by the
Borrower at any time under the Building Loan Agreement and under the Building Loan Notes to each
Lender shall be a separate and independent debt.
9. This affidavit is made pursuant to and in compliance with Section 22 of the Lien Law of the
State of New York.
10. The Borrower is a limited liability company. Therefore, this statement is verified by
deponent and not by the Borrower because the Borrower is a limited liability company and the
deponent is an officer of , a , the managing member of the Borrower.
11. The facts stated above and any costs itemized on this statement are true, to the knowledge
of the undersigned.
Sworn to before me this
____ day of , 200___.
____ day of , 200___.
Exhibit 10.69
Acadia Strategic Opportunity Fund III LLC,
a Delaware limited liability company
As Borrower
a Delaware limited liability company
As Borrower
Acadia Realty Acquisition III LLC,
a Delaware limited liability company
As Managing Member
a Delaware limited liability company
As Managing Member
Acadia Realty Limited Partnership,
a Delaware limited partnership
As Guarantor
a Delaware limited partnership
As Guarantor
Acadia Investors III, Inc.,
a Maryland corporation
As Pledgor
a Maryland corporation
As Pledgor
Revolving Credit Agreement
Bank of America, N.A.
As Administrative Agent
As Administrative Agent
Banc of America Securities LLC
As Sole Lead Arranger and Sole Book Manager
As Sole Lead Arranger and Sole Book Manager
YC Susi Trust,
As Conduit Lender
As Conduit Lender
Bank of America, N.A.
As an Administrator, Alternate Lender and Managing Agent
and
The Other Conduit Lenders, Administrators,
Alternate Lenders and Managing Agents
From Time to Time Party Hereto
As an Administrator, Alternate Lender and Managing Agent
and
The Other Conduit Lenders, Administrators,
Alternate Lenders and Managing Agents
From Time to Time Party Hereto
October 10, 2007
TABLE OF CONTENTS
| Page | ||||||||
| 1. | DEFINITIONS | 1 | ||||||
| 1.1. | Defined Terms | 1 | ||||||
| 1.2. | Other Definitional Provisions | 28 | ||||||
| 1.3. | Letter of Credit Amounts | 29 | ||||||
| 2. | LOANS AND LETTERS OF CREDIT | 29 | ||||||
| 2.1. | The Commitment | 29 | ||||||
| 2.2. | Revolving Credit Commitment | 32 | ||||||
| 2.3. | Borrowing Procedures | 32 | ||||||
| 2.4. | Determination of Yield and Interest Periods | 36 | ||||||
| 2.5. | Letters of Credit | 36 | ||||||
| 2.6. | Payment of Borrower Guaranty | 45 | ||||||
| 2.7. | Use of Proceeds and Letters of Credit | 46 | ||||||
| 2.8. | Administrative Agent and Arranger Fees | 46 | ||||||
| 2.9. | Unused Facility Fee | 46 | ||||||
| 2.10. | Letter of Credit Fees | 46 | ||||||
| 2.11. | Computation of Interest and Fees | 46 | ||||||
| 2.12. | Increase in the Facility Amount | 47 | ||||||
| 3. | PAYMENT OF OBLIGATIONS | 47 | ||||||
| 3.1. | Notes | 47 | ||||||
| 3.2. | Payment of Obligations | 48 | ||||||
| 3.3. | Payment of Interest | 48 | ||||||
| 3.4. | Payments Generally | 49 | ||||||
| 3.5. | Voluntary Prepayments | 50 | ||||||
| 3.6. | Reduction or Early Termination of Commitments | 51 | ||||||
| 3.7. | Lending Office | 51 | ||||||
| 4. | CHANGE IN CIRCUMSTANCES | 52 | ||||||
| 4.1. | Taxes | 52 | ||||||
| 4.2. | Illegality | 53 | ||||||
| 4.3. | Inability to Determine Rates | 53 | ||||||
| 4.4. | Increased Cost and Capital Adequacy | 54 | ||||||
-i-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| 4.5. | Funding Losses | 55 | ||||||
| 4.6. | Matters Applicable to all Requests for Compensation | 55 | ||||||
| 4.7. | Prohibited Event | 56 | ||||||
| 5. | SECURITY | 56 | ||||||
| 5.1. | Liens and Security Interest | 56 | ||||||
| 5.2. | Collateral Account; Capital Calls | 57 | ||||||
| 5.3. | Agreement to Deliver Additional Collateral Documents | 59 | ||||||
| 5.4. | Subordination of All Credit Party Claims | 60 | ||||||
| 6. | [RESERVED] | 61 | ||||||
| 7. | ADDITIONAL ALTERNATE LENDER PROVISIONS | 61 | ||||||
| 7.1. | Assignment to Alternate Lenders | 61 | ||||||
| 7.2. | Downgrade of Alternate Lender | 62 | ||||||
| 8. | CONDITIONS PRECEDENT TO LENDING | 65 | ||||||
| 8.1. | Obligation of Lenders | 65 | ||||||
| 8.2. | Qualified Borrower Loans and Letters of Credit | 68 | ||||||
| 8.3. | All Loans and Letters of Credit | 69 | ||||||
| 9. | REPRESENTATIONS AND WARRANTIES | 69 | ||||||
| 9.1. | Organization and Good Standing of Borrower | 69 | ||||||
| 9.2. | Organization and Good Standing of Managing Member | 69 | ||||||
| 9.3. | Organization and Good Standing of Guarantor | 70 | ||||||
| 9.4. | Organization and Good Standing of Pledgor | 70 | ||||||
| 9.5. | Authorization and Power | 70 | ||||||
| 9.6. | No Conflicts or Consents | 70 | ||||||
| 9.7. | Enforceable Obligations | 70 | ||||||
| 9.8. | Priority of Liens | 70 | ||||||
| 9.9. | Financial Condition | 71 | ||||||
| 9.10. | Full Disclosure | 71 | ||||||
| 9.11. | No Default | 71 | ||||||
| 9.12. | No Litigation | 71 | ||||||
| 9.13. | Material Adverse Change | 71 | ||||||
-ii-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| 9.14. | Taxes | 71 | ||||||
| 9.15. | Jurisdiction of Formation; Principal Office | 71 | ||||||
| 9.16. | ERISA Compliance | 72 | ||||||
| 9.17. | Compliance with Law | 72 | ||||||
| 9.18. | Hazardous Substances | 72 | ||||||
| 9.19. | Insider | 72 | ||||||
| 9.20. | Properties | 72 | ||||||
| 9.21. | Operating Structure | 72 | ||||||
| 9.22. | Capital Commitments and Contributions | 73 | ||||||
| 9.23. | Fiscal Year | 73 | ||||||
| 9.24. | Investment Company Act | 73 | ||||||
| 9.25. | Margin Stock | 73 | ||||||
| 9.26. | Foreign Asset Control Laws | 73 | ||||||
| 9.27. | Brokers’ Fees | 73 | ||||||
| 9.28. | Solvency | 73 | ||||||
| 9.29. | Managing Member Representation | 73 | ||||||
| 9.30. | Guarantor Representation | 73 | ||||||
| 9.31. | Pledgor Representation | 74 | ||||||
| 9.32. | Investments | 74 | ||||||
| 9.33. | Investor Documents | 74 | ||||||
| 9.34. | Advisory Committee | 74 | ||||||
| 10. | AFFIRMATIVE COVENANTS | 74 | ||||||
| 10.1. | Financial Statements, Reports and Notices | 74 | ||||||
| 10.2. | Payment of Taxes | 76 | ||||||
| 10.3. | Maintenance of Existence and Rights | 76 | ||||||
| 10.4. | Notice of Default | 76 | ||||||
| 10.5. | Other Notices | 76 | ||||||
| 10.6. | Compliance with Loan Documents, Operating Agreement, Partnership Agreement and Stockholders Agreement | 77 | ||||||
| 10.7. | Books and Records; Access | 77 | ||||||
-iii-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| 10.8. | Compliance with Law | 77 | ||||||
| 10.9. | Insurance | 77 | ||||||
| 10.10. | Authorizations and Approvals | 77 | ||||||
| 10.11. | Maintenance of Liens | 77 | ||||||
| 10.12. | Further Assurances | 78 | ||||||
| 10.13. | Investor Financial and Rating Information | 78 | ||||||
| 10.14. | Certain Included Investor Requirements | 78 | ||||||
| 10.15. | Covenants of Qualified Borrowers | 78 | ||||||
| 11. | NEGATIVE COVENANTS | 78 | ||||||
| 11.1. | Mergers | 79 | ||||||
| 11.2. | Negative Pledge | 79 | ||||||
| 11.3. | Fiscal Year and Accounting Method | 79 | ||||||
| 11.4. | Constituent Documents | 79 | ||||||
| 11.5. | Transfer by, or Admission of, Investors | 80 | ||||||
| 11.6. | Capital Commitments | 80 | ||||||
| 11.7. | ERISA Compliance | 81 | ||||||
| 11.8. | Environmental Matters | 81 | ||||||
| 11.9. | Dissolution | 81 | ||||||
| 11.10. | Limitations on Dividends and Distributions | 81 | ||||||
| 11.11. | Limitation on Debt | 81 | ||||||
| 11.12. | Limitation on Managing Member’s Activities | 81 | ||||||
| 11.13. | Limitation on Pledgor’s Activities | 81 | ||||||
| 11.14. | Limitation on Guarantor’s Activities | 82 | ||||||
| 11.15. | Investor Withdrawal | 82 | ||||||
| 12. | EVENTS OF DEFAULT | 82 | ||||||
| 12.1. | Events of Default | 82 | ||||||
| 12.2. | Remedies Upon Event of Default | 84 | ||||||
| 12.3. | Performance by Administrative Agent | 85 | ||||||
| 13. | AGENCY PROVISIONS | 85 | ||||||
| 13.1. | Appointment and Authorization of Agents | 85 | ||||||
-iv-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| 13.2. | Delegation of Duties | 86 | ||||||
| 13.3. | Exculpatory Provisions | 86 | ||||||
| 13.4. | Reliance on Communications | 87 | ||||||
| 13.5. | Notice of Default | 87 | ||||||
| 13.6. | Non-Reliance on Agents and Other Lenders | 87 | ||||||
| 13.7. | Indemnification | 88 | ||||||
| 13.8. | Agents in Their Individual Capacity | 88 | ||||||
| 13.9. | Successor Agent | 89 | ||||||
| 13.10. | No Other Duties, Etc | 89 | ||||||
| 13.11. | Administrative Agent May File Proofs of Claim | 89 | ||||||
| 14. | MISCELLANEOUS | 90 | ||||||
| 14.1. | Amendments | 90 | ||||||
| 14.2. | Setoff | 92 | ||||||
| 14.3. | Sharing of Payments | 92 | ||||||
| 14.4. | Payments Set Aside | 93 | ||||||
| 14.5. | Waiver | 93 | ||||||
| 14.6. | Payment of Expenses | 94 | ||||||
| 14.7. | Notice | 96 | ||||||
| 14.8. | GOVERNING LAW | 97 | ||||||
| 14.9. | Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by Jury | 97 | ||||||
| 14.10. | Invalid Provisions | 98 | ||||||
| 14.11. | Entirety and Amendments | 98 | ||||||
| 14.12. | Successors and Assigns | 98 | ||||||
| 14.13. | Lender Default | 103 | ||||||
| 14.14. | Replacement of Lender | 103 | ||||||
| 14.15. | Maximum Interest | 103 | ||||||
| 14.16. | Headings | 104 | ||||||
| 14.17. | Survival | 104 | ||||||
| 14.18. | Integration | 104 | ||||||
-v-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| 14.19. | Limited Liability of Investors | 104 | ||||||
| 14.20. | Confidentiality | 104 | ||||||
| 14.21. | USA PATRIOT Act Notice | 105 | ||||||
| 14.22. | Multiple Counterparts | 106 | ||||||
| 14.23. | No Bankruptcy Petition Against any Conduit Lender | 106 | ||||||
| 14.24. | No Recourse Against any Conduit Lender | 106 | ||||||
SCHEDULES |
||
SCHEDULE 1.1
|
Commitments | |
SCHEDULE 14.7
|
Address and Account Information | |
SCHEDULE 14.12(b)
|
Processing & Recording Fees |
EXHIBITS |
||
EXHIBIT A:
|
Schedule of Investors and Commitments | |
EXHIBIT B-1:
|
Form of Note | |
EXHIBIT B-2:
|
Form of Qualified Borrower Note | |
EXHIBIT B-3:
|
Form of Qualified Borrower Letter of Credit Note | |
EXHIBIT C:
|
Form of Loan Notice | |
EXHIBIT D-1:
|
Form of Request for Letter of Credit | |
EXHIBIT D-2:
|
Form of Letter of Credit | |
EXHIBIT E:
|
Form of Borrower and Managing Member Security Agreement | |
EXHIBIT F:
|
Form of Account Assignment | |
EXHIBIT G:
|
Form of Facility Increase Request | |
EXHIBIT H:
|
Form of Borrowing Base Certificate | |
EXHIBIT I:
|
Form of Investor Letter | |
EXHIBIT J:
|
[Reserved] | |
EXHIBIT K:
|
[Reserved] | |
EXHIBIT L:
|
Form of Capital Contributions Pledge Agreement | |
EXHIBIT M:
|
Form of Assignment and Assumption Agreement | |
EXHIBIT N:
|
Form of Borrower Guaranty | |
EXHIBIT O:
|
Form of Compliance Certificate | |
EXHIBIT P:
|
Form of Guaranty of Capital |
-vi-
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (together with all amendments and modifications hereof and
supplements and attachments hereto, this “Credit Agreement”) is dated as of October 10, 2007 by and
among ACADIA STRATEGIC OPPORTUNITY FUND III LLC, a Delaware limited liability company (the
“Borrower”), ACADIA REALTY ACQUISITION III LLC, a Delaware limited liability company (the “Managing
Member”), ACADIA REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the “Guarantor”)
ACADIA INVESTORS III, INC., a Maryland corporation (the “Pledgor”), YC SUSI Trust, as Conduit
Lender, BANK OF AMERICA, N.A., a national banking association (in its individual capacity, “Bank of
America”), as administrative agent (together with any successor appointed pursuant to Section 13.9
below, the “Administrative Agent”) for the Lenders, as an Alternate Lender, as an Administrator and
as a Managing Agent, and each of the other Persons from time to time party hereto as Lenders,
Managing Agents and Administrators (all such terms, as hereinafter defined).
A. Borrower, Managing Member, Guarantor and Pledgor have requested that Lenders make loans and
cause the issuance of letters of credit to Borrower and Qualified Borrowers (as hereinafter
defined) for the principal purposes of providing working capital to the Borrower; financing the
costs and other expenses to be incurred by Borrower in connection with making investments permitted
under the Operating Agreement (as hereinafter defined); and financing the costs of other
undertakings by Borrower permitted under the Operating Agreement; and
B. Lenders are willing to lend funds and to cause the issuance of letters of credit upon the terms
and subject to the conditions set forth in this Credit Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein contained and for other
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
1. DEFINITIONS
1.1. Defined Terms. For the purposes of this Credit Agreement, unless otherwise expressly
defined, the following terms shall have the respective meanings assigned to them in this Section 1
or in the Section or recital referred to:
“Account Assignment” means that certain assignment of the Collateral Account substantially in
the form of Exhibit F, dated the date hereof, executed by Borrower in favor of Administrative Agent
for the benefit of the Secured Parties.
“Adequately Capitalized” means in compliance with the capital standards for bank holding
companies as described in the Bank Holding Company Act of 1956, as amended, and regulations
promulgated thereunder.
“Administrative Agent” is defined in the first paragraph hereof.
Acadia Strategic Opportunity Fund III LLC
Revolving Credit Agreement
Revolving Credit Agreement
“Administrative Agent’s Account” means the account designated from time to time by the
Administrative Agent for payments by the Borrower Parties pursuant to this Credit Agreement.
“Administrative Agent’s Office” means Administrative Agent’s address set forth on Schedule
14.7 or such other address as Administrative Agent may from time to time notify the Borrower and
the Lenders in writing.
“Administrator” means: (a) with respect to YC SUSI, Bank of America or an Affiliate thereof;
and (b) with respect to any other Conduit Lender, the Person designated by such Conduit Lender as
its “Administrator”, which Person becomes a party to this Credit Agreement in such capacity.
“Affiliate” of any Person means any other Person that, directly or indirectly, controls or is
controlled by, or is under common control with, such Person. For the purpose of this definition,
“control” and the correlative meanings of the terms “controlled by” and “under common control with”
means the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting shares or
partnership interests or by contract or otherwise.
“Agent-Related Persons” means each Agent, together with its Affiliates (including, in the case
of Bank of America in its capacity as the Administrative Agent, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and their respective Affiliates.
“Agents” means, collectively, Administrative Agent, Letter of Credit Issuer, Administrators,
Managing Agents, the Arranger and any successors and assigns in such capacities.
“Alternate Lender Percentage” means, with respect to any Lender Group, at any time, a
fraction, expressed as a percentage, the numerator of which is the portion of the Loans funded by
the Alternate Lenders of such Lender Group and the denominator of which is the aggregate Loans at
such time of such Lender Group; provided that at all times on and after the first Assignment Date
occurring on or after the Conduit Investment Termination Date for the Conduit Lender related to
such Lender Group, the Alternate Lender Percentage for such Lender Group means 100%.
“Alternate Lender Pro Rata Share” means, with respect to each Alternate Lender and any Lender
Group, the percentage obtained from the fraction: (a) the numerator of which is the Commitment of
such Alternate Lender; and (b) the denominator of which is the aggregate Commitments of all
Alternate Lenders in the related Lender Group.
“Alternate Lenders” means: (a) for the YC SUSI Lender Group, Bank of America and any
assignees thereof that shall become party hereto pursuant to Section 7 or Section 14.12; and (b)
for any other Lender Group, the “Alternate Lenders” specified therefore who become parties hereto
and any assignees thereof that shall become party hereto pursuant to Section 7 or Section 14.12.
2
“Alternate Rate” means, for any Interest Period for any Portion of Loans for any Lender Group,
an interest rate per annum as provided in the Fee Letter above the LIBOR Rate for such Interest
Period; provided, however, that in the case of:
(a) any Interest Period of one to (and including) 14 days;
(b) any Interest Period which commences prior to the related Managing Agent receiving at least
three (3) Business Days notice thereof; or
(c) any Interest Period relating to a Portion of Loans which is less than $5,000,000;
the “Alternate Rate” for each such Interest Period shall be an interest rate per annum equal
to the Base Rate in effect on each day of such Interest Period. The “Alternate Rate” for any date
on or after the occurrence of an Event of Default or the Maturity Date shall be the Default Rate.
“Applicable Margin” has the meaning provided in the Fee Letter.
“Applicable Requirement” means, for any Included Investor that is (or whose Credit Provider,
if applicable, is): (a) a Bank Holding Company, Adequately Capitalized status or better and a
Rating of BBB/Baa2 or higher; (b) an insurance company, a Best’s Rating of A- or higher and a
Rating of BBB/Baa2 or higher; (c) an ERISA Investor, or the trustee or nominee of an ERISA
Investor, in addition to the Sponsor’s Rating of BBB/Baa2 or higher, a minimum Funding Ratio for
the related pension fund based on the Rating of the Sponsor of the related pension fund as follows:
| Sponsor Rating | Minimum Funding Ratio | |||
A-/A3 or higher |
No minimum | |||
BBB+/Baa1 |
90% | |||
BBB/Baa2 |
95% | |||
(d) a Governmental Plan Investor, or the Responsible Party with respect to such Governmental
Plan Investor, in addition to the Responsible Party’s Rating of BBB/Baa2 or higher, a minimum
Funding Ratio for the pension fund based on the Rating of the Responsible Party as follows:
| Responsible Party Rating | Minimum Funding Ratio | |||
A-/A3 or higher |
No minimum | |||
BBB+/Baa1 |
90% | |||
BBB/Baa2 |
95%; | |||
and (e) otherwise a Rated Investor, a Rating of BBB/Baa2 or higher.
The first Rating indicated in each case above is the S&P Rating and the second Rating
indicated in each case above is the Moody’s Rating. In the event that the S&P and Moody’s Ratings
are not equivalent, then the Applicable Requirement shall be based on the lower of the two. If any
such Person has only one Rating, from either S&P or Moody’s, then that Rating shall apply.
3
“Application and Agreement for Letter of Credit” means an application and agreement for
standby letter of credit by, between and among Borrower and a Qualified Borrower, on the one hand,
and the Letter of Credit Issuer, on the other hand, in a form acceptable to the Letter of Credit
Issuer (and customarily used by it in similar circumstances) and conformed to the terms of this
Credit Agreement, either as originally executed or as it may from time to time be supplemented,
modified, amended, renewed, or extended, provided, however, to the extent that the terms of such
Application and Agreement are inconsistent with the terms of this Credit Agreement, the terms of
this Credit Agreement shall control.
“Approved Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business, that is administered or managed by: (a) a Lender;
(b) an Affiliate of a Lender; or (c) an entity or an Affiliate of an entity that administers or
manages a Lender.
“Arranger” is defined in the preamble to this Credit Agreement.
“Assignee” is defined in Section 14.12(b) hereof.
“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or
two or more Approved Funds managed by the same investment advisor.
“Assignment Amount” means, with respect to an Alternate Lender at the time of any assignment
pursuant to Section 7.1 by any Conduit Lender in such Alternate Lender’s Lender Group, an amount
equal to the least of: (a) such Alternate Lender’s Alternate Lender Pro Rata Share of the
Obligations requested by such Conduit Lender to be assigned at such time; (b) such Alternate
Lender’s unused Commitment (minus the sum of (i) the unrecovered principal amount of such Alternate
Lender’s investments in such Obligations pursuant to the Program Support Agreement to which it is a
party and (ii) such Alternate Lender’s Alternate Lender Pro Rata Share of the applicable Lender
Group Percentage of the Letter of Credit Liability); and (c) in the case of an assignment on or
after the Conduit Investment Termination Date for the Conduit Lender related to such Lender Group,
(i) such Alternate Lender’s Alternate Lender Pro Rata Share of the applicable Conduit Lender
Percentage of the Lender Group Percentage of the
Borrowing Base minus (ii) such Alternate Lender’s Alternate Lender Pro Rata Share of the
applicable Lender Group Percentage of the Letter of Credit Liability.
“Assignment and Assumption Agreement” means the agreement contemplated by Section 14.12(b)
hereof, pursuant to which any Lender assigns all or any portion of its rights and obligations
hereunder, which agreement shall be substantially in the form of Exhibit M attached hereto.
“Assignment Date” is defined in Section 7.1(a) hereof.
“Assignment Fee” is defined in Schedule 14.12(b) hereto.
“Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or
other external counsel and the allocated cost of internal legal services and all disbursements of
internal counsel.
4
“Auto-Extension Letter of Credit” is defined in Section 2.5(b)(iii).
“Availability Period” means the period commencing on the Closing Date and ending on the
Maturity Date.
“Available Loan Amount” means, at any time, the lesser of (a) the Facility Amount at such
time; or (b) the Borrowing Base at such time.
“Bank Holding Company” means a “bank holding company” as defined in Section 2(a) of the Bank
Holding Company Act of 1956, as amended, or a non-bank subsidiary of such bank holding company.
“Bank of America” is defined in the preamble to this Credit Agreement.
“Base Rate” means, for any day for any Portion of Loans for any Lender Group, a fluctuating
rate per annum equal to the higher of: (a) the Federal Funds Rate for such day, plus the Applicable
Margin; and (b) the rate of interest in effect for such day as publicly announced from time to time
by Bank of America as its “prime rate”, plus the Applicable Margin. The “prime rate” is a rate set
by Bank of America based upon various factors including Bank of America’s costs and desired return,
general economic conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change in such rate
announced by Bank of America shall take effect at the opening of business on the day specified in
the public announcement of such change.
“Best‘s Rating” means a “Best‘s Rating” by A.M. Best Company.
“Borrower” is defined in the preamble to this Credit Agreement.
“Borrower and Managing Member Security Agreement” means that certain Security Agreement,
substantially in the form of Exhibit E, executed and delivered by Borrower and Managing Member in
favor of Administrative Agent for the benefit of Secured Parties.
“Borrower Guaranty” means an unconditional guaranty of payments in the form of Exhibit N
attached hereto, enforceable against Borrower for the payment of a Qualified Borrower’s debt or
obligation to Secured Parties; and “Borrower Guaranties” means such guaranties, collectively.
“Borrower Parties” means Borrower and each Qualified Borrower; and “Borrower Party” means any
of them.
“Borrowing” means a disbursement made by Lenders with respect to Loans hereunder (including
any reimbursement of the Letter of Credit Issuer following a draw on a Letter of Credit) and
“Borrowings” means the plural thereof.
“Borrowing Base” means the sum of (a) ninety percent (90%) of the Eligible Available
Contributions of the Included Investors at such time; and (b) sixty-five percent (65%) of the
Eligible Available Contributions of the Designated Investors at such time.
5
“Borrowing Base Certificate” means the certificate setting forth the calculation of the
Borrowing Base in the form of Exhibit H.
“Borrowing Base Deficit” means, on any date of determination, the amount (if any) by which:
(a) the Principal Obligation is in excess of (b) the Borrowing Base.
“Business Day” means any day of the year except a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the State of
New York or the city of Charlotte, North Carolina.
“Capital Call” means a call upon all or any of the Investors for payment of all or any portion
of their Unfunded Capital Commitments pursuant to and in accordance with the terms of the
Stockholders Agreement, the Partnership Agreement and/or the Operating Agreement, as applicable.
“Capital Call Notice” means any notice sent to an Investor for the purpose of making a Capital
Call.
“Capital Call Notice Date” is defined in Section 5.2(c) hereof.
“Capital Commitment” means the commitment of each Investor to fund Capital Contributions,
directly or indirectly, to a Credit Party in the amount set forth in, and pursuant to the terms of,
the Stockholders Agreement, the Partnership Agreement and/or the Operating Agreement, as
applicable.
“Capital Contribution” means for any Investor, any contribution of capital made to Borrower or
the Pledgor, as applicable, in response to a Capital Call Notice.
“Capital Contributions Pledge Agreement” means that certain Capital Contributions Pledge
Agreement, dated as of the date hereof executed and delivered by Pledgor in favor of Administrative
Agent on behalf of the Secured Parties, as the same may be amended, supplemented or otherwise
modified from time to time with the consent of Administrative Agent, the Letter of Credit Issuer,
and the Lenders to the extent expressly required hereby, which agreement shall be substantially in
the form of Exhibit L attached hereto.
“Capital Lease” means, as applied to any Person, any lease of any property (whether real,
personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be
accounted for as a capital lease on the balance sheet of that Person and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with GAAP.
“Cash Collateralize” is defined in Section 2.5(g)(ii) hereof.
“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System.
“Change in Law” means the occurrence, after the date of this Credit Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change
in any law, rule, regulation or treaty or in the administration, interpretation or application
6
thereof by any Governmental Authority; or (c) the making or issuance of any request, guideline or
directive (whether or not having the force of law) by any Governmental Authority.
“Closing Date” means the date on which all of the conditions precedent set forth in Section
8.1 hereof are satisfied or waived.
“Code” means the Uniform Commercial Code as adopted in the State of New York and any other
state, which governs creation or perfection (and the effect thereof) of security interests in any
collateral for the Obligations.
“Collateral” is defined in Section 5.1(a) hereof.
“Collateral Account” is defined in Section 5.2(a).
“Collateral Documents” means the security agreements, financing statements, assignments and
other documents and instruments from time to time executed and delivered pursuant to this Credit
Agreement and any documents or instruments amending or supplementing the same, including, without
limitation, the Borrower and Managing Member Security Agreement, the Capital Contributions Pledge
Agreement and the Account Assignment.
“Commercial Paper” means, with respect to a Conduit Lender, the promissory notes issued or to
be issued by such Conduit Lender (or its related commercial paper issuer if such Conduit Lender
does not itself issue commercial paper) in the commercial paper market.
“Commitment” means, with respect to each Alternate Lender, as the context requires, the
commitment of such Alternate Lender to make Loans (including Loans funding draws under Letters of
Credit) and to pay Assignment Amounts in accordance herewith in an amount not to exceed the amount
set forth opposite such Alternate Lender’s name on Schedule 1.1 hereof and the heading “Commitment”
(or, in the case of an Alternate Lender which becomes a party hereto pursuant to an Assignment and
Assumption Agreement entered into pursuant to the terms hereof, as set forth in such Assignment and
Assumption Agreement); minus the amount of any Commitment or portion thereof assigned by such
Alternate Lender pursuant to an Assignment and Assumption Agreement entered into pursuant to the
terms hereof; plus the amount of any increase to such Alternate Lender’s Commitment consented to by
such Alternate Lender prior to the time of determination; provided, however, that, to the extent
that the Facility Amount is reduced or otherwise declines, the aggregate of the Commitments of all
the Alternate Lenders shall decline by a like amount and the Commitment of each Alternate Lender
shall decline in proportion thereto.
“Compliance Certificate” is defined in Section 10.1(d).
“Concentration Limit” has the meaning provided in the definition of “Inclusion Percentage”.
“Conduit Assignee” means any special purpose entity that finances its activities directly or
indirectly through asset backed commercial paper and is administered by an Administrator or any of
its Affiliates and designated by such Administrator from time to time to accept an
7
assignment from
the applicable Conduit Lender of all or a portion of its Loans and other interests hereunder.
“Conduit Collateral Agent” means, with respect to any Conduit Lender, the “Collateral Agent”
(if any) with respect to such Conduit Lender’s commercial paper program.
“Conduit Investment Termination Date” means, with respect to any Conduit Lender, the date of
the delivery by such Conduit Lender to the Borrower of written notice that such Conduit Lender
elects, in its sole discretion, not to make any further Loans or participate in any further Letters
of Credit hereunder.
“Conduit Lender” means: (a) YC SUSI and any permitted Conduit Assignee thereof; and (b) any
other Person that shall become a party to this Credit Agreement as a “Conduit Lender” pursuant to
the terms hereof; and, subject to the terms and conditions of this Credit Agreement, their
respective successors and assigns (but not any Participant who is not otherwise a party to this
Credit Agreement).
“Conduit Lender Percentage” means, with respect to any Conduit Lender, at any time, 100%, less
the Alternate Lender Percentage of such Conduit Lender’s Lender Group at such time.
“Constituent Documents” means, for any entity, its constituent or organizational documents,
including: (a) in the case of a limited partnership, its certificate of registration as a limited
partnership and its limited partnership agreement; (b) in the case of a limited liability company,
its certificate of formation or organization and its operating agreement or limited liability
company agreement; (c) in the case of a corporation, its articles or certificate of incorporation
and its bylaws; and (d) in the case of a joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation and any agreement,
instrument, filing or notice with respect thereto filed in connection with its formation with the
secretary of state or other department in the state or jurisdiction of its formation, in each case
as amended from time to time.
“Controlled Group” means: (a) the controlled group of corporations as defined in Section 1563
of the Internal Revenue Code; or (b) the group of trades or businesses under common control as
defined in Section 414(c) of the Internal Revenue Code, in each case of which any Borrower Party is
a part or may become a part.
“CP Rate” means, for any Interest Period for any Portion of Loans funded by a Conduit Lender
(or its related commercial paper issuer if such Conduit Lender does not itself issue commercial
paper) of a Lender Group by issuing Commercial Paper, the per annum rate equivalent to the sum of
(a) the Used Fee, (b) the Dealer Fee, and (c) the weighted average cost (as determined by the
applicable Administrator and including incremental carrying costs incurred with respect to
Commercial Paper maturing on dates other than those on which corresponding funds are received by
such Conduit Lender, other borrowings by such Conduit Lender (other than under any Program Support
Agreement) and any other costs associated with the issuance of Commercial Paper) of or related to
the issuance of Commercial Paper that are allocated, in whole or in part, by such Conduit Lender or
the applicable Administrator to fund or maintain such
8
Portion of Loans (and which may be also
allocated in part to the funding of other assets of such Conduit Lender); provided, however, that
if any component of such rate is a discount rate, in calculating the “CP Rate” for such Portion of
Loans for such Interest Period, such Conduit Lender shall for such component use the rate resulting
from converting such discount rate to an interest bearing equivalent rate per annum.
“Credit Agreement” is defined in the preamble hereto.
“Credit Parties” means Borrower, each Qualified Borrower, Managing Member, Guarantor and
Pledgor; “Credit Party” means any one of them.
“Credit Party Claims” is defined in Section 5.4 hereof.
“Credit Provider” means a Person providing a guaranty, in form and substance reasonably
acceptable to Administrative Agent, of the obligations of an Included Investor to make Capital
Contributions to a Credit Party, or, under the applicable Investor Letter, to Administrative Agent
for the benefit of the Secured Parties.
“Current Party” is defined in Section 14.13.
“Dealer Fee” has the meaning provided in the Fee Letter.
“Debtor Relief Laws” means any applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, insolvency, fraudulent conveyance, reorganization, or similar laws
affecting the rights, remedies, or recourse of creditors generally, including without limitation
the United States Bankruptcy Code and all amendments thereto, as are in effect from time to time
during the term of the Loans.
“Default Rate” has the meaning provided in the Fee Letter.
“Defaulting Alternate Lender” means any Alternate Lender that: (a) has failed to make its Pro
Rata Share of any advance required to be made in respect of Loans or any disbursement by the Letter
of Credit Issuer in respect of Loans or Letters of Credit, respectively; (b) has otherwise failed
to pay over to the Administrative Agent or any other Lender any other amount required to be paid by
it hereunder within one (1) Business Day of the date when due, unless the subject of a good faith
dispute; or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.
“Defaulting Investor” is defined in Section 2.1(c) hereof.
“Designated Exclusion Event” means that, at any time, either: (a) five (5) Designated
Investors are Defaulting Investors, or (b) Designated Investors with an aggregate Unfunded Capital
Commitment greater than 10% of the total aggregate Unfunded Capital Commitment of all Investors are
Defaulting Investors, provided, that for purposes of determining a Designated Exclusion Event, any
(i) Designated Investor that becomes a Defaulting Investor but that is replaced by the Credit
Parties with a new Designated Investor, or (ii) whose obligations are transferred to any existing
Designated Investor or Included Investor in accordance with the terms
9
of this Credit Agreement and
the Operating Agreement or Stockholders Agreement, as applicable, shall not be counted.
“Designated Investor” means any Investor (other than an Included Investor): (a) that has been
so designated by 100% of the Lenders (in their sole discretion) as a Designated Investor, as
evidenced in writing executed by Administrative Agent; and (b) that has delivered to Administrative
Agent the information and documents required under Section 8.1(p); provided that, from and after
the occurrence of an Investor’s Effective Removal Date, the Investor shall no longer be a
Designated Investor until such time as all Exclusion Events affecting such Investor have been cured
and such Investor shall have been approved again as a Designated Investor in the sole and absolute
discretion of the Required Lenders. Designated Investors approved as such as of the Closing Date
are as set forth on Exhibit A.
“Dollars” and the sign “$” means lawful currency of the United States of America.
“Downgrade Collateral Account” is defined in Section 7.2(a) hereof.
“Downgrade Draw” is defined in Section 7.2(a) hereof.
“Effective Removal Date” means, with respect to any Investor, fifteen (15) Business Days
following the occurrence of an Exclusion Event with respect to such Investor.
“Eligible Assignee” means: (a) a Lender or Program Support Provider; (b) an Affiliate of a
Lender or an Approved Fund with respect to a Lender; and (c) any other Person approved by: (i)
Administrative Agent and, (ii) unless an Event of Default exists and is continuing at the time any
assignment is effected in accordance with Section 14.12(b) hereof, Borrower, each such approval not
to be unreasonably withheld or delayed by Borrower or Administrative Agent, as applicable, and such
approval to be deemed given by Borrower if no objection is received by the assigning Lender and
Administrative Agent from Borrower within five (5) Business Days after notice of such proposed
assignment has been provided by the assigning Lender to Borrower; provided, however, that no Credit
Party or Affiliate of any Credit Party shall qualify as an “Eligible Assignee.”
“Eligible Available Contributions of the Designated Investors” means, as of any date, an
amount equal to the sum of the products of (a) the Inclusion Percentage for each Designated
Investor multiplied by (b) the Unfunded Capital Commitment of such Designated Investor, provided,
that at any time a Designated Exclusion Event has occurred and is continuing, the Eligible
Available Contributions of all Designated Investors shall be zero.
“Eligible Available Contributions of the Included Investors” means, as of any date, an amount
equal to the sum of the products of (a) the Inclusion Percentage for each Included Investor
multiplied by (b) the Unfunded Capital Commitment of such Included Investor.
“Environmental Complaint” means any complaint, order, demand, citation or notice threatened or
issued in writing to any Credit Party by any Person with regard to air emissions, water discharges,
Releases, or disposal of any Hazardous Material, noise emissions or any other environmental, health
or safety matter affecting any Credit Party or any of their Properties.
10
“Environmental Laws” means: (a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and Re-authorization Act of 1986, 42
U.S.C. §9601 et seq.; (b) the Resource Conservation and Recovery Act of 1976, as amended by the
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §6901 et seq.; (c) the Clean Air Act, 42
U.S.C. §7401 et seq., as amended by the Clean Air Act Amendments of 1990; (d) the Clean Water Act
of 1977, 33 U.S.C. §1251 et seq.; (e) the Toxic Substances Control Act, 15 U.S.C.A. §2601 et seq.;
(f) all other federal, state and local laws, or ordinances, regulations or policies relating to
pollution or protection of human health or the environment including without limitation, air
pollution, water pollution, noise control, or the use, handling, discharge, disposal or Release or
recovery of on-site or off-site Hazardous Materials, as each of the foregoing may be amended from
time to time, applicable to any Credit Party, and (g) any and all regulations promulgated under or
pursuant to any of the foregoing statutes.
“Environmental Liability” means any written claim, demand, obligation, cause of action,
accusation or allegation, or any order, violation, damage (including, without limitation, to any
Person, property or natural resources), injury, judgment, penalty or fine, cost of enforcement,
cost of remedial action, cleanup, restoration or any other cost or expense whatsoever,
including Attorney Costs and disbursements resulting from the violation or alleged violation of any
Environmental Law or the imposition of any Environmental Lien or otherwise arising under any
Environmental Law or resulting from any common law cause of action asserted by any Person.
“Environmental Lien” means a Lien in favor of any Governmental Authority: (a) under any
Environmental Law; or (b) for any liability or damages arising from, or costs incurred by, any
Governmental Authority in response to the Release or threatened Release of any Hazardous Material.
“Environmental Requirement” means any Environmental Law, agreement, or restriction, as the
same now exists or may be changed, amended, or come into effect in the future, which pertains to
health, safety, or the environment, including, but not limited to ground, air, water, or noise
pollution, or underground or aboveground tanks.
“Equity Interest” means, (a) with respect to any member of Borrower, its Membership Interest,
and (b) with respect to any Stockholder, its Stockholder Interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder by any Governmental Authority, as from time to time in
effect.
“ERISA Investor” means an Investor that is (a) an “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) subject to Title I of ERISA, (b) any “plan” defined in Section
4975(e) of the Code other than a governmental plan, (c) a group trust, as described in Revenue
Ruling 81-100, or (d) a partnership or commingled account of a fund, or any other entity, whose
assets include or are deemed to include the assets of one or more such employee benefit plans
subject to Title I of ERISA, as determined under Section 2510.3-101 or Section 2550.401c-1 of the
regulations of the United States Department of Labor or under any other relevant legal authority.
11
“Event of Default” is defined in Section 12.1 hereof.
“Excluded Taxes” means, with respect to any Tax Indemnified Party or any other recipient of
any payment to be made by or on account of any obligation of any Credit Party hereunder: (a) taxes
imposed on or measured by its net income (however denominated), and franchise taxes imposed on it
(in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the
laws of which such Tax Indemnified Party or recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable Lending Office is located; (b)
any branch profits taxes imposed by the United States or any similar tax imposed by any other
jurisdiction in which such Credit Party is located; and (c) in the case of a Foreign Person (other
than an assignee pursuant to a request by the Borrower under Section 14.14), any withholding tax
that (i) is attributable to such Foreign Person’s failure or inability (other than as a result of a
Change in Law) to comply with Section 4.1(e), or (ii) is imposed on amounts payable to such Foreign
Person at the time such Foreign Person becomes a
party hereto (or designates a new Lending Office) except to the extent of the additional
amounts, if any, that such Foreign Person (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive from the Borrower with respect to
such withholding tax pursuant to Section 4.1(a).
“Exclusion Event” is defined in Section 2.1(c) hereof.
“Facility Amount” means an amount equal to $75,000,000 as it may be reduced by Borrower
pursuant to Section 3.6, or increased pursuant to Section 2.12 (not to exceed the Maximum
Commitment).
“Facility Increase Request” means the notice in the form of Exhibit G pursuant to which
Borrower requests an increase of the Commitments in accordance with Section 2.12.
“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate charged to the
Administrative Agent on such day on such transactions as determined by it.
“Fee Letter” shall mean, collectively, each separate letter agreement by and among Borrower
and each Managing Agent and/or Administrative Agent, together with all amendments and modifications
thereof.
“Foreign Person” means, with respect to any Credit Party, any Tax Indemnified Party that is a
resident of or organized under the laws of a jurisdiction other than that in which such Credit
Party is resident for tax purposes. For purposes of this definition, the United States, each State
thereof and the District of Columbian shall be deemed to constitute a single jurisdiction.
12
“Funding Ratio” means: (a) for a Governmental Plan Investor, the actuarial present value of
the assets of the plan over the actuarial present value of the plan’s total benefit liabilities, as
reported in such plan’s audited financial statements; and (b) for an ERISA Investor, the funded
current liability percentage reported on Schedule B to the most recent Form 5500 filed by such plan
with the United States Department of Labor.
“Generally Accepted Accounting Principles” or “GAAP” means those generally accepted accounting
principles and practices that are recognized as such by the American Institute of Certified Public
Accountants or by the Financial Accounting Standards Board or through other appropriate boards or
committees thereof, and that are consistently applied for all periods, after the date hereof, so as
to properly reflect the financial position of such Person,
except that any accounting principle or practice required to be changed by the Financial
Accounting Standards Board (or other appropriate board or committee of the said Board) in order to
continue as a generally accepted accounting principle or practice may be so changed.
“Governmental Authority” means any foreign governmental authority, the United States of
America, any State of the United States of America, and any subdivision of any of the foregoing,
and any agency, department, commission, board, authority or instrumentality, bureau or court having
jurisdiction over any Credit Party, any Agent, any Lender or the Letter of Credit Issuer, or any of
their respective businesses, operations, assets, or properties.
“Governmental Plan Investor” means an Investor that is a pension plan and that is a
governmental plan as defined in Section 3(32) of ERISA.
“Guaranteed Obligations” means those obligations guaranteed by the Guarantor pursuant to the
Guaranty of Capital.
“Guarantor” is defined in the preamble to this Credit Agreement.
“Guaranty” means the guaranty of the Guarantor made pursuant to the Guaranty of Capital.
“Guaranty Obligations” means, with respect to any Person, without duplication, any obligations
(other than endorsements in the ordinary course of business of negotiable instruments for deposit
or collection) guaranteeing any Indebtedness of any other Person in any manner, whether direct or
indirect, and including without limitation any obligation, whether or not contingent: (a) to
purchase any such Indebtedness or other obligation or any property constituting security therefor;
(b) to advance or provide funds or other support for the payment or purchase of such Indebtedness
or obligation or to maintain working capital, solvency or other balance sheet condition of such
other Person (including, without limitation, maintenance agreements, comfort letters, take or pay
arrangements, put agreements or similar agreements or arrangements) for the benefit of the holder
of Indebtedness of such other Person; (c) to lease or purchase property, securities or services
primarily for the purpose of assuring the owner of such Indebtedness; or (d) to otherwise assure or
hold harmless the owner of such Indebtedness or obligation against loss in respect thereof.
13
“Guaranty of Capital” means that certain Guaranty of Capital, substantially in the form of
Exhibit P, dated as of the date hereof, executed by Guarantor in favor of Administrative Agent on
behalf of the Secured Parties.
“Hazardous Material” means any substance, material, or waste which is or becomes regulated,
under any Environmental Law, as hazardous to public health or safety or to the environment,
including, but not limited to: (a) any substance or material designated as a “hazardous substance”
pursuant to Section 311 of the Clean Water Act, as amended, 33 U.S.C. §1251 et seq., or listed
pursuant to Section 307 of the Clean Water Act, as amended; (b) any substance or material defined
as “hazardous waste” pursuant to Section 1004 of the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. §6901 et seq.; (c) any substance or
material defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. §9601 et seq.; or (d)
petroleum, petroleum products and petroleum waste materials.
“Hedging Agreements” means, collectively, interest rate protection agreements, foreign
currency exchange agreements, commodity purchase or option agreements or other interest or exchange
rate or commodity price hedging agreements, in each case, entered into or purchased by Borrower.
“Honor Date” is defined in Section 2.5(c)(i) hereof.
“Implicit Borrowing Base Deficit” means, on any date of determination, the amount (if any) by
which: (a) the aggregate Principal Obligation is in excess of (b) the Borrowing Base (provided
that, for purposes of this definition, the Borrowing Base shall be calculated as if each Effective
Removal Date related to each Exclusion Event shall have occurred).
“Included Investor” means an Investor: (a) that has, or that has a Credit Provider that has,
met the Applicable Requirement for such Investor and that has been designated on the Closing Date
by Administrative Agent as an “Included Investor”; (b) that has delivered to Administrative Agent
the information and documents required under Section 8.1(p); and (c) for Investors being added to
the Borrowing Base as an “Included Investor” after the Closing Date, satisfaction of the
requirements in clauses (a) and (b) above and (i) in the case of a Rated Investor, with the consent
of the Administrative Agent, acting alone (which shall not be unreasonably withheld) as evidenced
in a writing executed by Administrative Agent, and (ii) in the cased of a Non-Rated Investor, with
the consent of 100% of the Lenders, as evidenced in a writing executed by Administrative Agent;
provided that a Defaulting Investor shall no longer be an Included Investor until such time as all
Exclusion Events affecting such Investor have been cured and such Investor shall have been approved
in writing as an Included Investor in the sole and absolute discretion of Administrative Agent, the
Letter of Credit Issuer, and all of the Lenders. Included Investors approved as such on the
Closing Date are as set forth on Exhibit A.
“Inclusion Percentage” means, (a) with respect to each Included Investor and each Designated
Investor, the highest percentage (up to 100%) which results in an aggregate amount of Unfunded
Capital Commitment of such Investor at such time not exceeding the applicable Concentration Limit
(as set forth below) for such Investor as a percentage of the total aggregate Unfunded Capital
Commitment of all Investors at such time:
14
| Concentration Limit (as a | ||||
| percentage of the total | ||||
| aggregate Unfunded Capital | ||||
| Rating (1) | Commitment of all Investors) | |||
AAA/Aaa |
15.0% | |||
AA-/Aa3 |
15.0% | |||
A-/A3 or higher |
10.0% | |||
BBB/Baa2 or higher |
5.0% | |||
Non-Rated Included Investors(2) |
15.0% | |||
Designated Investors(3) |
2.0% | |||
| (1) | Is the lower of the Rating of the Investor (or its Credit Provider, if applicable) as issued by either Standard & Poor’s or Moody’s. If any Investor has only one Rating from either Standard & Poor’s or Moody’s, then that Rating shall apply. For any Investor that is an unrated subsidiary of a parent with a Rating, a guaranty from the rated parent entity is required in order to apply the Concentration Limit applicable to the rated parent. | |
| (2) | In the aggregate may not exceed 50% of the total aggregate Unfunded Capital Commitment of all Investors at any time. | |
| (3) | In the aggregate may not exceed 45% of the total aggregate Unfunded Capital Commitment of all Investors at any time. |
(b) notwithstanding anything in clause (a) of this definition to the contrary, so long as Yale
University and/or any of its affiliates qualifies as an Included Investor and has a Rating of
AAA/Aaa, its Concentration Limit (collectively with any affiliates) will be 17%.
“Indebtedness” means, as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties and similar
instruments;
(c) all net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business);
(e) all indebtedness (excluding prepaid interest thereon) secured by a Lien on property
owned or being acquired by such Person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;
15
(f) all Capital Leases and Synthetic Lease Obligations; and
(g) all Guaranty Obligations of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture (other than a joint venture that is itself a corporation or limited
liability company) in which such Person is a general partner or a joint venturer, unless such
Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under
any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such
date. The amount of any Capital Lease or Synthetic Lease Obligation as of any date shall be deemed
to be the amount of Attributable Indebtedness in respect thereof as of such date.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Indemnitee” is defined in Section 14.6(b) hereof.
“Interest Component” means, with respect to a Conduit Lender, at any time of determination,
the aggregate for all Related Commercial Paper of such Conduit Lender at such time of: (a) with
respect to any Commercial Paper issued on an interest bearing basis, the interest payable on such
Commercial Paper at its maturity (including any dealer commissions); and (b) with respect to any
Commercial Paper issued on a discount basis, the portion of the face amount of such Commercial
Paper representing the discount incurred in respect thereof (including any dealer commissions).
“Interest Period” means, (a) with respect to any Portion of Loans funded by the issuance of
Commercial Paper, (i) initially the period commencing on (and including) the date of the initial
purchase or funding of such Portion of Loans and ending on (and including) the last day of the
current calendar month, and (ii) thereafter, each period commencing on (and including) the first
day after the last day of the immediately preceding Interest Period for such Portion of Loans and
ending on (and including) the last day of the current calendar month; and (b) with respect to any
Portion of Loans not funded by the issuance of Commercial Paper, (i) initially the period
commencing on (and including) the date of the initial purchase or funding of such Portion of Loans
and ending on (but excluding) the next following Settlement Date, and (ii) thereafter, each period
commencing on (and including) a Settlement Date and ending on (but excluding) the next following
Settlement Date; provided, that
(A) any Interest Period with respect to any Portion of Loans which would otherwise end
on a day which is not a Business Day shall be extended to the next succeeding Business Day;
provided, however, if Yield in respect of such Interest Period is computed by reference to
the LIBOR Rate, and such Interest Period would otherwise end on a day which is not a
Business Day, and there is no subsequent Business Day in the same calendar month as such
day, such Interest Period shall end on the next preceding Business Day;
(B) in the case of any Interest Period for any Portion of Loans which commences before
the Maturity Date and would otherwise end on a date occurring after the Maturity Date, such
Interest Period shall end on (but exclude) such Maturity Date and
16
the duration of each
Interest Period which commences on or after the Maturity Date shall be of such duration as
shall be selected by the applicable Managing Agent; and
(C) any Interest Period in respect of which Yield is computed by reference to the CP
Rate may be terminated at the election of applicable Managing Agent, in which case the
Portion of Loans allocated to such terminated Interest Period shall be allocated to a new
Interest Period commencing on (and including) the date of such termination and ending on
(but excluding) the next following Settlement Date, and shall accrue Yield at the Alternate
Rate.
“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended.
“Investment Period” has the meaning provided in the Operating Agreement.
“Investor” means each of Managing Member, Pledgor, any other member of Borrower or Stockholder
of Pledgor, as applicable.
“Investor Letter” is defined in Section 5.1(b) hereof.
“Investor Documents” means the Operating Agreement, the Stockholders Agreement, each Investor
Letter, and any amendments or supplements thereto or modifications thereof, executed or delivered
pursuant to the terms thereof and this Credit Agreement, and any additional documents delivered in
connection with any such amendment, supplement or modification.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998”
published by the Institute of International Banking Law & Practice (or such later version thereof
as may be in effect at the time of issuance).
“Issuer Documents” means with respect to any Letter of Credit, the Request for Letter of
Credit, the Application and Agreement for Letter of Credit, and any other document, agreement and
instrument entered into by the Letter of Credit Issuer and a Borrower Party or in favor of the
Letter of Credit Issuer and relating to any such Letter of Credit.
“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation
in any L/C Borrowing. All L/C Advances shall be denominated in Dollars.
“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of
Credit which has not been reimbursed on the date when made or refinanced as a Borrowing. All L/C
Borrowings shall be denominated in Dollars.
“Laws” means, collectively, all international, foreign, Federal, state and local statutes,
treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial
precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
17
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.
“Lender” means each Conduit Lender and each Alternate Lender, as the context may require, and
collectively, the “Lenders”.
“Lender Group” means each of: (a) the YC SUSI Lender Group; and (b) any other “Lender Group”
from time to time party hereto in accordance with the terms hereof as designated by the Managing
Agent of such group.
“Lender Group Percentage” means, for any Lender Group, the percentage equivalent (carried out
to five decimal places) of a fraction the numerator of which is the aggregate Commitments or
Principal Obligation, as applicable, of all Lenders in such Lender Group and the denominator of
which is the aggregate Commitments or Principal Obligation, as applicable, of all Lenders in all
Lender Groups.
“Lender Party” is defined in Section 13.1(a) hereof.
“Lending Office” means, as to any Lender, the office or offices of such Lender (or an
affiliate of such Lender) identified on Schedule 14.7, or such other office or offices as a Lender
may from time to time notify Borrower and Administrative Agent.
“Letter of Credit” means a standby letter of credit issued by the Letter of Credit Issuer
pursuant to Section 2.5 hereof in the form of Exhibit D-2 hereto (or such other form as approved by
the Letter of Credit Issuer) in Dollars either as originally issued or as the same may, from time
to time, be amended or otherwise modified or extended.
“Letter of Credit Expiration Date” means the day that is the earlier of: (a) fifteen (15) days
prior to the Stated Maturity Date then in effect (or, if such day is not a Business Day, the next
preceding Business Day); or (b) the date upon which Administrative Agent declares the Obligations
due and payable after the occurrence of an Event of Default.
“Letter of Credit Fees” is defined in Section 2.10 hereof.
“Letter of Credit Issuer” means Bank of America, or any Lender or Affiliate of such Lender so
designated, and which accepts such designation, by Administrative Agent and approved by Borrower.
“Letter of Credit Liability” means the aggregate amount of the undrawn face amount of all
outstanding Letters of Credit plus the amount drawn under Letters of Credit for which the Letter of
Credit Issuer and Lenders, or any one or more of them, have not yet received payment or
reimbursement (in the form of a conversion of such liability to Loans, or otherwise) as required
pursuant to Section 2.5. For all purposes of this Credit Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may still be drawn
thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be
deemed to be “outstanding” in the amount so remaining available to be drawn.
18
“Letter of Credit Sublimit” means, at any time, seventy-five percent (75%) of the Facility
Amount at such time.
“LIBOR Rate” means, for any Interest Period for any Portion of Loans for any Lender Group, a
rate per annum determined by Administrative Agent pursuant to the following formula:
LIBOR Rate =
|
London Interbank Offered Rate | |||
1.00 — Eurocurrency Reserve Percentage
|
||||
where,
“London Interbank Offered Rate” means, for such Interest Period:
(a) the rate per annum (carried out to the fifth decimal place) equal to the rate that
appears on the page of the Telerate Screen that displays an average British Bankers
Association Interest Settlement Rate (such page currently being page number 3750) for
deposits in Dollars (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period, or
(b) in the event that the rate referenced in the preceding subsection (a) does not appear on
such page or service or such page or service shall cease to be available, the rate per annum
(carried to the fifth decimal place) equal to the rate determined by Administrative Agent to
be the offered rate on such other page or other service that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period, or
(c) in the event the rates referenced in the preceding subsections (a) or (b) are not
available, the rate per annum determined by Administrative Agent as the rate of interest at
which deposits in Dollars (for delivery on the first day of such Interest Period) in same
day funds in the approximate amount of the applicable Portion of Loans to be funded by
reference to the LIBOR Rate and with a term equivalent to such Interest Period would be
offered by its London Branch to major banks in the offshore interbank market at their
request at approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period; and
“Eurocurrency Reserve Percentage” means, for any day during any Interest Period, the maximum
effective reserve percentage (expressed as a decimal, carried out to the fifth decimal
place) in effect on such date, whether or not applicable to any Lender, under regulations
issued from time to time by the Board of Governors of the Federal Reserve System (or any
successor), as such regulation may be amended from time to time or any successor regulation,
for determining the maximum reserve requirement (including any supplemental, emergency, or
marginal reserve requirement) with respect to eurocurrency funding (currently referred to as
“eurocurrency liabilities”). The LIBOR Rate shall be
19
adjusted automatically on and as of the effective date of any change in the Eurocurrency
Reserve Percentage.
“Lien” means any lien, mortgage, security interest, tax lien, pledge, encumbrance, or
conditional sale or title retention arrangement, or any other interest in property designed to
secure the repayment of indebtedness, whether arising by agreement or under any statute or law, or
otherwise.
“Liquidity Commitment” means an amount equal to 102% of the Facility Amount in effect from
time to time.
“Loan” means an extension of credit by a Lender to a Borrower Party pursuant to the terms and
conditions of this Credit Agreement, and “Loans” means the plural thereof. All Loans shall be
denominated in Dollars.
“Loan Amount” is defined in Section 2.3(g) hereof.
“Loan Date” is defined in Section 2.3(a) hereof.
“Loan Deficit” is defined in Section 2.3(h) hereof.
“Loan Documents” means this Credit Agreement, the Notes (including any renewals, extensions,
re-issuances and refundings thereof), each Application and Agreement for Letter of Credit, each of
the Collateral Documents, the Guaranty of Capital, each Assignment and Assumption Agreement and
such other agreements and documents, and any amendments or supplements thereto or modifications
thereof, executed or delivered pursuant to the terms of this Credit Agreement or any of the other
Loan Documents and any additional documents delivered in connection with any such amendment,
supplement or modification.
“Loan Notice” means any notice substantially in the form of Exhibit C, containing the
information specified therein, executed and delivered by a Borrower Party.
“Managing Agent” means, with respect to any Lender Group, the Person acting as Managing Agent
therefor and designated as such on the signature pages hereto or in the assignment pursuant to
which such Lender Group becomes a party hereto, and its successors and assigns.
“Managing Member” is defined in the preamble to this Credit Agreement.
“Margin Stock” shall have the meaning assigned to such term in Regulation U.
“Material Adverse Effect” means any circumstances or events which could reasonably be expected
to: (a) have any material adverse effect upon the validity, performance, or enforceability of any
of the Loan Documents executed by Borrower, any Qualified Borrower, Managing Member, Guarantor or
Pledgor; (b) materially impair the ability of Borrower, Managing Member, Guarantor or Pledgor, or
any one of them, to fulfill their respective
obligations under the Loan Documents; (c) cause an Event of Default; or (d) impair, impede, or
jeopardize, in any material respect, the obligation or the liability of Borrower, Managing
20
Member,
Guarantor or Pledgor to fulfill its obligations under the Operating Agreement, Stockholders
Agreement or Partnership Agreement, as applicable.
“Maturity Date” means the earliest of: (a) the Stated Maturity Date; (b) the date upon which
Administrative Agent declares the Obligations due and payable after the occurrence of an Event of
Default; (c) the date upon which Borrower terminates the Commitments pursuant to Section 3.6 hereof
or otherwise and (d) fifteen (15) Business Days prior to the end of the Investment Period.
“Maximum Commitment” means an amount equal to $300,000,000, as it may be reduced by Borrower
pursuant to Section 3.6.
“Maximum Rate” means, on any day, the highest rate of interest (if any) permitted by
applicable law on such day.
“Membership Interest” means, with respect to any member of Borrower, the equity interest of
such member in Borrower.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Non-Defaulting Alternate Lender” is defined in Section 2.3(h) hereof.
“Non-Extension Notice Date” is defined in Section 2.5(b)(iii) hereof.
“Non-Rated Investor” means an Investor that is not a Rated Investor.
“Non-Rated Included Investor” means an Included Investor that is not a Rated Investor.
“Notes” means the promissory notes provided for in Section 3.1 hereof, and all promissory
notes delivered in substitution or exchange therefor, as such notes may be amended, restated,
reissued, extended or modified, and the Qualified Borrower Notes; and “Note” means any one of the
Notes.
“Obligations” means all present and future Indebtedness, obligations, and liabilities of any
Credit Party to any of the Secured Parties, and all renewals and extensions thereof (including,
without limitation, Loans, Letters of Credit Liability, or both), or any part thereof, arising
pursuant to this Credit Agreement (including, without limitation, the indemnity provisions hereof)
or represented by the Notes and each Application and Agreement for Letter of Credit, and all
interest accruing thereon, and Attorney Costs incurred in the enforcement or collection thereof,
regardless of whether such indebtedness, obligations, and liabilities are direct, indirect, fixed,
contingent, joint, several, or joint and several; together with all indebtedness, obligations, and
liabilities of any Credit Party to any of the Secured Parties evidenced or arising pursuant to any
of the other Loan Documents, and all renewals and extensions thereof, or any part thereof.
“Operating Agreement” means that certain Operating Agreement of Borrower, by and among
Managing Member and Pledgor dated as of May 15, 2007, as supplemented by that certain pledge
agreement, dated as of May 15, 2007, from Pledgor to Borrower, as each may be
21
restated, modified,
amended or supplemented from time to time, with the consent of Administrative Agent, the Letter of
Credit Issuer, and the Lenders to the extent expressly required hereby.
“Operating Company” means an “operating company” within the meaning of 29 C.F.R.
§2510.3-101(c) of the regulations of the United States Department of Labor.
“Other Taxes” means all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made hereunder or under any
other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect
to, this Credit Agreement or any other Loan Document.
“Participant” is defined in Section 14.12(f).
“Partnership Agreement” means that certain Agreement of Limited Partnership of Guarantor,
dated as of May 13, 2003, as previously restated, modified, amended or supplemented from time to
time, with the consent of the Administrative Agent, the Letter of Credit Issuer and the Lenders to
the extent expressly required hereby.
“Pending Capital Call” means any Capital Call that has been made upon the Investors and that
has not yet been funded by the applicable Investor, but with respect to which such Investor is not
in default.
“Person” means an individual, sole proprietorship, joint venture, association, trust, estate,
business trust, corporation, limited liability company, nonprofit corporation, partnership,
sovereign government or agency, instrumentality, or political subdivision thereof, or any similar
entity or organization.
“Plan” means any plan, including single employer and multi-employer plans to which Section
4021(a) of ERISA applies, or any retirement medical plan, each as established or maintained for
employees of Borrower or any member of the Controlled Group to which Section 4021(a) of ERISA
applies.
“Plan Asset Regulations” means 29 C.F.R §2510.3-101, et seq.
“Plan Assets” means “plan assets” within the meaning of the Plan Asset Regulations.
“Pledgor” is defined in the first paragraph hereof.
“Portion of Loan” is defined in Section 2.4 hereof.
“Potential Default” means any condition, act, or event which, with the giving of notice or
lapse of time or both, would become an Event of Default.
“Principal Obligation” means the sum of: (a) the aggregate outstanding principal amount of the
Loans; plus (b) the Letter of Credit Liability.
22
“Pro Rata Share” means, with respect to each Lender, the percentage obtained from the
fraction: (a) (i) the numerator of which is the Commitment of such Lender; and (ii) the
denominator of which is the aggregate Commitments of all Lenders; or (b) in the event the
Commitments are zero (0): (i) the numerator of which is the Principal Obligation outstanding with
respect to such Lender; and (ii) the denominator of which is the total Principal Obligation
outstanding.
“Program Support Agreement” means and includes, with respect to any Conduit Lender, any
agreement entered into by any Program Support Provider providing for the issuance of one or more
letters of credit for the account of such Conduit Lender (or any related commercial paper issuer
that finances such Conduit Lender), the issuance of one or more surety bonds for which such Conduit
Lender (or such related issuer) is obligated to reimburse the applicable Program Support Provider
for any drawings thereunder, the sale by such Conduit Lender (or such related issuer) to any
Program Support Provider of its interests hereunder (or portions thereof or participations therein)
or the making of loans or other extensions of credit to such Conduit Lender (or such related
issuer) in connection with such Conduit Lender’s (or such related issuer’s) commercial paper
program, together with any letter of credit, surety bond or other instrument issued thereunder.
“Program Support Provider” means and includes, with respect to any Conduit Lender, any Person
now or hereafter extending credit or having a commitment to extend credit to or for the account of,
or to make purchases from, such Conduit Lender (or any related commercial paper issuer that
finances such Conduit Lender) or issuing a letter of credit, surety bond or other instrument to
support any obligations arising under or in connection with such Conduit Lender’s (or such related
issuer’s) commercial paper program.
“Prohibited Event” is defined in Section 4.7.
“Property” means any real property, improvements thereon and any leasehold or similar interest
in real property which is owned, directly or indirectly, by any Borrower Party, or secures any
investment of any Borrower Party.
“Qualified Borrower” means any entity, which entity may be organized in the United States or
outside of the United States, in which Borrower owns a direct or indirect ownership interest or
through which Borrower will acquire an investment, the indebtedness of which entity can be
guaranteed by Borrower pursuant to the terms of the Operating Agreement, and which entity has
executed a Qualified Borrower Note and in respect of which entity Borrower has executed a Borrower
Guaranty.
“Qualified Borrower Letter of Credit Note” means a letter of credit note executed and
delivered by a Qualified Borrower, in the form of Exhibit B-3 attached hereto, the payment of
which is guaranteed by Borrower pursuant to a Borrower Guaranty, as such note may be amended,
restated, reissued, extended or modified.
“Qualified Borrower Notes” means the Qualified Borrower Promissory Notes and the Qualified
Borrower Letter of Credit Notes, and “Qualified Borrower Note” means any one of them, as such note
may be amended, restated, reissued, extended or modified.
23
“Qualified Borrower Promissory Note” means a promissory note executed and delivered by a
Qualified Borrower, in the form of Exhibit B-2 attached hereto, the payment of which is guaranteed
by Borrower pursuant to a Borrower Guaranty.
“Rate Type” means the LIBOR Rate, the Base Rate or the CP Rate.
“Rated Investor” means any Investor that has a Rating (or that has a Credit Provider, Sponsor,
or Responsible Party that has a Rating).
“Rating” means, for any Person, its senior unsecured debt rating (or equivalent thereof, such
as, but not limited to, a corporate credit rating, issuer rating/insurance financial strength
rating (for an insurance company), general obligation rating (for a governmental entity), or
revenue bond rating (for an educational institution)) from either of S&P or Moody’s.
“Register” is defined in Section 14.12(e) hereof.
“Regulation T,” “Regulation U,” and “Regulation X” means Regulation T, U, or X, as the case
may be, of the Board of Governors of the Federal Reserve System, from time to time in effect, and
shall include any successor or other regulation relating to reserve requirements or margin
requirements, as the case may be, applicable to member banks of the Federal Reserve System.
“Related Commercial Paper” means, with respect to any Conduit Lender, at any time of
determination, Commercial Paper of such Conduit Lender (or its related commercial paper issuer) the
proceeds of which are then allocated by the Administrator of such Conduit Lender (or its related
commercial paper issuer) as the source of funding the acquisition or maintenance of its Principal
Obligation hereunder.
“Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching, or migration of Hazardous Materials into the environment, or into
or out of any Property, including the movement of any Hazardous Material through or in the air,
soil, surface water, groundwater, of any Property.
“Request for Letter of Credit” means a request for the issuance of a Letter of Credit
substantially in the form of Exhibit D-1 hereto.
“Required Lenders” means: (a) Alternate Lenders (other than Defaulting Alternate Lenders)
holding an aggregate of more than fifty (50%) of the aggregate Commitments of all Alternate Lenders
(other than Defaulting Alternate Lenders); or (b) at any time that the Available
Loan Amount is zero (0), Alternate Lenders (other than Defaulting Alternate Lenders) owed an
aggregate of more than fifty (50%) of the Principal Obligation outstanding and payable to all
Lenders (other than Defaulting Alternate Lenders) at such time (including, for purposes of such
calculation, each Alternate Lender’s Alternate Lender Pro Rata Share of that portion of the
Principal Obligations outstanding and payable to the Conduit Lender in its Lender Group).
“Responsible Officer” means: (a) in the case of a corporation, its president, senior vice
president, any vice president or treasurer, and, in any case where two Responsible Officers are
acting on behalf of such corporation, the second such Responsible Officer may be a secretary or
24
assistant secretary; (b) in the case of a limited partnership, the Responsible Officer of the
general partner, acting on behalf of such general partner in its capacity as general partner; and
(c) in the case of a limited liability company, the chief executive officer, president, general
counsel, chief financial officer, or senior vice president of the managing member, acting on behalf
of such managing member in its capacity as managing member.
“Responsible Party” means, for any Governmental Plan Investor: (a) if the state under which
the Governmental Plan Investor operates is obligated to fund the Governmental Plan Investor and is
liable to fund any shortfalls, the state; and (b) otherwise, the Governmental Plan Investor itself.
“S&P” means Standard & Poor’s Rating Services, a division of the McGraw & Hill Companies, Inc.
and any successor thereto.
“Secured Parties” means, collectively, the Lenders, Agents, Arranger, Letter of Credit Issuer,
Program Support Providers, Conduit Collateral Agents and Indemnitees, and “Secured Party” means any
of the foregoing.
“Settlement Date” means the 12th day of each month (or, if such day is not a
Business Day, on the next succeeding Business Day); provided that after the Maturity Date, any
Business Day selected from time to time by Administrative Agent shall be a Settlement Date.
“Solvent” means, with respect to any Person as of a particular date, that on such date: (a)
such Person is able to pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business; (b) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay
as such debts and liabilities mature in their ordinary course; (c) such Person is not engaged in a
business or a transaction, and is not about to engage in a business or a transaction, for which
such Person’s assets would constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which such Person is engaged or is to engage; (d) the
fair value of the assets of such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person; and (e) the present fair saleable value
of the assets of such Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured.
“Sponsor” of an ERISA Investor means a sponsor as that term is understood under ERISA,
specifically, the entity that established the plan and is responsible for the maintenance of the
plan and, in the case of a plan that has a sponsor and participating employers, the entity that has
the ability to amend or terminate the plan.
“Stockholder” means a holder of shares of the equity interests of Pledgor.
“Stockholders Agreement” means the Stockholders Agreement of Pledgor, dated as of May 15,
2007, as the same may be amended, restated, supplemented or otherwise modified from time to time
with the consent of Administrative Agent, the Letter of Credit Issuer, and the Lenders to the
extent expressly required hereby.
25
“Stockholders Interest” means, with respect to any Stockholder, its equity interest in
Pledgor.
“Stated Maturity Date” means October 10, 2011.
“Subsequent Investor” is defined in Section 11.5(c) hereof.
“Swap Contract” means: (a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options, forward commodity
contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or
options or forward bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or any other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement; and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or governed by, any
form of master agreement published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master agreement, including any
such obligations or liabilities under any such master agreement.
“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking
into account the effect of any legally enforceable netting agreement relating to such Swap
Contracts: (a) for any date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination value(s); and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Contracts (which may include a
Lender or any Affiliate of a Lender).
“Synthetic Lease Obligation” means the monetary obligation of a Person under: (a) a so-called
synthetic, off-balance sheet or tax retention lease; or (b) an agreement for the use or
possession of property creating obligations that do not appear on the balance sheet of such
Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the
indebtedness of such Person (without regard to accounting treatment).
“Tax Indemnified Parties” means, collectively, the Letter of Credit Issuer, the Lenders,
Agents, the Program Support Providers and Conduit Collateral Agents, and “Tax Indemnified Party”
means any of the foregoing.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.
“UCC” is defined in Section 8.1.
26
“Unfunded Capital Commitment” means, with respect to any Investor at any time: (a) such
Investor’s Capital Commitment at such time, excluding (1) any Capital Commitment subject to a
Pending Capital Call and (2) returns of Capital Contributions, unless a confirmation certificate in
form and substance satisfactory to the Administrative Agent has been received by the Administrative
Agent from a Credit Party, reporting the returned Capital Contributions and providing the amounts
of the remaining unfunded Capital Commitments of the Investors; minus (b) such Investor’s aggregate
Capital Contributions made prior to such time.
“Unreimbursed Amount” is defined in Section 2.5(c)(i) hereof.
“Used Fee” has the meaning provided in the Fee Letter.
“YC SUSI” means YC SUSI Trust, a Delaware Statutory Trust.
“YC SUSI Alternate Lenders” means the Alternate Lenders in the YC SUSI Lender Group, as set
forth on the signature pages hereto or the applicable Assignment and Assumption Agreement.
“YC SUSI Lender Group” means YC SUSI, any permitted Conduit Assignee thereof, the YC SUSI
Alternate Lenders from time to time party hereto and Bank of America, as Managing Agent.
“Yield” means, the sum of:
(a) for any Portion of Loans for any Lender Group during any Interest Period to the
extent a Conduit Lender funds such Portion of Loans through the issuance of Commercial Paper
(directly or indirectly through a related commercial paper issuer);
CPR x L x
|
D | |||
| 360 |
(b) for any Portion of Loans funded by the Alternate Lenders and for any Portion of
Loans for any Lender Group to the extent the related Conduit Lender does not fund such
Portion of Loans through the issuance of Commercial Paper (directly or indirectly through a
related commercial paper issuer);
AR/BR x L x
|
D | |||
| 360 |
where:
AR/BR = the Alternate Rate or Base Rate, as applicable, for such Portion of
Loans for such Interest Period;
CPR = the CP Rate for such Portion of Loans for such Interest Period (as
determined by each applicable Administrator on or prior to the fifth
Business Day of the calendar month next following such Interest Period);
27
D = the actual number of days during such Interest Period, and
L = the amount of such Portion of Loans during such Interest Period;
provided that no provision of this Credit Agreement shall require the payment or permit the
collection of Yield in excess of the Maximum Rate; and provided, further, that at all times during
the existence of an Event of Default or after the Maturity Date, Yield for all Portions of Loans
shall accrue at the Default Rate. Without limiting the obligation of any Borrower Party to pay
interest pursuant to Section 3.3, Yield shall include interest pursuant to Section 3.3 on the
Principal Obligation and all other Obligations not paid or deposited when due under this Credit
Agreement or under the Notes.
1.2. Other Definitional Provisions.
(a) All terms defined in this Credit Agreement shall have the above-defined meanings
when used in the Notes or any other Loan Documents or any certificate, report or other
document made or delivered pursuant to this Credit Agreement, unless otherwise defined in
such other document.
(b) Defined terms used in the singular shall import the plural and vice versa.
(c) The words “hereof,” “herein,” “hereunder,” and similar terms when used in this
Credit Agreement shall refer to this Credit Agreement as a whole and not to any particular
provisions of this Credit Agreement.
(d) The term “including” is by way of example and not limitation. The term “documents”
includes any and all instruments, documents, agreements, certificates, notices, reports,
financial statements and other writings, however evidenced, whether in physical or
electronic form.
(e) In the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including;” the words “to” and “until” each mean “to
but excluding;” and the word “through” means “to and including.”
(f) Section headings herein and in the other Loan Documents are included for
convenience of reference only and shall not affect the interpretation of this Credit
Agreement or any other Loan Document.
(g) Unless otherwise specified in the Loan Documents, time references are to time in
New York, New York.
1.3. Letter of Credit Amounts. Unless otherwise specified, all references herein to the
amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such
Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit
or the documents issued in connection therewith, but only to the extent such maximum face amount is
in effect at such time.
28
2. LOANS AND LETTERS OF CREDIT
2.1. The Commitment.
(a) Committed Amount. Subject to the terms and conditions herein set forth, including
Sections 8.1, 8.2 (if applicable) and 8.3, Lenders having Commitments agree severally,
during the Availability Period: (i) to extend to Borrower or any Qualified Borrower a
revolving line of credit; and (ii) to participate in Letters of Credit issued by the Letter
of Credit Issuer for the account of Borrower or any Qualified Borrower.
(b) Limitation on Borrowings. Notwithstanding anything to the contrary herein
contained, Lenders shall not be required to advance any Borrowing or cause the issuance of
any Letter of Credit hereunder if:
(i) after giving effect to such Borrowing or issuance of such Letter of Credit:
(A) the Principal Obligation would exceed the Available Loan Amount; (B) the Letter
of Credit Liability would exceed the Letter of Credit Sublimit; or (C) any Implicit
Borrowing Base Deficit would exist; or
(ii) an Event of Default or a Potential Default exists.
(c) Exclusion Events. If any of the following events (each, an “Exclusion Event”)
shall occur with respect to any Designated Investor or any Included Investor or, if
applicable, the Sponsor, Responsible Party, or Credit Provider of such Investor (such
Investor hereinafter referred to as a “Defaulting Investor”):
(i) it shall: (A) apply for or consent to the appointment of a receiver,
trustee, custodian, intervenor, or liquidator of itself or of all or a substantial
part of its assets; (B) file a voluntary petition as debtor in bankruptcy or admit
in writing that it is unable to pay its debts as they become due; (C) make a general
assignment for the benefit of creditors; (D) file a petition or answer seeking
reorganization or an arrangement with creditors or take advantage of any Debtor
Relief Laws; (E) file an answer admitting the material allegations of, or consent
to, or default in answering, a petition filed against it in any bankruptcy,
reorganization, or insolvency proceeding; or (F) take any personal, partnership,
limited liability company, corporate or trust action, as applicable, for the purpose
of effecting any of the foregoing;
(ii) an order, order for relief, judgment, or decree shall be entered by any
court of competent jurisdiction or other competent authority approving a petition
seeking such Person’s reorganization or appointing a receiver, custodian, trustee,
intervenor, or liquidator of such Person or of all or substantially all of its
assets, and such order, judgment, or decree shall continue unstayed and in effect
for a period of sixty (60) days;
(iii) any final judgment(s) for the payment of money which in the aggregate
exceed fifteen percent (15%) of its net worth shall be rendered against such Person,
and such judgment or judgments shall not be satisfied or discharged
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at least ten (10) days prior to the date on which any of its assets could be
lawfully sold to satisfy such judgment;
(iv) such Investor shall repudiate, challenge, or declare unenforceable its
obligation to make contributions to the capital of the applicable Credit Party
pursuant to its Capital Commitment or a Call Notice; shall otherwise disaffirm any
material provision of the Operating Agreement, the Stockholders Agreement or the
Partnership Agreement, as applicable; or shall otherwise disaffirm any material
provision of its Investor Letter; or a court of competent jurisdiction finds such
Capital Commitment or the obligations under its Investor Letter unenforceable;
(v) such Investor shall fail to make a contribution to the capital of the
applicable Credit Party when required pursuant to a Call Notice, subject to any
applicable notice or cure periods, or shall otherwise be in material default under
the Operating Agreement, the Stockholders Agreement, its Investor Letter or any Loan
Document, following any applicable notice requirements or cure periods;
(vi) any representation or warranty made under its Investor Letter or any Loan
Documents executed by such Person shall prove to be untrue or inaccurate in any
material respect, as of the date on which such representation or warranty is made,
and such Person shall fail to cure the adverse effect of the failure of such
representation or warranty within thirty (30) days after written notice thereof is
delivered by Administrative Agent to Borrower and to such Person;
(vii) such Investor shall transfer its Equity Interest in Borrower or Pledgor,
as applicable, in violation of this Credit Agreement;
(viii) default shall occur in the performance by it of any of the covenants or
agreements contained in its Investor Letter, the Operating Agreement, the
Stockholders Agreement or the Partnership Agreement (except, in each case, as
otherwise specifically addressed in this Section 2.1(c), in which case no grace
period beyond any provided for herein shall apply) and such default shall continue
uncured to the satisfaction of Administrative Agent for a period of thirty (30) days
after written notice thereof has been given by Administrative Agent to Borrower and
to such Investor;
(ix) in the case of each Included Investor that is a Rated Investor, it shall
fail to maintain the Applicable Requirement for such Investor required in the
definition of Applicable Requirement in Section 1 hereof;
(x) in the case of any Non-Rated Included Investor, such Investor shall fail to
maintain a net worth (determined in accordance with Generally Accepted Accounting
Principles), measured at the end of each fiscal year of such Person, of at least
seventy-five percent (75%) of the initial net worth of such Investor, Sponsor,
Responsible Party, or Credit Provider measured at the end of the fiscal
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year preceding the designation of such Investor as an Included Investor
hereunder; or
(xi) in the case of each Designated Investor and Non-Rated Included Investor,
following the occurrence of an event which materially adversely affects the ability
of such Investor to fulfill its obligations under the Operating Agreement or the
Stockholders Agreement, as applicable, and the Required Lenders elect to declare the
occurrence of an Exclusion Event with respect to such Investor,
then as of the Effective Removal Date for such Exclusion Event, such Investor shall no longer be a
Designated Investor or an Included Investor, as applicable, and Administrative Agent and the
Borrower Parties shall treat such Defaulting Investor’s Capital Commitment and Unfunded Capital
Commitment as zero (0) for purposes of: (A) calculating the aggregate Unfunded Capital Commitment
of the Designated Investors or Included Investors, as applicable, with respect to this Credit
Agreement; (B) calculating the Available Loan Amount and Borrowing Base; and (C) calculating
whether a mandatory prepayment is required to be made by Borrower pursuant to Section 2.1(d).
(d) Mandatory Prepayment.
(i) Excess Loans Outstanding. If, on any day, the Principal Obligation exceeds
the Available Loan Amount or if an Implicit Borrowing Base Deficit exists
(including, without limitation, as a result of an Exclusion Event), then the Credit
Parties shall pay on demand such excess or amount of Implicit Borrowing Base
Deficit, as applicable, to Administrative Agent, for the benefit of Lenders, in
immediately available funds (except to the extent any such excess is otherwise
addressed by Section 2.1(d)(ii): (A) promptly on demand (but in no event later than
one (1) Business Day), to the extent such funds are available in the Collateral
Account or another account maintained by Borrower; and (B) within fifteen (15)
Business Days of demand to the extent that it is necessary for a Credit Party to
issue Call Notices to fund such required payment (and the Credit Parties shall issue
such Call Notices during such time, and shall pay such excess or amount of Implicit
Borrowing Base Deficit, as applicable, immediately after the Capital Contributions
relating to such Call Notice are received); provided that the amount of such excess
shall be paid to Administrative Agent concurrently with the creation of such excess
or deficit if it results from any willful act of any Credit Party. The Credit
Parties hereby agree that Administrative Agent may withdraw from the Collateral
Account any Capital Contributions deposited therein in respect of such Call Notices
until the payment obligations required by this Section 2.1(d)(i) have been satisfied
in full.
(ii) Excess Letters of Credit Outstanding. If any excess or amount of Implicit
Borrowing Base Deficit, as applicable, calculated pursuant to Section 2.1(d)(i) is
attributable to undrawn Letters of Credit, the Credit Parties shall Cash
Collateralize the Letter of Credit Liability in the amount of such excess or
Implicit Borrowing Base Deficit, as applicable, when required pursuant to the
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terms of Section 2.1(d)(i), as security for such portion of the Obligations.
Unless otherwise required by law, upon: (i) a change in circumstances such that the
Principal Obligation no longer exceeds the Available Loan Amount; or (ii) the full
and final payment of the Obligations, Administrative Agent shall return to the
Credit Parties (or the applicable Qualified Borrower) any amounts remaining in said
cash collateral account.
(e) Loans in Dollars. Each Loan made pursuant to this Credit Agreement shall be both
funded and payable in Dollars.
2.2. Revolving Credit Commitment. Subject to the terms and conditions herein set forth, each
Alternate Lender severally agrees, on any Business Day during the Availability Period, to make
Loans to Borrower or any Qualified Borrower at any time and from time to time in an aggregate
principal amount up to such Lender’s Commitment at any such time; provided, however, that, after
making such Loans: (a) such Lender’s Pro Rata Share of the Principal Obligation would not exceed
such Lender’s Commitment as of such date; and (b) the Principal Obligation of such Lender’s Lender
Group would not exceed the aggregate Commitment of the Alternate Lenders in such Lender Group.
Subject to the foregoing limitation, the conditions set forth in Section 8 and the other terms and
conditions hereof, Borrower or any Qualified Borrower may borrow, repay without penalty or premium,
and re-borrow hereunder, during the Availability Period. Each Borrowing pursuant to this Section
2.2 shall be funded ratably by each Lender Group in accordance with its Lender Group Percentage.
No Lender shall be obligated to fund any Loan if the interest rate applicable thereto under Section
2.11 hereof would exceed the Maximum Rate in effect with respect to such Loan.
2.3. Borrowing Procedures.
(a) Loan Notice. The applicable Borrower Party may request a Loan hereunder by
delivering to Administrative Agent, by electronic mail, facsimile or by telephone notice
followed by the written confirmation via electronic mail or other evidence of writing, a
Loan Notice, appropriately completed and signed by a Responsible Officer of such Borrower
Party (and each Loan Notice submitted by a Qualified Borrower must be countersigned by a
Responsible Officer of Borrower), no later than 11:00 a.m. at least two (2) Business Days
prior to the proposed date of any Loan (including the initial Loan). Each such Loan Notice
shall specify: (i) the desired amount of such Loan, which shall be (a) at least $500,000 at
all times when there is only one Alternate Lender party hereto, and (b) at least $1,000,000
at all times when there are two or more Alternate Lenders party hereto; (ii) the desired
date of such Loan (the “Loan Date”), which shall be a Business Day; and (iii) such other
information as is required by the form of such Loan Notice. Each Loan Notice submitted by
such Borrower Party shall be deemed to constitute a representation and warranty by the
applicable Borrower Party that: (i) the representations and warranties set forth in Section
9 hereof are true and correct in all material respects on and as of the date of such Loan
Notice, with the same force and effect as if made on and as of such date (except to the
extent of changes in facts or circumstances that have been disclosed to the Administrative
Agent and do not constitute an Event of Default or a Potential Default under this Credit
Agreement or any other Loan Document); (ii) no Event of Default or, to its knowledge,
Potential Default
32
exists and is continuing at such date; (iii) the conditions specified in Sections 8.1,
8.2 (if applicable) and 8.3, have been or will be satisfied as of the Loan Date; and (iv)
after giving effect to such Borrowing, the Principal Obligation will not exceed the
Available Loan Amount as of such date. No Loan Notice shall be valid hereunder for any
purpose unless it shall have been accompanied or preceded by the information and other
documents required to be delivered in accordance with this Section 2.3. All Loans hereunder
shall be made by each Lender Group on a pro rata basis based on the Lender Group Percentage
of each Lender Group.
(b) Further Information. Each Loan Notice shall be accompanied or preceded by: (A) a
Borrowing Base Certificate dated the date of such Loan Notice; and (B) such documents as are
required to satisfy any applicable conditions precedent as provided in Section 8.2.
(c) Notification of Conduit Lender. Administrative Agent will promptly notify each
Managing Agent of Administrative Agent’s receipt of any Loan Notice, and each Managing Agent
will promptly notify each of the Lenders in its Lender Group. If the Loan Notice is
received prior to the Conduit Investment Termination Date for a Conduit Lender, such Conduit
Lender (or its Administrator on its behalf) shall instruct Administrative Agent to accept or
reject such Loan Notice by notice given to Administrative Agent and the applicable Borrower
Party by telephone or facsimile by no later than the close of its business on the later of
the Business Day of its receipt of any such Loan Notice or the Business Day prior to the
applicable Loan Date.
(d) Loan Notice Irrevocable. Each Loan Notice shall be irrevocable and binding on such
Borrower and any applicable Qualified Borrower, and Borrower (and, if applicable, the
Qualified Borrower) shall indemnify Lenders against any cost, loss, or expense incurred by
Lenders, or any of them, as a result of any failure to fulfill, on or before the date
specified in the Loan Notice, the conditions to such Borrowing set forth herein, including,
without limitation, any cost, loss, or expense incurred by reason of the liquidation or
redeployment of the deposits or other funds acquired by Lenders, or any of them, to fund the
Borrowing to be made by Lenders as a part of such Borrowing when such Borrowing, as a result
of such failure, is not made on such date (including, in the case of a Conduit Lender,
pursuant to a Program Support Agreement), except with respect to a Borrowing for a Loan at
the Base Rate, as to which Borrower shall not be required to indemnify Lenders against such
costs, losses or expenses incurred by Lenders as a result of such liquidation or
redeployment of funds. A certificate of Administrative Agent setting forth the amount of
any such cost, loss or expense, and the basis for the determination thereof and the
calculation thereof, shall be delivered to Borrower and the applicable Qualified Borrower
and shall, in the absence of a manifest error, be conclusive and binding
(e) Alternate Lender’s Commitment. At no time will any Conduit Lender have any
obligation to fund a Loan or participate in any Letter of Credit. At all times on and after
the Conduit Investment Termination Date for a Conduit Lender or if a Conduit Lender has
failed for whatever reason to fund its portion of a Borrowing in full, all Loans and
participations in Letters of Credit shall be made by the Alternate Lenders of the
33
related Lender Group. At any time when a Conduit Lender has rejected a request for
Loan (it being understood that if a Conduit Lender does not fund any Loan in relation to
which all of the conditions precedent set forth in Section 8.2 (if applicable) and Section
8.3 have been satisfied on the date set forth in the applicable Loan Notice, such Conduit
Lender shall be deemed to have rejected the request for Loan), the related Managing Agent
shall so notify the related Alternate Lenders and such Alternate Lenders shall make such
Loan, on a pro rata basis, in accordance with their respective Alternate Lender Pro Rata
Shares. Notwithstanding anything contained in this Section 2.3(e) or elsewhere in this
Credit Agreement to the contrary, no Alternate Lender shall be obligated to provide
Administrative Agent or any Borrower Party with funds in connection with a Loan in an amount
that would result in the sum of the portion of the Loans then funded by it plus such
Alternate Lender’s Alternate Lender Pro Rata Share of the applicable Lender Group Percentage
of the Letter of Credit Liability exceeding its Commitment then in effect (minus the
unrecovered principal amount of such Alternate Lender’s investments in the Principal
Obligation pursuant to the Program Support Agreement to which it is a party). The
obligation of each Alternate Lender to remit its Alternate Lender Pro Rata Share of any such
Loan requested of its Lender Group shall be several from that of each other Alternate
Lender, and the failure of any Alternate Lender to so make such amount available to
Administrative Agent shall not relieve any other Alternate Lender of its obligation
hereunder.
(f) Payment of Loan. On any Loan Date, each Conduit Lender or each Alternate Lender, as
the case may be, shall remit its share of the aggregate amount of such Loan to
Administrative Agent, by wire transfer of immediately available funds to Administrative
Agent for the account of the appropriate Borrower Party no later than 12:00 noon.
Administrative Agent shall in turn forward the same in immediately available funds to the
appropriate Borrower Party’s account at Administrative Agent specified in the Loan Notice,
or, if requested by the applicable Borrower Party in the Loan Notice, wire transfer such
funds as requested.
(g) Managing Agents May Advance Funds. Unless a Managing Agent shall have received
notice from any Lender in its Lender Group that such Person will not make its share of any
Loan available on the applicable Loan Date therefor (for purposes of this paragraph only,
the “Loan Amount”), such Managing Agent may (but shall have no obligation to) make any such
Lender’s share of any such Loan available to the applicable Borrower Party in anticipation
of the receipt by such Managing Agent of such Loan Amount from the applicable Lender. To
the extent any such Lender fails to remit such Loan Amount to such Managing Agent after any
such advance by such Managing Agent on such Loan Date, such Lender shall be required to pay
such Loan Amount for its own account, together with interest thereon at a per annum rate
equal to the Federal Funds Rate to such Managing Agent upon its demand therefor. If such
Lender does not pay such Loan Amount together with such interest, such Managing Agent will
promptly notify the Borrower, and Borrower shall immediately pay such Loan Amount to
Administrative Agent (for distribution to the applicable Managing Agent), together with
interest thereon from the applicable Loan Date through the date such Loan Amount is repaid
to Administrative Agent promptly on demand, to the extent such funds are available in the
Collateral Account; and otherwise, to the extent that it is necessary for
34
Borrower to issue Call Notices to fund such required payment, within fifteen (15)
Business Days after Administrative Agent’s demand (but, in any event, the Credit Parties
shall issue such Call Notices and shall make such payment promptly after the related Capital
Contributions are received); or (ii) from any Qualified Borrower (as applicable), promptly
on demand; in each case, together with interest at a rate per annum equal to the rate
applicable to the requested Borrowing for the period commencing on the borrowing date and
ending on (but excluding) the date Administrative Agent recovers the amount from Borrower.
Until such amount shall be repaid, such amount shall be deemed to be a Loan funded by the
applicable Managing Agent and such Managing Agent shall be deemed to be the owner of such
Loan. Upon the payment of such amount to Administrative Agent by such Lender, such payment
shall constitute such Person’s payment of its share of the applicable Loan.
(h) Defaulting Alternate Lender. If, by 2:00 p.m. on any Loan Date or Assignment Date,
as applicable, whether or not any Managing Agent has advanced the amount of the applicable
Loan or paid the applicable Assignment Amount, one or more Alternate Lenders in a Lender
Group (each, a “Defaulting Alternate Lender”, and each Alternate Lender other than any
Defaulting Alternate Lender being referred to as a “Non-Defaulting Alternate Lender”) fails
to make its share of any Loan available to Administrative Agent pursuant to Section 2.3(f)
or any Assignment Amount payable by it pursuant to Section 7.1 (the aggregate amount not so
made available to Administrative Agent being herein called in either case the “Loan
Deficit”), then such Alternate Lender’s Managing Agent shall, by no later than 2:30 p.m. on
the applicable Loan Date or the applicable Assignment Date, as the case may be, instruct
each Non-Defaulting Alternate Lender in such Lender Group to pay, by no later than 3:00 p.m.
on such date, in immediately available funds, to the account designated by Administrative
Agent, an amount equal to the lesser of: (i) such Non-Defaulting Alternate Lender’s
proportionate share (based upon the relative Commitments of the Non-Defaulting Alternate
Lenders) of the Loan Deficit with respect to such Lender Group; and (ii) its unused
Commitment. A Defaulting Alternate Lender shall forthwith, upon demand, pay to its related
Managing Agent for the ratable benefit of the Non-Defaulting Alternate Lenders all amounts
paid by each Non-Defaulting Alternate Lender on behalf of such Defaulting Alternate Lender,
together with interest thereon, for each day from the date a payment was made by a
Non-Defaulting Alternate Lender until the date such Non Defaulting Alternate Lender has been
paid such amounts in full, at a rate per annum equal to the Default Rate. In addition, if,
after giving effect to the provisions of the immediately preceding sentence, any Loan
Deficit with respect to any Assignment Amount continues to exist, each such Defaulting
Alternate Lender shall pay interest to the related Managing Agent, for the account of the
related Conduit Lender, on such Defaulting Alternate Lender’s portion of such remaining Loan
Deficit, at a rate per annum, equal to the Default Rate, for each day from the applicable
Assignment Date until the date such Defaulting Alternate Lender shall pay its portion of
such remaining Loan Deficit in full to such Conduit Lender.
(i) Intent to Fund. Subject to Section 2.4, each Conduit Lender confirms with Borrower
that it intends to fund all Loans hereunder through the issuance of its Commercial Paper to
the extent reasonably available prior to the occurrence of an Event of Default or Potential
Default.
35
2.4. Determination of Yield and Interest Periods. For purposes of determining the Interest
Period applicable to each Loan and of calculating Yield with respect thereto, each applicable
Managing Agent shall allocate the Loans of the Lenders in its Lender Group to tranches (each a
“Portion of Loan”). Any Portion of Loan funded by a Conduit Lender may from time to time be funded
through the issuance of Commercial Paper or pursuant to a Program Support Agreement, in the sole
discretion of such Conduit Lender. Any Portion of Loan funded by the Alternate Lenders or the
applicable Program Support Providers shall accrue Yield at the Alternate Rate or Base Rate, as
selected by the Borrower. Any Portion of Loan funded by the Conduit Lenders through the issuance
of Commercial Paper shall accrue Yield at the applicable CP Rate. At any time, each Portion of
Loan shall have only one Interest Period and one Rate Type. The aggregate Portions of Loans of
each Lender Group at all times shall be equal to the Loans of such Lender Group, and at any time
when the Loans are not divided into two or more portions, the term “Portion of Loans” shall mean
100% of the Loans of such Lender Group.
2.5. Letters of Credit.
(a) Letter of Credit Commitment.
(i) Subject to the terms and conditions hereof, on any Business Day during the
Availability Period: (A) the Letter of Credit Issuer agrees, in reliance upon the
agreements of the Lenders set forth in this Section 2.5: (1) from time to time on
any Business Day during the period from the Closing Date until the Letter of Credit
Expiration Date, to issue Letters of Credit denominated in Dollars for the account
of a Borrower Party, in aggregate face amounts that shall be not less than $500,000
(provided, however, three (3) Letters of Credit for amounts less than $500,000 may
be issued each calendar year), as a Borrower Party may request, and to amend or
extend Letters of Credit previously issued by it; and (2) to honor drawings under
the Letters of Credit; and (B) the Alternate Lenders severally agree to participate
in Letters of Credit issued for the account of a Borrower Party and any drawings
thereunder; provided that after giving effect to an issuance of a Letter of Credit;
(1) the Principal Obligation will not exceed the Available Loan Amount on such date;
(2) no Implicit Borrowing Base Deficit shall exist and (3) the Letter of Credit
Liability will not exceed the Letter of Credit Sublimit. Within the foregoing
limits, and subject to the terms and conditions hereof, a Borrower Party’s ability
to obtain Letters of Credit shall be fully revolving, and accordingly a Borrower
Party may, during the foregoing period, obtain Letters of Credit to replace Letters
of Credit that have expired or that have been drawn upon and reimbursed. The Letter
of Credit Issuer shall have the right to approve the form of Letter of Credit
requested.
(ii) The Letter of Credit Issuer shall not issue or extend any Letter of
Credit, if: (A) subject to Section 2.5(b)(iii), the expiration date of such Letter
of Credit would occur more than twelve (12) months after the date of issuance or
last extension, unless the Letter of Credit Issuer has approved such expiry date in
its sole discretion; or (B) the expiration date of such Letter of Credit would occur
after the date fifteen (15) Business Days prior to the Stated Maturity Date, unless
the Borrower or applicable Qualified Borrower shall Cash Collateralize the then-
36
outstanding Letter of Credit Liability in respect of such Letter of Credit
fifteen (15) Business Days prior to the then-applicable Stated Maturity Date, and
such Letter of Credit has an expiration date that is not later than twelve (12)
months following the Stated Maturity Date.
(iii) The Letter of Credit Issuer shall be under no obligation to issue any
Letter of Credit if: (A) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Letter of Credit
Issuer from issuing such Letter of Credit, or any Law applicable to the Letter of
Credit Issuer or any request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over the Letter of Credit Issuer
shall prohibit, or request that the Letter of Credit Issuer refrain from, the
issuance of letters of credit generally or such Letter of Credit in particular or
shall impose upon the Letter of Credit Issuer with respect to such Letter of Credit
any restriction, reserve or capital requirement (for which the Letter of Credit
Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or
shall impose upon the Letter of Credit Issuer any unreimbursed loss, cost or expense
which was not applicable on the Closing Date and which the Letter of Credit Issuer
in good faith deems material to it; (B) the issuance of such Letter of Credit would
violate any Laws or one or more policies of the Letter of Credit Issuer; (C) such
Letter of Credit is to be denominated in a currency other than Dollars; (D) such
Letter of Credit contains any provisions for automatic reinstatement of the stated
amount after any drawing thereunder; or (E) a default of any Lender’s obligations to
fund hereunder exists or any Lender is at such time a Defaulting Alternate Lender
hereunder, unless the Letter of Credit Issuer has entered into satisfactory
arrangements with the Borrower Parties or such Lender to eliminate the Letter of
Credit Issuer’s risk with respect to such Lender.
(iv) The Letter of Credit Issuer shall be under no obligation to amend any
Letter of Credit if: (A) the Letter of Credit Issuer would have no obligation at
such time to issue such Letter of Credit in its amended form under the terms hereof;
or (B) the beneficiary of such Letter of Credit does not accept the proposed
amendment to such Letter of Credit.
(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters
of Credit.
(i) Each Letter of Credit shall be issued or amended, as the case may be, upon
the request of a Borrower Party delivered to the Letter of Credit Issuer (with a
copy to Administrative Agent) in the form of a Request for Letter of Credit and an
Application and Agreement for Letter of Credit, together with a Borrowing Base
Certificate, each appropriately completed and signed by a Responsible Officer of
such Borrower Party. Such Request for Letter of Credit must be received by the
Letter of Credit Issuer and Administrative Agent not later than 11:00 a.m. at least
two (2) Business Days prior to the proposed issuance date or date of amendment, as
the case may be, of any Letter of Credit (or such later date and time as
Administrative Agent and the Letter of Credit Issuer may agree
37
in a particular instance in their sole discretion). In the case of a request
for an initial issuance of a Letter of Credit, such Request for Letter of Credit
shall specify in form and detail satisfactory to the Letter of Credit Issuer: (A)
the proposed issuance date of the requested Letter of Credit (which shall be a
Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and
address of the beneficiary thereof; (E) the documents to be presented by such
beneficiary in case of any drawing thereunder; (F) the full text of any certificate
to be presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the Letter of Credit Issuer may reasonably require. In the case of
a request for an amendment of any outstanding Letter of Credit, the related Request
for Letter of Credit shall specify in form and detail satisfactory to the Letter of
Credit Issuer: (1) the Letter of Credit to be amended; (2) the proposed date of
amendment thereof (which shall be a Business Day); (3) the nature of the proposed
amendment; and (4) such other matters as the Letter of Credit Issuer may reasonably
require. Additionally, the applicable Borrower Party shall furnish to the Letter of
Credit Issuer and Administrative Agent such other documents and information
pertaining to such requested Letter of Credit issuance or amendment, including any
Issuer Documents, as the Letter of Credit Issuer or Administrative Agent may
reasonably require.
(ii) Promptly after receipt of any Request for Letter of Credit, the Letter of
Credit Issuer will confirm with Administrative Agent (by telephone or in writing)
that Administrative Agent has received a copy of such Request for Letter of Credit
from a Borrower Party and, if not, the Letter of Credit Issuer will provide
Administrative Agent with a copy thereof. The Letter of Credit Issuer shall also
promptly notify each Managing Agent (which in turn shall promptly notify each Lender
in its Lender Group) of the Request for Letter of Credit and the terms thereof.
Unless the Letter of Credit Issuer has received written notice from any Lender,
Administrative Agent or any Borrower Party, at least one (1) Business Day prior to
the requested date of issuance or amendment of the applicable Letter of Credit, that
one or more applicable conditions contained in Section 8 shall not then be
satisfied, then, subject to the terms and conditions hereof, the Letter of Credit
Issuer shall, on the requested date, issue a Letter of Credit for the account of
such Borrower Party or enter into the applicable amendment, as the case may be, in
each case in accordance with the Letter of Credit Issuer’s usual and customary
business practices.
(iii) If a Borrower Party so requests in any applicable Request for Letter of
Credit, the Letter of Credit Issuer may, in its sole and absolute discretion, agree
to issue a Letter of Credit that has automatic extension provisions (each, an
“Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of
Credit must permit the Letter of Credit Issuer to prevent any such extension at
least once in each twelve-month period (commencing with the date of issuance of such
Letter of Credit) by giving prior notice to the beneficiary thereof not later than a
Business Day (the “Non-Extension Notice Date”) in each such twelve-month period to
be agreed upon at the time such Letter of Credit is issued. Unless otherwise
directed by the Letter of Credit
38
Issuer, a Borrower Party shall not be required to make a specific request to
the Letter of Credit Issuer for any such extension. Once an Auto-Extension Letter
of Credit has been issued, the Lenders shall be deemed to have authorized (but may
not require) the Letter of Credit Issuer to permit the extension of such Letter of
Credit at any time to an expiry date not later than the Letter of Credit Expiration
Date; provided, however, that the Letter of Credit Issuer shall not permit any such
extension if: (A) the Letter of Credit Issuer has determined that it would not be
permitted, or would have no obligation, at such time to issue such Letter of Credit
in its revised form (as extended) under the terms hereof (by reason of the
provisions of clause (ii) or (iii) of Section 2.5(a) or otherwise); or (B) it has
received notice (which may be by telephone or in writing) on or before the day that
is five Business Days before the Non-Extension Notice Date: (1) from Administrative
Agent that the Required Lenders have elected not to permit such extension; or (2)
from Administrative Agent, any Lender or any Borrower Party that one or more of the
applicable conditions specified in Section 8.2 and, if applicable, Section 8.3, is
not then satisfied, and in each such case directing the Letter of Credit Issuer not
to permit such extension.
(iv) Promptly after its delivery of any Letter of Credit or any amendment to a
Letter of Credit to an advising bank with respect thereto or to the beneficiary
thereof, the Letter of Credit Issuer will also deliver to the applicable Borrower
Party and Administrative Agent and each Managing Agent a true and complete copy of
such Letter of Credit or amendment.
(v) Whenever the Letter of Credit Issuer issues a Letter of Credit, each
Alternate Lender shall, automatically and without further action of any kind upon
the effective date of issuance of such Letter of Credit, have irrevocably (i) agreed
to acquire a participation interest therein in an amount equal to its Alternate
Lender Pro Rata Share of its Lender Group Percentage of the Letter of Credit
Liability attributable to such Letter of Credit and (ii) committed to make a Loan
hereunder equal to its Alternate Lender Pro Rata Share of its Lender Group
Percentage of the applicable reimbursement amount in the event that such Letter of
Credit is subsequently drawn and such drawn amount shall not have been reimbursed by
a Borrower Party upon such draw or a Loan with respect to such unreimbursed draw is
not made by such Alternate Lender’s related Conduit Lender. In the event that any
Letter of Credit expires or is surrendered to the Letter of Credit Issuer without
being drawn (in whole or in part) then, in such event, the foregoing commitment to
make Loans with respect to draws under such Letter of Credit shall expire with
respect to such Letter of Credit and the Letter of Credit Liability shall
automatically reduce by the amount of the Letter of Credit which is no longer
outstanding. Each Lender shall share in all rights and obligations resulting
therefrom, in accordance with such participation interest, including, without
limitation: (i) the right to receive from Administrative Agent its share of any
reimbursement of the amount of each draft drawn under each Letter of Credit,
including any interest payable with respect thereto; (ii) the right to receive from
the Letter of Credit Issuer its share of the Letter of Credit Fees pursuant to
Section 2.10 hereof; (iii) the right to receive from the Letter of Credit
39
Issuer its additional costs pursuant to Section 4 hereof; and (iv) the
obligation to reimburse Administrative Agent in the form of a Loan to the applicable
Borrower Party hereunder upon receipt of notice of any payment by the Letter of
Credit Issuer.
(c) Drawings and Reimbursements; Funding of Participation.
(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of
a drawing under such Letter of Credit, the Letter of Credit Issuer shall notify the
applicable Borrower Party and Administrative Agent thereof. Not later than 11:00
a.m. on the date of any payment by the Letter of Credit Issuer under a Letter of
Credit (each such date, an “Honor Date”), the applicable Borrower Party shall
reimburse the Letter of Credit Issuer through the Administrative Agent in an amount
equal to the amount of such drawing. If a Borrower Party fails to so reimburse the
Letter of Credit Issuer by such time, the Administrative Agent shall promptly notify
each Managing Agent of the Honor Date, the amount of the unreimbursed drawing (the
“Unreimbursed Amount”), and the amount of such Lender Group’s Lender Group
Percentage thereof. Each such notice by the Letter of Credit Issuer shall be
treated as a Loan Notice by the applicable Borrower Party. In such event, the
applicable Borrower Party shall be deemed to have requested a Borrowing to be
disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without
regard to the minimum and multiples specified in Section 2.3, but subject to the
amount of the unutilized portion of the Available Loan Amount and the conditions set
forth in Section 8.2, if applicable, and Section 8.3 (other than the delivery of a
Loan Notice). Any notice given by the Letter of Credit Issuer or Administrative
Agent pursuant to this Section 2.5(c)(i) may be given by telephone if immediately
confirmed in writing; provided that the lack of such an immediate confirmation shall
not affect the conclusiveness or binding effect of such notice.
(ii) If the Letter of Credit Issuer so notifies a Managing Agent prior to 11:00
a.m. on any Business Day, such Managing Agent’s related Lender Group shall make
available to Administrative Agent, for the account of the Letter of Credit Issuer,
its Lender Group Percentage of the Unreimbursed Amount by 4:30 p.m. on such Business
Day (or a subsequent day specified by Administrative Agent) in immediately available
funds. If the Letter of Credit Issuer so notifies a Managing Agent after 11:00 a.m.
on any Business Day, such Managing Agent’s related Lender Group shall make available
to Administrative Agent for the account of the Letter of Credit Issuer its Lender
Group Percentage of the Unreimbursed Amount by 12:00 noon on the next Business Day
(or a subsequent day specified by Administrative Agent) in immediately available
funds. If any amounts have been deposited into a segregated interest-bearing cash
collateral account for the purpose of Cash Collateralizing the Letter of Credit
Liability, the Letter of Credit Issuer shall use such funds to satisfy any drawings
under the Letters of Credit prior to notifying the Managing Agents of the need for a
Loan with respect thereto. Lenders may conclusively rely on the Letter of Credit
Issuer as to the amount due Administrative Agent by reason of any draft of a Letter
of
40
Credit or due the Letter of Credit Issuer under any Application and Agreement
for Letter of Credit. If any payment received by Administrative Agent pursuant to
this Section 2.5(c) is required to be returned under any of the circumstances
described in Section 14.4, each Alternate Lender shall pay to Administrative Agent
for the account of the Letter of Credit Issuer its Alternate Lender Pro Rata Share
of the related Lender Group Percentage thereof on demand of Administrative Agent,
plus interest thereon from the date of such demand to the date such amount is
returned by such Lender, at a rate per annum equal to the Federal Funds Rate from
time to time in effect.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a
Borrowing because the conditions set forth in Section 8.2, if applicable, and
Section 8.3, cannot be satisfied or for any other reason, the applicable Borrower
Party shall be deemed to have incurred from the Letter of Credit Issuer an L/C
Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which
L/C Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at the Default Rate. In such event, each Lender Group’s payment to
Administrative Agent for the account of the Letter of Credit Issuer pursuant to
Section 2.5(c)(i) shall be deemed payment in respect of its participation in such
L/C Borrowing and shall constitute an L/C Advance from the applicable Lenders in
such Lender Group in satisfaction of its participation obligation under this Section
2.5.
(iv) Until each applicable Lender in each Lender Group funds its Loan or L/C
Advance pursuant to this Section 2.5(c) to reimburse the Letter of Credit Issuer for
any amount drawn under any Letter of Credit, interest in respect of such Lender
Group’s Lender Group Percentage of such amount shall be solely for the account of
the Letter of Credit Issuer.
(v) Each Alternate Lender’s obligation to make Loans or L/C Advances to
reimburse the Letter of Credit Issuer for amounts drawn under Letters of Credit, as
contemplated by this Section 2.5(c), shall be absolute and unconditional and shall
not be affected by any circumstance, including: (A) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Letter of
Credit Issuer, any Credit Party, or any other Person for any reason whatsoever; (B)
the occurrence or continuance of a Potential Default or Event of Default; or (C) any
other occurrence, event or condition, whether or not similar to any of the
foregoing; provided, however, that each Alternate Lender’s obligation to make Loans
pursuant to this Section 2.5(c) is subject to the conditions set forth in Section
8.2, if applicable, and Section 8.3 (other than delivery of a Loan Notice). No such
making of an L/C Advance shall relieve or otherwise impair the obligations of any
Credit Party to reimburse the Letter of Credit Issuer for the amount of any payment
made by the Letter of Credit Issuer under any Letter of Credit, together with
interest as provided herein.
(vi) If any Alternate Lender fails to make available to Administrative Agent
for the account of the Letter of Credit Issuer any amount required to be
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paid by such Lender pursuant to the foregoing provisions of this Section 2.5(c)
by the time specified in Section 2.5(c)(ii), the Letter of Credit Issuer shall be
entitled to recover from such Alternate Lender (acting through Administrative
Agent), on demand, such amount with interest thereon for the period from the date
such payment is required to the date on which such payment is immediately available
to the Letter of Credit Issuer at a rate per annum equal to the Federal Funds Rate
from time to time in effect. A certificate of the Letter of Credit Issuer submitted
to any Alternate Lender (through Administrative Agent) with respect to any amounts
owing under this clause (vi) shall be conclusive absent manifest error.
(d) Repayment of Participations.
(i) At any time after the Letter of Credit Issuer has made a payment under any
Letter of Credit and has received from any Lender such Lender’s L/C Advance in
respect of such payment in accordance with Section 2.5(c), if Administrative Agent
receives for the account of the Letter of Credit Issuer any payment in respect of
the related Unreimbursed Amount or interest thereon (whether directly from Borrower
or otherwise, including proceeds of cash collateral applied thereto by
Administrative Agent), Administrative Agent will distribute to such Lender its Pro
Rata Share thereof (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender’s L/C Advance was outstanding)
in the same funds as those received by Administrative Agent.
(ii) If any payment received by Administrative Agent for the account of the
Letter of Credit Issuer pursuant to Section 2.5(c)(i) is required to be returned
under any of the circumstances described in Section 14.4 (including pursuant to any
settlement entered into by the Letter of Credit Issuer in its discretion), each
Alternate Lender shall, and each Conduit Lender may (and if a Conduit Lender does
not, the Alternate Lenders in its Lender Group shall), pay to Administrative Agent
for the account of the Letter of Credit Issuer its Pro Rata Share thereof on demand
of Administrative Agent, plus interest thereon from the date of such demand to the
date such amount is returned by such Lender, at a rate per annum equal to the
Federal Funds Rate from time to time in effect.
(e) Obligations Absolute. The obligations of the applicable Borrower Party to
reimburse the Letter of Credit Issuer for each drawing under each Letter of Credit and to
repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Credit Agreement under all circumstances,
including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this
Credit Agreement, or any other Loan Document;
(ii) the existence of any claim, counterclaim, set-off, defense or other right
that any Borrower Party may have at any time against any beneficiary or any
transferee of such Letter of Credit (or any Person for whom any such beneficiary
42
or any such transferee may be acting), the Letter of Credit Issuer or any other
Person, whether in connection with this Credit Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;
(iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect; or any
loss or delay in the transmission or otherwise of any document required in order to
make a drawing under such Letter of Credit;
(iv) any payment by the Letter of Credit Issuer under such Letter of Credit
against presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit; or any payment made by the Letter of Credit
Issuer under such Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit, including any arising in connection with any
proceeding under any Debtor Relief Law; or
(v) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Borrower Party.
The applicable Borrower Party shall promptly examine a copy of each Letter of Credit and each
amendment thereto that is delivered to it and, in the event of any claim of noncompliance with such
Borrower Party’s instructions or other irregularity, such Borrower Party will immediately notify
the Letter of Credit Issuer. The applicable Borrower Party shall be conclusively deemed to have
waived any such claim against the Letter of Credit Issuer and its correspondents unless such notice
is given as aforesaid.
(f) Role of Letter of Credit Issuer. Each Lender and each Borrower Party agree that,
in paying any drawing under a Letter of Credit, the Letter of Credit Issuer shall not have
any responsibility to obtain any document (other than any sight draft, certificates and
documents expressly required by the Letter of Credit) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person executing or
delivering any such document. None of the Letter of Credit Issuer, any Agent-Related Person
nor any of the respective correspondents, participants or assignees of the Letter of Credit
Issuer shall be liable to any Lender for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any
document or instrument related to any Letter of Credit or related Request for Letter of
Credit. Each Borrower Party hereby assumes all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit; provided,
however, that this assumption is not intended to, and shall not, preclude any Borrower
Party’s pursuing such rights and remedies as it may have against the
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beneficiary or transferee at law or under any other agreement. None of the Letter of
Credit Issuer, any Agent-Related Person, nor any of the respective correspondents,
participants or assignees of the Letter of Credit Issuer, shall be liable or responsible for
any of the matters described in clauses (i) through (v) of Section 2.5(e); provided,
however, that anything in such clauses to the contrary notwithstanding, a Borrower Party may
have a claim against the Letter of Credit Issuer, and the Letter of Credit Issuer may be
liable to such Borrower Party, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by such Borrower Party which such
Borrower Party proves were caused by the Letter of Credit Issuer’s willful misconduct or
gross negligence or the Letter of Credit Issuer’s willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In furtherance and
not in limitation of the foregoing, the Letter of Credit Issuer may accept documents that
appear on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, and the Letter of Credit Issuer
shall not be responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason.
(g) Cash Collateral. Upon the request of Administrative Agent if: (A) the Letter of
Credit Issuer has honored any full or partial drawing request under any Letter of Credit and
such drawing has resulted in an L/C Borrowing; or (B) an Event of Default has occurred and
is continuing; or (C) as of the Letter of Credit Expiration Date, any Letter of Credit for
any reason remains outstanding and partially or wholly undrawn, then the Borrower Parties
shall immediately Cash Collateralize the then-outstanding amount of the Letter of Credit
Liability (determined as of the date of the such Event of Default or Letter of Credit
Expiration Date, as the case may be).
(i) In addition, if Administrative Agent notifies the Borrower Parties at any
time that the outstanding amount of the Letter of Credit Liability at such time
exceeds 100% of the Letter of Credit Sublimit then in effect, then the Credit
Parties shall Cash Collateralize the Letter of Credit Liability in an amount equal
to the amount by which the outstanding amount of the Letter of Credit Liability
exceeds the Letter of Credit Sublimit: (A) promptly upon receipt of such notice (but
in no event later than two (2) Business Days thereafter), with proceeds from a
Borrowing hereunder, up to the Available Loan Amount at such time; and (B) within
fifteen (15) Business Days of receipt of such notice to the extent that it is
necessary for the Credit Parties to issue Call Notices to fund such required payment
(after giving effect to the preceding clause (A)) (and the Credit Parties shall
issue such Call Notices during such time, and shall prepay such Loans or Cash
Collateralize the Letter of Credit Liability, or both, immediately after the Capital
Contributions relating to such Call Notices are received).
(ii) Sections 2.1(d)(ii) and 3.6 set forth certain additional requirements to
deliver cash collateral hereunder. For purposes of this Section 2.5, and such other
Sections, “Cash Collateralize” means to pledge and deposit with or deliver
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to Administrative Agent, for the benefit of the Letter of Credit Issuer and the
Lenders, as collateral for the Letter of Credit Liability, cash or deposit account
balances in Dollars pursuant to documentation in form and substance satisfactory to
Administrative Agent and the Letter of Credit Issuer (which documents are hereby
consented to by the Lenders). Derivatives of such term have corresponding meanings.
Each Borrower Party hereby grants to Administrative Agent, for the benefit of the
Letter of Credit Issuer and the Lenders, a security interest in all such cash,
deposit accounts and all balances therein and all proceeds of the foregoing. Cash
Collateral shall be maintained in blocked, interest bearing deposit accounts at Bank
of America (provided that: (x) any interest accrued on any such deposit account
shall be payable to Borrower only upon the full and final payment of the
Obligations; and (y) upon the occurrence of an Event of Default, any such interest
accrued to the date thereof shall be applied as additional compensation to Lenders).
(h) Conflict with Issuer Documents. In the event of any conflict between the terms
hereof and the terms of any Issuer Documents, the terms hereof shall control.
(i) Applicability of ISP98. Unless otherwise expressly agreed by the Letter of Credit
Issuer and a Borrower Party when a Letter of Credit is issued, the rules of the ISP shall
apply to each Letter of Credit.
2.6. Payment of Borrower Guaranty. In consideration of Lenders’ agreement to advance funds to
a Qualified Borrower, to cause Letters of Credit to be issued for the account of a Qualified
Borrower, and to accept Borrower Guaranties in support thereof, Borrower hereby authorizes,
empowers, and directs the Administrative Agent, for the benefit of itself and the other Secured
Parties, within the limits of the Available Loan Amount, to disburse directly to Lenders, with
notice to Borrower, in immediately available funds, an amount equal to the amount due and owing
under any Qualified Borrower Note or any Borrower Guaranty, together with all interest, reasonable
costs and expenses and fees due to Lenders pursuant thereto, as a Borrowing hereunder, in the event
Administrative Agent shall have not received payment of such Obligation when due. Administrative
Agent will promptly notify Borrower of any disbursement made to Lenders pursuant to the terms
hereof, provided that the failure to give such notice shall not affect the validity of the
disbursement. Any such disbursement made by Administrative Agent to Lenders shall be deemed to be
a Loan, and Borrower shall be deemed to have given to Administrative Agent, in accordance with the
terms and conditions of Section 2.3(a), a Loan Notice with respect thereto. Administrative Agent
may conclusively rely on Lenders as to the amount of any such Obligation due to Lenders, absent
manifest error.
2.7. Use of Proceeds and Letters of Credit. The proceeds of the Loans and the Letters of
Credit shall be used solely for the purposes permitted under the Operating Agreement, the
Stockholders Agreement and the Constituent Documents of the Qualified Borrowers. None of the
Lenders, Agents or Administrative Agent shall have any liability, obligation, or responsibility
whatsoever with respect to any Borrower Party’s use of the proceeds of the Loans or the Letters of
Credit, and none of the Lenders, Agents or Administrative Agent shall be obligated to determine
whether or not any Borrower Party’s use of the proceeds of the Loans or the Letters of Credit are
for purposes permitted under the Operating Agreement, the Stockholders
45
Agreement or such Constituent Documents. Nothing, including, without limitation, any
Borrowing, or any issuance of any Letter of Credit, or acceptance of any other document or
instrument, shall be construed as a representation or warranty, express or implied, to any party by
any Agent, Lender or the Administrative Agent as to whether any investment by Borrower or any
Qualified Borrower is permitted by the terms of the Operating Agreement, the Stockholders Agreement
or the Constituent Documents of any Qualified Borrower.
2.8. Administrative Agent and Arranger Fees. Borrower shall pay to Administrative Agent and
Arranger fees in consideration of the arrangement of the Commitments and administration of this
Credit Agreement, which fees shall be payable in amounts and on the dates agreed to between
Borrower and Administrative Agent in the Fee Letter.
2.9. Unused Facility Fee. In addition to the payments provided for in Section 3 hereof,
Borrower shall pay to Administrative Agent, for the account of each Lender Group, in accordance
with its Lender Group Percentage, an unused facility fee on the daily amount of the Liquidity
Commitment minus the daily amount of the Principal Obligation at a rate per annum provided in the
Fee Letter, payable in arrears on each Settlement Date. Borrower and Lenders acknowledge and agree
that unused fees payable hereunder are bona fide unused fees and are intended as reasonable
compensation to Lenders for committing to make funds available to Borrower as described herein and
for no other purposes.
2.10. Letter of Credit Fees. The Borrower Parties shall pay letter of credit fees (the
“Letter of Credit Fees”) to the Letter of Credit Issuer and Administrative Agent in the amounts and
on the dates as set forth in the Fee Letter.
2.11. Computation of Interest and Fees. All computations of interest for Loans calculated by
reference to the Base Rate, when the Base Rate is determined by Bank of America’s “prime rate”
shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more fees or interest, as applicable, being paid than if
computed on the basis of a 365-day year). Interest shall accrue on each Loan from and including
the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the
day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same
day on which it is made shall, subject to Section 3.4, bear interest for one day.
2.12. Increase in the Facility Amount.
(a) Additional Increase. Administrative Agent shall, at the request of Borrower (not
more than three (3) times), increase the Facility Amount to the amount requested by Borrower
by increasing the Commitment of the Alternate Lenders (each, an “Increasing Lender”),
subject to the following conditions:
(i) Borrower shall have delivered to Administrative Agent the Facility Increase
Request at least three (3) Business Days prior to the date of increase;
46
(ii) After giving effect to the increase in the Commitment of each Increasing
Lender, the aggregate amount of Alternate Lenders’ Commitments will not exceed the
Maximum Commitment;
(iii) Each increase in the aggregate amount of Alternate Lenders’ Commitments
shall be in a minimum amount of $50,000,000;
(iv) No Event of Default or Potential Default has occurred and is continuing or
would result from such increase in the Alternate Lenders’ Commitments; and
(v) Borrower shall have paid the applicable fees in accordance with the
applicable Fee Letter on or prior to the date of increase.
(b) Consent of Alternate Lenders. Subject to the satisfaction of the conditions for
such an increase in this Section 2.12, each Alternate Lender agrees to increase its
Commitments pro rata in the event of an increase of the Facility Amount pursuant to this
Section 2.12.
(c) Amendments. If Administrative Agent deems it advisable in its sole discretion,
Borrowers and each Lender agree to execute an amendment to this Credit Agreement, in form
and substance reasonably acceptable to Administrative Agent and Borrower, to document an
increase in the Facility Amount pursuant to this Section 2.12.
3. PAYMENT OF OBLIGATIONS
3.1. Notes. The Loans to be made by Lenders to Borrower hereunder shall be evidenced by
promissory notes of Borrower. Each Note shall: (a) be in the amount of the applicable aggregate
Commitments of the applicable Lender Group; (b) be payable to the order of the Managing Agent for
such Lender Group; (c) bear interest in accordance with the provisions hereof; (d) be in the form
of Exhibit B-1 attached hereto (with blanks appropriately completed in conformity herewith); and
(e) be made by the Borrower. The Loans to be made by Lenders to Qualified Borrowers hereunder
shall be evidenced by a Qualified Borrower Promissory Note of each such Qualified Borrower. Each
Qualified Borrower Promissory Note shall: (a) be in the amount of the applicable aggregate Loans of
the applicable Lender Group to be advanced to such Qualified Borrower; (b) be payable to the order
of the Managing Agent for such Lender Group; (c) bear interest in accordance with the provisions
hereof; (d) be in the form of Exhibit B-2 attached hereto (with blanks appropriately completed in
conformity herewith); and (e) be duly executed by such Qualified Borrower. Each Borrower Party
agrees, from time to time, upon the request of Administrative Agent or any applicable Managing
Agent, to reissue new Notes, in accordance with the terms and in the form heretofore provided, to
any Lender and any Assignee of such Lender in accordance with Section 14.12(b) hereof, in renewal
of and substitution for the Note previously issued by such Borrower Party to the Managing Agent for
the affected Lender Group, and such previously issued Notes shall be returned to the applicable
Borrower Party marked “cancelled”. Each Managing Agent shall, and is hereby authorized to, make a
notation on the schedule attached to the Note of the date and the amount of each Loan and the date
and amount of each payment of principal thereon, and prior to any transfer of the
47
Note, such Managing Agent shall endorse the outstanding principal amount of the Note on the
schedule attached thereto; provided, however, that failure to make such notation shall not limit or
otherwise affect the obligations of any Borrower Party hereunder or under such Note to pay when due
the aggregate unpaid principal amount of Obligations owing to the applicable Lender Group by such
Borrower Party under this Credit Agreement, and to pay interest on the aggregate unpaid principal
amount of Obligations (as so adjusted) and to pay any other amount owing hereunder or thereunder,
in each case as provided herein.
3.2. Payment of Obligations. The principal amount of the Obligations outstanding on the
Maturity Date, together with all accrued but unpaid interest thereon, shall be due and payable on
the Maturity Date.
3.3. Payment of Interest.
(a) Interest. Interest on each Borrowing and any portion thereof shall commence to
accrue in accordance with the terms of this Credit Agreement and the other Loan Documents as
of the date of the disbursal or wire transfer of such Borrowing by Administrative Agent,
consistent with the provisions of Section 2.4 and 2.11, notwithstanding whether any Borrower
Party received the benefit of such Borrowing as of such date and even if such Borrowing is
held in escrow pursuant to the terms of any escrow arrangement or agreement. When a
Borrowing is disbursed by wire transfer pursuant to instructions received from a Borrower
Party, then such Borrowing shall be considered made at the time of the transmission of the
wire, in accordance with the Loan Notice, rather than the time of receipt thereof by the
receiving bank. With regard to the repayment of the Loans, interest shall continue to
accrue on any amount repaid until such time as the repayment has been received in federal or
other immediately available funds by Administrative Agent.
(b) Interest Payment Dates. Accrued and unpaid interest (i) on the Obligations shall
be due and payable in arrears in Dollars on each Settlement Date and on the Maturity Date,
(ii) on each other date of any reduction of the Principal Obligation hereunder, and (iii)
with respect to any Obligation on which such Borrower Party is in default shall be due and
payable at any time and from time to time following such default upon demand by
Administrative Agent. Interest hereunder shall be due and payable in accordance with the
terms hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.
(c) Direct Disbursement. If, at any time, Administrative Agent or Letter of Credit
Issuer shall not have received on the date due, any payment of interest upon the Loans or
any fee described herein, Administrative Agent may direct the disbursement of funds from the
Collateral Account to Lenders or Letter of Credit Issuer, in accordance with the terms
hereof, to the extent available therein for payment of any such amount. If, at any such
time, the amount available in the Collateral Account is not sufficient for the full payment
of such amounts due, Administrative Agent may, without prior notice to or the consent of any
Borrower Party, within the limits of the Available Loan Amount, disburse to Lenders, in
accordance with the terms hereof, in immediately available funds an amount equal to the
interest or fee due to Lenders, which disbursement shall be
48
deemed to be a Loan pursuant to Section 2.3 hereof, and Borrower shall be deemed to
have given to Lenders in accordance with the terms and conditions of Section 2.3 a Loan
Notice with respect thereto.
3.4. Payments Generally. (a) All payments of principal of, and interest on, the Obligations
under this Credit Agreement by any Borrower Party to or for the account of Lenders, or any of them,
shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff by
such Borrower Party. Except as otherwise expressly provided herein, all payments by the Borrower
Parties hereunder shall be made to Administrative Agent, for the account of the respective Lenders
to which such payment is owed, to the Administrative Agent’s Account in Dollars and in immediately
available funds not later than 2:00 p.m. on the date specified herein. Funds received after 2:00
p.m. shall be treated for all purposes as having been received by Administrative Agent on the first
Business Day next following receipt of such funds and any applicable interest or fees shall
continue to accrue. Each Lender Group shall be entitled to receive its Lender Group Percentage (or
other applicable share as provided herein) of each payment received by Administrative Agent
hereunder for the account of Lenders on the Obligations. Each payment received by Administrative
Agent hereunder for the account of a Lender Group shall be promptly distributed by Administrative
Agent in accordance with the instructions provided by the Managing Agent for such Lender Group. If
any payment to be made by any Borrower Party shall come due on a day other than a Business Day,
payment shall be made on the next following Business Day, and such extension of time shall be
reflected in computing interest or fees, as the case may be.
(b) Borrower Deposits. The Borrower Parties shall deposit or cause to be deposited
into the Administrative Agent’s Account:
(i) On each Settlement Date, accrued and unpaid Yield for the applicable
Interest Period;
(ii) On the specified Business Day with respect to a reduction of the Principal
Obligation under Section 3.5 or Section 3.6, the amount of the reduction, accrued
and unpaid Yield thereon to such Business Day and any other Obligations (other than
Yield) with respect to such amount;
(iii) On each applicable Business Day determined in accordance with Section
2.1(d), an amount equal to the mandatory principal payment specified therein,
accrued and unpaid Yield thereon to such Business Day and any other Obligation
(other than Yield) with respect to such amount;
(iv) On each Settlement Date, any Obligations then due and payable other than
Yield (without duplication); and
(v) On the Maturity Date, all accrued and unpaid Obligations (including Cash
Collateralization of the Letter of Credit Liability that will remain outstanding
after the Maturity Date).
(c) Order of Application. Upon the receipt by Administrative Agent of any payment with
respect to the Obligations, Administrative Agent shall distribute the
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amount of such payment or deposit to the Persons, for the purposes and in the order of
priority, set forth below:
(i) to Administrative Agent, the Managing Agents, the Administrator, the
applicable Lenders and such other Persons as may be entitled to the distribution
required by this clause (i), in payment of all costs, expenses, other fees
(including Attorney Costs) and Obligations owed to such Persons other than Loans
and Yield and other than the Cash Collateralization of the Letter of Credit
Liability, pro rata based on entitlement;
(ii) to the applicable Managing Agents (on behalf of their related Lenders),
pro rata based on the Lender Group Percentages of their respective Lender Groups in
the Loans, accrued and unpaid Yield on all Portions of Loans for the related
Interest Periods; and
(iii) first, to the applicable Managing Agents (on behalf of their related
Lenders), pro rata based on the Lender Group Percentages of their respective Lender
Groups in the Loans, in reduction of the aggregate outstanding Loans, and second,
for deposit in the Administrative Agent’s Account an amount necessary to Cash
Collateralize the Letter of Credit Liability as required pursuant to Section 2.5.
3.5. Voluntary Prepayments. Any Borrower Party may, upon notice to Administrative Agent, at
any time or from time to time voluntarily prepay Loans in whole or in part without premium or
penalty; provided that: (a) such notice must be received by Administrative Agent not later than
11:00 a.m. three (3) Business Days prior to any date of prepayment of Loans; and (b) any prepayment
of Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess
thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall
specify the date (which shall be a Business Day) and amount of such prepayment. Administrative
Agent will promptly notify each Managing Agent of its receipt of each such notice, and of the
amount of such Managing Agent’s Lender Group Percentage of such prepayment. If such notice is
given by a Borrower Party, such Borrower Party shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified therein. Any prepayment of
a Loan shall be accompanied by all accrued interest thereon, together with any additional amounts
required pursuant to Section 4 hereof. Each such prepayment shall be applied to the Obligations
held by each Lender in accordance with its respective Pro Rata Share.
3.6. Reduction or Early Termination of Commitments. So long as no Loan Notice or Request for
Letter of Credit is outstanding, Borrower may terminate the Commitments, or reduce the Facility
Amount, by giving prior irrevocable written notice to Administrative Agent of such termination or
reduction ten (10) Business Days prior to the effective date of such termination or reduction
(which date shall be specified by Borrower in such notice): (a) (i) in the case of complete
termination of the Commitments, upon prepayment of all of the outstanding Obligation, including,
without limitation, all interest accrued thereon, in accordance with the terms of Section 3.5; or
(ii) in the case of a reduction of the Facility Amount, upon prepayment of the amount by which the
Principal Obligation exceeds the reduced Available Loan Amount
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resulting from such reduction, including, without limitation, payment of all interest accrued
thereon, in accordance with the terms of Section 3.5, provided, however, that, except in connection
with a termination of the Commitments, the Facility Amount may not be reduced such that, upon such
reduction, the Available Loan Amount is less than the aggregate face amount of outstanding Letters
of Credit; and (b) in the case of the complete termination of the Commitments, if any Letter of
Credit Liability exists, Borrower shall immediately Cash Collateralize the then-outstanding amount
of the Letter of Credit Liability, without presentment, demand, protest or any other notice of any
kind, all of which are hereby waived. Unless otherwise required by law, upon the full and final
payment of the Letter of Credit Liability, or the termination of all outstanding Letter of Credit
Liability due to the expiration of all outstanding Letters of Credit prior to draws thereon,
Administrative Agent shall return to Borrower or the applicable Qualified Borrower any amounts
remaining in such cash collateral account, provided, however, that, so long as no Event of Default
exists, to the extent individual Letters of Credit expire, Administrative Agent will return to
Borrower or the applicable Qualified Borrower the corresponding amount of the expired Letter of
Credit Liability. Notwithstanding the foregoing: (1) after any reduction of the Facility Amount
by Borrower, the next subsequent reduction shall not occur until at least one month thereafter; (2)
any reduction of the Facility Amount shall be in an amount equal to or greater than $5,000,000; and
(3) in no event shall a reduction by Borrower reduce the Facility Amount to $10,000,000 or less
(except for a termination of all the Commitments). Promptly after receipt of any notice of
reduction or termination, Administrative Agent shall notify each Lender of the same. Any reduction
of the Facility Amount shall reduce the Commitments of the Alternate Lenders on a pro rata basis.
3.7. Lending Office. Each Lender may (a) designate its principal office or a branch,
subsidiary or Affiliate of such Lender as its Lending Office (and the office to whose accounts
payments are to be credited) for any Loan and (b) change its Lending Office from time to time by
notice to Administrative Agent and Borrower. In such event, the Managing Agent for such Lender
shall continue to hold the Note, if any, evidencing its loans for the benefit and account of such
branch, subsidiary or Affiliate. Each Lender shall be entitled to fund all or any portion of its
Commitment in any manner it deems appropriate, consistent with the provisions of Section 2.4.
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4. CHANGE IN CIRCUMSTANCES.
4.1. Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of
any Borrower Party hereunder or under any other Loan Document shall be made free and clear
of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided
that if any Borrower Party shall be required by applicable law to deduct any Indemnified
Taxes (including any Other Taxes) from such payments, then: (i) the sum payable shall be
increased as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.1) each Tax Indemnified Party
receives an amount equal to the sum it would have received had no such deductions been made;
(ii) the applicable Borrower Party shall make such deductions; and (iii) such Borrower Party
shall timely pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) Payment of Other Taxes by Borrower. Without limiting the provisions of subsection
(a) above, each Borrower Party shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.
(c) Indemnification by Borrower Parties. Each Borrower Party shall indemnify each Tax
Indemnified Party, within ten (10) days after demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 4.1) paid by such Tax
Indemnified Party and penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability delivered to the applicable Borrower Party by a Tax
Indemnified Party (with a copy to Administrative Agent), on its own behalf or on behalf of a
Tax Indemnified Party, shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by a Borrower Party to a Governmental Authority, such Borrower Party
shall deliver to Administrative Agent the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of the return reporting such
payment or other evidence of such payment reasonably satisfactory to Administrative Agent.
(e) Gross Up. If any Borrower Party shall be required to deduct or pay any Taxes or
Other Taxes from or in respect of any sum payable under any Loan Document to Administrative
Agent or any Secured Party, such Borrower Party shall also pay to Administrative Agent or to
such Secured Party, as the case may be, at the time interest is paid, such additional amount
that Administrative Agent or such Secured Party specifies is necessary to preserve the
after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net
income) that Administrative Agent or such Secured Party would have received if such Taxes or
Other Taxes had not been imposed.
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(f) Selection of Lending Office. If a Borrower Party is or is likely to be required to
pay additional amounts to or for the account of any Lender pursuant to this Section 4.1,
then such Lender will agree to use reasonable efforts to change the jurisdiction of its
Lending Office so as to eliminate or reduce any such additional payment which may thereafter
accrue if such change, in the good faith judgment of such Lender, is not otherwise
materially disadvantageous to such Lender.
(g) Treatment of Certain Refunds. If any Tax Indemnified Party determines, in its
reasonable discretion, that it has received a refund of any Taxes or Other Taxes as to which
it has been indemnified by the Borrower Parties or with respect to which any Borrower Party
has paid additional amounts pursuant to this Section 4.1, it shall pay to such Borrower
Party an amount equal to such refund (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower Party under this Section 4.1 with respect to the
Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such
Tax Indemnified Party, as the case may be, and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund); provided that each
Borrower Party, upon the request of such Tax Indemnified Party, agrees to repay the amount
paid over to such Borrower Party (plus any penalties, interest or other charges imposed by
the relevant Governmental Authority) to such Tax Indemnified Party in the event such Tax
Indemnified Party is required to repay such refund to such Governmental Authority. This
subsection shall not be construed to require any Tax Indemnified Party to make available its
tax returns (or any other information relating to its taxes that it deems confidential) to
the Borrower Parties or any other Person.
4.2. Illegality. If any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for such Lender or its Lending Office to
make, maintain, finance or fund Loans or other Obligations, or to determine or charge interest
rates based upon the LIBOR Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of, Dollars or to determine
or charge interest rates based upon the LIBOR Rate, then, on notice thereof by such Lender to
Borrower Parties through Administrative Agent, any obligation of such Lender to make or continue
Loans or to convert Portions of Loans accruing Yield calculated by reference to the LIBOR Rate to
Portions of Loans calculated by return to the Base Rate shall be suspended until such Lender
notifies Administrative Agent and Borrower Parties that the circumstances giving rise to such
determination no longer exist. Upon the prepayment of any such Loans, each Borrower Party shall
also pay accrued interest on the amount so prepaid. Each Lender agrees to designate a different
Lending Office if such designation will avoid the need for such notice and will not, in the good
faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.
4.3. Inability to Determine Rates. If the LIBOR Rate is at any time applicable and if
Administrative Agent is unable to obtain on a timely basis the information necessary to determine
the LIBOR Rate for any proposed Interest Period, then: (a) Administrative Agent shall forthwith
notify the Lenders and each Borrower Party that the LIBOR Rate cannot be determined for such
Interest Period; and (b) while such circumstances exist, none of the Managing Agents shall allocate
any Portion of Loans with respect to Loans made during such
53
period, or reallocate any Portion of Loans allocated to any then-existing Interest Period
ending during such period, to a Interest Period with respect to which Yield is calculated by
reference to the LIBOR Rate. If, with respect to any outstanding Interest Period, a Lender
notifies the Administrative Agent that it is unable to obtain matching deposits based upon the
London interbank market to fund its purchase or maintenance of such Portion of Loans or that the
LIBOR Rate applicable to such Portion of Loans will not adequately reflect the cost to the Person
of funding or maintaining such Portion of Loans for such Interest Period, then: (i) Administrative
Agent shall forthwith so notify Borrower and the Lenders; and (ii) upon such notice and thereafter
while such circumstances exist, the applicable Managing Agent shall not allocate any other Portion
of Loans with respect to Loans made by such Lender during such period, or reallocate any Portion of
Loans allocated to any Interest Period ending during such period, to an Interest Period with
respect to which Yield is calculated by reference to the LIBOR Rate.
4.4. Increased Cost and Capital Adequacy.
(a) Change in Law: Increased Cost. If any Secured Party determines that as a result of
the introduction of or any change in or in the interpretation of any Law, or such Secured
Party’s compliance therewith, there shall be any increase in the cost to such Secured Party
of agreeing to make or making, funding or maintaining Loans or (as the case may be) issuing
or participating in Letters of Credit (collectively, the “Covered Matters”), or its
obligation to advance funds under a Program Support Agreement or otherwise in respect of
Covered Matters, or a reduction in the amount received or receivable by such Secured Party
in connection with any of the foregoing (excluding for purposes of this clause (a) any such
increased costs or reduction in amount resulting from: (i) Taxes or Other Taxes (as to which
Section 4.1 shall govern); (ii) changes in the basis of taxation of overall net income or
overall gross income by the United States or any foreign jurisdiction or any political
subdivision of either thereof under the Laws of which such Secured Party is organized or has
its Lending Office; and (iii) reserve requirements utilized in the determination of the
LIBOR Rate), then from time to time upon demand of such Secured Party (with a copy of such
demand to the Administrative Agent), the Borrower Parties shall pay to such Secured Party
such additional amounts as will compensate such Secured Party for such increased cost or
reduction: (A) promptly on demand, to the extent that funds are available in the Collateral
Account or any other account maintained by Borrower; and (B) otherwise, to the extent that
it is necessary for Call Notices to be issued to fund such required payment, within fifteen
(15) Business Days after demand (but in any event, the Credit Parties shall issue such Call
Notices and shall make such payment immediately after the related Capital Contributions are
received).
(b) Change in Law: Capital Adequacy. If any Secured Party determines that the
introduction of any Law regarding capital adequacy or any change therein or in the
interpretation thereof, or compliance by such Secured Party (or its Lending Office)
therewith, has the effect of reducing the rate of return on the capital of such Secured
Party or any corporation controlling such Secured Party as a consequence of Covered Matters
or its obligation to advance funds under a Program Support Agreement or otherwise in respect
of Covered Matters (taking into consideration its policies with respect to capital adequacy
and such Secured Party’s desired return on capital), then from
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time to time upon demand of such Secured Party (with a copy of such demand to
Administrative Agent), the applicable Borrower Parties shall pay to such Secured Party such
additional amounts as will compensate such Secured Party for such reduction; provided,
however, that such amounts shall not be duplicative of any amounts paid by such Borrower
Party in the preceding clause (a): (A) promptly on demand, to the extent that funds are
available in the Collateral Account or any other account maintained by such Borrower Party;
and (B) otherwise, to the extent that it is necessary for Call Notices to be issued to fund
such required payment, within fifteen (15) Business Days after demand (but in any event, the
Credit Parties shall issue such Call Notices and shall make such payment after the related
Capital Contributions are received).
4.5. Funding Losses. Upon demand of any Lender (with a copy to Administrative Agent) from
time to time, the Borrower Parties shall promptly pay Administrative Agent for the account of such
Lender, such amount or amounts as shall compensate such Lender for and hold such Lender harmless
from any loss, cost or expense incurred by such Lender (as determined by the applicable Managing
Agent) as a result of (i) any reduction of any Portion of Loans other than on a date for which
timely notice thereof was provided in accordance with Section 3.5 or (ii) any failure by a Borrower
Party (for a reason other than the failure of such Lender to make a Loan) to pay, prepay or borrow
any Loan on the date or in the amount notified by such Borrower Party, or (iii) any failure by any
Borrower Party to make payment on any drawing under any Letter of Credit (or interest due thereon)
on its scheduled due date, and, in the case of an event described in clause (i) or (ii) to include:
(a) an amount equal to any loss or expense suffered by the applicable Lender during the period from
the date of receipt of such repayment to the applicable Settlement Date (or if in respect of a
reduction on a Settlement Date but without the requisite notice required by Section 3.5, to the
maturity date of such Commercial Paper (or other financing source)); and (b) net of the income, if
any, actually received by the recipient of such reduction from investing the proceeds of such
reduction of such Portion of Loans.
4.6. Matters Applicable to all Requests for Compensation.
(a) Determination of Amount. A certificate of Administrative Agent or any Secured
Party provided to Borrower claiming compensation under this Section 4 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, Administrative Agent or such Secured Party
may use any reasonable averaging and attribution methods.
(b) No Duplication. Any amount payable by the Borrower on account of Section 4.1, 4.4,
or 4.5 shall not be duplicative of: (i) any amount paid under any other such sections, or
(ii) any amounts included in the calculation of the LIBOR Rate. Notwithstanding anything to
the contrary set forth in this Section 4, Borrower Parties shall be required to compensate
the Lenders for amounts payable pursuant to Sections 4.1, 4.4 and 4.5 only to the extent
Lenders are holding comparable borrowers liable for such amounts.
(c) Replacement of Lenders. If any Lender requests compensation under Section 4.4, or
if any Borrower Party is required to pay any additional amount to any
55
Lender or any Governmental Authority for the account of any Lender pursuant to Section
4.1, Borrower may replace such Lender in accordance with Section 14.14.
(d) Refund. Any amount determined to be paid by the Borrower in error pursuant to this
Section 4 shall be, if no Event of Default has occurred and is continuing, promptly refunded
to the Borrower, or applied to amounts owing hereunder, as the Borrower may elect.
(e) Survival. All of the Borrower Parties’ obligations under this Section 4 shall
survive the termination of the Commitments and payment in full of all other Obligations
hereunder.
4.7. Prohibited Event. In the event a Lender notifies the Administrative Agent that,
subsequent to the Closing Date, such Lender or any of its Affiliates: (i) has become a fiduciary
with respect to any ERISA Investor in connection with its investment in the Borrower, the
Guarantor, the Pledgor or this transaction; or (ii) has acquired any discretionary authority or
control with respect to any ERISA Investor’s investment in any Credit Party, or renders any
investment advice (within the meaning of 29 C.F.R. §2510.3-21(c)) with respect to such investment,
the parties hereby agree that the event described in clause (i) or (ii) above (the “Prohibited
Event”) shall be deemed to have caused a prohibited transaction under Section 406(a) of ERISA or
Section 4975(c)(1)(A), (B), (C) or (D) of the Code with respect to the transactions described in
this Credit Agreement, and the parties to this Credit Agreement shall cooperate with each other to
correct such prohibited transaction in accordance with Section 4975(f)(5) of the Code.
NOTWITHSTANDING ANYTHING IN THIS CREDIT AGREEMENT TO THE CONTRARY, any such correction shall
prevent the Lender from receiving any direct or indirect fees, loan repayments, or any other
benefits from such ERISA Investor. If the Administrative Agent determines at any time in its
reasonable discretion that any of the corrections described herein are insufficient to correct the
prohibited transaction in accordance with Section 4975(f)(5) of the Internal Revenue Code, then the
parties shall also cooperate to replace such affected Lender.
5. SECURITY
5.1. Liens and Security Interest.
(a) Capital Commitments and Capital Calls. To secure performance by the Borrower
Parties of the payment of each Note and the Obligations: (i) each of Borrower and Managing
Member shall grant to Administrative Agent, for the benefit of each of the Secured Parties,
an exclusive, perfected, first priority security interest and Lien in and to the Collateral
Account pursuant to the Account Assignment; (ii) Borrower and Managing Member, to the extent
of their respective interests therein, shall grant to Administrative Agent, for the benefit
of Secured Parties, an exclusive, perfected, first priority security interest and Lien in
and to the Capital Calls, Capital Commitments, Capital Contributions and their rights under
the Operating Agreement, including, without limitation, any rights to make Capital Calls,
receive payment of Capital Contributions and enforce the payment thereof pursuant to the
Borrower and Managing Member Security Agreement and (iii) pursuant to the Capital
Contributions Pledge Agreement, the Pledgor shall grant to
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Administrative Agent, for the benefit of each Secured Party, an exclusive, perfected,
first priority security interest and Lien in all of the collateral described therein,
including the Capital Calls, Capital Commitments, Capital Contributions and, without
limitation, any rights to make Capital Calls, receive payment of Capital Contributions and
enforce the payment thereof with respect to the Stockholders pursuant to the Stockholders
Agreement (the collateral in clauses (i) through (iii) of this Section 5.1(a) being,
collectively, the “Collateral”); and (v) Borrower, Managing Member and Pledgor shall deliver
to Administrative Agent, or shall otherwise consent to the filing of, financing statements
and other documents satisfactory to Administrative Agent. Administrative Agent acknowledges
that the collateral for the Obligations does not include a security interest in any Equity
Interest.
(b) Investor Letters. Each Investor shall execute, in favor of Administrative Agent
for the benefit of Secured Parties, an agreement in substantially the form attached hereto
as Exhibit I (an “Investor Letter”).
5.2. Collateral Account; Capital Calls.
(a) Collateral Account. In order to secure further the payment and performance of the
Obligations and to effect and facilitate Secured Parties’ right of offset: (i) the Credit
Parties hereby irrevocably appoints Administrative Agent as subscription agent and the sole
party entitled in the name of the applicable Credit Party upon the occurrence and during the
continuance of an Event of Default, to make any Capital Calls upon the Investors pursuant to
the terms of the Operating Agreement and/or the Stockholders Agreement, as applicable, and
shall require that all Investors wire-transfer to Bank of America, N.A., ABA #026-009-593,
for further credit to Account No. 1233060441, reference “Acadia Strategic Opportunity Fund
III LLC Collateral Account” (the “Collateral Account”), all monies or sums paid or to be
paid by any Investor to the capital of any Credit Party as Capital Contributions as and when
Capital Contributions are called pursuant to the Call Notices. In addition, each Credit
Party shall, upon receipt, deposit in the applicable Collateral Account described above, any
payments and monies that such Credit Party receives directly from its Investors as Capital
Contributions.
(b) No Duty. Notwithstanding anything to the contrary herein contained, it is
expressly understood and agreed that neither Administrative Agent, Letter of Credit Issuer,
nor any other Secured Party undertakes any duties, responsibilities, or liabilities with
respect to Capital Calls. None of them shall be required to refer to the Constituent
Documents of any Credit Party or take any other action with respect to any other matter
which might arise in connection with such Constituent Documents, the Operating Agreement,
the Stockholders Agreement or any Capital Call. None of them shall have any duty to
determine or inquire into any happening or occurrence or any performance or failure of
performance of any Credit Party or of any Investor. None of them has any duty to inquire
into the use, purpose, or reasons for the making of any Capital Call or with respect to the
investment or the use of the proceeds thereof.
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(c) Capital Calls. In order that Secured Parties may monitor the Collateral and the
Capital Commitments, no Credit Party shall issue any Call Notice or otherwise request,
notify, or demand that any Investor make any Capital Contribution, without delivering to
Administrative Agent (which delivery may be via facsimile) simultaneously with delivery of
the Call Notices to any Investors (“Call Notice Date”), copies of the Call Notice for each
Investor from whom a Capital Contribution is being sought. Concurrently with the delivery
of any Call Notice, the Borrower shall deliver to Administrative Agent a Borrowing Base
Certificate showing no Implicit Borrowing Base Deficit would exist at such time after
application of the subject Capital Contributions in accordance with the terms of the Call
Notice.
(d) Use of Account; Capital Calls by Administrative Agent. Borrower may request that
Administrative Agent withdraw funds from the Collateral Account at any time or from time to
time and disburse such funds as Borrower may direct, so long as at the time of such
withdrawal or disbursement and after giving effect thereto: (i) there does not exist an
Event of Default or Potential Default; and (ii) the Principal Obligation does not exceed the
Available Loan Amount (unless, in the latter case), Borrower has directed that such
disbursement be paid to Administrative Agent to repay such excess) and any request by
Borrower for withdrawal from the Collateral Account shall be deemed a representation and
warranty that the conditions set forth in the foregoing clauses (i), (ii) and (iii) have
been satisfied. The Credit Parties hereby irrevocably authorize and direct the Secured
Parties, acting through Administrative Agent, to withdraw from time to time funds from the
Collateral Account for application to amounts not paid when due (after the passage of any
applicable grace period) to the Secured Parties or any of them hereunder, under any
Application and Agreement for Letter of Credit, under any Letter of Credit or under the
Notes to the extent provided herein. Administrative Agent, on behalf of the Secured
Parties, is hereby authorized, in the name of the Secured Parties or the name of any Credit
Party, at any time or from time to time upon the occurrence and while an Event of Default
exists, to notify any or all parties obligated to any Credit Party with respect to the
Capital Commitments to make all payments due or to become due thereon directly to
Administrative Agent on behalf of the Secured Parties, at a different account number, or to
initiate one or more Capital Call Notices in order to pay the Obligations. With or without
such general notification, when an Event of Default exists, Administrative Agent, on behalf
of Secured Parties: (i) may make Capital Calls in the name of any Credit Party; (ii) may
take or bring in any Credit Party’s name or (or that of the Secured Parties) all steps,
actions, suits, or proceedings deemed by Administrative Agent necessary or desirable to
effect possession or collection of Capital Commitments; (iii) may complete any contract or
agreement of any Credit Party in any way related to any of the Capital Commitments; (iv) may
make allowances or adjustments related to the Capital Commitments; (v) may compromise any
claims related to the Capital Commitments; (vi) may issue credit in its own name or the name
of any Credit Party; or (vii) may exercise any right, privilege, power, or remedy provided
to any Credit Party under the Constituent Documents of any Credit Party, the Operating
Agreement, or the Stockholders Agreement relating to the right to call for Capital
Contributions and to receive Capital Contributions. Regardless of any provision hereof, in
the absence of gross negligence or willful misconduct by Administrative Agent or Secured
Parties, none of Administrative Agent or Secured Parties shall ever be liable for failure to
collect or for
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failure to exercise diligence in the collection, possession, or any transaction
concerning, all or part of the Capital Call Notices, Capital Commitments, or any Capital
Contributions, or sums due or paid thereon, nor shall they be under any obligation
whatsoever to anyone by virtue of the security interests and Liens relating to the Capital
Call Notices, Capital Commitments or any Capital Contributions. Administrative Agent shall
give Borrower prompt notice of any action taken pursuant to this Section 5.2(d), but failure
to give such notice shall not affect the validity of such action or give rise to any defense
in favor of any Credit Party with respect to such action.
(e) Event of Default. During the existence and continuance of an Event of Default,
issuance by Administrative Agent on behalf of Secured Parties of a receipt to any Person
obligated to pay any Capital Contribution to any Credit Party shall be a full and complete
release, discharge, and acquittance to such Person to the extent of any amount so paid to
Administrative Agent for the benefit of Secured Parties, so long as such amount shall not be
invalidated, declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy act or code, state or
federal law, common law or equitable doctrine. Administrative Agent, on behalf of the
Secured Parties, is hereby authorized and empowered, during the existence of and continuance
of an Event of Default, on behalf of any Credit Party, to endorse the name of any Credit
Party upon any check, draft, instrument, receipt, instruction, or other document, agreement
or item, including, but not limited to, all items evidencing payment of a Capital
Contribution of any Person to any Credit Party coming into Administrative Agent’s or any
Lender’s possession, and to receive and apply the proceeds therefrom in accordance with the
terms hereof. Administrative Agent on behalf of Secured Parties is hereby granted an
irrevocable power of attorney, which is coupled with an interest, to execute all checks,
drafts, receipts, instruments, instructions, or other documents, agreements, or items on
behalf of any Credit Party, either before or after demand of payment on the Obligations but
only during the existence and continuance of an Event of Default, as shall be deemed by
Administrative Agent to be necessary or advisable, in the sole discretion, reasonably
exercised, of Administrative Agent, to preserve the security interests and Liens in the
Capital Commitments or to secure the repayment of the Obligations, and neither
Administrative Agent nor Secured Parties shall incur any liability, in the absence of gross
negligence or willful misconduct, in connection with or arising from its exercise of such
power of attorney. The application by Secured Parties of such funds shall, unless
Administrative Agent shall agree otherwise in writing, be the same as set forth in Section
3.4.
(f) No Representations. Neither Administrative Agent nor Secured Parties shall be
deemed to make at any time any representation or warranty as to the validity of any Call
Notice nor shall Administrative Agent or the Secured Parties be accountable for any Credit
Party’s use of the proceeds of any Capital Call Notice.
5.3. Agreement to Deliver Additional Collateral Documents. Each Credit Party shall deliver
such security agreements, financing statements, assignments, and other collateral documents (all of
which shall be deemed part of the “Collateral Documents”), in form and substance reasonably
satisfactory to Administrative Agent, as Administrative Agent acting on behalf of the Secured
Parties may reasonably request from time to time for the purpose of
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granting to, or maintaining or perfecting in favor of the Secured Parties, first and exclusive
security interests in any of the Capital Call Notices and Capital Commitments, together with other
assurances of the enforceability and priority of the Secured Parties’ Liens and assurances of due
recording and documentation of the Collateral Documents or copies thereof, as Administrative Agent
may reasonably require to avoid material impairment of the liens and security interests granted or
purported to be granted pursuant to this Section 5.
5.4. Subordination of All Credit Party Claims. As used herein, the term “Credit Party Claims”
means all debts and liabilities of any Investor to any Credit Party, whether such debts and
liabilities now exist or are hereafter incurred or arise, or whether the obligations of such Person
thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or
otherwise, and irrespective of the Person or Persons in whose favor such debts or liabilities may,
at their inception, have been, or may hereafter be created, or the manner in which they have been
or may hereafter be acquired by any Credit Party (including, without limitation, by setoff pursuant
to the terms of any applicable agreement). Credit Party Claims shall include without limitation
all rights and claims of any Credit Party against an Investor under the Constituent Documents of
such Person. At any time stays that the Principal Obligation exceeds the Available Loan Amount,
and until the mandatory prepayment pursuant to Section 2.1(d) hereof in connection therewith, if
any, shall be paid and satisfied in full, or, during the existence and continuation of an Event of
Default, no Credit Party shall receive or collect, directly or indirectly any amount upon the
Credit Party Claims, other than to obtain funds required to make any mandatory prepayment pursuant
to Section 2.1(d).
Any Liens, security interests, judgment liens, charges, or other encumbrances upon an
Investor’s assets securing payment of Credit Party Claims, including, but not limited to, any liens
or security interests on an Investor’s Equity Interest, shall be and remain inferior and
subordinate in right of payment and of security to any liens, security interests, judgment liens,
charges, or other encumbrances upon an Investor’s assets securing such Investor’s obligations and
liabilities to the Secured Parties pursuant to any of the Collateral Documents executed by such
Investor, regardless of whether such encumbrances in favor of Borrower or a Qualified Borrower,
Managing Member, the Pledgor or the Secured Parties presently exist or are hereafter created or
attach. Without the prior written consent of Administrative Agent, no Credit Party shall: (a)
exercise or enforce any creditor’s, shareholder or partnership right it may have against an
Investor; (b) foreclose, repossess, sequester, or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including without limitation, the commencement of, or joinder
in, any liquidation, bankruptcy, rearrangement, debtor’s relief, or insolvency proceeding) to
enforce any liens, mortgages, deeds of trust, security interest, collateral rights, judgments or
other encumbrances on assets of such Investor held by such Person; or (c) exercise any rights or
remedies against an Investor under the Constituent Documents of such Person; provided that any
action taken by Administrative Agent or the Secured Parties in Borrower’s name, or any action taken
by Borrower that is required under any Loan Document or to comply with any Loan Document, shall not
be a violation of this Section 5.4.
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6. [RESERVED]
7. ADDITIONAL ALTERNATE LENDER PROVISIONS
7.1. Assignment to Alternate Lenders.
(a) Assignment Amounts. At any time on or prior to the Stated Maturity Date, if the
related Administrator on behalf of the applicable Conduit Lender so elects, by
written notice to Administrative Agent, Borrower and its related Managing Agent,
such Conduit Lender hereby assigns effective on the Assignment Date referred to
below all or such portions as may be elected by such Conduit Lender of its interest
in the Principal Obligation at such time to its Alternate Lenders pursuant to this
Section 7.1; provided, however, that unless such assignment is an assignment of all
such Conduit Lender’s interest in the Principal Obligation in whole on or after its
Conduit Investment Termination Date, no such assignment shall take place pursuant to
this Section 7.1 if an Event of Default described in Section 12.1(n) shall then
exist; and provided, further, that no such assignment shall take place pursuant to
this Section 7.1 at a time when such Conduit Lender is subject to any proceedings
under any Debtor Relief Laws. No further documentation or action on the part of
such Conduit Lender, the Borrower, or the applicable Alternate Lenders shall be
required to exercise the rights set forth in the immediately preceding sentence,
other than the giving of the notice by the related Administrator on behalf of such
Conduit Lender referred to in such sentence and the delivery by the related Managing
Agent of a copy of such notice to each Alternate Lender in the Lender Group (the
date of the receipt by Administrative Agent of any such notice being the “Assignment
Date”). Each Alternate Lender hereby agrees, unconditionally and irrevocably and
under all circumstances, without set-off, counterclaim or defense of any kind, to
pay the full amount of its Assignment Amount on such Assignment Date to such Conduit
Lender in immediately available funds in Dollars based on the assigning Conduit
Lender’s interest in the Principal Obligation, to an account designated by the
related Managing Agent. Upon payment of its Assignment Amount, each such Alternate
Lender shall acquire an interest in the Principal Obligation equal to its Alternate
Lender Pro Rata Share thereof. Upon any assignment in whole by a Conduit Lender to
its Alternate Lenders on or after its Conduit Investment Termination Date as
contemplated hereunder, such Conduit Lender shall cease to make any additional Loans
hereunder. At all times prior to its Conduit Investment Termination Date, nothing
herein shall prevent a Conduit Lender from making a subsequent Loan hereunder, in
its sole discretion, following any assignment pursuant to this Section 7.1 or from
making more than one assignment pursuant to this Section 7.1.
(b) Additional Assignment Amounts. The applicable Borrower Party may pay to
Administrative Agent in Dollars, for the account of the related Managing Agent for
the benefit of its Conduit Lender, in connection with any assignment by a Conduit
Lender to its Alternate Lenders pursuant to this Section 7.1, an aggregate amount
equal to all Yield to accrue through the end of the current
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Interest Period to the extent attributable to the portion of the Loans so assigned
to the Alternate Lenders (as determined immediately prior to giving effect to such
assignment), plus all Obligations then due, other than the Loans and other than any
Yield described above, attributable to such portion of the Loans so assigned. If
the applicable Borrower Party does not make payment of such amounts at or prior to
the time of assignment by a Conduit Lender to its Alternate Lenders, such amount
shall be paid by such Alternate Lenders to the Conduit Lender as additional
consideration for the interests assigned to the Alternate Lenders and the amount of
the “Loans” hereunder held by such Alternate Lenders shall be increased by an amount
equal to the additional amount so paid by such Alternate Lenders.
(c) Administration of Agreement after Assignment from Conduit Lender to Alternate
Lenders following the Conduit Investment Termination Date. After any assignment in
whole by a Conduit Lender to its Alternate Lenders pursuant to this Section 7.1 at
any time on or after its Conduit Investment Termination Date (and the payment of all
amounts owing to such Conduit Lender in connection therewith), all rights of the
related Administrator and the related Conduit Collateral Agent set forth herein
shall be given to the applicable Managing Agent on behalf of its Alternate Lenders
instead of such Administrator and Conduit Collateral Agent.
(d) Payments to Administrative Agent. After any assignment in whole by a Conduit
Lender to its Alternate Lenders pursuant to this Section 7.1 at any time on or after
its Conduit Investment Termination Date, all payments to be made hereunder by a
Borrower Party to Administrative Agent for the benefit of such Conduit Lender shall
be made to the account specified by the applicable Managing Agent in writing to the
Administrative Agent and the applicable Borrower Party.
(e) Recovery of Loans. In the event that the aggregate of the Assignment Amounts
paid by the Alternate Lenders with respect to any Lender Group pursuant to this
Section 7.1 on any Assignment Date occurring on or after the Conduit Investment
Termination Date for the related Conduit Lender is less than the Loans of such
Conduit Lender on such Assignment Date, then to the extent that payments or deposits
thereafter received and applied by Administrative Agent with respect to such Lender
Group under Section 3.4 in respect of Loans exceed the aggregate of the unrecovered
Assignment Amounts and Loans funded by such Alternate Lenders, such excess shall be
remitted by Administrative Agent to the related Managing Agent.
7.2. Downgrade of Alternate Lender.
(a) Downgrades Generally. If at any time on or prior to the Stated Maturity Date,
the short-term debt rating of any Alternate Lender shall be “A-2” or “P-2” from S&P
or Moody’s, respectively, with negative credit implications, such Alternate Lender,
upon request of the related Managing Agent, shall, within thirty
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(30) days of such request, assign its rights and obligations hereunder to another
financial institution (which institution’s short term debt shall be rated at least
“A-2” or “P-2” from S&P or Moody’s, respectively, and which shall not be so rated
with negative credit implications and which is acceptable to such Conduit Lender and
such Managing Agent). If the short-term debt rating of such Alternate Lender shall
be “A-3” or “P-3”, or lower, from S&P or Moody’s, respectively (or such rating shall
have been withdrawn by S&P or Moody’s), such Alternate Lender, upon request of the
related Managing Agent, shall, within five (5) Business Days of such request, assign
its rights and obligations hereunder to another financial institution (which
institution’s short-term debt shall be rated at least “A-2” or “P-2”, from S&P or
Moody’s, respectively, and which shall not be so rated with negative credit
implications and which is acceptable to such Conduit Lender and such Managing
Agent). In either such case, if any such Alternate Lender shall not have assigned
its rights and obligations under this Credit Agreement within the applicable time
period described above (in either such case, the “Required Downgrade Assignment
Period”), the Administrator on behalf of such Conduit Lender shall have the right to
require such Alternate Lender to pay, in Dollars upon one (1) Business Day’s notice
at any time after the Required Downgrade Assignment Period (and each such Alternate
Lender hereby agrees in such event to pay within such time) to the applicable
Managing Agent an amount equal to such Alternate Lender’s unused Commitment (without
any deduction therefrom for such Alternate Lender’s share of the Letter of Credit
Liability) (a “Downgrade Draw”) for deposit by such Managing Agent into an account,
in the name of such Managing Agent (a “Downgrade Collateral Account”), which shall
be in satisfaction of such Alternate Lender’s obligations to make Loans and to pay
its Assignment Amount upon an assignment from such Conduit Lender in accordance with
Section 7.1; provided, however, that if, during the Required Downgrade Assignment
Period, such Alternate Lender delivers a written notice to such Managing Agent of
its intent to deliver a direct pay irrevocable letter of credit pursuant to this
proviso in lieu of the payment required to fund the Downgrade Draw, then such
Alternate Lender will not be required to fund such Downgrade Draw. If any Alternate
Lender gives the applicable Managing Agent such notice, then such Alternate Lender
shall, within one (1) Business Day after the Required Downgrade Assignment Period,
deliver to such Managing Agent a direct pay irrevocable letter of credit in favor of
such Managing Agent issued in Dollars, in an amount equal to the unused portion of
such Alternate Lender’s Commitment (without any deduction therefrom for such
Alternate Lender’s share of the Letter of Credit Liability), which letter of credit
shall be issued through a United States office of a bank or other financial
institution: (i) whose short-term debt ratings by S&P and Moody’s are at least
equal to the ratings assigned by such statistical rating organization to the
Commercial Paper; and (ii) that is acceptable to such Conduit Lender and such
Managing Agent. Such letter of credit shall provide that such Managing Agent may
draw thereon for payment of any Loan or Assignment Amount payable by such Alternate
Lender which is not paid hereunder when required, shall expire no earlier than the
Stated Maturity Date and shall otherwise be in form and substance acceptable to such
Managing
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Agent. If on any date the amount on deposit in the Downgrade Collateral Account or
the maximum stated amount under any letter of credit so provided is less than the
applicable Alternate Lender’s share of the unused Commitment, upon one (1) Business
Day’s notice, such Alternate Lender will pay the amount of such shortfall to the
applicable Managing Agent for deposit into the Downgrade Collateral Account or
provide a substitute or additional direct pay irrevocable letter of credit to cover
such shortfall.
(b) Application of Funds in Downgrade Collateral Account. If any Alternate Lender
in any Lender Group shall be required pursuant to subsection (a) to fund a Downgrade
Draw, then the related Managing Agent shall apply the monies in the Downgrade
Collateral Account applicable to such Alternate Lender’s share of Loans required to
be made by the related Alternate Lenders, to any Assignment Amount payable by such
Alternate Lender pursuant to Section 7.1 at the times, in the manner and subject to
the conditions precedent set forth in this Credit Agreement. The deposit of monies
in such Downgrade Collateral Account by any Alternate Lender shall not constitute a
Loan or the payment of any Assignment Amount (and such Alternate Lender shall not be
entitled to interest on such monies except as provided below in this Section
7.2(b)), unless and until (and then only to the extent that) such monies are used to
fund Loans or to pay any Assignment Amount pursuant to this Section 7.2(b). The
amount on deposit in such Downgrade Collateral Account shall be invested by the
related Managing Agent in investments selected by such Managing Agent in its sole
discretion and eligible in accordance with the applicable conduit program documents.
Such Managing Agent shall remit to such Alternate Lender, on the last Business Day
of each month, the interest income actually received thereon. Unless required to be
released as provided below in this subsection, payments or deposits received by such
Managing Agent in respect of such Alternate Lender’s portion of the Loans shall be
deposited in the Downgrade Collateral Account for such Alternate Lender. Amounts on
deposit in such Downgrade Collateral Account shall be released to such Alternate
Lender (or the stated amount of the letter of credit delivered by such Alternate
Lender pursuant to subsection (a) above may be reduced) within one (1) Business Day
after each Settlement Date following the Maturity Date to the extent that, after
giving effect to the distributions made and received by the Lenders on such
Settlement Date, the amount on deposit in such Downgrade Collateral Account would
exceed the Alternate Lender’s Alternate Lender Pro Rata Share (determined as of the
day prior to the Maturity Date) of the sum of all Portions of Loans then funded by
the related Conduit Lender, plus the related Interest Component, plus such Alternate
Lender’s Pro Rata Share of the Letter of Credit Liability. All amounts remaining in
such Downgrade Collateral Account shall be released to such Alternate Lender no
later than the Business Day immediately following the earliest of: (i) the
effective date of any replacement of such Alternate Lender or removal of such
Alternate Lender as a party to this Credit Agreement; (ii) the date on which such
Alternate Lender shall furnish the related Managing Agent with confirmation that
such Alternate Lender shall have short term debt ratings of at least “A-2” or “P-2”
from S&P and Moody’s, respectively,
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without negative credit implications; and
(iii) the Stated Maturity Date. Nothing in this Section 7.2 shall affect or
diminish in any way any such downgraded Alternate Lender’s Commitment to Borrower or
its related Conduit Lender or such downgraded Alternate Lender’s other obligations
and liabilities hereunder and under the other Loan Documents.
(c) Program Support Agreement Downgrade Provisions. Notwithstanding the other
provisions of this Section 7.2, an Alternate Lender shall not be required to make a
Downgrade Draw (or provide for the issuance of a letter of credit in lieu thereof)
pursuant to Section 7.2(a) at a time when such Alternate Lender has a downgrade
collateral account (or letter of credit in lieu thereof) established pursuant to the
Program Support Agreement to which it is a party in an amount at least equal to its
Commitment, and the related Managing Agent may apply monies in such downgrade
collateral account in the manner described in Section 7.2(b) as if such downgrade
collateral account were a Downgrade Collateral Account.
8. CONDITIONS PRECEDENT TO LENDING
8.1. Obligation of Lenders. The obligation of each Lender and the Letter of Credit Issuer to
make the initial Loan and issue the first Letter of Credit hereunder is subject to Administrative
Agent’s receipt of the following:
(a) Credit Agreement. This Credit Agreement, duly executed and delivered by Borrower,
Managing Member, Guarantor and Pledgor;
(b) Notes. Notes drawn to the order of each Managing Agent, duly executed and
delivered by Borrower and Managing Member;
(c) Security Agreements. (i) The Borrower and Managing Member Security Agreement, duly
executed and delivered by Borrower and Managing Member and (ii) any other security agreement
or related document reasonably requested by Administrative Agent.
(d) Capital Contributions Pledge Agreement. (i) The Capital Contributions Pledge
Agreement, duly executed and delivered by Pledgor; and (ii) any other similar agreement or
related document reasonably requested by Administrative Agent.
(e) Guaranty of Capital. The Guaranty of Capital, duly executed and delivered by
Guarantor.
(f) Account Documents. The Account Assignment, duly executed and delivered by
Borrower;
(g) Financing Statements.
(i) searches of Uniform Commercial Code (“UCC”) filings in each jurisdiction
where a filing has been or would need to be made in order to perfect the
Administrative Agent’s security interest on behalf of the Secured Parties in the
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Collateral, copies of the financing statements on file in such jurisdictions and
evidence that no Liens exist, or, if necessary, copies of proper financing
statements, if any, filed on or before the date hereof necessary to terminate all
security interests and other rights of any Person in any Collateral previously
granted; and
(ii) duly authorized UCC financing statements and any amendments thereto, for
each appropriate jurisdiction as is necessary, in the Administrative Agent’s sole
discretion, to perfect the Administrative Agent’s security interest on behalf of the
Secured Parties in the Collateral;
(h) Responsible Officer Certificates. A certificate from a Responsible Officer of each
Credit Party, stating that: (i) all of the representations and warranties contained in
Section 9 hereof and the other Loan Documents made by such Credit Party are true and correct
in all material respects as of such date (except to the extent of changes in facts or
circumstances that have been disclosed to Lenders and do not constitute an Event of Default
or, to its knowledge, a Potential Default under this Credit Agreement or any other Loan
Document); and (ii) no event has occurred and is continuing, or would result from the
Borrowing or issuance of the Letters of Credit, as applicable, which constitutes an Event of
Default or, to its knowledge, a Potential Default;
(i) Borrower’s Operating Agreement. A signed certificate of a Responsible Officer of
Borrower who shall certify that attached thereto is a true and complete copy of the
Operating Agreement of Borrower as in effect on the date hereof, together with certificates
of existence and good standing (or other similar instruments) of Borrower as in effect on
the date hereof;
(j) Managing Member’s Formation Documents. A signed certificate of a Responsible
Officer of Managing Member who shall certify that attached thereto are true and complete
copies of the Constituent Documents of Managing Member, together with certificates of
existence and good standing (or other similar instruments) of Managing Member as in effect
on the date hereof;
(k) Guarantor’s Formation Documents. A signed certificate of a Responsible Officer of
Guarantor who shall certify that attached thereto are true and complete copies of the
Constituent Documents of Guarantor together with certificates of existence and good standing
(or other similar instruments) of Guarantor as in effect on the date hereof;
(l) Pledgor’s Formation Documents. A signed certificate of a Responsible Officer of
Pledgor who shall certify that attached thereto are true and complete copies of the
Constituent Documents of Pledgor together with certificates of existence and good standing
(or other similar instruments) of Pledgor as in effect on the date hereof;
(m) Incumbency Certificate. From each Credit Party, a signed certificate of a
Responsible Officer, who shall certify the names of the Persons authorized, on the date
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hereof, to sign each of the Loan Documents and the other documents or certificates to be
delivered pursuant to the Loan Documents on behalf of such Credit Party, together with
the true signatures of each such Person. Administrative Agent may conclusively rely on such
certificate until it shall receive a further certificate canceling or amending the prior
certificate and submitting the signatures of the Persons named in such further certificate;
(n) Opinions of Counsel. (i) A favorable opinion of Robert Masters, Senior Vice
President and General Counsel of each Credit Party, as counsel to each Credit Party; (ii) a
favorable opinion of Berliner, Corcoran & Rowe, L.L.P., Maryland counsel to the Pledgor; and
(iii) an opinion of Mayer Brown LLP, special counsel to the Administrative Agent; each
covering such matters relating to the transactions contemplated hereby as reasonably
requested by Administrative Agent, and substantially in a form acceptable to Administrative
Agent;
(o) ERISA Certificate. A certificate from a Responsible Officer of the Credit Parties
confirming that the assets of the Credit Parties do not constitute plan assets by reason of
the fact that participation in the Credit Parties by “benefit plan investors” is not
“significant”, as such terms are defined in the Plan Asset Regulations;
(p) Investor Documents. Administrative Agent shall have received from each Included
Investor and Designated Investor: (i) a duly executed Investor Letter; (ii) a copy of such
Investor’s duly executed signature page to the Operating Agreement or Stockholders
Agreement, as applicable; and (iii) to the extent requested by Administrative Agent, true
and complete copies of the organizational documents of each Investor, or other documentation
in lieu thereof that is acceptable to Administrative Agent in its sole discretion.
Administrative Agent may waive one or more of the foregoing requirements with respect to
Designated Investors so long as Borrowers have made good faith efforts to obtain the same
without success;
(q) Fees; Costs and Expenses. Payment of all fees and other amounts due and payable on
or prior to the date hereof, including pursuant to the Fee Letter, and, to the extent
invoiced, reimbursement or payment of all reasonable expenses required to be reimbursed or
paid by Borrower hereunder, including the fees and disbursements invoiced through the date
hereof of Administrative Agent’s special counsel, Mayer Brown LLP;
(r) Advisory Committee Required Vote. Written evidence in form reasonably satisfactory
to the Administrative Agent that the Advisory Committee (as defined in the Operating
Agreement) has approved the Loans and Letters of Credit contemplated by this Credit
Agreement and the other Loan Documents as contemplated in Section 4.1(b) of the Operating
Agreement; and
(s) Additional Information. Such other information and documents as may reasonably be
required by Administrative Agent and its counsel, including any “Know Your Customer”
procedures as reasonably requested by the Lenders.
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8.2. Qualified Borrower Loans and Letters of Credit. The obligation of Lenders to advance a
Loan to a Qualified Borrower or to cause the issuance of a Letter of Credit for a Qualified
Borrower is subject to the conditions that:
(a) Qualified Borrower Promissory Note. Administrative Agent shall have received a
duly executed Qualified Borrower Promissory Note or Qualified Borrower Letter of Credit
Note, as applicable, complying with the terms and provisions hereof;
(b) Authorizations of Qualified Borrower. Administrative Agent shall have received
from the Qualified Borrower appropriate evidence of the authorization of the Qualified
Borrower approving the execution, delivery and performance of the Qualified Borrower
Promissory Note or the Qualified Borrower Letter of Credit Note, duly adopted by Qualified
Borrower, as required by law or agreement, and accompanied by a certificate of an authorized
Person of such Qualified Borrower stating that such authorizations are true and correct,
have not been altered or repealed and are in full force and effect;
(c) Incumbency Certificate. Administrative Agent shall have received from the
Qualified Borrower a signed certificate of the appropriate Responsible Officer of the
Qualified Borrower which shall certify the names of the Persons authorized to sign the
Qualified Borrower Promissory Note and the other documents or certificates to be delivered
pursuant to the terms hereof by such Qualified Borrower, together with the true signatures
of each such Person;
(d) Borrower Guaranty. Administrative Agent shall have received from Borrower a duly
executed Borrower Guaranty complying with the terms and provisions hereof;
(e) Opinion of Counsel to Qualified Borrower. Administrative Agent shall have received
a favorable opinion of counsel for the Qualified Borrower, in form and substance
satisfactory to Administrative Agent and addressed to Administrative Agent, that: (i) the
Qualified Borrower is duly organized and validly existing under the laws of the jurisdiction
of its formation; (ii) the subject Qualified Borrower Note has been duly authorized,
executed and delivered by the Qualified Borrower; (iii) the subject Qualified Borrower Note
is a valid and binding obligation and agreement of such Qualified Borrower, enforceable in
accordance with its terms, except to the extent that it may be limited by bankruptcy,
insolvency, moratorium and other laws affecting creditors’ rights generally, by general
equitable principles; and (iv) neither the execution nor delivery by Qualified Borrower of
the subject Qualified Borrower Note, and, if applicable, the Application and Agreement for
Letter of Credit, the performance by such Qualified Borrower of its obligations thereunder,
nor the compliance by Qualified Borrower with the terms and provisions thereof, will: (A)
contravene any provision of the general corporate law, or, if Qualified Borrower is a
partnership or another type of entity, the Managing Membership law or applicable law
governing such entity, of the jurisdiction of formation of such Qualified Borrower, or the
laws, statutes, rules or regulations of the State of New York or the United States of
America to which Qualified Borrower is subject, or conflict with, or result in any breach
of, any material agreement, mortgage,
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indenture, deed of trust or other instrument known to counsel to which Qualified
Borrower or its properties may be subject, or result in the creation of any mortgage, lien,
pledge or encumbrance in respect of any properties of Qualified Borrower; (B) contravene any
judgment, decree, license, order or permit applicable to Qualified Borrower; or (C) violate
any provision of the organizational documents of Qualified Borrower. Each Qualified
Borrower hereby directs its counsel to prepare and deliver such legal opinion to
Administrative Agent for the benefit of Lenders.
8.3. All Loans and Letters of Credit. The obligation of Lenders to advance each Borrowing or
the Letter of Credit Issuer to issue Letters of Credit hereunder is subject to the conditions that:
(a) Representations and Warranties. The representations and warranties set forth in
Section 9 hereof are true and correct in all material respects on and as of the date of the
advance of such Borrowing or issuance of such Letter of Credit, with the same force and
effect as if made on and as of such date (except to the extent of changes in facts or
circumstances that have been disclosed to Lenders and do not constitute an Event of Default
or a Potential Default under this Credit Agreement or any other Loan Document);
(b) No Default. No event shall have occurred and be continuing, or would result from
the Borrowing or the issuance of the Letter of Credit, which constitutes an Event of Default
or a Potential Default;
(c) Loan Notice. Administrative Agent shall have received a Loan Notice or Request for
Letter of Credit;
(d) Application. In the case of a Letter of Credit, the Letter of Credit Issuer shall
have received an Application and Agreement for Letter of Credit executed by Borrower or the
applicable Qualified Borrower and shall have countersigned the same; and
(e) Material Adverse Effect. No Material Adverse Effect has occurred and is
continuing.
9. REPRESENTATIONS AND WARRANTIES. To induce Lenders to make the Loans and cause the issuance of
Letters of Credit hereunder, each Credit Party represents and warrants to Lenders as to itself
that:
9.1. Organization and Good Standing of Borrower. Borrower is a limited liability company duly
organized and validly existing under the laws of the State of Delaware, has the requisite limited
liability company power and authority to own its properties and assets and to carry on its business
as now conducted, and is qualified to do business in each jurisdiction where the nature of the
business conducted or the property owned or leased requires such qualification or where the failure
to be so qualified to do business would have a Material Adverse Effect.
9.2. Organization and Good Standing of Managing Member. Managing Member is a limited
liability company duly organized and validly existing under the laws of the State of Delaware, has
the requisite limited liability company power and authority to own its properties
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and assets and to carry on its business as now conducted, and is qualified to do business in
each jurisdiction where the nature of the business conducted or the property owned or leased
requires such qualification or where the failure to be so qualified to do business would have a
Material Adverse Effect.
9.3. Organization and Good Standing of Guarantor. Guarantor is a limited partnership duly
organized and validly existing under the laws of the State of Delaware, has the requisite limited
partnership power and authority to own its properties and assets and to carry on its business as
now conducted, and is qualified to do business in each jurisdiction where the nature of the
business conducted or the property owned or leased requires such qualification or where the failure
to be so qualified to do business would have a Material Adverse Effect.
9.4. Organization and Good Standing of Pledgor. Pledgor is a corporation incorporated and
validly existing under the laws of the State of Maryland, has the requisite corporate power and
authority to own its properties and assets and to carry on its business as now conducted, and is
qualified to do business in each jurisdiction where the nature of the business conducted or the
property owned or leased requires such qualification or where the failure to be so qualified to do
business would have a Material Adverse Effect.
9.5. Authorization and Power. It has the partnership, limited liability company or corporate
power, as applicable, and requisite authority to execute, deliver, and perform its respective
obligations under this Credit Agreement, the Notes, and the other Loan Documents to be executed by
it. It is duly authorized to, and has taken all partnership, limited liability company and
corporate action, as applicable, necessary to authorize it to execute, deliver, and perform its
respective obligations under this Credit Agreement, the Notes, and such other Loan Documents and is
and will continue to be duly authorized to perform its respective obligations under this Credit
Agreement, the Notes, and such other Loan Documents.
9.6. No Conflicts or Consents. None of the execution and delivery of this Credit Agreement,
the Notes, or the other Loan Documents, the consummation of any of the transactions herein or
therein contemplated, or the compliance with the terms and provisions hereof or with the terms and
provisions thereof, will contravene or conflict, in any material respect, with any provision of
law, statute, or regulation to which it is subject or any judgment, license, order, or permit
applicable to it or any indenture, mortgage, deed of trust, or other agreement or instrument to
which it is a party or by which it may be bound, or to which it may be subject. No consent,
approval, authorization, or order of any court or Governmental Authority or third party is required
in connection with the execution and delivery by it of the Loan Documents to which it is a party or
to consummate the transactions contemplated hereby or thereby except for those that have been
obtained.
9.7. Enforceable Obligations. This Credit Agreement, the Notes and the other Loan Documents
to which it is a party are the legal and binding obligations of it, enforceable in accordance with
their respective terms, subject to Debtor Relief Laws and equitable principles.
9.8. Priority of Liens. The Collateral Documents create, as security for the Obligations,
valid and enforceable, exclusive, first priority security interests in and Liens on all of the
Collateral in which it has any right, title or interest, in favor of Administrative Agent for
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the benefit of the Secured Parties, subject to no other Liens, except as enforceability may be
limited by Debtor Relief Laws and equitable principles. Such security interests in and Liens on
the Collateral in which it has any right, title, or interest shall be superior to and prior to the
rights of all third parties in such Collateral, and, other than in connection with any future
change in its name, identity or structure, or the location of its chief executive office, no
further recordings or filings are or will be required in connection with the creation, perfection
or enforcement of such security interests and Liens, other than the filing of continuation
statements in accordance with applicable law. Each Lien referred to in this Section 9.7 is and
shall be the sole and exclusive Lien on the Collateral in which it has any right, title or
interest.
9.9. Financial Condition. Each Borrower Party has delivered to Administrative Agent: (a) the
most-recently available copies of the financial statements and reports described in Section 10.1;
or, with respect to such requirement on the Closing Date, if such statements and reports are not
then available (b) a pro forma balance sheet as of the Closing Date; in each case certified as true
and correct in all material respects by a Responsible Officer of such Borrower Party. Such
statements fairly present, in all material respects, the financial condition of such Borrower Party
as of the applicable date of delivery, and have been prepared in accordance with GAAP, except as
provided therein.
9.10. Full Disclosure. There is no material fact that any Credit Party has not disclosed to
Administrative Agent in writing which would reasonably be expected to result in a Material Adverse
Effect. No information heretofore furnished by any Credit Party in connection with this Credit
Agreement, the other Loan Documents or any transaction contemplated hereby or thereby contains any
untrue statement of a material fact that would reasonably be expected to result in a Material
Adverse Effect.
9.11. No Default. No event has occurred and is continuing which constitutes an Event of
Default or a Potential Default.
9.12. No Litigation. There are no actions, suits, investigations or legal, equitable,
arbitration or administrative proceedings pending, or to the knowledge of a Responsible Officer of
it, threatened, against such Credit Party that would reasonably be expected to result in a Material
Adverse Effect.
9.13. Material Adverse Change. No changes to it have occurred since the date of its most
recent financial statements delivered to Lenders which would reasonably be expected to result in a
Material Adverse Effect.
9.14. Taxes. To the extent that failure to do so would have a Material Adverse Effect, all
tax returns required to be filed by it in any jurisdiction have been filed and all taxes,
assessments, fees, and other governmental charges upon it or upon any of its respective properties,
income or franchises have been paid prior to the time that such taxes could give rise to a lien
thereon. There is no proposed tax assessment against it or any basis for such assessment which is
material and is not being contested in good faith.
9.15. Jurisdiction of Formation; Principal Office. (a) The jurisdiction of formation of
Borrower is Delaware; (b) the jurisdiction of formation of Managing Member is Delaware; (c)
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the jurisdiction of formation of Guarantor is Delaware; and (d) the jurisdiction of formation
of Pledgor is Maryland.
9.16. ERISA Compliance. It has not established nor does it maintain any Plan. (a) Each of
Credit Party and Guarantor is an Operating Company; or (b) the underlying assets of each Credit
Party do not otherwise constitute Plan Assets.
9.17. Compliance with Law. It is, to the best of its knowledge, in compliance in all material
respects with all material laws, rules, regulations, orders, and decrees which are applicable to it
or its properties, including, without limitation, Environmental Laws.
9.18. Hazardous Substances. To the knowledge of its Responsible Officers, it: (a) has not
received any notice or other communication or otherwise learned of any Environmental Liability
which would individually or in the aggregate reasonably be expected to have a Material Adverse
Effect arising in connection with: (i) any non-compliance with or violation of the requirements of
any Environmental Law by any Credit Party, or any permit issued under any Environmental Law to such
Credit Party; or (ii) the Release or threatened Release of any Hazardous Material into the
environment; and (b) to its knowledge, has threatened or actual liability in connection with the
Release or threatened Release of any Hazardous Material into the environment which would
individually or in the aggregate reasonably be expected to have a Material Adverse Effect.
9.19. Insider. It is not an “executive officer,” “director,” or “person who directly or
indirectly or acting through or in concert with one or more persons owns, controls, or has the
power to vote more than 10% of any class of voting securities” (as those terms are defined in 12
U.S.C. §375b or in regulations promulgated pursuant thereto) of any Lender, of a bank holding
company of which any Lender is a subsidiary, or of any subsidiary, of a bank holding company of
which any Lender is a subsidiary, of any bank at which any Lender maintains a correspondent
account, or of any bank which maintains a correspondent account with any Lender.
9.20. Properties. Each Credit Party has good title to, or valid leasehold interests in, all
its real and personal property material to its business, except for any defects that, individually
or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Each
Credit Party owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by such Credit Party and its
subsidiaries does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
9.21. Operating Structure. As of the date hereof, the sole Managing Member of Borrower is
Managing Member. The only members of Borrower and the only Stockholders of Pledgor are set forth
on Exhibit A attached hereto and incorporated herein by reference (or on a revised Exhibit A
delivered to Administrative Agent in accordance with Section 11.5 hereof), and the Capital
Commitment of each Investor is set forth on Exhibit A (or on such revised Exhibit A).
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9.22. Capital Commitments and Contributions. The aggregate amount of the Unfunded Capital
Commitments of all Investors as of the date hereof is as set forth on Exhibit A. The aggregate
amount of the Unfunded Capital Commitments of all Included Investors and Designed Investors
(separately) as of the date hereof is as set forth on Exhibit A. There are no Capital Call Notices
outstanding except as otherwise disclosed in writing to Administrative Agent. To its knowledge, no
Investor is in default under the Operating Agreement, Partnership Agreement or Stockholders
Agreement, as applicable. Prior to the date hereof, each Credit Party has satisfied all conditions
to its rights to make a Capital Call, including any and all conditions contained in its Constituent
Documents.
9.23. Fiscal Year. Its fiscal year is the calendar year.
9.24. Investment Company Act. It is not required to register as an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
9.25. Margin Stock. It is not engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock, and no proceeds of any Loan or Letter of Credit will be used:
(a) to purchase or carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock; (b) to reduce or retire any indebtedness which was
originally incurred to purchase or carry any such Margin Stock; or (c) for any other purpose which
might constitute this transaction a “purpose credit” within the meaning of Regulation T, U, or X.
Neither it nor any Person acting on its behalf has taken or will take any action which might cause
any Loan Document to violate Regulation T, U or X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act, in each case
as now in effect or as the same may hereafter be in effect.
9.26. Foreign Asset Control Laws. Neither it nor any Affiliate thereof, and no Investor or,
to its knowledge, Affiliate thereof, is a Person named on a list published by the Office of Foreign
Assets Control (“OFAC”) of the United States Treasury Department or is a Person with whom dealings
are prohibited under any OFAC regulations. To its knowledge, no Investor’s funds used in
connection with this transaction are derived from illegal or suspicious activities.
9.27. Brokers’ Fees. No Credit Party has dealt with any broker or finder with respect to the
transactions contemplated by the Loan Documents or otherwise in connection with the Loan Documents.
9.28. Solvency. Each Credit Party is, and after consummation of the transactions contemplated
by the Loan Documents will be, Solvent.
9.29. Managing Member Representation. Managing Member has received direct or indirect benefit
from the Loans and Letters of Credit evidenced by the Obligations and the grant of the security
interest in the collateral was a condition to granting such Loans and issuance of such Letters of
Credit.
9.30. Guarantor Representation. Guarantor has received direct or indirect benefit from the
Loans and Letters of Credit evidenced by the Obligations and the grant of the security
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interest in the collateral was a condition to granting such Loans and issuance of such Letters
of Credit.
9.31. Pledgor Representation. Pledgor has received direct or indirect benefit from the Loans
and Letters of Credit evidenced by the Obligations and the grant of the security interest in the
Collateral was a condition to granting such Loans and issuance of such Letters of Credit.
9.32. Investments. No investments made by any Credit Party or their subsidiaries, directly or
indirectly, are in violation of, or would cause a default under, the terms of the Operating
Agreement, the Partnership Agreement or the Stockholders Agreement.
9.33. Investor Documents. To the knowledge of each Credit Party after commercially reasonable
inquiry, each Investor Letter and Stockholders Agreement, as applicable, have been duly authorized
and executed by each Investor and constitute the legal, valid and binding obligations of each
Investor, enforceable against each Investor in accordance with their terms.
9.34. Advisory Committee. The Credit Parties confirm that the members of the Advisory
Committee (as defined in the Operating Agreement) as of the date hereof are Alan Forman, Verna Kuo,
Susan Meaney, Denise Strack and Laudan Nabizadeh.
10. AFFIRMATIVE COVENANTS. So long as Lenders have any commitment to lend hereunder or the Letter
of Credit Issuer has any obligation to cause the issuance of any Letters of Credit hereunder, and
until payment in full of the Notes and the performance in full of the Obligations under this Credit
Agreement and the other Loan Documents, Borrower and each other Credit Party, as applicable, each
agrees that, unless Administrative Agent shall otherwise consent in writing based upon the approval
of the Required Lenders (unless the approval of Administrative Agent alone or a different number of
Lenders is expressly permitted below):
10.1. Financial Statements, Reports and Notices. Borrower shall deliver to Administrative
Agent sufficient copies for each Lender of the following:
(a) Annual Statements. As soon as reasonably available and in any event within one
hundred twenty (120) days after the end of each fiscal year of Borrower, audited,
unqualified financial statements of Borrower, including a consolidated balance sheet of
Borrower and its consolidated subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations for such fiscal year prepared by independent public
accountants of nationally recognized standing;
(b) Quarterly Statements. As soon as available and in any event within sixty (60) days
after the end of each quarter of each fiscal year of Borrower, an unaudited consolidated
balance sheet of Borrower and its consolidated subsidiaries as of the end of such quarter
and the related unaudited consolidated statements of operations for such quarter;
(c) Borrowing Base Certificate. Concurrently with the delivery of each Loan Notice or
Request for Letter of Credit and each annual and quarterly report referenced in Sections
10.1(a) and 10.1(b) hereof, and as of the last calendar day of any calendar month when no
Borrowing has been made during such calendar month, a
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Borrowing Base Certificate signed by a Responsible Officer of Borrower and Managing
Member: (i) setting forth the Capital Contributions and Unfunded Capital Commitments of all
of the Investors and a calculation of the Available Loan Amount (all as of the end of the
relevant period); (ii) specifying changes, if any, in the names of Investors; and (iii)
listing Investors who have not delivered Investor Letters or with respect to Subsequent
Investors, who have not satisfied the conditions of Section 11.5(c) hereof;
(d) Compliance Certificate. Simultaneously with the delivery of the reports described
in clauses (a) and (b) above, a
compliance certificate (a “Compliance
Certificate”),
certified by a Responsible Officer of Borrower to be true and correct, substantially in the
form of Exhibit O attached hereto (with blanks appropriately completed in conformity
herewith): (i) stating that such officer is familiar with the terms and provisions of the
Loan Documents; (ii) certifying that such financial statements fairly present the financial
condition and the results of operations of the Borrower on the dates and for the periods
indicated, on the basis of GAAP, subject, in the case of interim financial statements, to
normally recurring year-end adjustments; (iii) stating that the Borrowers are in compliance
with all covenants in Section 10 hereof, including the covenants set forth in Section 10.11,
and containing the calculations evidencing such compliance; (iv) stating whether any Event
of Default or Potential Default exists on the date of such certificate and, if any Event of
Default or Potential Default then exists, setting forth the details thereof and the action
which the Credit Parties are taking or propose to take with respect thereto; (v) setting
forth the Unfunded Capital Commitments of all Investors (breaking out Included Investors and
Designated Investors) and a calculation of the Available Loan Amount (all as of the end of
the relevant period); (vi) specifying changes, if any, in the name of any Investor or in the
identity of any Investor, by merger or otherwise; and (vii) listing Investors which have
been subject to an Exclusion Event.
(e) ERISA Notices. Promptly upon any Credit Party obtaining knowledge or a reasonable
belief that its assets are, or are about to become, Plan Assets, such Credit Party shall
deliver written notice thereof to Administrative Agent (an “ERISA Event Notice”), and shall,
in such notice, or in subsequent written notices as events develop, notify Administrative
Agent of any actions contemplated by in connection therewith. Each Credit Party shall,
simultaneously with the delivery of any ERISA Notice to any Investors, deliver a copy of the
same to Administrative Agent;
(f) ERISA Certification. Annually (to be delivered within forty-five (45) days
following each annual valuation period of the Credit Parties and with the Compliance
Certificate of Borrower pursuant to Section 10.1(d)), a certification from a Responsible
Officer of the Credit Parties prepared in consultation with counsel that the assets of the
Credit Parties do not constitute Plan Assets;
(g) Reporting Relating to Investors. Promptly upon the receipt thereof, copies of all
financial statements, notices of default, notices relating in any way to an Investor’s
funding obligation and notices containing any reference to misconduct of any Credit Party,
sent to or received by a Borrower and/or any Credit Party from an Investor; and
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(h) Other Reporting. Simultaneously with delivery to the Investors, copies of all
other material financial statements, appraisal reports, notices, and other matters at any
time or from time to time prepared by a Credit Party and furnished to the Investors,
including, without limitation, any notice of default, notice of election or exercise of any
rights or remedies under the Operating Agreement, the Partnership Agreement, the
Stockholders Agreement, the Investor Letters or the Constituent Documents of any Credit
Party, or any notices relating in any way to any Investor’s Capital Commitment, and any
notice relating in any way to the misconduct of any Credit Party.
10.2. Payment of Taxes. Each Credit Party will pay and discharge all taxes, assessments, and
governmental charges or levies imposed upon it, upon its income or profits, or upon any property
belonging to it before delinquent, if such failure would have a Material Adverse Effect; provided,
however, that no Credit Party shall be required to pay any such tax, assessment, charge, or levy if
and so long as the amount, applicability, or validity thereof shall currently be contested in good
faith by appropriate proceedings and appropriate reserves therefor have been established.
10.3. Maintenance of Existence and Rights. Each Credit Party will preserve and maintain its
existence. Each Credit Party shall further preserve and maintain all of its rights, privileges,
and franchises necessary in the normal conduct of its business and in accordance with all valid
regulations and orders of any Governmental Authority the failure of which would have a Material
Adverse Effect.
10.4. Notice of Default. Each Credit Party will furnish to Administrative Agent, promptly
upon becoming aware of the existence of any condition or event which constitutes an Event of
Default or a Potential Default (including, without limitation, notice from the Investors of any
Credit Party that the Investors intend to seek a “Cause Event” as defined in the Operating
Agreement, Partnership Agreement and Stockholders Agreement, a written notice specifying the nature
and period of existence thereof and the action which the Credit Parties are taking or propose to
take with respect thereto. Each Credit Party shall promptly notify Administrative Agent in writing
upon becoming aware: (a) that any Investor has violated or breached any material term of the
Operating Agreement, Partnership Agreement or Stockholders Agreement, as applicable, or has become
a Defaulting Investor; or (b) of the existence of any condition or event which, with the lapse of
time or giving of notice or both, would cause an Investor to become a Defaulting Investor.
10.5. Other Notices. Each Credit Party will, promptly upon receipt of actual knowledge
thereof by a Responsible Officer, notify Administrative Agent of any of the following events that
would reasonably be expected to result in a Material Adverse Effect: (a) any change in the
financial condition or business of such Credit Party; (b) any default by such Credit Party under
any material agreement, contract, or other instrument to which such Credit Party is a party or by
which any of its properties are bound, or any acceleration of the maturity of any material
indebtedness owing by such Credit Party; (c) any uninsured claim against or affecting such Credit
Party or any of its properties; (d) the commencement of, and any material determination in, any
litigation with any third party or any proceeding before any Governmental Authority affecting such
Credit Party; (e) any Environmental Complaint or any claim, demand, action, event, condition,
report or investigation indicating any potential or actual liability of such Credit
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Party arising in connection with: (i) the non-compliance with or violation of the requirements
of any Environmental Law or any permit issued under any Environmental Law; or (ii) the Release or
threatened Release of any Hazardous Material into the environment; (f) the existence of any
Environmental Lien on any Properties or assets of such Credit Party; (g) any material remedial
action taken by any Credit Party in response to any order, consent decree or judgment of any
Governmental Authority or any Environmental Liability; or (h) the listing of any of such Credit
Party’s Properties on CERCLIS to the extent that such Credit Party obtains knowledge of such
listing, whether or not such listing would reasonably be expected to result in a Material Adverse
Effect.
10.6. Compliance with Loan Documents, Operating Agreement, Partnership Agreement and
Stockholders Agreement. Unless otherwise approved in accordance with the terms of this Credit
Agreement (which approval, by such terms, may require more or fewer Lenders than the Required
Lenders), each Credit Party will promptly comply with any and all covenants and provisions of this
Credit Agreement, the Notes, and all of the other Loan Documents executed by it. Each Borrower
Party will use the proceeds of any Capital Call Notices only for such purposes as are permitted by
its Constituent Documents.
10.7. Books and Records; Access. Each Credit Party will give any representative of
Administrative Agent, Managing Agent or Lenders, or any of them, reasonable access during all
business hours to, and permit representatives to examine, copy, or make excerpts from, any and all
books, records, and documents in the possession of such Credit Party and relating to its affairs,
and to inspect any of the properties of such Credit Party.
10.8. Compliance with Law. Each Credit Party will comply in all material respects with all
material laws, rules, regulations, and all orders of any Governmental Authority, including,
Environmental Laws and ERISA.
10.9. Insurance. Each Credit Party will maintain workmen’s compensation insurance, liability
insurance, and insurance on its present and future properties, assets, and business against such
casualties, risks, and contingencies, and in such types and amounts, as are consistent with
customary practices and standards of their industry and the failure of which to maintain could have
a Material Adverse Effect.
10.10. Authorizations and Approvals. Each Credit Party will promptly obtain, from time to
time at its own expense, all such governmental licenses, authorizations, consents, permits and
approvals as may be required to enable such Credit Party to comply with its respective obligations
hereunder, under the other Loan Documents, the Operating Agreement, the Partnership Agreement, the
Stockholders Agreement and its respective Constituent Documents.
10.11. Maintenance of Liens. Each Credit Party shall perform all such acts and execute all
such documents as Administrative Agent may reasonably request in order to enable the Secured
Parties to report, file, and record every instrument that Administrative Agent may deem necessary
in order to perfect and maintain the Secured Parties’ Liens and security interests in the
Collateral and otherwise to preserve and protect the rights of Secured Parties under the Collateral
Documents.
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10.12. Further Assurances. Each Credit Party will make, execute or endorse, and acknowledge
and deliver or file or cause the same to be done, all such vouchers, invoices, notices,
certifications, and additional agreements, undertakings, conveyances, transfers, assignments,
financing statements, or other assurances, and take any and all such other action, as
Administrative Agent may, from time to time, reasonably deem necessary in connection with this
Credit Agreement or any of the other Loan Documents, the obligations of the Credit Parties
hereunder or thereunder, or for better assuring and confirming unto Secured Parties all or any part
of the security for any of such obligations anticipated herein.
10.13. Investor Financial and Rating Information. Each Credit Party shall request, from each
Investor (without duplication), financial information required under the applicable Investor
Letter, as agreed from time to time with Administrative Agent, and shall, upon receipt of such
information, promptly deliver same to Administrative Agent, or shall promptly notify Administrative
Agent of its failure to timely obtain such information. The Credit Parties will promptly notify
Administrative Agent in writing (but in no event later than five (5) Business Days) after: (a)
becoming aware of: (i) any decline in the Rating of any Included Investor, or decline in the
capital status of any Included Investor that is a bank holding company, whether or not such change
results in an Exclusion Event and (ii) any other Exclusion Event; and (b) becoming aware of the
existence of any condition or event which, with the lapse of time or giving of notice or both,
would cause an Exclusion Event.
10.14. Certain Included Investor Requirements. In addition to the other requirements of this
Credit Agreement, each Included Investor that is: (i) organized under the laws of any jurisdiction
other than the United States of America or any state thereof shall deliver to Administrative Agent
a written submission to the jurisdiction of a United States Federal District Court and a United
States state court with respect to any litigation arising out of or in connection with its Investor
Letter or any Constituent Document of any Credit Party (each submission to be in form and substance
reasonably satisfactory to Administrative Agent, including provisions relating to waiver of venue,
waiver of defense of inconvenient forum, and consent to service of process; or (ii) a Governmental
Authority or an instrumentality of a Governmental Authority or majority-owned by a Governmental
Authority or otherwise entitled to any immunity in respect of any litigation in any jurisdiction,
court or venue, shall deliver to Administrative Agent a written waiver (in form and substance
reasonably satisfactory to Administrative Agent) of any such claim of immunity.
10.15. Covenants of Qualified Borrowers. The covenants and agreements of Qualified Borrowers
hereunder shall be binding and effective only upon and after the execution and delivery of a
Qualified Borrower Note by such Qualified Borrower.
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11. NEGATIVE COVENANTS. So long as Lenders have any commitment to lend hereunder or the Letter of
Credit Issuer has any obligation to cause the issuance of any Letter of Credit hereunder, and until
payment and performance in full of the Obligations under this Credit Agreement and the other Loan
Documents, each Credit Party agrees that, without the written consent of Administrative Agent,
based upon the approval of Required Lenders (unless the approval of Administrative Agent alone or a
different number of Lenders is expressly permitted below):
11.1. Mergers. No Credit Party will merge or consolidate with or into any Person, unless such
Credit Party is the surviving entity; provided, however, that any such merger (a) must be duly
authorized under the Constituent Documents of the applicable Credit Party or the applicable
managing member or general partner, as applicable, and (b) must not adversely affect the
enforceability of the Capital Commitments and the Investor Letters of the Investors in the
applicable Credit Party. No Credit Party will take any action to dissolve, terminate, or
liquidate, including, without limitation, any action to sell or dispose of all or substantially all
of its property..
11.2. Negative Pledge. Without the approval of all Lenders, no Credit Party will create or
suffer to exist any Lien upon the Collateral, other than the first priority security interest in
and upon the Collateral (or any portion thereof) to Administrative Agent for the benefit of the
Secured Parties.
11.3. Fiscal Year and Accounting Method. Without the prior written consent of Administrative
Agent alone (such approval not to be unreasonably withheld or delayed), no Credit Party will change
its fiscal year or method of accounting.
11.4. Constituent Documents. Without the prior written consent of Administrative Agent
consistent with this Section 11.4, no Credit Party shall alter, amend, modify, terminate, or change
any provision of its Constituent Documents affecting such Credit Party’s or the Investors’ debts,
duties, obligations, and liabilities, and the rights, titles, security interests, liens, powers and
privileges of any Credit Party, Administrative Agent or Secured Parties, in each case relating to
this Agreement, the Obligations, Capital Call Notices, Capital Commitments, Capital Contributions
or Unfunded Capital Commitments; or amend the terms of Articles V or XI of the Operating Agreement
or Section 6 of the Stockholders Agreement (or comparable provisions regarding leverage) (each an
“adverse amendment”); or suspend, reduce, excuse or terminate any Investor’s Unfunded Commitments.
With respect to any proposed amendment, modification or change to any Constituent Document, the
applicable Credit Party shall notify Administrative Agent of such proposal. Administrative Agent
shall determine, in its sole discretion (that is, the determination of the Lenders shall not be
required) on Administrative Agent’s good faith belief, whether such proposed amendment,
modification or change to such Constituent Document is an adverse amendment, and shall use
reasonable efforts to notify such Credit Party of its determination within five (5) Business Days
of the date on which it received such notification pursuant to Section 14.7. If Administrative
Agent determines that the proposed amendment is an adverse amendment, the approval of the Required
Lenders and Administrative Agent will be required (unless the approval of all Lenders is required
consistent with the terms of Section 11.6), and Administrative Agent shall promptly notify the
Lenders of such request for such approval, distributing, as appropriate, the proposed amendment and
any other relevant
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information provided by such Credit Party, to which the Lenders will respond to within ten
(10) Business Days. If Administrative Agent determines that the proposed amendment is not an
adverse amendment, such Credit Party may make such amendment without the consent of Lenders.
Notwithstanding the foregoing, without the consent of Administrative Agent or the Lenders, such
Credit Party may amend its Constituent Documents: (i) to admit new Investors to the extent
permitted by this Credit Agreement; and (ii) to reflect transfers of interests permitted by this
Credit Agreement.
11.5. Transfer by, or Admission of, Investors.
(a) Transfer of Equity Interest. Any transfer of an Equity Interest: (i) by any
Investor to any of its affiliates shall be made with prior written notice to Administrative
Agent promptly upon any Credit Party being aware of such proposed transfer; and (ii) by any
Investor to any other Person, with prior written notice to Administrative Agent at least
twenty (20) Business Days prior to the proposed date of transfer, in each case provided that
the transferee is not named on a list published by OFAC. In the event that the applicable
transferee does not itself qualify as an Included Investor or Designated Investor or if the
consummation of such transfer would require a mandatory prepayment pursuant to Section
2.1(d) for any reason, the Credit Parties will issue Capital Call Notices in an amount
sufficient to cure such Implicit Borrowing Base Deficit and will pay the mandatory
prepayment prior to permitting the consummation of any such transfer.
(b) Admission of Investors. No Credit Party shall admit any Person as an additional
Investor without the prior written consent of Administrative Agent acting alone, such
consent not to be unreasonably withheld.
(c) Documentation Requirements. Each Borrower shall require that: (i) any Person
admitted as a substitute or new Included Investor or Designated Investor (whether due to a
transfer by an existing Investor or otherwise) (a “Subsequent Investor”) shall, as a
condition to such admission, deliver an Investor Letter and provide other documentation
similar to that described in Section 8.1(p) satisfactory to Administrative Agent in its
reasonable discretion; (ii) comply with all requirements herein for an Included Investor or
Designated Investor, as applicable, and (iii) any existing Included Investor or Designated
Investor that is a transferee from another Investor shall provide confirmation of its
obligations under its Investor Letter with respect to any increase in its Capital Commitment
relating to such transfer, and, to the extent not addressed in the documentation previously
delivered by such Investor, evidence of its authority to assume such increased Capital
Commitment, all as satisfactory to Administrative Agent in its reasonable discretion. Any
substitute or new Investor that is unable to comply with the requirements of this Section
11.5(c) shall be a Non-Included Investor and be excluded from the Borrowing Base. In the
event any Person is admitted as a Subsequent Investor, Borrowers will promptly deliver to
Administrative Agent a revised Exhibit A to this Credit Agreement, containing the names and
addresses of each Investor and the Capital Commitments of each.
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11.6. Capital Commitments. No Credit Party shall: (a) without the prior written consent of
Administrative Agent, which may be withheld in its sole discretion, cancel, reduce, excuse, suspend
or defer the Capital Commitment of any non-Included Investor; and (b) without the prior written
approval of Administrative Agent and all Lenders: (i) issue any Capital Call Notices other than as
contemplated by Section 5.2(c); (ii) cancel, reduce, excuse, suspend or defer the Capital
Commitment of any Included Investor or Designated Investor; or (iii) excuse any Investor from or
permit any Investor to defer any Capital Contribution, if the proceeds from the related Capital
Call Notice are to be applied to the Obligations hereunder.
11.7. ERISA Compliance. No Credit Party shall establish or maintain any Plan. Without the
approval of all Lenders, no Credit Party will take any action that would cause its underlying
assets to constitute Plan Assets.
11.8. Environmental Matters. Except for such conditions as are in or will promptly be brought
into compliance with relevant Environmental Laws or otherwise would not reasonably be expected to
result in a Material Adverse Effect, no Credit Party: (a) shall cause any Hazardous Material to be
generated, placed, held, located or disposed of on, under or at, or transported to or from, any
Property of any Credit Party in material violation of Environmental Law; or (b) shall permit any
such Property to ever be used as a dump site or storage site (whether permanent or temporary) for
any Hazardous Material in material violation of Environmental Law.
11.9. Dissolution. Without the prior written consent of the Administrative Agent and all
Lenders, no Credit Party will take any action to dissolve or terminate any Credit Party.
11.10. Limitations on Dividends and Distributions.
(a) No Credit Party shall declare or pay any dividends or distributions except as
permitted under its Constituent Documents.
(b) No Credit Party shall declare or pay any dividends or distributions if: (i) any
Event of Default exists; or (ii) a Potential Default exists.
11.11. Limitation on Debt. (a) Borrower shall not, without the prior written consent of the
Administrative Agent and the Required Lenders, incur, together with its Affiliates on a
consolidated basis in accordance with GAAP, (i) aggregate Indebtedness (including the Obligations)
in an amount in excess of that permitted under the Operating Agreement; or (ii) any recourse debt
(other than its obligations under this Credit Agreement) in excess of twenty-five (25%) percent of
amounts under Section 11.11(a)(i); and (b) Pledgor shall not incur any Indebtedness (other than its
obligations under this Credit Agreement).
11.12. Limitation on Managing Member’s Activities. The Managing Member shall not: (a) without
the prior written consent of the Administrative Agent and the Required Lenders: (i) take any
actions that will cause the Managing Member or the Borrower to dissolve, terminate, merge or
consolidate; or (ii) create or suffer to exist any mortgage, pledge, lien, or other security
interest upon its Membership Interest in Borrower; or (b) transfer its Membership Interest in
Borrower without the prior written consent of Administrative Agent and the Required Lenders.
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11.13. Limitation on Pledgor’s Activities. Pledgor shall not: (a) without the prior written
consent of the Administrative Agent and the Required Lenders: (i) take any actions that will cause
the Pledgor to dissolve, terminate, merge or consolidate; or (ii) create or suffer to exist any
mortgage, pledge, lien, or other security interest upon its Membership Interest in Borrower; or (b)
transfer its Membership Interest in Borrower without the prior written consent of Administrative
Agent and the Required Lenders.
11.14. Limitation on Guarantor’s Activities. Guarantor shall not: (a) without the prior
written consent of the Administrative Agent and the Required Lenders: (i) take any actions that
will cause the Guarantor or Acadia Realty Acquisition III LLC to dissolve, terminate, merge or
consolidate; or (ii) create or suffer to exist any mortgage, pledge, lien, or other security
interest upon its equity interest in Acadia Realty Acquisition III LLC or permit Acadia Realty
Acquisition III LLC to create or suffer to exist any mortgage, pledge, lien, or other security
interest upon its Membership Interest in Borrower; or (b) transfer its equity interest in Acadia
Realty Acquisition III LLC or permit Acadia Realty Acquisition III LLC to transfer its Membership
Interest in Borrower, in each case without the prior written consent of Administrative Agent and
the Required Lenders.
11.15. Investor Withdrawal. No Credit Party shall take any action which would permit any
Investor to withdraw (unless a prepayment is made such that no Implicit Borrowing Base Deficit
would occur as a result of such withdrawal) from any Credit Party in accordance with the Operating
Agreement, Partnership Agreement, or the Stockholders Agreement, as applicable.
12. EVENTS OF DEFAULT
12.1. Events of Default. An “Event of Default” shall exist if any one or more of the
following events (herein collectively called “Events of Default”) shall occur and be continuing:
(a) (i) Borrower or any Qualified Borrower shall fail to pay when due any principal of
the Obligations; or (ii) any Credit Party or any Qualified Borrower shall fail to pay when
due any interest on the Obligations or any fee, expense, or other payment required
hereunder, including, without limitation, payment of cash for deposit as cash collateral as
required hereunder, and such failure under this clause (ii) shall continue for one (1)
Business Day thereafter (except for the failure to pay the Obligations in full on the
Maturity Date for which no notice shall be required and except for the failure to prepay any
amount required under Section 2.1(d) hereof for which no additional notice shall be
required);
(b) any representation or warranty made by any Credit Party or any Qualified Borrower
under this Credit Agreement, or any of the other Loan Documents executed by either of them,
or in any certificate or statement furnished or made to Lenders or any of them by any Credit
Party or any Qualified Borrower pursuant hereto or in connection herewith or with the Loans,
shall prove to be untrue or inaccurate in any material respect as of the date on which such
representation or warranty is made;
(c) default shall occur in the performance of any of the covenants or agreements
contained herein (other than the covenants contained in Section 2.1(d) or
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Section 11), or of the covenants or agreements of any Credit Party or any Qualified
Borrower contained in any other Loan Documents executed by such Person, and such default
shall continue uncured to the satisfaction of Administrative Agent for a period of thirty
(30) days after written notice thereof has been given by Administrative Agent to Borrower,
unless it cannot be cured within thirty (30) days and provided the party is diligently
proceeding to cure (provided that such thirty (30)-day cure period shall not apply
respecting covenants of a Credit Party relating to notices to be given by a Credit Party,
but a three (3)-day grace period shall apply);
(d) default shall occur in the performance of the covenants or agreements of Borrower
or any Qualified Borrower contained in Section 2.1(d) or Section 11;
(e) any of the Loan Documents executed by a Credit Party or any Qualified Borrower
shall cease, in whole or in material part, to be legal, valid, binding agreements
enforceable against the Credit Parties or such Qualified Borrower in accordance with the
terms thereof or shall in any way be terminated or become or be declared ineffective or
inoperative or shall in any way whatsoever cease to give or provide the respective liens,
security interest, rights, titles, interest, remedies, powers, or privileges intended to be
created thereby;
(f) default shall occur in the payment of any recourse indebtedness or Guaranty
Obligation of Borrower or Guarantor (other than the Obligations), in an aggregate amount
greater than or equal to $10,000,000, and such default shall continue for more than the
applicable period of grace, if any;
(g) any Credit Party shall: (i) apply for or consent to the appointment of a receiver,
trustee, custodian, intervenor, or liquidator of itself or of all or a substantial part of
its assets; (ii) file a voluntary petition in bankruptcy or admit in writing that it is
unable to pay its debts as they become due; (iii) make a general assignment for the benefit
of creditors; (iv) file a petition or answer seeking reorganization or an arrangement with
creditors or to take advantage of any Debtor Relief Laws; (v) file an answer admitting the
material allegations of, or consent to, or default in answering, a petition filed against it
in any bankruptcy, reorganization or insolvency proceeding; or (vi) take partnership or
corporate action for the purpose of effecting any of the foregoing;
(h) a case or proceeding shall be commenced, without application or consent of any
Credit Party, in any court, seeking an order for relief under the Bankruptcy Code, to
adjudicate if bankrupt or insolvent or seeking the liquidation, reorganization, debt
arrangement, dissolution, winding up or composition or readjustment of debts of any Credit
Party, the appointment of a trustee, receiver, custodian, liquidator, assignee or sequestor
(or similar official) for such Person or all or substantially all of the assets of such
Person, or any similar action with respect to such Person under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, and such case or
proceeding shall continue undismissed, or unstayed or in effect, for a period of sixty (60)
consecutive days or results in the entering of an order for relief or any such adjudication
or appointment
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(i) any final judgment(s) for the payment of money in excess of the sum of $5,000,000
in the aggregate shall be rendered against any Credit Party and such judgment or judgments
remain unsatisfied for a period of sixty (60) days or would reasonably be expected to have a
Material Adverse Effect, unless covered by insurance or unless being appealed and the
applicable Credit Party or such Qualified Borrower has posted a bond or cash collateral;
(j) Managing Member shall cease to be the sole Managing Member of Borrower or Managing
Member shall be removed as the Managing Member of Borrower;
(k) Managing Member shall repudiate, challenge, or declare unenforceable its obligation
to make contributions to the capital of Borrower pursuant to its Capital Commitments or
shall otherwise disaffirm the provisions of the Operating Agreement;
(l) there shall occur any change in the condition (financial or otherwise) of any
Credit Party which, in the reasonable judgment of Administrative Agent, has a Material
Adverse Effect (it being understood that the occurrence of Exclusion Events in respect of
one or more Investors is not, in and of itself, an event constituting a Material Adverse
Effect);
(m) Pledgor shall repudiate, challenge, or declare unenforceable its obligation to make
contributions to the capital of Borrower pursuant to its Capital Commitments or shall
otherwise disaffirm the provisions of the Operating Agreement or shall repudiate, challenge,
declare unenforceable or default under its obligations under the Capital Contributions
Pledge Agreement;
(n) the removal of the Managing Member pursuant to Section 10.2(a) of the Operating
Agreement or the removal of the Acadia D.R. Management Inc. pursuant to Section 5.2 of the
Stockholders Agreement;
(o) Guarantor shall repudiate, challenge declare unenforceable or default under its
obligations under the Guaranty of Capital; or
(p) the Borrowing Base Deficit is greater than zero (0) and is not eliminated within
one (1) Business Day.
12.2. Remedies Upon Event of Default. If an Event of Default shall have occurred and be
continuing, then Administrative Agent may, and, upon the direction of the Required Lenders, shall:
(a) suspend the Commitments of Lenders until such Event of Default is cured; (b) terminate the
Commitment of Lenders hereunder; (c) declare the principal of, and all interest then accrued on,
the Obligations to be forthwith due and payable (including the liability to fund the Letter of
Credit Liability pursuant to Section 2.5(g) hereof), whereupon the same shall forthwith become due
and payable without presentment, demand, protest, notice of default, notice of acceleration, or of
intention to accelerate or other notice of any kind all of which each of Borrower, each Qualified
Borrower and each other Credit Party hereby expressly waives, anything contained herein or in any
other Loan Document to the contrary notwithstanding; (d) require that the Borrower Parties Cash
Collateralize the Letter of Credit Liability; (e) exercise any right, privilege, or power set forth
in Section 5.2 hereof, including, but not limited to, the
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initiation of Capital Call Notices of the Capital Commitments; or (f) without notice of
default or demand, pursue and enforce any of Administrative Agent’s or Lenders’ rights and remedies
under the Loan Documents, or otherwise provided under or pursuant to any applicable law or
agreement; provided, however, that if any Event of Default specified in Section 12.1(g) or 12.1(h)
hereof shall occur, the principal of, and all interest on, the Obligations shall thereupon become
due and payable concurrently therewith, without any further action by Administrative Agent or
Lenders, or any of them, and without presentment, demand, protest, notice of default, notice of
acceleration, or of intention to accelerate or other notice of any kind, all of which each of
Borrower, each Qualified Borrower and Guarantor hereby expressly waives.
12.3. Performance by Administrative Agent. Should any Credit Party or any fail to perform any
covenant, duty, or agreement contained herein or in any of the Loan Documents, and such failure
continues beyond any applicable cure period, Administrative Agent may, but shall not be obligated
to, perform or attempt to perform such covenant, duty, or agreement on behalf of such Person. In
such event, each Credit Party shall, at the request of Administrative Agent promptly pay any amount
expended by Administrative Agent in such performance or attempted performance to Administrative
Agent, together with interest thereon at the Default Rate from the date of such expenditure until
paid. Notwithstanding the foregoing, it is expressly understood that neither any of the Agents nor
any of the other Secured Parties assume any liability or responsibility for the performance of any
duties any Credit Party, or any related Person hereunder or under any of the Loan Documents or
other control over the management and affairs of any Credit Party, or any related Person, nor by
any such action shall any of the Agents or any of the other Secured Parties be deemed to create a
partnership arrangement with any Credit Party or any related Person.
13. AGENCY PROVISIONS
13.1. Appointment and Authorization of Agents.
(a) Authority. Each Lender (including any Person that is an assignee, participant,
secured party or other transferee with respect to the interest of such Lender in any
Principal Obligation or otherwise under this Credit Agreement) (collectively with such
Lender, a “Lender Party”) hereby irrevocably appoints, designates and authorizes each Agent
(other than a Managing Agent for a different Lender Group) to take such action on its behalf
under the provisions of this Credit Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to such Agent by the terms
hereof and of the other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in
any other Loan Documents, no Agent shall have any duties or responsibilities, except those
expressly set forth herein and therein, nor shall any Agent have or be deemed to have any
fiduciary relationship with any Lender Party, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this Credit
Agreement or any of the other Loan Documents or otherwise exist against any Agent. Without
limiting the generality of the foregoing sentence, the use of the term “agent” herein and in
the other Loan Documents with reference to any Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency doctrine of any
applicable Law. Instead, such
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term is used merely as a matter of market custom, and is intended to create or reflect
only an administrative relationship between independent contracting parties.
(b) Release of Collateral. The Secured Parties irrevocably authorize Administrative
Agent, at Administrative Agent’s option and in its discretion, to release any security
interest in or Lien on any Collateral granted to or held by Administrative Agent: (i) upon
termination of this Credit Agreement and the other Loan Documents, termination of the
Commitments and all Letters of Credit (or the Cash Collateralization in full of all Letters
of Credit), and payment in full of all Obligations, including all fees and indemnified costs
and expenses that are then due and payable pursuant to the terms of the Loan Documents; and
(ii) if approved by the requisite Lenders pursuant to the terms of Section 14.1. Upon the
request of Administrative Agent, the Lenders will confirm in writing Administrative Agent’s
authority to release particular types or items of Collateral pursuant to this Section
13.1(b).
(c) Limitation on Beneficiaries. The provisions of Sections 13.1 through 13.8 and
Section 13.10 are solely for the benefit of the Administrative Agent, the Lenders, the
Letter of Credit Issuer and the other Secured Parties, and no Credit Party shall have rights
as a third party beneficiary of any of such provisions.
13.2. Delegation of Duties. Each Agent may execute any of its duties under this Credit
Agreement or under the other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of legal counsel, accountants, and other professionals concerning all matters
pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.
13.3. Exculpatory Provisions. No Agent-Related Person shall be liable for any action taken or
omitted to be taken by it under or in connection herewith or in connection with any of the other
Loan Documents or the transactions contemplated hereby (except for its own gross negligence or
willful misconduct) or be responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any of the Credit Parties contained herein or in
any of the other Loan Documents or in any certificate, report, document, financial statement or
other written or oral statement referred to or provided for therein, or received by such Agent
under or in connection herewith or in connection with the other Loan Documents, or enforceability
or sufficiency of this Credit Agreement of any of the other Loan Documents, or for any failure of
any Credit Party to perform its obligations hereunder or thereunder. No Agent-Related Person shall
be responsible to any Lender to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or in the other Loan
Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or of
the existence or possible existence of any Potential Default or Event of Default or to inspect the
properties, books or records of the Credit Parties. The Agents are not trustees for the Lenders
and owe no fiduciary duty to the Lender Groups. Each Lender recognizes and agrees that
Administrative Agent shall not be required to determine independently whether the conditions
described in Sections 8.2(a) or 8.2(b) have been satisfied and, when Administrative Agent disburses
funds to Borrower or a Qualified Borrower or the
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Letter of Credit Issuer causes Letters of Credit to be issued, it may rely fully upon
statements contained in the relevant requests by a Borrower Party.
13.4. Reliance on Communications. The Agents shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, facsimile, telex or telephone message, statement, order or other
document or conversation believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to any of the Credit Parties, independent accountants and other
experts selected by the Agents with reasonable care). Each Agent may deem and treat each Lender as
the owner of its interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with Administrative Agent in accordance with
Section 14.12(b). Each Agent shall be fully justified in failing or refusing to take any action
under this Credit Agreement or under any of the other Loan Documents unless it shall first receive
such advice or concurrence of the Lenders as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any of the other Loan
Documents in accordance with a request of the Required Lenders (or to the extent specifically
required, all of the Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and assigns).
13.5. Notice of Default. No Agent shall be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default hereunder unless such Agent has received
notice from a Lender or a Borrower Party referring to the Loan Document, describing such Potential
Default or Event of Default and stating that such notice is a “notice of potential default or event
of default.” Each Agent will notify the Lenders of its receipt of any such notice, and
Administrative Agent shall take such action with respect to such Potential Default or Event of
Default as shall be reasonably directed by the requisite Lenders and as is permitted by the Loan
Documents; provided, however, that unless and until the Administrative Agent shall have received
any such request, Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Potential Default or Event of Default as it
shall deem advisable or in the best interest of the Lenders.
13.6. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that no
Agent-Related Person or Arranger nor any of their officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by
any Agent-Related Person or Arranger hereafter taken, including any consent to any acceptance of
any assignment or review of the affairs of any Borrower Party or any of its Affiliates, shall be
deemed to constitute any representation or warranty by the Agent-Related Person or Arranger to any
Lender. Each Lender, including any Lender by assignment, represents to each Agent and Arranger
that it has, independently and without reliance upon any Agent-Related Person, any Arranger or any
other Lender, and based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of each Credit Party (or its Affiliates) and all
applicable bank regulatory laws
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related to the transactions contemplated hereby and made its own decision to make its Loans
hereunder and enter into this Credit Agreement. Each Lender also represents that it shall,
independently and without reliance upon any Agent-Related Person, any Arranger or any other Lender,
and based on such documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking action under this
Credit Agreement and the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of any Borrower Party (or its Affiliates). Except for notices,
reports and other documents expressly required to be furnished to the Lenders by Administrative
Agent hereunder, neither any Agent nor any Arranger shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the business, operations,
assets, property, financial or other conditions, prospects or creditworthiness of the Borrower
Parties which may come into the possession of any Agent-Related Person or Arranger or any of their
officers, directors, employees, agents, attorneys-in-fact or affiliates.
13.7. Indemnification. Whether or not the transactions contemplated hereby are consummated,
the Alternate Lenders shall indemnify, upon demand, each Agent-Related Person (to the extent not
reimbursed by a Borrower Party and without limiting the obligation of the Borrower Parties to do
so), ratably in accordance with the applicable Alternate Lender’s respective Alternate Lender Pro
Rata Share of its Lender Group’s Lender Group Percentage, and hold harmless each Agent-Related
Person from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following payment in full of the Obligations) be imposed
on, incurred by or asserted against it in its capacity as such in any way relating to or arising
out of this Credit Agreement or the other Loan Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby or any action
taken or omitted by it under or in connection with any of the foregoing; provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Person’s
gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction
or related to another Lender Group’s Managing Agent; provided, further, that no action taken in
accordance with the directions of the Required Lenders or all Lenders, as applicable, shall be
deemed to constitute gross negligence or willful misconduct for purposes of this Section 13.7.
Without limitation of the foregoing, each Alternate Lender shall reimburse Administrative Agent,
the Letter of Credit Issuer and its Managing Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including Attorney Costs) incurred by such Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Credit Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that such Agent is not reimbursed for such
expenses by or on behalf of the Borrower Parties. The agreements in this Section 13.7 shall
survive the termination of the Commitments, payment of all of the Obligations hereunder and under
the other Loan Documents or any documents contemplated by or referred to herein or therein, as well
as the resignation or replacement of any Agent.
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13.8. Agents in Their Individual Capacity. Each Agent (and any successor acting as an Agent)
and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in, and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with any Credit Party (or any of its subsidiaries or
Affiliates) as though such Agent were not an Agent or a Lender hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, any Agent or
its Affiliates may receive information regarding the Credit Parties or their Affiliates (including
information that may be subject to confidentiality obligations in favor of such Person) and
acknowledge that such Agent shall be under no obligation to provide such information to them. With
respect to the Loans made and Letters of Credit issued and all obligations owing to it, an Agent
acting in its individual capacity shall have the same rights and powers under this Credit Agreement
as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and
“Lenders” shall include each Agent in its individual capacity.
13.9. Successor Agent. Any Agent may, at any time, resign upon twenty (20) days written
notice to the Lenders and the Credit Parties. Upon any such resignation of the Administrative
Agent, the Required Lenders shall appoint a successor Administrative Agent from any of the
Alternate Lenders, in consultation with the Borrower. If no successor agent is appointed prior to
the effective date of the resignation of the applicable Agent, then the retiring Agent may appoint,
after consulting with the Lenders and the Borrower, a successor Agent from any of the Alternate
Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent
shall thereupon succeed to all the rights, powers and duties of the retiring Agent, and shall
assume the duties and obligations of such retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations as Agent under this Credit Agreement and the other Loan
Documents. After any retiring Agent’s resignation hereunder as Agent, the provisions of this
Section 13.9 and Sections 14.3 and 13.8 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent under this Credit Agreement. If no successor agent
has accepted appointment as Agent by the date which is thirty (30) days following a retiring
Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become
effective and the applicable Alternate Lenders shall perform all of the duties of the Agent
hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided
for above.
13.10. No Other Duties, Etc. Anything herein to the contrary notwithstanding, no Agent shall
have any powers, duties or responsibilities under this Credit Agreement or any of the other Loan
Documents, except in its capacity, as applicable, as Administrative Agent, a Lender or the Letter
of Credit Issuer hereunder.
13.11. Administrative Agent May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Credit Party, Administrative Agent
(irrespective of whether the principal of any Loan or Letter of Credit Liability shall then be due
and payable as herein expressed or by declaration or otherwise and irrespective of whether
Administrative Agent shall have made any demand on Credit Parties) shall be entitled and empowered,
by intervention in such proceeding or otherwise:
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(a) to file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans, Letter of Credit Liability and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary or advisable
in order to have the claims of the Secured Parties (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Secured Parties and their
respective agents and counsel and all other amounts due the Secured Parties hereunder)
allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Secured Party to make such payments to
Administrative Agent and, in the event that Administrative Agent shall consent to the making of
such payments directly to the Secured Party, to pay to Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent hereunder.
Nothing contained herein shall be deemed to authorize Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Secured Party any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights of any Secured Party
or to authorize Administrative Agent to vote in respect of the claim of any Secured Party in any
such proceeding.
14. MISCELLANEOUS
14.1. Amendments. Neither this Credit Agreement nor any other Loan Document, nor any of the
terms hereof or thereof, may be amended, waived, discharged or terminated, unless such amendment,
waiver, discharge, or termination is in writing and signed by Administrative Agent, based upon the
approval of the appropriate number of Lenders required hereunder, or such Lenders, on the one hand,
and the Credit Parties, on the other hand; and, if the rights or duties of an Agent are affected
thereby, by such Agent, provided that no such amendment, waiver, discharge, or termination shall,
without the consent of:
(a) each Lender affected thereby:
(i) reduce or increase the amount or alter the term of the Commitment of such
Lender, or alter the provisions relating to any fees (or any other payments) payable
to such Lender;
(ii) extend the time for payment for the principal of or interest on the
Obligations, or fees or costs, or reduce the principal amount of the Obligations
(except as a result of the application of payments or prepayments), or reduce the
rate of interest borne by the Obligations (other than as a result of waiving the
applicability of the Default Rate), or otherwise affect the terms of payment of the
principal of or any interest on the Obligations or fees or costs hereunder;
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(iii) release any Liens granted under the Collateral Documents, except as
otherwise contemplated herein or therein, and except in connection with the transfer
of interests in a Credit Party permitted hereunder or in any other Loan Documents;
(iv) release the Guaranty granted pursuant to the Guaranty of Capital or limit
or otherwise modify the liability of Guarantor under any of the Loan Documents; and
(v) extend the Stated Maturity Date or Maturity Date;
(b) all Lenders:
(i) permit the cancellation, excuse or reduction of the Capital Commitment
of any Included Investor or Designated Investor;
(ii) amend the definitions of (A) “Applicable Requirement”; (B) “Available
Loan Amount”; (C) “Eligible Available Contributions of the Designated
Investors”; (D) “Eligible Available Contributions of the Included
Investors”; (E) “Included Investor”; (F) “Inclusion Percentage”; (G)
“Designated Investor”; (H) “Unfunded Capital Commitment”; (I) “Borrowing
Base”; or (J) “Exclusion Event”;
(iii) change the percentages specified in the definition of Required Lenders
or any other provision hereof specifying the number or percentage of Lenders
which are required to amend, waive or modify any rights hereunder or
otherwise make any determination or grant any consent hereunder;
(iv) consent to the assignment or transfer by a Credit Party of any of their
respective rights and obligations under (or in respect of) the Loan
Documents; or
(v) amend, waive or in any way modify or suspend any provision requiring the
pro rata application of payments of the Obligations to Lenders; or
(vi) amend the terms of this Section 14.1.
Administrative Agent agrees that it will promptly notify the Managing Agents (who will in turn
promptly notify the Lenders in its Lender Group) of any proposed modification or amendment to any
Loan Document, and deliver drafts of any such proposed modification or amendment to the Managing
Agents (who will in turn promptly deliver to the Lenders in its Lender Group), prior to the
effectiveness of such proposed modification or amendment. Notwithstanding the above: (A) no
provisions of Section 13 may be amended or modified without the consent of Administrative Agent;
(B) no provisions of Section 2.5 may be amended or modified without the consent of the Letter of
Credit Issuer; and (C) Sections 10 and 11 specify the requirements for waivers of the affirmative
covenants and negative covenants listed
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therein, and any amendment to any provision of Section 10 or Section 11 shall require the
consent of the Lenders that are specified therein as required for a waiver thereof. Any amendment,
waiver or consent not specifically addressed in this Section 14.1 or otherwise shall be subject to
the approval of Required Lenders.
Notwithstanding the fact that the consent of all the Lenders is required in certain
circumstances as set forth above and in Section 11: (1) each Lender is entitled to vote as such
Lender sees fit on any reorganization plan that affects the Loans or the Letters of Credit, and
each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersede
the unanimous consent provisions set forth herein; (2) the Required Lenders may consent to allow a
Borrower Party to use cash collateral in the context of a bankruptcy or insolvency proceeding; and
(3) Administrative Agent may, in its sole discretion, agree to the modification or waiver of any of
the other terms of this Credit Agreement or any other Loan Document or consent to any action or
failure to act by any Credit Party, if such modification, waiver, or consent is of an
administrative nature.
If Administrative Agent shall request the consent of any Lender to any amendment, change,
waiver, discharge, termination, consent or exercise of rights covered by this Credit Agreement, and
not receive such consent or denial thereof in writing within ten (10) Business Days of the making
of such request by Administrative Agent, as the case may be, such Lender shall be deemed to have
given its consent to the request.
14.2. Setoff. In addition to any rights and remedies of the Lenders provided by law, upon the
occurrence and during the continuance of any Event of Default, each Lender is authorized at any
time and from time to time, without prior notice to any Credit Party or any other obligor, any such
notice being waived by each Credit Party (on its own behalf and on behalf of each obligor) to the
fullest extent permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other indebtedness at any time owing
by, such Lender to or for the credit or the account of any Credit Party against any and all of the
Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not
Administrative Agent or such Lender shall have made demand under this Credit Agreement or any other
Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees
promptly to notify the applicable Credit Party and Administrative Agent after any such setoff and
application made by such Lender; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
14.3. Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender
shall obtain on account of the Loans made by it or the participations in Letters of Credit held by
it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, the
receipt of any proceeds from a Capital Call or the exercise of any remedies under any Collateral
Documents, or otherwise) in excess of its ratable share (or other share contemplated hereunder)
thereof, such Lender shall immediately: (a) notify Administrative Agent of such fact; and (b)
purchase from the other Lenders such participations in the Loans made by them and/or such
subparticipations in the participations in Letters of Credit held by them, as the case may be, as
shall be necessary to cause such purchasing Lender to share the excess payment in respect of such
of Loans or such participations, as the case may be, pro rata with each of them; provided,
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however, that if all or any portion of such excess payment is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall
repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to
such paying Lender’s ratable share (according to the proportion of: (i) the amount that such paying
Lender’s required repayment bears to; (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the
total amount so recovered. Each Credit Party agrees that any Lender so purchasing a participation
from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff, but subject to Section 14.2) with respect to such participation as
fully as if such Lender were the direct creditor of the Credit Parties in the amount of such
participation. Administrative Agent will keep records (which shall be conclusive and binding in
the absence of manifest error) of participations purchased under this Section 14.3 and will in each
case notify the Lenders following any such purchases or repayments. Each Lender that purchases a
participation pursuant to this Section shall from and after such purchase have the right to give
all notices, requests, demands, directions and other communications under this Credit Agreement
with respect to the portion of the Obligations purchased to the same extent as though the
purchasing Lender were the original owner of the Obligations purchased. To the extent required to
implement the sharing of payments under this Section 14.3, each Lender hereby authorizes and
directs Administrative Agent to distribute any proceeds from Capital Calls or proceeds from the
exercise of remedies under the Collateral Documents held by Administrative Agent to Lenders
consistent with the terms of this Section 14.3.
14.4. Payments Set Aside. To the extent that any Credit Party makes a payment to
Administrative Agent or any Lender, or Administrative Agent or any Lender exercises its right of
setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant
to any settlement entered into by Administrative Agent or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any proceeding under any
Debtor Relief Law or otherwise, then: (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such setoff had not occurred, and (b) each Alternate Lender
severally agrees to pay to Administrative Agent upon demand its applicable share of any amount so
recovered from or repaid by Administrative Agent, plus interest thereon from the date of such
demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from
time to time in effect.
14.5. Waiver. No failure to exercise, and no delay in exercising, on the part of
Administrative Agent or Lenders, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other further exercise thereof or the exercise
of any other right. The rights and remedies of the Agents and Lenders hereunder and under the Loan
Documents shall be in addition to all other rights provided by law. No modification or waiver of
any provision of this Credit Agreement, the Notes or any of the other Loan Documents, nor consent
to departure therefrom, shall be effective unless in writing and no such consent or waiver shall
extend beyond the particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar or other instances
without such notice or demand. Subject to the terms of this Credit Agreement, including Section
14.1, Administrative Agent acting on behalf of all Lenders
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(pursuant to the terms hereof), and the Credit Parties may from time to time enter into
agreements amending or changing any provision of this Credit Agreement or the rights of Lenders or
the Credit Parties hereunder, or may grant waivers or consents to a departure from the due
performance of the obligations of the Credit Parties hereunder, any such agreement, waiver or
consent made with such written consent of Administrative Agent being effective to bind all Lenders.
14.6. Payment of Expenses.
(a) Borrower agrees to pay (within ten (10) days after the receipt of written notice
from Administrative Agent) all out-of-pocket costs and expenses of Administrative Agent
(including without limitation Attorney Costs) reasonably incurred by it in connection with
the negotiation, preparation, execution and delivery of this Credit Agreement, the Notes,
and the other Loan Documents and any and all amendments, modifications and supplements
thereof or thereto, and, subject to no gross negligence or willful misconduct on the part of
the Lenders, all out-of-pocket costs and expenses of Administrative Agent and the Secured
Parties (including, without limitation, the Attorney Costs of Administrative Agent’s and the
Secured Parties’ legal counsel) reasonably incurred by them in connection with the
preservation, enforcement and modification of, and Administrative Agent’s and the Secured
Parties’ rights under, this Credit Agreement, the Notes, and the other Loan Documents.
(b) Borrower agrees to indemnify Administrative Agent and each of Lenders and their
respective directors, officers, employees, attorneys and agents (each such Person, including
without limitation Administrative Agent and each of the Secured Parties, being called an
“Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses,
claims, actions, judgments, suits, disbursements, penalties, damages (other than
consequential damages), liabilities and related expenses, including reasonable counsel fees
and expenses, incurred by or asserted against any Indemnitee arising out of, in any way
connected with, or as a result of:
(i) the execution and delivery of this Credit Agreement or any other Loan
Document or any agreement or instrument contemplated thereby,
(ii) the use or misuse of the proceeds of the Loans,
(iii) the fraudulent actions or misrepresentations of any Credit Party or its
Affiliates in connection with the transactions contemplated by this Credit Agreement
and the other Loan Documents,
(iv) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto, or
(v) any claim, litigation, investigation or proceeding relating to the Investor
Documents, whether or not any Indemnitee is a party thereto;
provided, however, that such indemnity shall not, with respect to a particular Indemnitee, apply to
any such losses, claims, actions, judgments, suits, disbursements, penalties, damages,
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liabilities or related expenses to the extent arising from gross negligence or willful misconduct
of such Indemnitee.
(c) Borrower will indemnify Administrative Agent and each of the Lenders against any
costs or losses actually incurred as a result of any voluntary or involuntary prepayments of
any Loans on any date which is not a Settlement Date under the Credit Agreement and against
any increased costs or reduced return due to changes in applicable regulations regarding
withholding taxes, reserves, capital adequacy, or other similar regulations.
(d) In addition to and without limiting the foregoing, the Credit Parties hereby
indemnify and hold the Indemnitees harmless from and against, and agree to reimburse any
Indemnitee on demand for, and agree to defend the Indemnitees against, any and all
Environmental Damages (as hereinafter defined), incurred by Administrative Agent or a
Lender. Without Limitation, the Foregoing Indemnity Shall Apply to Each Indemnitee with
Respect to Environmental Damages Which in Whole or in Part Are Caused by or Arise out of the
Negligence of Such (Or Any Other) Indemnitee. However, Such Indemnity Shall Not Apply to a
Particular Indemnitee to the Extent That the Subject of the Indemnification Is Caused by or
Arises out of the Gross Negligence or Willful Misconduct of That Particular Indemnitee.
The term “Environmental Damages” means all claims, demands, liabilities (including strict
liability), losses, damages (including consequential damages), causes of action, judgments,
penalties, fines, costs and expenses (including reasonable fees, costs and expenses of attorneys,
consultants, contractors, experts and laboratories), of any and every kind or character, contingent
or otherwise, matured or unmatured, known or unknown, direct or indirect, foreseeable or
unforeseeable, made, incurred, suffered or brought at any time and from time to time and arising in
whole or in part from:
(i) The presence of any Hazardous Material on any Property, or any escape,
seepage, leakage, spillage, emission, release, discharge or disposal of any
Hazardous Material on or from any Property, or the migration or release or
threatened migration or release of any Hazardous Material to, from or through any
Property; or
(ii) Any act, omission, event or circumstance existing or occurring in
connection with the handling, treatment, containment, removal, storage,
decontamination, clean-up, transport or disposal of any Hazardous Material by
Borrower, or any party for whose actions Borrower is liable or in connection with
any Property; or
(iii) The breach of any representation, warranty, covenant or agreement
contained in Section 9.16 (to the extent such breach relates to Environmental
Requirements), Section 9.18 or Section 10.8 (to the extent such breach relates to
Environmental Requirements), or Section 11.8 of this Credit Agreement; or
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(iv) Any violation of any Environmental Requirement, regardless of whether any
act, omission, event or circumstance giving rise to the violation constituted a
violation at the time of the occurrence or inception of such act, omission, event or
circumstance; or
(v) Any Environmental Liability with respect to any Property, or the filing or
imposition of any Environmental Lien against any Property, because of, resulting
from, in connection with, or arising out of any of the matters referred to in
subsections (i) through (iv) preceding.
(d) The provisions of this Section 14.6 shall remain operative and in full force and
effect regardless of the termination or expiration of the Availability Period, this Credit
Agreement, or any other Loan Document, the consummation of the transactions contemplated
hereby, the repayment of the Loans, the occurrence of the Maturity Date, the invalidity,
illegality, or unenforceability of any term or provision of this Credit Agreement or any
other Loan Document, or any investigation made by or on behalf of Lenders. All amounts due
under this Section 14.6 shall be payable promptly on written demand therefor.
14.7. Notice. Any notice, demand, request or other communication which any party hereto may
be required or may desire to give hereunder shall be in writing (except where telephonic
instructions or notices are expressly authorized herein to be given) and shall be deemed to be
effective: (a) if by hand delivery, telecopy or other facsimile transmission, on the day and at
the time on which delivered to such party at the address or fax numbers specified below; (b) if by
mail, on the day which it is received after being deposited, postage prepaid, in the United States
registered or certified mail, return receipt requested, addressed to such party at the address
specified below; or (c) if by FedEx or other reputable express mail service, on the next Business
Day following the delivery to such express mail service, addressed to such party at the address set
forth below; or (d) if by telephone, on the day and at the time reciprocal communication (i.e.,
direct communication between two or more persons, which shall not include voice mail messages) with
one of the individuals named below occurs during a call to the telephone number or numbers
indicated for such party below:
If to Borrower, Managing Member, Guarantor or Pledgor:
c/o Acadia Realty Trust
1311 Mamaroneck Avenue, Suite 260
White Plains, New York 10605
Attention: Robert Masters, Esq.
1311 Mamaroneck Avenue, Suite 260
White Plains, New York 10605
Attention: Robert Masters, Esq.
If to Administrative Agent:
Bank of America, N.A., as Administrative Agent
NC1-027-19-01
214 North Tryon Street
Charlotte, North Carolina 28255
Attention: Dan Hattendorf
NC1-027-19-01
214 North Tryon Street
Charlotte, North Carolina 28255
Attention: Dan Hattendorf
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Telephone: (704) 388-3113
Facsimile: (704) 388-9211
Facsimile: (704) 388-9211
With a copy to:
Bank of America, N.A., as Administrative Agent
NC1-027-19-01
214 North Tryon Street
Charlotte, NC 28255
Attention: Brian Williams
Telephone: (704) 683-4747
Telecopy: (704) 968-1215
NC1-027-19-01
214 North Tryon Street
Charlotte, NC 28255
Attention: Brian Williams
Telephone: (704) 683-4747
Telecopy: (704) 968-1215
If to Lenders:
At the address and numbers set forth on Schedule 14.7.
Any party may change its address for purposes of this Credit Agreement by giving notice of
such change to the other parties pursuant to this Section 14.7. With respect to any notice
received by Administrative Agent from any Credit Party or any Investor not otherwise addressed
herein, Administrative Agent shall notify Lenders promptly of the receipt of such notice, and shall
provide copies thereof to Lenders. When determining the prior days notice required for any Loan
Notice, Request for Letter of Credit, or other notice to be provided by a Credit Party, any
Qualified Borrower or an Investor hereunder, the day the notice is delivered to Administrative
Agent (or such other applicable Person) shall not be counted, but the day of the related Borrowing,
issuance of Letter of Credit, or other relevant action shall be counted.
14.8. GOVERNING LAW. PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THAT MIGHT OTHERWISE
APPLY, EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION GOVERN THE CREATION, PERFECTION,
VALIDITY, OR ENFORCEMENT OF LIENS UNDER THE COLLATERAL DOCUMENTS, AND THE APPLICABLE FEDERAL LAWS
OF THE UNITED STATES OF AMERICA, SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS CREDIT AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS.
14.9. Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by
Jury. Any suit, action or proceeding against any Credit Party with respect to this Credit
Agreement, the Notes or the other Loan Documents or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of New York, or in the United States Courts
located in the Borough of Manhattan in New York City, pursuant to Section 5-1402 of the New York
General Obligations Law, as Lenders in their sole discretion may elect and each Credit Party hereby
irrevocably submits to the non-exclusive jurisdiction of such courts for the purpose of any such
suit, action or proceeding. Each Credit Party hereby irrevocably consents to
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the service of process in any suit, action or proceeding in said court by the mailing thereof
by Administrative Agent by registered or certified mail, postage prepaid, to the applicable address
set forth in Section 14.7. Each Credit Party hereby irrevocably waives any objections which it may
now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Credit Agreement or the Notes brought in the courts located in the State of New
York, Borough of Manhattan in New York City, and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought in an inconvenient
forum. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN
DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HERETO HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS CREDIT AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY
14.10. Invalid Provisions. If any provision of this Credit Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term of this Credit
Agreement, such provision shall be fully severable and this Credit Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this
Credit Agreement, and the remaining provisions of this Credit Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its
severance from this Credit Agreement, unless such continued effectiveness of this Credit Agreement,
as modified, would be contrary to the basic understandings and intentions of the parties as
expressed herein. If any provision of this Credit Agreement shall conflict with or be inconsistent
with any provision of any of the other Loan Documents, then the terms, conditions and provisions of
this Credit Agreement shall prevail.
14.11. Entirety and Amendments. The Loan Documents embody the entire agreement between the
parties and supersede all prior agreements and understandings, if any, relating to the subject
matter hereof and thereof, and this Credit Agreement and the other Loan Documents may be amended
only by an instrument in writing executed by the parties hereto in accordance with the terms
hereof.
14.12. Successors and Assigns.
(a) The provisions of this Credit Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns permitted hereby,
except that neither the Credit Parties nor any Qualified Borrower may assign or otherwise
transfer any of their respective rights or obligations hereunder without the prior written
consent of each Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except: (i) to an Eligible Assignee in accordance with the
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provisions of clause (b) of this Section 14.12; (ii) by way of participation in
accordance with the provisions of clause (f) of this Section 14.12; or (iii) by way of
pledge or assignment of a security interest subject to the restrictions of clause (h) of
this Section 14.12 (and any other attempted assignment or transfer by any party hereto shall
be null and void). Nothing in this Credit Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in clause (f)
of this Section 14.12, and, to the extent expressly contemplated hereby, the Indemnitees)
any legal or equitable right, remedy or claim under or by reason of this Credit Agreement.
(b) Any Lender may at any time assign to one or more Eligible Assignees (each, an
“Assignee”) all or a portion of its rights and obligations under this Credit Agreement
(including all or a portion of its Commitment and the Loans (including for purposes of this
clause (b), participations in Letter of Credit Liability) at the time owing to it); provided
that: (i) except in the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a
Lender, the aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) subject to each such assignment, determined as of the date the
Assignment and Assumption Agreement with respect to such assignment is delivered to
Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption
Agreement, as of the Trade Date, shall not be less than $2,500,000, and, after such
assignment, no Lender shall hold a Commitment of less than $5,000,000; (ii) each partial
assignment shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Credit Agreement with respect to the Loans or the
Commitment assigned; (iii) any assignment of a Commitment must be approved by Administrative
Agent, the Letter of Credit Issuer, and, unless an Event of Default exists and is
continuing, Borrower (such approval, in each case, not to be unreasonably withheld or
delayed), unless the Person that is the proposed assignee is itself a Program Support
Provider or a Lender (whether or not the proposed assignee would otherwise qualify as an
Eligible Assignee); (iv) the parties to each assignment shall execute and deliver to
Administrative Agent an Assignment and Assumption Agreement, together with a processing and
recordation fee as set forth on Schedule 14.12(b) (except in the case of a transfer at the
demand of Borrower under Section 14.12 hereof, in which case either Borrower or the
transferee Lender shall pay such fee); and (v) each assignment made as a result of a demand
by Borrower under Section 14.12 hereof shall be arranged by Borrower after consultation with
Administrative Agent and shall be either an assignment of all of the rights and obligations
of the assigning Lender under this Credit Agreement or an assignment of a portion of such
rights and obligations made concurrently with another assignment or assignments that
together constitute an assignment of all of the rights and obligations of the assigning
Lender. Subject to acceptance and recording thereof by Administrative Agent pursuant to
clause (e) of this Section 14.12, from and after the effective date specified in each
Assignment and Assumption Agreement, the Eligible Assignee thereunder shall be a party to
this Credit Agreement and, to the extent of the interest assigned by such Assignment and
Assumption Agreement, have the rights and obligations of a Lender
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under this Credit Agreement, and the assigning Lender thereunder shall, to the extent of
the interest assigned by such Assignment and Assumption Agreement, be released from its
obligations under this Credit Agreement (and, in the case of an Assignment and Assumption
Agreement covering all of the assigning Lender’s rights and obligations under this Credit
Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to
the benefits of Sections 4.1, 4.4, 4.5 and 14.6 with respect to facts and circumstances
occurring prior to the effective date of such assignment). Upon request, each applicable
Borrower Party (at its expense) shall execute and deliver a Note to the Managing Agent of
the assignee, and the applicable existing Note or Notes shall be returned to the applicable
Borrower Party. Any assignment or transfer by a Lender of rights or obligations under this
Credit Agreement that does not comply with this subsection shall be treated for purposes of
this Credit Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with clause (f) of this Section 14.12.
(c) Without limiting the foregoing, a Conduit Lender may, from time to time, with prior
or concurrent notice to Borrower and the Administrative Agent, in one transaction or a
series of transactions, assign all or a portion of its interest in the Principal Obligation
and its rights and obligations under this Agreement and any other Loan Documents to which it
is a party to a Conduit Assignee. Upon and to the extent of such assignment by the Conduit
Lender to a Conduit Assignee, (i) such Conduit Assignee shall be the owner of the assigned
portion of the Principal Obligation, (ii) the related administrator for such Conduit
Assignee will act as the Administrator for such Conduit Assignee, with all corresponding
rights and powers, express or implied, granted to the Administrator hereunder or under the
other Loan Documents, (iii) such Conduit Assignee (and any related commercial paper issuer,
if such Conduit Assignee does not itself issue commercial paper) and their respective
Program Support Provider(s) and other related parties shall have the benefit of all the
rights and protections provided to the Conduit Lender and its Program Support Provider(s)
herein and in the other Loan Documents (including any limitation on recourse against such
Conduit Assignee or related parties, any agreement not to file or join in the filing of a
petition to commence an insolvency proceeding against such Conduit Assignee, and the right
to assign to another Conduit Assignee as provided in this paragraph), (iv) such Conduit
Assignee shall assume all (or the assigned or assumed portion) of the Conduit Lender’s
obligations, if any, hereunder or any other Loan Document, and the Conduit Lender shall be
released from such obligations, in each case to the extent of such assignment, and the
obligations of the Conduit Lender and such Conduit Assignee shall be several and not joint,
(v) all distributions in respect of the Principal Obligation assigned shall be made to the
applicable Managing Agent, on behalf of the Conduit Lender and such Conduit Assignee on a
pro rata basis according to their respective interests, (vi) the definition of the term “CP
Rate” with respect to the portion of the Principal Obligation funded with commercial paper
issued by the Conduit Lender from time to time shall be determined in the manner set forth
in the definition of “CP Rate” applicable to the Conduit Lender on the basis of the interest
rate or discount applicable to commercial paper issued by such Conduit Assignee (or the
related commercial paper issuer, if such Conduit Assignee does not itself issue commercial
paper) rather than the Conduit Lender, (vii) the defined terms and other terms and
provisions of this Credit Agreement and the other Loan Documents shall be
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interpreted in accordance with the foregoing, and (viii) if requested by the Managing
Agent or Administrator with respect to the Conduit Assignee, the parties will execute
and deliver such further agreements and documents and take such other actions as the
Managing Agent or such Administrator may reasonably request to evidence and give effect to
the foregoing. No assignment by the Conduit Lender to a Conduit Assignee of all or any
portion of its interest in the Principal Obligation shall in any way diminish the related
Alternate Lenders’ obligation under Section 2.3 to fund any Loan not funded by the Conduit
Lender or such Conduit Assignee or to acquire from the Conduit Lender or such Conduit
Assignee all or any portion of its interest in the Principal Obligation pursuant to Section
7.1.
(d) In the event that a Conduit Lender makes an assignment to a Conduit Assignee in
accordance with clause (c) above, the related Alternate Lenders: (i) if requested by the
related Administrator, shall terminate their participation in the applicable Program Support
Agreement to the extent of such assignment, (ii) if requested by the related Administrator,
shall execute (either directly or through a participation agreement, as determined by such
Administrator) the program support agreement related to such Conduit Assignee, to the extent
of such assignment, the terms of which shall be substantially similar to those of the
participation or other agreement entered into by such Alternate Lender with respect to the
applicable Program Support Agreement (or which shall be otherwise reasonably satisfactory to
the related Administrator), (iii) if requested by such Conduit Lender, shall enter into such
agreements as requested by the Conduit Lender pursuant to which they shall be obligated to
provide funding to such Conduit Assignee on the same terms and conditions as is provided for
in this Agreement in respect of such Conduit Lender (or which agreements shall be otherwise
reasonably satisfactory to Borrower and such Conduit Lender), and (iv) shall take such
actions as the Administrator shall reasonably request in connection therewith.
(e) Administrative Agent, acting solely for this purpose as an agent of the Credit
Parties, shall maintain at Administrative Agent’s Office a copy of each Assignment and
Assumption Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal amounts of the
Loans and Letter of Credit Liability owing to, each Lender pursuant to the terms hereof from
time to time (the “Register”). The entries in the Register shall be conclusive, and each
Credit Party, Administrative Agent, Agents and the Lenders may treat each Person whose name
is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Credit Agreement. The Register shall be available for inspection and
copying by the Credit Parties, any Agent and any Lender, at any reasonable time and from
time to time upon reasonable prior notice. Upon the consummation of any assignment in
accordance with this Section 14.12, Schedule 14.12(b) shall automatically be deemed amended
(to the extent required) by Administrative Agent to reflect the name and address of the
applicable Assignee.
(f) Any Lender may at any time, without the consent of, or notice to, any Credit Party
or Administrative Agent, sell participations to any Person (other than a natural person or
any Credit Party or any Affiliate thereof) (each, a “Participant”) in all or a portion of
such Lender’s rights and/or obligations under this Credit Agreement
101
(including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in Letter of Credit Liability) owing to it); provided that: (i) such
Lender’s obligations under this Credit Agreement shall remain unchanged; (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance of such
obligations; and (iii) each Credit Party, Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Credit Agreement. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall retain the
sole right to enforce this Credit Agreement and to approve any amendment, modification or
waiver of any provision of this Credit Agreement; provided that such agreement or instrument
may provide that such Lender will not, without the consent of the Participant, agree to any
amendment, waiver or other modification described in Section 14.1(a), 14.1(b)(ii) or
14.1(b)(v) that directly affects such Participant. Subject to clause (g) of this Section
14.12, each Borrower Party agrees that each Participant shall be entitled to the benefits of
Sections 4.1, 4.4 and 4.5 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to clause (b) of this Section 14.12. To the extent
permitted by law, each Participant also shall be entitled to the benefits of the right of
setoff under application law as though it were a Lender, provided such Participant agrees to
be subject to Sections 14.2 and 14.3 as though it were a Lender.
(g) A Participant shall not be entitled to receive any greater payment under Sections
4.1 or 4.4 than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the participation to such
Participant is made with Borrower’s prior written consent.
(h) Any Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Credit Agreement (including under its Note, if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations
to a Federal Reserve Bank; provided that no such pledge or assignment shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.
(i) Notwithstanding anything to the contrary contained herein, if at any time Bank of
America assigns all of its Commitment and Loans pursuant to clause (b) above, Bank of
America may, upon thirty (30) days’ notice to the Borrower Parties and the Lenders, resign
as Administrative Agent and Letter of Credit Issuer. In the event of any such resignation,
Lenders shall appoint from among the Lenders a successor Administrative Agent and Letter of
Credit Issuer hereunder (subject, except when an Event of Default exists, to the consent of
Borrower, not to be unreasonably withheld); provided, however, that no failure by Lenders to
appoint any such successor shall affect the resignation of Bank of America as Letter of
Credit Issuer and Administrative Agent. If Bank of America resigns as Letter of Credit
Issuer and Administrative Agent, it shall retain all the rights and obligations of the
Letter of Credit Issuer hereunder with respect to all Letters of Credit outstanding as of
the effective date of its resignation as Letter of Credit Issuer and all Letter of Credit
Liability with respect thereto (including the right to
102
require the Lenders to fund payment of any amount drawn under a Letter of Credit issued by Bank of America as Letter of Credit
Issuer hereunder.
14.13. Lender Default. If for any reason any Lender shall fail or refuse to abide by its
obligations hereunder, and such Lender shall not have cured such failure or refusal within five (5)
Business Days of its occurrence (a “Lender Default”), then, in addition to the rights and remedies
that may be available to Administrative Agent, Lenders, or any Borrower Party at law or in equity,
such Lender’s right to vote on matters related to this Credit Agreement, and to participate in the
administration of the Loans, the Letters of Credit, and this Credit Agreement, shall be suspended.
Administrative Agent shall have the right, but not the obligation, in its sole discretion, to
acquire at par all of such Lender’s Commitment, including its Pro Rata Share in the Obligations
under this Credit Agreement. In the event that Administrative Agent does not exercise its right to
so acquire all of such Lender’s interests, then each Lender that is not a Defaulting Alternate
Lender (each, a “Current Party”) shall then, thereupon, have the right, but not the obligation, in
its sole discretion to acquire at par (or if more than one Current Party exercises such right, each
Current Party shall have the right to acquire, pro rata) such Lender’s Commitment, including its
Pro Rata Share in the outstanding Obligations under this Credit Agreement.
14.14. Replacement of Lender. Following a demand by an Alternate Lender for payment of any
amounts under Section 4.1 or 4.3, or if any Alternate Lender is a Defaulting Alternate Lender (in
either case, an “Affected Lender”), Borrower may elect to replace such Affected Lender as an
Alternate Lender party to this Credit Agreement with an Eligible Assignee procured by Borrower,
provided that no Potential Default nor Event of Default shall have occurred and be continuing at
the time of such replacement, and provided further that, concurrently with such replacement such
Eligible Assignee shall agree to purchase for cash the Loans and other Obligations due to the
Affected Lender pursuant to an Assignment and Assumption Agreement and to become an Alternate
Lender for all purposes under this Credit Agreement and to assume all obligations of the Affected
Lender to be terminated as of such date. Any such Affected Lender shall assign its rights and
interests hereunder, such assignment to be effected in compliance with the requirements of Section
14.12(b) hereof. In the event that such an assignment occurs, the Eligible Assignee (i) if
requested by the applicable Administrator, shall execute (either directly or through a
participation agreement, as determined by the Administrator) a Program Support Agreement related to
the applicable Conduit Lender, to the extent of such assignment, the terms of which shall be
substantially similar to those of the participation or other agreement by the assigning Alternate
Lender with respect to the applicable Program Support Agreement (or which shall be otherwise
reasonably satisfactory to the applicable Administrator), and (ii) shall take such actions as the
Agents shall reasonably request in connection therewith.
14.15. Maximum Interest. Regardless of any provision contained in any of the Loan Documents,
Lenders shall never be entitled to receive, collect or apply as interest on the Obligations any
amount in excess of the Maximum Rate, and, in the event that Lenders ever receive, collect or apply
as interest any such excess, the amount which would be excessive interest shall be deemed to be a
partial prepayment of principal and treated hereunder as such; and, if the principal amount of the
Obligations is paid in full, any remaining excess shall forthwith be paid to the applicable
Borrower Party. In determining whether or not the interest
103
paid or payable under any specific contingency exceeds the Maximum Rate, each Borrower Party and Lenders shall, to the maximum extent
permitted under applicable law: (a) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread,
in equal parts, the total amount of interest throughout the entire contemplated term of the
Obligations so that the interest rate does not exceed the Maximum Rate; provided that, if the
Obligations are paid and performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof exceeds the Maximum Rate,
Lenders shall refund to the applicable Borrower Party the amount of such excess or credit the
amount of such excess against the principal amount of the Obligations and, in such event, Lenders
shall not be subject to any penalties provided by any laws for contracting for, charging, taking,
reserving or receiving interest in excess of the Maximum Rate. As used herein, the term
“applicable law” shall mean the law in effect as of the date hereof; provided, however, that in the
event there is a change in the law which results in a higher permissible rate of interest, then the
Loan Documents shall be governed by such new law as of its effective date.
14.16. Headings. Section headings are for convenience of reference only and shall in no way
affect the interpretation of this Credit Agreement.
14.17. Survival. All representations and warranties made by the Credit Parties and the
Qualified Borrowers herein shall survive delivery of the Notes, the making of the Loans and the
issuance of the Letters of Credit.
14.18. Integration. This Credit Agreement is intended by the parties as the final, complete
and exclusive statement of the transactions evidenced by this Credit Agreement. All prior or
contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be
superseded by this Credit Agreement, and no party is relying on any promise, agreement or
understanding not set forth in this Credit Agreement.
14.19. Limited Liability of Investors. Except with respect to any expenses and losses arising
from any Credit Party’s intentional misrepresentation hereunder, fraud or willful misapplication of
proceeds in contravention of this Credit Agreement, for which there shall be full recourse to such
Credit Party, none of the Investors, including the Managing Member, shall have any personal,
partnership, corporate or trust liability for the payment or performance of the Obligations.
Nothing contained in this Section 14.19 or in any of the other provisions of the Loan Documents
shall be construed to limit, restrict, or impede the obligations, the liabilities, and indebtedness
of Borrower, or of any Investor to make its Capital Contributions to Borrower, Managing Member,
Guarantor or Pledgor, in accordance with the terms of the Operating Agreement, Partnership
Agreement or the Stockholders Agreement, as applicable, or pursuant to the terms of such Investor’s
Investor Letter. Nothing contained in this Section 14.19 shall be deemed to expressly or
implicitly limit or modify the liability of each Qualified Borrower to Lenders under the Qualified
Borrower Notes; provided, however, that such liability shall not extend beyond such Qualified
Borrower and its properties and assets. Notwithstanding anything contained in this Section 14.19,
the payment and performance of the Obligations shall be fully recourse to each Borrower Party and
the payment and performance of the Guaranteed Obligations shall be fully recourse to the Guarantor
and, in each case, their properties and assets.
104
14.20. Confidentiality. Administrative Agent, each Managing Agent, each Administrator and
each Lender agrees to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed: (a) to its and its Affiliates’ respective partners, directors, officers, employees, representatives, advisors and agents, including
accountants, legal counsel and other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Information and instructed
to keep such Information confidential and to use such Information only in connection with this
facility); (b) to the extent requested by any regulatory authority; (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party
to this Credit Agreement; (e) in connection with the exercise of any remedies hereunder or any
suit, action or proceeding relating to this Credit Agreement or the enforcement of rights
hereunder; (f) subject to an agreement containing provisions substantially the same as those of
this Section 13.21, to: (i) any Eligible Assignee of or Participant in, or any prospective Eligible
Assignee of or Participant in, any of its rights or obligations under this Credit Agreement; or
(ii) any direct or indirect contractual counterparty or prospective counterparty (or such
contractual counterparty’s or prospective counterparty’s professional advisor) to any credit
derivative transaction relating to obligations of the Borrower Parties; (g) with the consent of the
applicable Borrower; (h) to the extent such Information: (x) becomes publicly available other than
as a result of a breach of this Section 14.20 or (y) becomes available to Administrative Agent, any
Managing Agent, any Administrator or any Lender on a nonconfidential basis from a source other than
a Credit Party; or (i) to the National Association of Insurance Commissioners or any other similar
organization or any rating agency, Commercial Paper dealer, provider of credit enhancement or
liquidity to such Conduit Lender or any Person providing financing to, or holding equity interest
in, such Conduit Lender, any Program Support Provider, any Conduit Collateral Agent and to any
officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided
that such recipient has been advised of the confidential nature of such information and agrees to
be bound by the provisions of this Section 14.20. For the purposes of this Section 14.20,
“Information” means all information received from any Credit Party, other than any such information
that is available to Administrative Agent, any Managing Agent, any Administrator or any Lender on a
nonconfidential basis prior to disclosure by such Person; provided that, in the case of information
received from any Credit Party after the date hereof, such information is clearly identified in
writing at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 14.20 shall be considered to have
complied with its obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to its own
confidential information. Administrative Agent, Arranger, each Lender and Agent agrees not to
disclose the identity of the Investors in connection with any public disclosure of the transaction
contemplated hereby, such as in tombstones or marketing materials.
14.21. USA PATRIOT Act Notice. Each Lender and each Agent (for itself and not on behalf of
any Lender) hereby notifies the Credit Parties that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies the Credit Parties, which information
includes the name and address of the Credit Parties and other information that will allow such
Lender or Agent, as applicable, to identify the Credit Parties in accordance with the Patriot Act.
105
14.22. Multiple Counterparts. This Credit Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same agreement, and any of
the parties hereto may execute this Credit Agreement by signing any such counterpart.
14.23. No Bankruptcy Petition Against any Conduit Lender. Each Credit Party hereby covenants
and agrees that, prior to the date which is one year and one day after the payment in full of all
outstanding Commercial Paper or other rated indebtedness of a Conduit Lender, it will not institute
against, or encourage, cooperate with or join any other Person in instituting against, such Conduit
Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the
law of the United States or any state of the United States. The provisions of this Section 14.23
shall survive the termination of this Credit Agreement.
14.24. No Recourse Against any Conduit Lender. Notwithstanding anything to the contrary
contained in this Credit Agreement, the obligations of each Conduit Lender under this Credit
Agreement and all other Loan Documents are solely the corporate obligations of such Conduit Lender
and shall be payable solely to the extent of funds received by such Conduit Lender from the Credit
Parties in accordance herewith or from any party to any Loan Document in accordance with the terms
thereof in excess of funds necessary to pay such Conduit Lender’s matured and maturing Commercial
Paper or other rated indebtedness and, to the extent funds are not available to pay such
obligations, the claims relating thereto shall not constitute a claim against such Conduit Lender
but shall continue to accrue. The payment of any claim (as defined in Section 101 of Title 11 of
the Bankruptcy Code) of any party to this Credit Agreement or any other Loan Document against a
Conduit Lender shall be subordinated to the payment in full of all of such Conduit Lender’s
Commercial Paper and other rated indebtedness. No recourse under or with respect to any
obligation, covenant or agreement of any Conduit Lender as contained in this Credit Agreement or
any other agreement, instrument or document entered into by it pursuant hereto or in connection
herewith shall be had against any manager or administrator of such Person or any incorporator,
stockholder, member, officer, employee or director of such Person or of any such manager or
administrator, as such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise.
Remainder of Page Intentionally Left Blank
Signature Pages Follow.
Signature Pages Follow.
106
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed
as of the day and year first above written.
| BORROWER: ACADIA STRATEGIC OPPORTUNITY FUND III LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| MANAGING MEMBER: ACADIA REALTY ACQUISITION III LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| PLEDGOR: ACADIA INVESTORS III, INC., a Maryland corporation |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| GUARANTOR: ACADIA REALTY LIMITED PARTNERSHIP, a Delaware limited partnership |
||||
| By: | ACADIA REALTY TRUST, its General Partner |
|||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
Signature Page to Revolving Credit Agreement
| ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent |
||||
| By: | ||||
| Name: | ||||
| Title | ||||
Signature Page to Revolving Credit Agreement
| MANAGING AGENT AND ADMINISTRATOR: BANK OF AMERICA, N.A., as Managing Agent for the YC SUSI Lender Group and as Administrator for YC SUSI Trust |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Signature Page to Revolving Credit Agreement
| LENDERS: BANK OF AMERICA, N.A., as an Alternate Lender for the YC SUSI Lender Group |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Signature Page to Revolving Credit Agreement
| YC SUSI TRUST, as Conduit Lender |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Signature Page to Revolving Credit Agreement
Schedule 1.1
Commitments
| Alternate Lender | Commitment | |
Bank of America, N.A. |
$75,000,000 |
Schedule to Revolving Credit Agreement
Schedule 14.7
Addresses
Bank of America
Bank of America, N.A., as Administrative Agent
NC1-027-19-01
214 North Tryon Street
Charlotte, North Carolina 28255
Attention: Dan Hattendorf
Telephone: (704) 388-3113
Facsimile: (704) 388-9211
NC1-027-19-01
214 North Tryon Street
Charlotte, North Carolina 28255
Attention: Dan Hattendorf
Telephone: (704) 388-3113
Facsimile: (704) 388-9211
With copy to:
Bank of America, N.A., as Administrative Agent
NC1-027-19-01
214 North Tryon Street
Charlotte, NC 28255
Attention: Brian Williams
Telephone: (704) 683-4747
Telecopy: (704) 968-1215
NC1-027-19-01
214 North Tryon Street
Charlotte, NC 28255
Attention: Brian Williams
Telephone: (704) 683-4747
Telecopy: (704) 968-1215
YC SUSI Trust
YC SUSI Trust
c/o Bank of America, N.A.
NC1-027-19-01
214 North Tryon Street
Charlotte, North Carolina 28255
Attention: Dan Hattendorf
Telephone: (704) 388-3113
Facsimile: (704) 388-9211
NC1-027-19-01
214 North Tryon Street
Charlotte, North Carolina 28255
Attention: Dan Hattendorf
Telephone: (704) 388-3113
Facsimile: (704) 388-9211
With copy to:
YC SUSI Trust
c/o Bank of America, N.A.
NC1-027-19-01
214 North Tryon Street
Charlotte, NC 28255
Attention: Brian Williams
Telephone: (704) 683-4747
Telecopy: (704) 968-1215
NC1-027-19-01
214 North Tryon Street
Charlotte, NC 28255
Attention: Brian Williams
Telephone: (704) 683-4747
Telecopy: (704) 968-1215
Schedule to Revolving Credit Agreement
Schedule 14.12(b)
Processing and Recordation Fees
The Administrative Agent will charge the applicable Lenders a processing and recordation fee (an
“Assignment Fee”) in the amount of $2,500 for each assignment; provided, however, that in the event
of two or more concurrent assignments to members of the same Assignee Group (which may be effected
by a suballocation of an assigned amount among members of such Assignee Group) or two or more
concurrent assignments by members of the same Assignee Group to a single Eligible Assignee (or to
an Eligible Assignee and members of its Assignee Group), the Assignment Fee will be $2,500 plus the
amount set forth below:
| Transaction | Assignment Fee | |||
First four
concurrent assignments or suballocations to members of an Assignee Group (or from members of an
Assignee Group, as applicable) |
-0- | |||
Each additional
concurrent assignment or suballocation to a member of such Assignee Group (or from a member of such
Assignee Group, as applicable) |
$ | 500 | ||
Schedule to Revolving Credit Agreement
Exhibit 10.70
ACADIA TARRYTOWN LLC,
formerly known as
Acadia-Noddle Tarrytown Development Co., LLC
formerly known as
Acadia-Noddle Tarrytown Development Co., LLC
TO
ANGLO IRISH BANK CORPORATION PLC
MORTGAGE CONSOLIDATION AND MODIFICATION AGREEMENT
| Dated: | As of October 30, 2007 | |||||
| Location: | 124-134 Wildey Street | |||||
| County: | Westchester | |||||
| Town: | Greenburgh | |||||
| Village: | Tarrytown | |||||
| Section: | 1 | |||||
| Sheet: | 2 | |||||
| Lots: | P25 and P25B |
RECORD AND RETURN TO:
Sullivan & Worcester LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Hugh P. Finnegan, Esq.
1290 Avenue of the Americas
New York, New York 10104
Attention: Hugh P. Finnegan, Esq.
TABLE OF CONTENTS
Section 1.
|
Definitions | |
Section 2.
|
Consolidation; Spreader; Granting Clause | |
Section 3.
|
Obligations Secured | |
Section 4.
|
Representations and Warranties | |
Section 5.
|
Mortgagor’s Covenants | |
5.1
|
Title | |
5.2
|
Payment and Performance of Obligations | |
5.3
|
Insurance | |
5.4
|
Payment of Taxes and Liens | |
5.5
|
Insurance and Tax Deposits | |
5.6
|
Maintenance and Inspections | |
5.7
|
Alterations and Additions | |
5.8
|
Management and Operation | |
5.9
|
Compliance with Laws and Restrictions | |
5.10
|
Hazardous Waste | |
5.11
|
Condemnation | |
5.12
|
Records and Financial Statements | |
5.13
|
Alienation | |
5.14
|
Senior or Junior Indebtedness | |
5.15
|
Preservation of Easements, Licenses and Zoning | |
5.16
|
Mortgagee’s Right to Pay or Perform Mortgagor’s Covenants | |
5.17
|
Proceedings and Indemnification | |
5.18
|
Further Assurances | |
5.19
|
Expenses | |
5.20
|
Required Repairs | |
5.21
|
Estoppel Certificates | |
5.22
|
Undertakings | |
Section 6.
|
Assignment of Leases and Rents | |
Section 7.
|
Security Agreement | |
Section 8.
|
Events of Default | |
Section 9.
|
Remedies | |
9.1
|
Rights upon Default | |
9.2
|
Right to Release and Negotiate |
1
9.3
|
Mortgagor to Surrender Possession | |
9.4
|
Rights under UCC | |
Section 10.
|
Miscellaneous | |
10.1
|
Notices | |
10.2
|
Captions | |
10.3
|
Modifications | |
10.4
|
Non-Waiver | |
10.5
|
Cumulative Nature of Rights and Remedies | |
10.6
|
Limitation of Third-Party Rights | |
10.7
|
Interpretation | |
10.8
|
Assignability of Mortgagee’s Interest | |
10.9
|
Integration | |
10.10
|
Singular Includes Plural | |
10.11
|
Severability | |
10.12
|
Governing Law | |
10.13
|
Incorporation of Exhibits | |
10.14
|
Successors and Assigns Bound | |
10.15
|
Waiver of Jury Trial | |
Section 11.
|
New York Provisions. | |
11.1
|
Non-Residential Property | |
11.2
|
Trust Fund | |
11.3
|
Maximum Amount Secured |
Signature of Mortgagor
Acknowledgment(s)
Acknowledgment(s)
2
MORTGAGE CONSOLIDATION AND MODIFICATION AGREEMENT
This Mortgage Consolidation and Modification Agreement, dated as of this 30th day of October,
2007, is made by ACADIA TARRYTOWN LLC, formerly known as Acadia-Noddle Tarrytown Development Co.,
LLC, a New York limited liability company, having an address at c/o Acadia Realty Trust, 1311
Mamaroneck Avenue, Suite 260, White Plains, New York 10605, (“Mortgagor”) in favor of ANGLO IRISH
BANK CORPORATION PLC, a banking corporation organized under the laws of the Republic of Ireland
having its principal place of business at Stephen Court, 18/21 St. Stephen’s Green, Dublin 2,
Ireland (“Mortgagee”).
RECITALS:
WHEREAS, Mortgagor is the owner of the fee estate in the premises described in Exhibit
A attached hereto (the “Premises”) and Mortgagee is the owner and holder of certain mortgages
covering the fee estate of Mortgagor in the Premises, as more particularly described in Exhibit
C attached hereto (collectively, the “Existing Mortgages”) and of the notes, bonds or other
obligations secured thereby, as more particularly described in Exhibit C attached hereto
(collectively, the “Existing Notes”);
WHEREAS, there is, prior to the execution of the note and the mortgage dated the date hereof,
presently owing on the Existing Notes and the Existing Mortgages the principal balance of
$1,859,478.61 and interest;
WHEREAS, Mortgagor and Mortgagee have agreed in the manner hereinafter set forth (a) to spread
the Existing Mortgages and the respective liens thereof over those portions of the Mortgaged
Property not already covered thereby, if any, and (b) to modify the terms and provisions of the
Existing Mortgages;
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Mortgagor hereby represents and
warrants to and covenants and agrees with Mortgagee as follows:
Section 1. Definitions. Each reference in this Mortgage to the following terms shall
be deemed to have the following meaning:
Bankruptcy Code: The federal bankruptcy code, 11 U.S.C. § 101 et
seq., as the same now exists or may hereafter be amended.
Collateral: Collectively, the Personal Property, the Proceeds, the Leases, Rents and
Security Deposits.
Commitment Letter: Mortgagee’s term sheet, dated September 6, 2007, setting forth the
general terms of the Loan.
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Continuing Expenses: Normal operating expenses of the Mortgaged Property that are
incurred during the period of any loss due to a casualty with respect to the Mortgaged Property.
Cost to Repair: The term “Cost to Repair” is defined in Section 5.3.9 hereof.
Default Condition: The existence of any Event of Default or the existence of any
condition or state of facts which, with the giving of notice or passage of time, or both, would
constitute an Event of Default.
Default Rate: The rate of interest payable under the Note at maturity or upon the
occurrence of an Event of Default.
Deposited Funds: Any and all sums deposited with Mortgagee pursuant to Section 5.5
hereof for payment of Impositions and insurance premiums.
Environmental Site Assessment Report: The report, dated October 9, 2007 prepared by
ATC Associates Inc. and provided to Mortgagee in connection with the Loan.
Event of Default: Any event of default listed in Section 8 hereof.
Existing Mortgages: The term “Existing Mortgages” is defined in the Recitals.
Existing Notes: The term “Existing Notes” is defined in the Recitals.
Guarantor: The term “Guarantor” shall mean Acadia Strategic Opportunity Fund, LP.
Guaranty Documents: The term “Guaranty Documents” shall collectively mean that certain
Non-Recourse Carve Out Guaranty Agreement, dated the date hereof, executed by Mortgagor and
Guarantor in favor of Mortgagee and that certain Environmental Indemnity Agreement, dated the date
hereof, executed by Mortgagor and Guarantor in favor of Mortgagee.
Governmental Authority: Each and every national, state and local governmental body,
department, agency or subdivision having jurisdiction over Mortgagor, any Guarantor or the
Mortgaged Property or any part thereof or any use, operation or occupancy thereof.
Hazardous Waste: Any “oil,” “hazardous material,” “hazardous wastes” or “hazardous
substances” as defined in the Hazardous Waste Laws, including, without limitation (whether or not
included in the definition contained in the Hazardous Waste Laws), PCBs, asbestos, radon and other
chemicals which would be materially dangerous to the environment or to human beings.
Hazardous Waste Laws: Collectively, any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to
protection of human health or the environment, relating to Hazardous Substances, relating to
liability for or costs of remediation or prevention of releases of Hazardous Substances or relating
to liability for or costs of other actual or threatened danger to human health or the environment,
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including, but not limited to, the following statutes, as amended, any successor thereto, and
any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules,
regulations and the like addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the
Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the
Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act;
the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act.
Hedging Agreement: The term “Hedging Agreement” shall mean any swap, collar, option
or similar contract entered into or to be entered into between the Mortgagor and the Mortgagee in
connection with the Loan.
Impositions: Any and all taxes, assessments, water and sewer charges, and other
charges of whatever nature which may at any time be assessed against, levied upon or constitute a
lien on the whole or any part of the Mortgaged Property, or which otherwise might become a lien
prior to this Mortgage or otherwise have priority in the distribution of the proceeds of a judicial
sale, and any and all interest, costs or penalties with respect to any and all unpaid taxes,
assessments or charges.
Improvements: Any and all buildings and improvements now or hereafter located on the
Premises.
Lease: Each and every agreement providing for use or occupancy of all or any part of
the Mortgaged Property, whether written or oral, whether now existing or hereafter arising, and any
and all amendments, renewals and extensions thereof including all guaranties thereof.
Lessee: Any tenant pursuant to a Lease.
Licenses: Any and all franchises, licenses and permits whether issued by a
Governmental Authority or otherwise, relating to construction on the Premises or any part thereof,
or the use, operation or occupancy of the Premises and Improvements or any part thereof or any
business conducted thereon.
Loan: The loan evidenced by the Note.
Loan Documents: Collectively, the Note, the Security Instruments and the Other
Documents.
Mortgage: The term “Mortgage” is defined in Section 2.2 hereof.
Mortgaged Property: The term “Mortgaged Property” as defined in Section 2.1 hereof.
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Net Proceeds: The net amount of all insurance proceeds received by Mortgagee pursuant
to the provisions of this Mortgage as a result of damage or destruction of the Mortgaged Property,
after deducting Mortgagee’s reasonable costs and expenses, if any, in collecting the same available
for the repair and restoration of the Improvements.
Note: The term “Note” means that certain Note Consolidation and Modification
Agreement, dated the date hereof, executed by Mortgagor in favor of Mortgagee in the principal
amount of up to $9,800,000.00.
Obligations: The term “Obligations” as defined in Section 3 hereof.
Other Documents: Any document, instrument or agreement now or hereafter securing the
Note or executed by Mortgagor or any Other Liable Party in connection with the Loan, other than the
Note and the Security Instruments, including, without limitation, any Hedging Agreement.
Other Liable Party: Each and every person, corporation, limited liability company,
partnership or other entity (other than Mortgagor) now or hereafter liable, absolutely or
contingently, for the whole or any part of the indebtedness evidenced by the Note, including,
without limitation, the Guarantor.
Permitted Encumbrances: The liens and encumbrances, if any, listed on Exhibit
B attached hereto and incorporated herein by reference and any real estate taxes and
assessments with respect to the Premises and Improvements to the extent that the same are not yet
due and payable.
Permitted Use: Retail uses permitted by applicable law.
Personal Property: Any and all fixtures, machinery, equipment and other personal
property of every kind, now or hereafter located in or upon or affixed to the Premises or
Improvements, or any part thereof, or now or hereafter used or to be used in connection with any
present or future operation of the Premises or Improvements, or any part thereof, and now owned or
hereafter acquired by Mortgagor, or in which Mortgagor now or hereafter has an interest, including,
without limitation, any and all (i) heating, lighting, incinerating, refrigerating, ventilating,
air conditioning, air cooling, lifting, fire extinguishing, plumbing, cleaning, communications and
power equipment and apparatus, (ii) gas, water and electrical equipment, (iii) elevators,
escalators, switchboards, engines, motors, tanks, pumps, partitions, conduits, ducts and
compressors, (iv) electrical and/or gas appliances, incinerators, carpeting, furniture and
furnishings, draperies, storm windows and doors, and screens and awnings and (v) Licenses; and any
and all renewals of, replacements, accessions or additions to, substitutions for and proceeds of
any and all of the foregoing.
Premises: The term “Premises” is defined in the Recitals.
Proceeds: Any and all proceeds payable or paid for or with respect to any or as a
result of damage or loss to the Premises, Improvements and Personal Property, or any part thereof,
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including, without limitation, insurance proceeds, and all awards in connection with any
condemnation or other taking of the Premises, Improvements and Personal Property, or any part
thereof, or for conveyance in lieu thereof.
Rents: Any and all rents and other payments of every kind due or payable and to
become due or payable to Mortgagor by virtue of the Leases, or otherwise due or payable and to
become due or payable to Mortgagor as the result of any use, possession or occupancy of all or any
part of the Mortgaged Property.
Security Deposits: All tenant security deposits held by or deposited with Mortgagor
or Mortgagee in connection with any of the Leases, whether in the form of cash, letter of credit or
otherwise.
Security Instruments: (i) this Mortgage, (ii) an Assignment of Leases and Rents from
Mortgagor to Mortgagee of even date herewith, (iii) any guaranty or indemnity of the obligations of
Mortgagor under the Note or any of the other Loan Documents and (iv) the UCC-1 Financing Statements
perfecting the security interest granted herein.
Section 2. Consolidation; Spreader; Granting Clause.
2.1. The Existing Mortgages and the respective liens thereof are hereby spread over those
portions of the Mortgaged Property not already covered thereby, and for consideration paid and for
other good and valuable consideration, the receipt and legal adequacy of which are hereby
acknowledged, Mortgagor hereby grants, bargains, sells, conveys, transfers and assigns to
Mortgagee, its successors and assigns, forever, WITH MORTGAGE COVENANTS, and Mortgagor hereby
grants to Mortgagee, its successors and assigns a security interest in and to all of Mortgagor’s
right, title and interest, if any, in the following property, rights and interests (such property,
rights and interests being heretofore and hereinafter collectively referred to as the “Mortgaged
Property”):
(i) the Premises;
(ii) the Improvements;
(iii) the Personal Property;
(iv) any and all easements, rights of way, privileges, hereditaments and appurtenances now or
hereafter belonging to or inuring to the benefit of the Premises and/or Improvements or any part
thereof, all right, title and interest of Mortgagor in and to the land lying within any street or
roadway adjoining the Premises or any part thereof, and all right, title and interest of Mortgagor
in and to any now or hereafter vacated streets or roads adjoining the Premises or any part thereof;
(v) any and all issues, benefits and profits of the Premises and/or Improvements;
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(vi) the Leases, Rents and Security Deposits;
(vii) the Proceeds;
(viii) the Deposited Funds;
(ix) any and all records and books of account now or hereafter maintained by Mortgagor in
connection with the operation of the Premises, Improvements and Personal Property or any part
thereof;
(x) all of Mortgagor’s right, title and interest in and to any name under which the Premises
and/or Improvements may at any time be operated and any variation thereof and the goodwill of
Mortgagor in connection herewith or therewith;
(xi) all of Mortgagor’s right, title and interest in and to any Hedging Agreement.
All of which Premises, Improvements, Personal Property and other property hereby granted, sold and
conveyed, or intended so to be, are collectively referred to as the “Mortgaged Property.”
TO HAVE AND TO HOLD the Mortgaged Property unto and to the use of Mortgagee, its successors and
assigns forever.
2.2. The Existing Mortgages and the respective liens thereof, as so spread, constitute in law
but one mortgage, a single first mortgage lien, covering the Mortgaged Property and securing the
principal sum of up to $9,800,000.00, together with interest thereon as hereinafter provided (the
Existing Mortgages, as modified, amended, restated, ratified and confirmed pursuant to the
provisions of this Mortgage hereinafter set forth, being hereinafter collectively referred to as
the “Mortgage”).
2.3. The terms, covenants and provisions of the Mortgage are hereby modified, amended and
restated in their entirety so that henceforth the terms, covenants and provisions of the Mortgage
shall read the same as the paragraphs set forth herein, and the Mortgage, as so modified, amended
and restated, is hereby ratified and confirmed in all respects by Mortgagor.
2.4. Mortgagor represents, warrants and covenants that there are no offsets, counterclaims or
defenses against the Note or this Mortgage and that Mortgagor (and the undersigned representative
of Mortgagor) has full power, authority and legal right to execute this Mortgage and to keep and
observe all of the terms of this Mortgage on Mortgagor’s part to be observed and performed.
Section 3. Obligations Secured.
This conveyance is made to secure the following obligations (collectively, the “Obligations”):
8
(i) Payment of the indebtedness of Mortgagor to Mortgagee evidenced by the Note;
(ii) payment by Mortgagor to Mortgagee of any and all sums expended or advanced by Mortgagee
pursuant to any term or provision of this Mortgage;
(iii) performance and observance by Mortgagor of each and every covenant, condition and
obligation contained in the Note, this Mortgage, the other Security Instruments and any other
document, instrument or agreement now or hereafter given by Mortgagor as additional security for
the payment of the indebtedness hereby secured, or otherwise executed in connection therewith;
(iv) payment by Mortgagor to Mortgagee of any and all sums expended or advanced by Mortgagee
pursuant to any term or provision of any Hedging Agreement entered into between Mortgagor and
Mortgagee; and
(v) performance and observance by Mortgagor of every condition and obligation contained in any
Hedging Agreement entered into between Mortgagor and Mortgagee.
Section 4. Representations and Warranties.
4.1. Mortgagor is duly organized, validly existing and in good standing under the laws of the
state of its organization and is duly qualified to transact business in the state in which the
Premises is located;
4.2. Mortgagor has the requisite power and authority (a) to own its properties and to carry on
its business as now being conducted and as contemplated under this Mortgage and each Lease, (b) to
place mortgages and liens upon its assets and (c) to execute and deliver or cause to be executed
and delivered the Loan Documents and to perform its obligations thereunder;
4.3. The execution and delivery of the Loan Documents and the performance of the terms and
conditions thereof by Mortgagor, have been duly authorized by all requisite action, and create the
valid and binding obligations of Mortgagor, enforceable in accordance with their respective terms;
4.4. Neither the execution, delivery and performance of this Mortgage by Mortgagor, nor the
execution, delivery and performance, by Mortgagor or any other party (except for Mortgagee), of any
of the other Loan Documents or any and all other documents, instruments and agreements required by
Mortgagee in connection with the Loan, including, without limitation, the execution and delivery of
any guaranty by the Guarantor, will violate any provision of (a) law, (b) any order of any court or
other Governmental Authority, (c) Mortgagor’s organizational documents or operating agreement, (d)
any indenture, agreement or other instrument to which Mortgagor or any Guarantor is a party, or by
which Mortgagor or any Guarantor is bound, or be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever
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upon any of the property or assets of Mortgagor or any Guarantor, other than as provided
herein and in the Security Instruments;
4.5. All financial data, reports and other information prepared by or for the benefit of
Mortgagor or Guarantor and furnished Mortgagee in connection with the Loan are accurate and
complete and fairly present the financial position and the results of operations for the periods
indicated therein, and there has been no material adverse change in the condition, financial or
otherwise, of Mortgagor or the Guarantor since the dates of the most recent financial statements;
4.6. Neither Mortgagor, nor any Guarantor, nor any corporation, partnership or other legal
entity in which Mortgagor or any Guarantor is a principal, is in default under any of their
respective material obligations and agreements (including the payment of all federal, state and
local taxes), to the best of Mortgagor’s and Guarantor’s knowledge, no condition or state of facts
exists which with the giving of notice or passage of time or both would constitute such a default,
and there is no action, suit or proceeding at law or in equity or by or before any Governmental
Authority now pending, or, to the knowledge of Mortgagor or any Guarantor, threatened against or
affecting Mortgagor, any Guarantor, the Mortgaged Property or any properties adjacent to the
Mortgaged Property, which, if adversely determined, would have a material adverse effect on the
business, operations, properties (including without limitation, the Mortgaged Property), assets or
condition, financial or otherwise, of Mortgagor or any Guarantor;
4.7. To Mortgagor’s knowledge and except as otherwise previously disclosed to Mortgagee in
writing, there is no default under and there exists no condition or state of facts which, with the
giving of notice or passage of time or both, would constitute a default under any Lease;
4.8. To the best of Mortgagor’s knowledge, the Mortgaged Property and the use thereof for the
Permitted Use does not violate (a) any building, zoning, subdivision, land-use, health, sanitation,
environmental protection or other law, ordinance, rule or regulation promulgated by any
Governmental Authority or (b) any deed, plat or other restriction of any kind applicable to the
Mortgaged Property;
4.9. To the best of Mortgagor’s knowledge, all utilities and services necessary for the
operation of the Mortgaged Property for the Permitted Use and in accordance with each Lease, (a)
are available at the boundary of the Premises and are connected to the Improvements, (b) are
operational and (c) are of sufficient capacity to adequately service the operation of the
Improvements;
4.10. Except as may be set forth in that certain Title Commitment dated the date hereof issued
by Commonwealth Land Title Insurance Company under Title Number 07NYW10958 (the “Title
Commitment”), there are no party wall agreements or easements across or affecting the Mortgaged
Property which have any adverse effect upon the operation of the Mortgaged Property;
10
4.11. To the best of Mortgagor’s knowledge, the Improvements are not located in a designated
flood hazard area, as defined in the Flood Disaster Protection Act of 1973 (P.L. 93-234), as
amended;
4.12. There is unrestricted access for the passage of motor vehicles to and from the Premises
to and from the public road upon which the Premises fronts and all required curb cut or access
permits (if any) have been obtained; and
4.13. Neither the making of the Loan nor Mortgagee’s acceptance of the Loan Documents will
subject Mortgagee to any claim for a brokerage commission, finder’s fee or like charge by virtue of
any action of Mortgagor.
Section 5. Mortgagor’s Covenants. The Mortgagor covenants and agrees with Mortgagee
as follows:
5.1. Title.
5.1.1 Mortgagor has good and clear, record and marketable title in fee simple to the Mortgaged
Property subject only to the Permitted Encumbrances; this Mortgage is and will remain a valid and
enforceable lien on the Mortgaged Property; Mortgagor has full power and lawful authority to grant,
sell and convey the Mortgaged Property in the manner and form herein done; and Mortgagor will
preserve such title, will forever warrant and defend the same to Mortgagee and will forever warrant
and defend the validity and priority of the lien hereof against the claims of all persons
whatsoever, except the holders of the Permitted Encumbrances.
5.1.2 Mortgagor agrees to deliver, within thirty (30) days after the date hereof, an ALTA
standard form of Mortgagee’s loan policy of title insurance with respect to the Premises, in the
amount of the Note, insuring the lien of this Mortgage as a good and valid first lien subject only
to the Permitted Encumbrances, and containing such endorsements and affirmative coverage as have
been requested by or on behalf of Mortgagee in writing prior to the recording hereof or as
Mortgagee otherwise reasonably may require.
5.2. Payment and Performance of Obligations.
5.2.1 Mortgagor shall pay all indebtedness hereby secured at the time or times and in the
manner provided herein, in the Note, or in any other instrument secured hereby.
5.2.2 Mortgagor will perform and observe all the terms, provisions, covenants and conditions
imposed upon Mortgagor under each and every of the Loan Documents, all at the time or times and in
the manner provided therein.
5.3. Insurance.
5.3.1 Mortgagor shall keep the Improvements continuously insured against loss by fire and the
risks covered under a so-called “extended coverage endorsement”, flood, explosion of boilers,
heating apparatus and other pressure vessels, and such other hazards,
11
casualties and contingencies as Mortgagee from time to time reasonably may require, in an
amount equal to one hundred percent (100%) of the replacement cost of the Improvements. The
insurance policy evidencing such coverage: (a) shall be endorsed with an Agreed Amount Endorsement,
(b) shall be endorsed with a Loss of Rents Endorsement (or equivalent endorsement) for a twelve
(12) month period, and (c) shall contain a deductible satisfactory to Mortgagee. The amount of
such insurance coverage shall be reviewed not less than annually and increased whenever necessary
so as to provide the required coverage.
5.3.2 Mortgagor shall continuously keep in full force and effect a policy of public liability
insurance and (if relevant) elevator insurance, against claims for bodily injury, death or property
damage occurring upon, in or about the Mortgaged Property or any part thereof in which the limits
of liability shall not be less than One Million Dollars (US$1,000,000) per occurrence and Two
Million Dollars (US$2,000,000) general aggregate, together with an umbrella form liability policy
in the amount of Five Million Dollars (US$5,000,000), which shall be in addition to the limits
above set forth. Mortgagor agrees to increase the limits of such liability insurance to such
higher amounts as Mortgagee from time to time reasonably may require.
5.3.3 All such insurance shall be evidenced by valid and enforceable policies in form and
substance satisfactory to Mortgagee. Without limiting the generality of the foregoing: (a) all
such insurance policies shall contain an endorsement requiring thirty (30) days written notice to
Mortgagee prior to cancellation or change in the coverage, scope or amount of any such policy or
policies, (b) all such insurance policies and certificates thereof shall name Mortgagee, its
successors and assigns, as mortgagee, loss payee and additional insured, and (c) any and all
policies evidencing casualty insurance shall provide that any and all loss shall be payable to
Mortgagee and such loss shall be payable to Mortgagee notwithstanding any act or omission of
Mortgagor which might otherwise result in cancellation or forfeiture of said insurance.
5.3.4 Mortgagor shall deliver to Mortgagee evidence satisfactory to Mortgagee of the issuance
of renewal or replacement policies not less than thirty (30) days prior to the expiration date of
the policy to be renewed or replaced, accompanied, if requested by Mortgagee, by evidence
satisfactory to Mortgagee that all premiums payable with respect to such policies have been paid in
full by Mortgagor. In addition, Mortgagor shall provide such other insurance as may be reasonably
requested by Mortgagee from time to time.
5.3.5 From time to time, upon the request of Mortgagee, Mortgagor shall provide Mortgagee with
the originals of all policies evidencing the insurance coverage required under this Mortgage. In
any event Mortgagor shall furnish to Mortgagee (a) concurrently with the execution of this
Mortgage, a certificate of insurance or other evidence of insurance satisfactory to Mortgagee
evidencing that Mortgagor has in full force and effect the insurance coverage required hereunder,
and (b) from time to time at the request of Mortgagee, a certificate of insurance or other evidence
of insurance satisfactory to Mortgagee evidencing that Mortgagor has in full force and effect the
insurance coverage required hereunder.
5.3.6 Mortgagor shall have the right of free choice in the selection of the agent or insurer
through or by which the insurance required hereunder is to be placed; provided,
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however, said insurer is authorized to write such insurance in the state in which the Premises
is located, has a licensed resident agent in said state and has, at all times while this mortgage
is in effect, a general policyholder’s rating of A-VIII or better in Best’s latest rating guide.
5.3.7 Mortgagee shall be, and is hereby, authorized and empowered, for and in the name or
names and on behalf of Mortgagor and/or Mortgagee, and for the purposes hereinafter set forth,
shall be and is hereby made, constituted and appointed the true and lawful attorney-in-fact of
Mortgagor (with full power of substitution and revocation), and in the sole and uncontrolled
discretion of said attorney, (a) to demand, adjust, sue for, settle, compromise and collect any
amounts due under such insurance polices in the event of loss, and (b) to give releases for any and
all amounts received in settlement of loss under such policies; provided, however, so long as no
Default Condition exists, Mortgagee shall not exercise such power of attorney unless and until
three (3) months have elapsed from the date of such loss without settlement having been made.
Unless the settlement of such loss is in excess of the amount of the Obligations, no settlement
therefor shall be made without the prior written consent of Mortgagee. The foregoing appointment,
being coupled with an interest, is irrevocable until the Obligations are paid and otherwise
satisfied in full.
5.3.8 (a) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, Mortgagor shall give prompt notice thereof to Mortgagee. Mortgagor hereby
authorizes and empowers Mortgagee, at Mortgagee’s option and at Mortgagee’s sole discretion, as
attorney-in-fact for Mortgagor, to make proof of loss, to adjust and compromise any claim under any
insurance policy, to appear in and prosecute any action arising from any policy, to collect and
receive insurance proceeds and to deduct therefrom Mortgagee’s expenses incurred in the collection
process, to endorse any checks, drafts or other instruments representing any proceeds of such
insurance, whether payable by reason of loss thereunder or otherwise, and to make any election
required or permitted under any insurance policy relating to repair or restoration; provided,
however, so long as no Default Condition exists, Mortgagee shall not exercise such power of
attorney unless and until three (3) months have elapsed from the date of such loss without
settlement having been made. So long as no Default Condition exists, Mortgagee shall disburse any
Rents and Continuing Expenses received under any insurance policy to Mortgagor. Mortgagee shall
make the Net Proceeds available for the repair and restoration of the Improvements, provided that
(i) no Default Condition shall exist, (ii) Mortgagor shall proceed with the repair and restoration
of the Improvements as nearly as reasonably possible to the condition the Improvements were in
immediately prior to such fire or other casualty promptly after the insurance claims are settled,
(iii) no Lease shall be terminated as a result of such fire, (iv) Mortgagee shall be reasonably
satisfied that upon the completion of such repair and restoration the gross cash flow and the net
cash flow of the Mortgaged Property will be restored to a level at least equal to the level the
same were at prior to the date of such fire or other casualty and (v) the estimated cost of repair,
restoration, rebuilding or replacement (hereinafter, collectively, the “Cost to Repair”) does not
exceed $500,000.00. If the Cost to Repair is greater than $500,000.00 but does not exceed
$1,000,000.00, provided the conditions set forth in (i), (ii), (iii) and (iv) above have been
satisfied, Mortgagee shall release so much of the Net Proceeds as may be required to pay for the
actual Cost to Repair directly to the Mortgagor in accordance with the provisions of this Section
5.3.9. If the Cost to Repair is greater than or equal to $1,000,000.00 or if the casualty occurs
within one hundred and eighty
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(180) days of the Maturity Date (as such term is defined in the Note) the Mortgagee, in its
sole and absolute discretion, may either apply the proceeds of insurance to reduce the Mortgagor’s
Obligations or, provided the conditions set forth in (i), (ii), (iii) and (iv) above have been
satisfied, release so much of the Net Proceeds as may be required to pay for the actual Cost of the
repair work to repair, restore, rebuild or replace the Improvements (collectively, the “Repair
Work”) directly to the Mortgagor in accordance with the provisions of this Section 5.3.9.
(b) Upon satisfaction of the provisions of the preceding paragraph (a), the Net Proceeds will
be disbursed by Mortgagee to Mortgagor to pay for the costs of the Repair Work. The Net Proceeds
shall be held by Mortgagee in escrow until expended in connection with the Repair Work, it being
agreed that any Net Proceeds so held by Mortgagee may be commingled with the general funds of
Mortgagee, shall bear interest at such rate as reasonably determined by Mortgagee, and shall
constitute additional security for the payment of the Obligations. The Net Proceeds shall be paid
by Mortgagee to, or as directed by, Mortgagor from time to time during the course of the Repair
Work upon satisfaction of the following conditions: (i) all plans, specifications, costs estimates,
contracts and bonds, if any, for the Repair Work, have been obtained and are satisfactory to
Mortgagee in its commercially reasonable discretion and (ii) Mortgagee has received satisfactory
evidence that: (x) all materials installed and work and labor performed (except to the extent that
they are to be paid for out of the requested payment) in connection with the repair and restoration
have been paid for in full, (y) there exists no notices of intention, mechanics or other liens and
encumbrances on the Mortgaged Property arising out of the Repair Work, and (z) the balance of the
Net Proceeds plus the balance of any deficiency deposits made by Mortgagor pursuant to the
provisions of this paragraph hereinafter set forth shall be sufficient to pay in full the balance
of the cost of the Repair Work. The Repair Work shall be done and completed by Mortgagor in an
expeditious and diligent fashion and in compliance with all applicable laws, rules and regulations,
and all plans and specifications required in connection with the repair and restoration shall be
subject to the prior review and approval in all respects by an independent inspecting engineer
selected by Mortgagor and reasonably acceptable to Mortgagee (the “Inspecting Engineer”). All
costs and expenses incurred by Mortgagee in connection with making the Net Proceeds available for
the Repair Work, including, without limitation, counsel fees and disbursements and the Inspecting
Engineer’s fees incurred by Mortgagee, shall be paid by Mortgagor. In no event shall Mortgagee be
obligated to make disbursements of the Net Proceeds in excess of an amount equal to the value of
the work in place as part of the repair and restoration, as certified by the Inspecting Engineer,
minus 10% of such costs (such 10% being hereinafter referred to as the “Retainage”). Once fifty
percent (50%) of the Repair Work has been completed, the Retainage shall be reduced to 5%.
Mortgagee shall not be obligated to make disbursements of the Net Proceeds more than once every
thirty (30) days. If the Cost to Repair does not exceed $500,000.00, only one disbursement of the
Net Proceeds shall be made by Mortgagee, which disbursement shall be made upon certification by the
Inspecting Engineer that the Repair Work has been completed in accordance with the provisions of
this paragraph, and upon receipt by Mortgagee of evidence satisfactory to Mortgagee that the costs
of the repair and restoration have been paid in full or will be paid in full out of such
disbursement. The Retainage shall not be released until the Inspecting Engineer certifies that the
repair and restoration have been completed in accordance with the provisions of this paragraph, and
Mortgagee receives evidence satisfactory to Mortgagee that the costs of the repair and restoration
have been paid in full or will be paid in full out of the
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Retainage. The excess, if any, of the Net Proceeds after the completion of the Repair Work and the
payment in full of all costs incurred in connection therewith shall be applied by Mortgagee in
reduction of the Obligations in such priority and proportions as Mortgagee in its commercially
reasonable discretion shall deem proper. If at any time the Net Proceeds, or the undisbursed
balance thereof, shall not, in the commercially reasonable opinion of Mortgagee, be sufficient to
pay in full the balance of the costs which will be incurred in connection with the completion of
the Repair Work, Mortgagor shall deposit the deficiency with Mortgagee before any further
disbursement of the Net Proceeds shall be made, which deficiency deposit may be commingled with the
general funds of Mortgagee, shall bear interest at such rate as reasonably determined by Mortgagee
and shall be disbursed for costs actually incurred in connection with the Repair Work on the same
conditions applicable to the Net Proceeds. Any such deficiency deposit, until disbursed pursuant
to this paragraph, shall constitute additional security for the payment of the Obligations. The
balance, if any, of any such deficiency deposit remaining after the Inspecting Engineer certifies
that the Repair Work has been completed in accordance with the provisions of this paragraph and the
receipt by Mortgagee of evidence satisfactory to Mortgagee that all costs incurred in connection
with the Repair Work have been paid in full shall be returned by Mortgagee to Mortgagor. All costs
of the Repair Work in excess of the Net Proceeds shall be paid for by Mortgagor. If Mortgagee
shall receive and retain such Net Proceeds, the lien of this Mortgage shall be reduced only by the
amount thereof received and retained by Mortgagee and actually applied by Mortgagee in reduction of
the Obligations. Mortgagee shall not be obligated to see to the proper application of insurance
money paid over to Mortgagor, and if Mortgagee receives and retains any Net Proceeds, the lien of
this Mortgage shall be affected only by a reduction of the amount of said lien by the amount of
such insurance money so received and retained by Mortgagee. Nevertheless, if prior to the receipt
by Mortgagee of any insurance proceeds, the Mortgaged Property shall have been sold on foreclosure
of this Mortgage, as between Mortgagor and Mortgagee, Mortgagee shall have the right to receive
said insurance proceeds, and Mortgagor shall pay over to Mortgagee said insurance proceeds as, if
and when Mortgagor receives same, to the extent of (i) any deficiency found to be due upon such
sale, with legal interest thereon, whether or not a deficiency judgment on this Mortgage shall have
been sought or recovered, and (ii) of the attorneys’ fees, costs and disbursements incurred by
Mortgagee in connection with the collection of such insurance proceeds. Mortgagor will not permit
any condition to exist on the Mortgaged Property that would wholly or partially invalidate the
insurance policies.
5.3.9 If Mortgagee shall by any manner acquire title to the Mortgaged Property, it shall
thereupon become the sole and absolute owner of all insurance policies held by or required
hereunder to be delivered to Mortgagee, with the sole right to collect and retain all unearned
premiums and dividends thereon, and Mortgagor shall only be entitled to a credit, in reduction of
the then outstanding indebtedness secured hereby, in the amount of the short rate cancellation
refund. Without limiting the generality of the foregoing, in the event of foreclosure of this
Mortgage or any transfer of title to the Mortgaged Property to a third-party purchaser pursuant to
the power(s) in this Mortgage granted Mortgagee, Mortgagee shall be and is hereby authorized and
empowered, for and in the name or names and on behalf of Mortgagor and/or Mortgagee, and for the
purposes hereinafter set forth, shall be and is hereby made, constituted and appointed the true and
lawful attorney-in-fact of Mortgagor (with full power of substitution and revocation) in the name
place and stead of Mortgagor, and in the sole and uncontrolled
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discretion of said attorney, to surrender up the policies of insurance covering the Mortgaged
Property and any part thereof and to collect any amounts due thereunder or, at its option, to
transfer all right, title and interest in and to said policies and the proceeds thereof to any
purchaser of the Mortgaged Property or any part thereof without obligation to account therefor to
any person claiming title to the Mortgaged Property; provided, however, that any
amounts received by Mortgagee under said policies by way of refunds, dividends or otherwise, as
aforesaid, shall be applied to the payment of the Obligations, and any surplus shall be paid over
as a surplus on foreclosure. The foregoing appointment being coupled with an interest is
irrevocable. Upon the occurrence of an Event of Default, Mortgagee shall have no obligation to
disburse any funds to Mortgagor and all monies held by Mortgagee may be applied toward satisfaction
of the Obligations. Notwitstanding the foregoing, this Section 5.39 shall not apply with respect
to any blanket insurance policies of Mortgagor which do not relate solely to the Mortgaged
Property. The provisions of Subsection 4 of Section 254 of the Real Property Law of New York
covering the insurance of buildings against loss by fire shall not apply to the terms of this
Mortgage.
5.3.10 Mortgagee consents to Mortgagor providing the insurance coverage required under this
Section 5.3 by causing one or more tenants leasing the entire or a portion of the Mortgaged
Property to provide such insurance in the same form and amounts as set forth in this Section 5.3.
5.4. Payment of Taxes and Liens.
5.4.1 Mortgagor shall pay, when due, all Impositions and shall furnish to Mortgagee, promptly
after payment of the same, certificates, receipts or other evidence reasonably satisfactory to
Mortgagee of such payment; provided, however, Mortgagor shall not be required to pay and discharge
any such Imposition, if and so long as (a) the validity thereof shall be contested by Mortgagor
with diligence and in good faith by appropriate proceedings and (b) Mortgagor shall have deposited
with Mortgagee a sum equal to the amount being so contested and any additional charge, penalty or
expense which may be incurred as a result of such contest; and provided further, however, that any
such Imposition and any such additional charge, penalty or expense shall be paid in full before the
Mortgaged Property, or any part thereof, shall be seized and sold in satisfaction thereof.
5.4.2 Mortgagor shall pay, when the same shall become due and payable, all claims and demands
of mechanics, materialmen, laborers and others which, if unpaid, might result in or permit the
creation of a lien on the Mortgaged Property or any part thereof, provided, however, Mortgagor
shall not be required to pay any such claim or demand, if and so long as (a) the validity thereof
shall be contested by Mortgagor with diligence and in good faith by appropriate proceedings and (b)
in the event that such claim or demand results in a lien or notice of record against the Mortgaged
Property or any part thereof, Mortgagor shall have bonded or otherwise caused such lien to be
removed or discharged.
5.4.3 Mortgagor shall pay to Mortgagee, within thirty (30) days after Mortgagee’s demand, an
amount equal to any and all taxes, assessments or charges of whatever nature which may at any time
be assessed against Mortgagee with respect to the Note or this Mortgage or its ownership or holding
thereof, whether under statutes now or hereafter in effect.
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In the event any such tax, assessment or charge is not or, under applicable law, cannot be so
paid by Mortgagor, at the option of Mortgagee, the Obligations shall become immediately due and
payable.
5.5. Insurance and Tax Deposits.
Mortgagee, at any time if an Event of Default has occurred and is continuing or if Mortgagor
has failed to pay the Impositions for the immediately preceding due date, upon ten (10) days notice
to Mortgagor, may require Mortgagor to pay to Mortgagee, on the first day of each calendar month, a
sum equal to (a) one-twelfth (1/12) of the Impositions and (b) one-twelfth (1/12) of the annual
premiums for the insurance required hereunder to be maintained on the Mortgaged Property, the
respective amounts of such Impositions and premiums to be reasonably estimated from time to time by
Mortgagee. Mortgagee shall apply the Deposited Funds to the payment of such Impositions and
premiums and shall render an annual accounting to Mortgagor of all disbursements of the Deposited
Funds. Although each such monthly payment of Deposited Funds are to be in a lump sum, each
component thereof shall be deemed to be held separately by Mortgagor for, and shall be applied only
to, the particular item for which payment was made by Mortgagor, unless Mortgagee, in its
discretion, elects otherwise. If at any time Mortgagee estimates that there shall or will not be
on deposit with it, at least one (1) month prior to the due date (a) of any item constituting part
of the Impositions and/or (b) of any annual insurance premium, a sum sufficient for the payment of
such item and/or premium in full, Mortgagor, upon demand, shall pay the amount of such deficiency
to Mortgagee notwithstanding that there may already be deposited with Mortgagee sums for the
payment of other items which are not yet due. If the amount of the Deposited Funds shall exceed
the amount necessary to pay such Impositions and premiums for the then current year, such excess
shall be credited against future monthly deposits required hereunder. Unless otherwise required by
applicable law, no interest shall be paid on the Deposited Funds, and the Deposited Funds may be
commingled with Mortgagee’s general funds. Upon payment and other satisfaction in full of the
Obligations, any excess Deposited Funds shall be refunded to Mortgagor. Upon the occurrence of any
Event of Default, Mortgagee may apply against the Obligations, in such manner as Mortgagee may
determine, any or all of the Deposited Funds then held by Mortgagee.
5.6. Maintenance and Inspections.
5.6.1 Mortgagor shall at all times keep and maintain the Mortgaged Property and each part
thereof in sound condition and in a first-class state of decoration and repair.
5.6.2 Mortgagor shall not: permit any strip or waste of the Mortgaged Property; permit the
violation of any law, ordinance or rule or regulation of any Governmental Authority affecting the
same or the use thereof, permit any conditions to exist which would wholly or partially invalidate
any insurance on the Mortgaged Property; or do or permit anything to be done to the Mortgaged
Property or any part thereof that might materially diminish the value thereof.
5.6.3 Mortgagor shall permit Mortgagee, its officers, agents and representatives to enter upon
the Mortgaged Property at all reasonable times to view and inspect the same.
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5.6.4 Mortgagor, within thirty (30) days after demand by Mortgagee (or immediately upon demand
in cases which Mortgagee deems to be an emergency), shall make such repairs, replacements,
renewals, or additions, or perform such items of maintenance to the Mortgaged Property or any part
thereof as Mortgagee reasonably may require in order to maintain the Mortgaged Property at the
standards required by this Section.
5.7. Alterations and Additions.
Mortgagor shall not remove or demolish any Improvements, or make any material alteration or
addition to the Improvements (each an “Alteration”), including, without limitation, changes to the
character, design, structure or size of the Improvements, without the prior written consent of the
Mortgagee. Notwithstanding the foregoing, Mortgagor shall have the right to make any Alteration
with respect to the Improvements without Mortgagee’s prior written consent provided the cost of
such Alteration is equal to or less than Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00).
5.8. Management and Operation.
5.8.1 Mortgagor shall at all times provide management for the Mortgaged Property reasonably
satisfactory to Mortgagee. Mortgagor represents and warrants that , as of the date hereof, no
third party management company has been engaged to manage the Mortgaged Property. In the event
that (i) Mortgagor decides to engage a third-party management company to manage the Mortgaged
Property, or (ii) Mortgagee requires Mortgagor to engage a third-party management company pursuant
to Section 5.8.2, Mortgagor agrees to engage a management company satisfactory to Mortgagee,
pursuant to a management agreement satisfactory to Mortgagee, and to execute, and to cause such
management company to execute, an agreement assigning the management agreement to Mortgagee,
subordinating such management agreement and the terms thereof, including but not limited to such
management company’s right to payment of management fees, and containing certain other agreements
of Mortgagor and such management company, in Mortgagee’s then-current form of such agreement (the
“Assignment of Management Agreement”), and to deliver to Mortgagee promptly upon such engagement, a
fully-executed copy of the management agreement, together with the Assignment of Management
Agreement signed by Mortgagor and such manager.
5.8.2 If Mortgagee reasonably determines at any time that the Mortgaged Property is not being
managed in accordance with generally accepted management practices for similarly situated projects,
Mortgagee may deliver written notice thereof to Mortgagor, which notice shall specify in reasonable
detail the grounds for Mortgagee’s determination. If Mortgagee reasonably determines that the
conditions specified in Mortgagee’s notice are not remedied to Mortgagee’s reasonable satisfaction
by Mortgagor within 30 days after the date of such notice, Mortgagee may direct Mortgagor to engage
a management company acceptable to Mortgagee in Mortgagee’s sole discretion. In addition, if an
Event of Default has occurred, Mortgagee may direct Mortgagor to engage a management company
acceptable to Mortgagee in Mortgagee’s sole discretion.
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5.8.3 Mortgagor will continuously operate the Mortgaged Property for the Permitted Use.
5.9. Compliance with Laws and Restrictions.
5.9.1 Mortgagor promptly shall comply with all present and future laws, ordinances, rules,
regulations, directives and other requirements of all Governmental Authorities; provided, however,
Mortgagor may postpone such compliance provided such non-compliance shall not (a) subject Mortgagee
to liability, criminal prosecution or any other penalty, (b) impair the value, or jeopardize the
safety or condition, of the Mortgaged Property, or (c) constitute a default under any Lease, if and
so long as the validity or legality of any such governmental requirement shall be contested by
Mortgagor with diligence and in good faith by appropriate proceedings.
5.9.2 Mortgagor shall comply with all restrictive covenants and other private restrictions, if
any, applicable to the Mortgaged Property.
5.10. Hazardous Waste.
5.10.1 Mortgagor hereby warrants and represents to Mortgagee that, except as set forth in the
Environmental Site Assessment Report, (a) Mortgagor has never released, generated, stored or
disposed of any Hazardous Waste on the Mortgaged Property, (b) Mortgagor is not aware of the
existence, release or threat of release of any Hazardous Waste on or from the Mortgaged Property or
on or from any property adjacent to the Mortgaged Property, and (c) Mortgagor has not received any
notice, order, claim or demand from the United States Environmental Protection Agency (“EPA”) or
any state or local governmental agency, authority or body having jurisdiction over Hazardous Waste
or the storage or removal thereof (collectively, a “State Agency”) with respect to the existence,
release or threat of release of any Hazardous Waste.
5.10.2 Mortgagor shall not release, generate, store or dispose of any Hazardous Waste on the
Mortgaged Property or on any property adjacent to the Mortgaged Property.
5.10.3 Mortgagor shall immediately notify Mortgagee in writing of (a) any and all enforcement,
clean-up, removal or other action instituted or threatened by the EPA or any State Agency pursuant
to any Hazardous Waste Laws, and (b) any and all claims made or threatened by any third party
against Mortgagor or the Mortgaged Property or any part thereof, relating to the existence of, or
damage, loss or injury from, any Hazardous Waste; and Mortgagee, to the extent permitted by
applicable law, shall have the right to join and participate in, as a party if it so elects, any
proceedings or actions initiated in connection with any such claim and to have all of its costs and
expenses, including, without limitation, reasonable attorney’s fees, in connection therewith paid
by Mortgagor.
5.10.4 In the event that any Hazardous Waste is found on or in the Mortgaged Property,
Mortgagor shall immediately contain and remove the same in compliance with all Hazardous Waste
Laws.
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5.10.5 Mortgagor agrees to indemnify and hold Mortgagee harmless from and against any and all
claims, liabilities, costs and expenses incurred by Mortgagee, including, without limitation, costs
of litigation and reasonable attorney’s fees, arising from the release, existence or removal of,
any Hazardous Waste on or in the Mortgaged Property or on any properties adjacent to the Mortgaged
Property. THIS RIGHT OF INDEMNIFICATION SHALL SURVIVE THE PAYMENT IN FULL OF THE NOTE,
NOTWITHSTANDING ANY DISCHARGE OF THIS MORTGAGE.
5.10.6 Mortgagee, at its election and in its sole discretion, at any time and from time to
time, whether or not a Default Condition shall exist hereunder, upon receipt of evidence of the
existence of Hazardous Materials at the Mortgaged Property that were not disclosed in the
Environmental Site Assessment Report or upon substantial belief that a discharge of Hazardous
Materials may have occurred on or about the Mortgaged Property, may cause one or more environmental
site assessments of the Mortgaged Property to be undertaken. Environmental site assessments may
include, without limitation, a detailed visual inspection of the Mortgaged Property and any part
thereof, as well as the taking of soil samples, water samples and such other investigation or
analysis as is necessary or appropriate for a complete assessment of whether any Hazardous Waste
exists on or in the Mortgaged Property or any part thereof and the compliance of the Mortgaged
Property with all Hazardous Waste Laws provided that no soil samples or destructive tests shall be
made except on at least five (5) days notice to Mortgagor. If Mortgagee causes any such
environmental site assessment to be undertaken because Mortgagee has reason to suspect Hazardous
Waste may be present on the Mortgaged Property or any part thereof, or, if Mortgagee causes the
same to be undertaken without such reason but such environmental site assessment discloses
Hazardous Waste is so present, or, if Mortgagee causes such environmental site assessment to be
undertaken in contemplation of foreclosure of this Mortgage, Mortgagor shall pay the cost thereof
to Mortgagee on demand of Mortgagee, and until paid the cost thereof shall be added to the unpaid
principal of the Obligations, shall bear interest at the Default Rate, and the payment thereof,
together with such interest, shall be secured by the lien of this Mortgage and the other Security
Instruments.
5.10.7 Mortgagee, at its election and in its sole discretion, may (but shall not be obligated
to) cure any failure on the part of Mortgagor or any Lessee or other user of the Mortgaged Property
or any part thereof (any such Lessee or other user being, in this Section 5, hereinafter referred
to as a “User”) to comply with the Hazardous Waste Laws; such cure may include, without limitation,
the following actions:
(a) arranging for the cleanup or containment of Hazardous Waste found in, on or near the
Mortgaged Property and paying for such cleanup and containment costs and other costs associated
therewith;
(b) paying on behalf of Mortgagor or any User, any fines or penalties imposed on Mortgagor or
any User by the EPA or any State Agency in connection with Hazardous Waste; and
(c) making any other payment or performing any other act which may
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prevent a release of Hazardous Waste, facilitate the cleanup thereof, or prevent a lien from
attaching to the Mortgaged Property.
Any partial exercise by Mortgagee of the remedies hereinabove set forth or any partial
undertaking on the part of Mortgagee to cure the failure of Mortgagor or any User to comply with
the Hazardous Waste Laws, shall not obligate Mortgagee to complete any action taken or require
Mortgagee to expend further sums to cure Mortgagor’s or any User’s noncompliance; and the exercise
of any such remedies shall not place upon the Mortgagee any responsibility for the operation,
control, care, management or repair of the Mortgaged Property, or make the Mortgagee the “owner” or
“operator” of the Mortgaged Property or a “responsible party” within the meaning of any of the
Hazardous Waste Laws. Any amounts paid or costs incurred by the Mortgagee in the exercise of any
of its rights under this subsection 5.10.7 shall be paid by Mortgagor on demand of Mortgagee, and
until paid shall be added to the unpaid principal of the Obligations, shall bear interest at the
Default Rate, and the payment thereof, together with such interest, shall be secured by the lien of
this Mortgage and by the other Security Instruments. Mortgagee, by making any such payment or
incurring any such costs, shall be subrogated to any rights of Mortgagor or any User to seek
reimbursement from any third parties, including, without limitation, any predecessor in interest to
Mortgagor’s title to the Mortgaged Property or any part thereof.
5.10.8 Mortgagor shall: (i) promptly cause, but no later than ten (10) days from the date
hereof, the proposed scope of work for additional investigations specified in the Supplemental
Investigation Work Plan, revised as of September 20, 2007, and prepared by J.R. Holzmacher, P.E.,
LLC for The Robert Martin Company, to be implemented at the Mortgaged Property; and (ii) promptly
commence, but no later than ten (10) days from the date hereof, the development and implementation
of an asbestos Operations and Maintenance Program (the “O&M Program”), as recommended in the
Environmental Site Assessment Report. In addition, Mortgagor shall, during the term of the Loan,
including any extension or renewal thereof, comply with the terms and conditions of the O&M
Program.
5.11. Condemnation.
5.11.1 Upon the receipt by Mortgagor of notice of the institution of any proceeding or
negotiations for the taking of the Mortgaged Property, or any part thereof, in condemnation or by
the exercise of the power of eminent domain, Mortgagor shall give notice thereof to Mortgagee.
Mortgagee may appear in any such proceedings and participate in any such negotiations and may be
represented by counsel. Mortgagor, notwithstanding that Mortgagee may not be a party to any such
proceeding, will promptly give to Mortgagee copies of all notices, pleadings, judgments,
determinations and other papers received by Mortgagor therein. Mortgagor will not enter into any
agreement for the taking of the Mortgaged Property, or any part thereof, with anyone authorized to
acquire the same in condemnation or by eminent domain unless Mortgagee shall first have consented
thereto in writing, which consent shall not be unreasonably withheld or delayed.
5.11.2 Any award, whether paid as a result of a negotiated settlement or judgment, shall be
paid to Mortgagee, and Mortgagee shall have the right and is hereby
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constituted and appointed the true and lawful attorney of Mortgagor, in the name and stead of
Mortgagor, and in the discretion of said attorney, to collect and receive the total amount of such
award, including interest, and to give proper receipts and acquittances therefor. The foregoing
appointment, being coupled with an interest, is irrevocable until the Obligations are paid and
otherwise satisfied in full.
5.11.3 In the event of any taking of the Premises and/or Improvements or any part thereof in
condemnation or by exercise of the power of eminent domain, at the option of Mortgagee, the
Obligations shall become immediately due and payable, and, at the option of Mortgagee, all awards
paid or payable to Mortgagor on account of such taking shall be applied to the payment and
discharge of the Obligations, whether or not then due, such application to be in the following
order of priority: (a) payment of all amounts expended, advanced or incurred by Mortgagee in the
discharge of Mortgagor’s obligations hereunder; (b) payment of all expenses referenced in
subsection 5.19 hereof, (c) payment of accrued interest under the Note; (d) payment of unpaid
principal under the Note; and (e) payment and satisfaction of any and all other Obligations. To
the extent that such award or awards exceed the amount required to pay in full the principal and
interest under the Note and all other sums and charges then secured hereby, Mortgagee shall pay
over to the person or persons legally entitled thereto the amount of such excess; provided,
however, that until the actual vesting of title in the condemning authority in such proceeding or
pursuant to any agreement in lieu or in settlement thereof, the obligations of Mortgagor to pay,
perform and observe the terms, covenants and conditions of the Note and this Mortgage shall
continue unimpaired. In no event shall Mortgagee be required to satisfy or discharge this Mortgage
until the Obligations are paid and otherwise satisfied in full.
5.11.4 In the event of any taking of a portion of the, as opposed to the entire, Premises
and/or Improvements in condemnation or by exercise of the power of eminent domain, notwithstanding
anything to the contrary set forth herein, if the Premises is condemned and Mortgagee determines
that all of the conditions specified in this section have been satisfied, then Mortgagee shall
apply the condemnation proceeds (a) first to reimbursing itself for all reasonable costs incurred
by it in the collection of such proceeds and (b) second to reimbursing Mortgagor for such actual
costs as shall have been incurred by Mortgagor in restoring the Premises and shall be approved by
Mortgagee, which approval shall not be unreasonably withheld or delayed. Condemnation proceeds
shall be applied to such restoration solely if (A) Mortgagee reasonably determines that: (i) the
Premises is capable of being suitably restored in accordance with applicable governmental
requirements to the value, condition, character and general utility existing prior to such damage
or destruction; (ii) sufficient funds are unconditionally available (from condemnation proceeds or
from funds to Mortgagor) to enable Mortgagor promptly to commence, and thereafter diligently to
prosecute to completion, such restoration; (iii) no Default Condition exists; and (iv) neither the
validity, enforceability nor priority of the lien of this Mortgage shall be adversely affected; (B)
Mortgagor has entered into a written agreement, satisfactory in form and substance to Mortgagee,
containing such conditions to disbursements as are employed at the time by Mortgagee for
construction loans; (C) Mortgagor has delivered to Mortgagee such security as Mortgagee might have
reasonably required to assure completion of restoration in accordance with the standards specified
above; and (D) Mortgagor has complied with such further reasonable requirements as Mortgagee might
have specified. To the extent that
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the foregoing conditions are not satisfied, Mortgagee may apply such proceeds to the payment
of the Obligations.
5.11.5 Mortgagor shall pay interest on the Note and other indebtedness forming part of the
Obligations at the rate or rates provided for therein, notwithstanding any lesser rate required to
be paid by the authorities making such award or awards.
5.12. Records and Financial Statements; Financial Covenants.
5.12.1 Mortgagor will keep proper and separate books of account, in accordance with generally
accepted accounting principles, and make full and true entries of all dealings and transactions of
every kind relating to the Mortgaged Property.
5.12.2 Within one hundred twenty (120) days after the end of each fiscal year of Mortgagor,
Mortgagor shall furnish to Mortgagee: (a) a copy of the annual financial statements for such fiscal
year accurately reflecting the financial condition of Mortgagor and the results of its operations,
including, without limitation, balance sheets and profit and loss statements, all prepared in
accordance with generally accepted principles of accounting consistently applied; the financial
statements of Mortgagor shall be internally prepared by managment of Mortgagor and shall set forth
separately the property included in, the liabilities relating to and the results of the operations
of, the Mortgaged Property; and (b) a “rent roll,” dated as of the end of such fiscal year and
stating with respect to each unit in the Mortgaged Property the name of the tenant thereof, the
rent paid by such tenant, the date to which such rent is paid, the date on which such tenant’s
leasehold interest terminates and the amount held by Mortgagor by way of security deposit from each
such tenant (a “Rent Roll”); all such financial statements and such Rent Rolls to be certified to
as being accurate by the chief financial officer of Mortgagor.
5.12.3 Within thirty (30) days after the end of each quarter in each fiscal year of Mortgagor,
Mortgagor shall furnish to Mortgagee: (a) a financial report accurately reflecting the results of
the operations of the Mortgaged Property, including without limitation, a balance sheet and a
profit and loss statement for such quarter and on a year-to-date basis, (b) a Rent Roll dated as of
the end of such fiscal quarter; and (c) a gross sales report accurately reflecting the gross sales
of any Lessee obligated to report such sales to Mortgagor pursuant to the terms of the respective
Lease, including, but not limited to, Walgreen Eastern Co., Inc., its successors and assigns
(collectively, “Walgreen”); all such financial reports, such Rent Rolls and such gross sales report
to be certified to as being accurate by the chief financial officer of Mortgagor.
5.12.4 Mortgagor shall cause each Guarantor, (i) within one hundred twenty (120) days after
the end of each fiscal year of Guarantor, to furnish to Mortgagee a signed audited financial
statement accurately reflecting the financial condition of Mortgagor and the results of its
operations, including, without limitation, audited balance sheets and audited profit and loss
statements, in form reasonably satisfactory to Mortgagee, prepared by a certified public accountant
reasonably satisfactory to Mortgagee and in accordance with generally accepted principles of
accounting consistently applied; and (ii) within sixty (60) days after filing, a copy of each
Guarantor’s current signed Federal income tax returns (with all schedules and exhibits).
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5.12.5 Upon Mortgagee’s request, Mortgagor shall furnish such other information bearing on the
financial condition of Mortgagor and the Guarantor, and the status and progress of the operation of
the Mortgaged Property, as Mortgagee may from time to time reasonably request.
5.12.6 All books and records of Mortgagor with respect to the Mortgaged Property shall be kept
at the Mortgaged Property or at Mortgagor’s principal place of business and shall be open to
inspection by Mortgagee at all reasonable times. Upon the occurrence of any Default Condition, on
demand of Mortgagee, Mortgagor forthwith shall deliver to Mortgagee all such books and records.
5.12.7 At all times during the term of the Loan, Mortgagor shall maintain the financial
covenants set forth in the Note.
5.13. Alienation.
5.13.1 Mortgagor shall not, directly or indirectly, sell, convey, mortgage, pledge,
hypothecate, encumber, lease, assign or otherwise transfer the Mortgaged Property or any part
thereof or any interest therein without the prior written consent of Mortgagee.
5.13.2 Without limiting the generality of the foregoing, Mortgagor will not create, join or
consent to any private restrictive covenant or other restriction affecting the Mortgaged Property
or any part thereof, without the prior written consent of Mortgagee.
5.13.3 Acadia Realty Trust, or an affiliate or subsidiary of Acadia Realty Trust in which it
directly owns and controls, in the aggregate, at least fifty-one percent (51%) of such affiliate or
subsidiary (collectively, “ART”) may assume the Loan provided that: (i) no Event of Default has
occurred or is continuing; (ii) ART executes an assumption agreement in form and substance
satisfactory to the Mortgagee, (iii) ART provides a replacement guarantor or guarantors for the
Loan, which replacement guarantor(s) shall be satisfactory to Mortgagee in its sole discretion; and
(iv) ART pays all costs and expenses reasonably incurred in connection with such assumption of the
Loan, including, but not limited to, Mortgagee’s reasonable attorneys’ fees and disbursements,
title charges and recording fees, if any. Additionally, the replacement guarantor(s) shall execute
documents (the “Replacement Guaranty Documents”) similar in form and substance to the Guaranty
Documents, which documents shall contain financial covenants acceptable to Mortgagee and the
replacement guarantor(s), and any other documents as reasonably required by Mortgagee. The
foregoing right shall only be exercised one time during the term of the Loan. If it is exercised
in accordance with the foregoing, the assumption right shall thereafter be a nullity.
5.13.4 Notwithstanding Section 5.13.1, Mortgagee’s consent shall not be required for any
public offering or transfer of shares of Acadia Realty Trust on a national recognized stock
exchange.
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5.14. Senior or Junior Indebtedness.
Mortgagor shall pay any and all indebtedness secured by any mortgage creating a senior and
prior lien, if any, or junior and subordinate lien, if any, on the whole or any part of the
Mortgaged Property and perform all covenants, terms and conditions contained in any such mortgage
on the part of Mortgagor to be performed and observed, all within the periods provided for payment,
performance and observance in any such mortgage; provided, however, the foregoing shall not be
deemed to be a consent by Mortgagee to the creation of any such senior or junior indebtedness.
5.15. Preservation of Easements, Licenses and Zoning
5.15.1 Mortgagor, to the extent reasonably within its control, shall maintain, preserve and
renew (a) any and all easements, rights of way, privileges and hereditaments now or hereafter
belonging or inuring to the benefit of the Premises and/or Improvements or any part thereof, and
(b) any and all Licenses.
5.15.2 Without the prior consent of the Mortgagee, Mortgagor will not initiate, create, join
in or consent to any change of zoning with respect to the Mortgaged Property or any part thereof.
5.16. Mortgagee’s Right to Pay or Perform Mortgagor’s Covenants.
If Mortgagor fails, as required under this Mortgage, (a) to maintain insurance or pay the
premiums therefor, (b) to pay and furnish receipts for all Impositions, (c) to pay for all labor
and materials or to otherwise pay any claim which might result in or permit the creation of a lien
on the Mortgaged Property or any part thereof, (d) to maintain or repair the Improvements, (e) to
provide management or security for the Mortgaged Property, or (f) to pay any indebtedness secured
by a lien or encumbrance on the Mortgaged Property or any part thereof (other than the Note), or if
Mortgagor fails to otherwise pay, perform or observe any of Mortgagor’s other covenants contained
in this Mortgage, Mortgagee, at its option upon ten (10) days written notice to Mortgagor, may
procure such insurance, pay such Impositions and any penalty and interest thereon, redeem the
Mortgaged Property or any part thereof from any tax sale, procure such receipts, pay for such labor
and materials, pay any such claim, do such maintenance or make such repairs, retain and pay for
such management and/or security, pay any and all such liens and encumbrances and/or otherwise
disburse such sums and/or take such action as Mortgagee deems necessary or appropriate (a) to cause
compliance with Mortgagor’s covenants under this Mortgage and/or (b) to protect Mortgagee’s
interest and/or the Mortgaged Property or any part thereof, and all amounts advanced by Mortgagee
for the payment thereof and all expenses so incurred by Mortgagee, unless otherwise agreed in
writing, shall be paid by Mortgagor to Mortgagee on demand of Mortgagee, and until paid such
amounts shall be added to the unpaid principal of the Obligations, shall bear interest at the
Default Rate, and the payment thereof, together with such interest, shall be secured by the lien of
this Mortgage and the other Security Instruments. The failure of Mortgagee to take any such action
shall not render Mortgagee liable to Mortgagor or any third party.
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5.17. Proceedings and Indemnification.
5.17.1 If Mortgagor becomes a party defendant to any action or other proceeding brought by a
third party concerning or otherwise affecting (a) this Mortgage or any of the other Loan Documents,
(b) the Loan or (c) the Mortgaged Property or any part thereof or any interest therein or the
construction, operation or occupancy thereof, or (d) title to the Mortgaged Property and/or the
priority, perfection, enforceability or validity of any lien or security interest granted to secure
the Obligations, including any action to foreclose any lien or security interest affecting
Mortgagor or all or any part of the Mortgaged Property, Mortgagor shall:
(i) promptly inform Mortgagee of the commencement thereof and thereafter timely apprise
Mortgagee of all material developments therein;
(ii) not take any position therein which would materially and adversely affect the interest of
the Mortgagee;
(iii) cooperate fully with Mortgagee with respect thereto; and
(iv) consent to Mortgagee’s becoming a party thereto, at the election of Mortgagee and to the
extent permitted by law.
5.17.2 If Mortgagee becomes a party defendant to, or is compelled to testify or produce
documents in, any action or other proceeding described in subsection 5.17.1 above, whether before
or after payment in full of the Obligations, Mortgagor shall indemnify, defend and hold Mortgagee,
its officers, directors and employees harmless from any and all liability by reason of each and
every such action, including, without limitation, reasonable attorneys’ fees and expenses incurred
by Mortgagee in any such action, whether or not any such action is prosecuted to judgment. This
right of indemnification shall survive the payment in full of the Note, notwithstanding any
discharge of this Mortgage.
5.17.3 Mortgagor agrees to indemnify Mortgagee with respect to any and all loss, cost or
damage (including, without limitation, reasonable attorneys’ fees) incurred or suffered by
Mortgagee as a result of (1) any fraud or material misrepresentation made by or on behalf of
Mortgagor; (2) any and all condemnation awards or insurance proceeds which are not applied in
accordance with the provisions of the Security Instruments; (3) any and all rents, revenues,
incomes, issues, proceeds or profits of the Mortgaged Property (“Rents and Profits”) collected by
or on behalf of the Mortgagor following an Event of Default which are not applied, (i) first, to
the payment of customary and usual operating expenses of the Mortgaged Property as the same become
due and payable, and (ii) then, to the payment of principal, interest and other sums due under the
Note and other Loan Documents; (4) the Mortgagor’s failure following an Event of Default to deliver
to the Mortgagee, on demand, all Rents and Profits, security deposits and books and records
relating to the Mortgaged Property; (5) the Mortgagor’s failure to procure and maintain any
insurance policy required by the Security Instruments; (6) any damage or material waste of the
Mortgaged Property, or any portion thereof, caused by the willful, wanton or tortious act or
omission of the Mortgagor, any of its representatives or agents or any Guarantor; (7) any violation
of or failure to comply with the provisions of Section 5.10 of this Mortgage;
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and (8) the failure of the Mortgagor to pay any Impositions or insurance premiums with respect
to the Mortgaged Property or any charges for labor or materials which may result in the creation of
liens on the Mortgaged Property.
5.18. Further Assurances.
5.18.1 Mortgagor shall not do or suffer any act or thing to be done which would impair all or
any part of the security for the payment of the Obligations or this Mortgage or the other Security
Instruments.
5.18.2 Mortgagor and Mortgagee, within ten (10) days after request by the other, shall furnish
to the requesting party a written statement, duly acknowledged, of the amount of the unpaid balance
of the Note and containing such other information Mortgagee or Mortgagor, as the case may be, may
reasonably request.
5.18.3 At any time and from time to time until payment in full of the Obligations, upon
request of Mortgagee, Mortgagor will promptly execute, acknowledge and deliver to Mortgagee such
additional instruments, and shall take such further actions, all at the expense of Mortgagor, as
Mortgagee may reasonably require to further confirm, evidence or protect the lien of this Mortgage,
the security position of Mortgagee with respect to the Mortgaged Property or any part thereof and
the property and rights hereby conveyed to or conferred on Mortgagee, or intended to so be,
including, without limitation, the execution, acknowledgment of delivery of additional mortgages,
security agreements, financing statements, continuation statements and the like.
5.19. Expenses.
Mortgagor shall pay to Mortgagee on demand of Mortgagee any and all expenses reasonably
incurred or paid by Mortgagee in connection with or incident to (a) negotiation, closing and
administration of the Loan, including, without limitation, the examination of the title to the
Premises, the cost of title insurance, charges for examining public records in connection with
advances of the proceeds of the Loan, inspections, drawing of papers, recording and filing fees,
value added taxes and other taxes, revenue stamps, if any, and fees and disbursements of attorneys,
accountants, appraisers, tax advisors, architects and engineers engaged by the Mortgagee, and (b)
the collection or enforcement of any or all of the Obligations or rights of the Mortgagee under the
Note, the Security Instruments or any Other Document, whether by litigation, foreclosure or
otherwise, including, without limitation, attorneys’ fees to the extent permitted by law and
further including, without limitation, attorneys’ fees for any and all appellate proceedings, to
the extent permitted by law; and all such expenses, until paid, shall be added to the unpaid
principal of the Obligations, shall bear interest at the Default Rate, and the payment thereof,
together with such interest, and shall be secured by the lien of this Mortgage and the other
Security Instruments.
5.20. Required Repairs.
Mortgagor shall repair, within one hundred eight (180) days from the date hereof, all of
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the cracked exterior masonry of the buildings located on the Premises as recommended in the
Property Condition Assessment, revised as of October 16, 2007, prepared ATC Associated, Inc. and
certified to Mortgagee (collectively, the “Required Repairs”). Immediately upon completion of the
Required Repairs, but in no event later than one hundred eight (180) from the date hereof,
Mortgagor shall provide evidence of the completion of said Required Repairs, which evidence shall
be satisfactory to Mortgagee in its reasonable discretion. If Mortgagor fails to complete the
Required Repairs (or deliver satisfactory evidence to Mortgagee of the completion of said Required
Repairs) within one hundred eight (180) from the date hereof, such failure shall constitute an
Event of Default.
5.21. Estoppel Certificates.
Mortgagor has, as of the date hereof, executed and delivered to Mortgagee, a landlord form
estoppel certificate, in form and substance satisfactory to Mortgagee (“Landlord Estoppel
Certificate”) with respect to the certain Lease between Mortgagor and Walgreen. Mortgagor shall,
within thirty (30) days from the date hereof, obtain from Walgreen and deliver to Mortgagee, a
tenant’s form estoppel certificate, in form and substance satisfactory to Mortgagee (“Walgreen
Estoppel Certificate”). Failure of Mortgagor to comply with the provisions of this Section 5.21
shall constitute an Event of Default.
5.22. Undertakings.
Mortgagor shall, within thirty (30) days from the date hereof, obtain and deliver to
Mortgagee, Subordination, Non-Disturbance and Attornment Agreements from each of the following
Lessees: (i) JPMorgan Chase Bank, N.A., and (ii) FAC West Donuts, LLC. Mortgagor shall pay all
costs and expenses incurred by Mortgagee in connection with such Subordination, Non-Disturbance
and Attornment Agreements, including, without limitation, reasonable attorneys’ fees. Failure of
Mortgagor to comply with the provisions of this Section 5.22 shall constitute an Event of Default.
Section 6. Assignment of Leases and Rents.
6.1. Mortgagor does hereby transfer, assign and deliver unto Mortgagee, grant to Mortgagee a
security interest in, the Leases and the Rents and all right, title and interest of Mortgagor in
and to any and all guarantees of any of the Leases; TO HAVE AND TO HOLD the Leases and the Rents
and said guarantees, together with all the rights, privileges and appurtenances now or hereafter in
any wise belonging or pertaining thereto, unto Mortgagee, its successors and assigns, forever,
subject, however, to the terms and conditions hereinafter provided in this Section 6. Mortgagee
shall have all rights against tenants of the Mortgaged Property as set forth in Section 291-f of
the Real Property Law of New York.
6.2. Mortgagor hereby authorizes and empowers Mortgagee to collect the Rents as the same shall
become due, and hereby irrevocably directs each and all of the Lessees and sublessees to pay to
Mortgagee, upon demand by Mortgagee, the Rents as may now be due or payable and/or shall hereafter
become due or payable; provided however, no such demand shall be made by Mortgagee unless and until
there shall have occurred a default or an Event of Default hereunder beyond any applicable notice
and cure period. Until such demand is made, Mortgagor
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shall have the license to collect or continue to collect the Rents; upon such demand such
license shall cease.
6.2.1 Mortgagor’s right to collect or to continue to collect the Rents as aforesaid, shall not
authorize collection by Mortgagor of any installment of rent or any other payment (exclusive of
security deposits) more than one (1) month in advance of the respective dates prescribed in the
Leases or otherwise for the payment thereof without the written consent of Mortgagee.
6.2.2 No lessee, sublessee, tenants or other occupant of the Mortgaged Property making any
payment to Mortgagee pursuant to this Section 6 shall be under any obligation to inquire into or
determine the actual existence of any default claimed by Mortgagee.
6.3. Mortgagee shall be and hereby is authorized and empowered, for and in the name or names
and on behalf of Mortgagor and/or Mortgagee, and for the purposes hereinafter set forth, shall be
and hereby is made, constituted and appointed the true and lawful attorney-in-fact of Mortgagor
(with full power of substitution and revocation) and in the name, place and stead of Mortgagor, and
in the sole and uncontrolled discretion of said attorney, to cause the assignment to Mortgagee of
any Lease which has not been so assigned after request therefor by Mortgagee. The foregoing
appointment, being coupled with an interest, is irrevocable until the Obligations are paid and
otherwise satisfied in full.
6.4. Mortgagor shall not enter into any Lease in excess of 2,000 square feet without first
obtaining Mortgagee’s written approval of the terms and conditions thereof and the Lessee
thereunder, which approval shall not be unreasonably withheld or delayed. In the event Mortgagor
intends to enter into any Lease for less than 2,000 square feet, Mortgagor shall promptly notify
Mortgagee of the terms and conditions thereof. If requested by Mortgagor, Mortgagee will grant
conditional approvals of proposed Leases requiring Mortgagee’s approval hereunder or proposed
renewals, extensions or modifications of existing Leases at any stage of the leasing process, from
initial “term sheet” through negotiated Lease drafts; provided, however, that the final approval of
Mortgagee shall only be given following receipt of a final draft version of the Lease in question.
Provided that no Event of Default is continuing, if Mortgagor provides Mortgagee with a written
request for approval (which written request shall specifically refer to this Section 6.4 and shall
explicitly state that failure by Mortgagee to approve or disapprove within ten (10) business days
will constitute a deemed approval) and Mortgagee fails to reject the request in writing delivered
to Mortgagor within ten (10) business days after receipt by Mortgagee of the request, the proposed
Lease or proposed renewal, extension or modification of an existing Lease shall be deemed approved
by Mortgagee, and Mortgagor shall be entitled to enter into such proposed Lease or proposed
renewal, extension or modification of an existing Lease.
6.5. Notwithstanding anything in this Section 6 to the contrary, at Mortgagor’s written
request, Mortgagee shall enter into a subordination non-disturbance and attornment agreement on
Mortgagee’s then-current standard form with any national tenant or any other creditworthy tenant
leasing in excess of ten (10%) percent of the Mortgage Property. Mortgagor shall reimburse
Mortgagee upon demand for all reasonable costs and expenses incurred by Mortgagee
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in connection with the preparation and negotiation of such subordination, non-disturbance and
attornment agreements.
6.6. The provisions of the Assignment of Leases and Rents and the powers granted to Mortgagee
under Section 9 hereof shall in no respect operate to place upon Mortgagee any responsibility or
obligation to take any action whatsoever with respect to the operation, control, care, management
or repair of the Mortgaged Property and that any action taken or failure or refusal to act by
Mortgagee shall be at Mortgagee’s election and without any liability on its part.
Section 7. Security Agreement.
7.1. This Mortgage also shall constitute a security agreement, financing statement, and
fixture filing within the meaning of the applicable Uniform Commercial Code, and is to be filed or
recorded in the office where a mortgage on the Premises would be filed or recorded.
7.2. Mortgagor warrants and covenants that:
7.2.1 Except for the security interest granted hereby, Mortgagor is, or upon acquiring rights
in any of the Collateral will be, the owner of the Collateral free from any other lien, security
interest or encumbrance; and Mortgagor will defend the security interest of the Mortgagee in the
Collateral against claims and demands of all persons at any time claiming the same or any interest
therein; and
7.2.2 No financing statement covering any Collateral is on file in any public office, and at
the request of Mortgagee, Mortgagor will join with Mortgagee in executing one or more financing
statements pursuant to the Uniform Commercial Code in form satisfactory to Mortgagee and will pay
the cost of filing or recording the same in all public offices wherever filing or recording is
deemed by Mortgagee to be necessary or desirable.
7.3. Mortgagor hereby authorizes Mortgagee to file financing and continuation statements with
respect to the Collateral without the signature of Mortgagor whenever lawful.
7.4. The Personal Property will be kept at the Premises, and until installed will be suitably
and safely stored thereon.
7.5. Mortgagor will not remove or permit to be removed from the subject property any of the
Personal Property without the prior written consent of Mortgagee unless the same is immediately
replaced with unencumbered fixtures, chattels or articles of personal property, as the case may be,
of a quality, value and utility equal or superior to those which they replace. All such
replacements, renewals and additions shall become and be immediately subject to the security
interest of this Mortgage and be covered thereby.
7.6. Mortgagor, from time to time, on request of Mortgagee, shall deliver to Mortgagee an
inventory of the Personal Property in reasonable detail, including an itemization of all items
leased to Mortgagor or subject to conditional bill of sale, security agreement or other title
retention agreement.
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Section 8. Events of Default.
The occurrence of any one or more of the following events shall constitute an Event of
Default:
8.1. Nonpayment of any installment of principal and/or interest due under the Note when it
shall become due and payable (no prior demand therefore being necessary) and such nonpayment shall
have continued for more than ten (10) days.
8.2. Nonpayment of any other sum payable under this Mortgage, the Note, any of the other
Security Instruments or any of the Other Documents and, unless a different grace or notice period
is elsewhere specified, such nonpayment shall have continued for more than ten (10) days after
notice thereof from Mortgagee to Mortgagor.
8.3. Nonperformance or nonobservance of any of the other covenants, agreements, or conditions
of this Mortgage, any of the other Security Instruments or any of the Other Documents, and, unless
a different grace or notice period is elsewhere specified, such nonperformance or nonobservance
shall have continued for more than thirty (30) days after notice thereof from Mortgagee to
Mortgagor; provided, however, that if (a) the curing of such default cannot be accomplished with
due diligence within said thirty (30) day period, (b) Mortgagor commences to cure such default
promptly after receipt of notice thereof from Mortgagee and thereafter diligently and continuously
prosecutes the cure of such default, and (c) the extension of the period for effecting a cure will
not result in any material impairment of the Mortgaged Property or any portion thereof, or the
value thereof or Mortgagee’s lien thereon, then such period of thirty (30) days shall be extended
for such period of time as Mortgagee reasonably deems necessary for Mortgagor so acting to cure
such default; provided further, however, such extended cure period shall not be applicable to any
default which may be cured by the payment of money only. The foregoing shall not be deemed to
provide a grace or notice period for nonperformance or nonobservance of any covenant, agreement or
condition which is specifically listed as an Event of Default in any other subsection of this
Section 8.
8.4. The occurrence of any “Event of Default” under the Note, any of the other Security
Instruments or any of the Other Documents, or the occurrence of any event or condition which would
entitle Mortgagee to exercise any of its remedies under any of the Security Instruments or any of
the Other Documents.
8.5. Title to the Mortgaged Property is not satisfactory to the Mortgagee by reason of any
lien, charge, encumbrance, title condition or exception (other than Permitted Encumbrances) and
such condition continues for more than thirty (30) days after notice thereof from Mortgagee to
Mortgagor.
8.6. Any survey, report or examination discloses that the Improvements or any portion thereof
encroach upon or project over a street or upon or over adjoining property, and such condition shall
have continued for more than thirty (30) days after notice thereof from Mortgagee to Mortgagor.
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8.7. The cancellation, lapse or termination of any insurance coverage required to be
maintained by Mortgagor under this Mortgage or any of the other Security Instruments.
8.8. The Mortgaged Property or any part thereof or any interest therein is conveyed,
voluntarily encumbered or otherwise transferred directly or indirectly in any way without the prior
written consent of Mortgagee.
8.9. If any notice of responsibility, notice of violation, notice letter or other similar
notice or claim is issued or filed by the EPA or any State Agency against Mortgagor or the
Mortgaged Property under any of the Hazardous Waste Laws and within sixty (60) days after the
issuance or filing thereof either (a) the condition referenced therein is not cured or (b) a
consent agreement reasonably satisfactory to Mortgagee has not been entered into between Mortgagor
and the EPA or the State Agency in question.
8.10. Breach of, or the proving false or misleading, in any material respect, of any
representation or warranty now or hereafter made to Mortgagee by on behalf of, or for the benefit
of Mortgagor, or contained in:
(a) any of the Security Instruments or Other Documents;
(b) the Note; or
(c) any loan application, statement, financial statement, certificate or other document,
agreement or instrument furnished, signed or executed in connection herewith by, on behalf of, or
for the benefit of Mortgagor.
8.11. The occurrence of any “event of default” under any document, agreement or instrument now
or hereafter (a) evidencing or securing any other obligation or indebtedness of Mortgagor or any
Other Liable Party to Mortgagee now existing or hereafter arising or (b) evidencing any obligation
or other indebtedness secured in whole or in part by any or all of the property covered by any of
the Security Instruments, or the nonpayment nonperformance or nonobservance of any of the
covenants, agreements or conditions of any such documents, agreements or instruments, which
nonpayment, nonperformance or nonobservance shall have continued beyond the expiration of any
applicable grace or notice period, or the occurrence of any event or condition which would entitle
the obligee of or under any such documents, agreements or instruments to exercise any of its
remedies thereunder.
8.12. Nonpayment of any indebtedness of the Mortgagor or any Other Liable Party (other than
the Note or other indebtedness referred to in the preceding subsection) if the effect of such
nonpayment is to accelerate the maturity of such indebtedness or to permit the holder thereof to
cause such indebtedness to become due prior to the stated maturity thereof, or if any other
indebtedness, the validity of which is not being contested in good faith by appropriate
proceedings, is not paid when due and payable in accordance with the terms of such indebtedness or
customary trade practice.
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8.13. (a) (i) The insolvency or inability of Mortgagor or any Other Liable Party to pay his or
its debts as they mature; (ii) the appointment of a receiver, trustee, custodian or other
fiduciary, for, or for any of the property of, Mortgagor or any Other Liable Party; (iii) the
making of an assignment for the benefit of creditors, or the making of or entering into a trust
mortgage or deed or other instrument of similar import for the benefit of creditors, by Mortgagor
or any Other Liable Party; or (iv) the convening of a meeting of the creditors, or the selection of
a committee representing the creditors of Mortgagor or any Other Liable Party; or
(b) The filing of a petition, complaint, motion or other pleading seeking any relief under any
receivership, insolvency, or debtor relief law, or seeking any readjustment of indebtedness,
reorganization, composition, extension or any similar type of relief, or the filing of a petition,
complaint, or motion under any chapter of the Bankruptcy Code, by Mortgagor or any Other Liable
Party; or
(c) The filing of a petition, complaint, motion or other pleading seeking any relief under any
receivership, insolvency, or debtor relief law, or under any chapter of the Bankruptcy Code, or
seeking any readjustment of indebtedness, reorganization, composition, extension or any similar
type of relief, or the entry of any order for relief under any chapter of the Bankruptcy Code,
against Mortgagor or any Other Liable Party; provided, however, that if Mortgagor shall immediately
notify Mortgagee in writing of the filing of any such petition complaint, motion or other pleading
against Mortgagor or any Other Liable Party, and shall provide evidence satisfactory to Mortgagee
that Mortgagor or such Other Liable Party, as the case may be, has in good faith and within ten
(10) days after the filing of any such petition, complaint, motion or other pleading filed an
answer thereto contesting same, then there shall be no Event of Default under this subparagraph (c)
until the earliest of (i) the entry of an order for relief or a judgment under any proceedings
referred to in this subparagraph (c), (ii) the appointment of a receiver, trustee, custodian or
other fiduciary in any such proceeding or (iii) the expiration of a period of thirty (30) days, at
the end of which such petition, complaint, motion or other pleading remains undismissed; or
(d) The entry of any judgment against, or the attachment or garnishment of any of the
property, goods or credits of, Mortgagor or any Other Liable Party which remains unpaid, unstayed,
undismissed or unbonded for a period of thirty (30) days; or if any foreclosure is instituted (by
judicial proceedings, by publication of notice pursuant to a power of sale or otherwise) against
Mortgagor under any mortgage, deed of trust or security agreement granted by Mortgagor and is not
dismissed or terminated for a period of fifteen (15) days.
8.14. The dissolution, liquidation or termination of existence of Mortgagor or any Other
Liable Party or a sale of assets of Mortgagor or any other Liable Party out of the ordinary course
of business.
8.15. Any material adverse change in the financial condition of, or any act or omission of
Mortgagor or any Other Liable Party, or any act or omission of any officer or director of Mortgagor
or any Other Liable Party which leads Mortgagee reasonably to believe that performance of any of
the covenants, agreements, or conditions of the Note, any of the Security Instruments or any Other
Document, is or may be substantially impaired.
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8.16. The death, incompetence, or incapacity to act of any Guarantor, unless a replacement
guarantor is provided by Mortgagor within ninety (90) days of such death, which replacement
guarantor shall be acceptable to Mortgagee in its sole discretion and which replacement guarantor,
together with the other Guarantor, satisfies the financial covenants set forth in the Security
Instruments.
8.17. Except as permitted by Section 5.13 herein, (a) the transfer of any membership interest
in Mortgagor or (b) the transfer of any membership interest in Mortgagor held directly or
indirectly, through one or more intermediate entities, by any Guarantor or (c) the dilution of the
percentage membership interest in Mortgagor held directly or indirectly, through one or more
intermediate entities, by any Guarantor, without the prior written consent of Mortgagee.
8.18. The merger or consolidation with any entity by Mortgagor, or the transfer of any of the
membership interests of Mortgagor by any of the present members thereof or dilution of the
percentage of the membership interests in Mortgagor held by any of the present members thereof, or
the acquisition of any of the membership interests of Mortgagor by any person, corporation or
entity not presently a member thereof, without the prior written consent of Mortgagee.
8.19. If Mortgagor shall breach the financial covenants set forth in the Note beyond any
applicable cure period.
8.20. If Mortgagor fails to promptly notify Mortgagee, in writing, and in any event within ten
(10) days, of the occurrence of any event or condition of which Mortgagor is aware which
constitutes a Default Condition, and together with such notice, furnish a written statement to
Mortgagee which shall set forth the details of any action Mortgagor proposes to take with respect
thereto.
8.21. If any Hedging Agreement (i) fails or ceases in any respect to be in full force and
effect and to be continuing, (ii) is terminated, (iii) is disputed or (iv) becomes invalid or
unenforceable based on Mortgagor’s default thereunder.
8.22. If it becomes unlawful under the laws of the State of New York for Mortgagor to perform
all or any of Mortgagor’s obligations under any Hedging Agreement.
8.23. If any Hedging Agreement is not, or is alleged by Mortgagor not to be, binding on or
enforceable against Mortgagor or effective to create the security intended to be created by it.
Section 9. Remedies.
9.1. Rights Upon Default.
Upon the occurrence of any Event of Default beyond any applicable notice and cure period
hereunder, Mortgagee, in addition to the remedies provided above, shall have each and every of the
following rights and remedies, all of which rights and remedies shall be cumulative
34
and not exclusive and in addition to any and all other rights and/or remedies granted to
Mortgagee under this Mortgage, the Note, any of the other Security Instruments or Other Documents:
9.1.1 Mortgagee shall have the right forthwith, at its election, to exercise any and all
rights and remedies available to it at law or in equity.
9.1.2 Mortgagee shall have the right forthwith, at its election, and without further notice or
demand (except as otherwise specifically provided in the Note, this Mortgage or the other Security
Instruments) and without the commencement of any action to foreclose this Mortgage or exercise any
power of sale Mortgagee may have under this Mortgage, to enter immediately upon and take possession
of the Mortgaged Property, or any part thereof, without further consent or assignment by Mortgagor,
and to do, execute and perform any act, deed, matter or thing whatsoever that ought to be done,
executed and performed in and about or with respect to the Mortgaged Property and the leasing,
management, or operation thereof as fully as Mortgagor might do, including, without limitation, the
right to institute summary proceedings against any Lessee who shall fail to comply with the
provisions of the applicable Lease, with the right to lease the Mortgaged Property, or any part
thereof, and to collect and receive all of the Rents, issues and profits, and all other amounts
past due or to become due to Mortgagor by reason of its ownership of the Mortgaged Property and to
apply the same, after the payment of all necessary charges and expenses in connection with the
operation of the Mortgaged Property (including, without limitation, any managing agent’s
commission, at the option of Mortgagee), on account of the Obligations. If Mortgagor or any other
person claiming by, through or under it, (other than any Lessee whose tenancy Mortgagee has agreed
not to disturb or whose tenancy Mortgagee, in its sole and uncontrolled discretion, is willing not
to disturb) are occupying all or any part of the Mortgaged Property, it is hereby agreed that
Mortgagor and such other persons shall either immediately surrender possession of the Mortgaged
Property to Mortgagee and vacate the premises so occupied or pay a reasonable rental for the use
thereof, monthly in advance, to Mortgagee.
9.1.3 Mortgagee shall have the right to seek the immediate appointment by any court of
competent jurisdiction of a receiver for the Mortgaged Property and the business of Mortgagor in
connection therewith and of the Rents and profits arising therefrom, which receiver shall be
entitled to immediate possession of the entire Mortgaged Property, whether or not occupied by
Mortgagor. Mortgagee shall be entitled to the appointment of such a receiver as a matter of right
without consideration of the value of the Mortgaged Property or other security for the Obligations
or the solvency of any person or corporation liable for the payment thereof. If Mortgagor is then
in possession of the Mortgaged Property or any part thereof, Mortgagor shall immediately, upon the
appointment of such receiver, vacate the Mortgaged Property or such part thereof, as the case may
be, or pay a reasonable rental for the use thereof during such receivership, the amount of such
rental to be agreed upon between said receiver and Mortgagor or to be fixed by the court in which
said receiver shall have been appointed; and the relationship between said receiver and Mortgagor
shall be that of landlord and tenant.
9.1.4 Mortgagee, to the extent permitted by law, may choose to utilize the procedures set
forth in Article 14 of the Real Property Actions and Proceedings Law and
35
commence a non-judicial foreclosure by power of sale of this Mortgage. To the extent
permitted by law, Mortgagor waives any right granted pursuant to Section 1421, or any other
provision of the Real Property Actions and Proceedings Law, to challenge Mortgagee’s election to
enforce this Mortgage by means of such non-judicial power of sale unless Mortgagor in good faith
believes there is one or more specific factual, meritorious defenses to the foreclosure action.
9.2. Mortgagee’s Right to Release and Negotiate.
Without affecting the liability of Mortgagor or any Other Liable Party (except any person
expressly released in writing), and without affecting any lien or other security not expressly
released in writing, Mortgagee, at any time and from time to time, either before or after maturity
of the Note, irrespective of whether any Default Condition then exists and without notice or
consent, may do any one or more of the following:
(a) release any person liable for payment of or performance of any or all of the Obligations;
(b) make any agreement extending the time, or otherwise altering the terms of payment of the
Obligations or any part thereof, or modifying or waiving any of the Obligations, or subordinating,
modifying or otherwise dealing with the lien or liens securing payment of the Obligations;
(c) exercise or refrain from exercising or waive any right Mortgagee may have;
(d) accept additional security of any kind;
(e) release or otherwise deal with any property, real or personal, securing the Obligations or
any part thereof, including all or any part of the Mortgaged Property; and
(f) (in the event of any conveyance of Mortgagor’s interest in the Mortgaged Property to
parties not appearing in this instrument), deal with such successor or successors in interest with
reference to this Mortgage and the Obligations secured hereby, either by way of forbearance on the
part of Mortgagee or extension of the time of payment of the Note or any other sum forming part of
the Obligations, or otherwise, without in any way modifying or affecting the conveyance under this
Mortgage or the original liability of Mortgagor for the Obligations, either in whole or in part.
Nothing in this subsection, however, shall be deemed a consent by Mortgagee to the conveyance by
Mortgagor of any interest in the Mortgaged Property.
9.3. Mortgagor to Surrender Possession.
In the event of any sale of the Mortgaged Property under the provisions hereof, Mortgagor
shall forthwith surrender possession thereof to the purchaser. Upon failure to do so, Mortgagor
shall thereupon be a tenant at sufferance of such purchaser, and upon its failure to surrender
possession of the Mortgaged Property upon demand, such purchaser, his heirs, legal
36
representatives, successors or assigns, shall be entitled to institute and maintain an
appropriate action for possession of the Mortgaged Property.
9.4. Uniform Commercial Code. Upon the occurrence of any Event of Default, Mortgagee
shall have and may exercise all of the rights and remedies of a secured party under the Uniform
Commercial Code then in effect in the state in which the Premises is located. Without limiting the
generality of the foregoing:
(a) Mortgagee, at its option, pursuant to the applicable provisions of Article 9 of the
Uniform Commercial Code, may proceed as to both the real and personal property covered by this
Mortgage in accordance with its rights and remedies in respect of said real property, in which
event (i) the other provisions of the Uniform Commercial Code shall not apply to disposition of the
Collateral, and (ii) the sale of the Collateral in conjunction with and as one parcel with said
real estate shall be deemed to be a commercially reasonable manner of sale; or
(b) Mortgagee, at its option, may proceed as to the Collateral separately from said real
property, in which event the requirement of reasonable notice shall be met by mailing notice of the
sale, postage prepaid, to Mortgagor or any other person entitled thereto at least ten (10) days
before the time of the sale or other disposition of any of the Collateral.
Section 10. Miscellaneous.
10.1. Notices. Any notice, demand, request, instruction, document, or other
communication to be given under or in connection with this Mortgage shall be in writing and
hand-delivered, receipt requested or sent by registered or certified mail, postage prepaid, return
receipt requested, or sent by Federal Express or other similar courier service, addressed as
follows:
If to Mortgagee:
Anglo Irish Bank Corporation plc
Stephen Court
18/21 St. Stephen’s Green
Dublin 2, Ireland
Attn: Owen O’Neill, Director
Stephen Court
18/21 St. Stephen’s Green
Dublin 2, Ireland
Attn: Owen O’Neill, Director
Copy by ordinary
first class mail to:
first class mail to:
Anglo Irish New York Corporation
222 East 41st Street, 24th Floor
New York, New York 10017
Attn: Peter Lennon, Vice President
222 East 41st Street, 24th Floor
New York, New York 10017
Attn: Peter Lennon, Vice President
and
37
Sullivan & Worcester LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Hugh P. Finnegan, Esq.
1290 Avenue of the Americas
New York, New York 10104
Attn: Hugh P. Finnegan, Esq.
If to Mortgagor:
Acadia Tarrytown LLC
c/o Acadia Realty Trust
1311 Mamaroneck Avenue, Suite 260
White Plains, New York 10605
Attn.: Robert Masters, Esq.
c/o Acadia Realty Trust
1311 Mamaroneck Avenue, Suite 260
White Plains, New York 10605
Attn.: Robert Masters, Esq.
Copy by ordinary
first class mail to:
first class mail to:
Acadia Realty Trust
1311 Mamaroneck Avenue, Suite 260
White Plains, New York 10605
Attn.: Robert Masters, Esq.
1311 Mamaroneck Avenue, Suite 260
White Plains, New York 10605
Attn.: Robert Masters, Esq.
Any party may change the address to which notices are to be sent to it by giving written notice of
such change of address to the other party in the manner herein provided for giving notice. Any
such notice, demand, request, or other communication shall be deemed given when mailed as
aforesaid.
10.2. Captions. The captions in this Mortgage are for convenience and reference only
and do not define, limit or describe the scope of the provisions hereof.
10.3. Modifications. The provisions of this Mortgage may be modified or terminated
only in a writing signed by Mortgagor and Mortgagee.
10.4. Non-Waiver. Mortgagee shall not be deemed to have waived or amended any of its
rights or remedies under any of the Loan Documents unless such waiver or amendment be in writing
and signed by it. No delay or omission on the part of Mortgagee in exercising any such right or
remedy shall operate as a waiver of such right or remedy or any other right or remedy. A waiver on
any one occasion shall not be construed as a bar to or a waiver of the same right or remedy on any
future occasion. Without limiting the generality of the foregoing, the acceptance by Mortgagee of
any sum after the occurrence of any Event of Default shall not constitute a waiver of the right to
require prompt performance of all of the covenants and conditions contained in the Loan Documents.
The acceptance by Mortgagee of any sum less than the sum then due shall be deemed an acceptance on
account only and shall not constitute a waiver of the obligation of Mortgagor to pay the entire sum
then due, and Mortgagor’s failure to pay said entire sum due shall be and continue to be an Event
of Default notwithstanding such acceptance of such lesser amount on account, and Mortgagee shall be
entitled at all times thereafter to
38
exercise all rights and remedies conferred upon it following an Event of Default,
notwithstanding the acceptance by Mortgagee thereafter of future sums on account.
10.5. Cumlative Nature of Rights and Remedies. The rights and remedies provided
Mortgagee in the Loan Documents and any of them, or otherwise available by law, shall be cumulative
and may be exercised concurrently or successively. Any one or more of such rights or remedies may
be exercised by Mortgagee, at its option, without regard to the adequacy of its security.
10.6. Limitation of Third-Party Rights. The Mortgagor and Mortgagee do not intend the
benefits of any one or more of the Loan Documents to inure to, or otherwise exist for, the benefit
of any third party who has a contractual relationship with Mortgagor, who is a creditor of
Mortgagor with respect to the Mortgaged Property, or any part thereof, or who otherwise succeeds to
Mortgagor’s interest or rights, and none of the Loan Documents shall be construed to make or render
Mortgagee liable to any materialman, supplier, contractor, subcontractor, successor in title to the
Mortgaged Property, or any part thereof, or any Lessee, or for debts or claims accruing to any such
persons against Mortgagor. Notwithstanding anything contained in any of the Loan Documents, or any
conduct or course of conduct by Mortgagor or Mortgagee or both, whether before or after signing
this Mortgage, none of the Loan Documents shall be construed as creating any right, claim or cause
of action against Mortgagee, or any of its officers, directors, agents or employees, in favor of
any materialman, supplier, contractor, subcontractor, successor in title to the Mortgaged Property,
or any part thereof, or any Lessee or to any other person, corporation or other entity, other than
Mortgagor.
10.7. Interpretation. Mortgagor acknowledges that Mortgagor, Mortgagee and their
respective counsel have reviewed and revised the Loan Documents and the Commitment Letter and agree
that any rule of construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of the Loan Documents or said Commitment
Letter.
10.8. Assignability of Mortgagee’s Interest. Mortgagee may assign, negotiate, or
pledge all or any portion of its rights under the Loan Documents or any of them, and, in case of
such assignment, Mortgagor shall accord full recognition thereto. Without limiting the generality
of the foregoing, Mortgagee shall have the right to sell or otherwise grant participations in the
Loan to one or more of the participating financial institutions and to disclose all information in
its possession with respect to Mortgagor and the Mortgaged Property to such institutions; Mortgagor
shall cooperate with Mortgagee, if requested by Mortgagee, with respect to any of Mortgagee’s
efforts to obtain such participants.
10.9. Integration. The Loan Documents and the Commitment Letter reflect the entire
agreement between Mortgagor and Mortgagee; provided, however, to the extent there shall exist a
conflict between any term or provision of the Commitment Letter and any term or provision of the
Loan Documents, the term or provision of the Loan Documents shall prevail.
39
10.10. Singular Includes Plural. Every word herein purporting to the neuter gender
only shall extend to and include males and females and every word herein importing the singular
number only shall be construed to extend to and include the plural number also.
10.11. Severability. In the event any term or provision of this Mortgage or the
application thereof to any person or circumstance shall, to any extent, be held invalid or
unenforceable, the remainder of this Mortgage or the application of such term or provision to
persons or circumstances other than those to which it is held invalid or unenforceable, shall be
valid and enforceable to the fullest extend permitted by law.
10.12. Governing Law. This Mortgage shall be construed in accordance with and
governed by the laws of the State of New York in the United States of America, without resort to
that state’s conflict of laws rules.
10.13. Incorporation of Exhibits. All Exhibits referred to in this Mortgage are by
such references fully incorporated herein.
10.14. Successors and Assigns Bound. This Mortgage shall inure to the benefit of and
be binding on the successors and assigns of Mortgagee and the heirs, legal representatives,
successors and assigns of Mortgagor; provided, however, the foregoing shall not be deemed to allow
any assignment by Mortgagor in violation of the terms hereof.
10.15. Waiver of Jury Trial. Mortgagor and Mortgagee by acceptance of this Mortgage,
expressly acknowledge and agree that the Loan involves a sophisticated commercial real estate
finance transaction and that disputes arising in connection with the Loan would be most fairly
resolved by a judge applying applicable federal and state laws, rather than by arbitration rules or
jury trial. To the fullest extent permitted by law, Mortgagor hereby waives, for Mortgagor and
Mortgagor’s heirs, legal representatives, successors and assigns, and by acceptance of this
Mortgage, Mortgagee hereby waives, for itself, its successors and assigns, any right to a trial by
jury in respect to any litigation directly or indirectly arising out of, under, or in connection
with this Mortgage, the Note or any of the other Loan Documents. Mortgagor hereby (a) certifies
that no employee, attorney or other agent or representative of Mortgagee has represented, expressly
or otherwise, that Mortgagee, in the event of litigation, would not seek to enforce the foregoing
waiver, and (b) acknowledges that Mortgagee has been induced to make the Loan, by, among other
things, the waiver, acknowledgments and certification contained in this subsection.
Section 11. State of New York Provisions.
11.1. Non-Residential Property. This Mortgage does not cover real property
principally improved by one or more structures containing in the aggregate six (6) or less
residential dwelling units having their own separate cooking facilities.
40
11.2. Trust Fund. Pursuant to Section 13 of the Lien Law of New York, Mortgagor shall
receive the advances secured by this Mortgage and shall hold the right to receive such advances as
a trust fund to be applied first for the purpose of paying the cost of any improvement on the
Mortgaged Property before using any part of the total of the same for any other purpose.
11.3. Liability. If Mortgagor consists of more than one person or entity, the
obligations and liabilities of each such person or entity hereunder shall be joint and several.
11.4. Multiple Parcels. In addition to all other rights and remedies of Mortgagee set
forth herein, upon the occurrence of an Event of Default, Mortgagee may institute a non-judicial
foreclosure proceeding in compliance with applicable law in effect on the date foreclosure is
commenced (including, without limitation, non-judicial foreclosure proceedings pursuant to New York
Real Property Actions and Proceedings § 1401 et seq.) for Mortgagee to sell the
Premises either as a whole or in separate parcels as Mortgagee may determine at public sale or
sales to the highest bidder for cash, in order to pay the Indebtedness. If the Premises is sold as
separate parcels, Mortgagee may direct the order in which the parcels are sold. Mortgagee shall
deliver to the purchaser a Mortgagee’s deed or deeds without covenant or warranty, express or
implied. Mortgagee may postpone the sale of all or any portion of the Premises by public
announcement at the time and place of sale, and from time to time may further postpone the sale by
public announcement in accordance with applicable law.
11.5. Maximum Amount Secured. Notwithstanding anything contained herein to the
contrary, the maximum amount of indebtedness secured by this Mortgage at execution or which under
any contingency may become secured hereby at any time hereafter is (i) the principal sum of NINE
MILLION EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS (US$9,800,000.00) plus interest and late charges
thereon (at such rates as provided for in the Note or herein, as applicable), plus (ii) amounts
expended by Mortgagee to maintain the lien of this Mortgage or to protect the property secured by
this Mortgage, including, without limitation, amounts in respect of insurance premiums, real estate
taxes, litigation expenses to prosecute or defend the rights, remedies and lien of this Mortgage or
title to the Mortgaged Property secured hereby, and any costs, charges or amounts to which
Mortgagee becomes subrogated upon payment, whether under recognized principles of law or equity or
under express statutory authority, together with interest on all the foregoing amounts at such
rates as provided for in the Note or herein, as applicable.
[remainder of page intentionally left blank]
41
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed, under seal, hereunto
duly authorized, as of the date first above written.
| ACADIA TARRYTOWN LLC, formerly known as Acadia-Noddle Tarrytown Development Co., LLC, a New York limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
State of )
: ss:
County of )
On
this ___ day of , 2007, before me, the undersigned notary public, personally
appeared Robert Masters, proved to me through satisfactory evidence of identification, which were
, to be the person whose name is signed on the preceding or attached
document, and acknowledged to me that he signed it voluntarily for its stated purpose.
| (official signature and seal of notary) | ||||
Execution Page-Mortgage Consolidation and Modification Agreement
EXHIBIT A
Legal Description
EXHIBIT B
Permitted Encumbrances
EXHIBIT C
The term “Notes” shall mean all of the notes secured by the mortgages set forth below and
“Mortgages” shall mean, collectively:
1. Mortgage made by RMC Development Company, LLC in favor of Emigrant Savings Bank in the
principal amount of $2,000,000.00, dated as of September 9, 1999 and recorded April 25, 2000 in the
Office of the County Clerk, Westchester County (the “Register’s Office”) under Control Number
400410557, as assigned by Assignment of Mortgage made by Emigrant Savings Bank to Acadia Realty
Limited Partnership, dated May 13, 2004 and recorded April 8, 2005 in the Register’s Office under
Control Number 450620831, and as further assigned by an Assignment of Mortgage made by Acadia
Realty Limited Partnership to Mortgagee, dated as of October 30, 2007 and intended to be recorded
in the Register’s Office simultaneously herewith.
2. Mortgage, dated the date hereof, in the principal amount of $7,940,521.39, executed by
Mortgagor in favor of Mortgagee and intended to be recorded in the Register’s Office simultaneously
herewith.
Exhibit 10.71
PROJECT LOAN AGREEMENT
Dated as of December 10, 2007
Between
P/A-ACADIA PELHAM MANOR, LLC,
as Borrower
as Borrower
and
BEAR STEARNS COMMERCIAL MORTGAGE, INC.,
as Lender
as Lender
MERS MIN: 8000101-0000007140-6
TABLE OF CONTENTS
| ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION | 1 | |||||||
| Section 1.1 | Definitions | 1 | ||||||
| Section 1.2 | Principles of Construction | 6 | ||||||
| ARTICLE II. GENERAL TERMS | 6 | |||||||
| Section 2.1 | Loan Commitment; Disbursement to Borrower | 6 | ||||||
| Section 2.2 | Interest Rate | 10 | ||||||
| Section 2.3 | Loan Payment | 10 | ||||||
| Section 2.4 | Prepayments | 12 | ||||||
| Section 2.5 | Defeasance | 13 | ||||||
| Section 2.6 | Release of Property | 15 | ||||||
| Section 2.7 | Clearing Account/Cash Management | 16 | ||||||
| Section 2.8 | Intentionally Omitted | 16 | ||||||
| Section 2.9 | Payments Not Conditional | 16 | ||||||
| Section 2.10 | Initial Advance | 16 | ||||||
| Section 2.11 | Project Loan Advances | 19 | ||||||
| Section 2.12 | Final Advance | 21 | ||||||
| Section 2.13 | No Reliance | 24 | ||||||
| Section 2.14 | Method of Disbursement of Loan Proceeds | 24 | ||||||
| Section 2.15 | Interest Advances | 26 | ||||||
| ARTICLE III. CONDITIONS PRECEDENT | 27 | |||||||
| Section 3.1 | Conditions Precedent to Closing | 27 | ||||||
| ARTICLE IV. REPRESENTATIONS AND WARRANTIES | 27 | |||||||
| Section 4.1 | Borrower Representations | 27 | ||||||
| Section 4.2 | Survival of Representations | 27 | ||||||
| ARTICLE V. BORROWER COVENANTS | 27 | |||||||
| Section 5.1 | Affirmative Covenants | 27 | ||||||
| Section 5.2 | Negative Covenants | 27 | ||||||
| ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS | 28 | |||||||
| Section 6.1 | Insurance | 28 | ||||||
| Section 6.2 | Casualty and Condemnation | 28 | ||||||
| Section 6.3 | Application of Net Proceeds | 28 | ||||||
| ARTICLE VII. RESERVE FUNDS | 28 | |||||||
| Section 7.1 | Reserve Funds | 28 | ||||||
| Section 7.2 | Other Loan Documents | 28 | ||||||
| Section 7.3 | Reserve Funds, Generally | 26 | ||||||
| ARTICLE VIII. DEFAULTS | 29 | |||||||
| Section 8.1 | Event of Default | 29 | ||||||
| Section 8.2 | Remedies | 33 | ||||||
| Section 8.3 | Remedies Cumulative; Waivers | 34 | ||||||
| ARTICLE IX. SPECIAL PROVISIONS | 34 | |||||||
| ARTICLE X. MISCELLANEOUS | 34 | |||||||
| Section 10.1 | Survival | 34 | ||||||
| Section 10.2 | Lender’s Discretion | 35 | ||||||
| Section 10.3 | Governing Law | 35 | ||||||
| Section 10.4 | Modification, Waiver in Writing | 36 | ||||||
| Section 10.5 | Delay Not a Waiver | 36 | ||||||
| Section 10.6 | Notices | 37 | ||||||
| Section 10.7 | Trial by Jury. | 37 | ||||||
| Section 10.8 | Headings | 38 | ||||||
| Section 10.9 | Severability | 38 | ||||||
| Section 10.10 | Preferences | 38 | ||||||
| Section 10.11 | Waiver of Notice | 38 | ||||||
| Section 10.12 | Remedies of Borrower | 38 | ||||||
| Section 10.13 | Expenses; Indemnity | 38 | ||||||
| Section 10.14 | Schedules and Exhibits Incorporated | 40 | ||||||
| Section 10.15 | Offsets, Counterclaims and Defenses | 40 | ||||||
| Section 10.16 | No Joint Venture or Partnership; No Third Party Beneficiaries. | 40 | ||||||
| Section 10.17 | Publicity | 40 | ||||||
| Section 10.18 | Waiver of Marshalling of Assets | 41 | ||||||
| Section 10.19 | Waiver of Counterclaim | 41 | ||||||
| Section 10.20 | Identical Obligations; Conflict; Construction of Documents; Reliance | 41 | ||||||
| Section 10.21 | Brokers and Financial Advisors | 41 | ||||||
| Section 10.22 | Prior Agreements | 42 | ||||||
| Section 10.23 | Joint and Several Liability | 42 | ||||||
| Section 10.24 | Certain Additional Rights of Lender (VCOC) | 42 | ||||||
| Section 10.25 | MERS | 42 | ||||||
2
PROJECT LOAN AGREEMENT
THIS PROJECT LOAN AGREEMENT, dated as of December 10, 2007 (as amended, restated, replaced,
supplemented or otherwise modified from time to time, this “Agreement” or sometimes, this “Project
Loan Agreement”), is made by and between BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York
corporation, having an address at 383 Madison Avenue, New York, New York 10179 (“Lender”) and
P/A-ACADIA PELHAM MANOR, LLC, a Delaware limited liability company, having its principal place of
business c/o Acadia Realty Trust, 1311 Mamaroneck Avenue — Suite 260, White Plains, New York 10605
(“Borrower”).
WITNESSETH:
WHEREAS, Borrower desires to obtain the Project Loan (as hereinafter defined) from Lender; and
WHEREAS, Lender is willing to make the Project Loan to Borrower, subject to and in accordance
with the terms of this Agreement and the other Loan Documents (as hereinafter defined).
NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the parties hereto hereby
covenant, agree, represent and warrant as follows:
ARTICLE 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, all capitalized terms used herein but not otherwise
defined shall have their respective meanings set forth in the Building Loan Agreement and:
“Advance” or “Advances” shall mean any disbursement of the proceeds of the Project Loan by
Lender pursuant to the terms of this Agreement.
“Agreement” shall mean this Project Loan Agreement, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together
with its successors and permitted assigns.
“Building Loan” shall mean the loan made by Lender to Borrower pursuant to the Building Loan
Agreement in the principal amount of up to the Building Loan Amount.
“Building Loan Agreement” shall mean that certain Building Loan Agreement dated as of the date
hereof between Borrower and Lender as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
“Building Loan Amount” shall have the meaning set forth in the Building Loan Agreement.
“Building Loan Assignment of Leases” shall have the meaning set forth in the Building Loan
Agreement.
“Building Loan Documents” shall have the meaning set forth in the Building Loan Agreement.
“Building Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.2
hereof.
“Building Loan Mortgage” shall have the meaning set forth in the Building Loan Agreement.
“Building Loan Note” shall have the meaning set forth in the Building Loan Agreement.
“Contingency Excess” shall have the meaning set forth in Section 2.1.7(b) hereof.
“Debt” shall mean the outstanding principal amount of the Project Loan set forth in, and
evidenced by, this Agreement, the Project Loan Note and the other Project Loan Documents, together
with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the
Project Loan under the Project Loan Note, this Agreement, the Project Loan Mortgage or any other
Project Loan Document.
“Debt Service” shall mean, with respect to any particular period of time, the aggregate
scheduled principal and interest payments due under this Agreement and the Project Loan Note.
“Defeasance Date” shall have the meaning set forth in Section 2.5.1(a)(i) hereof.
“Defeasance Event” shall have the meaning set forth in Section 2.5.1(a) hereof.
“Earn Out Advances” shall have the meaning set forth in Section 2.12.2 hereof.
“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.
“Final Advance” shall have the meaning set forth in Section 2.12.1 hereof.
“Final Building Loan Advance” shall mean the Final Advance as defined in Section 2.12.1 of the
Building Loan Agreement.
“Home Depot” shall have the meaning set forth in Section 2.11.15 hereof.
2
“Home Depot Estoppel Certificate” shall have the meaning set forth in Section 2.10.8
hereof.
“Home Depot Lease” shall have the meaning set forth in Section 2.11.15 hereof.
“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(a) hereof.
“Initial Advance” shall have the meaning set forth in Section 2.10 hereof.
“Initial Advance Conditions” shall have the meaning set forth in Section 2.10 hereof.
“Interest Period” shall mean: (a) the period commencing on the Closing Date and ending on
the last day of the month in which the Closing Date occurs, both dates inclusive; and (b) the
period commencing on and including the first day of each calendar month thereafter during the term
of Loan and ending and including the last day of such calendar month.
“Interest Rate” shall mean seven and one hundred eighty-two one thousandths percent (7.182%),
provided, however, in the event that (a) on or before June 1, 2009, the Property shall have
achieved a Debt Service Coverage Ratio as determined by Lender of 1.15 to 1.00, and Borrower
delivers to Lender a MAI appraisal performed, at Borrower’s sole cost and expense, by an appraiser
approved by Lender and dated, or updated, to a date within 30 days of such date made in compliance
with FIRREA and reasonably satisfactory to Lender in all respects; the appraisal value shall be
subject to review and confirmation and updating as to valuation by Lender’s internal appraisal
staff, whose decision shall be final absent manifest error showing that loan-to-value ratio for the
Property is no greater than 80% assuming a fully advanced Loan, Lender shall, upon Borrower’s
written request, reduce the Interest Rate to a per annum rate equal to five and ninety-three one
hundredth percent (5.93%), commencing on the first Payment Date after Borrower’s request, and (b)
on or before June 1, 2010, the Property shall have achieved a Debt Service Coverage Ratio as
determined by Lender of 1.15 to 1.00, and Borrower delivers to Lender a MAI appraisal performed, at
Borrower’s sole cost and expense, by an appraiser approved by Lender and dated, or updated, to a
date within 30 days of such date made in compliance with FIRREA and reasonably satisfactory to
Lender in all respects; the appraisal value shall be subject to review and confirmation and
updating as to valuation by Lender’s internal appraisal staff, whose decision shall be final absent
manifest error showing that loan-to-value ratio for the Property is no greater than 80% assuming a
fully advanced Loan, Lender shall, upon Borrower’s written request, reduce the Interest Rate to a
per annum rate equal to five and ninety-eight one hundredth percent (5.98%), commencing on the
first Payment Date after Borrower’s request. Any reduction in the Interest Rate as set forth above
shall be effective commencing on the first Payment Date after Borrower’s request for such reduction
and satisfaction of the conditions set forth above and no reduction in the Interest Rate shall be
retroactive. In the event that Borrower fails to satisfy the conditions for a reduction of the
Interest Rate within the time periods set forth above, time being of the essence, Borrower
shall have no further right to obtain a reduction in the Interest Rate. Notwithstanding
anything to the contrary contained herein, Lender shall have the right, in its sole discretion, at
any time
3
prior to a Securitization of the Loan, to increase the Interest Rate by up to two-tenths
of one percent (0.20%).
“Interest Reserve Line Item” shall mean the interest reserve Line Item of the Project Loan
Budget.
“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with
its successors and assigns.
“Loan” shall mean collectively, the Building Loan and the Project Loan.
“Loan Agreement” shall mean collectively, this Project Loan Agreement and the Building Loan
Agreement.
“Loan Documents” shall mean collectively, the Building Loan Documents and the Project Loan
Documents, the Environmental Indemnity, the Guaranty of Completion, the Guaranty of Recourse
Carveouts, the Cash Management Agreement, the Clearing Account Agreement, the Collateral Assignment
of Condominium Documents, the Assignment of Contracts, the Administration Fee Agreement, the Rate
Lock Agreement and all other documents executed and/or delivered in connection with the Loan.
“Maturity Date” shall mean January 1, 2020 or such earlier date on which the final payment of
principal of the Project Loan Note becomes due and payable as therein or herein provided, whether
at such stated maturity date, by declaration of acceleration, or otherwise.
“Monthly Debt Service Payment Amount” shall mean (a) an amount equal to interest only on the
outstanding principal balance of the Building Loan, calculated in accordance with Section
2.2 hereof, for each Payment Date commencing with the Payment Date occurring in February, 2008
through and including the Payment Date occurring in January, 2013, and (b) a constant monthly
payment of $85,625.17 commencing with the Payment Date occurring in February,
2013 and on each Payment Date thereafter, provided, however, that in the event that the Interest
Rate is modified in accordance with the provisions of the definition of “Interest Rate,” the
Monthly Debt Service Payment Amount shall be adjusted by Lender based upon the modified Interest
Rate and a thirty (30) year amortization schedule, Lender’s determination of the Monthly Debt
Service Payment Amount being binding absent manifest error.
“MERS” shall have the meaning set forth in Section 10.25 hereof.
“Open Period Date” shall have the meaning set forth in Section 2.4.1 hereof.
“Other Debt” shall mean the “Debt” as defined in both the Building Loan Agreement and the
Mezzanine Loan Documents, if applicable.
“Other Obligations” shall have the meaning as set forth in the Mortgage.
4
“Payment Date” shall mean February 1, 2008, and the 1st day of every month
thereafter during the term of the Loan until and including the Maturity Date or, if such day is not
a Business Day, the immediately preceding Business Day.
“Prepayment Date” shall have the meaning set forth in Section 2.4.4 hereof.
“Project Loan” shall mean the loan being made by Lender to Borrower pursuant to this Project
Loan Agreement in the principal amount of up to the Project Loan Amount.
“Project Loan Amount” shall mean Twelve Million Six Hundred Thirty-Seven Thousand Ninety-Three
and 40/100 Dollars ($12,637,093.40).
“Project Loan Assignment of Leases” shall mean that certain Project Loan Assignment of Leases
and Rents, dated the date hereof, from Borrower, as assignor, to Lender, as assignee, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Project Loan Documents” shall mean, collectively, this Agreement, the Project Loan Note, the
Project Loan Mortgage, the Project Loan Assignment of Lease as well as all other documents not or
hereafter executed and/or delivered with respect to the Project Loan.
“Project Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.2
hereof.
“Project Loan Mortgage” shall mean that certain Project Loan Fee and Leasehold Mortgage and
Security Agreement dated the date hereof, executed and delivered by Borrower to Lender as security
for the Project Loan and encumbering the Property, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
“Project Loan Note” shall mean that certain Project Loan Promissory Note, dated the date
hereof, in the principal amount of up to the Project Loan Amount made by Borrower in favor of
Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
“Required Equity Funds” shall have the meaning set forth in Section 2.11.13.
“Retaining Wall Letter” shall have the meaning set forth in Section 2.10.10 hereof.
“Scheduled Defeasance Payments” shall have the meaning set forth in Section 2.5.1(b)
hereof.
“Security Agreement” shall have the meaning set forth in Section 2.5.1(a)(v) hereof.
“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c). hereof.
5
“Shortfall” shall have the meaning set forth in Section 2.1.10 hereof.
“Successor Borrower” shall have the meaning set forth in Section 2.5.3 hereof.
Section 1.2 Principles of Construction.
(a) All references to sections and schedules are to sections and schedules in or to this
Agreement unless otherwise specified. All uses of the word “including” shall mean “including,
without limitation” unless the context shall indicate otherwise. Any reference in this Agreement
or in any other Loan Document to any Loan Document shall be deemed to include references to such
documents as the same may hereafter be amended, modified, supplemented, extended, replaced and/or
restated from time to time (and, in the case of any note or other instrument, to any instrument
issued in substitution therefor). 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.
(b) With respect to any cross-reference to the Building Loan Documents or the Project Loan
Documents or any combination thereof, as the case may be, for terms defined therein or provisions
set forth therein or Schedules or Exhibits thereto, such cross-references shall be to referenced
defined terms or provisions or Schedules or Exhibits, as the case may be, as the same are set forth
in the Building Loan Documents or the Project Loan Documents or any combination thereof, as the
case may be, as of the date hereof, and as the same may be amended, modified, supplemented,
extended, replaced or restated or any combination thereof from time to time, and shall survive the
repayment or satisfaction of the Building Loan or the Project Loan as the case may be, or the
termination of the Building Loan Agreement or this Agreement or any combination thereof, as the
case may be, for so long as the Project Loan remains outstanding.
ARTICLE II.
GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower.
2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions set
forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept Advances in respect
of the Project Loan as more particularly set forth in Section 2.10.
2.1.2 No Reborrowings. Any amount borrowed and repaid hereunder in respect of the Building Loan may not be
reborrowed.
2.1.3 The Note, Mortgage and Loan Documents. The Project Loan shall be evidenced by
the Project Loan Note and secured by the Project Loan Mortgage, the Project Loan Assignment of
Leases and the other Project Loan Documents.
2.1.4 Use of Proceeds. Borrower hereby agrees that Borrower shall use the proceeds of
the Project Loan to pay or reimburse itself for Project-Loan Costs actually incurred
6
in connection
with the construction of the Project Improvements if and to the extent that such Project-Loan Costs
are reflected in the Project Loan Budget, subject to reallocation pursuant to Sections
2.1.6 and 2.1.7 hereof, and 5.1.33 of the Building Loan Agreement (or other
reallocations approved by Lender in its sole discretion).
2.1.5 Advances. The Project Loan Budget shall reflect, by category and line item, the
purposes and amounts for which funds to be advanced by Lender under this Agreement are to be used.
Lender shall not be required to Advance funds hereunder for any category or line item of Project
Loan Costs in excess of the amount specified for such line item or category in the Project Loan
Budget, subject to Sections 2.1.6 and 2.1.7 hereof and 5.1.33 of the Building Loan Agreement (or
other reallocations approved by Lender in its sole discretion). No Advances shall be made to pay
for Affiliate Fees.
2.1.6 Cost Overruns. If Borrower becomes aware of any change in actual or projected
Project Loan Costs which will increase any one or more category or line item of costs reflected in
the Project Loan Budget, Borrower shall immediately notify Lender in writing and promptly submit to
Lender for its approval a revised Project Loan Budget. Any reallocation of any category or line
items in the Project Loan Budget in connection with cost overruns shall be subject to Lender’s
approval in Lender’s sole discretion except as set forth in Sections 2.1.7 hereof and
5.1.33 of the Building Loan Agreement, provided, however, under no circumstances shall
Borrower be permitted, or Lender obligated to approve, the reallocation of line items from the
Building Loan Budget to the Project Loan Budget. Lender shall have no obligation to make any
further Advances unless and until the revised Project Loan Budget so submitted by Borrower is
approved by Lender and Borrower has satisfied its obligations with respect to any resulting
Shortfall under Section 2.1.10. Lender reserves the right to approve or disapprove any
revised Project Loan Budget in its sole and absolute discretion (except with respect to
reallocations in accordance with Sections 2.1.7 and 5.1.33).
2.1.7 Contingency Reserve.
(a) Following the satisfaction of the Initial Advance Conditions, and subject to the prior
approval of Lender in its sole discretion, Borrower may revise the Project Loan Budget to move
amounts available under any Line Item that are designated to “Contingency” to other Line Items in
the Project Loan Budget. In no event may the Contingency Line Item of the Building Loan Budget be
reallocated to any Line Item in the Project Loan Budget. Provided no Event of Default exists and
with Lender’s consent (which shall not be unreasonably withheld), after Completion of the
Improvements, Borrower may draw amounts available under the Contingency Line Item of the Project
Loan Budget to fund Shortfalls in monthly interest due, which amounts shall be deposited in the
Interest Reserve. Such drawing shall be in addition to any Interest Reserve Line Item advanced
under the Project Loan pursuant to Section 2.14.10 hereof.
(b) Following the occurrence of Final Completion, Lender shall reasonably cooperate with
Borrower to amend the Project Loan Budget, Building Loan Budget, Project Loan Documents and
Building Loan Documents such that: (x) the Building Loan Budget is amended to remove the amounts
then available under the Building Loan Budget either in the contingency Line Item or as cost
savings from other Line Items (the “Contingency Excess”) and
7
the Building Loan Amount is reduced by
the Contingency Excess; and (y) the contingency line item of the Project Loan Budget and the
Project Loan Amount are increased by the Contingency Excess. Borrower and Lender shall execute and
deliver such documents, certificates and instruments as may be reasonably required to effect the
above described re-allocation, including, without limitation, the filing of an amended Section 22
Affidavit and the modification of the Project Loan Documents and Building Loan Documents to reflect
the respective changes in the Project Loan Amount and the Building Loan Amount and Borrower shall
obtain such other evidence as Lender may reasonably request to confirm that none of the foregoing
shall adversely impact the validity or priority of its security interests in the Property or
otherwise adversely impact its rights and remedies under the Loan Documents including, without
limitation, appropriate endorsements to the title insurance policy. Borrower shall pay any and all
title insurance, recording and other charges and all reasonable costs and expenses (including legal
fees) incurred by Lender in connection with the foregoing.
2.1.8 Intentionally Omitted.
2.1.9 Amount of Advances. In no event shall any Advance exceed the full amount of
Project Loan Costs theretofore paid or to be paid with the proceeds of such Advance plus any
Project Loan Costs incurred by Borrower through the date of the Draw Request for such Advance
minus (i) the applicable Retainage for each Contract and Subcontract, and (ii) the
aggregate amount of any Advances previously made by Lender. It is further understood that the
Retainage described above is intended to provide a contingency fund protecting Lender against
failure of Borrower or Guarantor to fulfill any obligations under the Loan Documents, and that
Lender may charge amounts to pay for Project Loan Costs against such Retainage in the event Lender
is required or elects to expend funds to cure any Default or Event of Default, in either instance,
in accordance with the terms of this Agreement. No Advance of the Loan by Lender shall be deemed
to be an approval or acceptance by the Lender of any work performed thereon or the materials furnished
with respect thereto.
2.1.10 Loan-In-Balance. As used herein, a “Shortfall” shall mean, as to any Line Item
in the Development Budget as of any date, the amount determined by Lender, in Lender’s sole but
reasonable judgment, by which (A) the cost of completing or satisfying such Line Item, exceeds
(B) the remaining undisbursed portion of the Loan allocated to such Line Item in the Development
Budget plus any sums deposited with Lender pursuant to this Section 2.1.10 to pay for such
Line Item and not previously disbursed plus any Reserve Funds to the extent such Reserve Funds are
available hereunder for the payment of such Line Item. From time to time and at any time during
the Construction Period, Lender shall have the right, but not the obligation, to notify Borrower
that it has determined a Shortfall exists as to any one or more Line Items. If Lender at any time
shall so notify Borrower, Borrower shall, at its option within five (5) days of Lender’s
notification as aforesaid, either: (i) deposit with Lender an amount equal to such Shortfall, which
Lender disburse to Borrower to the satisfaction of the costs of such Line Item prior to advancing
any further Loan proceeds on account of such costs; (ii) post an irrevocable standby Letter of
Credit in the amount of such Shortfall, in favor of Lender; (iii) to the extent permitted under
Sections 2.1.7 hereof and 5.1.33 of the Building Loan Agreement, and following the
satisfaction of the Initial Advance Conditions allocate the Contingency Reserve, with respect to
the Line Item(s) in question, to the Shortfall, and provided, further that the amount of the
remaining Contingency Reserve for such Line Item(s) (following the
8
allocation to the Shortfall) is
sufficient for such Line Item(s), as determined by Lender in its sole discretion; and (iv) to the
extent permitted under Section 5.1.33 of the Building Loan Agreement, and then only
following the satisfaction of the Initial Advance Conditions, reallocate cost savings from the
Development Budget in respect of the Loan (or other reallocations which are approved by Lender, in
its sole discretion) in accordance with the terms of this Agreement, but only to the extent such
cost savings can be allocated to the related Line Items. Borrower hereby agrees that Lender shall
have a lien on and security interest in, for the benefit of Lender, any sums deposited pursuant to
clause (i) above and that Borrower shall have no right to withdraw any such sums except for the
payment of the aforesaid costs as approved by Lender. Lender shall have no obligation to make any
further Advances of proceeds of the Loan as to any Line Item until the sums required to be
deposited pursuant to clause (i) above as to such Line Item have been exhausted, or until Borrower
has posted an irrevocable standby Letter of Credit pursuant to clause (iii) above, as the case may
be, and, in any such case, the Loan is back “in balance”. Any such sums not used as provided in
said clause (i) shall be released to Borrower when and to the extent that Lender reasonably
determines that the amount thereof is more than the excess, if any, of the remaining
Project-Related Costs over the undisbursed balance of the Loan, provided, however, that should an
Event of Default occur, Lender, in its sole discretion, may apply such amounts either to the
remaining Project-Related Costs or to the immediate reduction of outstanding principal and/or
interest under the Note.
2.1.11 Quality of Work. No Advance or any portion thereof shall be made with respect
to defective work or to any contractor that has performed work that is defective and that has not
been cured, as confirmed by the report of the Construction Consultant, but Lender may disburse all or part of
any Advance before the sum shall become due if Lender believes it advisable to do so, and all such
Advances or parts thereof shall be deemed to have been made pursuant to this Agreement.
2.1.12 Required Equity Funds. All Required Equity Funds shall be contributed (i.e.,
expended by Borrower and invested by Borrower in the Property, for Project Related Costs set forth
on the approved Development Budget) before the Closing Date.
2.1.13 Trust Fund. Pursuant to Section 13 of the New York Lien Law, Borrower shall
receive the Advances hereunder and shall hold the right to receive the Advances as a trust fund to
be applied first for the purpose of paying the Costs of the Improvements and shall apply the
Advances first to the payment of the Cost of the Improvements on the Property before using any part
of the total of the same for any other purpose.
2.1.14 Final Project Report and Development Budget. The provisions of Section
2.1.14 of the Building Loan Agreement are incorporated herein by reference as if fully set
forth herein.
2.1.15 Miscellaneous.
(a) The making of an Advance by Lender shall not constitute Lender’s approval or acceptance of
the construction theretofore completed. Lender’s inspection and approval of the Plans and
Specifications, the construction of the Project Improvements, or the workmanship and materials used
therein, shall impose no liability of any kind on Lender, the
9
sole obligation of Lender as the
result of such inspection and approval being to make the Advances if and to the extent, required by
this Agreement.
(b) ALL POTENTIAL LIENORS ARE HEREBY CAUTIONED TO EXERCISE SOUND BUSINESS JUDGMENT IN THE
EXTENSION OF CREDIT TO BORROWER. NO POTENTIAL LIENOR SHOULD EXPECT LENDER TO MAKE ADVANCES OF THE
LOAN IN AMOUNTS AND AT TIMES SUCH THAT IT WILL NOT BE NECESSARY FOR EACH SUCH POTENTIAL LIENOR TO
EXERCISE SOUND BUSINESS JUDGMENT IN THE EXTENSION OF CREDIT TO BORROWER. MOREOVER, ALL POTENTIAL
LIENORS ARE REMINDED THAT SUBDIVISION (3) OF SECTION 13 OF THE NEW YORK LIEN LAW PROVIDES THAT
“NOTHING IN THIS SUBDIVISION SHALL BE CONSIDERED AS IMPOSING UPON THE LENDER ANY OBLIGATION TO SEE
THE PROPER APPLICATION OF SUCH ADVANCES BY THE OWNER,” AND LENDER DOES NOT IMPOSE SUCH AN
OBLIGATION ON ITSELF.
Section 2.2 Interest Rate.
2.2.1 Interest Rate. Interest on the outstanding principal balance of the Loan shall
accrue from (and include) the Closing Date to but excluding the Maturity Date at the Interest Rate
calculated as set forth in Section 2.2.2 below.
2.2.2 Interest Calculation. Interest on the outstanding principal balance of the Loan
shall be calculated by multiplying (a) the actual number of days elapsed in the period for which
the calculation is being made by (b) a daily rate based on the Interest Rate and a three hundred
sixty (360) day year by (c) the outstanding principal balance.
2.2.3 Default Rate. In the event that, and for so long as, any Event of Default shall
have occurred and be continuing, the outstanding principal balance of the Loan and, to the extent
permitted by law, all accrued and unpaid interest in respect of the Loan and any other amounts due
pursuant to the Loan Documents, shall accrue interest at the Default Rate, calculated from the date
such payment was due without regard to any grace or cure periods contained herein.
2.2.4 Usury Savings. This Agreement, the Note and the other Loan Documents are subject
to the express condition that at no time shall Borrower be obligated or required to pay interest on
the principal balance of the Loan at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this
Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the
Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to
the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be
deemed to have been payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of
the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the Loan until payment in full
so that the rate or amount of interest on account of the Loan does
10
not exceed the Maximum Legal
Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is
outstanding.
Section 2.3 Loan Payment.
2.3.1 Monthly Debt Service Payments. Borrower shall pay to Lender (a) on the Closing
Date, an amount equal to interest only on the outstanding principal balance of the Loan from and
including the Closing Date up to and including December 31, 2007, which interest shall be
calculated in accordance with the provisions of Section 2.2 hereof, and (b) on each Payment Date commencing on
the Payment Date occurring in February, 2008, and thereafter up to and including the Maturity Date,
Borrower shall make a payment to Lender equal to the Monthly Debt Service Payment Amount, which
payments shall be applied first to interest due for the related Interest Period at the Interest
Rate, for such related Interest Period and then to the principal amount of the Loan due in
accordance with this Agreement, and lastly, to any other amounts due and unpaid pursuant to the
Loan Documents hereto. Borrower and Lender acknowledge and agree that, on the 15th
calendar day of the month preceding each Payment Date during the Construction Term: (a) if and to
the extent undrawn funds remain available for Advance under the Project Loan from the Interest
Reserve Line Item of the Project Loan Budget, and provided that that no Event of Default or
monetary Default then exists under any of the Loan Documents or would occur as a result of such
Advance, the Monthly Debt Service Amount then due and owing shall be advanced by Lender by a
Advance under Interest Reserve Line Item of the Project Loan Budget; and (b) if no amount remains
available under the Interest Reserve Line Item but and to the extent Interest Reserve Funds are on
deposit in the Interest Reserve Account, and no Event of Default or monetary Default then exists
under any of the Loan Documents, the Monthly Debt Service Payment Amount then due and payable shall
be paid by application of funds from the Interest Reserve Account. Borrower and Lender acknowledge
and agree that Lender may automatically make an Advance or apply Interest Reserve Funds on deposit
in the Interest Reserve Account on each Payment Date occurring during the Construction Term, in
either instance, in accordance with this Section 2.3.1, without the need for Borrower to
submit a Draw Request or otherwise request such an Advance or application.
2.3.2 Payments Generally. The first Interest Period hereunder shall commence on and
include the Closing Date and shall end on and include December 31, 2007. Thereafter each Interest
Period shall commence on the first (1st) day of each calendar month during the term of
this Agreement and shall end on and include the final calendar date of such calendar month. For
purposes of making payments hereunder, but not for purposes of calculating Interest Periods, if the
day on which such payment is due is not a Business Day, then amounts due on such date shall be due
on the immediately preceding Business Day and with respect to payments of principal due on the
Maturity Date, interest shall be payable at the Interest Rate or the Default Rate, as the case may
be, through and including the day immediately preceding such Maturity Date. All amounts due under
this Agreement and the other Loan Documents shall be payable without setoff, counterclaim, defense
or any other deduction whatsoever.
2.3.3 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the
outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts
due hereunder and under the Note, the Mortgage and the other Loan Documents.
11
2.3.4 Late Payment Charge. If any principal, interest or any other sums due under the
Loan Documents (including the amounts due on the Maturity Date) are not paid by Borrower on or
prior to the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the
lesser of five percent (5%) of such unpaid sum or the Maximum Legal Rate 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
Mortgage and the other Loan Documents to the extent permitted by applicable law.
2.3.5 Method and Place of Payment. Except as otherwise specifically provided herein,
all payments and prepayments under this Agreement and the Note shall be made to Lender not later
than 11:00 A.M., New York City time, on the date when due and shall be made in lawful money of the
United States of America in immediately available funds at Lender’s office or as otherwise directed
by Lender, and any funds received by Lender after such time shall, for all purposes hereof, be
deemed to have been paid on the next succeeding Business Day.
Section 2.4 Prepayments.
2.4.1 Voluntary Prepayments. Except as otherwise provided in this Section
2.4.1 and Section 2.4.2, Borrower shall not have the right to prepay the Loan in whole
or in part prior to the Maturity Date. If for any reason Borrower prepays the Loan on a date other
than a Payment Date, Borrower shall pay Lender, in addition to the Debt, all interest which would
have accrued on the amount of the Loan through and including the Payment Date next occurring
following the date of such prepayment. Notwithstanding anything to the contrary contained herein,
commencing after the Payment Date three (3) months prior to the Maturity Date (the “Open Period
Date”), or on any Payment Date thereafter (or on any date thereafter, provided that interest is
paid through the next Payment Date), Borrower may, at its option, prepay the Debt in whole, but not
in part, without payment of the Yield Maintenance Premium.
2.4.2 Mandatory Prepayments. On the next occurring Payment Date following the date on
which Lender actually receives any Net Proceeds, if Lender is not obligated to make such Net
Proceeds available to Borrower for the Restoration of the Property or otherwise remit such Net
Proceeds to Borrower pursuant to Section 6.4 of the Building Loan Agreement, Borrower shall prepay
or authorize Lender to apply Net Proceeds as a prepayment of all or a portion of the outstanding
principal balance of the Loan together with accrued interest through the end of the related
Interest Period and any other sums due hereunder in an amount equal to one hundred percent (100%)
of such Net Proceeds; provided, however, if an Event of Default has occurred and is continuing,
Lender may apply such Net Proceeds to the Debt (until paid in full) in any order or priority in its
sole discretion. Other than following an Event of Default, no Yield Maintenance Premium shall be
due in connection with any prepayment made pursuant to this Section 2.4.2.
2.4.3 Prepayments After Default. If following an Event of Default, payment of all or any part of the Debt is tendered by
Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) made on the next
occurring Payment Date together with the Monthly Debt Service Payment and (b) deemed a voluntary
prepayment by Borrower in
12
violation of the prohibition against prepayment set forth in Section
2.4.1 hereof and Borrower shall pay, in addition to the Debt, an amount equal to the Yield
Maintenance Default Premium.
2.4.4 Prepayment Prior to Defeasance Expiration Date. If the Permitted Release Date has
occurred but the Defeasance Expiration Date has not occurred, the Debt may be prepaid in whole (but
not in part) prior to the date permitted under Section 2.4.1 hereof upon not less than thirty (30)
days prior written notice to Lender specifying the Payment Date on which prepayment is to be made
(a “Prepayment Date”) provided no Event of Default exists and upon payment of an amount equal to
the Yield Maintenance Premium. Lender shall notify Borrower of the amount and the basis of
determination of the required prepayment consideration. If any notice of prepayment is given, the
Debt shall be due and payable on the Prepayment Date. Lender shall not be obligated to accept any
prepayment of the Debt unless it is accompanied by the prepayment consideration due in connection
therewith. If for any reason Borrower prepays the Loan on a date other than a Payment Date,
Borrower shall pay Lender, in addition to the Debt, all interest which would have accrued on the
amount of the Loan through and including the Payment Date next occurring following the date of such
prepayment.
2.4.5 Application of Prepayments to Components. Any prepayment of the principal of
the Loan, in whole or in part, voluntary or involuntary, shall be applied (a) first, to the
reduction of the outstanding principal balance of the Project Loan until reduced to zero, and (b)
second, to the reduction of the outstanding principal balance of the Building Loan until reduced to
zero. Subsequent to any Event of Default, any payment of principal from whatever source may be
applied by Lender between the various components of the Loan in Lender’s sole discretion.
Section 2.5 Defeasance.
2.5.1 Voluntary Defeasance (a) Provided no Event of Default shall then exist,
Borrower shall have the right at any time after the Defeasance Expiration Date and prior to the
date voluntary prepayments are permitted under Section 2.4.1 hereof to voluntarily defease all, but
not part, of the Loan by and upon satisfaction of the following conditions (such event being a
“Defeasance Event”):
(i) Borrower shall provide not less than thirty (30) days prior written notice
to Lender specifying the Payment Date (the “Defeasance Date”) on which the
Defeasance Event is to occur;
(ii) Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Loan to and including the Defeasance Date. If for any
reason the Defeasance Date is not a Payment Date, the Borrower shall also pay interest that would have accrued on the Note through and including the Payment
Date immediately preceding the next Payment Date, provided, however,
if the Defeasance Deposit shall include short-term interest computed from the date
of such prepayment through to the next succeeding Payment Date, Borrower shall not
be required to pay such short term interest pursuant to this sentence;
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(iii) Borrower shall pay to Lender all other sums, not including scheduled
interest or principal payments, then due under the Note, this Agreement, the
Mortgage and the other Loan Documents;
(iv) Borrower shall use the Defeasance Deposit to purchase U.S. Obligations in
accordance with Section 2.5.1(b) below;
(v) Borrower shall execute and deliver a pledge and security agreement, in form
and substance that would be reasonably satisfactory to a prudent lender creating a
first priority lien on the Defeasance Deposit and the U.S. Obligations purchased
with the Defeasance Deposit in accordance with the provisions of this Section
2.5 (the “Security Agreement”);
(vi) Borrower shall deliver an opinion of counsel for Borrower that is standard
in commercial lending transactions and subject only to customary qualifications,
assumptions and exceptions opining, among other things, that Borrower has legally
and validly transferred and assigned the U.S. Obligations and all obligations,
rights and duties under and to the Note to the Successor Borrower, that Lender has a
perfected first priority security interest in the Defeasance Deposit and the U.S.
Obligations delivered by Borrower and that any REMIC Trust formed pursuant to a
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result of
such Defeasance Event;
(vii) Borrower shall deliver confirmation in writing from each of the
applicable Rating Agencies to the effect that such release will not result in a
downgrade, withdrawal or qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the Securities issued in connection
with the Securitization which are then outstanding. If required by the applicable
Rating Agencies, Borrower shall also deliver or cause to be delivered an Additional
Insolvency Opinion with respect to the Successor Borrower in form and substance
satisfactory to Lender and the applicable Rating Agencies;
(viii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1(a) have been satisfied;
(ix) Borrower shall deliver a certificate of Borrower’s independent certified
public accountant certifying that the U.S. Obligations purchased with the Defeasance
Deposit generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments;
(x) Borrower shall deliver such other certificates, documents or instruments as
Lender may reasonably request; and
(xi) Borrower shall pay all costs and expenses of Lender incurred in connection
with the Defeasance Event, including (A) any costs and expenses associated with a
release of the Lien of the Mortgage as provided in Section 2.6 hereof, (B)
reasonable attorneys’ fees and expenses incurred in connection with
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the Defeasance
Event, (C) the costs and expenses of the Rating Agencies, (D) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in connection
with the transfer of the Note, or otherwise required to accomplish the defeasance
and (E) the costs and expenses of Servicer and any trustee, including reasonable
attorneys’ fees.
(b) In connection with the Defeasance Event, Borrower shall use the Defeasance Deposit to
purchase U.S. Obligations which provide payments on or prior to, but as close as possible to, all
successive scheduled Payment Dates after the Defeasance Date upon which interest and principal
payments are required under this Agreement and the Note, and in amounts equal to the scheduled
payments due on such Payment Dates under this Agreement and the Note (including, without
limitation, scheduled payments of principal, interest, servicing fees (if any), and any other
amounts due under the Loan Documents on such Payment Dates) and assuming the Note is prepaid in
full on the Open Period Date (the “Scheduled Defeasance Payments”). Borrower, pursuant to the
Security Agreement or other appropriate document, shall authorize and direct that the payments
received from the U.S. Obligations may be made directly to the Clearing Account (unless otherwise
directed by Lender) and applied to satisfy the Debt Service obligations of Borrower under this
Agreement and the Note. Any portion of the Defeasance Deposit in excess of the amount necessary to
purchase the U.S. Obligations required by this Section 2.5 and satisfy Borrower’s other
obligations under this Section 2.5 and Section 2.6 shall be remitted to Borrower.
2.5.2 Collateral. Each of the U.S. Obligations that are part of the defeasance
collateral shall be duly endorsed by the holder thereof as directed by Lender or accompanied by a
written instrument of transfer in form and substance that would be satisfactory to a prudent lender
(including, without limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to effectuate book-entry
transfers and pledges through the book-entry facilities of such institution) in order to perfect
upon the delivery of the defeasance collateral a first priority security interest therein in favor
of Lender in conformity with all applicable state and federal laws governing the granting of such
security interests.
2.5.3 Successor Borrower. In connection with any Defeasance Event, Borrower shall
establish a successor entity (the “Successor Borrower”), which shall be a Special Purpose Entity,
which shall not own any other assets or have any other liabilities or operate other property
(except in connection with other defeased loans held in the same securitized loan pool with the
Loan). Borrower shall transfer and assign all obligations, rights and duties under and to the Note, together with
the pledged U.S. Obligations to such Successor Borrower. Such Successor Borrower shall assume the
obligations under the Note and the Security Agreement and Borrower shall be relieved of its
obligations under such documents. Borrower shall pay One Thousand and 00/100 Dollars ($1,000) to
any such Successor Borrower as consideration for assuming the obligations under the Note and the
Security Agreement. Notwithstanding anything in this Agreement to the contrary, no other
assumption fee shall be payable upon a transfer of the Note in accordance with this Section
2.5.3, but Borrower shall pay all costs and expenses incurred by Lender, including Lender’s
attorneys’ fees and expenses and any fees and expenses of any Rating Agencies, incurred in
connection therewith.
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Section 2.6 Release of Property. Except as set forth in this Section 2.6, no
repayment, prepayment or defeasance of all or any portion of the Loan shall cause, give rise to a
right to require, or otherwise result in, the release of the Lien of the Mortgage on the Property.
2.6.1 Release of Property.
(a) If Borrower has elected to defease the Loan and the requirements of Section 2.5
and this Section 2.6 have been satisfied, all of the Property shall be released from the
Lien of the Mortgage and the U.S. Obligations, pledged pursuant to the Security Agreement, shall be
the sole source of collateral securing the Note.
(b) In connection with the release of the Mortgage, Borrower shall submit to Lender, not less
than thirty (30) days prior to the Defeasance Date, a release of Lien (and related Loan Documents)
for the Property for execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Property is located and that would be satisfactory to a prudent lender
and contains standard provisions, if any, protecting the rights of the releasing lender. In
addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered
by Borrower in connection with such release, together with an Officer’s Certificate certifying that
such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such
releases in accordance with the terms of this Agreement.
2.6.2 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 due 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 Agreement, release the Lien of the Mortgage on the Property.
Section 2.7 Clearing Account/Cash Management. The provisions of Section 2.7
of the Building Loan Agreement are incorporated herein by reference as if fully set forth herein
Section 2.8 Intentionally Omitted.
Section 2.9 Payments Not Conditional. All payments required to be made by Borrower
hereunder or under the Note or the other Loan Documents shall be made irrespective of, and without
deduction for, any setoff, claim or counterclaim and shall be made irrespective of any defense
thereto.
Section 2.10 Initial Advance The obligation of Lender to make the initial Advance of
the Project Loan (the “Initial Advance”) shall be subject to the following conditions precedent
(collectively, the “Initial Advance Conditions”) on or prior to the Required Initial Advance Date,
all of which conditions precedent must be satisfied prior to Lender making any such Initial
Advance:
2.10.1 Prior Conditions Satisfied. All conditions precedent to closing shall continue
to be satisfied as of the date of the Initial Advance (in the same manner in which they were
satisfied for the closing without reimposing any one-time condition).
2.10.2 Performance; No Default. Borrower shall have performed and complied with all
terms and conditions herein required to be performed or complied with by it at or prior to
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the date
of such Initial Advance, and on the date of such Initial Advance there shall exist no Default or
Event of Default.
2.10.3 Representations and Warranties. The representations and warranties made by
Borrower or Guarantor in the Loan Documents or otherwise made by or on behalf of Borrower or
Guarantor in connection therewith after the date thereof shall have been true and correct in all
material respects on the date on which made and shall also be true and correct in all material
respects on the date of the Initial Advance.
2.10.4 No Damage. The Project Improvements shall not have been injured or damaged by
fire, explosion, accident, flood or other casualty, unless Lender shall be satisfied that
sufficient insurance proceeds will be available in the reasonable judgment of Lender to effect the
satisfactory restoration of the Project Improvements and to permit the Completion of the
Improvements prior to the Required Completion Date.
2.10.5 Deliveries. Lender shall have received:
(a) Draw Request. A Draw Request complying with the requirements hereof;
(b) Intentionally Omitted;
(c) Title Insurance Policy. A Title Insurance Policy for the full amount of the Loan,
which includes a pending disbursement clause to increase the coverage of the Title Insurance Policy
by the amount of the any Advance, insuring the lien of the Mortgage subject to no liens or
encumbrances other than the Permitted Encumbrances;
(d) Lien Waivers. Duly executed lien waivers, which shall be conditional lien waivers
or unconditional lien waivers, as determined by Lender in its sole discretion, and otherwise
substantially in the form set forth in Exhibit J to the Building Loan Agreement from the
General Contractor and all Contractors and Subcontractors who have performed work, for the work so
performed, and/or who have supplied labor and/or materials, for the labor and/or materials so
supplied, except for such work or labor and/or materials for which payment thereof is requested, as
to which duly executed lien waivers shall be delivered to Lender with the next request for an
Advance;
(e) Ratios. Evidence satisfactory to Lender that following the Initial Advance, the
Loan-to-Cost Ratio shall be no greater than 80%.
(f) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents;
(g) Anticipated Costs Report. An Anticipated Costs Report; and
(h) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
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2.10.6 Initial Building Loan Advance. All conditions to the initial advance of the
Building Loan set forth in Section 2.10 of the Building Loan Agreement shall have been satisfied.
2.10.7 Rate Lock Agreement. Simultaneously with the Initial Advance, Lender shall
return to Borrower, a pro-rata portion of the deposit held by Lender pursuant to the Rate Lock
Agreement in such proportion as the amount of the Initial Advance bears to the Total Loan Amount.
2.10.8 Home Depot Estoppel Certificate. Borrower shall have delivered to Lender
estoppel certificates from Home Depot certifying to Lender that the Home Depot Lease is in full
force and effect and that there are no defaults by Borrower or Home Depot thereunder, and otherwise in form and substance
satisfactory to Lender in Lender’s sole discretion (the “Home Depot Estoppel Certificate”).
2.10.9 Initial Reserve Deposits Borrower shall have deposited the Initial Tax and
Insurance Escrow Deposit and the Initial Interest Reserve Deposit with Lender. The Initial Tax and
Insurance Escrow Deposit and the Initial Interest Reserve Deposit shall be funded on the date of
the Initial Advance with a portion of the Initial Advance under the Project Loan.
2.10.10 Retaining Wall Letter. Borrower shall have delivered to Lender a letter from
the Village of Pelham Manor evidencing resolution of the retaining wall issue in form and substance
satisfactory to Lender in Lender’s sole discretion (the “Retaining Wall Letter”).
2.10.11 Satisfaction of Initial Advance Conditions. Borrower covenants and agrees
that, prior to the Required Initial Advance Date, time being of the essence, it shall cause all of
the Initial Advance Conditions to be satisfied. Borrower shall not perform any work at the
Property, including, without limitation, any demolition of the existing improvements, until all of
the Initial Advance Conditions have been satisfied. Borrower’s failure to satisfy, or cause the
satisfaction of, any of the Initial Advance Conditions on or prior to the Required Initial Advance
Date shall, at Lender’s election, constitute an Event of Default. In addition to any and all other
remedies that may be available to Lender hereunder, under the other Loan Documents, at law or in
equity, upon the occurrence of an Event of Default resulting from the failure of any Initial
Advance Condition to have been satisfied, Borrower hereby irrevocably empowers Lender, in the name
of Borrower as its true and lawful attorney-in-fact, with full power of substitution to complete or
undertake such steps as may be necessary, in Lender’s sole determination, to satisfy the Initial
Advance Condition in the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said attorney-in-fact as
follows: (i) to employ such contractors, subcontractors, agents, architects and inspectors as shall
be required for such purposes; (iii) to pay, settle or compromise all existing bills and claims
which are or may become Liens against the Property, or as may be necessary or desirable for the
completion of such Initial Advance Conditions, or for clearance of title; (v) to execute all
applications and certificates in the name of Borrower which may be required by any of the contract
documents; (vi) to prosecute and defend all actions or proceedings in connection with the Property
or the Project; and (vii) to do any and every act which Borrower might do in its own behalf to
fulfill the terms of this Agreement and the other Loan Documents. In addition, upon such Event of
Default,. Lender shall have the right to unwind any interest rate hedge
18
entered into by Lender and
apply any deposits or other amounts held by Lender pursuant to the Rate Lock Agreement to costs and
expenses incurred by Lender under this Agreement, the Rate Lock Agreement or any of the other Loan
Documents.
Section 2.11 Project Loan Advances. The obligation of Lender to make the Advances of the Project Loan after the Initial Advance
shall be subject to the following conditions precedent, all of which conditions precedent must be
satisfied prior to Lender making any such Advance:
2.11.1 Prior Conditions Satisfied. All conditions precedent to any prior Advance (in
the same manner in which they were satisfied for the Initial Advance or prior Advance, as
applicable, and without reimposing any one-time requirement) shall continue to be satisfied as of
the date of such subsequent Advance.
2.11.2 Performance; No Default. Borrower shall have performed and complied with all
terms and conditions herein required to be performed or complied with by it at or prior to the date
of such Advance, and on the date of such Advance there shall exist no Default or Event of Default
or Shortfall.
2.11.3 Representations and Warranties. The representations and warranties made by
Borrower and Guarantor in the Loan Documents or otherwise made by or on behalf of Borrower or
Guarantor in connection therewith after the date thereof shall have been true and correct in all
material respects on the date on which made and shall also be true and correct in all material
respects on the date of such Advance.
2.11.4 No Damage. The Improvements shall not have been injured or damaged by fire,
explosion, accident, flood or other casualty, unless Lender shall have received insurance proceeds
sufficient in the reasonable judgment of Lender to effect the satisfactory restoration of the
Improvements and to permit the Completion of the Improvements prior to the Required Completion
Date.
2.11.5 Deliveries. The following items or documents shall have been delivered to
Lender:
(a) Anticipated Costs Report. An Anticipated Costs Report in the form set forth in
Exhibit I to the Building Loan Agreement executed by the General Contractor which sets
forth the anticipated costs to complete construction of the Project Improvements, after giving
effect to costs incurred during the previous month and any anticipated change orders;
(b) Endorsement to Title Insurance Policy. A “datedown” endorsement to Lender’s title
insurance policy as described in the form set forth in Exhibit C to the Building Loan
Agreement which continuation or endorsement shall increase the coverage of the Title Insurance
Policy by the amount of the Advance through the pending disbursement clause (but not the overall
policy amount which shall be for the full amount of the Loan), amend the effective date of the
Title Insurance Policy to the date of such Advance, continue to insure the lien of the Mortgage
subject to no liens or encumbrances other than the Permitted Encumbrances and which shall state that since the last disbursement of the Loan there have been no changes
in
19
the state of title to the Property (other than Permitted Encumbrances) and that there are no
additional survey exceptions not previously approved by Lender;
(c) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents.
(d) Draw Request. A Draw Request complying with the provisions of this Agreement
which shall constitute Borrower’s representation and warranty to Lender that: (a) any completed
construction is substantially in accordance with the Plans and Specifications, (b) all costs for
the payment of which Lender have previously advanced funds have in fact been paid, (c) all the
representations and warranties contained in Article IV of this Agreement continue to be true and
correct in all material respects, (d) no Event of Default shall have occurred and be continuing
hereunder, and (e) Borrower continues to be in compliance in all respects with all of the other
terms, covenants and conditions contained in this Agreement.
(e) Affirmation of Payment. General Contractor’s Affirmation of Payment (AIA Form
G706) in the form attached as Exhibit E to the Building Loan Agreement.
(f) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.11.6 Construction Consultant Certificate. Each draw request relating to Hard Costs
shall be accompanied by a certificate or report of the Construction Consultant to Lender based upon
a site observation of the Property made by the Construction Consultant not more than thirty (30)
days prior to the date of such draw, in which the Construction Consultant shall in substance: (i)
verify that the portion of the Project Improvements completed as of the date of such site
observation has been completed substantially in accordance with the Plans and Specifications; and
(ii) state its estimate of (1) the percentages of the construction of the Project Improvements
completed as of the date of such site observation on the basis of work in place as part of the
Project Improvements and the Building Loan Budget, (2) the Hard Costs actually incurred for work in
place as part of the Improvements as of the date of such site observation, (3) the sum necessary to
complete construction of the Project Improvements in accordance with the Plans and Specifications,
and (4) the amount of time from the date of such inspection that will be required to achieve
Completion of the Improvements.
2.11.8 Certification Regarding Chattels. Lender shall have received a certification
from the Title Company or other service satisfactory to Lender or counsel satisfactory to Lender
(which shall be updated from time to time at Borrower’s expense upon request by Lender in connection with future Advances)
that a search of the public records disclosed no significant or material changes since the Closing
Date including no judgment or tax liens affecting Borrower or Guarantor, the Property or the
Personal Property, and no conditional sales contracts, chattel mortgages, leases of personalty,
financing statements (other than those in favor of Lender) or title retention agreements which
affect the Property.
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2.11.9 Lien Waivers. Borrower shall have delivered duly executed lien waivers, which
shall be conditional lien waivers or unconditional lien waivers, as applicable, and otherwise
substantially in the form set forth as Exhibit J to the Building Loan Agreement, from the
General Contractor, all Major Contractors and Major Subcontractors for all work performed, and all
labor or material supplied for which payment thereof has been made prior to the date of the
Advance.
2.11.10 Construction Consultant Approval. Lender has received advice from the
Construction Consultant, satisfactory to Lender, as to Construction Consultant’s determination,
acting seasonably, based on on-site inspections of the Improvements and the data submitted to and
reviewed by it as part of Borrower’s Requisition of the value of the labor and materials in place,
that the construction of the Project Improvements is proceeding satisfactorily and according to
schedule and that the work on account of which the Advance is sought has been completed in a good
and workmanlike manner to such Construction Consultant’s satisfaction and substantially in
accordance with the Plans and Specifications.
2.11.11 Ratios. Following such Advance (and any Building Loan Advance being made on
such date), the Loan-to-Cost Ratio shall be no greater than 80%.
2.11.12 Administration Fee. Borrower shall have paid the Administration Fee in
accordance with the provisions of the Administration Fee Agreement.
2.11.13 Required Equity Funds. Borrower shall furnish Lender with evidence in form and
content satisfactory to Lender that, as of the date of each Advance, Borrower has invested Cash
equity in an amount equal to or greater than (a) $8,916,000 or (b) 20% of the Total Project Costs
or (c) the difference between the Development Budget and the maximum Loan amount of $35,664,000 for
approved Project-Related Costs (the “Required Equity Funds”). Notwithstanding the foregoing, if
the Borrower realizes cost savings from the development of the Project, either in the form of Hard
Costs or Soft Costs, Advances may be advanced to Borrower provided that (i) the Borrower would not
have less than $8,916,000 of cash equity in the Project through such Advance and (ii) the Debt
Service Coverage Ratio shall be equal to or greater than 1.15 to 1.0 assuming a fully advanced Loan using a debt service constant of 7.31%, and (iii) the loan-to-value ratio for the Property is
greater than 80% assuming a fully advanced Loan. If Borrower is in non-compliance solely with
respect to condition (i) above, at Borrower’s option, either (A) any excess cost savings
(funds in excess of the amount so that the Required Equity Funds shall continue to be satisfied)
shall be deposited as follows: (1) 100% into the Replacement Reserve Account until the amount on
deposit in such account equals the Replacement Reserve Cap, and then (2) 100% of any excess into
the Rollover Reserve Account until the amount on deposit in such account equals the Rollover
Reserve Cap, and then (3) 100% of any excess into any other Reserves required by Lender pursuant to
this Agreement, or (B) Borrower shall release Lender from its obligation to fund the remaining
amounts of the Loan and Borrower and any guarantor under the Rate Lock Agreement pays for the
breakage costs, if any, on the unfunded portion of the Loan payable pursuant to the Rate Lock
Agreement. If Borrower is in compliance with respect to condition (i) above but is not in
compliance with conditions (ii) and (iii) above, any excess cost savings shall, at
Borrower’s option, (A) be held back by Lender as additional collateral for the Loan until
satisfaction of each of the requirements are satisfied, or (B) be deposited as follows: (1) 100%
into the Replacement Reserve Account until the amount
21
on deposit in such account equals the
Replacement Reserve Cap, and then (2) 100% of any excess into the Rollover Reserve Account until
the amount on deposit in such account equals the Rollover Reserve Cap, and then (3) 100% of any
excess into any other Reserves required by Lender pursuant to this Agreement, or (C) Borrower shall
release Lender from its obligation to fund the remaining amounts of the Loan and Borrower and any
guarantor under the Rate Lock Agreement pays for the breakage costs, if any, on the unfunded
portion of the Loan payable pursuant to the Rate Lock Agreement.
2.11.14 Rate Lock Agreement. Simultaneously with each Construction Advance, Lender
shall return to Borrower, a pro-rata portion of the deposit held by Lender pursuant to the Rate
Lock Agreement in such proportion as the amount of the Construction Advance bears to the Total Loan
Amount, provided, however, that in the event that any of the conditions of Section 2.11.13
are not satisfied, Lender shall have the right to apply the portion of the deposit under the Rate
Lock Agreement to be returned to Borrower to satisfy the conditions of Section 2.11.13.
2.11.15 Home Depot Contribution. In the event that Borrower receives any portion of the
Tenant Contribution (as defined in the Home Depot Lease) payable to Borrower pursuant to that
certain Sublease dated as of December 21, 2006 (the “Home Depot Lease”), with Home Depot U.S.A.,
Inc. (“Home Depot”) or the proceeds of any letter of credit delivered by Home Depot pursuant to the
Home Depot Lease as security for Home Depot’s obligation to pay the Tenant Contribution, Borrower
shall apply such Tenant Contribution or the proceeds of such letter of credit, as applicable, to
the payment of Project Related Costs and shall provide Lender with evidence that such Tenant
Contribution or proceeds, as applicable, have been applied to the payment of Project Related Costs
prior to Lender making any further Advances under this Agreement.
Section 2.12 Final Advance.
2.12.1 Conditions to Release of Final Advance. In addition to the conditions set
forth in Section 2.10 and Section 2.11, above, Lender’s obligation to make the
final Advance in the amount calculated pursuant to Section 2.12.2 of this Agreement (the
“Final Advance”) shall be subject to receipt by Lender of the following:
(a) Completion of Improvements. Evidence satisfactory to Lender and the Construction
Consultant that the Completion of the Improvements has occurred.
(b) Final Building Loan Advance. All conditions to the Final Building Loan Advance
have been satisfied and the Final Building Loan Advance shall have been made or will be made
simultaneously therewith.
(c) Lien Waivers. Duly executed final lien waivers, which shall be conditional lien
waivers or unconditional lien waivers, as determined by Lender in its sole discretion, and
otherwise substantially in the form as Exhibit J to the Building Loan Agreement from the
General Contractor and Major Contractors and Major Subcontractors who have performed work for the
work so performed, and/or who have supplied labor and/or materials for the labor and/or materials
so supplied.
22
(d) “As-Built” Plans and Specifications. A full and complete set of “as built” Plans
and Specifications certified to by Borrower’s Architect.
(e) Administration Fee. Borrower shall have paid the Administration Fee in accordance
with the provisions of the Administration Fee Agreement.
(f) Certificates. Completed AIA Form G704 (Certificate of Substantial Completion) and
completed AIA Form G707 (Consent of Surety to Final Payments) shall have been executed and
delivered by Borrower’s Architect, General Contractor and each surety issuing any of the Required
Construction Bonds. .
(g) Deposits to Reserves. All deposits to the Reserve Funds required under the
Building Loan Agreement have been made.
(h) Other Documents. Such documents, letters, affidavits, reports and assurances, as
Lender, Lender’s counsel and the Construction Consultant may reasonably require.
(i) Required Ratios at Completion. Lender shall have determined that, following the
Final Advance (and taking into consideration the Final Building Loan Advance to be made
simultaneously under the Building Loan) the Required Ratios at Completion have been satisfied, or
Borrower shall have deposited with Lender Cash or a Letter of Credit to satisfy the Required Ratios
at Completion in accordance with Section 2.12.2.
(j) Tenant Estoppel Certificates. Borrower shall have delivered to Lender estoppel
certificates from all of the tenants at the Property in form and substance satisfactory to Lender.
(k) Required Equity Funds. Borrower shall furnish Lender with evidence in form and
content satisfactory to Lender that, as of the date of the Final Advance, Borrower has invested
Cash equity in an amount equal to or greater than the Required Equity Funds or has otherwise
complied with the provisions of Section 2.11.13 with respect thereto.
(l) Insolvency Opinion. The issuance of and delivery to Lender of six (6) original
counterparty Insolvency Opinions in the form attached hereto as Exhibit K to the Building
Loan Agreement from Wachtel & Masyr, LLP or another law firm reasonably acceptable to Lender.
2.12.2 Amount of Final Advance. Except as expressly provided for below, the amount of
the Final Advance shall be equal to the sum of: (a) any Retainage not previously released and
advanced to Borrower; plus (b) the amount of any Punch List and Deferred Maintenance Reserve
Deposit not funded pursuant to the Building Loan Agreement; plus (c) the positive difference, if
any, between, (i) the Building Loan Amount and (ii) all amounts previously Advanced under the
Building Loan (including the amounts described in clauses (a) and (b) of the sentence). The portion
of the Final Advance described in clause (c) of the foregoing sentence is referred to herein as the
“Project Loan Earn Out Advance” and the corresponding portion of the Final Building Loan Advance is
referred to herein as the “Building Loan Earn Out Advance” and together with the Project Loan Earn
Out Advance, the “Earn
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Out Advances”. Notwithstanding anything to the contrary provided for
herein, the Earn Out Advances shall be reduced, pro rata, but not below $0.00, if and to the extent
necessary for the Required Ratios at Completion to be achieved following the Final Advances. In
addition, if the Required Ratios at Completion cannot be achieved even if the Earn Out Advances are
reduced to $0.00, Lender shall have the right, but not the obligation, to apply any deposits held
by Lender pursuant to the Rate Lock Agreement and any Interest Reserve Funds to the payment of the
Building Loan and the Project Loan in such order and priority as Lender shall determine in its sole
discretion. If the Required Ratios at Completion cannot be achieved even if the Earn Out Advances
are reduced to $0.00 and the deposits, if any under the Rate Lock Agreement and the Interest
Reserve Funds are applied to the payment of the Loan, Borrower shall deposit with Lender Cash or a
Letter of Credit satisfactory to Lender in an amount equal to the amount which, if used to pay down
the Loan, would result in Stabilized Loan-to-Value Ratio of 80% and a Debt Service Coverage Ratio
of 1.15 to 1.00, calculated based upon Lender’s determination on a pro-forma basis of Lender’s
Stabilized Net Cash Flow for the 12 months immediately following and assuming a thirty (30) year
amortization schedule based upon a debt service constant equal to the greater of the actual debt
service constant and 7.31%.
2.12.3 Rate Lock Agreement. Upon satisfaction of all of the conditions to the Final
Advance set forth in Section 2.12.1, and subject to the provisions of Section
2.12.2, Lender shall return to Borrower, the remaining deposits, if any, held by Lender under
the Rate Lock Agreement and not applied by Lender in accordance with the provisions of the Rate Lock Agreement and any Interest
Reserve Funds held by Lender pursuant to the Building Loan Agreement.
Section 2.13 No Reliance. All conditions and requirements of this Agreement are for
the sole benefit of Lender and no other person or party (including, without limitation, the
Construction Consultant, the General Contractor and subcontractors (including, without limitation,
Major Contractors and Major Subcontractors) and materialmen engaged in the construction of the
Improvements) shall have the right to rely on the satisfaction of such conditions and requirements
by Borrower. Lender shall have the right, in its sole and absolute discretion, to waive any such
condition or requirement.
Section 2.14 Method of Disbursement of Loan Proceeds.
2.14.1 Draw Request to Be Submitted to Lender. At such time as Borrower shall desire
to obtain an Advance, Borrower shall complete, execute and deliver to Lender a Borrower’s
Requisition in the form attached as Exhibit L to the Building Loan Agreement.
(a) Borrower’s Requisition shall be accompanied by a completed and itemized Application and
Certificate for Payment (AIA Document No. G702) attached as Exhibit M to the Building Loan
Agreement or similar form approved by Lender, containing the certification of the General
Contractor or contractor or subcontractor to whom such payment is made, as applicable, and
Borrower’s Architect as to the accuracy of same, together with invoices relating to all items of
Hard Costs covered thereby and accompanied by a cost breakdown showing the cost of work on, and the
cost of materials incorporated into, the Improvements to the date of the requisition. The cost
breakdown shall also show the percentage of completion of each line item on the Project Loan
Budget, and the accuracy of the cost breakdown shall be
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certified by Borrower and by Borrower’s
Architect. All such applications for payment shall also show all contractors and subcontractors,
including Major Contractors and Major Subcontractors, by name and trade, the total amount of each
contract or subcontract, the amount theretofore paid to each subcontractor as of the date of such
application, and the amount to be paid from the proceeds of the Advance to each contractor and
subcontractor;
(b) the completed construction will be reviewed by the Construction Consultant who will
certify to Lender as to the value of completed construction, percentage of completion and
compliance with Plans and Specifications;
(c) lien waivers from each other Major Contractor and Major Subcontractors for work done and
materials supplied by them which were paid for pursuant to any prior Draw Request;
(d) a written request of Borrower for any necessary changes in the Plans and Specifications,
the Project Loan Budget, the Disbursement Schedule or the Construction Schedule;
(e) copies of all executed change orders, contracts and subcontracts, and, to the extent
requested by Lender, of all inspection or test reports and other documents relating to the
construction of the Project Improvements not previously delivered to Lender; and
(f) such other information, documentation and certification as Lender shall reasonably
request.
2.14.2 Procedure of Advances.
(a) Each Draw Request shall be submitted to Lender and Construction Consultant at least ten
(10) Business Days prior to the Requested Advance Date, and no more frequently than monthly.
Lender shall make the requested Advance on the Requested Advance Date so long as all conditions to
such Advance are satisfied or waived.
(b) Not later than 11:00 A.M. New York City time, on the Requested Advance Date, Lender shall
make such Advance available to Borrower in accordance with the terms of this Section 2.14.
(c) Each Advance (other than the Final Advance) shall be in an amount of not less than
$500,000.00.
(d) Each Advance shall be made on a Payment Date.
2.14.3 Funds Advanced. Each Advance shall be made by Lender by wire transfer to such
checking account of Borrower as specified to Lender in writing or as provided in Section
2.14.4 below. All proceeds of all Advances shall be used by Borrower only for the purposes for
which such Advances were made. Borrower shall not commingle such funds with other funds of
Borrower.
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2.14.4 Direct Advances to Third Parties. Lender may make, at Lender’s option, any or
all Advances directly or through the Title Company to (i) any Contractor, as applicable, for
construction expenses which shall theretofore have been approved by Lender and for which Borrower
shall have failed to make payment after receipt by Borrower of such applicable Advance, (ii)
Borrower’s Architect to pay its fees to the extent funds are allocated thereto in the Building Loan
Budget if Borrower shall have failed to do so, (iii) the Construction Consultant to pay its fees,
(iv) Lender’s counsel to pay its fees, (v) to pay (x) any installment of interest due under the
Note, (y) any expenses incurred by Lender which are reimbursable by Borrower under the Loan
Documents (including, without limiting the generality of the foregoing, reasonable attorneys’ fees
and expenses and other fees and expenses incurred by Lender), provided that Borrower shall
theretofore have received notice from Lender that such expenses have been incurred and Borrower shall have failed to reimburse
Lender for said expenses beyond any grace periods provided for said reimbursement under the Note,
this Agreement or any of the other Loan Documents, or (z) following the occurrence and continuation
of an Event of Default, any other sums due to Lender under the Note, this Agreement or any of the
other Loan Documents, all to the extent that the same are not paid by the respective due dates
thereof, and (vi) any other Person to whom Lender in good faith determines payment is due and any
portion of the Loan so disbursed by Lender shall be deemed disbursed as of the date on which the
Person to whom payment is made receives the same. The execution of this Agreement by Borrower
shall, and hereby does, constitute an irrevocable authorization so to advance the proceeds of the
Loan directly to any such Person or through the Title Company to such Persons in accordance with
this Section 2.14.4 as amounts become due and payable to them hereunder and any portion of
the Loan so disbursed by Lender shall be deemed disbursed as of the date on which the Person to
whom payment is made receives the same. No further authorization from Borrower shall be necessary
to warrant such direct Advances to such relevant Person, and all such Advances shall satisfy pro
tanto the obligations of Lender hereunder and shall be secured by the Mortgage and the other Loan
Documents as fully as if made directly to Borrower.
2.14.5 One Advance Per Month. Lender shall have no obligation to make Advances of the
Loan more often than once in each calendar month except that Lender, in its sole discretion, shall
have the right but not the obligation, to make additional advances per month for interest, fees and
expenses due under the Loan Documents.
2.14.6 Advances Do Not Constitute a Waiver. No Advance shall constitute a waiver of
any of the conditions of Lender’s obligation to make further Advances nor, in the event Borrower is
unable to satisfy any such condition, shall any Advance have the effect of precluding Lender from
thereafter declaring such inability to be an Event of Default hereunder.
2.14.7 Trust Fund Provisions. All proceeds advanced hereunder shall be subject to the
trust fund provisions of Section 13 of the Lien Law. Nothing contained in this Agreement
is intended to constitute a promise by Borrower, express or implied, or to create any obligation,
express or implied, on the part of Borrower, to make an “improvement,” as such term is defined in
the Lien Law of the State of New York, and no advance of proceeds of the Loan shall at any time be
conditioned, directly or indirectly, upon the making of any such “improvement”.
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2.14.8 Advances and Disbursements Under Completion Guaranty. Notwithstanding anything
to the contrary contained in this Agreement or in any other Loan Document, Borrower hereby
irrevocably and unconditionally authorizes Lender to make any disbursements of proceeds of the Loan
or of any Reserve Funds held by Lender to Guarantor in accordance with the Guaranty of Completion.
Section 2.15 Interest Advances. Notwithstanding the requirements contained in Section
2.10, Section 2.11 and Section 2.12, and provided that no Event of Default shall have occurred,
Lender shall make an Advance on each Payment Date during the Construction Term from the Interest
Reserve Line Item, if and to the extent funds remain available under such line item, to pay
interest then due under the Note. Notwithstanding the foregoing, if and to the extent that funds
are available in the Additional Interest Reserve Deposit, Lender shall first apply funds available
in the Additional Interest Reserve Deposit to the payment of interest due, prior to making an
Advance for such purpose. Nothing contained in this Section 2.15 shall limit or derogate
from Borrower’s absolute and unconditional obligation to pay interest due under the Note.
ARTICLE 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 conditions
precedent set forth in Section 3.1 of the Building Loan Agreement no later than the Closing
Date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations. The representations and warranties of
Borrower set forth in Section 4.1 of the Building Loan Agreement are incorporated herein by
reference as if fully set forth herein and remade by Borrower.
Section 4.2 Survival of Representations. Borrower agrees that all of the
representations and warranties of Borrower set forth in Section 4.1 hereof and elsewhere in
this Agreement and in the other Loan Documents shall survive for so long as any amount remains
owing to Lender under this Agreement or any of the other Loan Documents by Borrower. All
representations, warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.
ARTICLE V.
BORROWER COVENANTS
Section 5.1 Affirmative Covenants. The affirmative covenants of Borrower set forth in Section 5.1 of the Building Loan
Agreement are incorporated herein by reference as if fully set forth herein and remade by Borrower.
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Section 5.2 Negative Covenants. The negative covenants of Borrower set forth in
Section 5.2 of the Building Loan Agreement are incorporated herein by reference as if fully
set forth herein and remade by Borrower.
ARTICLE VI.
INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
Section 6.1 Insurance. Borrower, at its sole cost and expense, shall obtain and
maintain, or cause to be maintained, insurance policies necessary to satisfy the requirements of
Section 6.1 of the Building Loan Agreement.
Section 6.2 Casualty and Condemnation. Section 6.2 of the Building Loan
Agreement is incorporated herein by reference as if fully set forth herein.
Section 6.3 Application of Net Proceeds. Section 6.3 of the Building Loan
Agreement is incorporated herein by reference as if fully set forth herein.
ARTICLE VII.
RESERVE FUNDS
Section 7.1 Reserve Funds. Borrower shall establish such accounts and make such
deposits as are required by Article VII of the Building Loan Agreement. The provisions of
Article VII of the Building Loan Agreement are incorporated herein by reference as if fully
set forth herein.
Section 7.2 Other Loan Documents. Borrower’s obligations under this Article VII shall
be suspended for so long as sufficient amounts are on deposit and reserved as required by the
Building Loan Agreement.
Section 7.3 Reserve Funds, Generally. Borrower grants to Lender a first-priority
perfected security interest in each of the Reserve Funds and any and all monies now or hereafter
deposited in each Reserve Fund as additional security for payment of the Debt. Until expended or applied in accordance
herewith, the Reserve Funds shall constitute additional security for the Debt. Upon the occurrence
of an Event of Default, Lender may, in addition to any and all other rights and remedies available
to Lender, apply any sums then present in any or all of the Reserve Funds to the payment of the
Debt in any order in its sole discretion. The Reserve Funds shall not constitute trust funds and
may be commingled with other monies held by Lender. All interest on a Reserve Fund shall not be
added to or become a part thereof and shall be the sole property of and shall be paid to Lender.
Borrower shall be responsible for payment of any federal, state or local income or other tax
applicable to the interest earned on the Reserve Funds credited or paid to Borrower. Borrower
shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant
any security interest in any Reserve Fund or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect thereto. Lender shall
not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds.
Borrower shall indemnify Lender and hold Lender harmless
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from and against any and all actions,
suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including
litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the performance of the obligations for which the Reserve Funds were
established. Borrower shall assign to Lender all rights and claims Borrower may have against all
persons or entities supplying labor, materials or other services which are to be paid from or
secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
ARTICLE VIII.
DEFAULTS
Section 8.1 Event of Default. (a) Each of the following events shall constitute an
event of default hereunder (an “Event of Default”):
(i) if any portion of the Debt is not paid within five (5) days of the date
when due (except that Borrower shall not be afforded such 5-day cure period for the
portion of the Debt due and payable on the Maturity Date);
(ii) if any of the Taxes (other than Taxes being contested pursuant to
Section 5.1.2 of this Agreement) are not paid when the same are due and
payable or Other Charges are not paid within five (5) days after Borrower receives
notice of same;
(iii) if the Policies are not kept in full force and effect, or if certified
copies of the Policies are not delivered to Lender upon request;
(iv) if Borrower Transfers or otherwise encumbers any portion of the Property
without Lender’s prior written consent in violation of the provisions of this
Agreement or the Mortgage;
(v) if any material representation or warranty made by Borrower or Guarantor
herein or in any other Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished to Lender shall have
been false or misleading in any material respect as of the date the representation
or warranty was made;
(vi) if Borrower, Mezzanine Borrower, Guarantor or any other guarantor under
any guaranty issued in connection with the Loan shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
Mezzanine Borrower, Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Mezzanine Borrower, Guarantor or such other
guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against,
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consented to, or
acquiesced in by, Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
or if any proceeding for the dissolution or liquidation of Borrower, Mezzanine
Borrower, Guarantor or such other guarantor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
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 breaches any covenant contained in Section 4.1.30;
(x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if Borrower shall be in
default under such term, covenant or condition after the giving of such notice or
the expiration of such grace period;
(xi) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in any
material respect;
(xii) if Borrower fails to pay the Administration Fee, or any portion or
installment thereof, within five (5) days of the date when due;
(xiii) If Borrower fails to deposit with Lender the cash deposit or Letter of
Credit required in accordance with Section 2.12.2 hereof;
(xiv) if Borrower fails to materially comply with the Construction Schedule;
(xv) if the Completion of the Improvements has not occurred on or prior to the
Required Completion Date, subject to Force Majeure or if Lender or the Construction
Consultant determines that Completion of the Improvements cannot occur on or prior
to the Required Completion Date;
(xvi) if any voucher or invoice is fraudulently submitted by Borrower or in
connection with any Advance for services performed or for materials used in or
furnished for the Property;
(xvii) if there is any cessation at any time in construction of the Project
Improvements for more than twenty (20) consecutive Business Days, other than as a
result of Force Majeure;
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(xviii) if Borrower expressly confesses in writing to Lender its inability to
continue or complete construction of the Project Improvements in accordance with
this Agreement;
(xix) if Lender, the Construction Consultant or their representatives are not
permitted at all reasonable times upon not less than three (3) Business Days notice
to enter upon the Property, inspect the Improvements and the construction thereof
and all materials, fixtures and articles used or to be used in the construction and
to examine all the Plans and Specifications, or if Borrower shall fail to furnish to
Lender or its authorized representative, when requested upon not less than five (5)
Business Days notice, copies of the Plans and Specifications;
(xx) if a material adverse change in Borrower’s financial condition shall occur
which would, in Lender’s reasonable determination, materially and adversely affect
Borrower’s ability to perform its obligations under this Agreement or any other
document evidencing or securing the Loan beyond any applicable notice and grace
periods expressly set forth in the Loan Documents;
(xxi) if the conditions precedent to the Final Advance have not been satisfied
on or prior to the Required Completion Date;
(xxii) If the Guarantor fails to maintain the Required Liquidity and the
Required Net Worth covenants specified in the Guaranty of Completion or if the
Guarantor shall default under the Guaranty of Completion or the Guaranty of Recourse
Carveouts;
(xxiii) if a material default has occurred and continues beyond any applicable
cure period under the Management Agreement (or any Replacement Management Agreement)
and if such default permits the Manager thereunder to terminate or cancel the
Management Agreement (or any Replacement Management Agreement);
(xxiv) if Borrower shall continue to be in Default under any of the terms,
covenants or conditions of Section 9.1 hereof, or fails to cooperate with
Lender in connection with a Securitization pursuant to the provisions of Section
9.1 hereof, in either case for three (3) Business Days after notice to Borrower
from Lender;
(xxv) if an Event of Default (as defined in the Building Loan Agreement) shall
have occurred;
(xxvi) if there shall be default by Borrower or Guarantor under any of the
other Loan Documents, beyond applicable cure periods, if any, contained in such
documents, whether as to Borrower, Guarantor or the Property, or if any other such
event shall occur or condition shall exist, if the effect of such other default,
event or condition is to accelerate the maturity of all or any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the Debt;
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(xxvii) if (A) a breach or default by Borrower under any condition or
obligation contained in the Ground Lease shall occur, (B) there occurs any event or
condition that gives the Ground Lessor under the Ground Lease a right to terminate
or cancel the Ground Lease, (C) the Ground Lease shall be surrendered or the Ground
Lease shall be terminated or cancelled for any reason or under any circumstances
whatsoever, or (D) any of the terms, covenants or conditions of the Ground Lease
shall in any manner be modified, changed, supplemented, altered, or amended without
the prior written consent of Lender;
(xxviii) if (A) a breach or default by Borrower or Storage Facility Tenant
under any condition or obligation contained in the Storage Facility Master Lease
shall occur, (B) there occurs any event or condition that gives the Borrower or the
Storage Facility Tenant under the Storage Facility Master Lease a right to terminate
or cancel the Storage Facility Master Lease, (C) the Storage Facility Master Lease
shall be surrendered or the Storage Facility Master Lease shall be terminated or
cancelled for any reason or under any circumstances whatsoever, except as
specifically permitted herein, or (D) any of the terms, covenants or conditions of
the Storage Facility Master Lease shall in any manner be modified, changed,
supplemented, altered, or amended without the prior written consent of Lender;
(xxix) if Guarantor or Storage Facility Tenant shall dissolve or cease to exist
during the term of the Loan, except in compliance with the provisions of Section
5.2.15 or Section 5.1,44(e) hereof, respectively;
(xxx) if the Initial Advance Conditions are not satisfied by the Required
Initial Advance Date; or
(xxxi) 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
(xxx) above, for twenty (20) 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 thirty (30) day period and provided
further that Borrower shall have commenced to cure such Default within such thirty
(30) day period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (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 (60) days.
(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, in addition to any other rights or
remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in
equity, Lender may take such action, without notice or demand, that Lender deems advisable to
protect and enforce its rights against Borrower and the Property, including, without limitation,
declaring the Debt to be immediately due and payable, and Lender
32
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
Property, 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 Other
Obligations of Borrower hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and Borrower hereby expressly
waives any such notice or demand, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
Section 8.2 Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrower under this Agreement or any of
the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in
equity may be exercised by Lender at any time and from time to time, whether or not all or any of
the Debt shall be declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and remedies under any of
the Loan Documents with respect to all or any part of the Property. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender may determine in its
sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees
that if an Event of Default is continuing (i) Lender is not subject to any “one action” or
“election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges
provided to Lender shall remain in full force and effect until Lender has exhausted all of its
remedies against the Property and the Mortgage has been foreclosed, sold and/or otherwise realized
upon in satisfaction of the Debt or the Debt has been paid in full.
(b) With respect to Borrower and the Property, nothing contained herein or in any other Loan
Document shall be construed as requiring Lender to resort to the Property for the satisfaction of
any of the Debt in any preference or priority, and Lender may seek satisfaction out of the Property, or any part thereof, in its absolute discretion in respect of the Debt. In
addition, Lender shall have the right from time to time to partially foreclose the Mortgage in any
manner and for any amounts secured by the Mortgage 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 the Mortgage 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 the Mortgage to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage
as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain
subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously
recovered.
(c) Lender shall have the right from time to time to sever the Note and the other Loan
Documents into one or more separate notes, mortgages and other security documents
33
(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) Business Days after notice has been given to Borrower by Lender of Lender’s intent
to exercise its rights under such power. Borrower shall be obligated to pay any costs or expenses
incurred in connection with the preparation, execution, recording or filing of the Severed Loan
Documents and the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and warranties contained
in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative; Waivers. The rights, powers and remedies of Lender
under this Agreement shall be cumulative and not exclusive of any other right, power or remedy
which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or
existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued
singularly, 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.
ARTICLE IX.
SPECIAL PROVISIONS
Article 9 of the Building Loan Agreement is incorporated herein by reference as if
fully set forth herein.
ARTICLE 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
34
legal representatives, successors and assigns of such party. All covenants, promises and
agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal
representatives, successors and assigns of Lender.
Section 10.2 Lender’s Discretion. Whenever pursuant to this Agreement, Lender
exercises any right given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section 10.3 Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND
ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN 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, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER 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 CONFLICTS OF 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 LIEN
AND SECURITY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE 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, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDER’S OPTION BE INSTITUTED IN
35
ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED
ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
BORROWER DOES HEREBY DESIGNATE AND APPOINT:
National Registered Agents, Inc.
875 Avenue of the Americas, Suite 501
New York, New York 10001
875 Avenue of the Americas, Suite 501
New York, New York 10001
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,
36
the
Note or any other Loan Document, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this Agreement, the Note or the
other Loan Documents, or to declare a default for failure to effect prompt payment of any such
other amount.
Section 10.6 Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing and shall be
effective for all purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery, and by telecopier
(with answer back acknowledged), addressed as follows (or at such other address and Person as shall
be designated from time to time by any party hereto, as the case may be, in a written notice to the
other parties hereto in the manner provided for in this Section):
| If to Lender: | Bear Stearns Commercial Mortgage, Inc. 383 Madison Avenue New York, New York 10179 Attention: J. Christopher Hoeffel Facsimile No.: (212) 272-7047 |
|||
| with a copy to: | Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178 Attention: Paul A. Keenan, Esq. Facsimile No.: (212) 808-7897 |
|||
| If to Borrower: | P/A-Acadia Pelham Manor, LLC c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, New York 10605 Attention: Robert Masters, Esq., General Counsel Facsimile No.: (914) 288-2162 |
|||
| If to MERS: | MERS Commercial P.O. Box 2300 Flint, Michigan 48501-2300 |
A notice shall be deemed to have been given: in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the
first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a
machine-generated confirmation of successful transmission after advice by telephone to recipient
that a telecopy notice is forthcoming.
Section 10.7 Trial by Jury.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO
37
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
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 Preferences. Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of
Borrower hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of
such payment or proceeds received, the obligations hereunder or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender.
Section 10.11 Waiver of Notice. Borrower shall not be entitled to any notices of any
nature whatsoever from Lender except with respect to matters for which this Agreement or the other
Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower
and except with respect to matters for which Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right
to receive any notice from Lender with respect to any matter for which this Agreement or the other
Loan Documents do not specifically and expressly provide for the giving of notice by Lender to
Borrower.
Section 10.12 Remedies of Borrower. In the event that a claim or adjudication is made
that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where
by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may
be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its
agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree
that any action or proceeding to determine whether Lender has acted reasonably shall be determined
by an action seeking declaratory judgment.
38
Section 10.13 Expenses; Indemnity. (1) Borrower covenants and agrees to pay or, if
Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all
reasonable costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by
Lender in connection with (i) the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby
and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without
limitation any opinions requested by Lender as to any legal matters arising under this Agreement or
the other Loan Documents with respect to the Property); (ii) Borrower’s ongoing performance of and
compliance with Borrower’s respective agreements and covenants contained in this Agreement and
the other Loan Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and insurance requirements;
(iii) Lender’s ongoing performance and compliance with all agreements and conditions contained in
this Agreement and the other Loan Documents on its part to be performed or complied with after the
Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents
and any other documents or matters requested by Lender; (v) securing Borrower’s compliance with any
requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all
required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in
favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing or
preserving any rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or affecting Borrower, this
Agreement, the other Loan Documents, the Property, or any other security given for the Loan; and
(viii) enforcing any obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the Property (including any fees incurred by
Servicer in connection with the transfer of the Loan to a special servicer prior to a Default or
Event of Default) or in connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a “work-out” or of any insolvency or bankruptcy
proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs
and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or
willful misconduct of Lender. Any cost and expenses due and payable to Lender may be paid from any
amounts in the Clearing Account or Cash Management Account, as applicable.
(a) 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. To the extent that
39
the undertaking to indemnify, defend and
hold harmless set forth in the preceding sentence may be unenforceable because it violates any law
or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
(b) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender
for, any fees and expenses incurred by any Rating Agency in connection with any consent, approval,
waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of
this Agreement or any other Loan Document and Lender shall be entitled
to require payment of such fees and expenses as a condition precedent to the obtaining of any
such consent, approval, waiver or confirmation.
Section 10.14 Schedules and Exhibits Incorporated. The Schedules and Exhibits annexed
to the Building Loan Agreement are hereby incorporated herein as a part of this Agreement with the
same effect as if set forth in the body hereof.
Section 10.15 Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest
in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear
of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may
otherwise have against any assignor of such documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such
assignee upon such documents and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrower and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee,
beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein or therein. All conditions to
the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the
benefit of Lender and no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Lender will refuse to make
the Loan in the absence of strict compliance with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may
be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it
advisable or desirable to do so.
Section 10.17 Publicity. All news releases, publicity or advertising by Borrower or
its Affiliates through any media intended to reach the general public which refers to the Loan
40
Documents or the financing evidenced by the Loan Documents, to Lender, BSCMI, or any of their
Affiliates shall be subject to the prior written approval of Lender.
Section 10.18 Waiver of Marshalling of Assets. 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 Property, 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 Property 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 Property in preference to every
other claimant whatsoever.
Section 10.19 Waiver of Counterclaim. Borrower hereby waives the right to assert a
counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it
by Lender or its agents.
Section 10.20 Identical Obligations; Conflict; Construction of Documents; Reliance.
To the extent that Borrower has identical obligations under this Agreement and under any of the
other Loan Agreements, performance by Borrower of such obligations under this Agreement or any of
the other Loan Agreements shall be deemed performance by Borrower, as applicable, under all such
Loan Agreements and hereunder of such obligations. In the event of any conflict between the
provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement
shall control. The parties hereto acknowledge that they were represented by competent counsel in
connection with the negotiation, drafting and execution of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning against the party which
drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on
its own judgment and advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of
Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any rights or
remedies available to it under any of the Loan Documents or any other agreements or instruments
which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably
waives the right to raise any defense or take any action on the basis of the foregoing with respect
to Lender’s exercise of any such rights or remedies. Borrower acknowledges that Lender engages in
the business of real estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors. Borrower hereby represents that it has
dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any and all claims, liabilities, costs
and expenses of any kind (including Lender’s attorneys’ fees and expenses) in any way relating to
or arising from a claim by any Person that such Person acted on behalf of Borrower or Lender in
connection with the transactions contemplated herein. The provisions of this Section
41
10.21 shall survive
the expiration and termination of this Agreement and the payment of the Debt.
Section 10.22 Prior Agreements. This Agreement and the other Loan Documents contain
the entire agreement of the parties hereto and thereto in respect of the transactions contemplated
hereby and thereby, and all prior agreements among or between such parties, whether oral or
written, including, without limitation, the Commitment Letter dated August 9, 2007 between Borrower
and Lender are superseded by the terms of this Agreement and the other Loan Documents.
Section 10.23 Joint and Several Liability. If Borrower consists of more than one (1)
Person the obligations and liabilities of each Person shall be joint and several.
Section 10.24 Certain Additional Rights of Lender (VCOC). Notwithstanding anything to
the contrary contained in this Agreement, Lender shall have:
(a) the right to routinely consult with and advise Borrower’s management regarding the
significant business activities and business and financial developments of Borrower;
provided, however, that such consultations shall not include discussions of
environmental compliance programs or disposal of hazardous substances. Consultation meetings
should occur on a regular basis (no less frequently than quarterly) with Lender having the right to
call special meetings at any reasonable times and upon reasonable advance notice;
(b) the right, in accordance with the terms of this Agreement, to examine the books and
records of Borrower at any reasonable times upon reasonable notice;
(c) the right, in accordance with the terms of this Agreement, including, without limitation,
Section 5.1.11 hereof, to receive monthly, quarterly and year end financial reports,
including balance sheets, statements of income, shareholder’s equity and cash flow, a management
report and schedules of outstanding indebtedness; and
(d) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to approve any acquisition by Borrower of any other significant property (other
than personal property required for the day to day operation of the Property and/or construction of
the Project Improvements).
The rights described above in this Section 10.24 may be exercised by any entity which
owns and controls, directly or indirectly, substantially all of the interests in Lender.
Section 10.25 MERS. Mortgage Electronic Registration Systems, Inc., a Delaware corporation
(“MERS”), serves as mortgagee of record and secured party solely as nominee, in an administrative
capacity, for Lender and only holds legal title to the interests granted, assigned, and transferred in the
Mortgage and the Assignments of Leases. MERS shall at all times comply with the instructions of
Lender. If necessary to comply with law or custom, MERS (for the benefit of Lender) may be
directed by Lender to exercise any or all of those interests, including without limitation, the
right to foreclose and sell the Property, and take any action required of Lender, including without
limitation, a release, discharge or reconveyance of the Mortgage. Subject to the foregoing, all
references in the Loan Documents to “Mortgagee” shall include
42
Lender and its successors and
assigns. The relationship of Mortgagor and Lender under the Mortgage and the other Loan Documents
is, and shall at all times remain, solely that of borrower and lender (the role of MERS thereunder
being solely that of nominee as set forth above and not that of a lender); and Mortgagee neither
undertakes nor assumes any responsibility or duty to Borrower or to any other Person with respect
to the Property.
[SIGNATURE PAGE TO PROJECT LOAN AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above written.
| BORROWER P/A-ACADIA PELHAM MANOR, LLC, a Delaware limited liability company |
||||
| By: | , | |||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| LENDER BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York corporation |
||||
| By: | ||||
| Name: | ||||
| Title: | Authorized Signatory | |||
43
Exhibit 10.72
BUILDING LOAN AGREEMENT
Dated as of December 10, 2007
Between
P/A-ACADIA PELHAM MANOR, LLC,
as Borrower
as Borrower
and
BEAR STEARNS COMMERCIAL MORTGAGE, INC.,
as Lender
as Lender
MERS MIN: 8000101-0000007140-6
TABLE OF CONTENTS
| ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION | 1 | |||||||
| Section 1.1 | Definitions | 1 | ||||||
| Section 1.2 | Principles of Construction | 35 | ||||||
| ARTICLE II. GENERAL TERMS | 36 | |||||||
| Section 2.1 | Loan Commitment; Disbursement to Borrower | 36 | ||||||
| Section 2.2 | Interest Rate | 40 | ||||||
| Section 2.3 | Loan Payment | 41 | ||||||
| Section 2.4 | Prepayments | 42 | ||||||
| Section 2.5 | Defeasance | 43 | ||||||
| Section 2.6 | Release of Property | 46 | ||||||
| Section 2.7 | Clearing Account/Cash Management | 46 | ||||||
| Section 2.8 | Intentionally Omitted | 49 | ||||||
| Section 2.9 | Payments Not Conditional | 49 | ||||||
| Section 2.10 | Initial Advance | 49 | ||||||
| Section 2.11 | Construction Advances | 53 | ||||||
| Section 2.12 | Final Advance | 56 | ||||||
| Section 2.13 | No Reliance | 59 | ||||||
| Section 2.14 | Method of Disbursement of Loan Proceeds | 59 | ||||||
| Section 2.15 | Plan Review Process | 61 | ||||||
| ARTICLE III. CONDITIONS PRECEDENT | 62 | |||||||
| Section 3.1 | Conditions Precedent to Closing | 62 | ||||||
| ARTICLE IV. REPRESENTATIONS AND WARRANTIES | 66 | |||||||
| Section 4.1 | Borrower Representations | 66 | ||||||
| Section 4.2 | Survival of Representations | 78 | ||||||
| ARTICLE V. BORROWER COVENANTS | 79 | |||||||
| Section 5.1 | Affirmative Covenants | 79 | ||||||
| Section 5.2 | Negative Covenants | 100 | ||||||
| ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS | 112 | |||||||
| Section 6.1 | Insurance | 112 | ||||||
| Section 6.2 | Casualty and Condemnation | 118 | ||||||
| Section 6.3 | Application of Net Proceeds | 124 | ||||||
| ARTICLE VII. RESERVE FUNDS | 124 | |||||||
| Section 7.1 | Tax and Insurance Escrow Fund | 124 | ||||||
| Section 7.2 | Interest Reserve | 125 | ||||||
| Section 7.3 | Replacements and Replacement Reserve | 126 | ||||||
| Section 7.4 | Punch List and Deferred Maintenance Reserve | 130 | ||||||
| Section 7.5 | Intentionally Omitted | 131 | ||||||
| Section 7.6 | Excess Cash Flow | 131 | ||||||
| Section 7.7 | Operating Reserve | 132 | ||||||
| Section 7.8 | Rollover Reserve | 132 | ||||||
| Section 7.9 | Ground Lease Reserve Fund | 133 | ||||||
| Section 7.10 | Storage Facility Master Lease Reserve | 133 | ||||||
| Section 7.11 | Reserve Funds, Generally | 134 | ||||||
| Section 7.12 | Letter of Credit Rights | 135 | ||||||
| ARTICLE VIII. DEFAULTS | 135 | |||||||
| Section 8.1 | Event of Default | 135 | ||||||
| Section 8.2 | Remedies | 139 | ||||||
| Section 8.3 | Remedies Cumulative; Waivers | 140 | ||||||
| ARTICLE IX. SPECIAL PROVISIONS | 140 | |||||||
| Section 9.1 | Sale of Notes and Securitization | 140 | ||||||
| Section 9.2 | Securitization Indemnification | 143 | ||||||
| Section 9.3 | Exculpation | 146 | ||||||
| Section 9.4 | Intentionally Omitted | 148 | ||||||
| Section 9.5 | Servicer | 148 | ||||||
| ARTICLE X. MISCELLANEOUS | 148 | |||||||
| Section 10.1 | Survival | 148 | ||||||
| Section 10.2 | Lender’s Discretion | 149 | ||||||
| Section 10.3 | Governing Law | 149 | ||||||
| Section 10.4 | Modification, Waiver in Writing | 150 | ||||||
| Section 10.5 | Delay Not a Waiver | 150 | ||||||
| Section 10.6 | Notices | 151 | ||||||
| Section 10.7 | Trial by Jury | 151 | ||||||
| Section 10.8 | Headings | 152 | ||||||
| Section 10.9 | Severability | 152 | ||||||
| Section 10.10 | Preferences | 152 | ||||||
| Section 10.11 | Waiver of Notice | 152 | ||||||
| Section 10.12 | Remedies of Borrower | 152 | ||||||
| Section 10.13 | Expenses; Indemnity | 152 | ||||||
| Section 10.14 | Schedules and Exhibits Incorporated | 154 | ||||||
| Section 10.15 | Offsets, Counterclaims and Defenses | 154 | ||||||
| Section 10.16 | No Joint Venture or Partnership; No Third Party Beneficiaries | 154 | ||||||
| Section 10.17 | Publicity | 154 | ||||||
| Section 10.18 | Waiver of Marshalling of Assets | 155 | ||||||
| Section 10.19 | Waiver of Counterclaim | 155 | ||||||
| Section 10.20 | Conflict; Construction of Documents; Reliance | 155 | ||||||
| Section 10.21 | Brokers and Financial Advisors | 155 | ||||||
| Section 10.22 | Prior Agreements | 155 | ||||||
| Section 10.23 | Joint and Several Liability | 156 | ||||||
| Section 10.24 | Certain Additional Rights of Lender (VCOC) | 156 | ||||||
| Section 10.25 | MERS | 156 | ||||||
ii
SCHEDULES
Schedule I
|
— | Organizational Chart of Borrower | ||
Schedule II
|
— | Development Budget | ||
Schedule III
|
— | Plans and Specifications | ||
Schedule IV
|
— | Construction Schedule | ||
Schedule V
|
— | Rent Roll |
EXHIBITS
Exhibit A
|
Legal Description of the Land | |
Exhibit B
|
Intentionally Omitted | |
Exhibit C
|
Form of Datedown Endorsement | |
Exhibit D
|
Section 22 Affidavit | |
Exhibit E
|
Affirmation of Payment (AIA Form G706) | |
Exhibit F
|
Architect’s Certificate | |
Exhibit G
|
General Contractor’s Certificate | |
Exhibit H
|
Form of Performance Letter | |
Exhibit I
|
Anticipated Cost Report Form | |
Exhibit J
|
Form of Lien Waivers | |
Exhibit K
|
Form of Insolvency Opinion —To Be Delivered Upon Completion | |
Exhibit L
|
Form of Borrower’s Requisition | |
Exhibit M
|
Application and Certificate for Payment (AIA Form G702) |
iii
BUILDING LOAN AGREEMENT
THIS BUILDING LOAN AGREEMENT, dated as of December 10, 2007 (as amended, restated, replaced,
supplemented or otherwise modified from time to time, this “Agreement” or sometimes, this “Building
Loan Agreement”), is made by and between BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York
corporation, having an address at 383 Madison Avenue, New York, New York 10179 (“Lender”) and
P/A-ACADIA PELHAM MANOR, LLC, a Delaware limited liability company, having its principal place of
business at c/o Acadia Realty Trust, 1311 Mamaroneck Avenue — Suite 260, White Plains, New York
10605, as Borrower (“Borrower”).
WITNESSETH :
WHEREAS, Borrower desires to obtain the Building Loan (as hereinafter defined) from Lender;
and
WHEREAS, Lender is willing to make the Building Loan to Borrower, subject to and in accordance
with the terms of this Agreement and the other Loan Documents (as hereinafter defined).
NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the parties hereto hereby
covenant, agree, represent and warrant as follows:
ARTICLE 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:
“ADA” shall mean the Americans with Disabilities Act of 1992, as amended from time to time.
“Additional Insolvency Opinion” shall have the meaning set forth in Section 4.1.30(c).
“Additional Interest Reserve Deposit” shall have the meaning set forth in Section
5.1.28 hereof.
“Additional Mezzanine Borrower” shall have the meaning set forth in Section 5.2.14(g)
hereof.
“Additional Mezzanine Loan” shall have the meaning set forth in Section 5.2.14 hereof.
“Additional Mezzanine Loan Documents” shall have the meaning set forth in Section
5.2.14(f) hereof.
“Administration Fee” shall have the meaning set forth in the Administration Fee Agreement.
“Administration Fee Agreement” shall mean that certain Administration Fee Agreement dated as
of the date hereof between Borrower and Lender.
“Advance” or “Advances” shall mean any disbursement of the proceeds of the Building Loan by
Lender pursuant to the terms of this Agreement.
“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.
“Affiliated Manager” shall mean any Manager in which Borrower or Guarantor has, directly or
indirectly, any legal, beneficial or economic interest.
“Affiliate Fees” shall mean collectively, any development fee, management fee, brokerage fee,
commission, distribution, reimbursement, salary, consideration sum or amount, however
characterized, payable to any Restricted Party with respect to the Property and/or the Project.
“Affirmation of Payment” shall have the meaning as set forth in Section 2.11.5(e).
“Aggregate Debt Service Coverage Ratio” shall have the meaning set forth in Section
5.2.14 hereof.
“Agreement” shall mean this Building Loan Agreement, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“ALTA” shall mean American Land Title Association, or any successor thereto.
“Anchor Tenant” shall mean Home Depot, Inc. or any other tenant occupying 20,000 square feet
or more of space at the Property.
“Annual Budget” shall mean the operating budget, including all planned Capital Expenditures,
for the Property prepared by Borrower in accordance with Section 5.1.11.(e) hereof for the
applicable Fiscal Year or other period.
“Anticipated Costs Report” shall have the meaning as set forth in Section 2.11.5(a).
2
“Approved Annual Budget” shall have the meaning set forth in Section 5.1.11(e) hereof.
“Approved Bank” shall mean a bank or other financial institution which has a minimum long term
unsecured debt rating of at least “AA” by S&P and Fitch and “Aa2” by Moody’s.
“Architect’s Certificate” shall have the meaning as set forth in Section 2.10.10.
“Architect’s Contract” shall mean those certain executed proposals from Borrower’s Architect
to General Contractor dated September 1, 2005 (revised September 21, 2005) and November 3, 2005,
and accepted by Borrower, as the same may be amended from time to time in compliance with the terms
hereof.
“Assignment of Contracts” shall mean that certain Assignment of Contracts, Licenses and
Permits dated as of the date hereof from Borrower, as assignor, to Lender, as assignee.
“Assignment of Leases” shall mean, collectively, the Building Loan Assignment of Leases and
the Project Loan Assignment of Leases.
“Assignment of Management Agreement” shall mean, with respect to each Manager, that certain
Assignment of Management Agreement and Subordination of Management Fees, dated as of the date
hereof, among Lender, Borrower and the applicable Manager, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“Award” shall mean any compensation paid by any Governmental Authority in connection with a
Condemnation in respect of all or any part of the Property.
“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary
petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b)
the filing of an involuntary petition against such Person under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law, in which such Person colludes with, or otherwise
assists such Person, or causes to be solicited petitioning creditors for any involuntary petition
against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or
joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code
or any other Federal or state bankruptcy or insolvency law; (d) such Person consenting to or
acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee,
or examiner for such Person or any portion of the Property; (e) such Person making an assignment
for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency
or inability to pay its debts as they become due.
“Bankruptcy
Code” shall mean Title 11 of the United States Code, 11
U.S.C. §101, et seq., as the same may be amended from time to time, and any successor statute or statutes
and all rules and regulations from time to time promulgated thereunder, and any comparable foreign
laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state
bankruptcy or insolvency law.
3
“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together
with its successors and permitted assigns.
“Borrower’s Architect” shall mean Greenberg Farrow Architects.
“Borrower’s Requisition” shall have the meaning set forth in Section 2.14.1 hereof.
“BSCMI” shall mean Bear Stearns Commercial Mortgage, Inc., a New York corporation, and its
successors in interest.
“Budget Line” shall have the meaning set forth in Section 2.1.14 hereof.
“Building Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement in
the principal amount of up to the Building Loan Amount.
“Building Loan Amount” shall mean Twenty-Three Million Twenty-Six Thousand Nine Hundred Six
and 60/100 Dollars ($23,026,906.60).
“Building Loan Assignment of Leases” shall mean that certain Building Loan Assignment of
Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee.
“Building Loan Budget” shall have the meaning set forth in Section 2.1.14 hereof.
“Building Loan Costs” shall mean all Project-Related Costs (including Hard Costs and Soft
Costs) that are Costs of the Improvements.
“Building Loan Documents” shall mean, collectively, this Agreement, the Building Loan Note,
the Building Loan Mortgage, the Building Loan Assignment of Leases, as well as all other documents
now or hereafter executed and/or delivered with respect to the Building Loan.
“Building Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.2
hereof.
“Building Loan Mortgage” shall mean that certain Building Loan Fee and Leasehold Mortgage,
Assignment of Leases and Rents and Security Agreement dated the date hereof, executed and delivered
by Borrower to Lender as security for the Building Loan and encumbering the Property.
“Building Loan Note” shall mean that certain Building Loan Promissory Note, dated the date
hereof, in the principal amount of up to the Building Loan Amount made by Borrower in favor of
Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
4
“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which
national banks in New York, New York, or the place of business of any Servicer are not open for
business.
“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized
under GAAP (including expenditures for building improvements or major repairs).
“Carrying Costs” shall mean, the sum of the following costs associated with the Property for
any specified period: (a) Taxes, (b) Other Charges, (c) Insurance Premiums and (d) Operating
Expenses.
“Cash” shall mean the legal tender of the United States of America.
“Cash and Cash Equivalents” shall mean any one or a combination of the following: (i) Cash,
and (ii) U.S. Obligations, and (iii) an irrevocable standby Letter of Credit.
“Cash Management Account” shall have the meaning set forth in Section 2.7.2(a) hereof.
“Cash Management Agreement” shall mean that certain Cash Management Agreement, dated as of the
date hereof, by and among Borrower, Manager, Cash Management Bank and Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to time.
“Cash Management Bank” shall mean Wells Fargo Bank, N.A., a national banking association, or
any successor Eligible Institution acting as Agent under the Cash Management Agreement.
“Cash Management Conditions” shall have the meaning set forth in Section 2.7 hereof.
“Cash Trap Event” shall mean the occurrence of any of the following: (a) an Event of Default;
(b) any Bankruptcy Action of Borrower or Mezzanine Borrower; (c) any Bankruptcy Action of Manager;
(d) on or after the last day of the Construction Term, a DSCR Trigger, or (e) on or after the
earlier of that date that an Anchor Tenant opens for business or the last day of the Construction
Term, a Go Dark Trigger .
“Cash Trap Event Cure” shall mean:
(a) if the Cash Trap Event is caused solely by the occurrence of:
(i) clause (a) in the definition of “Cash Trap Event”, a cure of the Event of Default
which gave rise to the Cash Trap Event which is accepted or waived in writing by Lender, in its
sole discretion, prior to Lender exercising any of its rights, to accelerate the Loan, move to
appoint a receiver, or commence a foreclosure action;
5
(ii) clause (c) in the definition of “Cash Trap Event”, either (A) if such Cash Trap
Event is as a result of the filing of an involuntary petition against Manager and not consented to
by Manager, upon the same being discharged, stayed or dismissed within thirty (30) days of such
filing and such filing (after dismissal or discharge), provided, that such dismissal or
discharge in Lender’s reasonable opinion does not adversely impact the Loan or the Property, or (B)
if Borrower replaces the Manager with a Qualified Manager pursuant to a Replacement Management
Agreement approved by Lender;
(iii) a DSCR Trigger Event, if the Debt Service Coverage Ratio is greater than 1.05 to 1:00
based upon the trailing six (6) month period annualized as of two (2) consecutive Debt Service
Coverage Ratio Determination Dates occurring thereafter;
(iv) a Go Dark Trigger, if the relevant Anchor Tenant subsequently is in occupancy, open for
business for one hundred twenty (120) days, and paying full contractual rent with no free rent,
credit or right of offset during the term of its Lease, as evidenced by an estoppel letter from
such Anchor Tenant in form acceptable to Lender.
(b) provided, that, each such Cash Trap Event Cure set forth in this definition shall be
subject to the following conditions, (i) no Event of Default (other than that giving rise to the
Cash Trap Event) shall have occurred and be continuing under this Agreement or any of the other
Loan Documents, (ii) Borrower shall have notified Lender in writing of its election to cure the
respective Cash Trap Event, (iii) a Cash Trap Event Cure under clauses (a)(i) and
(a)(ii) may occur no more than 3 times during the term of the Loan, (iv) Borrower shall
have paid all of Lender’s reasonable expenses incurred in connection with such cure including,
reasonable attorney’s fees and costs; and (v) in no event shall Borrower have the right to “cure” a
Cash Trap Event occurring by reason of a Bankruptcy Action of Borrower or Mezzanine Borrower.
“Cash Trap Period” shall mean each period commencing on the occurrence of a Cash Trap Event
and continuing until the earlier of (a) the Payment Date next occurring following the related Cash
Trap Event Cure, or (b) until payment in full of all principal and interest on the Loan and all
other amounts payable under the Loan Documents in accordance with the terms and provisions of the
Loan Documents.
“Casualty” shall have the meaning set forth in Section 6.2 hereof.
“Casualty Consultant” shall have the meaning set forth in Section 6.2.4(d) hereof.
“Casualty Retainage” shall have the meaning set forth in Section 6.2.4(e) hereof.
“Clearing Account” shall have the meaning set forth in Section 2.7 hereof.
“Clearing Account Agreement” shall have the meaning set forth in Section 2.7.1 hereof.
“Clearing Bank” shall have the meaning set forth in Section 2.7 hereof.
“Closing Date” shall mean the date of this Agreement.
6
“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended
from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
“Completion of the Improvements” shall mean the substantial completion (i.e., completion of
the Project Improvements other than Punch List Items) of the construction and renovation of the
Project Improvements substantially in accordance with all Plans and Specifications, all Legal
Requirements, all Permitted Encumbrances and this Agreement, and that all utilities necessary to
service the Project Improvements have been connected and are in operation, such completion to be
evidenced to the reasonable satisfaction of Lender and the Construction Consultant; together with
the delivery to Lender of:
(i) a permanent or temporary certificate(s) of occupancy for the Project Improvements and
evidence that all other Governmental Approvals have been issued and all other Legal Requirements
have been satisfied so as to allow the Project Improvements to be used and operated in accordance
with the Loan Documents and the Plans and Specifications; and
(ii) AIA Form G704 (Certificate of Substantial Completion) completed and executed by
Borrower’s Architect certifying the substantial completion of the Project Improvements in
accordance with the Plans and Specifications.
“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the
result or in lieu or in anticipation of the exercise of the right of condemnation or eminent
domain, of all or any part of the Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting the Property or any part
thereof.
“Condemnation Proceeds” shall have the meaning set forth in Section 6.2.1 hereof.
“Construction Advance Conditions” shall have the meaning set forth in Section 2.11
hereof.
“Construction Consultant” shall mean Valcon Construction Consultants, Inc., or such other
Person as Lender may designate and engage as a replacement to inspect the Project Improvements and
the Property as construction progresses and consult with and to provide advice to and to render
reports to Lender, which Person may be, at Lender’s option upon notice to Borrower, either an
officer or employee of Lender or consulting architects, engineers or inspectors appointed by
Lender.
“Construction Schedule” shall mean the construction schedule attached hereto as Schedule
IV, broken down by trade, of Borrower’s best good faith estimate of the dates of commencement
and completion of the Project Improvements certified by Borrower to Lender in final form approved
by Lender and the Construction Consultant prior to the Closing.
“Construction Term” shall mean the period commencing on the date hereof and ending on the
first to occur of (i) the Maturity Date, whether by acceleration or otherwise, (ii) the
24th Payment Date, and (iii) the Final Advance.
7
“Contingency” shall mean the contingency Line Item in the Building Loan Budget and/or Project
Loan Budget.
“Contract” shall mean shall mean any agreement (including the General Contractor’s Agreement)
entered into by Borrower or by General Contractor, in which the Contractor or Subcontractor
thereunder agrees to provide services, labor and/or materials in connection with the Project
Improvements. All Contracts shall require that the Contractor or Subcontractor thereunder use
union labor.
“Contractor” shall mean any contractor hired by Borrower, including, without limitation, the
General Contractor (including subsidiaries and affiliates), supplying services, labor and/or
materials in connection with the Project.
“Control” shall mean the possession, directly or indirectly, of the power to direct or cause
the direction of management, policies or activities of a Person, whether through ownership of
voting securities, by contract or otherwise. “Controlled” and “Controlling” shall have correlative
meanings.
“Costs of the Improvement” shall mean those items defined as an “improvement” and/or a “cost
of improvement” under Section 2 of Article 1 the Lien Law.
“Covered Disclosure Information” shall have the meaning set forth in Section 9.2(b)
hereof.
“Debt” shall mean the outstanding principal amount of the Building Loan set forth in, and
evidenced by, this Agreement, the Building Loan Documents and the Building Loan Note, together with
all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Building
Loan under the Building Loan Note, this Agreement, the Building Loan Mortgage or any other Building
Loan Document.
“Debt Service” shall mean, with respect to any particular period of time, the aggregate
scheduled principal and interest payments due under this Building Loan Agreement and the Building
Loan Note.
“Debt Service Coverage Ratio” shall mean a ratio for the applicable period in which:
| (a) | the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, adjusted for a vacancy rate equal to the greater of the actual vacancy rate, the market vacancy rate and an assumed vacancy rate equal to five percent (5%), without deduction for (i) actual management fees incurred in connection with the operation of the Property less (A) management fees equal to the greater of (1) assumed management fees of four percent (4%) of Gross Income from Operations or (2) the actual management fees incurred, (B) Replacement Reserve Fund contributions equal to $47,544 per annum; and |
8
(C) Rollover Reserve Fund contributions equal to $187,744 per annum, and
| (b) | the denominator is the Total Debt Service for such period assuming a thirty (30) year amortization schedule. |
“Debt Service Coverage Ratio Determination Date” shall mean the earlier of the Required
Completion Date and the date of the Final Advance and the first day of each calendar month
thereafter.
“Default” shall mean the occurrence of any event hereunder or under any other Loan Document
which, but for the giving of notice or passage of time, or both, would be an Event of Default.
“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of
(a) the maximum rate permitted by applicable law or (b) five percent (5%) above the Interest Rate.
“Defeasance Date” shall have the meaning set forth in Section 2.5.1(a)(i) hereof.
“Defeasance Deposit” shall mean an amount equal to the remaining principal amount of the Note,
the Defeasance Payment Amount, any costs and expenses incurred or to be incurred in the purchase of
U.S. Obligations necessary to meet the Scheduled Defeasance Payments and any revenue, documentary
stamp or intangible taxes or any other tax or charge due in connection with the transfer of the
Note or otherwise required to accomplish the agreements of Section 2.5 hereof (including,
without limitation, any fees and expenses of accountants, attorneys and the Rating Agencies
incurred in connection therewith).
“Defeasance Event” shall have the meaning set forth in Section 2.5.1(a) hereof.
“Defeasance Expiration Date” shall mean the date that is two (2) years from the “startup day”
within the meaning of Section 860G(a)(9) of the Code for the REMIC Trust.
“Defeasance Payment Amount” shall mean the amount (if any) which, when added to the remaining
principal amount of the Note, will be sufficient to purchase U.S. Obligations providing the
required Scheduled Defeasance Payments.
“Deferred Maintenance Condition” shall have the meaning set forth in Section 7.4.1.
“Development Budget” shall have the meaning set forth in Section 2.1.14 hereof.
“Disbursement Schedule” shall mean the schedule of the amounts of Advances hereunder and
Project Loan Advances under the Project Loan anticipated to be requisitioned by Borrower each month
during the term of the Loan, attached hereto as part of the Development Budget and in final form
approved by Lender and the Construction Consultant prior to the Closing Date.
9
“Disclosure Document” shall mean a prospectus, prospectus supplement, private placement
memorandum, or similar offering memorandum or offering circular, or such other information
reasonably requested by Lender, in each case in preliminary or final form, used to offer Securities
in connection with a Securitization.
“Dollars” or “$” shall mean lawful money of the United States of America.
“Draw Request” shall mean, with respect to each Advance, Borrower’s Requisition for such
Advance, along with such other documents required by this Agreement to be furnished to Lender as a
condition to such Advance.
“DSCR Trigger Event” shall mean, that as of any Debt Service Coverage Ratio Determination
Date, the Debt Service Coverage Ratio as determined by Lender based on the trailing six (6) month
period (annualized) immediately preceding the date of such determination is less than 1.00 to 1.00.
“Earn Out Advance” shall have the meaning set forth in Section 2.12.2 hereof.
“Eligible Account” shall mean a separate and identifiable account from all other funds held by
the holding institution that is either (a) an account or accounts maintained with a federal or
state-chartered depository institution or trust company which complies with the definition of
Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or
state chartered depository institution or trust company acting in its fiduciary capacity which, in
the case of a state chartered depository institution or trust company, is subject to regulations
substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus
of at least Fifty Million and 00/100 Dollars ($50,000,000.00) and subject to supervision or
examination by federal and state authority. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.
“Eligible Institution” shall mean a depository institution or trust company, the short term
unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by
Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or
less (or, in the case of accounts in which funds are held for more than thirty (30) days, the
long-term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by
Moody’s).
“Embargoed Person” shall have the meaning set forth in Section 5.1.42 hereof.
“Environmental Engineer” shall mean such environmental engineering or similar inspection firms
approved by Lender.
“Environmental Indemnity” shall mean that certain Environmental Indemnification Agreement,
dated as of the date hereof, executed by Borrower and Guarantor in connection with the Loan for the
benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Equipment” shall have the meaning as set forth in the granting clause of the Building Loan
Mortgage.
10
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations promulgated and the rulings issued thereunder.
“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.
“Excess Cash Flow” shall have the meaning set forth in Section 3.4(i) of the Cash Management
Agreement.
“Excess Cash Flow Funds” shall have the meaning set forth in Section 7.6 hereof.
“Excess Cash Flow Reserve” shall have the meaning set forth in Section 7.6 hereof.
“Exchange Act” shall have the meaning set forth in Section 9.2(a) hereof.
“Extraordinary Expense” shall have the meaning set forth in Section 5.1.11(f) hereof.
“Final Advance” shall have the meaning set forth in Section 2.12.1.
“Final Project Loan Advance” shall mean the Final Advance as defined in the Project Loan
Agreement.
“Final Project Report” shall mean the report to be prepared by the Construction Consultant of
its review of the Development Budget, Building Loan Budget, Project Loan Budget, the Plans and
Specifications, the Construction Schedule in final form, the Disbursement Schedule, all in final
form, the General Contractor’s Agreement, the Contracts, the Major Contracts and such other
documents and information reasonably required by the Construction Consultant.
“FIRREA” shall mean the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on
December 31 during each year of the term of the Loan.
“Fitch” shall mean Fitch, Inc.
“Fixtures” shall have the meaning set forth in the Mortgage.
“Force Majeure” shall mean, with respect to the obligations of any Person, actual delay beyond
the reasonable control of such Person, which is due to any of the following (a) natural disaster,
fire or other casualty, earthquake, flood, explosion, abnormally inclement weather for the season
in question (as reported by an appropriate authority) or any other act of God, (b) declared or
undeclared war, acts of domestic or international terrorism, riot, mob violence, insurrection or
sabotage, (c) the inability to procure labor, equipment, facilities, energy,
11
materials or supplies, the failure of transportation, any other labor disturbance, strikes,
lockouts or actions of labor unions, in each such case, so long as such cause is not within the
reasonable control of such Person, (d) condemnation, temporary restraining orders or injunctions,
changes after the date hereof in the requirements or interpretations of relevant laws, in each such
case, so long as such cause is not within the reasonable control of such Person, or (e) any other
cause not within the reasonable control of such Person; provided that, with respect to any
of the circumstances described in the foregoing clauses (a) through (e) inclusive:
(i) for the purposes of this Agreement, any period of Force Majeure shall apply only to such
person’s performance of the obligations necessarily affected by such circumstance and shall
continue only so long as such person is continuously and diligently using all reasonable efforts to
minimize the effect and duration thereof; and (ii) notwithstanding the foregoing, Force Majeure
shall not include (A) the unavailability or insufficiency of funds as a result of the insolvency of
such Person or any of its Affiliates, (B) any breach of contract or default by Borrower’s
Architect, the General Contractor or any Major Contractor under their respective contracts and
agreements concerning the Project Improvements.
“GAAP” shall mean generally accepted accounting principles in the United States of America as
of the date of the applicable financial report.
“General Contractor” shall mean ACRS, Inc. or any other general contractor or construction
manager, as applicable, approved by Lender and the Construction Consultant in accordance with the
terms of this Agreement.
“General Contractor’s Agreement” shall have the meaning set forth in Section 2.10.9.
“General Contractor’s Certificate” shall have the meaning set forth in Section
2.10.10.
“Go Dark Trigger” shall mean that an Anchor Tenant Goes Dark.
“Goes Dark” shall mean with respect to any tenant, that the relevant tenant ceases to
continuously occupy and operate is business at its premises on the Property in a manner similar to
which it operates its business as of the date that such tenant opens for business at the Property.
“Governmental Approvals” shall mean all approvals, consents, waivers, orders, acknowledgments,
authorizations, permits and licenses required under applicable Legal Requirements to be obtained
from any Governmental Authority for the performance of the demolition work and construction of the
Project Improvements and/or the use, occupancy and operation of the Project Improvements before the
commencement, during and following completion of construction and Building Loan, as the context
requires, including, without limitation, all land use, building, subdivision, zoning and similar
ordinances and regulations promulgated by any Governmental Authority.
“Governmental Authority” shall mean any court, board, agency, commission, office or other
authority of any nature whatsoever for any governmental unit (foreign, federal, state, county,
district, municipal, city or otherwise) whether now or hereafter in existence.
12
“Gross Income from Operations” shall mean, for any period, all sustainable income, computed in
accordance with GAAP, derived from the ownership and operation of the Property from whatever source
during such period, including, but not limited to, Rents under the Storage Facility Master
Lease and Rents from tenants in occupancy, open for business and paying full contractual rent
without right of offset or credit, utility charges, escalations, forfeited security deposits,
interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions
or credits, business interruption or other loss of income or rental insurance proceeds or other
required pass-throughs and interest on Reserves, if any, but excluding Rents from
month-to-month tenants, or tenants that are included in any Bankruptcy Action, sales, use and
occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental
Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment,
Insurance Proceeds (other than business interruption or other loss of income or rental insurance),
Awards, unforfeited security deposits, utility and other similar deposits and any disbursements to
Borrower from the Reserve Funds, if any.
“Ground Lease” shall mean that certain Ground Lease dated as of October 1, 2004 between
Ground Lessor as lessor and Borrower, as lessee, as the same has been amended and may hereafter be
amended, restated, replaced, supplemented or otherwise modified from time to time in accordance
with the terms hereof.
“Ground Lease Reserve Account” shall have the meaning set forth in Section 7.9.1
hereof.
“Ground Lease Reserve Fund” shall have the meaning set forth in Section 7.9.1 hereof.
“Ground Lessor” shall mean Rusciano & Son Corp. and Secor Lane Corp., and any successor lessor
under the Ground Lease.
“Ground Rent” shall have the meaning set forth in Section 7.9.1 hereof.
“Guarantor” shall mean Acadia Strategic Opportunity Fund II, LLC, a Delaware limited liability
company.
“Guaranty of Completion” shall mean that certain Guaranty of Completion, dated as of the date
hereof, executed and delivered by Guarantor in connection with the Loan to and for the benefit of
Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
“Guaranty of Recourse Carveouts” shall mean that certain Guaranty of Recourse Carveouts, dated
as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for
the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Hard Costs” shall mean those Building Loan Costs which are for labor, materials, equipment
and fixtures.
“Home Depot” shall have the meaning set forth in Section 2.11.15 hereof.
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“Home Depot Estoppel Certificate” shall have the meaning set forth in Section 2.10.19
hereof.
“Home Depot Lease” shall have the meaning set forth in Section 2.11.15 hereof.
“Improvements” shall have the meaning set forth in the granting clause of the Mortgage
“Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such
date of (a) all indebtedness or liability of such Person (including, without limitation, amounts
for borrowed money and indebtedness in the form of mezzanine debt or preferred equity); (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations
for the deferred purchase price of property or services (including trade obligations); (d)
obligations under letters of credit; (e) obligations under acceptance facilities; (f) all
guaranties, endorsements (other than for collection or deposit in the ordinary course of business)
and other contingent obligations to purchase, to provide funds for payment, to supply funds, to
invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations
secured by any Liens, whether or not the obligations have been assumed (other than the Permitted
Encumbrances).
“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(a) hereof.
“Indemnified Persons” shall have the meaning set forth in Section 9.2(b) hereof.
“Indemnifying Person” shall mean Borrower and Guarantor.
“Independent Director” shall mean a director of a corporation or a limited liability company
that is a Special Purpose Entity and “Independent Manager” shall mean a manager of a limited
liability company that is a Special Purpose Entity, in either case, who is not at the time of
initial appointment, or at any time while serving as an Independent Director or Independent
Manager, as applicable, and has not been at any time during the preceding five (5) years: (a) a
stockholder, director (with the exception of serving as the Independent Director or Independent
Manager of a Special Purpose Entity), officer, employee, partner, member, attorney or counsel of
Guarantor, Borrower, or any Affiliate of any of them (unless such natural person is an Independent
Director or Independent Manager provided by a nationally recognized company that provides
professional independent managers and which also provides other corporate services in the ordinary
course of business, in which case such Person may receive reasonable fees for servicing as
Independent Director or Independent Manager of a Special Purpose Entity); (b) a creditor, customer,
supplier or other Person who derives any of its purchases or revenues from its activities with
Guarantor, Borrower or any Affiliate of any of them; (c) a Person controlling or under common
control with any such stockholder, director, officer, employee, partner, member, creditor,
customer, supplier or other Person; or (d) a member of the immediate family of any such
stockholder, director, officer, employee, partner, member, creditor, customer, supplier or other
person. As used in this definition, the term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of management, policies or activities of
a Person, whether through ownership of voting securities, by contract or otherwise.
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“Initial Advance” shall have the meaning set forth in Section 2.10 hereof.
“Initial Advance Conditions” shall have the meaning set forth in Section 2.10 hereof.
“Initial Interest Reserve Deposit” shall have the meaning set forth in Section 7.2.1.
“Initial Tax and Insurance Escrow Deposit” shall have the meaning set forth in Section
7.1 hereof.
“Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated the date
hereof delivered by Wachtel & Masyr, LLP in connection with the Loan.
“Insurance Premiums” shall have the meaning set forth in Section 6.1.1(e) hereof.
“Insurance Proceeds” shall have the meaning set forth in Section 6.2.1.
“Intellectual Property” shall have the meaning set forth in Section 4.1.44 hereof.
“Interest Period” shall mean: (a) the period commencing on the Closing Date and ending on
the last day of the month in which the Closing Date occurs, both dates inclusive; and (b) the
period commencing on and including the first day of each calendar month thereafter during the term
of Loan and ending and including the last day of such calendar month.
“Interest Rate” shall mean seven and one hundred eighty-two one thousandths percent (7.182%),
provided, however, in the event that (a) on or before June 1, 2009, the Property shall have
achieved a Debt Service Coverage Ratio as determined by Lender of 1.15 to 1.00, and Borrower
delivers to Lender a MAI appraisal performed, at Borrower’s sole cost and expense, by an appraiser
approved by Lender and dated, or updated, to a date within 30 days of such date made in compliance
with FIRREA and reasonably satisfactory to Lender in all respects; the appraisal value shall be
subject to review and confirmation and updating as to valuation by Lender’s internal appraisal
staff, whose decision shall be final absent manifest error showing that loan-to-value ratio for the
Property is no greater than 80% assuming a fully advanced Loan, Lender shall, upon Borrower’s
written request, reduce the Interest Rate to a per annum rate equal to five and ninety-three one
hundredth percent (5.93%), commencing on the first Payment Date after Borrower’s request, and (b)
on or before June 1, 2010, the Property shall have achieved a Debt Service Coverage Ratio as
determined by Lender of 1.15 to 1.00, and Borrower delivers to Lender a MAI appraisal performed, at
Borrower’s sole cost and expense, by an appraiser approved by Lender and dated, or updated, to a
date within 30 days of such date made in compliance with FIRREA and reasonably satisfactory to
Lender in all respects; the appraisal value shall be subject to review and confirmation and
updating as to valuation by Lender’s internal appraisal staff, whose decision shall be final absent
manifest error showing that loan-to-value ratio for the Property is no greater than 80% assuming a
fully advanced Loan, Lender shall, upon Borrower’s written request, reduce the Interest Rate to a
per annum rate equal to five and ninety-eight one hundredth percent (5.98%), commencing on the
first Payment Date after Borrower’s request. Any reduction in the Interest Rate as set forth above
shall be effective
15
commencing on the first Payment Date after Borrower’s request for such reduction and
satisfaction of the conditions set forth above and no reduction in the Interest Rate shall be
retroactive. In the event that Borrower fails to satisfy the conditions for a reduction of the
Interest Rate within the time periods set forth above, time being of the essence, Borrower shall
have no further right to obtain a reduction in the Interest Rate. Notwithstanding anything to
the contrary contained herein, Lender shall have the right, in its sole discretion, at any time
prior to a Securitization of the Loan, to increase the Interest Rate by up to two-tenths of one
percent (0.20%).
“Interest Reserve Account” shall have the meaning set forth in Section 7.2.1.
“Interest Reserve Deposit” shall have the meaning set forth in Section 7.2.1.
“Interest Reserve Fund” shall have the meaning set forth in Section 7.2.1.
“Interest Reserve Line Item” shall mean the interest reserve Line Item of the Project Loan
Budget.
“Land” shall mean the land described on Exhibit “A” attached hereto.
“Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any
Person is granted a possessory interest in, or right to use or occupy all or any portion of any
space in the Property, and every modification, amendment or other agreement relating to such lease,
sublease, subsublease, or other agreement entered into in connection with such lease, sublease,
subsublease, or other agreement and every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the other party thereto.
“Legal Requirements” shall mean, all federal, state, county, municipal and other governmental
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting the 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 the Property or any part thereof, including,
without limitation, any which may (a) require repairs, modifications or alterations in or to the
Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.
“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with
its successors and assigns.
“Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean sight draft
letter of credit, as the same may be replaced, split, substituted, modified, amended, supplemented,
assigned or otherwise restated from time to time, (either an evergreen letter of credit or a letter
of credit which does not expire until at least two (2) Business Days after the Maturity Date or
such earlier date as such Letter of Credit is no longer required pursuant to the
16
terms of this Agreement) in favor of Lender and entitling Lender to draw thereon based solely
on a statement purportedly executed by an officer of Lender stating that it has the right to draw
thereon, and issued by a domestic Approved Bank or the U.S. agency or branch of a foreign Approved
Bank, or if there are no domestic Approved Banks or U.S. agencies or branches of a foreign Approved
Bank then issuing letters of credit, then such letter of credit may be issued by a domestic bank,
the long term unsecured debt rating of which is the highest such rating then given by the Rating
Agency or Rating Agencies, as applicable, to a domestic commercial bank.
“Liabilities” shall have the meaning set forth in Section 9.2(b) hereof.
“Lien” shall mean, any mortgage, deed of trust, lien, pledge, hypothecation, assignment,
security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, the
Property, any portion thereof or any interest therein, including, without limitation, any
conditional sale or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing statement, and
mechanic’s, materialmen’s and other similar liens and encumbrances.
“Lien Law” shall mean the Lien Law of the State of New York.
“Line Item” shall have the meaning set forth in Section 2.1.14 hereof.
“Liquidity” means unrestricted and unencumbered Cash and Cash Equivalents acceptable to
Lender.
“Loan” shall mean collectively, the Building Loan and the Project Loan.
“Loan Agreement” shall mean collectively, this Building Loan Agreement, and the Project Loan
Agreement.
“Loan Documents” shall mean collectively, the Building Loan Documents and the Project Loan
Documents, the Environmental Indemnity, the Guaranty of Completion, the Guaranty of Recourse
Carveouts, the Cash Management Agreement, the Clearing Account Agreement, the Assignment of
Contracts, the Administration Fee Agreement, the Rate Lock Agreement, and all other documents
executed and/or delivered in connection with the Loan.
“Loan-to-Cost Ratio” shall mean, as of any date, the ratio of (i) the Total Loan Amount to
(ii) the aggregate amount of Project-Related Costs (excluding any Affiliate Fees) actually paid as
of such date plus Project-Related Costs to be paid with the proceeds of the Advance(s)
being requested by Borrower on such date hereunder and under the Project Loan Agreement.
“Major Contractor” shall mean any contractor hired by Borrower, including, without limitation,
the General Contractor (including subsidiaries and affiliates), supplying services, labor and/or
materials in connection with the Project which is for an aggregate contract price equal to or
greater than $500,000, whether pursuant to one contract or agreement or multiple contracts or
agreements, after taking into account all change orders, or which relates to major project elements
such as steel, concrete, HVAC systems, windows, doors and other similar items.
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“Major Contracts” shall mean any Contract with a Major Contractor or Major Subcontractor.
“Major Subcontractor” shall mean any subcontractor supplying services, labor and/or materials
in connection with the Project which is for an aggregate contract price equal to or greater than
$500,000, whether pursuant to one contract or agreement or multiple contracts or agreements, after
taking into account all change orders, or which relates major project elements such as steel,
concrete, HVAC systems, windows, doors and other similar items.
“Management Agreement” shall mean, collectively, the Management Agreement dated as of August
23, 2007 by and between Borrower and Acadia—P/A Management Services, LLC and the Management
Agreement dated as of December 4, 2007 by and between Borrower and Post Management, L.L.C. pursuant
to which Manager is to provide management and other services with respect to the Property, or, if
the context requires, the Replacement Management Agreement.
“Manager” shall mean Acadia—P/A Management Services, LLC, a Delaware limited liability
company, and Post Management, L.L.C., a Delaware limited liability company, or, if the context
requires, a Qualified Manager who is managing the Property in accordance with the terms and
provisions of this Agreement pursuant to a Replacement Management Agreement.
“Material Action” means, with respect to any Person, to file any insolvency or reorganization
case or proceeding, to institute proceedings to have such Person be adjudicated bankrupt or
insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under
any law relating to relief from debts or the protection of debtors, to consent to the filing or
institution of bankruptcy or insolvency proceedings against such Person, to file a petition
seeking, or consent to, reorganization or relief with respect to such Person under any applicable
federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or
for such Person or a substantial part of its property, to make any assignment for the benefit of
creditors of such Person, to admit in writing such Person’s inability to pay its debts generally as
they become due, or to take action in furtherance of any of the foregoing.
“Maturity Date” shall mean January 1, 2020 or such earlier date on which the final payment of
principal of the Building Loan Note becomes due and payable as therein or herein provided, whether
at such stated maturity date, by declaration of acceleration, or otherwise.
“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any
time or from time to time may be contracted for, taken, reserved, charged or received on the
indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under
the laws of such state or states whose laws are held by any court of competent jurisdiction to
govern the interest rate provisions of the Loan.
“MERS” shall have the meaning set forth in Section 10.25 hereof.
“Mezzanine Borrower” shall have the meaning set forth in Section 9.1.
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“Mezzanine Loan Documents” shall have the meaning set forth in Section 9.1.
“Monthly Debt Service Payment Amount” shall mean (a) an amount equal to interest only on the
outstanding principal balance of the Building Loan, calculated in accordance with Section
2.2 hereof, for each Payment Date commencing with the Payment Date occurring in February, 2008
through and including the Payment Date occurring in January, 2013, and (b) a constant monthly
payment of $[___]156,023.44 commencing with the Payment Date occurring in February,
2013 and on each Payment Date thereafter, provided, however, that in the event that the Interest
Rate is modified in accordance with the provisions of the definition of “Interest Rate,” the
Monthly Debt Service Payment Amount shall be adjusted by Lender based upon the modified Interest
Rate and a thirty (30) year amortization schedule, Lender’s determination of the Monthly Debt
Service Payment Amount being binding absent manifest error.
“Moody’s” shall mean Moody’s Investors Service, Inc.
“Mortgage” shall mean, collectively, the Building Loan Mortgage and the Project Loan Mortgage,
as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Net Cash Flow” shall mean, for any period, the amount obtained by subtracting Operating
Expenses and Capital Expenditures for such period from Gross Income from Operations for such
period.
“Net Operating Income” shall mean the amount obtained by subtracting Operating Expenses from
Gross Income from Operations.
“Net Proceeds” shall have the meaning set forth in Section 6.2.1 hereof.
“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.2.4(g) hereof.
“Net Worth” means with respect to any Person for any period, assets less liabilities of such
Person, determined in accordance with GAAP.
“Note” shall mean, collectively, the Building Loan Note and the Project Loan Note.
“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower that is
signed by an authorized officer of the general partner or managing member of Borrower.
“Open Period Date” shall have the meaning set forth in Section 2.4.1 hereof.
“Operating Expenses” shall mean the total of all expenditures, computed in accordance with
GAAP, of whatever kind relating to the operation, maintenance and management of the Property that
are incurred on a regular monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance, license fees, property taxes and assessments,
advertising expenses, management fees, payroll and related
19
taxes, computer processing charges, operational equipment or other lease payments as approved
by Lender, and other similar costs, but excluding depreciation, Debt Service, Capital Expenditures
and contributions to the Reserve Funds.
“Operating Reserve Account” shall have the meaning set forth in Section 7.7.1 hereof.
“Operating Reserve Deposit” shall have the meaning set forth in Section 7.7.1 hereof.
“Operating Reserve Funds” shall have the meaning set forth in Section 7.7.1 hereof.
“Other Charges” shall mean all 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 Property, now or hereafter levied or assessed or imposed
against the Property or any part thereof.
“Other Debt” shall mean the “Debt” as defined in both the Project Loan Agreement, and the
Mezzanine Loan Documents, if applicable.
“Other Design Professionals” shall mean all architects (other than Borrower’s Architect) and
engineers engaged by Borrower and/or Borrower’s agent to work on the Project Improvements.
“Other Obligations” shall have the meaning as set forth in the Mortgage.
“Payment Date” shall mean February 1, 2008, and the 1st day of every month
thereafter during the term of the Loan until and including the Maturity Date or, if such day is not
a Business Day, the immediately preceding Business Day.
“Performance Letter” shall have the meaning set forth in Section 2.10.11(a) hereof.
“Permitted Encumbrances” shall mean, with respect to the 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 Policy, (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent, unless and to the extent being contested by Borrower in
compliance with the terms of this Agreement, and (d) such other title and survey exceptions as
Lender has approved or may approve in writing in Lender’s sole discretion, which Permitted
Encumbrances in the aggregate do not materially adversely affect the value or use of the Property
or Borrower’s ability to complete the Project or repay the Loan.
“Permitted Investments” shall have the meaning set forth in the Cash Management Agreement.
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“Permitted Mezzanine Lender” shall have the meaning set forth in Section 5.2.14
hereof.
“Permitted Release Date” shall mean the earlier of (i) the Defeasance Expiration Date or (ii)
the date that is the fourth (4th) anniversary of the Completion of the Improvements.
“Permitted Transfer” means any of the following:
(a) any transfer, directly as a result of the death of a natural Person, of stock, membership
interests, partnership interests or other ownership interests in any Restricted Party previously
held by the decedent in question to the spouse or any lineal descendant of such individual, or to a
trust for the benefit of any one or more of such individual, spouse or lineal descendant, so long
as Borrower delivers notice to Lender as soon as practicable thereafter and that such Restricted
Party is promptly reconstituted, if applicable, following the death of such member, partner or
shareholder and there is no change in Control of such Restricted Party as a result of such
transfer;
(b) any transfer, directly as a result of the legal incapacity of a natural person, of stock,
membership interests, partnership interests or other ownership interests previously held by the
such natural Person to the spouse or any lineal descendant of such individual, or to a trust for
the benefit of any one or more of such individual, spouse or lineal descendant, so long as Borrower
delivers notice to Lender as soon as practicable thereafter and that such Restricted Party is
promptly reconstituted, if applicable, following the death of such member, partner or shareholder
and there is no change in Control of such Restricted Party as a result of such transfer,
(c) transfers for estate planning purposes of a natural Person’s stock, membership interests,
partnership interests or other ownership interests in a Restricted Party by the current partner(s),
shareholder(s) or member(s), as applicable, to the spouse or any lineal descendant of such
individual, or to a trust for the benefit of any one or more of such individual, spouse or lineal
descendant, so long as such Restricted Party is reconstituted, if required, following such transfer
and there is no change in Control of such Restricted Party as a result of such transfer;
(d) transfers permitted pursuant to Section 5.2.11(d) of this Agreement;
(e) the sale, transfer, or issuance of stock in Acadia Realty Trust, in the ordinary course
of business, provided such stock is listed on the NYSE or other nationally recognized stock
exchange; and
(f) a Transfer by P/A Associates, LLC of 100% of its membership interest in Acadia—P/A
Holding Company, LLC to Acadia Strategic Opportunity Fund II, LLC (“Fund II”) or an
Affiliate of Fund II Controlled by Acadia Realty Trust.
“Person” shall mean any individual, corporation, partnership, joint venture, limited liability
company, estate, trust, unincorporated association, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.
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“Personal Property” shall have the meaning set forth in the granting clause of the Mortgage.
“Physical Conditions Report” shall mean, a structural engineering report prepared by a company
satisfactory to Lender regarding the physical condition of the Property, satisfactory in form and
substance to Lender in its sole discretion, which report shall, among other things, confirm that
the Property and its use complies, in all material respects, with all applicable Legal Requirements
(including, without limitation, zoning, subdivision and building laws).
“Plans and Specifications” shall mean the final plans and specifications for the performance
of the Project Improvements prepared by Borrower’s Architect and the Other Design Professionals
listed on Schedule III attached hereto and approved by Lender, the Construction Consultant,
as the same may be amended and supplemented from time to time in accordance with the terms of this
Agreement.
“Policies” shall have the meaning specified in Section 6.1.1(e) hereof.
“Policy” shall have the meaning specified in Section 6.1.1(e) hereof.
“Prepayment Date” shall have the meaning set forth in Section 2.4.4 hereof.
“Prepayment Rate” shall mean the bond equivalent yield (in the secondary market) on the United
States Treasury Security that as of the Prepayment Rate Determination Date has a remaining term to
maturity closest to, but not exceeding, the remaining term to the Maturity Date as most recently
published in the “Treasury Bonds, Notes and Bills” section in The Wall Street Journal as of such
Prepayment Rate Determination Date. If more than one issue of United States Treasury Securities
has the same remaining term to the Maturity Date, the “Prepayment Rate” shall be the yield on such
United States Treasury Security most recently issued as of the Prepayment Rate Determination Date.
The rate so published shall control absent manifest error. If the publication of the Prepayment
Rate in The Wall Street Journal is discontinued, Lender shall determine the Prepayment Rate on the
basis of “Statistical Release H.15 (519), Selected Interest Rates,” or any successor publication,
published by the Board of Governors of the Federal Reserve System, or on the basis of such other
publication or statistical guide as Lender may reasonably select.
“Prepayment Rate Determination Date” shall mean the date which is five (5) Business Days prior
to the date that such prepayment shall be applied in accordance with the terms and provisions of
Section 2.4.1 hereof.
“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power
Act, 50 U.S.C. §1701 et. seq. and (d) all other Legal Requirements relating to money laundering or
terrorism.
22
“Principal” shall mean the Special Purpose Entity that is the general partner of Borrower, if
Borrower is a limited partnership, or member of Borrower, if Borrower is a limited liability
company.
“Proceeds” shall mean Insurance Proceeds or Condemnation Proceeds.
“Project” shall mean the development and construction of Project Improvements, all in
accordance with the Plans and Specifications, all Legal Requirements, this Agreement and the other
Loan Documents.
“Project Improvements” shall mean the demolition of all existing improvements located on the
Land and the development and construction thereon by Borrower of a multi-anchor community shopping
center with a gross leaseable area of approximately 228,862 square feet of floor area and
self-storage space of approximately 88,127 square feet of floor area, substantially as depicted on
the Plans and Specifications, as the same will be developed, renovated and constructed in
accordance with the Plans and Specifications and all Legal Requirements.
“Project Loan” shall mean the loan being made by Lender to Borrower pursuant to the Project
Loan Agreement in the principal amount of up to the Project Loan Amount.
“Project Loan Advance” shall mean “Advance” as such term is defined in the Project Loan
Agreement.
“Project Loan Agreement” shall mean that certain Project Loan Agreement dated the date hereof
among, Lender and Borrower.
“Project Loan Amount” shall mean Twelve Million Six Hundred Thirty-Seven Thousand Ninety-Three
and 40/100 Dollars ($12,637,093.40).
“Project Loan Assignment of Leases” shall mean that certain Project Loan Assignment of Leases
and Rents, dated the date hereof, from Borrower, as assignor, to Lender, as assignee.
“Project Loan Budget” shall have the meaning set forth in Section 2.1.14.
“Project Loan Costs” shall mean all Projected Related Costs that are not Costs of the
Improvements.
“Project Loan Documents” shall have the meaning as set forth in the Project Loan Agreement.
“Project Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.1
hereof.
“Project Loan Mortgage” shall have the meaning as set forth in the Project Loan Agreement.
23
“Project Loan Note” shall have the meaning as set forth in the Project Loan Agreement.
“Project-Related Costs” shall mean all direct and indirect costs and expenses of acquiring the
Property, demolishing the existing improvements on the Property, designing, inspecting, renovating,
constructing and developing the Project Improvements, including, without limitation, Hard Costs and
Soft Costs, along with all Carrying Costs, Debt Service, financing charges, Operating Expense and
other costs and expenses associated with the Property during the Construction Term.
“Property” shall mean the Land, all Improvements now or hereafter located thereon, the
easements and other rights, licenses and privileges and appurtenance to the Land, and all personal
property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to
such property and Improvements, as more particularly described in the granting clauses of the
Mortgage and referred to therein as the “Mortgaged Property”.
“Provided Information” shall mean any and all financial and other information provided at any
time prepared by, or on behalf of, any Indemnifying Person with respect to the Property, Borrower,
Principal, Guarantor and/or Manager, including, without limitation, any financial data or financial
statements required under Section 5.1.11.
“Punch List and Deferred Maintenance Reserve Deposit” shall have the meaning set forth in
Section 7.4.1.
“Punch List and Deferred Maintenance Reserve Funds” shall have the meaning set forth in
Section 7.4.1.
“Punch List Items” shall mean, collectively, any Punch List items identified by the
Construction Consultant and other minor or insubstantial details of construction, decoration,
mechanical adjustment or installation, which do not hinder or impede the use, operation, or
maintenance of the Property or the ability to obtain a permanent certificate of occupancy with
respect thereto.
“Qualified Manager” shall mean in the reasonable judgment of Lender, a reputable and
experienced management organization (which may be an Affiliate of Borrower) possessing experience
in managing properties similar in size, scope, use and value as the Property, provided, that
Borrower shall have obtained (i) prior written confirmation from the applicable Rating Agencies
that management of the Property by such Person will not cause a downgrade, withdrawal or
qualification of the then current ratings of the Securities or any class thereof and (ii) if such
Person is an Affiliate of Borrower, an Additional Insolvency Opinion.
“Rate Lock Agreement” shall mean that certain Extended Rate Lock Agreement-Application Stage
dated May 9, 2007 between Borrower and Lender, as amended by that certain First Amendment to
Extended Rate Lock Agreement-Application Stage dated as of the date hereof.
“Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally
recognized statistical rating agency which has been approved by Lender.
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“Related Entities” shall have the meaning set forth in Section 5.2.11(e).
“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code that holds any portion of the Note.
“Rentable Space Percentage” shall have the meaning set forth in Section 6.2.4(a)
(B)(iii).
“Rents” shall mean, all rents (including percentage rents), rent equivalents, moneys payable
as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all
oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, all other amounts payable as rent under any Lease
or other agreement relating to the Property, including, without limitation, charges for
electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy,
telecommunication, telephone, utility or similar items or time use charges, HVAC equipment charges,
sprinkler charges, escalation charges, license fees, maintenance fees, charges for Taxes, Operating
Expenses or other reimbursables payable to Borrower (or to the Manager, for the account of
Borrower) under any Lease, and other consideration of whatever form or nature received by or paid
to or for the account of or benefit of Borrower or its agents or employees from any and all sources
arising from or attributable to the Property, and proceeds, if any, from business interruption or
other loss of income or insurance.
“Replacements” shall have the meaning set forth in Section 7.3.1.
“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management
agreement with a Qualified Manager substantially in the same form and substance as the Management
Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement
shall be reasonably acceptable to Lender in form and substance, provided, with respect to this
subclause (ii), Lender, at its option, may require that Borrower shall have obtained prior
written confirmation from the applicable Rating Agencies that such management agreement will not
cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any
class thereof and (b) an assignment of management agreement and subordination of management fees
substantially in the form then used by Lender (or of such other form and substance reasonably
acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at
Borrower’s expense.
“Replacement Reserve Account” shall have the meaning set forth in Section 7.3.1.
“Replacement Reserve Cap” shall have the meaning set forth in Section 7.3.1.
“Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1.
“Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section
7.3.1.
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“Requested Advance Date” shall have the meaning set forth in Section 2.14.2(a).
hereof.
“Required Completion Date” shall mean June 1, 2009, provided, however, that the Required
Completion Date may be extended by Lender to December 1, 2009 in Lender’s sole discretion.
“Required Equity Funds” shall have the meaning set forth in Section 2.11.13.
“Required Initial Advance Date” shall mean January 10, 2008, provided, however, that Borrower
shall have the right to extend the Required CompletionInitial Advance Date to February 10,
2008, provided that Lender is satisfied that prior to January 10, 2008, Borrower has used
commercially reasonable efforts to obtain the Home Depot Estoppel Certificate and the Retaining
Wall Letter, and further provided that Lender shall have the right to further extend the Required
Initial Advance Date in Lender’s sole discretion.
“Required Ratios at Completion” shall have the meaning set forth in Section 2.12(j)
hereof.
“Reserve” or “Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the
Interest Reserve Funds, the Excess Cash Flow Reserve Funds, the Replacement Reserve Fund, the Punch
List and Deferred Maintenance Fund, the Operating Reserve Fund, the Ground Lease Reserve Fund, the
Rollover Reserve Fund, the Storage Facility Master Lease Reserve Fund and any other escrow fund
established by the Loan Documents.
“Restoration” shall mean the repair and restoration of the Property after a Casualty or
Condemnation to substantially the condition the Property was in immediately prior to such Casualty
or Condemnation, with such alterations as may be reasonably approved by Lender.
“Restoration Threshold” shall have the meaning set forth in Section 6.2.3(a) hereof.
“Restricted Party” shall mean collectively, (a) Borrower, any Guarantor, and any Affiliated
Manager and (b) any shareholder, partner, member, non-member manager, any direct or indirect legal
or beneficial owner of, Borrower, any Guarantor, any Affiliated Manager or any non-member manager.
“Retainage” shall mean, for each Contract and Subcontract, the greater of (a) ten percent
(10%) of all costs funded to the Contractor or Subcontractor under the Contract or Subcontract, or
(b) the actual retainage required under such Contract or Subcontract.
“Retaining Wall Letter” shall have the meaning set forth in Section 2.10.21 hereof.
“Rollover Reserve Account shall have the meaning set forth in Section 7.8.1.
“Rollover Reserve Cap” shall have the meaning set forth in Section 7.8.1.
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“Rollover Reserve Fund” shall have the meaning set forth in Section 7.8.1.
“Rollover Reserve Monthly Deposit” shall have the meaning set forth in Section 7.8.1.
“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.
“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer,
encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial
interest, whether direct or indirect.
“Scheduled Defeasance Payments” shall have the meaning set forth in Section 2.5.1(b)
“Second Tax and Insurance Escrow Deposit” shall have the meaning set forth in Section
7.1 hereof.
“Securities” shall have the meaning set forth in Section 9.1 hereof.
“Securities Act” shall have the meaning set forth in Section 9.2(a) hereof.
“Securitization” shall have the meaning set forth in Section 9.1 hereof.
“Self Storage Facility” shall have the meaning set forth in Section 5.1.44 hereof.
“Servicer” shall have the meaning set forth in Section 9.5 hereof.
“Servicing Agreement” shall have the meaning set forth in Section 9.5 hereof.
“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof.
“Shortfall” shall have the meaning set forth in Section 2.1.10.
“Soft Costs” shall mean those Building Loan Costs which are not Hard Costs, including but not
limited to, architect’s, engineer’s and general contractor’s fees, interest on the Building Loan,
recording taxes and title charges in respect of the Building Loan Mortgage and such other
non-construction costs as are part of the Cost of the Improvements.
“Special Purpose Entity” shall mean a corporation, limited partnership or limited liability
company that, since the date of its formation and at all times on and after the date thereof, has
complied with and shall at all times comply with the following requirements unless it has received
either prior consent to do otherwise from Lender or a permitted administrative agent thereof, or,
while the Loan is securitized, confirmation from each of the applicable Rating Agencies that such
noncompliance would not result in the requalification, withdrawal, or downgrade of the ratings of
any Securities or any class thereof:
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(i) is and shall be organized solely for the purpose of (A) in the case of Borrower,
leasing pursuant to the Ground Lease, holding, selling, leasing, transferring, exchanging,
managing and operating the Property, entering into and performing its obligations under the
Loan Documents with Lender, refinancing the Property in connection with a permitted
repayment of the Loan, and transacting lawful business that is incident, necessary and
appropriate to accomplish the foregoing; or (B) in the case of a Principal, acting as a
general partner of the limited partnership that owns the Property or as member of the
limited liability company that owns the Property and transacting lawful business that is
incident, necessary and appropriate to accomplish the foregoing;
(ii) has not engaged and shall not engage in any business unrelated to (A) the
acquisition, development, ownership, management or operation of the Property, or (B) in the
case of a Principal, acting as general partner of the limited partnership that owns the
Property or acting as a member of the limited liability company that owns the Property, as
applicable;
(iii) has not owned and shall not own any real property other than, in the case of
Borrower, a fee or leasehold interest in the Property;
(iv) does not have, shall not have and at no time had any assets other than (A) in the
case of Borrower, the Property and personal property necessary or incidental to its
ownership and operation of the Property or (B) in the case of a Principal, its partnership
interest in the limited partnership or the member interest in the limited liability company
that owns the Property and personal property necessary or incidental to its ownership of
such interests;
(v) has not engaged in, sought, consented or permitted to and shall not engage in,
seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or
merger, (B) any sale or other transfer of all or substantially all of its assets or any sale
of assets outside the ordinary course of its business, except as permitted by the Loan
Documents, or (C) in the case of a Principal, any transfer of its partnership or membership
interests;
(vi) shall not cause, consent to or permit any amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of formation,
operating agreement or other formation document or organizational document (as applicable)
with respect to the matters set forth in this definition;
(vii) if such entity is a limited partnership, has and shall have at least one general
partner and has and shall have, as its only general partners, Special Purpose Entities each
of which (A) is a corporation or single-member Delaware limited liability company, (B) has
two (2) Independent Directors, and (C) holds a direct interest as general partner in the
limited partnership of not less than 0.5% (or 0.1%, if the limited partnership is a Delaware
entity);
(viii) if such entity is a corporation, has and shall have at least two (2) Independent
Director, and shall not cause or permit the board of directors of such entity
28
to take any Material Action either with respect to itself or, if the corporation is a
Principal, with respect to Borrower or any action requiring the unanimous affirmative vote
of one hundred percent (100%) of the members of its board of directors unless two
Independent Directors shall have participated in such vote and shall have voted in favor of
such action;
(ix) if such entity is a limited liability company (other than limited liability
company meeting all of the requirements applicable to a single-member limited liability
company set forth in this definition of “Special Purpose Entity”), has and shall have at
least one (1) member that is a Special Purpose Entity, that is a corporation, that has at
least two (2) Independent Directors and that directly owns at least one-half-of-one percent
(0.5%) of the equity of the limited liability company (or 0.1% if the limited liability
company is a Delaware entity);
(x) if such entity is a single-member limited liability company, (A) is and shall be a
Delaware limited liability company, (B) has and shall have at least two (2) Independent
Directors serving as a manager of such company, (C) shall not take any Material Action and
shall not cause or permit the members or managers of such entity to take any Material
Action, either with respect to itself or, if the company is a Principal, with respect to
Borrower, in each case unless one Independent Director then serving as a manager of the
company shall have participated and consented in writing to such action, and (D) has and
shall have either (1) a member which owns no economic interest in the company, has signed
the company’s limited liability company agreement and has no obligation to make capital
contributions to the company, or (2) two natural persons or one entity that is not a member
of the company, that has signed its limited liability company agreement and that, under the
terms of such limited liability company agreement becomes a member of the company
immediately prior to the withdrawal or dissolution of the last remaining member of the
company;
(xi) has not and shall not (and, if such entity is (a) a limited liability company, has
and shall have a limited liability agreement or an operating agreement, as applicable, (b) a
limited partnership, has a limited partnership agreement, or (c) a corporation, has a
certificate of incorporation or articles that, in each case, provide that such entity shall
not) (1) dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of its
assets; (3) amend its organizational documents with respect to the matters set forth in this
definition without the consent of Lender; or (4) without the affirmative vote of two (2)
Independent Directors or Independent Managers of itself or the consent of a Principal that
is a member or general partner in it: (A) file or consent to the filing of any bankruptcy,
insolvency or reorganization case or proceeding, institute any proceedings under any
applicable insolvency law or otherwise seek relief under any laws relating to the relief
from debts or the protection of debtors generally, file a bankruptcy or insolvency petition
or otherwise institute insolvency proceedings; (B) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for
the entity or a substantial portion of its property; (C) make an assignment for the benefit
of the creditors of the entity; or (D) take any action in furtherance of any of the
foregoing;
29
(xii) has at all times been and shall at all times remain solvent and has paid and
shall pay its debts and liabilities (including, a fairly-allocated portion of any personnel
and overhead expenses that it shares with any Affiliate) from its assets as the same shall
become due, and has maintained and shall 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;
(xiii) has not failed and shall not fail to correct any known misunderstanding
regarding the separate identity of such entity and has not identified and shall not identify
itself as a division of any other Person;
(xiv) has maintained and shall maintain its bank accounts, books of account, books and
records separate from those of any other Person and, to the extent that it is required to
file tax returns under applicable law, has filed and shall file its own tax returns, except
to the extent that it is required by law to file consolidated tax returns and, if it is a
corporation, has not filed and shall not file a consolidated federal income tax return with
any other corporation, except to the extent that it is required by law to file consolidated
tax returns;
(xv) has maintained and shall maintain its own records, books, resolutions and
agreements;
(xvi) has not commingled and shall not commingle its funds or assets with those of any
other Person and has not participated and shall not participate in any cash management
system with any other Person;
(xvii) has held and shall hold its assets in its own name;
(xviii) has conducted and shall conduct its business in its name or in a name
franchised or licensed to it by an entity other than an Affiliate of itself or of Borrower,
except for business conducted on behalf of itself by another Person under a business
management services agreement that is on commercially-reasonable terms, so long as the
manager, or equivalent thereof, under such business management services agreement holds
itself out as an agent of Borrower;
(xix) (A) has maintained and shall maintain its financial statements, accounting
records and other entity documents separate from those of any other Person; (B) has shown
and shall show, in its financial statements, its asset and liabilities separate and apart
from those of any other Person; and (C) has not permitted and shall not permit its assets to
be listed as assets on the financial statement of any of its Affiliates except as required
by GAAP; provided, however, that any such consolidated financial statement contains a note
indicating that the Special Purpose Entity’s separate assets and credit are not available to
pay the debts of such Affiliate and that the Special Purpose Entity’s liabilities do not
constitute obligations of the consolidated entity;
(xx) has paid and shall pay its own liabilities and expenses, including the salaries of
its own employees, out of its own funds and assets, and has maintained and
30
shall maintain a sufficient number of employees in light of its contemplated business
operations;
(xxi) has observed and shall observe all partnership, corporate or limited liability
company formalities, as applicable;
(xxii) has not incurred any Indebtedness other than (i) acquisition financing with
respect to the Property; construction financing with respect to the Improvements and certain
off-site improvements required by municipal and other authorities as conditions to the
construction of the Improvements; and first mortgage financings secured by the Property; and
Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements
and other similar instruments executed and delivered in connection with such financings,
(ii) unsecured trade payables and operational debt not evidenced by a note, and (iii)
Indebtedness incurred in the financing of equipment and other personal property used on the
Property;
(xxiii) shall have no Indebtedness other than (i) the Loan, (ii) liabilities incurred
in the ordinary course of business relating to the ownership and operation of the Property
and the routine administration of Borrower, in amounts not to exceed $525,000, which
liabilities are not more than sixty (60) days past the date incurred, are not evidenced by a
note and are paid when due, and which amounts are normal and reasonable under the
circumstances, and (iii) such other liabilities that are permitted pursuant to this
Agreement;
(xxiv) has not assumed, guaranteed or become obligated and shall not assume or
guarantee or become obligated for the debts of any other Person, has not held out and shall
not hold out its credit as being available to satisfy the obligations of any other Person or
has not pledged and shall not pledge its assets for the benefit of any other Person, in each
case except as permitted pursuant to this Agreement;
(xxv) has not acquired and shall not acquire obligations or securities of its partners,
members or shareholders or any other owner or Affiliate;
(xxvi) has allocated and shall allocate fairly and reasonably any overhead expenses
that are shared with any of its Affiliates, constituents, or owners, or any guarantors of
any of their respective obligations, or any Affiliate of any of the foregoing (individually,
a “Related Party” and collectively, the “Related Parties”), including, but not limited to,
paying for shared office space and for services performed by any employee of an Affiliate;
(xxvii) has maintained and used and shall maintain and use separate stationery,
invoices and checks bearing its name and not bearing the name of any other entity unless
such entity is clearly designated as being the Special Purpose Entity’s agent;
(xxviii) has not pledged and shall not pledge its assets to or for the benefit of any
other Person other than with respect to loans secured by the Property and no such pledge
remains outstanding except to Lender to secure the Loan;
31
(xxix) has held itself out and identified itself and shall hold itself out and identify
itself as a separate and distinct entity under its own name or in a name franchised or
licensed to it by an entity other than an Affiliate of Borrower and not as a division or
part of any other Person;
(xxx) has maintained and shall maintain its assets in such a manner that it shall not
be costly or difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(xxxi) has not made and shall not make loans to any Person and has not held and shall
not hold evidence of indebtedness issued by any other Person or entity (other than cash and
investment-grade securities issued by an entity that is not an Affiliate of or subject to
common ownership with such entity);
(xxxii) has not identified and shall not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or part of it, and has not
identified itself and shall not identify itself as a division of any other Person;
(xxxiii) other than capital contributions and distributions permitted under the terms
of its organizational documents, has not entered into or been a party to, and shall not
enter into or be a party to, any transaction with any of its partners, members, shareholders
or Affiliates except in the ordinary course of its business and on terms which are
commercially reasonable terms comparable to those of an arm’s-length transaction with an
unrelated third party;
(xxxiv) has not had and shall not have any obligation to, and has not indemnified and
shall not indemnify its partners, officers, directors or members, as the case may be, in
each case unless such an obligation or indemnification is fully subordinated to the Debt and
shall not constitute a claim against it in the event that its cash flow is insufficient to
pay the Debt;
(xxxv) if such entity is a corporation, has considered and shall consider the interests
of its creditors in connection with all corporate actions;
(xxxvi) has not had and shall not have any of its obligations guaranteed by any
Affiliate except as provided by the Loan Documents;
(xxxvii) has not formed, acquired or held and shall not form, acquire or hold any
subsidiary, except that a Principal may acquire and hold its interest in Borrower;
(xxxviii) has complied and shall comply with all of the terms and provisions contained
in its organizational documents.
(xxxix) has conducted and shall conduct its business so that each of the assumptions
made about it and each of the facts stated about it in the Insolvency Opinion are true;
32
(xl) has not permitted and shall not permit any Affiliate or constituent party
independent access to its bank accounts;
(xli) is, has always been and shall continue to be duly formed, validly existing, and
in good standing in the state of its incorporation or formation and in all other
jurisdictions where it is qualified to do business;
(xlii) has paid all taxes which it owes and is not currently involved in any dispute
with any taxing authority;
(xliii) is not now, nor has ever been, party to any lawsuit, arbitration, summons, or
legal proceeding that resulted in a judgment against it that has not been paid in full;
(xliv) has no judgments or Liens of any nature against it except for tax liens not yet
due and the Permitted Encumbrances;
(xlv) has provided Lender with complete financial statements that reflect a fair and
accurate view of the entity’s financial condition; and
(xlvi) has no material contingent or actual obligations not related to the Property.
“Stabilized Net Cash Flow” shall mean underwritten Gross Income from Operations calculated
using an vacancy rate equal to the greater of five percent (5%), the actual vacancy rate for the
Property and the market vacancy rate (“Effective Gross Income”), less (i) Operating Expenses
including a management fee of not less than four percent (4%) of Effective Gross Income and (ii) an
adjustment for Replacement Reserves and normalized costs of tenant improvements and leasing
commissions of $235,000.00.
“Stabilized Value” shall mean the value of the Property, determined following the Completion
of the Improvements. The Stabilized Value shall be determined based upon an MAI appraisal
performed, at Borrower’s sole cost and expense, by an appraiser approved by Lender and dated, or
updated, to a date within 30 days or the date of the Completion of the Improvement occurs made in
compliance with FIRREA and reasonably satisfactory to Lender in all respects; the appraisal value
shall be subject to review and confirmation and updating as to valuation by Lender’s internal
appraisal staff, whose decision shall be final absent manifest error.
“Stabilized Loan-to-Value Ratio” shall mean the ratio of the Total Loan Amount to the
Stabilized Value.
“State” shall mean, the State or Commonwealth in which the Property or any part thereof is
located.
“Storage Facility Master Lease” shall have the meaning set forth in Section 5.1.44
hereof.
“Storage Facility Master Lease Reserve Account” shall have the meaning set forth in
Section 7.10.1 hereof.
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“Storage Facility Master Lease Reserve Fund” shall have the meaning set forth in Section
7.10.1 hereof.
“Storage Facility Rent” shall have the meaning set forth in Section 5.1.44 hereof.
“Storage Facility Tenant” shall have the meaning set forth in Section 5.1.44 hereof.
“Stored Materials” shall have the meaning set forth in Section 2.1.8 hereof.
“Subcontract” shall mean shall mean any agreement (other than the Architect’s Contract and the
General Contractor’s Agreement) entered into by Borrower or by General Contractor, in which the
Subcontractor thereunder agrees to provide services, labor and/or materials in connection with the
Project Improvements.
“Subcontractor” shall mean any subcontractor supplying services, labor and/or materials in
connection with the Project Improvements.
“Subordinate Financing” shall have the meaning set forth in Section 9.1.2(b).
“Successor Borrower” shall have the meaning set forth in Section 2.5.3 hereof.
“Survey” shall mean a survey of the Property prepared by a Surveyor licensed in the State and
satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and
containing a certification of such surveyor satisfactory to Lender.
“Surveyor” shall mean Control Point Associates, Inc., or such other land surveyor registered
as such in the State of New York.
“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.1
hereof.
“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 the Property or part thereof.
“Tenant” shall mean the tenant under any Lease.
“Threshold Amount” shall have the meaning set forth in Section 5.1.21(a) hereof.
“Title Company” shall have the meaning set forth in Section 3.1.3(b) hereof.
“Title Insurance Policy” shall mean, an ALTA mortgagee title insurance policy in the form
acceptable to Lender (or, if the Property is in a State which does not permit the issuance of such
ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with
respect to the Property and insuring the lien of the Mortgage.
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“Total Debt” shall mean, collectively, the Debt and Other Debt.
“Total Debt Service” shall mean, with respect to any particular period of time, scheduled
payments of principal, if any, and interest under the Building Loan, the Project Loan and, if
applicable, the Subordinate Financing.
“Total Loan Amount” shall mean the sum of the Building Loan Amount, the Project Loan Amount
and the Subordinate Financing, if applicable.
“Transfer” shall have the meaning set forth in Section 5.2.11(b) hereof.
“Transferee” shall have the meaning set forth in Section 5.2.11(e).
“Transferee’s Principals” shall mean collectively, (A) Transferee’s managing members, general
partners or principal shareholders and (B) such other members, partners or shareholders which
directly or indirectly shall own a fifty-one percent (51%) or greater economic and voting interest
in Transferee.
“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the
State in which the Property is located.
“U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay
principal and/or interest in a full and timely manner that are (a) direct obligations of the United
States of America for the payment of which its full faith and credit is pledged, or (b) to the
extent acceptable to the Rating Agencies, other “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as amended.
“Yield Maintenance Default Premium” shall mean an amount equal to the greater of (a) five
percent (5%) of the outstanding principal balance of the Loan to be prepaid or satisfied and (b)
the Defeasance Payment Amount that would be required if a Defeasance Event were to occur at such
time (whether or not then permitted) in an amount equal to the outstanding principal amount of the
Loan to be prepaid or satisfied.
Yield Maintenance Premium” shall mean an amount equal to the greater of (a) one percent (1%)
of the outstanding principal of the Loan to be prepaid or satisfied and (b) the excess, if any, of
(i) the sum of the present values of all then-scheduled payments of principal and interest under
the Note assuming that all outstanding principal and interest on the Loan is paid on the Open
Period Date (with each such payment and assumed payment discounted to its present value at the date
of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when
compounded semi-annually and deducting from the sum of such present values any short-term interest
paid from the date of prepayment to the next succeeding Payment Date in the event such payment is
not made on a Payment Date), over (ii) the principal amount being prepaid.
Section 1.2 Principles of Construction. All references to sections and schedules are to sections and schedules in or to this
Agreement unless otherwise specified. All uses of the word “including” shall mean “including,
without limitation” unless the context shall indicate otherwise. Any reference in this Agreement
or in any other Loan Document to any Loan
35
Document shall be deemed to include references to such documents as the same may hereafter be
amended, modified, supplemented, extended, replaced and/or restated from time to time (and, in the
case of any note or other instrument, to any instrument issued in substitution therefor). 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.
ARTICLE II.
GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower.
2.1.1
Agreement to Lend and Borrow. Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make
and Borrower hereby agrees to accept Advances in respect of the Building Loan as more particularly
set forth in Section 2.10.
2.1.2 No Reborrowings. Any amount borrowed and repaid hereunder in respect of the Building Loan may not be
reborrowed.
2.1.3 The Note, Mortgage and Loan Documents. The Building Loan shall be evidenced by the Building Loan Note and secured by the Building
Loan Mortgage, the Building Loan Assignment of Leases and the other Building Loan Documents.
2.1.4 Use of Proceeds. Borrower hereby agrees that Borrower shall use the proceeds of the Building Loan to pay or
reimburse itself for Building Loan Costs actually incurred in connection with demolition and the
construction of the Project Improvements if and to the extent that such Building Loan Costs are
reflected in the Building Loan Budget, subject to reallocation pursuant to Sections 2.1.6,
2.1.7 and 5.1.33 (or other reallocations approved by Lender in its sole
discretion).
2.1.5 Advances. Lender shall not be required to Advance funds hereunder for any category or line item of
Building Loan Costs in excess of the amount specified for such line item or category in the
Building Loan Budget, subject to Sections 2.1.6, 2.1.7 and 5.1.33 (or other
reallocations approved by Lender in its sole discretion). No Advances shall be made to pay for
Affiliate Fees.
2.1.6 Cost Overruns. If Borrower becomes aware of any change in actual or projected Project-Related Costs which
will increase any one or more category or line item of costs reflected in the Development Budget,
Borrower shall immediately notify Lender in writing and promptly submit to Lender for its approval
a revised Development Budget. Any reallocation of any category or line items in the Development
Budget in connection with cost overruns shall be subject to Lender’s approval in Lender’s sole
discretion except as set forth in Sections 2.1.7 and 5.1.33, provided, however,
under no circumstances shall Borrower be permitted, or Lender obligated to approve, the
reallocation of line items from the Building Loan Budget to the Project Loan Budget. Lender shall
have no obligation to make any further Advances unless and until the
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revised Development Budget so
submitted by Borrower is approved by Lender and Borrower has satisfied its obligations with respect
to any resulting Shortfall under Section 2.1.10. Lender reserves the right to approve or
disapprove any revised Development Budget in its sole and absolute discretion (except with respect
to reallocations in accordance with Sections 2.1.7 and 5.1.33).
2.1.7 Contingency Reserve. Following the satisfaction of the Initial Advance Conditions, and subject to the prior
approval of Lender in its sole discretion, Borrower may revise the Building Loan Budget to move (i)
amounts available under any Line Item for Hard Costs that are designated to “Contingency” to other
Line Items for Hard Costs in the Building Loan Budget, or (ii) amounts available under any Line
Item for Soft Costs that are designated “Contingency” to other Line Items for Soft Costs in the
Building Loan Budget. Any cost savings shall be allocated in accordance with Section
5.1.33 hereof. In no event may the Contingency Line Item of the Building Loan Budget be
reallocated to any Line Item in the Project Loan Budget. The Contingency Line Item in the Building
Loan Budget for Hard Costs shall contain at least five percent (5%) of the total projected Hard
Costs, separate from the Contingency Line Items in the Project Loan Budget.
2.1.8 Stored Materials. Lender shall not be required to disburse any funds for any materials, machinery or other
Personal Property not yet incorporated into the Project Improvements (the “Stored Materials”),
unless the following conditions are satisfied:
(a) Borrower shall deliver to Lender bills of sale or other evidence reasonably satisfactory
to Lender of the cost of, and, subject to the payment therefor, Borrower’s title in and to such
Stored Materials;
(b) The Stored Materials are identified to the Property and Borrower, are segregated so as to
adequately give notice to all third parties of Borrower’s title in and to such materials, and are
components in substantially final form ready for incorporation into the Project Improvements;
(c) The Stored Materials are stored at the Property or at such other third-party owned and
operated site as Lender shall reasonably approve, and are protected against theft and damage in a
manner satisfactory to Lender, including, if requested by Lender, storage in a bonded warehouse in
the greater metropolitan area in which the Property is located;
(d) The Stored Materials will be paid for in full with the funds to be disbursed, and all lien
rights or claims of the supplier will be released upon full payment;
(e) Lender has or will have upon payment with disbursed funds a perfected, first priority
security interest in the Stored Materials;
(f) The Stored Materials are insured for an amount equal to their replacement costs in
accordance with Section 6.1 of this Agreement;
(g) The aggregate cost of Stored Materials stored at the Property is approved by the
Construction Consultant and, if required by Lender, the Construction Consultant shall
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certify that
it has inspected such Stored Materials and they are in good condition and suitable for use in
connection with the Project Improvements; and
(h) The aggregate cost of Stored Materials stored on the Property at any one time shall not
exceed ten percent (10%) of the maximum amount of the Loan and the aggregate cost of Stored
Materials stored off the Property at any one time shall not exceed five percent (5%) of the maximum
amount of the Loan.
2.1.9 Amount of Advances. In no event shall any Advance exceed the full amount of Building Loan Costs theretofore
paid or to be paid with the proceeds of such Advance plus any Building Loan Costs incurred by
Borrower through the date of the Draw Request for such Advance minus (i) the applicable
Retainage for each Contract and Subcontract, and (ii) the aggregate amount of any Advances
previously made by Lender. It is further understood that the Retainage described above is intended
to provide a contingency fund protecting Lender against failure of Borrower or Guarantor to fulfill
any obligations under the Loan Documents, and that Lender may charge amounts to pay for Building
Loan Costs against such Retainage in the event Lender is required or elects to expend funds to cure
any Default or Event of Default, in either instance, in accordance with the terms of this
Agreement. No Advance of the Loan by Lender shall be deemed to be an approval or acceptance by the
Lender of any work performed thereon or the materials furnished with respect thereto.
2.1.10 Loan-In-Balance. As used herein, a “Shortfall” shall mean, as to any Line Item in the Development Budget as
of any date, the amount determined by Lender, in Lender’s sole but reasonable judgment, by which
(A) the cost of completing or satisfying such Line Item, exceeds (B) the remaining undisbursed
portion of the Loan allocated to such Line Item in the Development Budget plus any sums deposited
with Lender pursuant to this Section 2.1.10 to pay for such Line Item and not previously
disbursed plus any Reserve Funds to the extent such Reserve Funds are available hereunder for the
payment of such Line Item. From time to time and at any time during the Construction Period,
Lender shall have the right, but not the obligation, to notify Borrower that it has determined a
Shortfall exists as to any one or more Line Items. If Lender at any time shall so notify Borrower,
Borrower shall, at its option within five (5) days of Lender’s notification as aforesaid, either:
(i) deposit with Lender an amount equal to such Shortfall, which Lender disburse to Borrower to the
satisfaction of the costs of such Line Item prior to advancing any further Loan proceeds on account
of such costs; (ii) post an irrevocable standby Letter of Credit in the amount of such Shortfall, in favor of Lender;
(iii) to the extent permitted under Sections 2.1.7 and 5.1.33, and following the
satisfaction of the Initial Advance Conditions allocate the Contingency Reserve, with respect to
the Line Item(s) in question, to the Shortfall, and provided, further that the amount of the
remaining Contingency Reserve for such Line Item(s) (following the allocation to the Shortfall) is
sufficient for such Line Item(s), as determined by Lender in its sole discretion; and (iv) to the
extent permitted under Section 5.1.33, and then only following the satisfaction of the
Initial Advance Conditions, reallocate cost savings from the Development Budget in respect of the
Loan (or other reallocations which are approved by Lender, in its sole discretion) in accordance
with the terms of this Agreement, but only to the extent such cost savings can be allocated to the
related Line Items. Borrower hereby agrees that Lender shall have a lien on and security interest
in, for the benefit of Lender, any sums deposited pursuant to clause (i) above and that
Borrower shall have no right to withdraw any such sums except for the payment of the aforesaid
costs as approved by
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Lender. Lender shall have no obligation to make any further Advances of
proceeds of the Loan as to any Line Item until the sums required to be deposited pursuant to
clause (i) above as to such Line Item have been exhausted, or until Borrower has posted an
irrevocable standby Letter of Credit pursuant to clause (iii) above, as the case may be,
and, in any such case, the Loan is back “in balance”. Any such sums not used as provided in said
clause (i) shall be released to Borrower when and to the extent that Lender reasonably
determines that the amount thereof is more than the excess, if any, of the remaining
Project-Related Costs over the undisbursed balance of the Loan, provided, however, that should an
Event of Default occur, Lender, in its sole discretion, may apply such amounts either to the
remaining Project-Related Costs or to the immediate reduction of outstanding principal and/or
interest under the Note.
2.1.11 Quality of Work. No Advance or any portion thereof shall be made with respect to defective work or to any
contractor that has performed work that is defective and that has not been cured, as confirmed by
the report of the Construction Consultant, but Lender may disburse all or part of any Advance
before the sum shall become due if Lender believes it advisable to do so, and all such Advances or
parts thereof shall be deemed to have been made pursuant to this Agreement.
2.1.12 Required Equity Funds. All Required Equity Funds shall be contributed (i.e., expended by Borrower and invested by
Borrower in the Property, for Project—Related Costs set forth on the approved Development Budget)
before the Closing Date.
2.1.13 Trust Fund. Pursuant to Section 13 of the New York Lien Law, Borrower shall receive the Advances
hereunder and shall hold the right to receive the Advances as a trust fund to be applied first for
the purpose of paying the Costs of the Improvements and shall apply the Advances first to the
payment of the Cost of the Improvements on the Property before using any part of the total of the
same for any other purpose.
2.1.14 Final Project Report and Development Budget. Attached hereto as Schedule II is Borrower’s detailed and definitive budget of all
Project-Related Costs to be incurred by Borrower during the Construction Term and that will be
disbursed out of Loan proceeds subject to availability and satisfaction of all applicable
conditions to Advances hereunder and under the Project Loan Agreement, being so indicated,
delineated by each category of Project-Related Costs (each a “Line Item” or “Budget Line”) and
further broken down to segregate Building Loan Costs and Project Loan Costs, which budget has been
approved by Lender and Construction Consultant (the “Development Budget”). The portion of the
Development Budget that includes only Building Loan Costs is referred to herein as the “Building
Loan Budget” and the portion of the Development Budget that includes only Project Loan Costs is
referred to herein as the “Project Loan Budget.”
2.1.15 Miscellaneous.
(a) The making of an Advance by Lender shall not constitute Lender’s approval or acceptance of
the construction theretofore completed. Lender’s inspection and approval of the Plans and
Specifications, the construction of the Project Improvements, or the workmanship and materials used
therein, shall impose no liability of any kind on Lender, the
39
sole obligation of Lender as the
result of such inspection and approval being to make the Advances if and to the extent, required by
this Agreement.
(b) ALL POTENTIAL LIENORS ARE HEREBY CAUTIONED TO EXERCISE SOUND BUSINESS JUDGMENT IN THE
EXTENSION OF CREDIT TO BORROWER. NO POTENTIAL LIENOR SHOULD EXPECT LENDER TO MAKE ADVANCES OF THE
LOAN IN AMOUNTS AND AT TIMES SUCH THAT IT WILL NOT BE NECESSARY FOR EACH SUCH POTENTIAL LIENOR TO
EXERCISE SOUND BUSINESS JUDGMENT IN THE EXTENSION OF CREDIT TO BORROWER. MOREOVER, ALL POTENTIAL
LIENORS ARE REMINDED THAT SUBDIVISION (3) OF SECTION 13 OF THE NEW YORK LIEN LAW PROVIDES THAT
“NOTHING IN THIS SUBDIVISION SHALL BE CONSIDERED AS IMPOSING UPON THE LENDER ANY OBLIGATION TO SEE
THE PROPER APPLICATION OF SUCH ADVANCES BY THE OWNER,” AND LENDER DOES NOT IMPOSE SUCH AN
OBLIGATION ON ITSELF.
Section 2.2 Interest Rate.
2.2.1 Interest Rate. Interest on the outstanding principal balance of the Loan shall accrue from (and include)
the Closing Date to but excluding the Maturity Date at the Interest Rate calculated as set forth in
Section 2.2.2 below.
2.2.2 Interest Calculation. Interest on the outstanding principal balance of the Loan shall be calculated by multiplying
(a) the actual number of days elapsed in the period for which the calculation is being made by (b)
a daily rate based on the Interest Rate and a three hundred sixty (360) day year by (c) the
outstanding principal balance.
2.2.3 Default Rate. In the event that, and for so long as, any Event of Default shall have occurred and be
continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, all
accrued and unpaid interest in respect of the Loan and any other amounts due pursuant to the Loan
Documents, shall accrue interest at the Default Rate, calculated from the date such payment was due
without regard to any grace or cure periods contained herein.
2.2.4 Usury Savings. This Agreement, the Note and the other Loan Documents are subject to the express condition
that at no time shall Borrower be obligated or required to pay interest on the principal balance of
the Loan at a rate which could subject Lender to either civil or criminal liability as a result of
being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan
Documents, Borrower is at any time required or obligated to pay interest on the principal balance
due hereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate or the Default Rate,
as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all
previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in
reduction of principal and not on account of the interest due hereunder. All sums paid or agreed
to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall,
to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout
the full stated term of the Loan until payment in full so that the rate or amount of interest on
account of the Loan does
40
not exceed the Maximum Legal Rate of interest from time to time in effect
and applicable to the Loan for so long as the Loan is outstanding.
Section 2.3 Loan Payment.
2.3.1 Monthly Debt Service Payments. Borrower shall pay to Lender (a) on the Closing Date, an amount equal to interest only on
the outstanding principal balance of the Loan from and including the Closing Date up to and
including December 31, 2007, which interest shall be calculated in accordance with the provisions
of Section 2.2 hereof, and (b) on each Payment Date commencing on the Payment Date
occurring in February, 2008 and thereafter up to and including the Maturity Date, Borrower shall
make a payment to Lender equal to the Monthly Debt Service Payment Amount, which payments shall be
applied first to interest due for the related Interest Period at the Interest Rate, for such
related Interest Period and then to the principal amount of the Loan due in accordance with this
Agreement, and lastly, to any other amounts due and unpaid pursuant to the Loan Documents hereto.
Borrower and Lender acknowledge and agree that, on the 15th calendar day of the month
preceding each Payment Date during the Construction Term: (a) if and to the extent undrawn funds
remain available for Advance under the Project Loan from the Interest Reserve Line Item of the
Project Loan Budget, and provided that that no Event of Default or monetary Default then exists
under any of the Loan Documents or would occur as a result of such Project Loan Advance, the
Monthly Debt Service Amount then due and owing shall be advanced by Lender by a Project Loan
Advance under Interest Reserve Line Item of the Project Loan Budget; and (b) if no amount remains
available under the Interest Reserve Line Item but and to the extent Interest Reserve Funds are on deposit in the Interest Reserve Account, and
no Event of Default or monetary Default then exists under any of the Loan Documents, the Monthly
Debt Service Payment Amount then due and payable shall be paid by application of funds from the
Interest Reserve Account. Borrower and Lender acknowledge and agree that Lender may automatically
make a Project Loan Advance or apply Interest Reserve Funds on deposit in the Interest Reserve
Account on each Payment Date occurring during the Construction Term, in either instance, in
accordance with this Section 2.3.1, without the need for Borrower to submit a Draw Request
or otherwise request such an Advance or application.
2.3.2 Payments Generally. The first Interest Period hereunder shall commence on and include the Closing Date and
shall end on and include December 31, 2007. Thereafter each Interest Period shall commence on the
first (1st) day of each calendar month during the term of this Agreement and shall end
on and include the final calendar date of such calendar month. For purposes of making payments
hereunder, but not for purposes of calculating Interest Periods, if the day on which such payment
is due is not a Business Day, then amounts due on such date shall be due on the immediately
preceding Business Day and with respect to payments of principal due on the Maturity Date, interest
shall be payable at the Interest Rate or the Default Rate, as the case may be, through and
including the day immediately preceding such Maturity Date. All amounts due under this Agreement
and the other Loan Documents shall be payable without setoff, counterclaim, defense or any other
deduction whatsoever.
2.3.3 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the
Loan, all accrued and unpaid interest and
41
all other amounts due hereunder and under the Note, the
Mortgage and the other Loan Documents.
2.3.4 Late Payment Charge. If any principal, interest or any other sums due under the Loan Documents (including the
amounts due on the Maturity Date) are not paid by Borrower on or prior to the date on which it is
due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of
such unpaid sum or the Maximum Legal Rate 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 Mortgage and the other Loan
Documents to the extent permitted by applicable law.
2.3.5 Method and Place of Payment. Except as otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 11:00 A.M., New York City time, on
the date when due and shall be made in lawful money of the United States of America in immediately
available funds at Lender’s office or as otherwise directed by Lender, and any funds received by
Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next
succeeding Business Day.
Section 2.4 Prepayments.
2.4.1 Voluntary Prepayments. Except as otherwise provided in this Section 2.4.1 and Section 2.4.2,
Borrower shall not have the right to prepay the Loan in whole or in part prior to the Maturity
Date. If for any reason Borrower prepays the Loan on a date other than a Payment Date, Borrower
shall pay Lender, in addition to the Debt, all interest which would have accrued on the amount of
the Loan through and including the Payment Date next occurring following the date of such
prepayment. Notwithstanding anything to the contrary contained herein, commencing after the
Payment Date three (3) months prior to the Maturity Date (the “Open Period Date”), or on any
Payment Date thereafter (or on any date thereafter, provided that interest is paid through the next
Payment Date), Borrower may, at its option, prepay the Debt in whole, but not in part, without
payment of the Yield Maintenance Premium.
2.4.2 Mandatory Prepayments. On the next occurring Payment Date following the date on which Lender actually receives any
Net Proceeds, if Lender is not obligated to make such Net Proceeds available to Borrower for the
Restoration of the Property or otherwise remit such Net Proceeds to Borrower pursuant to
Section 6.4 hereof, Borrower shall prepay or authorize Lender to apply Net Proceeds as a
prepayment of all or a portion of the outstanding principal balance of the Loan together with
accrued interest through the end of the related Interest Period and any other sums due hereunder in
an amount equal to one hundred percent (100%) of such Net Proceeds; provided, however, if an Event
of Default has occurred and is continuing, Lender may apply such Net Proceeds to the Debt (until
paid in full) in any order or priority in its sole discretion. Other than following an Event of
Default, no Yield Maintenance Premium shall be due in connection with any prepayment made pursuant
to this Section 2.4.2.
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2.4.3 Prepayments After Default. If following an Event of Default, payment of all or any part of the Debt is tendered by
Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) made on the next
occurring Payment Date together with the Monthly Debt Service Payment and (b) deemed a voluntary
prepayment by Borrower in violation of the prohibition against prepayment set forth in Section
2.4.1 hereof and Borrower shall pay, in addition to the Debt, an amount equal to the Yield
Maintenance Default Premium.
2.4.4 Prepayment Prior to Defeasance Expiration Date. If the Permitted Release Date
has occurred but the Defeasance Expiration Date has not occurred, the Debt may be prepaid in whole
(but not in part) prior to the date permitted under Section 2.4.1 hereof upon not less than thirty
(30) days prior written notice to Lender specifying the Payment Date on which prepayment is to be
made (a “Prepayment Date”) provided no Event of Default exists and upon payment of an amount equal
to the Yield Maintenance Premium. Lender shall notify Borrower of the amount and the basis of
determination of the required prepayment consideration. If any notice of prepayment is given, the
Debt shall be due and payable on the Prepayment Date. Lender shall not be obligated to accept any
prepayment of the Debt unless it is accompanied by
the prepayment consideration due in connection therewith. If for any reason Borrower prepays
the Loan on a date other than a Payment Date, Borrower shall pay Lender, in addition to the Debt,
all interest which would have accrued on the amount of the Loan through and including the Payment
Date next occurring following the date of such prepayment.
2.4.5 Application of Prepayments to Components. Any prepayment of the principal of the Loan, in whole or in part, voluntary or involuntary,
shall be applied (a) first, to the reduction of the outstanding principal balance of the Project
Loan until reduced to zero, and (b) second, to the reduction of the outstanding principal balance
of the Building Loan until reduced to zero. Subsequent to any Event of Default, any payment of
principal from whatever source may be applied by Lender between the various components of the Loan
in Lender’s sole discretion.
Section 2.5 Defeasance.
2.5.1 Voluntary Defeasance (a) Provided no Event of Default shall then exist, Borrower shall have the right at any time
after the Defeasance Expiration Date and prior to the date voluntary prepayments are permitted
under Section 2.4.1 hereof to voluntarily defease all, but not part, of the Loan by and upon
satisfaction of the following conditions (such event being a “Defeasance Event”)
(i) Borrower shall provide not less than thirty (30) days prior written
notice to Lender specifying the Payment Date (the “Defeasance Date”) on which the
Defeasance Event is to occur;
(ii) Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Loan to and including the Defeasance Date. If for any
reason the Defeasance Date is not a Payment Date, the Borrower shall also pay
interest that would have accrued on the Note through and including the Payment
Date immediately preceding the next Payment Date, provided,
however, if the Defeasance Deposit shall include short-term interest
computed
43
from the date of such prepayment through to the next succeeding Payment
Date, Borrower shall not be required to pay such short term interest pursuant to
this sentence;
(iii) Borrower shall pay to Lender all other sums, not including scheduled
interest or principal payments, then due under the Note, this Agreement, the
Mortgage and the other Loan Documents;
(iv) Borrower shall use the Defeasance Deposit to purchase U.S. Obligations
in accordance with Section 2.5.1(b) below;
(v) Borrower shall execute and deliver a pledge and security agreement, in
form and substance that would be reasonably satisfactory to a prudent lender
creating a first priority lien on the Defeasance Deposit and the
U.S. Obligations purchased with the Defeasance Deposit in accordance with the
provisions of this Section 2.5 (the “Security Agreement”);
(vi) Borrower shall deliver an opinion of counsel for Borrower that is
standard in commercial lending transactions and subject only to customary
qualifications, assumptions and exceptions opining, among other things, that
Borrower has legally and validly transferred and assigned the U.S. Obligations and
all obligations, rights and duties under and to the Note to the Successor
Borrower, that Lender has a perfected first priority security interest in the
Defeasance Deposit and the U.S. Obligations delivered by Borrower and that any
REMIC Trust formed pursuant to a Securitization will not fail to maintain its
status as a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code as a result of such Defeasance Event;
(vii) Borrower shall deliver confirmation in writing from each of the
applicable Rating Agencies to the effect that such release will not result in a
downgrade, withdrawal or qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the Securities issued in connection
with the Securitization which are then outstanding. If required by the applicable
Rating Agencies, Borrower shall also deliver or cause to be delivered an
Additional Insolvency Opinion with respect to the Successor Borrower in form and
substance satisfactory to Lender and the applicable Rating Agencies;
(viii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1(a) have been satisfied;
(ix) Borrower shall deliver a certificate of Borrower’s independent certified
public accountant certifying that the U.S. Obligations purchased with the
Defeasance Deposit generate monthly amounts equal to or greater than the Scheduled
Defeasance Payments;
(x) Borrower shall deliver such other certificates, documents or instruments
as Lender may reasonably request; and
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(xi) Borrower shall pay all costs and expenses of Lender incurred in
connection with the Defeasance Event, including (A) any costs and expenses
associated with a release of the Lien of the Mortgage as provided in Section
2.6 hereof, (B) reasonable attorneys’ fees and expenses incurred in connection
with the Defeasance Event, (C) the costs and expenses of the Rating Agencies, (D)
any revenue, documentary stamp or intangible taxes or any other tax or charge due
in connection with the transfer of the Note, or otherwise required to accomplish
the defeasance and (E) the costs and expenses of Servicer and any trustee,
including reasonable attorneys’ fees.
(b) In connection with the Defeasance Event, Borrower shall use the Defeasance Deposit to
purchase U.S. Obligations which provide payments on or prior to, but as close as possible to, all
successive scheduled Payment Dates after the Defeasance Date upon which interest and principal
payments are required under this Agreement and the Note, and in
amounts equal to the scheduled payments due on such Payment Dates under this Agreement and the
Note (including, without limitation, scheduled payments of principal, interest, servicing fees (if
any), and any other amounts due under the Loan Documents on such Payment Dates) and assuming the
Note is prepaid in full on the Open Period Date (the “Scheduled Defeasance Payments”). Borrower,
pursuant to the Security Agreement or other appropriate document, shall authorize and direct that
the payments received from the U.S. Obligations may be made directly to the Clearing Account
(unless otherwise directed by Lender) and applied to satisfy the Debt Service obligations of
Borrower under this Agreement and the Note. Any portion of the Defeasance Deposit in excess of the
amount necessary to purchase the U.S. Obligations required by this Section 2.5 and satisfy
Borrower’s other obligations under this Section 2.5 and Section 2.6 shall be
remitted to Borrower.
2.5.2 Collateral. Each of the U.S. Obligations that are part of the defeasance collateral shall be duly
endorsed by the holder thereof as directed by Lender or accompanied by a written instrument of
transfer in form and substance that would be satisfactory to a prudent lender (including, without
limitation, such instruments as may be required by the depository institution holding such
securities or by the issuer thereof, as the case may be, to effectuate book-entry transfers and
pledges through the book-entry facilities of such institution) in order to perfect upon the
delivery of the defeasance collateral a first priority security interest therein in favor of Lender
in conformity with all applicable state and federal laws governing the granting of such security
interests.
2.5.3 Successor Borrower. In connection with any Defeasance Event, Borrower shall establish a successor entity (the
“Successor Borrower”), which shall be a Special Purpose Entity, which shall not own any other
assets or have any other liabilities or operate other property (except in connection with other
defeased loans held in the same securitized loan pool with the Loan). Borrower shall transfer and
assign all obligations, rights and duties under and to the Note, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower shall assume the obligations under
the Note and the Security Agreement and Borrower shall be relieved of its obligations under such
documents. Borrower shall pay One Thousand and 00/100 Dollars ($1,000) to any such Successor
Borrower as consideration for assuming the obligations under the Note and the Security Agreement.
Notwithstanding anything in this Agreement to the contrary, no other assumption fee shall be
45
payable upon a transfer of the Note in accordance with this Section 2.5.3, but Borrower
shall pay all costs and expenses incurred by Lender, including Lender’s attorneys’ fees and
expenses and any fees and expenses of any Rating Agencies, incurred in connection therewith.
Section 2.6 Release of Property. Except as set forth in this Section 2.6, no repayment, prepayment or defeasance of
all or any portion of the Loan shall cause, give rise to a right to require, or otherwise result
in, the release of the Lien of the Mortgage on the Property.
2.6.1 Release of Property.
(a) If Borrower has elected to defease the Loan and the requirements of Section 2.5
and this Section 2.6 have been satisfied, all of the Property shall be released from the
Lien of the Mortgage and the U.S. Obligations, pledged pursuant to the Security Agreement, shall be
the sole source of collateral securing the Note.
(b) In connection with the release of the Mortgage, Borrower shall submit to Lender, not less
than thirty (30) days prior to the Defeasance Date, a release of Lien (and related Loan Documents)
for the Property for execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Property is located and that would be satisfactory to a prudent lender
and contains standard provisions, if any, protecting the rights of the releasing lender. In
addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered
by Borrower in connection with such release, together with an Officer’s Certificate certifying that
such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such
releases in accordance with the terms of this Agreement.
2.6.2 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 due 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 Agreement, release the
Lien of the Mortgage on the Property.
Section 2.7 Clearing Account/Cash Management. On or prior to the Closing Date, Borrower shall, at its sole cost and expense, cause each
of the following to occur to the satisfaction of Lender (collectively, the “Cash Management
Conditions”): (a) Borrower shall establish an Eligible Account (the “Clearing Account”) with an
Eligible Institution selected by Borrower and approved by Lender (the “Clearing Bank”); (b)
Borrower shall cause the Clearing Bank to execute and deliver the Clearing Account Agreement in
accordance with Section 2.7.1(b); (c) Borrower shall establish an Eligible Account (the
“Cash Management Account”) with an the Cash Management Bank designated by Lender pursuant to and
in accordance with the Cash Management Agreement and Section 2.7.2 hereof; (d) Borrower
shall deliver a Payment Direction Letter to the Tenant under any Lease then or thereafter in effect
and provide Lender with reasonably satisfactory evidence that the Tenant under such Lease has
confirmed that it shall comply with the terms thereof; (e) Borrower will take all actions necessary
to establish and maintain in favor of Lender a perfected first priority security interest in the
Clearing Account and Cash Management Account and all deposits at any time contained in either such
account and the proceeds thereof, including, without limitation, executing and filing UCC-1
Financing Statements; (f) Borrower shall deliver to Lender an opinion of Borrower’s counsel with
respect to the due execution, authority, enforceability of the Cash Management Agreement
46
and
Clearing Account Agreement and confirming that Lender has first priority perfected security
interest in the Cash Management Account and Clearing Account and such other matters as Lender may
reasonably require, all such opinions in form, scope and substance satisfactory to Lender and
Lender’s counsel; and (g) Borrower shall reimburse Lender
for any and all cost and expenses, including reasonable attorney’s fees and disbursements,
resulting form the foregoing.
2.7.1 Clearing Account.
(a) Borrower shall establish and maintain the Clearing Account with the Clearing Bank on or
prior to the Closing Date, and thereafter Borrower shall maintain the Clearing Account at all times
during the remainder of the term of the Loan. The Clearing Account shall be entitled “P/A-Acadia
Pelham Manor, LLC, as Borrower and Bear Stearns Commercial Mortgage, Inc., as Lender, pursuant to
Loan Agreement dated as of December 10, 2007 — Clearing Account”. Borrower hereby grants to Lender
a first-priority security interest in the Clearing Account and all deposits at any time contained
therein and the proceeds thereof. All monies now or hereafter deposited into the Clearing Account
shall be deemed additional security for the Debt.
(b) Borrower shall obtain from the Clearing Bank and deliver to Lender an agreement, in form
and substance satisfactory to Lender (the “Clearing Account Agreement”), pursuant to which: (i)
Borrower and Clearing Bank acknowledge and agree that during a Cash Trap Period, Lender shall have
the sole right to make withdrawals from the Clearing Account and all costs and expenses for
establishing and maintaining the Clearing Account shall be paid by Borrower; (ii) upon notice from
Lender that a Cash Trap Period exists, the Clearing Bank agrees to transfer to the Cash Management
Account in immediately available funds by federal wire transfer all amounts on deposit in the
Clearing Account once every Business Day during the term of the Loan.
(c) Borrower shall (i) deliver irrevocable written instructions to all tenants under Leases to
deliver all Rents (including additional rent, payable thereunder directly to the Clearing Account,
and (ii) deliver irrevocable written instructions to each of the credit card companies or credit
card clearing banks with which Borrower or Manager has entered into merchant’s agreements to
deliver all receipts payable with respect to the Property directly to the Clearing Account
(collectively, the “Payment Direction Letters.”). Borrower and Manager shall deposit all amounts
received by Borrower or Manager constituting Rents into the Clearing Account within one (1)
Business Day after receipt thereof.
(d) Upon the occurrence of an Event of Default, Lender may, in addition to any and all other
rights and remedies available to Lender, apply any sums then present in the Clearing Account to the
payment of the Debt in any order in its sole discretion.
(e) The Clearing Account shall be an Eligible Account and shall not be commingled with other
monies held by Borrower or Clearing Bank.
(f) Borrower shall not further pledge, assign or grant any security interest in the Clearing
Account or the monies deposited therein or permit any lien or encumbrance to
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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.
(g) Borrower shall indemnify Lender and hold Lender harmless from and against any and all
actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys fees and expenses) arising from or in any way
connected with the Clearing Account and/or the Clearing Account Agreement (unless arising from the
gross negligence or willful misconduct of Lender) or the performance of the obligations for which
the Clearing Account was established.
2.7.2 Cash Management Account.
(a) Pursuant to and in accordance with the Cash Management Agreement, Borrower shall establish
and maintain a segregated Eligible Account (the “Cash Management Account”) to be held by an
Eligible Institution selected by Lender (the “Cash Management Bank”) in trust and for the benefit
of Lender, which Cash Management Account shall be under the sole dominion and control of Lender.
The Cash Management Account shall be entitled “P/A-Acadia Pelham Manor, LLC as Borrower and Bear
Stearns Commercial Mortgage, Inc., as Lender, pursuant to Loan Agreement dated as of December 10,
2007 — Cash Management Account.” Borrower hereby grants to Lender a first priority security
interest in the Cash Management Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected
first priority security interest in the Cash Management Account, including, without limitation,
executing and filing UCC-1 Financing Statements and continuations thereof. Borrower will not in
any way alter or modify the Cash Management Account and will notify Lender of the account number
thereof. Lender and Servicer shall have the sole right to make withdrawals from the Cash
Management Account and all costs and expenses for establishing and maintaining the Cash Management
Account shall be paid by Borrower.
(b) During a Cash Trap Period, and provided no Event of Default shall have occurred, on each
Payment Date (or, if such Payment Date is not a Business Day, on the immediately preceding Business
Day), all funds on deposit in the Cash Management Account shall be applied as set forth in the Cash
Management Agreement
(c) The insufficiency of funds on deposit in the Cash Management Account shall not relieve
Borrower from the obligation to make any payments, as and when due pursuant to this Agreement and
the other Loan Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
(d) Borrower hereby agrees that Lender may modify the Cash Management Agreement for the
purpose of establishing additional sub-accounts in connection with any payments otherwise required
under this Agreement and the other Loan Documents and Lender shall provide notice thereof to
Borrower.
(e) All funds on deposit in the Cash Management Account following the occurrence of an Event
of Default may be applied by Lender in such order and priority as Lender shall determine.
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(f) Notwithstanding anything to the contrary herein, all transfers of Borrower’s funds from
the Cash Management Account or other sources to or for the benefit of
any mezzanine lender under any Subordinate Financing pursuant to this Agreement or any of the
other Loan Documents shall constitute distributions from Borrower to the Mezzanine Borrower and
must comply with the requirements as to distributions of the Delaware Limited Liability Company
Act. No provision of any of the Loan Documents shall create a debtor-creditor relationship between
Borrower and any mezzanine or subordinate lender.
2.7.3 Payments Received Under the Cash Management Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan
Documents, and provided no Event of Default has occurred and is continuing, Borrower’s obligations
with respect to the payment of the Monthly Debt Service Payment Amount and amounts required to be
deposited on a monthly basis into the Reserve Funds, if any, shall be deemed satisfied to the
extent sufficient amounts are deposited in the Cash Management Account to satisfy such obligations
pursuant to the Cash Management Agreement on the dates each such payment is required, regardless of
whether any of such amounts are so applied by Lender.
Section 2.8 Intentionally Omitted.
Section 2.9 Payments Not Conditional . All payments required to be made by Borrower hereunder or under the Note or the other Loan
Documents shall be made irrespective of, and without deduction for, any setoff, claim or
counterclaim and shall be made irrespective of any defense thereto.
Section 2.10 Initial Advance. The obligation of Lender to make the initial Advance of the Building Loan (the “Initial
Advance”) shall be subject to the following conditions precedent (collectively, the “Initial
Advance Conditions”) on or prior to the Required Initial Advance Date, all of which conditions
precedent must be satisfied prior to Lender making any such Initial Advance:
2.10.1 Prior Conditions Satisfied. All conditions precedent to closing shall continue to be satisfied as of the date of the
Initial Advance (in the same manner in which they were satisfied for the closing without reimposing
any one-time condition).
2.10.2 Performance; No Default. Borrower shall have performed and complied with all terms and conditions herein required to
be performed or complied with by it at or prior to the date of such Initial Advance, and on the
date of such Initial Advance there shall exist no Default or Event of Default.
2.10.3 Representations and Warranties. The representations and warranties made by Borrower or Guarantor in the Loan Documents or
otherwise made by or on behalf of Borrower or Guarantor in connection therewith after the date
thereof shall have been true and correct in all material respects on the date on which made and
shall also be true and correct in all material respects on the date of the Initial Advance.
2.10.4 No Damage. The Project Improvements shall not have been injured or damaged by fire, explosion,
accident, flood or other casualty, unless Lender shall be satisfied that sufficient insurance
proceeds will be available in the reasonable judgment of Lender to effect the
49
satisfactory restoration of the Project Improvements and to permit the Completion of the Improvements prior to
the Required Completion Date.
2.10.5 Government Approvals. Borrower shall have delivered to Lender evidence satisfactory to Lender that all
Governmental Approvals necessary for the construction of the Project Improvements as contemplated
by the Plans and Specifications, have been obtained and are in full force and effect, including,
without limitation, the final approval of the Plans and Specifications by the all applicable
Governmental Authorities for the Project Improvements and building permit(s) covering the entire
scope of work contemplated by the Project Improvements in accordance with the approved Plans and
Specification lawfully issued to Borrower.
2.10.6 Final Project Report. The Final Project Report shall have been delivered to Lender by the Construction
Consultant.
2.10.7 Development Budget. Borrower shall have prepared and Lender and Construction Consultant shall have approved
the Development Budget (including both the Building Loan Budget and the Project Loan Budget) and
the Disbursement Schedule.
2.10.8 Plans and Specifications. Two (2) complete sets of the Plans and Specifications and any and all modifications and
amendments made thereto which have been reviewed and approved by (A) Lender, and (B) the
Construction Consultant. Borrower shall deliver to Lender a list identifying the Plans and
Specifications and any and all modifications and amendments made thereto.
2.10.9 General Contractor’s Agreement. Borrower and the General Contractor have entered into a Standard Form of Agreement between
Owner and Construction Manager where Construction Manager is NOT a Constructor dated as of February
22, 2006 that obligates the General Contractor to cause the Completion of the Improvements to occur
prior to the Required Completion Date reasonably acceptable to Lender and the Construction
Consultant in both form and substance (once
approved, the “General Contractor’s Agreement”). The General Contractor’s Agreement, shall
have been duly executed and delivered by the parties thereto, shall be in full force and effect and
Lender shall have received a certified copy or a fully executed duplicate original thereof. The
General Contractor shall have duly executed and delivered to Lender a consent to the assignment of
the General Contractor’s Agreement, in form and substance reasonably satisfactory to Lender, and
Lender shall have received a certified copy or a fully executed duplicate original thereof. If
General Contractor consist of more than one Person, then each such Person shall deliver a consent
to the assignment of the General Contractor’s Agreement, in form and substance satisfactory to
Lender, and Lender shall have received a certified copy or a fully executed duplicate original
thereof.
2.10.10 Architect’s and General Contractor’s Certificates. Certificates from the Borrower’s Architect (the “Architect’s Certificate”)
substantially in the form attached hereto as Exhibit F and from the General Contractor (the
“General Contractor’s Certificate”) substantially in the form attached hereto as Exhibit G.
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2.10.11 Contracts and Subcontracts. Borrower shall have delivered to Lender, and Lender and Construction Consultant shall have
approved a list, certified by Borrower, of all Contractors and Subcontractors who have been or, to
the extent identified by Borrower, will be supplying labor or materials for the Property. The list
of Contractors and Subcontractors may be amended from time to time subject to the approval of
Lender and Construction Consultant, in accordance with the terms hereof. Borrower shall have
delivered to Lender all Contract and Major Contracts for all of the work necessary for Completion
of the Improvements, and Lender and Construction Consultant shall have approved all such Major
Contracts. No Advance shall be made by Lender with regard to work done by or on behalf of any
Contractor or Subcontractor unless Borrower shall have delivered to Lender and Construction
Consultant originals of the following documents as to such Contractor or Subcontractor, each in
form and substance reasonably satisfactory to Lender:
(a) Performance Letters. if requested by Lender, a performance letter (“Performance
Letter”) substantially in the form attached hereto as Exhibit H from such Contractors
and/or Subcontractors as Lender shall designate.
(b) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.10.12 Contractors’ Consent to Assignment. Each Contractor, Sub-Contractor and Other Design Professionals shall have delivered a
consent to the assignment of each of their Contracts, in form and substance satisfactory to Lender,
and Lender shall have received a certified copy or a fully executed duplicate original of each such
Contract.
2.10.13 Cash Management. Lender has determined that the Cash Management Conditions have been satisfied.
2.10.14 Notices. All notices required by any Governmental Authority or by any applicable Legal Requirement
to be filed prior to commencement of construction of the Project Improvements shall have been
filed.
2.10.15 Deliveries. Lender shall have received:
(a) Draw Request. A Draw Request complying with the requirements hereof;
(b) Affirmation of Payment. An Affirmation of Payment;
(c) Title Insurance Policy. A Title Insurance Policy for the full amount of the Loan,
which includes a pending disbursement clause to increase the coverage of the Title Insurance Policy
by the amount of the any Construction Advance, insuring the lien of the Mortgage subject to no
liens or encumbrances other than the Permitted Encumbrances;
(d) Lien Waivers. Duly executed lien waivers, which shall be conditional lien waivers
or unconditional lien waivers, as determined by Lender in its sole discretion, and otherwise
substantially in the form set forth in Exhibit J from the General Contractor and all
Contractors and Subcontractors who have performed work, for the work so performed, and/or who have
supplied labor and/or materials, for the labor and/or materials so supplied, except for
51
such work
or labor and/or materials for which payment thereof is requested, as to which duly executed lien
waivers shall be delivered to Lender with the next request for an Advance;
(e) Ratios. Evidence satisfactory to Lender that following the Initial Advance, the
Loan-to-Cost Ratio shall be no greater than 80%;
(f) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents;
(g) Anticipated Costs Report. An Anticipated Costs Report; and
(h) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.10.16 Building Loan Agreement Filed. This Building Loan Agreement shall have been filed in the Westchester County Clerk’s
Office.
2.10.17 Initial Project Loan Advance. All conditions to the initial advance of the Project Loan set forth in Section 2.10 of the
Project Loan Agreement shall have been satisfied.
2.10.18 Rate Lock Agreement. Simultaneously with the Initial Advance, Lender shall return to Borrower, a pro-rata
portion of the deposit held by Lender pursuant to the Rate Lock Agreement in such proportion as the
amount of the Initial Advance bears to the Total Loan Amount.
2.10.19 Home Depot Estoppel Certificate. Borrower shall have delivered to Lender an estoppel certificate from Home Depot certifying
to Lender that the Home Depot Lease is in full force and effect and that there are no defaults by
Borrower or Home Depot thereunder, and otherwise in form and substance satisfactory to Lender in
Lender’s sole discretion (the “Home Depot Estoppel Certificate”).
2.10.20 Initial Reserve Deposits Borrower shall have deposited the Initial Tax and Insurance Escrow Deposit and the Initial
Interest Reserve Deposit with Lender. The Initial Tax and Insurance Escrow Deposit and the Initial
Interest Reserve Deposit shall be funded on the date of the Initial Advance with a portion of the
Initial Advance under the Project Loan.
2.10.21 Retaining Wall Letter. Borrower shall have delivered to Lender a letter from the Village of Pelham Manor
evidencing resolution of the retaining wall issue in form and substance satisfactory to Lender in
Lender’s sole discretion (the “Retaining Wall Letter”).
2.10.22 Satisfaction of Initial Advance Conditions. Borrower covenants and agrees that, prior to the Required Initial Advance Date, time being
of the essence, it shall cause all of the Initial Advance Conditions to be satisfied. Borrower
shall not perform any work at the Property, including, without limitation, any demolition of the
existing improvements, until all of the Initial Advance Conditions have been satisfied. Borrower’s
failure to satisfy, or cause the satisfaction of, any of the Initial Advance Conditions on or prior
to the Required Initial Advance
52
Date shall, at Lender’s election, constitute an Event of Default.
In addition to any and all other remedies that may be available to Lender hereunder, under the
other Loan Documents, at law or in equity, upon the occurrence of an Event of Default resulting
from the failure of any Initial Advance Condition to have been satisfied, Borrower hereby
irrevocably empowers Lender, in the name of Borrower as its true and lawful attorney-in-fact, with
full power of substitution to complete or undertake such steps as may be necessary, in Lender’s
sole determination, to satisfy the Initial Advance Condition in the name of Borrower. Such power
of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower
empowers said attorney-in-fact as follows: (i) to employ such contractors, subcontractors, agents,
architects and inspectors as shall be required for such purposes; (iii) to pay, settle or
compromise all existing bills and claims which are or may become Liens against the Property, or as
may be necessary or desirable for the completion of such Initial Advance Conditions, or for
clearance of title; (v) to execute all applications and certificates in
the name of Borrower which may be required by any of the contract documents; (vi) to prosecute
and defend all actions or proceedings in connection with the Property or the Project; and (vii) to
do any and every act which Borrower might do in its own behalf to fulfill the terms of this
Agreement and the other Loan Documents. In addition, upon such Event of Default,. Lender shall
have the right to unwind any interest rate hedge entered into by Lender and apply any deposits or
other amounts held by Lender pursuant to the Rate Lock Agreement to costs and expenses incurred by
Lender under this Agreement, the Rate Lock Agreement or any of the other Loan Documents.
Section 2.11 Construction Advances. The obligation of Lender to make the Advances of the Building Loan after the Initial
Advance shall be subject to the following conditions precedent (collectively, the “Construction
Advance Conditions”), all of which conditions precedent must be satisfied prior to Lender making
any such Advance:
2.11.1 Prior Conditions Satisfied. All conditions precedent to any prior Advance (in the same manner in which they were
satisfied for the Initial Advance or prior Advance, as applicable, and without reimposing any
one-time requirement) shall continue to be satisfied as of the date of such subsequent Advance.
2.11.2 Performance; No Default. Borrower shall have performed and complied with all terms and conditions herein required to
be performed or complied with by it at or prior to the date of such Advance, and on the date of
such Advance there shall exist no Default or Event of Default or Shortfall.
2.11.3 Representations and Warranties. The representations and warranties made by Borrower and Guarantor in the Loan Documents or
otherwise made by or on behalf of Borrower or Guarantor in connection therewith after the date
thereof shall have been true and correct in all material respects on the date on which made and
shall also be true and correct in all material respects on the date of such Advance.
2.11.4 No Damage. The Improvements shall not have been injured or damaged by fire, explosion, accident, flood
or other casualty, unless Lender shall have received insurance proceeds sufficient in the
reasonable judgment of Lender to effect the satisfactory restoration of the Improvements and to
permit the Completion of the Improvements prior to the Required Completion Date.
53
2.11.5 Deliveries. The following items or documents shall have been delivered to Lender:
(a) Anticipated Costs Report. An anticipated cost report (“Anticipated Costs Report”)
in the form set forth in Exhibit I executed by the General Contractor which sets forth the
anticipated costs to complete construction of the Project Improvements, after giving effect to
costs incurred during the previous month and any anticipated change orders;
(b) Endorsement to Title Insurance Policy. A “datedown” endorsement to Lender’s title
insurance policy as described in the form set forth in Exhibit C hereto, which continuation
or endorsement shall increase the coverage of the Title Insurance Policy by the amount of the
Advance through the pending disbursement clause (but not the overall policy amount which shall be
for the full amount of the Loan), amend the effective date of the Title Insurance Policy to the
date of such Advance, continue to insure the lien of the Mortgage subject to no liens or
encumbrances other than the Permitted Encumbrances and which shall state that since the last
disbursement of the Loan there have been no changes in the state of title to the Property (other
than Permitted Encumbrances) and that there are no additional survey exceptions not previously
approved by Lender;
(c) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents.
(d) Draw Request. A Draw Request complying with the provisions of this Agreement
which shall constitute Borrower’s representation and warranty to Lender that: (a) any completed
construction is substantially in accordance with the Plans and Specifications, (b) all costs for
the payment of which Lender have previously advanced funds have in fact been paid, (c) all the
representations and warranties contained in Article IV of this Agreement continue to be
true and correct in all material respects, (d) no Event of Default shall have occurred and be
continuing hereunder, and (e) Borrower continues to be in compliance in all respects with all of
the other terms, covenants and conditions contained in this Agreement.
(e) Affirmation of Payment. General Contractor’s Affirmation of Payment (“Affirmation
of Payment”) (AIA Form G706) in the form attached hereto as Exhibit E.
(f) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.11.6 Construction Consultant Certificate. Each draw request relating to Hard Costs shall be accompanied by a certificate or report of
the Construction Consultant to Lender based upon a site observation of the Property made by the
Construction Consultant not more than thirty (30) days prior to the date of such draw, in which the
Construction Consultant shall in substance: (i) verify that the portion of the Project
Improvements completed as of the date of such site observation has been completed substantially in
accordance with the Plans and Specifications; and (ii) state its estimate of (1) the percentages of
the construction of the Project Improvements completed as of the date of such site observation on
the basis of work in place as
54
part of the Project Improvements and the Building Loan Budget, (2)
the Hard Costs actually incurred for work in place as part of the Improvements
as of the date of such site observation, (3) the sum necessary to complete construction of the
Project Improvements in accordance with the Plans and Specifications, and (4) the amount of time
from the date of such inspection that will be required to achieve Completion of the Improvements.
2.11.7 Other Bids. If in the reasonable judgment of Lender and the Construction Consultant all Contracts,
Major Contracts, and the General Contractor’s Agreement do not cover all of the work necessary for
Completion of the Improvements, Borrower shall cause to be furnished firm bids from responsible
parties, or estimates and other information reasonably satisfactory to Lender, for the work not so
covered, to enable Lender to ascertain the total estimated cost of all work done and to be done.
2.11.8 Certification Regarding Chattels. Lender shall have received a certification from the Title Company or other service
satisfactory to Lender or counsel satisfactory to Lender (which shall be updated from time to time
at Borrower’s expense upon request by Lender in connection with future Advances) that a search of
the public records disclosed no significant or material changes since the Closing Date including no
judgment or tax liens affecting Borrower or Guarantor, the Property or the Personal Property, and
no conditional sales contracts, chattel mortgages, leases of personalty, financing statements
(other than those in favor of Lender) or title retention agreements which affect the Property.
2.11.9 Lien Waivers. Borrower shall have delivered duly executed lien waivers, which shall be conditional lien
waivers or unconditional lien waivers, as applicable, and otherwise substantially in the form set
forth in Exhibit J, from the General Contractor, all Major Contractors and Major
Subcontractors for all work performed, and all labor or material supplied for which payment thereof
has been made prior to the date of the Advance.
2.11.10 Construction Consultant Approval. Lender has received advice from the Construction Consultant, satisfactory to Lender, as to
Construction Consultant’s determination, acting reasonably, based on on-site inspections of the
Improvements and the data submitted to and reviewed by it as part of Borrower’s Requisition of the
value of the labor and materials in place, that the construction of the Project Improvements is
proceeding satisfactorily and according to schedule and that the work on account of which the
Advance is sought has been completed in a good and workmanlike manner to such Construction
Consultant’s satisfaction and substantially in accordance with the Plans and Specifications.
2.11.11 Ratios. Following such Advance (and any Project Loan Advance being made on such date), the
Loan-to-Cost Ratio shall be no greater than 80%.
2.11.12 Administration Fee. Borrower shall have paid the Administration Fee in accordance with the provisions of the
Administration Fee Agreement.
2.11.13 Required Equity Funds. Borrower shall furnish Lender with evidence in form and content satisfactory to Lender that, as
of the date of each Advance, Borrower has invested Cash equity in an amount equal to or greater
than (a) $8,916,000 or (b) 20% of the Total Project Costs or (c) the difference between the
Development Budget and the maximum Loan
55
amount of $35,664,000 for approved Project-Related Costs
(the “Required Equity Funds”). Notwithstanding the foregoing, if the Borrower realizes cost
savings from the development of the Project, either in the form of Hard Costs or Soft Costs,
Advances may be advanced to Borrower provided that (i) the Borrower would not have less than
$8,916,000 of cash equity in the Project through such Advance and (ii) the Debt Service Coverage
Ratio shall be equal to or greater than 1.15 to 1.0 assuming a fully advanced Loan using a debt
service constant of 7.31%, and (iii) the loan-to-value ratio for the Property is no greater than
80% assuming a fully advanced Loan. If Borrower is in non-compliance solely with respect to
condition (i) above, at Borrower’s option, either (A) any excess cost savings (funds in
excess of the amount so that the Required Equity Funds shall continue to be satisfied) shall be
deposited as follows: (1) 100% into the Replacement Reserve Account until the amount on deposit in
such account equals the Replacement Reserve Cap, and then (2) 100% of any excess into the Rollover
Reserve Account until the amount on deposit in such account equals the Rollover Reserve Cap, and
then (3) 100% of any excess into any other Reserves required by Lender pursuant to this Agreement,
or (B) Borrower shall release Lender from its obligation to fund the remaining amounts of the Loan
and Borrower and any guarantor under the Rate Lock Agreement pays for the breakage costs, if any,
on the unfunded portion of the Loan payable pursuant to the Rate Lock Agreement. If Borrower is in
compliance with respect to condition (i) above but is not in compliance with conditions
(ii) and (iii) above, any excess cost savings shall, at Borrower’s option, (A) be held
back by Lender as additional collateral for the Loan until satisfaction of each of the requirements
are satisfied, or (B) be deposited as follows: (1) 100% into the Replacement Reserve Account until
the amount on deposit in such account equals the Replacement Reserve Cap, and then (2) 100% of any
excess into the Rollover Reserve Account until the amount on deposit in such account equals the
Rollover Reserve Cap, and then (3) 100% of any excess into any other Reserves required by Lender
pursuant to this Agreement, or (C) Borrower shall release Lender from its obligation to fund the
remaining amounts of the Loan and Borrower and any guarantor under the Rate Lock Agreement pays for
the breakage costs, if any, on the unfunded portion of the Loan payable pursuant to the Rate Lock
Agreement.
2.11.14 Rate Lock Agreement. Simultaneously with each Construction Advance, Lender shall return to Borrower, a pro-rata
portion of the deposit held by Lender pursuant to the Rate Lock Agreement in such proportion as the
amount of the Construction Advance bears to the Total Loan Amount, provided, however, that in the
event that any of the conditions of Section 2.11.13 are not satisfied, Lender shall have
the right to apply the portion of the deposit under the Rate Lock Agreement to be returned to
Borrower to satisfy the conditions of Section 2.11.13.
2.11.15 Home Depot Contribution. In the event that Borrower receives any portion of the Tenant Contribution (as defined in the
Home Depot Lease) payable to Borrower pursuant to that certain Sublease dated as of December 21,
2006 (the “Home Depot Lease”), with Home Depot U.S.A., Inc. (“Home Depot”) or the proceeds of any
letter of credit delivered by Home Depot pursuant to the Home Depot Lease as security for Home
Depot’s obligation to pay the Tenant Contribution, Borrower shall apply such Tenant Contribution or
the proceeds of such letter of credit, as applicable, to the payment of Project Related Costs and
shall provide Lender with evidence that such Tenant Contribution or proceeds, as applicable, have
been applied to the payment of Project Related Costs prior to Lender making any further Advances
under this Agreement.
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Section 2.12 Final Advance.
2.12.1 Conditions to Release of Final Advance. In addition to the conditions set forth in Section 2.10 and Section 2.11,
above, Lender’s obligation to make the final Advance in the amount calculated pursuant to
Section 2.12.2 of this Agreement (the “Final Advance”) shall be subject to receipt by
Lender of the following:
(a) Completion of Improvements. Evidence satisfactory to Lender and the Construction
Consultant that the Completion of the Improvements has occurred.
(b) Final Project Loan Advance. All conditions to the Final Project Loan Advance have
been satisfied and the Final Project Loan Advance shall have been made or will be made
simultaneously therewith.
(c) Lien Waivers. Duly executed final lien waivers, which shall be conditional lien
waivers or unconditional lien waivers, as determined by Lender in its sole discretion, and
otherwise substantially in the form attached hereto as Exhibit J from the General
Contractor and Major Contractors and Major Subcontractors who have performed work for the work so
performed, and/or who have supplied labor and/or materials for the labor and/or materials so
supplied.
(d) “As-Built” Plans and Specifications. A full and complete set of “as built” Plans
and Specifications certified to by Borrower’s Architect.
(e) Administration Fee. Borrower shall have paid the Administration Fee in accordance
with the provisions of the Administration Fee Agreement.
(f) Certificates. Completed AIA Form G704 (Certificate of Substantial Completion) and
completed AIA Form G707 (Consent of Surety to Final Payments) shall have been executed and
delivered by Borrower’s Architect and General Contractor.
(g) Deposits to Reserves. If Lender determines that any Punch List Work or Deferred
Maintenance Condition exists, the Punch List and Deferred Maintenance Deposit has been made, if
Lender determines that the deposits are required to the Operating Reserve
Account, the Operating Reserve Deposit has been made, and all other deposits to the Reserve
Funds required by this Agreement have been made.
(h) Other Documents. Such documents, letters, affidavits, reports and assurances, as
Lender, Lender’s counsel and the Construction Consultant may reasonably require.
(i) Required Ratios at Completion. Lender shall have determined that, following the
Final Advance (and taking into consideration the Final Project Loan Advance under the Project
Loan): (i) the Loan-to-Cost Ratio shall be no more than 80%; (ii) the Stabilized Loan-to-Value
Ratio shall be no more than 80%; (iii) the Stabilized Net Cash Flow for the entire Property shall
be not less than $3,100,000; (iv) the Debt Service Coverage Ratio based on Lender’s underwritten
Net Operating Income and the greater of the actual debt service constant or 9.30% shall be .99 to
1.0 or greater; and (v) the Debt Service Coverage Ratio based on the
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Stabilized Net Cash Flow and
the greater of the actual debt service constant or 7.31% shall be 1.15 to 1.0 or greater (the
“Required Ratios at Completion”), or Borrower shall have deposited with Lender Cash or a Letter of
Credit to satisfy the Required Ratios at Completion in accordance with Section 2.12.2.
(j) Tenant Estoppel Certificates. Borrower shall have delivered to Lender estoppel
certificates from all of the tenants at the Property in form and substance satisfactory to Lender.
(k) Required Equity Funds. Borrower shall furnish Lender with evidence in form and
content satisfactory to Lender that, as of the date of the Final Advance, Borrower has invested
Cash equity in an amount equal to or greater than the Required Equity Funds or has otherwise
complied with the provisions of Section 2.11.13 with respect thereto.
(l) Insolvency Opinion. The issuance of and delivery to Lender of six (6) original
counterparty Insolvency Opinions in the form attached hereto as Exhibit K from Wachtel &
Masyr, LLP or another law firm reasonably acceptable to Lender.
2.12.2 Amount of Final Advance. Except as expressly provided for below, the amount of
the Final Advance shall be equal to the sum of: (a) any Retainage not previously released and
advanced to Borrower; plus (b) the amount of any Punch List and Deferred Maintenance Reserve
Deposit; plus (c) the positive difference, if any, between, (i) the Building Loan Amount and (ii)
all amounts previously Advanced under the Building Loan (including the amounts described in
clauses (a) and (b) of the sentence). The portion of the Final Advance described in
clause (c) of the foregoing sentence is referred to herein as the “Building Loan Earn Out
Advance” and the corresponding portion of the Final Project Loan Advance is referred to herein as
the “Project Loan Earn Out Advance” and together with the Building Loan Earn Out Advance, the “Earn
Out Advances”. Notwithstanding anything to the contrary provided for herein, the Earn Out Advances
shall be reduced, pro rata, but not below $0.00, if and to the extent necessary for the Required
Ratios at Completion to be achieved following the Final Advances. In addition, if the Required
Ratios at Completion cannot be achieved even if the Earn Out Advances are reduced to $0.00, Lender
shall have the right, but not the obligation, to apply any deposits held by Lender pursuant to the
Rate Lock Agreement and any Interest Reserve Funds to the payment of the Building Loan and the
Project Loan in such order and priority as Lender shall determine in its sole discretion. If the
Required Ratios at Completion
cannot be achieved even if the Earn Out Advances are reduced to $0.00 and the deposits, if any
under the Rate Lock Agreement and the Interest Reserve Funds are applied to the payment of the
Loan, Borrower shall deposit with Lender Cash or a Letter of Credit satisfactory to Lender in an
amount equal to the amount which, if used to pay down the Loan, would result in Stabilized
Loan-to-Value Ratio of 80% and a Debt Service Coverage Ratio of 1.15 to 1.00, calculated based upon
Lender’s determination on a pro-forma basis of Lender’s Stabilized Net Cash Flow for the 12 months
immediately following and assuming a thirty (30) year amortization schedule based upon a debt
service constant equal to the greater of the actual debt service constant and 7.31%.
2.12.3 Rate Lock Agreement. Upon satisfaction of all of the conditions to the Final Advance set forth in Section
2.12.1, and subject to the provisions of Section 2.12.2, Lender shall return to
Borrower, the remaining deposits, if any, held by Lender under the Rate
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Lock Agreement and not
applied by Lender in accordance with the provisions of the Rate Lock Agreement and any Interest
Reserve Funds held by Lender pursuant to this Agreement.
Section 2.13 No Reliance. All conditions and requirements of this Agreement are for the sole benefit of Lender and no
other person or party (including, without limitation, the Construction Consultant, the General
Contractor and subcontractors (including, without limitation, Major Contractors and Major
Subcontractors) and materialmen engaged in the construction of the Improvements) shall have the
right to rely on the satisfaction of such conditions and requirements by Borrower. Lender shall
have the right, in its sole and absolute discretion, to waive any such condition or requirement.
Section 2.14 Method of Disbursement of Loan Proceeds.
2.14.1 Draw Request to Be Submitted to Lender. At such time as Borrower shall desire to obtain an Advance, Borrower shall complete,
execute and deliver to Lender a Borrower’s Requisition in the form attached hereto as Exhibit
L (“Borrower’s Requisition”).
(a) Borrower’s Requisition shall be accompanied by a completed and itemized Application and
Certificate for Payment (AIA Document No. G702) attached hereto as Exhibit M or similar
form approved by Lender, containing the certification of the General Contractor or contractor or
subcontractor to whom such payment is made, as applicable, and Borrower’s Architect as to the
accuracy of same, together with invoices relating to all items of Hard Costs covered thereby and
accompanied by a cost breakdown showing the cost of work on, and the cost of materials incorporated
into, the Improvements to the date of the requisition. The cost breakdown shall also show the
percentage of completion of each line item on the Building Loan Budget, and the accuracy of the
cost breakdown shall be certified by Borrower and by Borrower’s Architect. All such applications
for payment shall also show all contractors and subcontractors, including Major Contractors and
Major Subcontractors, by name and trade, the total amount of each contract or subcontract, the
amount theretofore paid to each subcontractor
as of the date of such application, and the amount to be paid from the proceeds of the Advance
to each contractor and subcontractor;
(b) the completed construction will be reviewed by the Construction Consultant who will
certify to Lender as to the value of completed construction, percentage of completion and
compliance with Plans and Specifications;
(c) lien waivers from each other Major Contractor and Major Subcontractors for work done and
materials supplied by them which were paid for pursuant to any prior Draw Request;
(d) a written request of Borrower for any necessary changes in the Plans and Specifications,
the Building Loan Budget, the Disbursement Schedule or the Construction Schedule;
(e) copies of all executed change orders, contracts and subcontracts, and, to the extent
requested by Lender, of all inspection or test reports and other documents relating to the
construction of the Project Improvements not previously delivered to Lender; and
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(f) such other information, documentation and certification as Lender shall reasonably
request.
2.14.2 Procedure of Advances.
(a) Each Draw Request shall be submitted to Lender and Construction Consultant at least ten
(10) Business Days prior to the date of the requested Advance (the “Requested Advance Date”), and
no more frequently than monthly. Lender shall make the requested Advance on the Requested Advance
Date so long as all conditions to such Advance are satisfied or waived.
(b) Not later than 11:00 A.M. New York City time, on the Requested Advance Date, Lender shall
make such Advance available to Borrower in accordance with the terms of this Section 2.14.
(c) Each Advance (other than the Final Advance) shall be in an amount of not less than
$500,000.00.
(d) Each Advance shall be made on a Payment Date.
2.14.3 Funds Advanced. Each Advance shall be made by Lender by wire transfer to such checking account of Borrower
as specified to Lender in writing or as provided in Section 2.14.4 below. All proceeds of
all Advances shall be used by Borrower only for the purposes for which such Advances were made.
Borrower shall not commingle such funds with other funds of Borrower.
2.14.4 Direct Advances to Third Parties. Lender may make, at Lender’s option, any or all Advances directly or through the Title
Company to (i) any Contractor, as applicable, for construction expenses which shall theretofore
have been approved by Lender and for which Borrower shall have failed to make payment after receipt
by Borrower of such applicable Advance, (ii) Borrower’s Architect to pay its fees to the extent
funds are allocated thereto in the Building Loan Budget if Borrower shall have failed to do so,
(iii) the Construction Consultant to pay its fees, (iv) Lender’s counsel to pay its fees, (v) to
pay (x) any installment of interest due under the Note, (y) any expenses incurred by Lender which
are reimbursable by Borrower under the Loan Documents (including, without limiting the generality
of the foregoing, reasonable attorneys’ fees and expenses and other fees and expenses incurred by
Lender), provided that Borrower shall theretofore have received notice from Lender that such
expenses have been incurred and Borrower shall have failed to reimburse Lender for said expenses
beyond any grace periods provided for said reimbursement under the Note, this Agreement or any of
the other Loan Documents, or (z) following the occurrence and continuation of an Event of Default,
any other sums due to Lender under the Note, this Agreement or any of the other Loan Documents, all
to the extent that the same are not paid by the respective due dates thereof, and (vi) any other
Person to whom Lender in good faith determines payment is due and any portion of the Loan so
disbursed by Lender shall be deemed disbursed as of the date on which the Person to whom payment is
made receives the same. The execution of this Agreement by Borrower shall, and hereby does,
constitute an irrevocable authorization so to advance the proceeds of the Loan directly to any such
Person or through the Title Company to such Persons in accordance with this
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Section 2.14.4
as amounts become due and payable to them hereunder and any portion of the Loan so disbursed by
Lender shall be deemed disbursed as of the date on which the Person to whom payment is made
receives the same. No further authorization from Borrower shall be necessary to warrant such
direct Advances to such relevant Person, and all such Advances shall satisfy pro tanto the
obligations of Lender hereunder and shall be secured by the Mortgage and the other Loan Documents
as fully as if made directly to Borrower.
2.14.5 One Advance Per Month. Lender shall have no obligation to make Advances of the Loan more often than once in each
calendar month except that Lender, in its sole discretion, shall have the right but not the
obligation, to make additional advances per month for interest, fees and expenses due under the
Loan Documents.
2.14.6 Advances Do Not Constitute a Waiver. No Advance shall constitute a waiver of any of the conditions of Lender’s obligation to
make further Advances nor, in the event Borrower is unable to satisfy any such condition, shall any
Advance have the effect of precluding Lender from thereafter declaring such inability to be an
Event of Default hereunder.
2.14.7 Trust Fund Provisions. All proceeds advanced hereunder shall be subject to the trust fund provisions of
Section 13 of the Lien Law. The affidavit attached hereto as Exhibit D is made
pursuant to and in compliance with Section 22 of the Lien Law, and, if so indicated in said
affidavit, Building Loan proceeds will be used, in part, for reimbursement for payments made by the
Borrower prior
to the Initial Advance hereunder but subsequent to the commencement of the construction and
equipping of the Improvements for items constituting Costs of the Improvement.
2.14.8 Advances and Disbursements Under Completion Guaranty. Notwithstanding anything to the contrary contained in this Agreement or in any other Loan
Document, Borrower hereby irrevocably and unconditionally authorizes Lender to make any
disbursements of proceeds of the Loan or of any Reserve Funds held by Lender to Guarantor in
accordance with the Guaranty of Completion.
Section 2.15 Plan Review Process.
(a) Borrower hereby acknowledges and agrees that neither Lender nor the Construction
Consultant’s approval of any Plans and Specifications (or any revisions thereto), nor its
inspection of the performance of the construction, nor its right to inspect such work, shall impose
upon Lender and/or Construction Consultant any obligation or liability whatsoever with respect
thereto, including, without limitation, any obligation or liability that might arise as a result of
such work not being performed in accordance with applicable laws and/or requirements of public
authorities or with the Plans and Specifications (and revisions thereto) approved by Lender and
Construction Consultant or otherwise. The review or approval by Lender and Construction Consultant
of any Plans and Specifications or any revisions thereto is solely for Lender’s benefit, and is
without any representation or warranty whatsoever with respect to the adequacy, correctness or
efficiency thereof or otherwise. The granting by Lender and/or Construction Consultant of its
approval of any Plans and Specifications or any revisions thereto, shall not in any manner
constitute or be deemed to constitute a judgment or acknowledgment by Lender as to their legality
or compliance with laws and/or requirements of public authorities.
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ARTICLE III.
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Closing. The obligation of Lender to make the Loan hereunder is subject to the fulfillment by
Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date:
3.1.1 Representations and Warranties; Compliance with Conditions. The representations and warranties of Borrower contained in this Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on and as of such date, and no Default or an Event of Default shall
have occurred and be continuing; and Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each other Loan Document on its part to
be observed or performed.
3.1.2 Loan Agreement and Note. Lender shall have received a copy of this Agreement and the Note, in each case, duly
executed and delivered on behalf of Borrower.
3.1.3 Delivery of Loan Documents; Title Insurance; Reports; Leases.
(a) Mortgage, Assignment of Leases. Lender shall have received from Borrower fully
executed and acknowledged counterparts of the Mortgage and the Assignment of Leases and evidence
that counterparts of the Mortgage and Assignment of Leases have been delivered to the Title Company
for recording, in the reasonable judgment of Lender, so as to effectively create upon such
recording valid and enforceable Liens upon the Property, of the requisite priority, in favor of
Lender or Lender’s nominee (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
other Loan Documents.
(b) Title Insurance. Lender shall have received the Title Insurance Policy issued by
a title company acceptable to Lender (the “Title Company”) and dated as of the Closing Date, with
reinsurance and direct access agreements acceptable to Lender. Such Title Insurance Policy shall
(i) provide coverage in amounts satisfactory to Lender, (ii) insure Lender that the Mortgage
creates a valid lien on the Property of the requisite priority, free and clear of all exceptions
from coverage other than Permitted Encumbrances and standard exceptions and exclusions from
coverage (as modified by the terms of any endorsements), (iii) contain such endorsements and
affirmative coverages as Lender may reasonably request, and (iv) name Lender as the insured. The
Title Insurance Policy shall be assignable. Lender also shall have received evidence that all
premiums in respect of such Title Insurance Policy have been paid.
(c) Survey. Lender shall have received a title survey for the 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 Accuracy Standards for ALTA/ACSM Land Title Surveys as adopted by American Land
Title Association, American Congress on Surveying &
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Mapping and National Society of Professional
Surveyors in 1999 or in such other form as Lender shall approve (the “Survey”). The Survey shall
reflect the same legal description contained in the Title Insurance Policy referred to in
clause (b) above and shall include, among other things, a metes and bounds description of
the real property comprising part of the Property reasonably satisfactory to Lender. The
surveyor’s seal shall be affixed to the Survey and the surveyor shall provide a certification for
the Survey in form and substance acceptable to Lender.
(d) 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.
(e) Environmental Reports. Lender shall have received a Phase I environmental report
(and, if recommended by the Phase I environmental report, a Phase II environmental report) in
respect of the Property, in each case satisfactory in form and substance to Lender.
(f) Zoning. Evidence reasonably acceptable to Lender confirming that the Project
Improvements can be developed and constructed in accordance with the Plans and
Specifications “as of right” without requiring the issuance of any zoning variance or other
discretionary permit and/or approval and such other matters as Lender may reasonably require.
(g) Encumbrances. Borrower shall have taken or caused to be taken such actions in
such a manner so that Lender has a valid and perfected first priority Lien as of the Closing Date
with respect to the Mortgage, subject only to applicable Permitted Encumbrances and such other
Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory
evidence thereof.
3.1.4 Related Documents. Each additional document not specifically referenced herein, but relating to the
transactions contemplated herein, shall be in form and substance reasonably satisfactory to Lender,
and shall have been duly authorized, executed and delivered by all parties thereto and Lender shall
have received and approved certified copies thereof.
3.1.5 Delivery of Organizational Documents. On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender
copies certified by Borrower of all organizational documentation related to Borrower and/or the
formation, structure, existence, good standing and/or qualification to do business, as Lender may
request in its sole discretion, including, without limitation, amendments (as requested by Lender),
good standing certificates, qualifications to do business in the appropriate jurisdictions,
resolutions authorizing the entering into of the Loan and incumbency certificates as may be
requested by Lender.
3.1.6 Opinions of Borrower’s Counsel. Lender shall have received opinions from Borrower’s counsel with respect to due
execution, authority, enforceability of the Loan Documents and such other matters as Lender may
reasonably require, including, without limitation, the Insolvency Opinion, all such opinions in
form, scope and substance satisfactory to Lender and Lender’s counsel in their sole discretion.
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3.1.7 Development Budget. Borrower shall have delivered, and Lender and Construction Consultant shall have
approved, the Development Budget and the Disbursement Schedule attached thereto, and certified by
Borrower as being true, correct and complete.
3.1.8 Carrying Costs. Borrower shall have paid all Carrying Costs relating to the Property then due and payable
including without limitation, (a) accrued but unpaid Insurance Premiums due pursuant to the
Policies, (b) currently due Taxes (including any in arrears) relating to the Property, and (c)
currently due Other Charges relating to the Property, which amounts shall be funded with proceeds
of the Loan.
3.1.9 Completion of Proceedings. All organizational 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 satisfactory to Lender, and Lender shall have
received all such counterpart originals or certified copies of such documents as Lender may
reasonably request.
3.1.10 Payments. All payments, deposits or escrows required to be made or established by Borrower under this
Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been
paid.
3.1.11 Payment of Fees. Payment by Borrower of all fees and expenses required by this Agreement and/or the other
Loan Documents, to the extent due and payable, including, without limitation, Lender’s reasonable
attorneys’ fees and expenses, all origination fees, and brokerage commissions.
3.1.12 Transaction Costs. Borrower shall have paid or reimbursed Lender for all title insurance premiums, recording
and filing fees, costs of environmental reports, Physical Conditions Report, appraisals and other
reports, the fees and costs of Lender’s counsel, and all other third party out-of-pocket expenses
incurred in connection with the origination and closing of the Loan.
3.1.13 Material Adverse Change. There shall have been no material adverse change in the financial condition or business
condition of Borrower, any one or more of the Persons comprising Guarantor that, in the aggregate,
constitutes a material adverse change in the financial condition of the Guarantor collectively, or
a material adverse change in the Property since the date of the most recent financial statements
delivered to Lender. The income and expenses of the Property, the occupancy thereof, and all other
features of the transaction shall be as represented to Lender without material adverse change.
Neither Borrower, Guarantor nor any of their respective constituent Persons shall be the subject of
any bankruptcy, reorganization, or insolvency proceeding.
3.1.14 Required Equity Funds. Borrower shall furnish Lender with evidence in form and content satisfactory to Lender
that Borrower has contributed the Required Equity Funds for approved Project-Related Costs.
3.1.15 Ratios. Following the Initial Advance, the Loan-to-Cost Ratio shall be no greater than 80%.
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3.1.16 Intentionally Omitted
3.1.17 Physical Conditions Report. Lender shall have received a Physical Conditions Report with respect to the Property, which
report shall be issued by an engineer selected by Lender and shall be reasonably satisfactory in
form and substance to Lender.
3.1.18 The Architect’s Contract. The Architect’s Contract in form and substance satisfactory to Lender, shall have been duly
executed and delivered by the parties thereto, shall be in full force and effect and Lender shall
have received a certified copy or a fully executed duplicate original thereof. Borrower’s
Architect shall have duly executed and delivered to Lender a consent to the assignment of the
Architect’s Contract, in form and substance satisfactory to Lender, and Lender shall have received
a certified copy or a fully executed duplicate original thereof. If Borrower’s Architect consists
of more than one Person, then each such Person shall deliver a consent to the assignment of the
Architect’s Contract in form and substance satisfactory to Lender, and Lender shall have received
a certified copy or a fully executed duplicate original thereof. All Other Design Professionals
shall deliver a consent to the assignment to each of their Contracts, in form and substance
satisfactory to Lender, and Lender shall have received a certified copy or a fully executed
duplicate original of each such Contract.
3.1.19 Appraisal. Lender shall have received an appraisal of the Property, from an appraiser selected by
Lender, which appraisal shall be satisfactory in form and substance to Lender.
3.1.20 Deliveries. The following items or documents shall have been delivered to Lender:
(a) Plans and Specifications. Two (2) complete sets of the Plans and Specifications
and any and all modifications and amendments made thereto which have been reviewed and approved by
Lender and the Construction Consultant. Borrower shall deliver to Lender a list identifying the
Plans and Specifications and any and all modifications and amendments made thereto.
(b) Insurance. All Policies of insurance (or certificates thereof) required by
Section 6.1 of this Agreement or any other Loan Document.
(c) Final Project Report. The Final Project Report shall have been delivered to
Lender by the Construction Consultant.
(d) Certification Regarding Chattels. Lender shall have received a certification from
the Title Company or other service satisfactory to Lender or counsel satisfactory to Lender (which
shall be updated from time to time at Borrower’s expense upon
request by Lender in connection with future Advances) that a search of the public records
disclosed no significant or material changes since the Closing Date including no judgment or tax
liens affecting Borrower or Guarantor, the Property or the Personal Property, and no conditional
sales contracts, chattel mortgages, leases of personalty, financing statements (other than those in
favor of Lender) or title retention agreements which affect the Property.
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(e) Construction Schedule. The Construction Schedule, certified by Borrower as being
true, correct and complete, which shall have been approved by Lender and the Construction
Consultant.
3.1.21 Management Agreement. Lender shall have received a certified copy of each Management Agreement with respect to
the Property which shall be satisfactory in form and substance to Lender.
3.1.22 Subordination. Lender shall have received the Subordination of Affiliate Fee executed by Borrower,
Guarantor, each member of Borrower or any other Affiliate of Borrower entitled to an Affiliate Fee.
3.1.23 Ground Lease/Estoppels. Lender shall have received a fully executed copy of the Ground Lease in form and substance
satisfactory to lender together with an executed estoppel letter from the Ground Lessor, which
shall be in form and substance satisfactory to Lender.
3.1.24 Further Documents. Lender or its counsel shall have received such other documents and further approvals,
opinions, documents and information as Lender or its counsel may have reasonably requested
including the Loan Documents in form and substance satisfactory to Lender and its counsel.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations. Borrower represents and warrants as of the date hereof and as of the Closing Date that:
4.1.1 Organization. Borrower has been duly organized and is validly existing and in good standing with
requisite power and authority to own its properties and to transact the businesses in which it is
now engaged. Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its properties, businesses
and operations. Borrower possesses all rights, licenses, permits and authorizations, governmental
or otherwise, necessary to entitle it to own its properties and to transact the
businesses in which it is now engaged, and the sole business of Borrower is the ownership,
management and operation of the Property. The ownership interests in Borrower are as set forth on
the organizational chart attached hereto as Schedule I.
4.1.2 Proceedings. Borrower has taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the other Loan Documents. This Agreement and such other Loan
Documents have been duly executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in accordance with their
respective terms, subject only to applicable 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).
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4.1.3 No Conflicts. The execution, delivery and performance of this Agreement and the other Loan Documents by
Borrower will not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of
Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement, management agreement or other agreement or instrument to which Borrower is a
party or by which any of Borrower’s property or assets is subject, nor will such action result in
any violation of the provisions of any statute or any order, rule or regulation of any Governmental
Authority having jurisdiction over Borrower or any of Borrower’s properties or assets, and any
consent, approval, authorization, order, registration or qualification of or with any court or any
such Governmental Authority required for the execution, delivery and performance by Borrower of
this Agreement or any other Loan Documents has been obtained and is in full force and effect.
4.1.4 Litigation. There are no actions, suits or proceedings at law or in equity by or before any
Governmental Authority or other agency now pending, or threatened against or affecting Borrower,
Guarantor or the Property, which actions, suits or proceedings, if determined against Borrower,
Guarantor or the Property, might materially adversely affect the condition (financial or otherwise)
or business of Borrower, Guarantor or the condition or ownership of the Property.
4.1.5 Agreements. Borrower is not a party to any agreement or instrument or subject to any restriction which
might materially and adversely affect Borrower or the Property, or Borrower’s business, properties
or assets, operations or condition, financial or otherwise. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party or by which Borrower
or the Property is bound. Borrower has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a
party or by which Borrower or the Property is otherwise
bound, other than (a) obligations incurred in the ordinary course of the operation of the
Property as permitted pursuant to clause (xx) of the definition of “Special Purpose Entity”
set forth in Section 1.1 hereof and (b) obligations under the Loan Documents.
4.1.6 Title. Borrower has good, marketable and insurable leasehold title to the real property comprising
part of the Property and good title to the balance of the Property, free and clear of all Liens
whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. The Permitted Encumbrances in the
aggregate do not materially and adversely affect the value, operation or use of the Property (as
currently used) or Borrower’s ability to repay the Loan. The Mortgage, when properly recorded in
the appropriate records, together with any Uniform Commercial Code financing statements required to
be filed in connection therewith, will create (a) a valid, perfected first priority lien on the
Property, subject only to Permitted Encumbrances and the Liens created by the Loan Documents and
(b) perfected security interests in and to, and perfected collateral assignments of, all 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. There are no claims for payment for work, labor or
materials affecting the Property
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which are or may become a Lien prior to, or of equal priority
with, the Liens created by the Loan Documents.
4.1.7 Solvency. Borrower has (a) not entered into this transaction or executed the Note, this Agreement or
any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b)
received reasonably equivalent value in exchange for its obligations under such Loan Documents.
Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will,
immediately following the making of the Loan, exceed Borrower’s total liabilities, including,
without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be
greater than Borrower’s probable liabilities, including the maximum amount of its contingent
liabilities on its debts as such debts become absolute and matured. Borrower’s assets do not and,
immediately following the making of the Loan will not, constitute unreasonably small capital to
carry out its business as conducted or as proposed to be conducted. Borrower does not intend to,
and does not believe that it will, incur debt and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into
account the timing and amounts of cash to be received by Borrower and the amounts to be payable on
or in respect of obligations of Borrower). No petition in bankruptcy has been filed against
Borrower or any Guarantor in the last seven (7) years, and neither Borrower nor any Guarantor in
the last seven (7) years has ever made an assignment for the benefit of creditors or taken
advantage of any insolvency act for the benefit of debtors. Neither Borrower nor any Guarantor 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 Borrower’s assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such petition against it or
such constituent Persons.
4.1.8 Full and Accurate Disclosure. No statement of fact made by Borrower in this Agreement or in any of the other Loan
Documents contains any untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading. There is no material fact
presently known to Borrower which has not been disclosed to Lender which adversely affects, nor as
far as Borrower can foresee, might adversely affect, the Property or the business, operations or
condition (financial or otherwise) of Borrower.
4.1.9 No Plan Assets. Borrower does not sponsor, is not obligated to contribute to, and is not itself an
“employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA or
Section 4975 of the Code, and none of the assets of Borrower constitutes or will constitute “plan
assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition,
(a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA and (b)
transactions by or with Borrower are not subject to any state or other statute , regulation or
other restriction regulating investments of, or fiduciary obligations with respect to, governmental
plans within the meaning of Section 3(32) of ERISA which is similar to the provisions of Section
406 of ERISA or Section 4975 of the Code and which prohibit or otherwise restrict the transactions
contemplated by this Agreement, including but not limited to the exercise by Lender of any of its
rights under the Loan Documents.
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4.1.10 Compliance. Borrower and the Property and the use thereof comply in all material respects with all
applicable Legal Requirements, including, without limitation, building and zoning ordinances and
codes. To the best of Borrower’s knowledge, Borrower is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority. There has not been committed by
Borrower or any other Person in occupancy of or involved with the operation or use of the Property
any act or omission affording the federal government or any other Governmental Authority the right
of forfeiture as against the Property or any part thereof or any monies paid in performance of
Borrower’s obligations under any of the Loan Documents.
4.1.11 Financial Information. All financial data, including, without limitation, the statements of cash flow and income
and operating expense, that have been delivered to Lender in connection with the Loan (i) are true,
complete and correct in all material respects, (ii) accurately represent the financial condition of
Borrower and the Property, as applicable, as of the date of such reports, and (iii) to the extent
prepared or audited by an independent certified public accounting firm, have been prepared in
accordance with GAAP throughout the periods covered, except as disclosed therein. Except for
Permitted Encumbrances, Borrower does not have any contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a materially adverse effect on
the Property or the operation thereof as a mixed use retail and self-storage facility, except as
referred to or reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial condition, operations or
business of Borrower from that set forth in said financial statements.
4.1.12 Condemnation. No Condemnation or other proceeding has been commenced or, to Borrower’s best knowledge, is
threatened or contemplated with respect to all or any portion of the Property or for the relocation
of roadways providing access to the Property.
4.1.13 Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring
any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such Regulation U or any
other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements
or by the terms and conditions of this Agreement or the other Loan Documents.
4.1.14 Utilities and Public Access. The Property has rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service the Property for its intended uses. All
public utilities necessary or convenient to the full use and enjoyment of the Property are located
either in the public right-of-way abutting the Property (which are connected so as to serve the
Property without passing over other property) or in recorded easements serving the Property and
such easements are set forth in and insured by the Title Insurance Policy. All roads necessary for
the use of the Property for its current purposes have been completed and dedicated to public use
and accepted by all Governmental Authorities.
4.1.15 Not a Foreign Person. Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.
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4.1.16 Separate Lots. The Property is comprised of one (1) or more parcels which constitute a separate tax lot or
lots and does not constitute a portion of any other tax lot not a part of the Property.
4.1.17 Assessments. There are no pending or proposed special or other assessments for public improvements or
otherwise affecting the Property, nor are there any contemplated improvements to the Property that
may result in such special or other assessments.
4.1.18 Enforceability. The Loan Documents are not subject to any right of rescission, set-off, counterclaim or
defense by Borrower or Guarantor, 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 (subject to principles of equity and bankruptcy, insolvency and other laws generally
affecting creditors’ rights and the enforcement of debtors’
obligations), and neither Borrower nor Guarantor have asserted any right of rescission,
set-off, counterclaim or defense with respect thereto.
4.1.19 No Prior Assignment. There are no prior assignments of the Leases or any portion of the Rents due and payable or
to become due and payable which are presently outstanding.
4.1.20 Insurance. Borrower has obtained and has delivered to Lender certified copies of the Policies
reflecting the insurance coverages, amounts and other requirements set forth in this Agreement. No
claims have been made or are currently pending, outstanding or otherwise remain unsatisfied under
any such Policy, and neither Borrower nor any other Person, has done, by act or omission, anything
which would impair the coverage of any such Policy.
4.1.21 Management Agreement. The Management Agreement is in full force and effect and there is no default thereunder by
any party thereto and no event has occurred that, with the passage of time and/or the giving of
notice would constitute a default thereunder. The Management Agreement was entered into on
commercially reasonable terms.
4.1.22 Ground Lease. Borrower hereby represents and warrants to Lender the following with respect to the Ground
Lease:
(a) Recording; Modification. A memorandum of the Ground Lease has been duly recorded.
The Ground Lease permits the interest of Borrower to be encumbered by a mortgage or the Ground
Lessor has approved and consented to the encumbrance of the Property by the Mortgage. There have
been no amendments or modifications to the terms of the Ground Lease since recordation of the
Ground Lease (or a memoranda thereof), with the exception of written instruments which have been
delivered to Lender. The Ground Lease may not be terminated, surrendered or amended without the
prior written consent of Lender; provided that Ground Lessor shall not be prevented from exercising
its remedies in accordance with the Ground Lease if the obligations of Borrower under the Ground
Lease are not performed as provided in the Ground Lease, subject to notice and cure rights provided
to Lender in the Ground Lease.
(b) No Liens. Except for the Permitted Encumbrances and other encumbrances of record,
Borrower’s interest in the Ground Lease is not subject to any Liens or
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encumbrances superior to, or
of equal priority with, the Mortgage other than the Ground Lessor’s related fee interest.
(c) Ground Lease Assignable. Borrower’s interest in the Ground Lease is assignable
without the consent of the Ground Lessor to Lender, the purchaser at any foreclosure sale or the
transferee under a deed or assignment in lieu of foreclosure in connection with the foreclosure of
the Lien of the Mortgage or transfer of Borrower’s leasehold state by deed or
assignment in lieu of foreclosure. In connection with the first assignment thereafter, the
Ground Lease is further assignable by such transferee and its successors and assigns without the
consent of the Ground Lessor, subject to the provisions of Section 11.1(b) of the Ground Lease.
(d) Default. As of the date hereof, the Ground Lease is in full force and effect and
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.
(e) Notice. The Ground Lease requires the Ground Lessor to give notice of any default
by Borrower to Lender prior to exercising its remedies thereunder.
(f) Cure. Lender is permitted the opportunity (including, where necessary, sufficient
time to gain possession of the interest of Borrower under the Ground Lease) to cure any default
under the Ground Lease, which is curable after the receipt of notice of any of the default before
the Ground Lessor thereunder may terminate the Ground Lease as set forth in Section 11.8 thereof.
(g) Term. The Ground Lease has a term which extends not less than ten (10) years
beyond the Maturity Date.
(h) New Lease. The Ground Lease requires the Ground Lessor to enter into a new lease
upon termination of the Ground Lease for any reason, including rejection or disaffirmation of the
Ground Lease in a bankruptcy proceeding.
(i) Insurance Proceeds. Under the terms of the Ground Lease and the Mortgage, taken
together, any related insurance and condemnation proceeds that are paid or awarded with respect to
the leasehold interest will be applied either to the repair or restoration of all or part of the
Property, with Lender having the right, if the proceeds exceed $500,000, 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.
(j) Subleasing. Except as set forth in Article 11 of the Ground Lease, the Ground
Lease does not impose any restrictions on subleasing.
4.1.23 Flood Zone. None of the Improvements on the Property is located in an area as identified by the Federal
Emergency Management Agency as an area having special flood hazards and, if so located, the flood
insurance required pursuant to Section 6.1.1(a)(A) is in full force and effect with respect
to the Property.
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4.1.24 Required Equity Funds. Borrower represents and warrants to Lender that Borrower has contributed the Required
Equity Funds for approved Project-Related Costs.
4.1.25 Boundaries. All of the improvements which were included in determining the appraised value of the
Property lie wholly within the boundaries and building restriction lines of the Property, and no
improvements on adjoining properties encroach upon the Property, and no easements or other
encumbrances upon the Property encroach upon any of the Improvements, so as to affect the value or
marketability of the Property except those which are insured against by the Title Insurance Policy.
4.1.26 Leases. The Property is not subject to any leases other than the Leases described in the rent roll
attached hereto as Schedule V and made a part hereof. Borrower is the owner and lessor of
landlord’s interest in the Leases. No Person has any possessory interest in the Property or right
to occupy the same except under and pursuant to the provisions of the Leases. The current Leases
are in full force and effect and, to the best of Borrower’s knowledge, (a) there are no defaults
thereunder by either party and (b) there are no conditions that, with the passage of time or the
giving of notice, or both, would constitute defaults thereunder. No Rent (including security
deposits) has been paid more than one (1) month in advance of its due date. To the best of
Borrower’s knowledge, all work to be completed by Borrower prior to the date hereof under each
Lease has been performed as required and has been accepted by the applicable tenant, and any
payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or
abatements required to be given by Borrower to any tenant has already been received by such tenant.
There has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of
the Rents received therein. To the best of Borrower’s knowledge, no tenant listed on Schedule
I has assigned its Lease or sublet all or any portion of the premises demised thereby, no such
tenant holds its leased premises under assignment or sublease, nor does anyone except such tenant
and its employees occupy such leased premises. No Tenant under any Lease has a right or option
pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the
building of which the leased premises are a part. No Tenant has no right or option for additional
space in the Improvements. Except as otherwise disclosed by the Environmental Report (as defined
in the Mortgage), no hazardous wastes or toxic substances, as defined by applicable federal, state
or local statutes, rules and regulations, have been disposed, stored or treated by any tenant under
any Lease on or about the Property nor does Borrower have any knowledge of any Tenant’s intention
to use its premises for any activity which, directly or indirectly, involves the use, generation,
treatment, storage, disposal or transportation of any petroleum product or any toxic or hazardous
chemical, material, substance or waste. True, correct and complete copies of the Leases have been
provided to Lender and such Leases have not been modified or amended in any way.
4.1.27 Survey. The Survey for the Property delivered to Lender in connection with this Agreement has been
prepared in accordance with the provisions of Section 3.1.3(c) hereof, and does not fail to
reflect any material matter affecting the Property or the title thereto.
4.1.28 Inventory. Borrower is the owner of all of the Equipment, Fixtures and Personal Property (as such
terms are defined in the Mortgage) located on or at the Property and shall not lease any Equipment,
Fixtures or Personal Property other than as permitted hereunder.
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All of the Equipment, Fixtures and Personal Property are sufficient to operate the Property in the manner
required hereunder and in the manner in which it is currently operated.
4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of
transfer taxes required to be paid by any Person under applicable Legal Requirements currently in
effect in connection with the transfer of the Property to Borrower have been 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 Mortgage, have been paid, and, under current Legal Requirements,
the Mortgage is enforceable in accordance with its terms by Lender (or any subsequent holder
thereof), subject to principles of equity and bankruptcy, insolvency and other laws generally
applicable to creditors’ rights and the enforcement of debtors’ obligations.
4.1.30 Special Purpose Entity/Separateness.
(a) Until the Total Debt has been paid in full, Borrower hereby represents, warrants and
covenants, that Borrower is, shall be and shall continue to be a Special Purpose Entity.
(b) The representations, warranties and covenants set forth in Section 4.1.30(a) shall
survive for so long as any amount remains payable to Lender under this Agreement or any other Loan
Document.
(c) All of the facts stated and all of the assumptions made in the Insolvency Opinion,
including, but not limited to, in any exhibits attached thereto, are true and correct in all
respects and all facts stated and all assumptions made in any subsequent non-consolidation opinion
required to be delivered in connection with the Loan Documents (an “Additional Insolvency
Opinion”), including, but not limited to, any exhibits attached thereto, will have been and shall
be true and correct in all respects. Borrower has complied and will comply with, all of the
assumptions made with respect to Borrower in the Insolvency Opinion. Borrower will have complied
and will comply with all of the assumptions made with respect to Borrower in any Additional
Insolvency Opinion. Each entity other than Borrower with respect to which an assumption shall be
made in any Additional Insolvency Opinion will have complied and will comply with all of the
assumptions made with respect to it in any Additional Insolvency Opinion.
4.1.31 Property Management Agreement. The Management Agreement is in full force and effect and there is no default
thereunder by any party thereto and no event has occurred that, with the passage of time and/or the
giving of notice would constitute a default thereunder. The Management Agreement was entered into
on commercially reasonable terms.
4.1.33 Illegal Activity. No portion of the Property has been or will be purchased with proceeds of any illegal
activity.
4.1.34 No Change in Facts or Circumstances; Disclosure. All information submitted by and on behalf of Borrower to Lender and in all financial
statements, rent rolls
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(including the Rent Roll attached hereto as Schedule V), reports,
certificates and other documents submitted in connection with the Loan or in satisfaction of the
terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan
Document, are accurate, complete and correct in all material respects. There has been no material
adverse change in any condition, fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially
and adversely affects or might materially and adversely affect the use, operation or value of the
Property or the business operations or the financial condition of Borrower. Borrower has disclosed
to Lender all material facts and has not failed to disclose any material fact that could cause any
Provided Information or representation or warranty made herein to be materially misleading.
4.1.35 Investment Company Act. Borrower is not (a) an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended; (b) a “holding
company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding
company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of
1935, as amended; or (c) subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
4.1.36 Embargoed Person. As of the date hereof and at all times throughout the term of the Loan, including after
giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or
other assets of Borrower and Guarantor constitute property of, or are beneficially owned, directly
or indirectly, by any Embargoed Person; (b) no Embargoed Person has any interest of any nature
whatsoever in Borrower or Guarantor, as applicable, with the result that the investment in Borrower
or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is
in violation of law; and (c) none of the funds of Borrower or Guarantor, as applicable have been
derived from any unlawful activity with the result that the investment in Borrower or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of
law.
4.1.37 Principal Place of Business; State of Organization. Borrower’s principal place of business as of the date hereof is the address set forth in
the introductory paragraph of this Agreement. The Borrower is organized under the laws of the
State of Delaware.
4.1.38 Intentionally Omitted.
4.1.39 Mortgage Taxes. As of the date hereof, Borrower represents that it has paid all state, county and municipal
recording and all other taxes imposed upon the execution and recordation of the Mortgage.
4.1.40 Zoning; Building Permits. The Project Improvements can be developed and constructed in accordance with the Plans and
Specifications “as of right” without requiring the issuance of any zoning variance or other
discretionary permit and/or approval. Borrower has obtain all building permits and other
Governmental Approvals required for the construction of the Project Improvements.
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4.1.41 Intentionally Omitted..
4.1.42 Single Purpose; Borrower’s Prior Acts. Borrower hereby represents and warrants to Lender that:
(a) Since its formation, Borrower has not owned any asset or property other than (i) the
Property, and (ii) incidental personal property necessary for the ownership or operation of the
Property.
(b) Since its formation, Borrower has not engaged in any business other than the ownership,
management and operation of the Property and Borrower has conducted and operated its business as
presently conducted and operated.
(c) Since its formation, Borrower has not entered into any contract or agreement with any of
its Affiliates, any of its constituent parties or any Affiliate of any constituent party, except
those (i) in the ordinary course of its business and on terms which are intrinsically fair,
commercially reasonable and are substantially similar to those that would be obtained in a
comparable arm’s-length transaction with an unrelated third party, and (ii) in connection with this
Agreement.
(d) Since its formation, Borrower has not incurred any Indebtedness.
(e) Since its formation, Borrower has not made any loans to any Person or held evidence of
indebtedness issued by any other Person or entity (other than cash and investment-grade securities
issued by an entity that is not an Affiliate of or subject to common ownership with such entity).
(f) Since its formation, Borrower has remained solvent and has paid its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its own assets and
generally as the same have became due.
(g) Since its formation, Borrower, has done or caused to be done all things necessary to
observe its respective organizational formalities applicable to a business entity of its
type and to preserve their respective existence or has promptly taken curative action with
respect thereto.
(h) Since its formation, (i) Borrower has maintained all of its respective accounts (including
bank accounts), books and records separate from those of its Affiliates and any constituent party;
(ii) Borrower has maintained separate financial statements and its respective assets have not been
listed as assets on the financial statement of any other entity except as required by GAAP;
provided, however, that any such consolidated financial statement shall contain a
note indicating that its separate assets and liabilities are neither available to pay the debts of
the consolidated entity nor constitute obligations of the consolidated entity; (iii) Borrower has
filed its own tax returns and has not filed a consolidated federal income tax return with any other
Person, except to the extent that Borrower was required to file consolidated tax returns by law;
and (iv) Borrower has maintained books, records, resolutions and agreements as official records.
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(i) Since its formation, Borrower has been, and at all times has held itself out and
identified itself and will hold itself out and identify itself as a separate and distinct entity
under its own name or in a name franchised or licensed to it by an entity other than an Affiliate
of Borrower and not as a division or part of any other Person, except for services rendered under a
business management services agreement with an Affiliate that complies with the terms contained in
Subsection (h) above, so long as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent of Borrower, has conducted business in
its own name; has not identified itself or any of its Affiliates as a division or part of the
other; and has used separate stationery, invoices and checks bearing its own name and not the name
of any Affiliate.
(j) Since its formation, Borrower has maintained adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of its contemplated
business operations.
(k) Since its formation, neither Borrower has, nor have any of its constituent parties, have
sought or effected the liquidation, dissolution, winding up, liquidation, consolidation or merger,
in whole or in part, of Borrower.
(l) Since its formation, Borrower has not commingled its funds or other assets with those of
any Affiliate or constituent party or any other Person, and Borrower, has held all of its assets in
its own name.
(m) Since its formation, Borrower has maintained its assets in such a manner that it would not
be costly or difficult to segregate, ascertain or identify their respective individual assets from
those of any Affiliate or constituent party or any other Person.
(n) Since its formation, Borrower has not guaranteed or become obligated for the debts of any
other Person and has not held itself out to be responsible for or to have their respective credit
available to satisfy the debts or obligations of any other Person.
(o) Borrower is presently conducting its business so that the assumptions made with respect to
Borrower in the Insolvency Opinion are currently true and correct in all material respects.
(p) Since its formation, Borrower has not permitted any Affiliate or constituent party
independent access to its bank accounts.
(q) Since its formation, Borrower has paid the salaries of its own employees (if any) from its
own funds and has maintained a sufficient number of employees (if any) in light of their respective
contemplated business operations.
(r) Since its formation, Borrower has compensated each of its consultants and agents from its
own funds for services provided to it and pay from its own respective assets all obligations of any
kind incurred.
(s) Since its date of formation, Borrower has not acquired any obligations or securities of
any of its Affiliates.
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(t) Since the date of its formation, Borrower has not acquired or held any interest in or
formed any entity or subsidiary.
4.1.43 Cash Management Account. Borrower hereby represents and warrants to Lender that:
(a) This Agreement, together with the other Loan Documents, create a valid and continuing
security interest (as defined in the Uniform Commercial Code of the State of Delaware) in the
Clearing Account and Cash Management Account in favor of Lender, which security interest is prior
to all other Liens, other than Permitted Encumbrances, and is enforceable as such against creditors
of and purchasers from Borrower. Other than in connection with the Loan Documents and except for
Permitted Encumbrances, Borrower has not sold, pledged, transferred or otherwise conveyed the
Clearing Account and Cash Management Account;
(b) Each of the Clearing Account and Cash Management Account constitutes a “deposit account”
within the meaning of the Uniform Commercial Code of the State of Delaware;
(c) Pursuant and subject to the terms hereof, the Clearing Bank and the Cash Management Bank
have agreed to comply with all instructions originated by Lender, without further consent by
Borrower, directing disposition of the Clearing Account and Cash Management Account and all sums at
any time held, deposited or invested therein, together with any interest or other earnings thereon,
and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts,
general intangibles, chattel paper, deposit accounts, instruments, documents or securities; and
(d) The Clearing Account and Cash Management Account are not in the name of any Person other
than Borrower, as pledgor, or Lender, as pledgee. Borrower has not consented to the Clearing Bank
and the Cash Management Bank complying with instructions with respect to the Clearing Account and
Cash Management Account from any Person other than Lender.
4.1.44 Trade Name; Other Intellectual Property. Borrower owns and possesses or licenses (as the case may be) all such patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark
rights, websites, domain names and copyrights, as Borrower considers necessary for the conduct of
its business as now conducted without, individually or in the aggregate, any infringement upon
rights of other Persons, in each case except as could not reasonably be expected to (i) materially
and adversely affect the value of the Property, (ii) impair the use and operation of the Property
or (iii) impair Borrower’s ability to pay its obligations in a timely manner, and there is no
individual patent, patent right, trademark, trademark right, trade name, trade name right, service
mark, service mark right or copyright the loss of which would (i) materially and adversely affect
the value of the Property, (ii) impair the use and operation of the Property or (iii) impair
Borrower’s ability to pay its obligations in a timely manner (collectively, the “Intellectual
Property”).
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4.1.45 General Contractor’s Agreement. As of the date hereof, (i) the General Contractor’s Agreement is in full force and effect;
(ii) Borrower and General Contractor are in full compliance with their respective obligations under
the General Contractor’s Agreement; (iii) the work to be performed by General Contractor under the
General Contractor’s Agreement is the work called for by the Plans and Specifications; and (iv) all
work on the Project Improvements heretofore completed has been completed in accordance with the
Plans and Specifications in a good and workmanlike manner and is free of any defects. Borrower
shall from time to time, upon request by Lender, cause General Contractor to provide Lender with
reports in regard to the status of construction of the Project Improvements, in such form and
detail as reasonably requested by Lender.
4.1.46 Architect’s Contract. As of the date hereof, (i) the Architect’s Contract is in full force and effect; (ii) both
Borrower and, to the best of Borrower’s knowledge, Borrower’s Architect are in compliance in all
material respects with their respective obligations under the Architect’s Contract; (iii) the work
to be performed by Borrower’s Architect under the Architect’s Contract is the architectural
services required to design the Project Improvements to be built in accordance with the Plans and
Specifications and all architectural services required to complete the Project Improvements in
accordance with the Plans and Specifications is provided for under the Architect’s Contract; and
(iv) all work on the Project Improvements heretofore completed has been completed in accordance
with the Plans and Specifications in a good and workmanlike manner and is free of any defects.
Upon request by Lender, Borrower shall or Borrower shall cause Borrower’s Architect to provide
Lender with reports in regard to the status of construction of the Project Improvements, in such
form and detail as reasonably requested by Lender.
4.1.47 Plans and Specifications. As of the date hereof, Borrower has furnished Lender true and complete sets of the Plans
and Specifications. The Plans and Specifications comply with all applicable Legal Requirements,
all Governmental Approvals, and all restrictions, covenants and easements affecting the Property,
and have been approved by each such Governmental Authority as is required for construction and
renovation of the Project Improvements and the General Contractor, Guarantor, Borrower’s Architect,
Lender and the Construction Consultant.
4.1.48 Budget. The Development Budget accurately reflects all anticipated Project-Related Costs. Upon the
making of the Advances requested in Borrower’s Requisition in the manner set forth therein, all
materials and labor therefore supplied or performed in connection with the Property will have been
paid for in full (subject to the Retainage).
4.1.49 Feasibility. Each of the Construction Schedule and the Disbursement Schedule is accurate.
Section 4.2 Survival of Representations. Borrower agrees that all of the representations and warranties of Borrower set forth in
Section 4.1 hereof and elsewhere in this Agreement and in the other Loan Documents shall
survive for so long as any amount remains owing to Lender under this Agreement or any of the other
Loan Documents by Borrower. All representations, warranties, covenants and agreements made in this
Agreement or in the other
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Loan Documents by Borrower shall be deemed to have been relied upon by
Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.
ARTICLE V.
BORROWER COVENANTS
Section 5.1 Affirmative Covenants. From the date hereof and until payment and performance in full of all obligations of
Borrower under the Loan Documents or the earlier release of the Lien of the Mortgage encumbering
the Property (and all related obligations) in accordance with the terms of this Agreement and the
other Loan Documents, Borrower hereby covenants and agrees with Lender that:
5.1.1 Existence; Compliance with Legal Requirements. Borrower shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its existence, rights, licenses, permits and franchises and comply with all
Legal Requirements applicable to it and the Property. There shall never be committed by Borrower,
and Borrower shall never permit any other Person in occupancy of or involved with the operation or
use of the Property to commit any act or omission affording the federal government or any state or
local government the right of forfeiture against the Property or any part thereof or any monies
paid in performance of Borrower’s obligations under any of the Loan Documents. Borrower hereby
covenants and agrees not to commit, permit or suffer to exist any act or omission affording such
right of forfeiture. Borrower shall at all times maintain, preserve and protect all franchises and
trade names and preserve all the remainder of its property used or useful in the conduct of its
business and shall keep the Property 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 Mortgage. Borrower shall keep the Property
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. 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 validity of any Legal
Requirement, the applicability of any Legal Requirement to Borrower or the Property or any alleged
violation of any Legal Requirement, provided that (i) no Default or 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 superior in lien to the Mortgage; (iii) such proceeding shall be permitted under and
be conducted in accordance with the provisions of any 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) neither the Property nor any part thereof or
interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (v)
Borrower shall promptly upon final determination thereof comply with any such Legal Requirement
determined to be valid or applicable or cure any violation of any Legal Requirement; (vi) such
proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or the
Property; and (vii) Borrower shall furnish such security as may be required in the proceeding, or
as may be requested by Lender, to insure compliance with such Legal Requirement, together with all
interest and penalties payable in connection therewith. Lender may apply any such security, as
necessary to cause compliance with such Legal Requirement at any time when, in the reasonable
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judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally
established or the Property (or any part thereof or interest therein) shall be in danger of being
sold, forfeited, terminated, cancelled or lost.
5.1.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or
imposed against the Property or any part thereof as the same become due and payable; provided,
however, Borrower’s obligation to directly pay Taxes shall be suspended for so long as Borrower
complies with the terms and provisions of Section 7.1 hereof. Borrower will deliver to
Lender receipts for payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid or are not then delinquent no later than ten (10) days prior to the date
on which the Taxes and/or Other Charges would otherwise be delinquent if not paid. Borrower shall
furnish to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the
same shall become delinquent (provided, however, Borrower is not required to furnish such receipts
for payment of Taxes in the event that such Taxes have been paid by Lender pursuant to Section
7.1 hereof). Borrower shall not suffer and shall promptly cause to be paid and discharged any
Lien or charge whatsoever which may be or become a Lien or charge against the Property, and shall
promptly pay for all utility services provided to the Property. 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 Default or 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 superior in lien to the Mortgage; (iii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder and such proceeding shall be
conducted in accordance with all applicable statutes, laws and ordinances; (iv) neither the
Property nor any part thereof or interest therein will be in danger of being sold, forfeited,
terminated, cancelled or lost; (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; (vi)
such proceeding shall suspend the collection of such contested Taxes or Other Charges from the
Property; and (vii) Borrower shall furnish 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 or the Property (or part thereof or interest therein)
shall be in danger of being sold, forfeited, terminated, cancelled or lost or there shall be any
danger of the Lien of the Mortgage being primed by any related Lien.
5.1.3 Litigation. Borrower shall give prompt written notice to Lender of any litigation or governmental
proceedings pending or threatened against Borrower and/or Guarantor which, might materially
adversely affect Borrower’s or Guarantor’s condition (financial or otherwise) or business or the
Property.
5.1.4 Access to Property. Borrower shall permit agents, representatives and employees of Lender to inspect the
Property or any part thereof at reasonable hours upon reasonable advance notice and subject to the
rights of Tenants under Leases.
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5.1.5 Notice of Default. Borrower shall promptly advise Lender of any material adverse change in Borrower’s
condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which
Borrower has knowledge.
5.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully with Lender with respect to any proceedings before any
court, board or other Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection
therewith, permit Lender, at its election, to participate in any such proceedings.
5.1.7 Perform Loan Documents. Borrower shall observe, perform and satisfy all the terms, provisions, covenants and
conditions of, and shall pay when due all costs, fees and reasonable expenses to the extent
required under the Loan Documents executed and delivered by, or applicable to, Borrower.
5.1.8 Award and Insurance Benefits. Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or
Insurance Proceeds lawfully or equitably payable in connection with the Property, and Lender shall
be reimbursed for any expenses incurred in connection therewith (including
attorneys’ fees and disbursements, and the payment by Borrower of the expense of an appraisal
on behalf of Lender in case of Casualty or Condemnation affecting the Property or any part thereof)
out of such Insurance Proceeds.
5.1.9 Further Assurances. Borrower shall, at Borrower’s sole cost and expense:
(a) furnish to Lender all instruments, documents, boundary surveys, footing or foundation
surveys, certificates, plans and specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and instrument required to be
furnished by Borrower pursuant to the terms of the Loan Documents or which are reasonably requested
by Lender in connection therewith;
(b) execute and deliver to Lender such documents, instruments, certificates, assignments and
other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect
the collateral at any time securing or intended to secure the obligations of Borrower under the
Loan Documents, as Lender may reasonably require including, without limitation, the execution and
delivery of all such writings necessary to transfer any licenses with respect to the Property into
the name of Lender or its designee after the occurrence of an Event of Default; and
(c) do and execute all and such further lawful and reasonable acts, conveyances and assurances
for the better and more effective carrying out of the intents and purposes of this Agreement and
the other Loan Documents, as Lender shall reasonably require from time to time.
5.1.10 Principal Place of Business, State of Organization. Borrower will not cause or permit any change to be made in its name, identity (including its
trade name or names), place of organization or formation (as set forth in Section 4.1.36
hereof) or Borrower’s corporate or partnership structure unless Borrower shall have first notified
Lender in writing of such
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change at least thirty (30) days prior to the effective date of such
change, and shall have first taken all reasonable action required by Lender for the purpose of
perfecting or protecting the lien and security interests of Lender pursuant to this Agreement, the
Cash Management Agreement and the other Loan Documents and, in the case of a change in Borrower’s
structure, without first obtaining the prior consent of Lender. Upon Lender’s request, Borrower
shall execute and deliver additional financing statements, security agreements and other
instruments which may be necessary to effectively evidence or perfect Lender’s security interest in
the Property as a result of such change of principal place of business or place of organization.
Borrower’s principal place of business and chief executive office, and the place where Borrower
keeps its books and records, including recorded data of any kind or nature, regardless of the
medium or recording, including software, writings, plans, specifications and schematics, has been
for the preceding four months (or, if less, the entire period of the existence of Borrower) and
will continue to be the address of Borrower set forth at the introductory paragraph of this
Agreement (unless Borrower notifies Lender in writing at least thirty (30) days prior to the date
of such change). Borrower’s organizational identification number, if any, assigned by the state of
incorporation or organization is correctly set forth in the introductory paragraph of this
Agreement. Borrower shall promptly notify Lender of any change in its
organizational identification number. If Borrower does not now have an organizational
identification number and later obtains one, Borrower promptly shall notify Lender of such
organizational identification number.
5.1.11 Financial Reporting .
(a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year
basis, in accordance with GAAP (or such other accounting basis acceptable to Lender), proper and
accurate books, records and accounts reflecting all of the financial affairs of Borrower and all
items of income and expense in connection with the operation of the Property. Lender shall have
the right from time to time at all times during normal business hours upon reasonable notice to
examine such books, records and accounts at the office of Borrower or any other Person maintaining
such books, records and accounts and to make such copies or extracts thereof as Lender shall desire
at Lender’s expense unless an Event of Default shall have occurred. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower’s accounting records with respect to the Property, as Lender shall determine to be
necessary or appropriate in the protection of Lender’s interest. Upon Lender’s reasonable request,
Borrower shall deliver to Lender such other information necessary and sufficient to fairly
represent the financial condition of Borrower and the Property.
(b) Borrower will furnish to Lender annually, within one hundred twenty (120) days following
the end of each Fiscal Year of Borrower, a complete copy of Borrower’s annual financial statements
covering the Property for such Fiscal Year audited by a “Big Four” accounting firm or other
independent certified public accountant acceptable to Lender in accordance with GAAP and containing
statements of profit and loss for Borrower and the Property and a balance sheet for Borrower. Such
statements shall set forth the financial condition and the results of operations for the Property
for such Fiscal Year, and shall include, but not be limited to, amounts representing annual Net
Cash Flow, Net Operating Income, Gross Income from Operations and Operating Expenses. Borrower’s
annual financial statements shall be accompanied by (i) a comparison of the budgeted income and
expenses and the actual income
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and expenses for the prior Fiscal Year, (ii) an Officer’s
Certificate stating that each such annual financial statement presents fairly the financial
condition and the results of operations of Borrower and the Property being reported upon and has
been prepared in accordance with GAAP; (iii) a list of tenants, if any, occupying more than twenty
percent (20%) of the total floor area of the Improvements, (iv) a breakdown showing the year in
which each Lease then in effect expires and the percentage of total floor area of the Improvements
and the percentage of base rent with respect to which Leases shall expire in each such year, each
such percentage to be expressed on both a per year and cumulative basis, and (v) a schedule audited
by such independent certified public accountant reconciling Net Operating Income to Net Cash Flow
(the “Net Cash Flow Schedule”), which shall itemize all adjustments made to Net Operating Income to
arrive at Net Cash Flow deemed material by such independent certified public accountant. Together
with Borrower’s annual financial statements, Borrower shall furnish to Lender an Officer’s
Certificate certifying as of the date thereof whether there exists an event or circumstance which
constitutes a Default or Event of Default under the Loan Documents executed and delivered by, or
applicable to, Borrower, and if such Default or Event of Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy the same.
(c) Borrower will furnish, or cause to be furnished, to Lender on or before thirty (30) days
after the end of each calendar month throughout the term of the Loan the following items,
accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and
complete and fairly present the financial condition and results of the operations of Borrower and
the Property (subject to normal year-end adjustments) as applicable: monthly and year-to-date
operating statements (including Capital Expenditures) prepared for each calendar month, noting all
Net Operating Income, Gross Income from Operations and Operating Expenses (not including any
contributions to the Reserve Funds) and other information necessary and sufficient to fairly
represent the financial position and results of operation of the Property during such calendar
month, and containing (i) a comparison of budgeted income and expenses and the actual income and
expenses together with a detailed explanation of any variances of five percent (5%) or more between
budgeted and actual amounts for such periods, for any individual items in excess of $10,000, all in
form satisfactory to Lender, (ii) a calculation reflecting the annual Debt Service Coverage Ratio
for the immediately preceding twelve (12) month period as of the last day of such month accompanied
by an Officers’ Certificate with respect thereto; and (iii) a Net Cash Flow Schedule. In addition,
such Officer’s Certificate shall also state that the representations and warranties of Borrower set
forth in Section 4.1.30 and Section 4.1.35 are true and correct as of the date of
such certificate and that there are no trade payables outstanding for more than sixty (60) days.
(d) Borrower will furnish, or cause to be furnished, to Lender on or before thirty (30) days
after the end of each calendar month throughout the term of the Loan, an rent roll for the subject
month, accompanied by an Officer’s Certificate stating that such rent roll is true, correct,
accurate, and complete and fairly presents the financial condition and results of the operations of
Borrower and the Property (subject to normal year-end adjustments) as applicable.
(e) For the partial year period commencing on the date of the Closing Date, and for each
Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget not later than thirty (30)
days prior to the commencement of such period or Fiscal Year in form
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reasonably satisfactory to
Lender. The Annual Budget shall be subject to Lender’s written approval (each such Annual Budget,
an “Approved Annual Budget”). In the event that Lender objects to a proposed Annual Budget
submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15) days
after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender.
Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days
after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise the same in accordance with the process described in
this subsection until Lender approves the Annual Budget. Until such time that Lender approves a
proposed Annual Budget, the most recent Approved Annual Budget shall apply; provided that, such
Approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums
and Other Charges.
(f) In the event that, Borrower must incur an extraordinary operating expense or capital
expense not set forth in the Approved Annual Budget (each an “Extraordinary Expense”), then
Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender’s approval, except in the case of emergency (provided that
Borrower will notify Lender promptly after such emergency).
(g) Any reports, statements or other information required to be delivered under this Agreement
shall be delivered (i) in paper form, (ii) on a diskette, and (iii) if requested by Lender and
within the capabilities of Borrower’s data systems without change or modification thereto, in
electronic form and prepared using a Microsoft Word for Windows or WordPerfect for Windows files
(which files may be prepared using a spreadsheet program and saved as word processing files).
Borrower agrees that Lender may disclose information regarding the Property and Borrower that is
provided to Lender pursuant to this Section 5.1.11 in connection with the Securitization to
such parties requesting such information in connection with such Securitization.
5.1.12 Business and Operations . Borrower will continue to engage in the businesses presently conducted by it as and to the
extent the same are necessary for the ownership, maintenance, management and operation of the
Property. Borrower will qualify to do business and will remain in good standing under the laws of
all relevant jurisdictions as and to the extent the same are required for the ownership,
maintenance, management and operation of the Property. Borrower shall at all times during the term
of the Loan, continue to own and/or maintain all of the Equipment, Fixtures and Personal Property
which are necessary to operate the Property in the manner required hereunder and in the manner in
which it is currently operated.
5.1.13 Title to the Property . Borrower will warrant and defend (a) the title to the Property and every part thereof, subject
only to Liens permitted hereunder (including Permitted Encumbrances) and (b) the validity and
priority of the Lien of the Mortgage and the Assignment of Leases on the Property, 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 the
Property, other than as permitted hereunder, is claimed by another Person.
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5.1.14 Costs of Enforcement. In the event (a) that the Mortgage encumbering the Property is foreclosed in whole or in part
or that the Mortgage is put into the hands of an attorney for collection, suit, action or
foreclosure, (b) of the foreclosure of any mortgage encumbering the Property prior to or subsequent
to the Mortgage in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons
or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of
collection and defense, including attorneys’ fees and costs, incurred by Lender or Borrower in
connection therewith and in connection with any appellate proceeding or post-judgment action
involved therein, together with all required service or use taxes.
5.1.15 Estoppel Statement.
(a) After written request by Lender, Borrower shall within ten (10) days furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate
of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any, and (vi) that the Note, this Agreement, the
Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification.
(b) Borrower shall deliver to Lender upon written request, tenant estoppel certificates from
each tenant paying base rent in an amount equal to or exceeding five percent (5%) of the Gross
Income from Operations from the Property occupied by such tenant in form and substance reasonably
satisfactory to Lender provided that Borrower shall not be required to deliver such certificates
more frequently than two (2) times in any calendar year.
(c) After written request by Borrower, Lender shall within ten (10) days furnish Borrower with
a statement, duly acknowledged and certified, setting forth (i) the original principal amount of
the Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, and
(iv) the date installments of interest and/or principal were last paid.
5.1.16
Loan Proceeds . Borrower shall use the proceeds of the Loan solely and
exclusively for the purposes of constructing and renovating the Project Improvements in accordance
herewith and in accordance with the Building Loan Budget which shall be subject to no change except
as permitted hereby. Borrower will receive the Advances to be made hereunder and will hold the
right to receive the same as a trust fund for the purpose of paying the Costs of the Improvement
and it will apply the same first to such payment before using any part thereof for any other
purpose.
5.1.17 Performance by Borrower. Borrower shall in a timely manner observe, perform
and fulfill each and every covenant, term and provision of each Loan Document executed and
delivered by, or applicable to, Borrower, and shall not enter into or otherwise suffer or permit
any amendment, waiver, supplement, termination or other modification of any Loan Document executed
and delivered by, or applicable to, Borrower without the prior written consent of Lender.
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5.1.18 Confirmation of Representations. Borrower shall deliver, in connection with any
Securitization, (a) one (1) or more Officer’s Certificates certifying as to the accuracy of all
representations made by Borrower in the Loan Documents as of the date of the closing of such
Securitization in all relevant jurisdictions, and (b) certificates of the relevant Governmental
Authorities in all relevant jurisdictions indicating the good standing and qualification of
Borrower and Guarantor as of the date of the Securitization.
5.1.19 Intentionally Omitted.
5.1.20 Leasing Matters. Borrower may not enter into a Lease, license or other occupancy
agreement for any portion of the Property without Lender’s prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed, provided, however, that after the
Property shall have achieved the Required Ratios at Completion, Borrower shall not be required to
obtain Lender’s approval of Leases for less than 15,000 square feet that otherwise satisfy the
requirements of this Agreement. Upon request, Borrower shall furnish Lender with executed copies
of all Leases. All renewals of Leases and all proposed Leases shall provide for rental rates
comparable to existing local market rates. All proposed Leases shall be on commercially reasonable
terms and shall not contain any terms which would materially affect Lender’s rights under the Loan
Documents. All Leases executed after the date hereof shall provide that they are subordinate to
the Mortgage and that the lessee agrees to attorn to Lender or any purchaser at a sale by
foreclosure or power of sale. Borrower (i) shall observe and perform the obligations imposed upon
the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend
or terminate the terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner
not to impair the value of the Property involved except that no termination by Borrower or
acceptance of surrender by a tenant of any Leases shall be permitted unless by reason of a tenant
default and then only in a commercially reasonable manner to preserve and protect the Property;
provided, however, that no such termination or surrender of any Lease will be permitted without the
written consent of Lender, provided, further, that after the Property shall have achieved the
Required Ratios at Completion, Borrower shall not be required to obtain Lender’s approval for
termination of Leases for less than 15,000 square feet that otherwise satisfy the requirements of
this Agreement; (iii) shall not collect any of the rents more than one (1) month in advance (other
than security deposits); (iv) shall not execute any other assignment of lessor’s interest in the
Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not alter, modify or
change the terms of the Leases in a manner inconsistent with the provisions of the Loan Documents
without Lender’s prior written consent which shall not be unreasonably withheld; and (vi) shall
execute and deliver at the request of Lender all such further assurances, confirmations and
assignments in connection with the Leases as Lender shall from time to time reasonably require.
Notwithstanding anything to the contrary contained herein, Borrower shall not enter into a lease of
all or substantially all of the Property without Lender’s prior written consent.
5.1.21 Alterations.
(a) Following the Completion of the Improvements, Borrower shall obtain Lender’s prior written
consent to any subsequent alterations to any Improvements, which consent shall not be unreasonably
withheld or delayed except with respect to alterations that may have a
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material adverse effect on
Borrower’s financial condition or the value of the Property or the Net Operating Income.
Notwithstanding the foregoing, Lender’s consent shall not be required in connection with (i) any
alterations that will not have a material adverse effect on Borrower’s financial condition or the
value of the Property or the Net Operating Income, and not adversely affecting any structural
component of any Improvements, any utility or HVAC system contained in any Improvements or the
exterior of any building constituting a part of any Improvements, or (ii) alterations performed in
connection with the Restoration of the Property after the occurrence of a Casualty or Condemnation
in accordance with the terms and provisions of this Agreement. If the total unpaid amounts due and
payable with respect to alterations to the Improvements at the Property (other than such amounts to
be paid or reimbursed by tenants under the Leases) shall at any time exceed Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00) (the “Threshold Amount”), Borrower shall promptly deliver
to Lender as security for the payment of such amounts and as additional security for Borrower’s
obligations under the Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C)
other securities having a rating acceptable to Lender and that the applicable Rating Agencies have
confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification
of the initial, or, if higher, then current ratings assigned to any Securities or any class thereof
in connection with any Securitization or (D) a completion and performance bond or (E) a Letter of
Credit. 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 Property (other than such amounts to be paid or
reimbursed by tenants under the Leases) over the Threshold Amount and Lender may apply such
security from time to time at the option of Lender to pay for such alterations.
(b) Notwithstanding anything contained herein to the contrary, the construction, Building Loan
and alteration of the Improvements in accordance with the Plans and Specifications shall not
constitute “alterations” to the Improvements and will not be subject to the terms of this
Section 5.1.21.
5.1.22 No Fees or Payments to Affiliates. In no event shall Borrower pay any fees or make
any payments to any Affiliates without Lender’s approval, which may be withheld in its sole
discretion.
5.1.23 Payment of Administration Fee. Borrower shall pay to Lender on the first
(1st) day of each calendar month the Administration Fee in advance.
5.1.24 General Contractor’s Agreement. Borrower shall (a) enforce the General Contractor’s Agreement in the best interests of the
Improvements using sound business judgment, (b) waive none of the material obligations of any of
the parties thereunder, (c) do no act which would relieve the General Contractor from its material
obligations to construct the Project Improvements according to the Plans and Specifications, (d)
make no amendments to or change orders under the General Contractor’s Agreement, except as
permitted under this Agreement, without the prior approval of Lender, (e) ensure that the work to
be performed by General Contractor under the General Contractor’s Agreement is the work called for
by the Plans and Specifications, and (f) ensure that all work on the Improvements shall be
completed in accordance with the Plans and Specifications in a good and workmanlike manner and
shall be free of any defects. Borrower shall from time to time, upon request by Lender, use
reasonable efforts to cause General Contractor to provide Lender with reports in regard to the
status of
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construction of the Project Improvements, in such form and detail as reasonably requested
by Lender.
5.1.25 Architect’s Contract. Borrower shall enforce the Architect’s Contract in the best
interests of Borrower consistent with the construction of the Project Improvements using sound
business judgment, (b) waive none of the material obligations of Borrower’s Architect thereunder,
(c) do no act which would relieve Borrower’s Architect from its material obligations under the
Architect’s Contract and (d) make no amendments to the Architect’s Contract without the prior
approval of Lender. Upon request by Lender, Borrower shall cause Borrower’s Architect to provide
Lender with reports in regard to the status of construction of the Project Improvements, in such
form and detail as reasonably requested by Lender.
5.1.26 Building Loan Costs and Expenses. Borrower shall promptly pay when due all Building
Loan Costs.
5.1.27 Fees. Borrower shall pay when due the reasonable fees of the Construction Consultant,
all reasonable costs and expenses, including, without limitation, appraisal fees (only if required
by law after the initial appraisal) recording fees and charges, abstract fees, title policy fees,
escrow fees, reasonable attorneys’ fees, fees of inspecting architects and engineers to the extent
provided hereunder in connection with Advances, fees of environmental consultants to the extent
provided in the Mortgage, and all other reasonable and customary costs and expenses which have been
incurred or which may hereafter be incurred by Lender in connection with the preparation and
execution of the Loan Documents, including any extension, amendment or modification thereof; the
funding of the Loan, the administration and enforcement of this Agreement, the Mortgage, the Note,
and the other Loan Documents, including, without limitation, reasonable attorneys’ fees in any
action for the foreclosure of the Mortgage and the collection of the Loan, and all such fees
incurred in connection with any bankruptcy or insolvency proceeding; and Borrower will, within
twenty (20) days after demand by Lender, reimburse Lender for all such expenses which have been
incurred; and Borrower will indemnify and hold harmless Lender from and against, and reimburse it
for all claims, demands, liabilities, losses, damages, judgments, penalties, costs, and expenses
(including, without limitation, reasonable attorneys’ fees) which may be imposed upon, asserted against, or incurred or paid
by Lender by reason of, on account of or in connection with any bodily injury or property damage
occurring in or upon or in the vicinity of the Property through any cause whatsoever or asserted
against Lender or Borrower on account of any act performed or omitted to be performed hereunder by
Borrower or on account of any transaction arising out of or in any way connected with the Property,
or with this Agreement or any of the indebtedness evidenced by the Note, provided that the
foregoing indemnity shall not apply to any such liabilities, losses, damages and expenses of Lender
to the extent arising from the willful misconduct or gross negligence of Lender. All amounts
incurred or paid by Lender under this Section 5.1.27, together with interest thereon at the
Default Rate from the due date until paid by Borrower, shall be added to the Debt and shall be
secured by the lien of the Mortgage.
5.1.28 Completion of Construction.
(a) Borrower shall cause the Project Improvements to be constructed in accordance with the
Plans and Specifications and any Permitted Encumbrance and in full
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compliance with the Building
Loan Budget, as the same may be amended from time to time in accordance with the terms hereof.
(b) Borrower shall cause the Completion of the Improvements to occur on or before the Required
Completion Date.
(c) Borrower shall diligently pursue construction of the entire Project Improvements to cause
the Complete of the Improvements and obtain a temporary or permanent certificate of occupancy (and
to the extent the same are conditional or require performance by Borrower, satisfy all conditions
to the issuance of and/or performed all obligations required for the continued validity of the
same) for the Property on or prior to the Required Completion Date, in accordance with the Plans
and Specifications and in compliance with all restrictions, covenants and easements affecting the
Property, all applicable Legal Requirements, and all Governmental Approvals, and with all terms and
conditions of the Loan Documents; pay all sums and to perform such duties as may be necessary to
complete such construction of the Project Improvements substantially in accordance with the Plans
and Specifications and in compliance with all restrictions, covenants and easements affecting the
Property, all Legal Requirements and all Governmental Approvals, and with all terms and conditions
of the Loan Documents, all of which shall be accomplished on or before the Required Completion
Date, free from any liens, claims or assessments (actual or contingent) asserted against the
Property for any material, labor or other items furnished in connection therewith unless bonded and
removed as a Lien on the Property. The renovation of the Project Improvements shall include all
work necessary to put the Property in conformity with, and eliminate any breaches from, the ADA.
Evidence of satisfactory compliance with all of the foregoing shall be furnished by Borrower to
Lender on or before the Required Completion Date. In addition, if such certificate of occupancy or
other Governmental Approvals are temporary in nature, Borrower shall diligently pursue procuring
final Governmental Approvals. In addition, Borrower shall diligently pursue construction of the
entire Project Improvements to Final Completion after the Required Completion Date.
(d) If at any time prior to the Completion of the Improvements and satisfaction of the
conditions to the Final Advance Lender determines in its sole discretion that the undrawn funds
then available under the Interest Reserve Line Item of the Project Loan Budget and the amount of
Interest Reserve Funds on deposit with Lender is insufficient to pay the Debt Service on the Loan,
then, Borrower shall deposit with Lender, on demand, either (i) an amount reasonably determined by
Lender to pay interest on the Loan as it comes due prior to the Completion of the Improvements and
the satisfaction of the conditions to the Final Advance (the “Additional Interest Reserve
Deposit”), or (ii) a Letter of Credit in such amount (the “Additional Interest Reserve Letter of
Credit”). In determining the amount of the Additional Interest Reserve Deposit or Additional
Interest Reserve Letter of Credit, Lender will consider, among other things, (i) the degree of
completion of the Improvements on such date, and (ii) the amount, if any, of undrawn funds then
available under the Interest Reserve Line Item of the Project Loan Budget. In addition, and
subject to the applicable terms hereof and the applicable terms of the Project Loan Agreement
regarding the re-allocation of Line Items, Lender shall not unreasonably withhold its consent to
Borrower’s request at the time of the deposit of the Additional Interest Reserve Deposit or the
Additional Interest Reserve Letter of Credit to re-allocate a portion of the then undrawn
Contingency Line Item (or any other Line Item within the
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Building Loan Budget) from the Project
Loan Budget to the Interest Reserve Line Item of the Project Loan Budget, provided,
however, under no circumstances may any portion of the Contingency Line Item of the
Building Loan Budget be reallocated to the Interest Reserve Line Item. The Additional Interest
Reserve Deposit or Additional Interest Reserve Letter of Credit shall be a Reserve Fund for all
purposes hereunder. Lender shall apply the Additional Interest Reserve Deposit or Additional
Interest Reserve Letter of Credit in accordance with Section 7.2 hereof.
5.1.29 Inspection of Property. Borrower shall permit Lender, the Construction Consultant and
their respective representatives, to enter upon the Property, inspect the Project Improvements and
all materials to be used in the construction and Building Loan thereof and to examine the Plans and
Specifications which are or may be kept at the construction site and will cooperate, and cause the
General Contractor, the Major Contractors and the Major Subcontractors to cooperate with the
Construction Consultant to enable him or her to perform his or her functions hereunder.
5.1.30 Construction Consultant. Borrower acknowledges that (i) the Construction Consultant
has been retained by Lender to act as a consultant and only as a consultant to Lender in connection
with the construction of the Project Improvements and has no duty to Borrower, (ii) the
Construction Consultant shall in no event have any power or authority to give any approval or
consent or to do any other act or thing which is binding upon Lender, (iii) Lender reserves the
right to make any and all decisions required to be made by Lender under this Agreement and to give
or refrain from giving any and all consents or approvals required to be given by Lender under this
Agreement and to accept or not accept any matter or thing required to be accepted by Lender under
this Agreement, and without being bound or limited in any manner or under any circumstance
whatsoever by any opinion expressed or not expressed, or advice given or not given, or information,
certificate or report provided or not provided, by the Construction
Consultant with respect thereto, (iv) Lender reserves the right in its sole and absolute
discretion to disregard or disagree, in whole or in part, with any opinion expressed, advice given
or information, certificate or report furnished or provided by the Construction Consultant to
Lender or any other person or party, and (v) Lender reserves the right to replace the Construction
Consultant with another construction consultant at any time and without prior notice to or approval
by Borrower.
5.1.31 Construction Consultant/Duties and Access. Borrower shall permit Lender to retain the
Construction Consultant at the reasonable cost of Borrower to perform the following services on
behalf of Lender:
(a) Prepare the Final Project Report;
(b) To review and advise Lender whether, in the opinion of the Construction Consultant, the
Plans and Specifications are satisfactory;
(c) To review Draw Requests and change orders; and
(d) To make periodic inspections in accordance with Section 5.1.29 (approximately at
the date of each Draw Request) for the purpose of assuring that construction of
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the Project
Improvements to date is in accordance with the Plans and Specifications and to approve Borrower’s
then current Draw Request as being consistent with Borrower’s Obligations under this Agreement.
The fees of the Construction Consultant shall be paid by Borrower within thirty (30) days after
billing therefor and expenses incurred by Lender on account thereof shall be reimbursed to Lender
within thirty (30) days after request therefor, but neither Lender nor the Construction Consultant
shall have any liability to Borrower on account of (i) the services performed by the Construction
Consultant, (ii) any neglect or failure on the part of the Construction Consultant to properly
perform its services or (iii) any approval by the Construction Consultant of construction of the
Project Improvements. Neither Lender nor the Construction Consultant assumes any obligation to
Borrower or any other Person concerning the quality of construction of the Project Improvements or
the absence therefrom of defects.
5.1.32 Correction of Defects. Borrower shall promptly correct all material defects in the
Project Improvements or any material departure from the Plans and Specifications not previously
approved by Lender to the extent required hereunder. Borrower agrees that the advance of any
proceeds of the Loan whether before or after such defects or departures from the Plans and
Specifications are discovered by, or brought to the attention of, Lender shall not constitute a
waiver of Lender’s right to require compliance with this covenant.
5.1.33 Approval of Change Orders; Cost Savings. Borrower shall permit no deviations from the
Plans and Specifications during construction without the prior approval of Lender; provided,
however, that Borrower may make
changes without Lender’s prior written approval so long as (a) with respect to any Major
Contract or Major Subcontract, such changes do not exceed two percent (2%) of the amount of the
applicable contract, (b) such changes do not exceed in the aggregate $250,000.00, provided that
changes which have been approved by Lender either before or after such changes have been made shall
be disregarded in calculating said $250,000.00 threshold, (c) such changes do not cause any line
item in the Building Loan Budget to be exceeded (after taking into account use of the Contingency
Reserve to the extent permitted under Section 2.1.7, reallocations under this Section
5.1.33 and other reallocations approved by Lender in its sole discretion), (d) Borrower uses
reasonable efforts to deliver to Lender and Construction Consultant prior notice of such change
orders or, if Borrower is unable to deliver prior notice, Borrower shall submit to Lender and
Construction Consultant copies of all change orders entered into with respect to the Project
Improvements within fifteen (15) days after the same are entered into, irrespective of whether the
same require the prior approval of Lender and Construction Consultant pursuant to this Agreement,
(e) such changes will not materially change the gross square feet or the net rentable square feet
of commercial space to be contained in the Improvements, or the basic layout of the Improvements,
or involve the use of materials, furniture, fixtures and equipment that will not be at least equal
in quality to the materials, furniture, fixtures and equipment originally specified in or required
by the approved Plans and Specifications, and (f) such change will not prevent Borrower from
completing the Project Improvements by the Required Completion Date. The foregoing to the contrary
notwithstanding, Borrower may allocate cost savings actually achieved and verifiable in any line
item of the Building Loan Budget to other line items of the Building Loan Budget, provided that if
such costs savings are being allocated from a line item of the Building Loan Budget, (i) such
Building Loan Budget line item has a firm contract or sub-contract in place, (ii) the work has
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commenced and is proceeding in accordance with the Construction Schedule and (iii) the Construction
Consultant is satisfied with said contract or sub-contract, including, without limitation, with
regard to the scope of said contract or sub-contract.
5.1.34 Intentionally Omitted.
5.1.35 Easements and Restrictions; Zoning. Borrower shall submit to Lender for Lender’s
approval prior to the execution thereof by Borrower all proposed easements, restrictions,
covenants, permits, licenses, and other instruments which would affect the title to the Property,
accompanied by a Survey showing the exact proposed location thereof and such other information as
Lender shall reasonably require. Borrower shall not subject the Property or any part thereof to
any easement, restriction or covenant (including any restriction or exclusive use provision in any
lease or other occupancy agreement) without the prior approval of Lender (not to be unreasonably
withheld or delayed in the case of utility easements only). Notwithstanding the foregoing, Lender
shall consent to a reciprocal easement agreement in connection with the future development of the
adjacent development site provided that such reciprocal easement agreement is reasonably acceptable
to Lender. With respect to any and all existing easements, restrictions, covenants or operating
agreements which benefit or burden the Property and any easement, restriction or covenant to which
the Property may hereafter be subjected in accordance with the provisions hereof, Borrower shall:
(a) observe and perform in all material respects the obligations imposed upon
Borrower or the Property; (b) not alter, modify or change the same in any material respect
without the prior approval of Lender; (c) enforce its rights thereunder in a commercially
reasonable manner so as to preserve for the benefit of the Property the full benefits of the same;
and (d) deliver to Lender a copy of any notice of default or other material notice received by
Borrower in respect of the same promptly after Borrower’s receipt of such notice.
5.1.36 Laborers, Subcontractors and Materialmen. Borrower shall notify Lender promptly, and
in writing, if Borrower receives any default notice, notice of lien or demand for past due payment,
written or oral, from any laborer, subcontractor or materialmen. Borrower will also furnish to
Lender at any time and from time to time upon reasonable demand by Lender, lien waivers in form
reasonably satisfactory to Lender bearing a then current date from the Major Contractors and the
Major Subcontractors.
5.1.37 Ownership of Personalty. Borrower shall furnish to Lender, if Lender so requests,
photocopies of the fully executed contracts, bills of sale, receipted vouchers and agreements, or
any of them, under which Borrower claims title to the materials, articles, fixtures and other
personal property used or to be used in the construction or operation of the Improvements.
5.1.38 Comply with Other Loan Documents. Borrower shall perform all of Borrower’s
Obligations under the Note and the other Loan Documents.
5.1.39 Purchase of Material Under Conditional Sale Contract. Borrower shall not permit any
materials, equipment, fixtures or any other part of the Improvements to be purchased or installed
under any security agreement or other arrangements wherein the seller reserves or purports to
reserve the right to remove or to repossess any such items or to consider
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them personal property
after their incorporation in the Property, unless authorized by Lender in writing and in advance.
5.1.40 Further Assurance of Title. If at any time Lender has reason to believe in its
reasonable opinion that any Advance is not secured or will or may not be secured by the Mortgage as
a first priority lien or security interest on the Improvements (subject only to the Permitted
Encumbrances and the Loan Documents), then Borrower shall, within ten (10) days after written
notice from Lender, do all things and matters necessary (including execution and delivery to Lender
of all further documents and performance of all other acts which Lender reasonably deems necessary
or appropriate) to assure to the reasonable satisfaction of Lender that any Advance previously made
hereunder or to be made hereunder is secured or will be secured by the Mortgage as a first priority
lien or security interest with respect to the Improvements (subject only to the Permitted
Encumbrances and the Loan Documents). Lender, at Lender’s option, may decline to make further
Advances hereunder until Lender has received such assurance.
5.1.41 Management Agreement.
(a) From and after Final Completion, Borrower shall cause the Property to be operated, in all
material respects, in accordance with the Management Agreement (or Replacement Management
Agreement, as applicable). In the event that the Management Agreement expires or is terminated
(without limiting any obligation of Borrower to obtain Lender’s consent to any termination or
modification of the Management Agreement in accordance with the terms and provisions of this
Agreement), Borrower shall promptly enter into a Replacement Management Agreement with Manager or
another Qualified Manager, as applicable.
(b) Borrower shall: (i) promptly perform and/or observe, in all material respects, all of the
covenants and agreements required to be performed and observed by it under the Management Agreement
and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii)
promptly notify Lender of any material default under the Management Agreement of which it is aware;
(iii) promptly deliver to Lender a copy of each financial statement, business plan, capital
expenditures plan, notice, report and estimate received by it under the Management Agreement; and
(iv) enforce the performance and observance of all of the covenants and agreements required to be
performed and/or observed by Manager under the Management Agreement, in a commercially reasonable
manner.
(c) If: (a) an Event of Default shall have occurred and be continuing, (b) Manager shall
become bankrupt or insolvent; (c) a default beyond any applicable notice and/or cure period, if
any, occurs under the Management Agreement, or (d) following the Completion of the Improvements,
the Debt Service Coverage Ratio (based upon the trailing six (6) month period, annualized) as of
any Debt Service Coverage Determination Date is less than 1.05 to 1.00, then, in any such event,
Borrower shall, at the request of Lender, terminate the Management Agreement and replace the
Manager with a Qualified Manager pursuant to a Replacement Management Agreement, it being
understood and agreed that the management fee for such Qualified Manager shall not exceed then
prevailing market rates.
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5.1.42 Embargoed Person. Borrower has performed and shall perform reasonable due diligence
to insure that at all times throughout the term of the Loan, including after giving effect to any
Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of
Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to trade restrictions under U.S. law,
including, but not limited to, The USA PATRIOT Act (including the anti-terrorism provisions
thereof), the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading
with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated
thereunder including those related to Specially Designated Nationals and Specially Designated
Global Terrorists, with the result that the investment in Borrower, Principal or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan made by the Lender is
in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any
nature whatsoever in Borrower, Principal or Guarantor, as applicable, with the result that the
investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower,
Principal or Guarantor, as applicable, have been derived from, or are the proceeds of, any unlawful
activity, including money laundering, terrorism or terrorism activities, with the result that the
investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan is in violation of law, or may cause the Property to be subject to
forfeiture or seizure.
5.1.43 Ground Lease. (a) Borrower shall, at its sole cost and expense, promptly and
timely perform and observe all the material terms, covenants and conditions required to be
performed and observed by Borrower as lessee under the Ground Lease (including, but not limited to,
the payment of all rent, additional rent, percentage rent and other charges required to be paid
under the Ground Lease).
(b) If Borrower shall be in default under the Ground Lease, then, subject to the terms of the
Ground Lease, Borrower shall grant Lender the right (but not the obligation), to cause the default
or defaults under the Ground Lease to be remedied and otherwise exercise any and all rights of
Borrower under the Ground Lease, as may be necessary to prevent or cure any default provided such
actions are necessary to protect Lender’s interest under the Loan Documents, and Lender shall have
the right to enter all or any portion of the Ground Lease Property at such times and in such manner
as Lender deems necessary, to prevent or to cure any such default.
(c) The actions or payments of Lender to cure any default by Borrower under the Ground Lease
shall not remove or waive, as between Borrower and Lender, the default that occurred under this
Agreement by virtue of the default by Borrower under the Ground Lease. All sums expended by Lender
to cure any such default shall be paid by Borrower to Lender, upon demand, with interest on such
sum at the rate set forth in this Agreement from the date such sum is expended to and including the
date the reimbursement payment is made to Lender. All such indebtedness shall be deemed to be
secured by the Mortgage.
(d) Borrower shall notify Lender promptly in writing of the occurrence of any material default
by the Ground Lessor under the Ground Lease or the occurrence of any event that, with the passage
of time or service of notice, or both, would constitute a material default by
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the Ground Lessor
under the Ground Lease, and the receipt by Borrower of any notice (written or otherwise) from the
Ground Lessor under the Ground Lease noting or claiming the occurrence of any default by Borrower
under the Ground Lease or the occurrence of any event that, with the passage of time or service of
notice, or both, would constitute a default by Borrower under the Ground Lease. Borrower shall
promptly deliver to Lender a copy of any such written notice of default.
(e) Within ten (10) days after receipt of written demand by Lender, Borrower shall use
reasonable efforts to obtain from the Ground Lessor under the Ground Lease and furnish to Lender
the estoppel certificate of the Ground Lessor stating the date through which
rent has been paid and whether or not there are any defaults thereunder and specifying the
nature of such claimed defaults, if any.
(f) Borrower shall promptly execute, acknowledge and deliver to Lender such instruments as may
reasonably be required to permit Lender to cure any default under the Ground Lease or permit Lender
to take such other action required to enable Lender to cure or remedy the matter in default and
preserve the security interest of Lender under the Loan Documents with respect to the Ground Lease
Property. Borrower irrevocably appoints Lender as its true and lawful attorney-in-fact to do, in
its name or otherwise, any and all acts and to execute any and all documents that are necessary to
preserve any rights of Borrower under or with respect to the Ground Lease, including, without
limitation, the right to effectuate any extension or renewal of the Ground Lease, or to preserve
any rights of Borrower whatsoever in respect of any part of the Ground Lease (and the above powers
granted to Lender are coupled with an interest and shall be irrevocable).
(g) Notwithstanding anything to the contrary contained in this Agreement with respect to the
Ground Lease:
(i) The lien of the Mortgage attaches to all of Borrower’s rights and remedies
at any time arising under or pursuant to Subsection 365(h) of the Bankruptcy Code,
including, without limitation, all of Borrower’s rights, as debtor, to remain in
possession of the related Ground Lease Property.
(ii) Borrower shall not, without Lender’s written consent, elect to treat the
Ground Lease as terminated under subsection 365(h)(l) of the Bankruptcy Code. Any
such election made without Lender’s prior written consent shall be void.
(iii) As security for the Debt, Borrower unconditionally assigns, transfers and
sets over to Lender all of Borrower’s claims and rights to the payment of damages
arising from any rejection by the Ground Lessor under the Ground Lease under the
Bankruptcy Code. Lender and Borrower shall proceed jointly or in the name of
Borrower in respect of any claim, suit, action or proceeding relating to the
rejection of the Ground Lease, including, without limitation, the right to file and
prosecute any proofs of claim, complaints, motions, applications, notices and other
documents in any case in respect of Ground Lessor under the Bankruptcy Code. This
assignment constitutes a
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present, irrevocable and unconditional assignment of the
foregoing claims, rights and remedies, and shall continue in effect until all of the
Debt shall have been satisfied and discharged in full. Any amounts received by
Lender or Borrower as damages arising out of the rejection of the Ground Lease as
aforesaid shall be applied to all costs and expenses of Lender (including, without
limitation, attorney’s fees and costs) incurred in connection with the exercise of
any of its rights or remedies in accordance with the applicable provisions of this
Agreement.
(iv) If, pursuant to subsection 365(h) of the Bankruptcy Code, Borrower seeks
to offset, against the rent reserved in the Ground Lease, the
amount of any damages caused by the nonperformance by Ground Lessor of any of
its obligations thereunder after the rejection by Ground Lessor of the Ground Lease
under the Bankruptcy Code, then Borrower shall not effect any offset of the amounts
so objected to by Lender. If Lender has failed to object as aforesaid within ten
(10) days after notice from Borrower in accordance with the first sentence of this
subsection, Borrower may proceed to offset the amounts set forth in Borrower’s
notice.
(v) If any action, proceeding, motion or notice shall be commenced or filed in
respect of Ground Lessor of all or any part of the Property in connection with any
case under the Bankruptcy Code, Lender and Borrower shall cooperatively conduct and
control any such litigation with counsel agreed upon between Borrower and Lender in
connection with such litigation. Borrower shall, upon demand, pay to Lender all
costs and expenses (including reasonable attorneys’ fees and costs) actually paid or
actually incurred by Lender in connection with the cooperative prosecution or
conduct of any such proceedings. All such costs and expenses shall be secured by
the lien of the related Mortgage.
(vi) Borrower shall promptly, after obtaining knowledge of such filing notify
Lender orally of any filing by or against Ground Lessor under the Ground Lease of a
petition under the Bankruptcy Code. Borrower shall thereafter promptly give written
notice of such filing to Lender, setting forth any information available to Borrower
as to the date of such filing, the court in which such petition was filed, and the
relief sought in such filing. Borrower shall promptly deliver to Lender any and all
notices, summonses, pleadings, applications and other documents received by Borrower
in connection with any such petition and any proceedings relating to such petition.
5.1.44 Storage Facility Master Lease. (a) Borrower has entered into a Sublease
Agreement dated December 10, 2007 (the “Storage Facility Master Lease”) with Acadia Strategic
Opportunity Fund II, LLC, a Delaware limited liability company (the “Storage Facility Tenant”) for
the approximately 88,127 square foot self storage facility to be constructed at the Property (the
"Self Storage Facility”) which Storage Facility Master Lease (i) provides for the payment of an
annual base rent of $800,000 per annum (the “Storage Facility Rent”) (payable in equal monthly
installments), (b) has a term expiring no earlier than December 1, 2024, and (c) is otherwise in
form and substance satisfactory to Lender. Borrower hereby assigns to Lender all
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of its right
title and interest in the Storage Facility Master Lease and the guaranty thereto as additional
security for the Loan.
(b) The Storage Facility Master Lease is in full force and effect and there are no uncured
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. The copy of the Storage
Facility Master Lease delivered to Lender is true and complete, and there are no oral agreements
with respect thereto.
(c) Borrower shall give to Lender copies of all notices given to Borrower or received by
Borrower with respect to the Storage Facility Master Lease. Borrower shall not (i) waive any
rights under the Storage Facility Master Lease, (ii) modify the Rent or other amounts payable under
the Storage Facility Master Lease, or extend any period for the payment of rent or other amounts
under the Storage Facility Master Lease, or (iii) terminate, cancel accept a surrender (except as
specifically provided in Section 5.1.44(d) hereof) of or otherwise amend or modify the
Storage Facility Master Lease, without, in each case, the prior written consent of Lender, which
consent may be granted or withheld by Lender in Lender sole discretion.
(d) Lender will consent to a termination of the Storage Facility Master Lease in the event
that (i) the Self Storage Facility is open for business and (ii) either (x) the Self Storage
Facility yields an underwritten Net Cash Flow of $800,000 with no free rent, credit or right of
offset, or (y) the entire Property yields a Stabilized Net Cash Flow of $3,100,000.
(e) Notwithstanding anything to the contrary in the organizational documents of Storage
Facility Tenant, Storage Facility Tenant shall not dissolve unless and until each of the following
conditions have been satisfied: (i) an appropriate winding down of and disposition of its assets
and liabilities, satisfaction of all claims, creditors and liabilities, and retention of adequate
reserves to satisfy future contingent liabilities, including, without limitation, its liabilities
under the Storage Facility Master Lease; (ii) compliance with all organizational and applicable
Legal Requirements relating to dissolution and winding up of Storage Facility Tenant, and (iii) the
assignment of the Storage Facility Master Lease to and the assumption thereof by a replacement
storage facility tenant acceptable to Lender in its sole discretion and as to which Lender has
received a Rating Agency Confirmation.
5.1.45 Home Depot Work. Borrower agrees (i) to complete the Asphalt Binder Work (as
defined in the Home Depot Lease) prior to February 1, 2008, (ii) to complete the Site Work (as
defined in the Home Depot Lease) prior to April 18, 2008, and (iii) to complete all of Landlord’s
Work (as defined in the Home Depot Lease) prior to March 18, 2009. Borrower’s failure to complete
the foregoing work within the time periods required hereunder shall, at Lender’s election, be an
Event of Default and Lender shall have the right (without prejudice to any other rights of Lender
hereunder), but not the obligations, to complete such work and Borrower shall reimburse Lender for
any costs and expenses incurred in connection therewith upon demand.
5.1.46 Condominium Provisions.
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(a) Condominium Representations and Warranties. Borrower hereby makes the following
representations and warranties: (a) no unpaid Condominium Assessments currently exist, or to the
best of Borrower’s knowledge, are pending and to the best of Borrower’s knowledge, no assessments
or special assessments are currently contemplated, (b) the Condominium Documents are in full force
and effect and Borrower is not in default of any obligation to the Condominium with respect to any
of the Condominium Documents and (c) to the best of Borrower’s knowledge, the Condominium is in
compliance with all state, local or federal laws, rules and regulation applicable to the
condominium regime.
(b) Condominium Covenants.
(i) Borrower shall pay all Condominium Assessments, as and when the same become due and
payable, subject to any right of Borrower to contest same in accordance with the provisions
of the Condominium Documents and provided that Borrower shall exercise any such right if and
only if: (i) such proceeding suspends the collection of such Condominium Assessments and the
Property will not be in danger of being sold for such unpaid Condominium Assessments, or
Borrower has paid all of such Condominium Assessments under protest, (ii) such proceeding is
permitted under and is conducted in accordance with the provisions of the Condominium
Documents, (iii) if Borrower has not paid the disputed amounts in full under protest,
Borrower shall deposit with Lender cash (or other security as may be approved, in writing,
by Lender) in an amount Lender deems sufficient to insure the payment of any such
Condominium Assessments together with interest and penalties thereon, if any, provided
that after a Securitization, one hundred twenty-five percent (125%) of the contested
amount (plus anticipated penalty and interest) shall be deposited with Lender, (iv) Borrower
furnishes to Lender all other items reasonably requested by Lender and (v) upon a final
determination thereof, Borrower promptly pays the amount of any such Condominium
Assessments, together with all costs, interest and penalties which may be payable in
connection therewith.
(ii) In addition to the financial reporting requirements of Section 5.1.11
hereof Borrower shall furnish the following to Lender, each prepared in such detail as
reasonably required by Lender and certified by a Responsible Officer to be true, complete
and correct: as soon as available, but in any event within forty-five (45) days after the
end of each fiscal quarter, evidence satisfactory to Lender that all Condominium Assessments
for the immediately preceding quarter which are then due and payable for an Individual
Property, have been paid by Borrower (or are being duly and properly contested in accordance
with Section (a)(1) above) which evidence shall include, without limitation, a true and
correct photocopy of Borrower’s cancelled check(s) evidencing such payment(s) with respect
to such Individual Property provided, however, in lieu of furnishing such evidence to
Lender, Borrower shall have the right to deposit cash with Lender in the full annual amount
of such Condominium Assessments due with respect to such Individual Property, which deposit
shall be held by Lender as additional security for the Loan until such time as satisfactory
evidence of such payment in accordance with this clause is accepted by Lender.
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(iii) Borrower shall observe and enforce all obligations imposed upon it under the
Condominium Documents and shall enforce the terms, covenants and conditions contained in the
Condominium Documents to be observed or performed upon the part of the other parties
thereunder in a commercially reasonable manner.
(iv) Borrower shall not alter, modify or change the material terms of, nor terminate,
any of the Condominium Documents without Lender’s consent (which consent shall not be
unreasonably withheld, conditioned or delayed).
(v) Borrower shall comply with any such state, local or federal law, rule and
regulation applicable to the condominium regime at the Property, the Land or the sale or
transfer of the Land, including but not limited to, the securities and condominium laws of
the State where the Property is located and the rules and regulations pertaining thereto.
(vi) Borrower shall take all actions as may be necessary from time to time to preserve
and maintain the condominium regime at the Property in accordance with the laws of the State
where the Property is located.
(vii) Provided that the same was not included in any of the reports, statements,
certificates or other documentation submitted to Lender, Borrower shall give Lender prompt
notice of any special assessment relating to the condominium regime received by Borrower.
(viii) Borrower shall provide Lender with notice of any proposed additions, alterations
or improvements proposed by any Condominium Board costing in excess of $50,000 and provided
that Borrower or its designee has consent rights under the Condominium Documents, Borrower
shall not consent to same without Lender’s prior approval, not to be unreasonably withheld.
(ix) Borrower shall promptly deliver to Lender a true and complete copy of each and
every notice of default received or delivered by Borrower with respect to any obligation of
Borrower or any other party under the Condominium Documents.
(x) If an Event of Default has occurred and is continuing, Borrower hereby acknowledges
and agrees that, subject to the provisions of the Condominium Documents, Lender (or its
nominee) shall be solely entitled to remove any Condominium Board members appointed by
Borrower and/or to designate replacement or substitute members of the Condominium Board. If
an Event of Default has occurred and is continuing, Lender shall have the right to exercise
the power of attorney granted pursuant to the Proxy (as hereinafter defined) to exercise all
rights, powers and remedies of Borrower pursuant to the Condominium Documents. The rights
granted to Lender under the Proxy shall automatically terminate upon the payment of the Loan
in full or upon a defeasance of the Loan in accordance with the terms hereof.
(xi) If an Event of Default has occurred and is continuing, Lender may, at its option,
and Borrower hereby grants and assigns to Lender, from and after the occurrence and during
the continuation of an Event of Default, the right, either by itself
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or by its nominee or
designee, in the name of Borrower, to exercise the rights, powers and remedies of Borrower
pursuant to the Condominium Documents. Such rights and remedies shall include, without
limitation, the right to exercise all voting, consent, managerial and other rights relating
to the Condominium, whether in Borrower’s name or otherwise, and the right to exercise
Borrower’s rights in the Condominium, including, without limitation, voting to elect members
of the Condominium Board and voting to amend the Condominium Documents.
(c) Additional Event of Default. It shall be an immediate Event of Default hereunder
if Borrower violates or does not comply with any of the material provisions of Section
5.1.46(a) or (b) above and/or the Condominium shall become subject to an action for
partition and said action has been commenced and not dismissed within thirty (30) days after
commencement thereof, or if any provision of the applicable Condominium Act or any section,
sentence, clause, phrase or word or the application thereof in any circumstances, is held invalid
and such invalidity shall affect the lien of the Security Instrument or the rights of Lender under
the Loan Documents.
(d) Additional Defined Terms. As used herein, the following words and phrases shall
have the meaning specified below:
“Association” means the Condominium Association of the Property.
“Condominium” means the P/A Acadia Pelham Manor Condominium established pursuant to the
Declaration.
“Condominium Assessment” means the Common Charges (as such term is defined in the By-Laws) and
all other assessments for common charges against the Property.
“Condominium Board” means the Board of Directors or the Association of an Individual Property.
“Condominium Documents” means, the Declaration, the By-Laws attached thereto, and all other
constituent documents establishing or governing the condominium regime at such Individual Property,
as the same may be amended from time to time.
“Declaration” means that certain Declaration of P/A-Acadia Pelham Manor Condominium (the
“Declaration”), dated September 17, 2007, recorded October 23, 2007 as Document number 472850497
for the creation and establishment of the Condominium with respect to the Property.
“Proxy” shall mean that certain Condominium Proxy, dated as of the date hereof, from Borrower
to Lender, pursuant to which Borrower granted Lender a proxy to vote its interest with respect to
all matters affecting the Condominium upon the occurrence and during the continuance of an Event of
Default and which includes conditional resignations of each of the representatives elected or
appointed by Borrower to the Condominium Board.
Section 5.2 Negative Covenants. From the date hereof until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier
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release of the Lien of the Mortgage
and any other collateral in accordance with the terms of this Agreement and the other Loan
Documents, Borrower covenants and agrees with Lender that it will not do, directly or indirectly,
any of the following:
5.2.1 Intentionally Omitted.
5.2.2 Liens. Borrower shall not create, incur, assume or suffer to exist any Lien on any
portion of the Property or permit any such action to be taken, except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan Documents; and
(iii) Liens for Taxes or Other Charges not yet due.
5.2.3 Dissolution. Borrower shall not (a) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (b) engage in any business activity
not related to the ownership and operation of the Property, (c) transfer, lease or sell, in one
transaction or any combination of transactions, the assets or all or substantially all of the
properties or assets of Borrower except to the extent permitted by the Loan Documents, or (d)
modify, amend, waive or terminate its organizational documents or its qualification and good
standing in any jurisdiction in each case, without obtaining the prior written consent of Lender or
Lender’s designee.
5.2.4 Change In Business. Borrower shall not enter into any line of business other than the
ownership and operation of the Property, or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in activities other than
the continuance of its present business.
5.2.5 Debt Cancellation. Borrower shall not cancel or otherwise forgive or release any
claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any
Person, except for adequate consideration and in the ordinary course of Borrower’s business.
5.2.6 Zoning. Borrower shall not initiate or consent to any zoning reclassification of any
portion of the Property or seek any variance under any existing zoning ordinance or use or permit
the use of any portion of the Property in any manner that could result in such use becoming a
non-conforming use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender.
5.2.7 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint
assessment of the Property with (a) any other real property constituting a tax lot separate from
the Property, or (b) any
portion of the Property which may be deemed to constitute personal property, or any other
procedure whereby the Lien of any taxes which may be levied against such personal property shall be
assessed or levied or charged to the Property.
5.2.8 Ground Lease. (a) Borrower shall not, without Lender’s written consent, fail
to exercise any option or right to renew or extend the term of the Ground Lease in
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accordance with
the terms of the Ground Lease, and shall give immediate written notice to Lender and shall execute,
acknowledge, deliver and record any document requested by Lender to evidence the Lien of the
Mortgage on such extended or renewed lease term; provided, however, Borrower shall not be required
to exercise any particular such option or right to renew or extend to the extent Borrower shall
have received the prior written consent of Lender (which consent may be withheld by Lender in its
sole and absolute discretion) allowing Borrower to forego exercising such option or right to renew
or extend. If Borrower shall fail to exercise any such option or right as aforesaid, Lender may
exercise the option or right as Borrower’s agent and attorney-in-fact as provided above in Lender’s
own name or in the name of and on behalf of a nominee of Lender, as Lender may determine in the
exercise of its sole and absolute discretion.
(b) Borrower shall not waive, excuse, condone or in any way release or discharge Ground Lessor
under the Ground Lease of or from Ground Lessor’s material obligations, covenant and/or conditions
under the Ground Lease without the prior written consent of Lender.
(c) Borrower shall not, without Lender’s prior written consent, surrender, terminate, forfeit,
or suffer or permit the surrender, termination or forfeiture of, or change, modify or amend in a
material or adverse manner, any Ground Lease. Consent to one amendment, change, agreement or
modification shall not be deemed to be a waiver of the right to require consent to other, future or
successive amendments, changes, agreements or modifications. Any acquisition of lessor’s interest
in the Ground Lease by Borrower or any Affiliate of Borrower shall be accomplished by Borrower in
such a manner so as to avoid a merger of the interests of lessor and lessee in Ground Lease, unless
consent to such merger is granted by Lender.
5.2.10 ERISA.
(a) Borrower shall not engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note,
this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative
class exemption) prohibited transaction under ERISA.
(b) Borrower further covenants and agrees to deliver to Lender such certifications or other
evidence from time to time throughout the term of the Loan, as requested by Lender in its sole
discretion, that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the
meaning of Section 3(32) of ERISA; (B) Borrower is not subject
to any state statute regulating investment of, or fiduciary obligations with respect to
governmental plans and (C) one or more of the following circumstances is true:
(i) Equity interests in Borrower are publicly offered securities, within the
meaning of 29 C.F.R. §2510.3-101(b)(2);
(ii) Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower are held by “benefit plan investors” within the meaning of
29 C.F.R. §2510.3-101(f)(2); or
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(iii) Borrower qualifies as an “operating company” or a “real estate
operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).
5.2.11 Transfers.
(a) Borrower acknowledges that Lender has examined and relied on the experience of Borrower
and its general partners, members, principals and (if Borrower is a trust) beneficial owners in
owning and operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the
Property as security for repayment of the Debt and the performance of the Other Obligations.
Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so
as to ensure that, should Borrower default in the repayment of the Debt or the performance of the
Other Obligations, Lender can recover the Debt by a sale of the Property.
(b) Without the prior written consent of Lender, and except to the extent otherwise set forth
in this Section 5.2.11, Borrower shall not, and shall not permit any Restricted Party do
any of the following (collectively, a “Transfer”): (i) sell, convey, mortgage, grant, bargain,
encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of
(directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) the Property or any part thereof or any legal or
beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party,
other than (A) pursuant to Leases of space in the Improvements to tenants in accordance with the
provisions of Section 5.1.20 and (B) Permitted Transfers.
(c) A Transfer shall include, but not be limited to, (i) an installment sales agreement
wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower’s right, title and interest in and to any
Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or
Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any merger or consolidation
or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the
partnership interest of any general partner or any profits or proceeds relating to such partnership
interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds
relating to such
limited partnership interest or the creation or issuance of new limited partnership interests;
(v) if a Restricted Party is a limited liability company, any merger or consolidation or the
change, removal, resignation or addition of a managing member or non-member manager (or if no
managing member, any member) or the Sale or Pledge of the membership interest of a managing member
(or if no managing member, any member) or any profits or proceeds relating to such membership
interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of
new non-managing membership interests; (vi) if a Restricted Party is a trust or nominee trust, any
merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted
Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal or the
resignation of the managing agent (including, without limitation, an Affiliated Manager) other than
in accordance with Section 5.1.22 hereof.
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(d) Notwithstanding the provisions of this Section 5.2.11, Lender’s consent shall not
be required in connection with one or a series of Transfers, of not more than forty-nine percent
(49%) of the stock, the limited partnership interests or non-managing membership interests (as the
case may be) in a Restricted Party; provided, however, no such Transfer shall result in the change
of Control in a Restricted Party, and as a condition to each such Transfer, Lender shall receive
not less than thirty (30) days prior notice of such proposed Transfer. If after giving effect to
any such Transfer, more than forty-nine percent (49%) in the aggregate of direct or indirect
interests in a Restricted Party are owned by any Person and its Affiliates that owned less than
forty-nine percent (49%) direct or indirect interest in such Restricted Party as of the Closing
Date, Borrower shall, no less than thirty (30) days prior to the effective date of any such
Transfer, deliver to Lender an Additional Insolvency Opinion acceptable to Lender and the Rating
Agencies. In addition, at all times, (a) Guarantor must continue to Control, and own, directly or
indirectly, in the aggregate, at least a 51% legal and beneficial interest in, Borrower, and (b)
Acadia Realty Trust must continue to Control, and own, directly or indirectly, at least a 20% legal
and beneficial interest in, each of Guarantor and any Affiliated Manager.
(e) No consent to any assumption of the Loan shall occur on or before the date that is twelve
(12) Payment Dates after the Completion of the Improvements. Thereafter, Lender’s consent to a
Transfer of the Property and assumption of the Loan shall not be unreasonably withheld provided
that Lender receives sixty (60) days prior written notice of such Transfer and no Event of Default
has occurred and is continuing, and further provided that the following additional requirements are
satisfied for all Transfers other than those described in subsection (d) above:
(i) Borrower shall pay Lender at the time of such Transfer a transfer fee
equal to one half of one percent (0.5%) of the outstanding principal balance of
the Loan for the first Transfer and one percent (1.0%) of the outstanding
principal balance of the Loan for each subsequent Transfer;
(ii) Borrower shall pay any and all reasonable out-of-pocket costs incurred
in connection with such Transfer (including, without limitation, Lender’s counsel
fees and disbursements and all recording fees, title insurance premiums and
mortgage and intangible taxes and the fees and expenses of the Rating Agencies
pursuant to clause (x) below);
(iii) The proposed transferee (the “Transferee”) or Transferee’s Principals
must have demonstrated expertise in owning and operating properties similar in
location, size, class and operation to the Property, which expertise shall be
reasonably determined by Lender;
(iv) Transferee and Transferee’s Principals shall, as of the date of such
transfer, have an aggregate Net Worth and Liquidity reasonably acceptable to
Lender;
(v) Transferee, Transferee’s Principals and all other entities which may be
owned or Controlled directly or indirectly by Transferee’s Principals (“Related
Entities”) must not have been party to any bankruptcy proceedings,
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voluntary or
involuntary, made an assignment for the benefit of creditors or taken advantage of
any insolvency act, or any act for the benefit of debtors within seven (7) years
prior to the date of the proposed Transfer;
(vi) Transferee shall assume all of the obligations of Borrower under the
Loan Documents in a manner satisfactory to Lender in all respects, including,
without limitation, by entering into an assumption agreement in form and substance
satisfactory to Lender;
(vii) There shall be no material litigation or regulatory action pending or
threatened against Transferee, Transferee’s Principals or Related Entities which
is not reasonably acceptable to Lender;
(viii) Transferee, Transferee’s Principals and Related Entities shall not
have defaulted under its or their obligations with respect to any other
Indebtedness in a manner which is not reasonably acceptable to Lender;
(ix) Transferee and Transferee’s Principals must be able to satisfy all the
representations and covenants set forth in Sections 4.1.30, 4.1.35, 5.1.46
and 5.2.10 of this Agreement, no Default or Event of Default shall
otherwise occur as a result of such Transfer, and Transferee and Transferee’s
Principals shall deliver (A) all organizational documentation reasonably requested
by Lender, which shall be reasonably satisfactory to Lender and (B) all
certificates, agreements and covenants reasonably required by Lender;
(x) Transferee shall be approved by the Rating Agencies selected by Lender,
which approval, if required by Lender, shall take the form of a confirmation in
writing from such Rating Agencies to the effect that such Transfer will not result
in a requalification, reduction, downgrade or withdrawal of the ratings in effect
immediately prior to such assumption or transfer for the Securities or any class
thereof issued in connection with a Securitization which are then outstanding;
(xi) Borrower or Transferee, at its sole cost and expense, shall deliver to
Lender an Additional Insolvency Opinion reflecting such Transfer satisfactory in
form and substance to Lender;
(xii) Prior to any release of Guarantor, one (1) or more substitute
guarantors reasonably acceptable to Lender shall have assumed all of the
liabilities and obligations of Guarantor under the Guaranty of Completion, the
Guaranty of Recourse Carveouts and the Environmental Indemnity executed by
Guarantor or execute replacement guaranties and environmental indemnity reasonably
satisfactory to Lender;
(xiii) Borrower shall deliver, at its sole cost and expense, an endorsement
to the Title Insurance Policy, as modified by the assumption agreement, as a valid
first lien on the Property and naming the Transferee as owner of the Property,
which endorsement shall insure that, as of the date of the
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recording of the
assumption agreement, the Property shall not be subject to any additional
exceptions or liens other than those contained in the Title Policy issued on the
date hereof and the Permitted Encumbrances; and
(xiv) The Property shall be managed by a Qualified Manager pursuant to a
Replacement Management Agreement.
Immediately upon a Transfer to such Transferee and the satisfaction of all of the above
requirements, the named Borrower and Guarantor herein shall be released from all liability under
this Agreement, the Note, the Mortgage and the other Loan Documents accruing after such Transfer.
The foregoing release shall be effective upon the date of such Transfer, but Lender agrees to
provide written evidence thereof reasonably requested by Borrower.
5.2.12 No Distributions. Until Completion of the Improvements and satisfaction of the
conditions to the Final Advance, Borrower shall not make any distributions or other disbursements
to its partners, shareholders, members or Persons owned by or related to any of its partners,
shareholders or members. Borrower shall use any and all Rents collected from the Property to pay
operating expenses of and real property taxes on the Property.
5.2.13 Management Agreement. Borrower shall not, without Lender’s prior written consent
(which consent shall not be unreasonably withheld): (i) surrender, terminate, cancel, amend or
modify the Management Agreement; provided, that Borrower may, without Lender’s consent, replace the
Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement
Management Agreement; (ii) reduce or consent to the reduction of the term of the Management
Agreement; (iii) increase or consent to the increase of the amount of any charges under the
Management Agreement; or (iv) otherwise modify, change, supplement, alter or amend, or waive or
release any of its rights and remedies under, the Management Agreement in any material respect.
Following the occurrence and during the continuance of an Event of Default, Borrower shall not
exercise any rights, make any decisions, grant any approvals or otherwise take any action under the
Management Agreement without the prior written consent of Lender, which consent may be granted,
conditioned or withheld in Lender’s sole discretion.
5.2.14 Permitted Additional Mezzanine Indebtedness. Notwithstanding anything the contrary contained in this Agreement, but subject to the
rights of Lender to convert a portion of the Loan to a mezzanine loan pursuant to Section
9.1.2 hereof, an Additional Mezzanine Borrower (as defined below) shall have the right to
pledge its direct and/or indirect equity interests in Borrower or Mezzanine Borrower, as applicable
(but not of any direct interest in the Property, or Borrower, if there is Subordinate Financing in
the form of a mezzanine loan) to a Permitted Mezzanine Lender (as defined below) as security for a
loan to such Additional Mezzanine Borrower (an “Additional Mezzanine Loan”) provided that the
following terms and conditions are satisfied:
(a) no Event of Default shall then exist;
(b) Lender shall have received at least thirty (30) and no more than sixty (60) days’ prior
written notice of the proposed Additional Mezzanine Loan;
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(c) the Completion of the Improvements shall have occurred and all of the conditions to the
Final Advance shall have been satisfied;
(d) the aggregate amounts of the outstanding principal amount of the Total Debt (calculated
without regard to any scheduled amortization paid under the Building Loan or the Project Loan) and
the maximum principal amount of the Additional Mezzanine Loan (as of the effective date of the
Additional Mezzanine Loan) shall not exceed eighty-five (85%) of the fair market value of the
Property as determined by an MAI appraisal performed, at Borrower’s sole cost and expense, by an
appraiser approved by Lender acting reasonably and dated, or updated, to a date within 30 days of
the effective date of the Additional Mezzanine Loan, made in compliance with FIRREA and reasonably
satisfactory to Lenders in all respects; the appraisal value shall be subject to review and
confirmation and updating as to valuation by Lender’s internal appraisal staff, whose decision
shall be final absent manifest error.
(e) the Aggregate Debt Service Coverage Ratio is at least 1.10 to 1.00;
(f) Borrower shall not be obligated to repay the Additional Mezzanine Loan nor incur any
obligation or liability to the Permitted Mezzanine Lender or any other Person with respect to the
Additional Mezzanine Loan, and the terms and conditions of the Additional Mezzanine Loan, the
collateral pledged as security therefor, and the documents evidencing the Additional Mezzanine Loan
(the “Additional Mezzanine Loan Documents”), shall be reasonably satisfactory to Lender;
(g) a new Single-Purpose Entity shall have been formed that will directly or indirectly own
100% of the Equity Interests in Borrower, or Mezzanine Borrower, as applicable (the “Additional
Mezzanine Borrower”), the organizational documents of Borrower, Mezzanine Borrower, if any, such
Additional Mezzanine Borrower, and their respective constituent owners shall be reasonably
satisfactory to Lender, and Borrower, Mezzanine Borrower, if any and such Additional Mezzanine
Borrower shall otherwise satisfy all applicable Rating Agency criteria for single-purpose entities,
bankruptcy remoteness, and mezzanine borrowers;
(h) the Permitted Mezzanine Lender shall have executed and delivered to Lender a
subordination, standstill and intercreditor agreement acceptable to Lender in its sole
and absolute discretion, which shall provide among other things that the Permitted Mezzanine
Lender shall not have the right to foreclose on its interest in Borrower or Mezzanine Borrower, as
applicable, or otherwise exercise its rights under the Additional Mezzanine Loan Documents unless
and until the Loan is paid in full and that the Additional Mezzanine Loan shall not be transferable
except to a Qualified Transferee;
(i) Borrower and Guarantor shall have executed such additional Loan Documents and such
amendments to and reaffirmations of the existing Loan Documents as Lender may require , including
entering into a new cash management arrangement with Lender (or modifying any existing cash
management requirement) to provide for, among other things, the payment of Lender-approved
operating expenses and capital expenses prior to the payment of debt service on the Additional
Mezzanine Loan;
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(j) Lender shall have received (i) such opinions of counsel to Borrower as Lender may require,
in form and content acceptable to Lender (including a new non-consolidation opinion if one was
required to be delivered in connection with the Loan); and (ii) confirmation by each of the
applicable Rating Agencies that the incurrence of the Additional Mezzanine Loan will not result in
any qualification, withdrawal or downgrading of any existing ratings of securities created in any
applicable Securitization; and
(k) Borrower shall have paid or reimbursed Lender for all of its costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred in connection with the foregoing.
Notwithstanding anything herein to the contrary, none of BSCMI, Lender or their respective
Affiliates shall have any obligation to provide an Additional Mezzanine Loan or any other
financing.
For purposes hereof, the following terms shall have the following respective meanings:
“Aggregate Debt Service Coverage Ratio” shall mean a ratio for the applicable period in
which:,
| (a) | the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, adjusted for a vacancy rate equal to the greater of the actual vacancy rate, the market vacancy rate and an assumed vacancy rate equal to five percent (5%), without deduction for (i) actual management fees incurred in connection with the operation of the Property less (A) management fees equal to the greater of (1) assumed management fees of four percent (4%) of Gross Income from Operations or (2) the actual management fees incurred, (B) Replacement Reserve Fund contributions equal to $47,544 per annum; and (C) Rollover Reserve Fund contributions equal to $187,744 per annum; and | ||
| (b) | the denominator is the Total Debt Service for such period assuming a thirty (30) year amortization schedule (and calculated without regard to any scheduled amortization paid under the Building Loan or the Project Loan, or the Subordinate Financing, if applicable), plus all principal and interest payable for such period under the Additional Mezzanine Loan (assuming the Additional Mezzanine Loan had been fully advanced at the beginning of such period) (provided, however, with respect to the Additional Mezzanine Loan, such ratio shall be determined utilizing a debt service constant calculated with the interest rate payable with respect to the Additional Mezzanine Loan and an assumed amortization period of thirty (30) years). |
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“Permitted Mezzanine Lender” shall mean a Qualified Transferee.
“Qualified Transferee” means (i) BSCMI or an Affiliate of BSCMI, or (ii) one or more of the
following:
(A) a real estate investment trust, bank, saving and loan association, investment bank,
insurance company, trust company, commercial credit corporation, pension plan, pension fund
or pension advisory firm, mutual fund, government entity or plan, provided that any such
Person referred to in this clause (A) satisfies the Eligibility Requirements;
(B) an investment company, money management firm or “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an
institutional “accredited investor” within the meaning of Regulation D under the Securities
Act of 1933, as amended, provided that any such Person referred to in this clause
(B) satisfies the Eligibility Requirements;
(C) an institution substantially similar to any of the foregoing entities described in
clause (ii)(A), (ii)(B) or (ii)(F) that satisfies the Eligibility
Requirements;
(D) any entity Controlled by, Controlling or under common Control with any of the
entities described in clause (i) or clause (ii)(A) or (ii)(C) above
or clause (ii)(F) below;
(E) a Qualified Trustee in connection with (aa) a securitization of, or (bb) the
creation of collateralized debt obligations (“CDO”) secured by, or (cc) a financing through
an “owner trust” of, the Mezzanine Loan or any interest therein (any of the foregoing, a
“Securitization Vehicle”), provided, that (1) one or more classes of securities issued by
such Securitization Vehicle is initially rated at least investment grade by each of the
Rating Agencies which assigned a rating to one or more classes of securities issued in
connection with a Securitization (it being understood that with respect to any Rating Agency
that assigned such a rating to the securities issued by such Securitization Vehicle, a
Rating Agency Confirmation will not be required in connection with a transfer of the
Additional Mezzanine Loan or any interest therein to such Securitization Vehicle, except
that if one or more classes of securities issued in
connection with a Securitization is rated by Moody’s, the transferee may not rely on
this clause (1) with respect to Moody’s); (2) in the case of a Securitization Vehicle that
is not a CDO, the special servicer of such Securitization Vehicle has the Required Special
Servicer Rating at the time of Transfer and the related transaction documents for such
Securitization Vehicle require that any successor have the Required Special Servicer Rating
(such entity, an “Approved Servicer”) and such Approved Servicer is required to service and
administer such Additional Mezzanine Loan or any interest therein in accordance with
servicing arrangements for the assets held by the Securitization Vehicle which require that
such Approved Servicer act in accordance with a servicing standard notwithstanding any
contrary direction or instruction from any other Person; or (3) in the case of a
Securitization Vehicle that is a CDO, the CDO Asset Manager and, if applicable, each
Intervening Trust Vehicle that is not administered and managed by a
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CDO Asset Manager which
is a Qualified Transferee, are each a Qualified Transferee under clauses (ii)(A), (B), (C),
(D), (F) or (G) of this definition;
(F) an investment fund, limited liability company, limited partnership or general
partnership (a “Permitted Investment Fund”) where a Permitted Fund Manager acts as general
partner, managing member or fund manager and at least fifty percent (50%) of the equity
interests in such investment vehicle are owned, directly or indirectly, by one or more of
the following: the Mezzanine Lender, a Qualified Transferee, an institutional “accredited
investor”, within the meaning of Regulation D promulgated under the Securities Act of 1933,
as amended, and/or a “qualified institutional buyer” or both within the meaning of Rule 144A
promulgated under the Securities Exchange Act of 1934, as amended, provided such
institutional “accredited investors” or “qualified institutional buyers” that are used to
satisfy the 50% test set forth above in this clause (F) satisfy the financial tests
in clause (i) of the definition of Eligibility Requirements; or
(G) any Person for which the Rating Agencies have issued a Rating Agency Confirmation
with respect to such Transfer.
“Eligibility Requirements” means, with respect to any Person, that such Person (i) has total
assets (in name or under management) in excess of $650,000,000 and (except with respect to a
pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity of
$250,000,000 and (ii) is regularly engaged in the business of making or owning commercial real
estate loans or loans similar in type as the Mezzanine Loan or operating commercial mortgage
properties.
“CDO Asset Manager” with respect to any Securitization Vehicle (hereinafter defined) that is a
CDO, shall mean the entity that is responsible for managing or administering the Additional
Mezzanine Loan (or any interest therein) as an underlying asset of such Securitization Vehicle or,
if applicable, as an asset of any Intervening Trust Vehicle (including, without limitation, the
right to exercise any consent and control rights available to the holder of the Additional
Mezzanine Loan).
“Intervening Trust Vehicle” shall mean with respect to any Securitization Vehicle that is a
CDO, a trust vehicle or entity which holds the Additional Mezzanine Loan (or
any interest therein) as collateral securing (in whole or in part) any obligation or security
held by such Securitization Vehicle as collateral for the CDO.
“Permitted Fund Manager” means any Person that on the date of determination is not subject to
a Proceeding and is either (i) a nationally-recognized manager of investment funds investing in
debt or equity interests relating to commercial real estate, or (ii) an entity that is a Qualified
Transferee pursuant to clause (i) or clauses (ii)(A), (B), (C),
(D) or (G) of the definition thereof, in each case, which is investing through a
fund with committed capital of at least $250,000,000.
“Qualified Trustee” means (i) a corporation, national bank, national banking association or a
trust company, organized and doing business under the laws of any state or the United States of
America, authorized under such laws to exercise corporate trust powers and to
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accept the trust
conferred, having a combined capital and surplus of at least $100,000,000 and subject to
supervision or examination by federal or state authority, (ii) an institution insured by the
Federal Deposit Insurance Corporation or (iii) an institution whose long-term senior unsecured debt
is rated either of the then in effect top two (2) rating categories of S&P and either Fitch or
Moody’s (provided, however, if the Loan has been securitized, the rating requirement of any agency
not a Rating Agency will be disregarded).
“Required Special Servicer Rating” means a special servicer that (i) has a rating of “CSS3” in
the case of Fitch, (ii) is on the S&P’s select servicer list as a “U.S. Commercial Mortgage Special
Servicer” in the case of S&P and (iii) in the case of Moody’s, such special servicer is acting as
special servicer in a commercial mortgage loan securitization that was rated by Moody’s within the
twelve (12) month period prior to the date of determination and Moody’s has not downgraded or
withdrawn the then-current rating on any class of commercial mortgage securities or placed any
class of commercial mortgage securities on watch citing the continuation of such special servicer
as special servicer of such commercial mortgage securities. The requirement of any agency not a
Rating Agency shall be disregarded.
“Rating Agency Confirmation” means a written affirmation from each of the Rating Agencies that
the credit rating of the Certificates assigned by such Rating Agency immediately prior to the
occurrence of the event with respect to which such Rating Agency Confirmation is sought will not be
qualified, downgraded or withdrawn as a result of the occurrence of such event. In the event that
no Certificates are outstanding or the Loan is not part of a Securitization, any action that would
otherwise require a Rating Agency Confirmation shall instead require the consent of Lender. All
fees and expenses of the Rating Agencies incurred in connection with any Rating Agency Confirmation
required pursuant to this Agreement as the result of a request or action of Borrower shall be paid
by Borrower.
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5.2.15 Guarantor. Notwithstanding anything to the contrary in the organizational documents
of Guarantor, Guarantor shall not dissolve unless and until each of the following conditions have
been satisfied: (i) an appropriate winding down of and disposition of its assets and liabilities,
satisfaction of all claims, creditors and liabilities, and retention of adequate reserves to
satisfy future contingent liabilities, including, without limitation, its liabilities under the
Guaranty and the Environmental Indemnity; (ii) compliance with all organizational and applicable
Legal Requirements relating to dissolution and winding up of Guarantor, and (iii) replacement of
the Guarantor with a replacement guarantor acceptable to Lender in its sole discretion and as to
which Lender has received a Rating Agency Confirmation.
ARTICLE VI.
INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
Section 6.1 Insurance.
6.1.1 Insurance Policies. Borrower, at its sole cost and expense, shall obtain and
maintain, or cause to be maintained, the following insurance policies:
(a) At all times prior to Completion of the Improvements and at any time thereafter during
which construction work is being performed at the Property:
(A) Builder’s Risk “All Risk” insurance in such amount as Lender shall require but in no event
less than one hundred percent (100%) of the replacement cost value of the completed Project
Improvements, but excluding foundations and any other improvements not subject to physical damage).
Such policy shall be written on a Builder’s Risk Completed Value Form (100% non-reporting) or its
equivalent and shall include, without limitation, coverage for loss by testing, collapse, theft,
flood, and earth movement. Such insurance Policy shall also include coverage for:
(i) Loss suffered with respect to materials, equipment, heating and air
conditioning machinery, machinery, and supplies, in each case owned by Borrower or
required to be insured by Borrower, whether on-site, in transit, or stored offsite
and with respect to temporary structures, hoists, sidewalks, retaining walls, and
underground property in each case owned by Borrower or required to by insured by
Borrower;
(ii) Soft costs that are recurring costs, which shall include, without
limitation, delayed opening loss of income/revenue coverage for a period of
recovery of not less than twelve (12) months commencing from the date the Project
Improvements are as to be completed agreed to by Lender in its sole
discretion, as well as costs to reproduce plans, specifications, blueprints
and models in connection with any restoration following a casualty;
(iii) Demolition, debris removal and increased cost of construction,
including, without limitation, increased costs arising out of changes in
applicable laws and codes; and
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(iv) Operation of building laws.
(B) Borrower shall cause the Borrower’s Architect to obtain and maintain Architect’s or
Professional Liability insurance during the period commencing on the date of the Architect’s
Contract respectively, and expiring no earlier than five (5) years after the Completion of the
Improvements. Such insurance shall be in an amount equal to at least $1,000,000 per claim or as
otherwise acceptable to Lender.
(C) Commercial General Liability insurance (vacant building) naming Lender as an additional
insured with a minimum liability of $10,000,000 including “Umbrella Liability,” of like amount per
occurrence and in the aggregate per location.
(D) Workers Compensation, Employer’s Liability coverage and Disability insurance as required
by law covering Borrower.
(E) Prior to or simultaneously with its entering into the General Contractor’s Agreement,
Borrower shall, or shall cause the General Contractor to, obtain and maintain Commercial General
Liability coverage, including, without limitation, products and completed operations and containing
no “X”, “C”, “U” exclusion if excavation and/or demolition is to be provided, and Automobile
Liability insurance with no less than $10,000,000 in limits per occurrence and in the aggregate per
project through primary and umbrella liability coverages. Such insurance shall name Borrower as
the insured and Lender as additional insured. Borrower shall also require that all Contractors
cause all of their respective subcontractors to maintain similar coverage with limits of no less
than $1,000,000 per occurrence and shall include Borrower and Lender as additional insureds. All
Persons engaged in work on the improvements at the Property shall maintain statutory Workers
Compensation and Disability insurance in force for all workers on the job. The liability insurance
to be maintained by Borrower and/or the General Contractor pursuant to this subsection (E)
shall include coverage for products and completed operations and coverage for construction defects
for a period of five (5) years after Completion of the Improvements.
(b) At all times after Completion of the Improvements:
(i) comprehensive all risk insurance (“Special Form”) including, but not limited to,
loss caused by any type of windstorm or hail on the Improvements and the Personal Property,
(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 or to be written on a no co-insurance form; (C) providing for no deductible
in excess of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) for all such insurance
coverage excluding windstorm and earthquake and (D) if any of the Improvements or the use
of the Property shall at any time constitute legal non-conforming structures or uses,
coverage for loss due to operation of law in an amount equal to the full Replacement Cost,
coverage for demolition costs and coverage for increased costs of construction. In
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addition, Borrower shall obtain: (x) 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 (y) earthquake insurance in amounts and in form and substance satisfactory to
Lender in the event the Property is located in an area with a high degree of seismic
activity;
(ii) 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) in an
amount equal to one hundred percent (100%) of the projected gross revenues from the
operation of the Property (as reduced to reflect expenses not incurred during a period of
Restoration) for a period of at least eighteen (18) months after the date of the Casualty;
and (D) 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 six (6) 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. 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 revenues from the Property
for the succeeding eighteen (18) month period. Notwithstanding the provisions of Section
2.7.1 hereof, all proceeds payable to Lender pursuant to this subsection shall be held by
Lender and shall be applied to the obligations secured by the Loan Documents from time to
time due and payable hereunder and under the Note; provided, however, that nothing herein
contained shall be deemed to relieve Borrower of its obligations to pay the obligations
secured by the Loan Documents on the respective dates of payment provided for in this
Agreement and the other Loan Documents except to the extent such amounts are actually paid
out of the proceeds of such business income insurance; and
(iii) comprehensive boiler and machinery insurance, if steam boilers or other
pressure-fixed vessels are in operation, in amounts as shall be reasonably required by
Lender on terms consistent with the commercial property insurance policy required under
subsection (i) above.
(c) At all times during the term of the Loan:
(i) commercial general liability insurance against claims for personal injury, bodily
injury, death or property damage occurring upon, in or about the Property, such insurance
(A) to be on the so-called “occurrence” form with a combined limit of not less than Two
Million and 00/100 Dollars ($2,000,000.00) in the aggregate and One Million and 00/100
Dollars ($1,000,000.00) per occurrence; (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
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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 written contracts and (5)
contractual liability covering the indemnities contained in Article 9 of the Mortgage to the
extent the same is available;
(ii) automobile liability coverage for all owned and non-owned vehicles, including
rented and leased vehicles containing minimum limits per occurrence of One Million Dollars
and 00/100 Dollars ($1,000,000.00);
(iii) worker’s compensation and employee’s liability subject to the worker’s
compensation laws of the applicable state;
(iv) umbrella and excess liability insurance in an amount not less than Fifty Million
and 00/100 Dollars ($50,000,000.00) per occurrence on terms consistent with the commercial
general liability insurance policy required under subsection (v) above, including, but not
limited to, supplemental coverage for employer liability and automobile liability, which
umbrella liability coverage shall apply in excess of the automobile liability coverage in
clause (ii) above;
(v) Insurance covering the decrease or diminution in value of the Property resulting
from the enforcement of any law, building code, zoning regulation or other Legal Requirement
or act of any Governmental Authority to the extent that the Property cannot legally be
restored to a condition that existed prior to the Casualty (which insurance shall be in a
stipulated sum amount reasonably acceptable to Lender in its sole discretion);
(vi) the insurance required under this Sections 6.1(a)(A) and 6.1(b)(i)
above shall cover perils of terrorism and acts of terrorism and Borrower shall maintain
insurance for loss resulting from perils and acts of terrorism on terms (including amounts)
consistent with those required under Sections 6.1(a)(A) and 6.1(b)(i) above
at all times during the term of the Loan; and
(vii) upon sixty (60) days written notice, such other reasonable insurance, including,
but not limited to, sinkhole or land subsidence insurance, and in such reasonable amounts as
Lender from time to time may reasonably request against such other insurable hazards which
at the time are commonly insured against for property similar to the Property located in or
around the region in which the Property is located.
(d) Intentionally Omitted.
(e) All insurance provided for in this Section 6.1 shall be obtained under valid and
enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and, to the
extent not specified above, shall be subject to the approval of Lender as to deductibles, loss
payees and insureds. The Policies described in Section 6.1 hereof (other than those strictly
limited to liability protection) shall designate Lender as loss payee. Not less than fifteen (15)
days prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of
insurance evidencing the Policies and within thirty (30) days after commencement of the new or
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renewal Policy evidence satisfactory to Lender of payment of the premiums due thereunder (the
"Insurance Premiums”), shall be delivered by Borrower to Lender.
(f) Prior to the renewal or replacement of any Policy (the “Existing Policy”), any required
insurance may be procured under a blanket insurance Policy covering the Property and other
properties or assets of Borrower or its affiliates, provided that any such blanket insurance Policy
shall specifically allocate to the 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 this Article VI. Lender, in its
reasonable discretion, shall determine whether such blanket Policies provide sufficient limits of
insurance.
(g) Unless otherwise specified, all Policies of insurance provided for or contemplated by this
Article VI shall, in the case of property damage, builder’s risk, boiler and machinery,
flood and earthquake insurance, name Borrower as the insured and Lender (for the ratable benefit of
Lenders and their successors and/or assigns) as the additional insured and shall contain a
so-called New York standard non-contributing mortgagee clause or its equivalent in favor of Lender
(including Lender as mortgagee and loss payee) providing that the loss thereunder shall be payable
to Lender for the ratable benefit of Lenders and providing thirty (30) days’ advance notice of
cancellation to Lender.
(h) All Property insurance also shall include a co-insurance waiver and Agreed Amount
Endorsement. The amount of any deductible under any Policy must be reasonably acceptable to
Lender. Without the Lender’s prior written consent, Borrower shall not name any Person other than
the Lender, as loss payee, as it pertains to the Property, nor shall Borrower carry separate or
additional insurance coverage covering the improvements at the Property concurrent in form or
contributing in the event of loss with that required by this Agreement or; provided that, if
blanket policies are obtained, this sentence shall not apply to property covered by such blanket
policies other than the improvements at the Property and such tenant improvements and betterments
that Borrower is required to insure pursuant to the applicable Lease.
(i) Each Policy shall contain a provision whereby the insurer: (i) agrees that such Policy
shall not be canceled or terminated, the coverage, deductible, and limits of such Policy shall not
be modified, other provisions of such Policy shall not be modified if such Policy, after giving
effect to such modification, would not satisfy the requirements of this Agreement, and such Policy
shall not be so modified, canceled or fail to be renewed, without in each case, at least thirty
(30) days prior written notice to Lender, (ii) waives any right to claim any Insurance Premiums and
commissions against Lender or any Lender, provided that the Policy need not waive the requirement
that the Insurance Premiums be paid in order for a claim to be paid to the
insured and (iii) provides that Lender is permitted to make payments to effect the
continuation of such policy upon notice of cancellation due to non-payment of premiums. In the
event any Policy (except for general public and other liability and Workers Compensation insurance)
shall contain breach of warranty provisions, such Policy shall not be invalidated by and shall
insure Lender for the benefit of Lenders regardless of (A) any act, failure to act or negligence of
or violation of warranties, declarations or conditions contained in such Policy by any named
insured, (B) the occupancy or use of the Property for purposes more hazardous than permitted by
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the
terms thereof, or (C) any foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage or any other Loan Document.
(j) Borrower shall pay the Insurance Premiums for the Policies as the same become due and
payable. Borrower shall deliver to Lender certified copies of the Policies required to be
maintained pursuant to this Article VI; provided, however, Lender shall not
be deemed by reason of the custody of such Policies to have knowledge of the contents thereof.
Borrower also shall deliver to Lender within ten (10) days after Lender’s request, a statement
setting forth the particulars as to all such Policies, indicating that all Insurance Premiums due
thereon have been paid and that the same are in full force and effect. Not later than fifteen (15)
days prior to the expiration date of each Policy, Borrower shall deliver to Lender a certificate of
insurance evidencing renewal of coverage as required herein. Not later than thirty (30) days after
the renewal or replacement of each of the Policies, Borrower shall deliver to Lender evidence of
payment of Insurance Premiums for such renewal or replacement Policies satisfactory to the Lender
and not later than sixty (60) days after the renewal or replacement of each of the Policies,
Borrower shall deliver to Lender an original or certified copy (as required pursuant to this
paragraph) of a renewal or replacement Policy or Policies.
(k) If at any time Lender is not in receipt of written evidence that all insurance required
hereunder is maintained in full force and effect, Lender shall have the right (but not the
obligation), upon notice to Borrower, to take such action as Lender deems necessary to protect
Lenders’ interest in the Property, including, without limitation, the obtaining of such insurance
coverage as Lender in its sole discretion deems appropriate after three (3) Business Days notice to
Borrower if prior to the date upon which any such coverage will lapse or at any time Lender deems
necessary (regardless of prior notice to Borrower) to avoid the lapse of any such coverage. All
Insurance 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 Building Loan Mortgage and shall bear interest at the Default Rate.
(l) In the event of foreclosure of the Building Loan Mortgage and/or the Project Loan Mortgage
or other transfer of title to the Property in extinguishment in whole or in part of the Total Debt,
all right, title and interest of Borrower in and to the Policies that are not blanket Policies then
in force concerning the 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.
6.1.2 Insurance Company. 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 “A/VII” or better by A.M. Best Company, Inc. and “A- or better
(and the equivalent thereof) by at least two (2) of the Rating Agencies rating the Securities (one
of which shall be S&P if they are rating the Securities and one of which will be Moody’s if they
are rating the Securities), or if only one (1) Rating Agency is rating the Securities, then only by
such Rating Agency.
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Section 6.2Casualty and Condemnation.
6.2.1 Casualty. The term “Net Proceeds” for purposes of this Agreement shall mean: (i) the
net amount of all insurance proceeds received by Lender pursuant to Section 6.1.1 (b)(1),
(b)(iii), (c)(ii) and (c)(iv) 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. If
the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a
"Casualty”), Borrower shall give prompt notice of such Casualty to Lender and Borrower shall
promptly commence and diligently prosecute to completion the repair and restoration of the Property
as nearly as possible to the condition the Property was in immediately prior to such Casualty with
such alterations as may be reasonably approved by Lender (a “Restoration”) and otherwise in
accordance with this Agreement. Borrower shall pay all costs of such Restoration whether or not
such costs are covered by the Net Proceeds. Lender may, but shall not be obligated to, make proof
of loss if not made promptly by Borrower. In addition, Lender may participate in any settlement
discussions with any insurance companies (and shall approve the final settlement, which approval
shall not be unreasonably withheld or delayed) with respect to any Casualty in which the Net
Proceeds or the costs of completing the Restoration are equal to or greater than One Million and
00/100 Dollars ($1,000,000.00) and Borrower shall deliver to Lender all instruments required by
Lender to permit such participation.
6.2.2 Condemnation. Borrower shall give Lender prompt notice of any actual or threatened
commencement of any proceeding for the Condemnation by any Governmental Authority of all or any
part of the Property and shall deliver to Lender a copy 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 Lender 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 Condemnation, Borrower shall continue to pay the Total Debt
at the time and in the manner provided for its payment in the Building Loan Note and the Project
Loan Note and in this Agreement and the Project Loan Agreement. Lenders shall not be limited to
the interest paid on the Award by any Governmental Authority but shall be entitled to receive out
of the Award interest and additional interest (if any)
at the rate or rates provided in this Agreement or in the Building Loan Note or in the Project
Loan Agreement or in the Project Loan Note, as applicable and the Debt shall not be reduced until
any Award shall have been actually received and applied by Lender, after the deduction of expenses
of collection, to the reduction or discharge of the Debt. If the Property or any portion thereof
is taken by any Governmental Authority, Borrower shall promptly commence and diligently prosecute
the Restoration of the Property pursuant to this Section 6.2 and otherwise comply with the
provisions of hereof. 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 Building Loan Note or the Project Loan Note shall have been sought, recovered or denied, to
receive the Award, or a portion thereof sufficient to pay the Total Debt. Notwithstanding anything
contained in this Section 6.2 or this Agreement to the contrary, Lender may, in its sole
discretion, elect to (y) apply the net proceeds of any Condemnation
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Proceeds (after deduction of
Lender’s reasonable costs and expenses, if any, in collecting the same) in reduction of the Total
Debt in such order and manner as Lender may elect, whether due or not, or (z) make the proceeds
available to Borrower for the restoration or repair of the Property. Any implied covenant in this
Agreement restricting the right of Lender to make such an election is waived by Borrower. If the
Condemnation Proceeds are made available to Borrower for restoration or repair, the Condemnation
Proceeds shall be disbursed upon satisfaction of and in accordance with the terms and conditions
set forth in this Section 6.2.
6.2.3 Application of Net Proceeds.
(a) Minor Casualty or Condemnation. If a Casualty or Condemnation has occurred to the
Property, Borrower’s right, title and interest in and to all Proceeds are, except as otherwise
herein provided, hereby assigned by Borrower to Lender and all Net Proceeds shall, except as
otherwise herein provided, be paid to Lender. Borrower shall, in good faith and in a commercially
reasonable manner, file and prosecute the adjustment, compromise or settlement of any claim for
Proceeds and, subject to Borrower’s right to receive the direct payment of any Net Proceeds as
herein provided, will cause the same to be paid directly to Lender to be held and applied in
accordance with the provisions of this Agreement. Except upon the occurrence and during the
continuance of an Event of Default, Borrower may settle any insurance claim with respect to Net
Proceeds which do not One Million and 00/100 Dollars ($1,000,000.00) (the “Restoration Threshold”).
Whether or not an Event of Default shall have occurred and be continuing, Lender shall have the
right to approve, such approval not to be unreasonably withheld, any settlement which would in
Lender’s reasonable judgment result in Net Proceeds which exceed the Restoration Threshold and
Borrower shall deliver or cause to be delivered to Lender all instruments reasonably requested by
Lender to permit such approval. Borrower shall pay all reasonable out-of-pocket costs, fees and
expenses incurred by Lender on behalf of Lenders (including all reasonable attorneys’ fees and
expenses, the reasonable fees of insurance experts and adjusters and reasonable costs incurred in
any litigation or arbitration), and interest thereon at the Default Rate to the extent not paid
within fifteen (15) Business Days after delivery of a request for reimbursement by Lender,
accompanied by reasonable back-up documentation, in connection with the settlement of any claim for
Proceeds and the seeking and obtaining of any payment on account thereof in accordance with the
foregoing provisions. If any Proceeds are received by Borrower and may be retained by Borrower
pursuant to this Section 6.2, such
Proceeds shall, until the completion of the related Work, be held in trust for Lender for the
ratable benefit of Lenders and shall be segregated from other funds of Borrower to be used to pay
for the cost of the Restoration in accordance with the terms hereof, and to the extent such
Proceeds exceed the Restoration Threshold, such Proceeds shall be forthwith paid directly to and
held by Lender to be applied or disbursed in accordance with this Article VI. If an Event
of Default shall have occurred and be continuing, or if Borrower fails to file any insurance claim
for a period of fifteen (15) Business Days, or to prosecute same with commercially reasonable
diligence following Borrower’s receipt of written notice to do so from Lender, Borrower hereby
irrevocably empowers Lender, in the name of Borrower as its true and lawful attorney-in-fact, to
file and prosecute such claim (including settlement thereof) with counsel satisfactory to Lender
and to collect and to make receipt for any such payment, all at Borrower’s expense (including
payment of interest at the Default Rate for any amounts advanced by Lender pursuant to this
sentence). Notwithstanding anything to the contrary set forth in this Agreement, but excluding all
situations requiring prepayment of the Note, to the extent any Proceeds (either singly or when
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aggregated with all other then unapplied Proceeds with respect to the Property) do not exceed the
Restoration Threshold, such Proceeds are to be paid directly to Borrower to be applied to
restoration of the Property in accordance with the terms hereof. As soon as reasonably practicable
after receipt of the Net Proceeds Borrower shall commence and satisfactorily complete with due
diligence: (x) the Completion of the Improvements in accordance with the terms of this Agreement,
if such Casualty or Condemnation occurs prior to the Completion of the Improvements; of (y) the
Restoration in accordance with the terms of this Agreement, if such Casualty or Condemnation occurs
after the Completion of the Improvements.
6.2.4 Major Casualty or Condemnation.
(a) If a Casualty or Condemnation has occurred to the Property, Borrower shall commence and
satisfactorily complete with due diligence the Restoration in accordance with the terms of this
Agreement and the Project Loan Agreement. If the Net Proceeds are equal to or greater than the
Restoration Threshold or the costs of completing the Restoration, or Completion of the
Improvements, as applicable, is equal to or greater than the Restoration Threshold, Lender shall
make the Net Proceeds available for the Restoration, provided that each of the following conditions
are met:
(A) If the Casualty or Condemnation occurs prior to the Completion of the Improvements:
(i) No Event of Default shall have occurred and be continuing;
(ii) Lender is reasonably satisfied that the Net Proceeds plus any Advances
available under this Building Loan Agreement and Project Loan Agreement is
sufficient to cause the Completion of the Improvements and pay all Project-Related
Costs to be incurred in connection therewith;
(iii) Lender shall be reasonably satisfied that Completion of the
Improvements will be achieved on or prior to the Required Completion Date as such
date may be extended by Force Majeure (which may include the Casualty giving rise
to the Net Proceeds).
(B) If the Casualty or Condemnation occurs following the Completion of the Improvements:
(i) No Event of Default shall have occurred and be continuing;
(ii) In the event the Net Proceeds are Insurance Proceeds, less than
thirty-five percent (35%) of the total floor area of the Improvements at the
Property has been damaged, destroyed or rendered unusable as a result of such
Casualty or (B) in the event the Net Proceeds are Condemnation :Proceeds, less
than ten percent (10%) of the land constituting the Property is taken, and such
land is located along the perimeter or periphery of the Property, and no portion
of the Improvements is the subject of the Condemnation;
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(iii) Leases demising in the aggregate a percentage amount equal to or
greater than the Rentable Space Percentage of the total rentable space in the
Property which has been demised under executed and delivered Leases in effect as
of the date of the occurrence of such Casualty or Condemnation, 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 Casualty or
Condemnation, whichever the case may be, and Borrower and/or Tenant, as applicable
under the respective Lease, will make all necessary repairs and restorations
thereto at their sole cost and expense. The term “Rentable Space Percentage”
shall mean (1) in the event the Net Proceeds are Insurance Proceeds, a percentage
amount equal to ninety percent (90%) and (2) in the event the Net Proceeds are
Condemnation Proceeds, a percentage amount equal to ninety percent (90%);
(iv) Borrower shall commence the Restoration as soon as reasonably
practicable (but in no event later than sixty (60) days after such Casualty or
Condemnation, whichever the case may be) and Borrower and shall diligently pursue
the same to satisfactory completion;
(v) Lender shall be satisfied that any operating deficit, including all
scheduled all payments of principal and interest under the Note which will be
incurred with respect to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be paid during the
period required for Restoration from (A) the Net Proceeds, (B) the insurance
coverage referred to in Section 6.1.1(b)(ii) hereof, if applicable, or (C)
other funds of Borrower;
(vi) Lender shall be satisfied that the Restoration will be achieved, on or
before the earliest to occur of (A) the date six (6) months prior to the Maturity
Date, (B) such time as may be required under applicable Legal Requirements in
order to repair and restore the Property to the condition it was in immediately
prior to such Casualty or to as nearly as possible the condition it was in
immediately prior to such Condemnation, as applicable or (C) the expiration of the
insurance coverage referred to above;
(vii) The Property and the use thereof after the Restoration will be in
compliance with and permitted under all applicable Legal Requirements;
(viii) The Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
Requirements; and
(ix) Such Casualty or Condemnation, as applicable, does not result in the
permanent loss of access to the Property or the related Improvements
(x) the Debt Service Coverage Ratio for the Property, after giving effect to
the Restoration, shall be equal to or greater than 1.15 to 1.00;
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(xi) Borrower shall deliver, or cause to be delivered, to Lender a signed
detailed budget approved in writing by Borrower’s architect or engineer stating
the entire cost of completing the Restoration, which budget shall be acceptable to
Lender; and
(xii) the Net Proceeds together with any Cash or Cash Equivalent deposited by
Borrower with Lender are sufficient in Lender’s discretion to cover the cost of
the Restoration.
(b) The Net Proceeds shall be paid directly to Lender and held by Lender in an
interest-bearing account and, until disbursed in accordance with the provisions of this Section
6.2.4 shall constitute additional security for the Total Debt and the Other Obligations under
the Loan documents.
(c) 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 requirements set forth in Section 6.2.4(a) have been satisfied, (B) all relevant
conditions to the making of Advances of the Building Loan shall have been satisfied with respect to
disbursements of Net Proceeds for Restoration as though such disbursements were of Loan Proceeds
rather than Net Proceeds, it being understood however that disbursements of Net Proceeds shall not
be deemed to be advances of the Loan, (C) 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 (D) 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
of any nature whatsoever on the 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.
(d) All plans and specifications required in connection with the Restoration shall be subject
to prior approval by Lender and by an independent architect selected by Lender (which shall be the
Construction Consultant if the Casualty or Condemnation occurs prior to the Completion of the
Improvements) (the “Casualty Consultant”). 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 approval by Lender and the Casualty Consultant. All costs and expenses incurred by
Lender in connection with recovering, holding and advancing the Net Proceeds for the Restoration
including, without limitation, reasonable attorneys’ fees and disbursements and the Casualty
Consultant’s reasonable fees and disbursements, shall be paid by Borrower.
(e) 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, less 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
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no event, and notwithstanding
anything to the contrary set forth above, be less than the amount actually held back by Borrower
from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty
Retainage shall not be released until the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of this Section 6.2 and
all applicable Legal Requirements and that all approvals necessary for the re-occupancy and use of
the Property have been obtained from all appropriate Governmental Authorities, and Lender receives
evidence reasonably 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 such 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 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.
(f) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently
than once every calendar month.
(g) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the
opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to be incurred in connection
with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds
Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made. The
Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for
costs actually incurred in connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.2.4
shall constitute additional security for the Debt.
(h) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net
Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that
the Restoration has been completed in accordance with the provisions of this Section 6.2.4,
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 deposited in the Cash Management Account to
be disbursed in accordance with the Cash Management Agreement provided no Event of Default shall
have occurred and shall be continuing under any of the Loan Documents.
(i) 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 this Article VI may be retained and
applied by Lender toward the payment of the Total Debt in accordance with Section
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2.4.2 whether or
not then due and payable in such order, priority and proportions as Lender in its sole discretion
shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in
part, to Borrower for such purposes as Lender shall approve, in its discretion.
Section 6.3 Application of Net Proceeds. Upon the occurrence and continuation of an Event of
Default, Lender, at its option, may withdraw all the Net Proceeds or the undisbursed balance
thereof and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender and
may apply the such Net Proceeds and Net Proceeds Deficiency either to the payment of Restoration or
to payment of the Total Debt in such order, proportion and priority as Lender may determine in its
sole discretion. Lender’s right to withdraw and apply such Net Proceeds and Net Proceeds
Deficiency shall be in addition to all other rights and remedies provided to Lender under the
Building Loan Documents.
ARTICLE VII.
RESERVE FUNDS
Section 7.1 Tax and Insurance Escrow Fund. On the date hereof, Borrower shall pay or cause to be
paid, all Taxes, Insurance Premiums and Other Charges that will be payable on or prior to January
2, 2008. Simultaneously with the Initial Advance, Borrower shall deposit with Lender an amount
(the “Initial Tax and Insurance Escrow Deposit”) equal to the Taxes, Insurance Premiums and Other
Charges that Lender estimates will be payable from and after the date of the Initial Advance
through and including the date that the Second Tax and Insurance Escrow Deposit is payable, which
shall be funded from the Project Loan Advance. At least thirty (30) day prior to the first
anniversary of the date hereof, Borrower shall deposit with Lender an amount (the “Second Tax and
Insurance Escrow Deposit”) equal to the Taxes, Insurance Premiums and Other Charges that Lender
estimates will be payable from and after the first anniversary of the date hereof through and
including the last day of the Construction Term. Subject to the terms and conditions of the
Project Loan Agreement concerning Advances, the Second Tax and Insurance Escrow Deposit shall be
funded from an Advance of like amount under the Project Loan. Simultaneously with the Final
Advance, Borrower shall pay to Lender an amount that, when added to the amounts payable under the
next sentence, will be sufficient to accumulate
with Lender sufficient funds to pay all Taxes and Other Charges payable on the next due date
thereof at least thirty (30) days prior to their respective due dates, and to pay all Insurance
Premiums that Lender estimates will be payable for the next renewal of the coverage afforded by the
Policies upon the expiration thereof at least thirty (30) days prior to the expiration of the
Policies. In addition, Borrower shall pay to Lender (or shall cause Lender to advance) on each
Payment Date occurring after the Construction Term (a) one-twelfth (1/12) of the Taxes and Other
Charges 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 and Other Charges at least thirty
(30) days prior to their respective due dates, and (b) one-twelfth (1/12) of the Insurance Premiums
that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon
the expiration thereof in order to accumulate with Lender sufficient funds to pay all such
Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (said amounts
in (a) and (b) above hereinafter called the “Tax and Insurance Escrow Fund”). The Tax and
Insurance Escrow Fund and the Monthly Debt Service Payment Amount, shall be added together and
shall be paid as an aggregate sum by Borrower to
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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 5.1.2 hereof and under the Mortgage. In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from
the appropriate public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes, Other Charges
and Insurance Premiums pursuant to Section 5.1.2 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. If at any time Lender
reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to
pay Taxes, Other Charges and Insurance Premiums by the dates set forth in (a) and (b) above, Lender
shall notify Borrower of such determination and Borrower shall increase its monthly payments (or,
if such determination is made during the Construction Term, Borrower shall deposit the full amount
of such deficiency within 5 days of such notice) to Lender by the amount that Lender estimates is
sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Taxes
and Other Charges and/or thirty (30) days prior to expiration of the Policies, as the case may be.
Notwithstanding the foregoing, Borrower’s obligation to make monthly deposits with Lender for
Insurance Premiums shall be suspended for so long as no Event of Default has occurred and is
continuing and Borrower provides Lender with written evidence reasonably satisfactory to Lender
that all insurance coverages required to be maintained by Borrower pursuant to the terms of this
Agreement are being maintained in full force and effect through one or more blanket insurance
policies (provided that any such blanket insurance policies provide the same level of coverage
which would otherwise be provided by a stand-alone policy). Borrower shall provide evidence
reasonably acceptable to Lender on an annual basis thirty (30) days prior to the expiration of the
existing insurance that the insurance has been renewed and will provide notice of cancellation for
non-payment. In the event Borrower fails to provide such evidence or an Event of Default occurs,
however, Borrower will thereafter be required to make deposits with Lender for Insurance Premiums
as provided herein.
Section 7.2 Interest Reserve.
7.2.1 Deposit of Interest Reserve Funds. Simultaneously with the Initial Advance,
Borrower shall deposit the sum of $5,970,398.00 with Lender (the “Initial Interest Reserve
Deposit”), which shall be funded from the Initial Advance of the Project Loan. In addition,
pursuant to Section 5.1.28(d), Borrower may be obligated to deposit an Additional Interest
Reserve Deposit and in the event that Lender determines in its sole discretion that the Interest
Reserve Funds on deposit in the Interest Reserve Account are insufficient, Borrower shall deposit
with Lender an amount equal to the deficiency in the Interest Reserve Funds as determined by Lender
(each an “Interest Reserve Deposit”, each such amount so deposited shall hereinafter be referred to
as the “Interest Reserve Fund”). The account in which the Interest Reserve Fund are held shall
hereinafter be referred to as Borrower’s “Interest Reserve Account”. In lieu of making the
Interest Reserve Deposits with Lender, Borrower shall have the right to deliver to Lender an
irrevocable Letter of Credit acceptable to Lender in the amount of the Interest Reserve Deposit.
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7.2.2 Release of Interest Reserve Funds. Provided no Event of Default or monetary
Default exists and no amounts remain available for Advance under the Interest Reserve Line Item of
the Project Loan Budget, on each Payment Date, Lender shall apply the Interest Reserve Funds to
payments of the Monthly Debt Service Payment due on such date.
7.2.3 Application of Interest Reserve Funds. Upon the occurrence of an Event of
Default, Lender, at its option, may withdraw all the Interest Reserve Funds and if Lender does so,
shall apply the Interest Reserve Funds either to the payment of interest due on the Loan or toward
payment of the Total Debt in such order, proportion and priority as Lender may determine in its
sole discretion. Lender’s right to withdraw and apply the Interest Reserve Funds shall be in
addition to all other rights and remedies provided to Lender under the Loan Documents.
Section 7.3 Replacements and Replacement Reserve.
7.3.1 Replacement Reserve Fund. From and after Completion of the Improvements, Borrower
shall pay to Lender on each Payment Date an amount equal to $3,962.00 (the “Replacement Reserve
Monthly Deposit”) for replacements and repairs required to be made to the Property (collectively,
the “Replacements”). Amounts so deposited shall hereinafter be referred to as Borrower’s
"Replacement Reserve Fund” and the account in which such amounts are held shall hereinafter be
referred to as Borrower’s “Replacement Reserve Account”. Lender may reassess its estimate of the
amount necessary for the Replacement Reserve Fund from time to time, and may increase the monthly
amounts required to be deposited into the Replacement Reserve Fund upon thirty (30) days notice to
Borrower if Lender determines in its reasonable discretion that an increase is necessary to
maintain the proper maintenance and operation of the Property. Notwithstanding the foregoing,
Borrower shall not be required to deposit any portion of the
Replacement Reserve Monthly Deposit which would cause the amount then on deposit in the
Replacement Reserve, as determined by Lender, to exceed $236,280 (the “Replacement Reserve Cap”).
When the Replacement Reserve Funds on deposit in the Replacement Reserve Account equals or exceeds
the Replacement Reserve Cap, Borrower may cease making Replacement Reserve Monthly Deposits to the
Replacement Reserve Fund. If at any time thereafter the amount of the Replacement Reserve funds on
deposit in the Replacement Reserve Account is less than the Replacement Reserve Cap, then Borrower
shall recommence and continue making Replacement Reserve Monthly Deposits to the Replacement
Reserve Funds, until the amount of Replacement Reserve Funds on deposit in the Replacement Reserve
Account equal or exceed the Replacement Reserve Cap.
7.3.2 Disbursements from Replacement Reserve Account. (a) Lender shall make disbursements
from the Replacement Reserve Account to pay Borrower only for the costs of the Replacements.
Lender shall not be obligated to make disbursements from the Replacement Reserve Account to
reimburse Borrower for the costs of routine maintenance to the Property, replacements of inventory
or for costs which are a Tenant’s obligation.
(b) Lender shall, upon written request from Borrower and satisfaction of the requirements set
forth in this Section 7.3.2, disburse to Borrower amounts from the Replacement Reserve
Account necessary to pay for the actual approved costs of Replacements or to reimburse Borrower
therefor, upon completion of such Replacements (or, upon partial completion in the
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case of
Replacements made pursuant to Section 7.3.2(e) hereof) as determined by Lender. In no
event shall Lender be obligated to disburse funds from the Replacement Reserve Account if a Default
or an Event of Default exists.
(c) Each request for disbursement from the Replacement Reserve Account shall be in a form
specified or approved by Lender and shall specify (i) the specific Replacements for which the
disbursement is requested, (ii) the quantity and price of each item purchased, if the Replacement
includes the purchase or replacement of specific items, (iii) the price of all materials (grouped
by type or category) used in any Replacement other than the purchase or replacement of specific
items, and (iv) the cost of all contracted labor or other services applicable to each Replacement
for which such request for disbursement is made. With each request Borrower shall certify that all
Replacements have been made in accordance with all applicable Legal Requirements of any
Governmental Authority having jurisdiction over the Property. Each request for disbursement shall
include copies of invoices for all items or materials purchased and all contracted labor or
services provided and, unless Lender has agreed to issue joint checks as described below in
connection with a particular Replacement, each request shall include evidence satisfactory to
Lender of payment of all such amounts. Except as provided in Section 7.3.2(e) hereof, each
request for disbursement from the Replacement Reserve Account shall be made only after completion
of the Replacement for which disbursement is requested. Borrower shall provide Lender evidence of
completion of the subject Replacement satisfactory to Lender in its reasonable judgment.
(d) Borrower shall pay all invoices in connection with the Replacements with respect to which
a disbursement is requested prior to submitting such request for disbursement
from the Replacement Reserve Account or, at the request of Borrower, Lender will issue joint
checks, payable to Borrower and the contractor, supplier, materialman, mechanic, subcontractor or
other party to whom payment is due in connection with a Replacement. In the case of payments made
by joint check, Lender may require a waiver of lien from each Person receiving payment prior to
Lender’s disbursement from the Replacement Reserve Account. In addition, as a condition to any
disbursement, Lender may require Borrower to obtain lien waivers from each contractor, supplier,
materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than
Twenty-Five Thousand and 00/100 Dollars ($25,000.00) for completion of its work or delivery of its
materials. Any lien waiver delivered hereunder shall conform to the requirements of applicable law
and shall cover all work performed and materials supplied (including equipment and fixtures) for
the Property by that contractor, supplier, subcontractor, mechanic or materialman through the date
covered by the current reimbursement request (or, in the event that payment to such contractor,
supplier, subcontractor, mechanic or materialmen is to be made by a joint check, the release of
lien shall be effective through the date covered by the previous release of funds request).
(e) If (i) the cost of a Replacement exceeds Twenty-Five Thousand and 00/100 Dollars
($25,000.00), (ii) the contractor performing such Replacement requires periodic payments pursuant
to terms of a written contract, and (iii) Lender has approved in writing in advance such periodic
payments, a request for reimbursement from the Replacement Reserve Account may be made after
completion of a portion of the work under such contract, provided (A) such contract requires
payment upon completion of such portion of the work, (B) the materials for which the request is
made are on site at the Property and are properly secured or
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have been installed in the Property,
(C) all other conditions in this Agreement for disbursement have been satisfied, (D) funds
remaining in the Replacement Reserve Account are, in Lender’s judgment, sufficient to complete such
Replacement and other Replacements when required, and (E) if required by Lender, each contractor or
subcontractor receiving payments under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.
(f) Borrower shall not make a request for disbursement from the Replacement Reserve Account
more frequently than once in any calendar month and (except in connection with the final
disbursement) the total cost of all Replacements in any request shall not be less than Ten Thousand
and 00/100 Dollars ($10,000.00).
7.3.3 Performance of Replacements. (a) Borrower shall make Replacements when required in
order to keep the Property in condition and repair consistent with other first class, mixed use
retail and self-storage facilities in the same market segment in the metropolitan area in which the
Property is located, and to keep the Property or any portion thereof from deteriorating. Borrower
shall complete all Replacements in a good and workmanlike manner as soon as practicable following
the commencement of making each such Replacement.
(b) Lender reserves the right, at its option, to approve all contracts or work orders over
Twenty-five Thousand and 00/100 Dollars ($25,000.00) with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Replacements. Upon Lender’s request, Borrower shall assign any contract
or subcontract to Lender.
(c) In the event Lender determines in its reasonable discretion that any Replacement is not
being performed in a workmanlike or timely manner or that any Replacement has not been completed in
a workmanlike or timely manner, after notice and a reasonable period to cure, Lender shall have the
option to withhold disbursement for such unsatisfactory Replacement and to proceed under existing
contracts or to contract with third parties to complete such Replacement and to apply the
Replacement Reserve Fund toward the labor and materials necessary to complete such Replacement,
upon reasonable prior notice to Borrower and to exercise any and all other remedies available to
Lender upon an Event of Default hereunder.
(d) In order to facilitate Lender’s completion or making of such Replacements pursuant to
Section 7.3.3(c) above, Borrower grants Lender the right to enter onto the Property and
perform any and all work and labor necessary to complete or make such Replacements and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender, to the extent not
from the Replacement Reserve Fund, shall be deemed to have been advanced under the Loan to Borrower
and secured by the Mortgage. For this purpose Borrower constitutes and appoints Lender its true
and lawful attorney-in-fact with full power of substitution to complete or undertake such
Replacements in the name of Borrower. Such power of attorney shall be deemed to be a power coupled
with an interest and cannot be revoked. Borrower empowers said attorney-in-fact as follows: (i)
to use any funds in the Replacement Reserve Account for the purpose of making or completing such
Replacements; (ii) to make such additions, changes and corrections to such Replacements as shall be
necessary or desirable to complete such Replacements; (iii) to employ such contractors,
subcontractors, agents, architects
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and inspectors as shall be required for such purposes; (iv) to
pay, settle or compromise all existing bills and claims which are or may become Liens against the
Property, or as may be necessary or desirable for the completion of such Replacements, or for
clearance of title; (v) to execute all applications and certificates in the name of Borrower which
may be required by any of the contract documents; (vi) to prosecute and defend all actions or
proceedings in connection with the Property or the rehabilitation and repair of the Property; and
(vii) to do any and every act which Borrower might do in its own behalf to fulfill the terms of
this Agreement.
(e) Nothing in this Section 7.3.3 shall: (i) make Lender responsible for making or
completing any Replacements; (ii) require Lender to expend funds in addition to the Replacement
Reserve Fund to make or complete any Replacement; (iii) obligate Lender to proceed with any
Replacements; or (iv) obligate Lender to demand from Borrower additional sums to make or complete
any Replacement.
(f) Borrower shall permit Lender and Lender’s agents and representatives (including, without
limitation, Lender’s engineer, architect, or inspector) or third parties making Replacements
pursuant to this Section 7.3.3 to enter onto the Property during normal business hours
(subject to the rights of tenants under their Leases) to inspect the progress of any Replacements
and all materials being used in connection therewith, to examine all plans and shop drawings
relating to such Replacements which are or may be kept at the Property, and to complete any
Replacements made pursuant to this Section 7.3.3. Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender’s representatives or such
other persons described above in connection with inspections described in this Section
7.3.3(f) or the completion of Replacements pursuant to this Section 7.3.3.
(g) Lender may require an inspection of the Property at Borrower’s expense prior to making a
monthly disbursement from the Replacement Reserve Account in order to verify completion of the
Replacements for which reimbursement is sought. Lender may require that such inspection be
conducted by an appropriate independent qualified professional selected by Lender and/or may
require a copy of a certificate of completion by an independent qualified professional acceptable
to Lender prior to the disbursement of any amounts from the Replacement Reserve Account. Borrower
shall pay the expense of the inspection as required hereunder, whether such inspection is conducted
by Lender or by an independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or any other item comprising a
part of any Replacement shall be constructed, installed or completed, as applicable, free and clear
of all mechanic’s, materialmen’s or other liens (except for those Liens existing on the date of
this Agreement which have been approved in writing by Lender).
(i) Before each disbursement from the Replacement Reserve Account, Lender may require Borrower
to provide Lender with a search of title to the Property effective to the date of the disbursement,
which search shows that no mechanic’s or materialmen’s liens or other liens of any nature have been
placed against the Property since the date of recordation of the related Mortgage and that title to
the Property is free and clear of all Liens (other than the lien of the related Mortgage and any
other Liens previously approved in writing by Lender, if any).
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(j) All Replacements shall comply with all applicable Legal Requirements of all Governmental
Authorities having jurisdiction over the Property and applicable insurance requirements including,
without limitation, applicable building codes, special use permits, environmental regulations, and
requirements of insurance underwriters.
(k) In addition to any insurance required under the Loan Documents, Borrower shall provide or
cause to be provided workmen’s compensation insurance, builder’s risk, and public liability
insurance and other insurance to the extent required under applicable law in connection with a
particular Replacement. All such policies shall be in form and amount reasonably satisfactory to
Lender. All such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such policies shall be
delivered to Lender.
7.3.4 Failure to Make Replacements. (a) It shall be an Event of Default under this
Agreement if Borrower fails to comply with any provision of this Section 7.3 and such
failure is not cured within thirty (30) days after notice from Lender. Upon the occurrence of such
an Event of Default, Lender may use the Replacement Reserve Fund (or any portion thereof) for any
purpose, including but not limited to completion of the Replacements as provided in Section
7.3.3, or for any other repair or replacement to the Property or toward payment of the Total
Debt in such order, proportion and priority as Lender may determine in its sole discretion.
Lender’s right to withdraw and apply the
Replacement Reserve Fund shall be in addition to all other rights and remedies provided to
Lender under this Agreement and the other Loan Documents.
(a) Nothing in this Agreement shall obligate Lender to apply all or any portion of the
Replacement Reserve Fund on account of an Event of Default to payment of the Total Debt or in any
specific order or priority.
7.3.5 Balance in the Replacement Reserve Account. The insufficiency of any balance in the
Replacement Reserve Account shall not relieve Borrower from its obligation to fulfill all
preservation and maintenance covenants in the Loan Documents.
Section 7.4 Punch List and Deferred Maintenance Reserve.
7.4.1 Establishment of Deferred Maintenance Reserve. In the event that, following the
Completion of the Improvements but prior to the Final Advance, Lender determines that any Punch
List Items remain to be completed or if Lender determines that any condition (a “Deferred
Maintenance Condition”) exists at the Property which requires maintenance or correction, Borrower
shall deposit with Lender an amount equal to 150% of Lender’s good faith estimate of the cost to
perform any Punch List Items plus 125% of Lender’s good faith estimate of the cost of
performing such Deferred Maintenance Condition (the “Punch List and Deferred Maintenance Reserve
Deposit”, such amounts so deposited shall hereinafter be referred to as the “Punch List and
Deferred Maintenance Reserve Funds”).
7.4.2 Performance of Punch List Items and Deferred Maintenance. Borrower shall correct the
Punch List Items and Deferred Maintenance Conditions in a diligent, workmanlike manner and shall
complete the same within a reasonable time period. Upon the
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request of Borrower from time to time
(but not more often than once per calendar month), Lender shall cause disbursements to Borrower
from the Punch List and Deferred Maintenance Reserve Funds to reimburse Borrower for reasonable
costs and expenses incurred in order to correct Punch List Items and Deferred Maintenance
Conditions, upon satisfaction by Borrower of each of the following conditions: (a) Borrower shall
submit a written request for payment to Lender at least thirty (30) days prior to the date on which
Borrower requests such payment be made and specifies the Punch List Items and Deferred Maintenance
Conditions to be paid, (b) on the date such request is received by Lender and on the date such
payment is to be made, no Default or Event of Default shall exist and remain uncured, (c) Lender
shall have received an Officers’ Certificate (i) stating that all the Punch List Items and Deferred
Maintenance Conditions to be funded by the requested disbursement have been completed in good and
workmanlike manner and in accordance with all applicable federal, state and local laws, rules and
regulations, such certificate to be accompanied by a copy of any license, permit or other approval
by any Governmental Authority required to commence and/or complete the Punch List Items and
Deferred Maintenance Conditions, (ii) identifying each
Person that supplied materials or labor in connection with the Punch List Items and Deferred
Maintenance Conditions to be funded by the requested disbursement, and (iii) stating that each such
Person has been paid in full or will be paid in full upon such disbursement, such Officers’
Certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender,
(d) at Lender’s option, a title search for the Property indicating that the Property is free from
all liens, claims and other encumbrances not previously approved by Lender, and (e) Lender shall
have received such other evidence as Lender shall reasonably request that the Required Repairs to
be funded by the requested disbursement have been completed and are paid for or will be paid upon
such disbursement to Borrower. Lender may condition the making of a requested disbursement on (1)
reasonable evidence establishing that Borrower has applied any amounts previously received by it in
accordance with this Section 7.4 for the expenses to which specific draws made hereunder
relate, (2) reasonably satisfactory site inspections, and (3) receipt of lien releases and waivers
from any contractors, subcontractors and others with respect to such amounts. Lender shall not be
required to make disbursements from the Required Repair Account with respect to the Property unless
such requested disbursement is in an amount greater than Twenty-five Thousand and 00/100 Dollars
($25,000.00) (or a lesser amount if the total amount in the Required Repair Account is less than
Twenty-five Thousand and 00/100 Dollars ($25,000.00), in which case only one disbursement of the
amount remaining in the account shall be made) and such disbursement shall be made only upon
satisfaction of each condition contained in this Section 7.4.2.
7.4.3 Release of Deferred Maintenance Funds. Upon substantial completion (as reasonably
determined by Lender) of any Punch List Item or Deferred Maintenance Condition, and provided no
Event of Default is then continuing, Lender shall, on the first following Payment Date, release to
Borrower the remainder of the portion of the Punch List and Deferred Maintenance Reserve Funds held
for such Punch List Item or Deferred Maintenance Condition.
Section 7.5 Intentionally Omitted.
Section 7.6 Excess Cash Flow. Any Excess Cash Flow that, pursuant to the Cash Management
Agreement, is required to be deposited to the Excess Cash Flow Reserve (such funds “Excess Cash
Flow Funds”) shall be deposited in an account (the “Excess Cash Flow
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Reserve Account”) and held by
Lender as additional security for the payment and performance by Borrower of its obligations
hereunder and other the other Loan Documents.
Section 7.7 Operating Reserve.
7.7.1 Deposit of Operating Reserve Funds. In the event that, following the Completion
of the Improvements, Lender determines that the Gross Income from Operations is not sufficient to
pay the Operating Expenses of the Property and the Total Debt Service,
Borrower shall deposit with Lender an amount equal Lender’s good faith estimate of the
shortfall in Gross Income from Operations until such time that Lender determines that the Property
will achieve a Debt Service Coverage Ratio of 1.15 to 1.00 (the “Operating Reserve Deposit”, such
amounts so deposited shall hereinafter be referred to as the “Operating Reserve Funds”). The
account in which the Interest Reserve Fund are held shall hereinafter be referred to as the
"Operating Reserve Account”.
7.7.2 Release of Operating Reserve Funds. Provide no Event of Default or monetary
Default exists, in the event that the amounts on deposit in the Cash Management Account are not
sufficient to make the payments required under Section 3.4(a) through (g), of the
Cash Management Agreement on each Payment Date, Lender shall apply the Operating Reserve Funds to
payments of the such items.
7.7.3 Application of Operating Reserve Funds. Upon the occurrence of an Event of
Default, Lender, at its option, may withdraw all the Operating Reserve Funds and if Lender does so,
shall apply the Operating Reserve Funds toward payment of the Total Debt in such order, proportion
and priority as Lender may determine in its sole discretion. Lender’s right to withdraw and apply
the Operating Reserve Funds shall be in addition to all other rights and remedies provided to
Lender under the Loan Documents.
7.7.4 Release of Operating Reserve Funds. Provided that no Event of Default or
Monetary Default then exists if Lender determines that the Property has achieved a Debt Service
Coverage Ratio of 1.15 to 1.00 for two consecutive Debt Service Coverage Ratio Determination Dates,
Lender shall release to Borrower any amount remaining in the Operating Reserve Account.
Section 7.8 Rollover Reserve.
7.8.1 Deposits to Rollover Reserve Fund. From and after Completion of the
Improvements, Borrower shall pay to Lender on each Payment Date the sum of $15,645.33 (the
"Rollover Reserve Monthly Deposit”), which amounts shall be deposited with and held by Lender for
tenant improvement and leasing commission obligations incurred following the date hereof. Amounts
so deposited shall hereinafter be referred to as the “Rollover Reserve Fund” and the account to
which such amounts are held shall hereinafter be referred to as the “Rollover Reserve Account".
Notwithstanding the foregoing, Borrower shall not be required to deposit any portion of the
Rollover Reserve Monthly Deposit which would cause the amount then on deposit in the Rollover
Reserve, as determined by Lender, to exceed $938,720.00 (the “Rollover Reserve Cap”). When the
Rollover Reserve Funds on deposit in the Rollover Reserve Account equals or exceeds the Rollover
Reserve Cap, Borrower may cease making Rollover Reserve
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Monthly Deposits to the Rollover Reserve
Fund. If at any time thereafter the amount of the Rollover Reserve funds on deposit in the
Rollover Reserve Account is less than the Rollover Reserve Cap, then Borrower shall recommence and
continue making Rollover Reserve
Monthly Deposits to the Rollover Reserve Funds, until the amount
of Rollover Reserve Funds on deposit in the Rollover Reserve Account equal or exceed the Rollover
Reserve Cap.
7.8.2 Withdrawal of Rollover Reserve Funds. Lender shall make disbursements from the
Rollover Reserve Fund for tenant improvement and leasing commission
obligations incurred by Borrower. All such expenses shall be approved by Lender in its sole
discretion. Lender shall make disbursements as requested by Borrower on a quarterly basis in
increments of no less than $5,000.00 upon delivery by Borrower of Lender’s standard form of draw
request accompanied by copies of paid invoices for the amounts requested and, if required by
Lender, lien waivers and releases from all parties furnishing materials and/or services in
connection with the requested payment. Lender may require an inspection of the Property at
Borrower’s expense prior to making a quarterly disbursement in order to verify completion of
improvements for which reimbursement is sought.
Section 7.9 Ground Lease Reserve Fund.
7.9.1 Deposits to Ground Lease Fund. From and after the earlier of the Completion of
the Improvements or the Required Completion Date, Borrower shall deposit with Lender, the sum of
$250,000.00. On each Payment Date, commencing on the Payment Date occurring in February, 2008,
Borrower shall pay to Lender an amount equal to the rents (including both base and additional
rents) and other charges due under the Ground Lease that will be payable by Borrower as lessee
under the Ground Lease (collectively, the “Ground Rent”) on the next date that Ground Rent is
payable under the Ground Lease. Amounts so deposited shall hereinafter be referred to as the
"Ground Lease Reserve Fund” and the account in which such amounts are held shall hereinafter be
referred to as the “Ground Lease Reserve Account.” Notwithstanding the foregoing, Borrower’s
obligation to make monthly deposits with Lender for Ground Rent shall be suspended for so long as
no Event of Default has occurred and is continuing and Borrower provides Lender with written
evidence reasonably satisfactory to Lender on a monthly basis that all Ground Rent has been paid
when due. In the event Borrower fails to provide such evidence or an Event of Default occurs,
however, Borrower will thereafter be required to make deposits with Lender for Ground Rent as
provided herein.
7.9.2 Release of Ground Lease Reserve Fund. Provided no Event of Default has occurred
and is continuing, Lender shall apply amounts in the Ground Lease Reserve Fund to the payment of
the Ground Rent as and when such Ground Rent is payable. In making any payment relating to the
Ground Rent, Lender may do so according to any bill, statement or estimate procured from the Ground
Lessor, without inquiry into the accuracy of such bill, statement or estimate. Any amounts
remaining in the Ground Lease Reserve Fund after the Debt has been paid in full shall be returned
to Borrower. If the Ground Rent increases at any time Borrower shall, within thirty (30) days
thereafter, deposit with Lender such amount as shall be sufficient so that at all times the amount
on deposit in the Ground Rent Reserve Account shall be not less than two month’s rent.
Section 7.10 Storage Facility Master Lease Reserve.
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7.10.1 Storage Facility Master Lease Reserve Fund. On the earlier of the Completion
of the Improvements or the Required Completion Date, Borrower shall deposit with Lender the amount
of $800,000.00, representing one (1) year’s Storage Facility Rent under the Storage Facility Master
Lease, which amount shall be deposited with and held by Lender as additional security for the Loan.
Amounts so deposited shall hereinafter be referred to as the “Storage Facility Master Lease
Reserve Fund” and the account in which such amount is held shall hereinafter be referred to as the
“Storage Facility Master Lease Reserve Account”. Until
such time as the Storage Facility Master Lease Reserve Fund is fully released as set forth in
Section 7.10.2, the Storage Facility Master Lease Reserve Fund shall be held by Lender as
additional security for the Loan. The tenant under the Storage Facility Master Lease shall be
obligated to make monthly rent payments and reimbursements thereunder until such time as the
Storage Facility Master Lease shall have been terminated pursuant to Section 5.1.44.
7.10.2 Disbursement of Storage Facility Master Lease Reserve Funds. Provided no Event
of Default shall have occurred and be continuing; Lender shall disburse the Storage Facility Master
Lease Reserve Fund in the event that (a) the Self Storage Facility is open for business and (b)
either (i) the Self Storage Facility yields an underwritten Net Cash Flow of $800,000 with no free
rent, credit or right of offset, or (ii) the entire Property yields a Stabilized Net Cash Flow of
$3,100,000.
Section 7.11 Reserve Funds, Generally. Borrower grants to Lender a first-priority perfected
security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in
each Reserve Fund as additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Funds shall constitute additional security for the Debt. Upon the
occurrence of an Event of Default, Lender may, in addition to any and all other rights and remedies
available to Lender, apply any sums then present in any or all of the Reserve Funds to the payment
of the Total Debt in any order in its sole discretion. The Reserve Funds shall not constitute
trust funds and may be commingled with other monies held by Lender. The Reserve Funds shall be
held in an Eligible Account in Permitted Investments in accordance with the terms and provisions of
the Cash Management Agreement. Interest earned on the Replacement Reserve Funds shall be added to
and become a part of such Reserve Fund and shall be disbursed in the same manner as other monies
deposited in such Reserve Fund. Any interest on the Rollover Reserve Funds, the Ground Rent
Reserve Funds, the Cash Collateral Reserve Funds, the Punch List and Deferred Maintenance Reserve
Funds, the Operating Reserve Funds, the Interest Reserve Funds, the Storage Facility Master Lease
Reserve Fund and the Tax and Insurance Escrow Funds shall not be added to or become a part thereof
and shall be the sole property of and shall be paid to Lender. Borrower shall be responsible for
payment of any federal, state or local income or other tax applicable to the interest earned on the
Reserve Funds credited or paid to Borrower. Borrower shall not, without obtaining the prior
written consent of Lender, further pledge, assign or grant any security interest in any Reserve
Fund or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any
levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the
secured party, to be filed with respect thereto. Lender shall not be liable for any loss sustained
on the investment of any funds constituting the Reserve Funds. Borrower shall indemnify Lender and
hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities,
losses, damages, obligations and costs and expenses (including litigation costs and reasonable
attorneys fees and expenses) arising from or in any way connected with the Reserve Funds or the
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performance of the obligations for which the Reserve Funds were established. Borrower shall assign
to Lender all rights and claims Borrower may have against all persons or entities supplying labor,
materials or other services which are to be paid from or secured by the Reserve Funds; provided,
however, that Lender may not pursue any such right or claim unless an Event of Default has occurred
and remains uncured.
Section 7.12 Letter of Credit Rights. Any Letter of Credit delivered to Lender pursuant to this
Agreement shall be held by Lender as additional security for the Loan. Lender shall have the right
to draw upon any Letter of Credit immediately and without further notice:
(a) upon the occurrence and during the continuance of an Event of Default;
(b) if Borrower fails to deliver to Lender, no less than thirty (30) days prior to the
expiration of any Letter of Credit (including any renewal or extension thereof), a renewal or
extension of such Letter of Credit or a replacement Letter of Credit; or
(c) if the institution issuing the Letter of Credit ceases to be an Approved Bank and Borrower
fails to deliver to Lender a replacement Letter of Credit from an Approved Bank within thirty (30)
days of the date that such institution ceased to be an Approved Bank.
ARTICLE VIII.
DEFAULTS
Section 8.1 Event of Default. (a) Each of the following events shall constitute an event of
default hereunder (an “Event of Default”):
(i) if any portion of the Debt is not paid within five (5) days of the date
when due (except that Borrower shall not be afforded such 5-day cure period for the
portion of the Debt due and payable on the Maturity Date);
(ii) if any of the Taxes (other than Taxes being contested pursuant to
Section 5.1.2 of this Agreement) are not paid when the same are due and
payable or Other Charges are not paid within five (5) days after Borrower receives
notice of same;
(iii) if the Policies are not kept in full force and effect, or if certified
copies of the Policies are not delivered to Lender upon request;
(iv) if Borrower Transfers or otherwise encumbers any portion of the Property
without Lender’s prior written consent in violation of the provisions of this
Agreement or the Mortgage;
(v) if any material representation or warranty made by Borrower or Guarantor
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;
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(vi) if Borrower, Mezzanine Borrower, Guarantor or any other guarantor under
any guaranty issued in connection with the Loan shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
Mezzanine Borrower, Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Mezzanine Borrower, Guarantor or such other
guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
or if any proceeding for the dissolution or liquidation of Borrower, Mezzanine
Borrower, Guarantor or such other guarantor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
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 breaches any covenant contained in Section 4.1.30;
(x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if Borrower shall be in
default under such term, covenant or condition after the giving of such notice or
the expiration of such grace period;
(xi) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in any
material respect;
(xii) if Borrower fails to pay the Administration Fee, or any portion or
installment thereof, within five (5) days of the date when due;
(xiii) If Borrower fails to deposit with Lender the cash deposit or Letter of
Credit required in accordance with Section 2.12.2 hereof;
(xiv) if Borrower fails to materially comply with the Construction Schedule;
(xv) if the Completion of the Improvements has not occurred on or prior to the
Required Completion Date, subject to Force Majeure or if Lender or the Construction
Consultant determines that Completion of the Improvements cannot occur on or prior
to the Required Completion Date;
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(xvi) if any voucher or invoice is fraudulently submitted by Borrower or in
connection with any Advance for services performed or for materials used in or
furnished for the Property;
(xvii) if there is any cessation at any time in construction of the Project
Improvements for more than twenty (20) consecutive Business Days, other than as a
result of Force Majeure;
(xviii) if Borrower expressly confesses in writing to Lender its inability to
continue or complete construction of the Project Improvements in accordance with
this Agreement;
(xix) if Lender, the Construction Consultant or their representatives are not
permitted at all reasonable times upon not less than three (3) Business Days notice
to enter upon the Property, inspect the Improvements and the construction thereof
and all materials, fixtures and articles used or to be used in the construction and
to examine all the Plans and Specifications, or if Borrower shall fail to furnish to
Lender or its authorized representative, when requested upon not less than five (5)
Business Days notice, copies of the Plans and Specifications;
(xx) if a material adverse change in Borrower’s financial condition shall occur
which would, in Lender’s reasonable determination, materially and adversely affect
Borrower’s ability to perform its obligations under this Agreement or any other
document evidencing or securing the Loan beyond any applicable notice and grace
periods expressly set forth in the Loan Documents;
(xxi) if the conditions precedent to the Final Advance have not been satisfied
on or prior to the Required Completion Date;
(xxii) If the Guarantor fails to maintain the Required Liquidity and the
Required Net Worth covenants specified in the Guaranty of Completion or if the
Guarantor shall default under the Guaranty of Completion or the Guaranty of Recourse
Carveouts;
(xxiii) if a material default has occurred and continues beyond any applicable
cure period under the Management Agreement (or any Replacement Management Agreement)
and if such default permits the Manager thereunder to terminate or cancel the
Management Agreement (or any Replacement Management Agreement);
(xxiv) if Borrower shall continue to be in Default under any of the terms,
covenants or conditions of Section 9.1 hereof, or fails to cooperate with
Lender in connection with a Securitization pursuant to the provisions of Section
9.1 hereof, in either case for three (3) Business Days after notice to Borrower
from Lender;
(xxv) if an Event of Default (as defined in the Project Loan Agreement) shall
have occurred;
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(xxvi) if there shall be default by Borrower or Guarantor under any of the
other Loan Documents, beyond applicable cure periods, if any, contained in such
documents, whether as to Borrower, Guarantor or the Property, or if any other such
event shall occur or condition shall exist, if the effect of such other default,
event or condition is to accelerate the maturity of all or any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the Debt;
(xxvii) if (A) a breach or default by Borrower under any condition or
obligation contained in the Ground Lease shall occur, (B) there occurs any event or
condition that gives the Ground Lessor under the Ground Lease a right to terminate
or cancel the Ground Lease, (C) the Ground Lease shall be surrendered or the Ground
Lease shall be terminated or cancelled for any reason or under any circumstances
whatsoever, or (D) any of the terms, covenants or conditions of the Ground Lease
shall in any manner be modified, changed, supplemented, altered, or amended without
the prior written consent of Lender;
(xxviii) if (A) a breach or default by Borrower or Storage Facility Tenant
under any condition or obligation contained in the Storage Facility Master Lease
shall occur, (B) there occurs any event or condition that gives the Borrower or the
Storage Facility Tenant under the Storage Facility Master Lease a right to terminate
or cancel the Storage Facility Master Lease, (C) the Storage Facility Master Lease
shall be surrendered or the Storage Facility Master Lease shall be terminated or
cancelled for any reason or under any circumstances whatsoever, except as
specifically permitted herein, or (D) any of the terms, covenants or conditions of
the Storage Facility Master Lease shall in any manner be modified, changed,
supplemented, altered, or amended without the prior written consent of Lender;
(xxix) if Guarantor or Storage Facility Tenant shall dissolve or cease to exist
during the term of the Loan, except in compliance with the provisions of Section
5.2.15 or Section 5.1,44(e) hereof, respectively; or
(xxx) if the Initial Advance Conditions are not satisfied by the Required
Initial Advance Date; or
(xxxi) 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
(xxx) above, for twenty (20) 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 thirty (30) day period and provided further that
Borrower shall have commenced to cure such Default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same, such
thirty (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 (60) days.
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(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, in
addition to any other rights or remedies available to it pursuant to this Agreement and the other
Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that
Lender deems advisable to protect and enforce its rights against Borrower and the Property,
including, without limitation, declaring the Debt to be immediately due and payable, and Lender may
enforce or avail itself of any or all rights or remedies provided in the Loan Documents against
Borrower and any or all of the Property, 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 Other Obligations of Borrower hereunder and
under the other Loan Documents shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
Section 8.2 Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrower under this Agreement or any of
the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in
equity may be exercised by Lender at any time and from time to time, whether or not all or any of
the Debt shall be declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and remedies under any of
the Loan Documents with respect to all or any part of the Property. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender may determine in its
sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees
that if an Event of Default is continuing (i) to Lender is not subject to any “one action” or
“election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges
provided to Lender shall remain in full force and effect until Lender has exhausted all of its
remedies against the Property and the Mortgage has been foreclosed, sold and/or otherwise realized
upon in satisfaction of the Debt or the Debt has been paid in full.
(b) With respect to Borrower and the Property, nothing contained herein or in any other Loan
Document shall be construed as requiring Lender to resort to the Property for the satisfaction of
any of the Debt in any preference or priority, and Lender may seek satisfaction out of the
Property, or any part thereof, in its absolute discretion in respect of the Debt. In addition,
Lender shall have the right from time to time to partially foreclose the Mortgage in any manner and
for any amounts secured by the Mortgage 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 the Mortgage 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 the Mortgage to recover so
much of the principal balance of the Loan as Lender may accelerate and such other sums secured
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by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Property
shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not
previously recovered.
(c) Lender shall have the right from time to time to sever the Note and the other Loan
Documents into one or more separate notes, mortgages and other security documents (the “Severed
Loan Documents”) in such denominations as Lender shall determine in its sole discretion for
purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall
execute and deliver to Lender from time to time, promptly after the request of Lender, a severance
agreement and such other documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.
Borrower hereby absolutely and irrevocably appoints Lender 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) Business Days after notice has been given to Borrower by Lender of Lender’s intent
to exercise its rights under such power. Borrower shall be obligated to pay any costs or expenses
incurred in connection with the preparation, execution, recording or filing of the Severed Loan
Documents and the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and warranties contained
in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative; Waivers. The rights, powers and remedies of Lender under this
Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at
law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singularly,
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.
ARTICLE IX.
SPECIAL PROVISIONS
Section 9.1 Sale of Notes and Securitization. Borrower acknowledges and agrees that Lender may
sell all or any portion of the Loan and the Loan Documents, or issue one or more participations
therein, or consummate one or
more private or public securitizations of rated single- or multi-class securities (the
“Securities”) secured by or evidencing ownership interests in all or any portion of the Loan and
the Loan Documents or a pool of assets that include the Loan and the Loan Documents (such sales,
participations and/or securitizations, collectively, a “Securitization”). At the request of
Lender, and to the extent not already required to be
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provided by or on behalf of Borrower under this Agreement, Borrower shall use reasonable efforts to
provide information not in the possession of Lender or which may be reasonably required by Lender
or take other actions reasonably required by Lender, in each case in order to satisfy the market
standards to which Lender customarily adheres or which may be reasonably required by prospective
investors and/or the Rating Agencies in connection with any such Securitization including, without
limitation, to:
(a) provide additional and/or updated Provided Information, together with appropriate
verification and/or consents related to the Provided Information through letters of auditors or
opinions of counsel of independent attorneys reasonably acceptable to Lender, prospective investors
and/or the Rating Agencies;
(b) assist in preparing descriptive materials for presentations to any or all of the Rating
Agencies, and work with, and if requested, supervise, third-party service providers engaged by
Borrower and approved by Lender, Guarantor and their respective affiliates to obtain, collect, and
deliver information requested or required by Lender, prospective investors and/or the Rating
Agencies;
(c) deliver (i) an Additional Insolvency Opinion and an opinion with respect to, due execution
and enforceability with respect to the Property, Borrower, Guarantor and their respective
Affiliates and the Loan Documents, and such other legal opinions as Lender may request including,
without limitation, a so called “10b-5” opinion, and (ii) revised organizational documents for
Borrower, which counsel opinions and organizational documents shall be reasonably satisfactory to
Lender, prospective investors and/or the Rating Agencies;
(d) if required by any prospective investor and/or any Rating Agency, use commercially
reasonable efforts to deliver such additional tenant estoppel letters, subordination agreements or
other agreements from parties to agreements that affect the Property, which estoppel letters,
subordination agreements or other agreements shall be reasonably satisfactory to Lender,
prospective investors and/or the Rating Agencies;
(e) make such representations and warranties as of the closing date of the Securitization with
respect to the Property, Borrower, Guarantor and the Loan Documents as may be reasonably requested
by Lender, prospective investors and/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;
(f) execute such amendments to the Loan Documents as may be requested by Lender, prospective
investors and/or the Rating Agencies to effect the Securitization;
(g) if requested by Lender, review any information regarding the Property, Borrower,
Guarantor, and the Loan which is contained in a preliminary or final private placement memorandum,
prospectus, prospectus supplement (including any amendment or supplement to either thereof), or
other disclosure document to be used by Lender or any affiliate thereof; and
(h) supply to Lender such documentation, financial statements and reports in form and
substance required in order to comply with any applicable securities laws.
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9.1.2 Loan Components.
(a) Borrower covenants and agrees that in connection with any Securitization of the Loan, upon
Lender’s request, Borrower shall deliver one or more new component notes to replace the original
note or modify the original note to reflect multiple components of the Loan (and such new notes or
modified note shall initially have the same fully funded weighted average interest rate as the
original note, but such new notes or modified note may subsequently change the weighted average
spread and apply principal, interest rates and amortization of the Loan between the components in a
manner specified by Lender in its sole discretion) and modify the Cash Management Agreement with
respect to the newly created components such that the pricing and marketability of the Securities
and the size of each class of Securities and the rating assigned to each such class by the Rating
Agencies shall provide the most favorable rating levels and achieve the optimum rating levels for
the Loan, provided that the same do not materially increase Borrower’s obligations and/or
liabilities under the Loan Documents or materially decrease Borrower’s rights under the Loan
Documents.
(b) Borrower covenants and agrees that Lender may hereafter convert any portion of the Loan to
subordinate financing, including one or more tranches of mezzanine debt, preferred equity,
subordinate debt or participation in such loan, subordinate to such loan (collectively,
“Subordinate Financing”), provided, however, such Subordinate Financing and the Loan following the
creation of the Subordinate Financing shall, in the aggregate, initially have the same fully funded
weighted average interest rate as the fully funded interest rate of the Loan prior to the creation
of such Subordinate Financing, but such Subordinate Financing may subsequently change the weighted
average spread and Lender may apply principal, interest rates and amortization of the Loan and the
Subordinate Financing in a manner specified by Lender in its sole discretion. If the Subordinate
Financing takes the form of a mezzanine loan, a mezzanine borrower (the “Mezzanine Borrower”) may
be created which will own one hundred percent (100%) of the equity interests in the Borrower. One
hundred percent (100%) of the ownership and economic interests in the Mezzanine Borrower may, at
Lender’s discretion, be required to be pledged as security for such tranches of Subordinate
Financing, if any. A default with the related Loan shall be a default under the respective
Subordinate Financing. Such Subordinate Financing shall be subject to an intercreditor agreement
by and between the Lender and the subordinate lender(s).
9.1.3 Costs of Subordinate Financing. Borrower shall be responsible for all costs and
expenses incurred by Lender in connection with any Subordinate Financing, (including reasonable
attorneys’ fees and disbursements) including without limitation (i) the preparation, negotiation,
execution and delivery of any mezzanine loan documents (“Mezzanine Loan Documents”) and the
consummation of the transactions contemplated thereby and all the costs of furnishing all opinions
by counsel for Borrower and Mezzanine Borrower; (ii) Mezzanine Borrower’s and Lender’s ongoing
performance under and compliance with the Mezzanine Loan Documents, including confirming compliance
with environmental and insurance requirements; (iii) the negotiation, preparation, execution,
delivery and administration of any consents, amendments,
waivers or other modifications of or under any Mezzanine Loan Document and any other documents
or matters requested by Lender; (iv) filing and recording of any Mezzanine Loan Documents; (v)
title insurance (including any applicable mezzanine endorsements or UCC endorsements or policies),
surveys, inspections and appraisals; (vi) the creation, perfection or
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protection of Lender’s Liens
in the collateral securing the Mezzanine Loan Documents (including fees and expenses for title and
lien searches, intangibles taxes, personal property taxes, recording taxes, due diligence expenses,
travel expenses, accounting firm fees, costs of appraisals, environmental reports and Construction
Consultant, surveys and engineering reports); and (vii) fees charged by Rating Agencies in
connection with the creation of the Subordinate Financing, or any modification of the Loan or the
Subordinate Financing.
Section 9.2 Securitization Indemnification . (a) Borrower understands that certain
of the Provided Information may be included in Disclosure Documents in connection with the
Securitization 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
Exchange Act of 1934, as amended (the “Exchange Act”), or provided or made available to investors
or prospective investors in the Securities, the Rating Agencies, and service providers relating to
the Securitization. In the event that the Disclosure Document is required to be revised prior to
the sale of all Securities, Borrower will cooperate with the holder of the 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) The Indemnifying Persons agree to provide, in connection with the Securitization, an
indemnification agreement (A) certifying that (i) the Indemnifying Persons have carefully examined
the Disclosure Documents, including without limitation, the sections entitled “Risk Factors,”
“Special Considerations,” “Description of the Mortgages,” “Description of the Mortgage Loans and
Mortgaged Property,” “The Manager,” “The Borrower” and “Certain Legal Aspects of the Mortgage
Loan,” and (ii) such sections and such other information in the Disclosure Documents (to the extent
such information relates to or includes any Provided Information or any information regarding the
Properties, Borrower, Manager and/or the Loan) (collectively with the Provided Information, the
“Covered Disclosure Information”) 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) jointly and severally indemnifying
Lender, BSCMI (whether or not it is the Lender), any Affiliate of BSCMI that has filed any
registration statement relating to the Securitization or has acted as the sponsor or depositor in
connection with the Securitization, any Affiliate of BSCMI that acts as an underwriter, placement
agent or initial purchaser of Securities issued in the Securitization, any other co-underwriters,
co-placement agents or co-initial purchasers of Securities issued in the Securitization, and each
of their respective officers, directors, partners, employees, representatives, agents and
Affiliates and each Person or entity who Controls any such Person within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively, the “Indemnified Persons”),
for any losses, claims, damages, liabilities, costs or expenses (including without limitation legal
fees and expenses for enforcement of these obligations (collectively, the “Liabilities”) to which
any such Indemnified Person may become subject insofar as the Liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact contained in the Covered
Disclosure Information or arise out of or are based upon the omission or alleged omission to state
in the
Covered Disclosure Information a material fact required to be stated therein or necessary in
order to make the statements in the Covered Disclosure Information, in light of the circumstances
under which they were made, not misleading and (C) agreeing to reimburse each Indemnified Person
for any legal or other expenses incurred by such Indemnified Person, as they are incurred,
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in
connection with investigating or defending the Liabilities. This indemnity agreement will be in
addition to any liability which Borrower may otherwise have. Moreover, the indemnification and
reimbursement obligations provided for in clauses (B) and (C) above shall be
effective, valid and binding obligations of the Indemnifying Persons whether or not an
indemnification agreement described in clause (A) above is provided.
(c) In connection with Exchange Act Filings, the Indemnifying Persons jointly and severally
agree to indemnify (i) the Indemnified Persons for Liabilities to which any such Indemnified Person
may become subject insofar as the Liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact in the Covered Disclosure Information, or the
omission or alleged omission to state in the Covered Disclosure Information a material fact
required to be stated therein or necessary in order to make the statements in the Covered
Disclosure Information, in light of the circumstances under which they were made, not misleading
and (ii) reimburse each Indemnified Person for any legal or other expenses incurred by such
Indemnified Persons, as they are incurred, in connection with defending or investigating the
Liabilities.
(d) Promptly after receipt by an Indemnified Person of notice of any claim or the commencement
of any action, the Indemnified Person shall, if a claim in respect thereof is to be made against
any Indemnifying Person, notify such Indemnifying Person in writing of the claim or the
commencement of that action; provided, however, that the failure to notify such Indemnifying Person
shall not relieve it from any liability which it may have under the indemnification provisions of
this Section 9.2 except to the extent that it has been materially prejudiced by such
failure and, provided further that the failure to notify such Indemnifying Person shall not relieve
it from any liability which it may have to an Indemnified Person otherwise than under the
provisions of this Section 9.2. If any such claim or action shall be brought against an
Indemnified Person, and it shall notify any Indemnifying Person thereof, such Indemnifying Person
shall be entitled to participate therein and, to the extent that it wishes, assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Person. After notice from any
Indemnifying Person to the Indemnified Person of its election to assume the defense of such claim
or action, such Indemnifying Person shall not be liable to the Indemnified Person for any legal or
other expenses subsequently incurred by the Indemnified Person in connection with the defense
thereof except as provided in the following sentence; provided, however, if the defendants in any
such action include both an Indemnifying Person, on the one hand, and one or more Indemnified
Persons on the other hand, and an Indemnified Person shall have reasonably concluded that there are
any legal defenses available to it and/or other Indemnified Persons that are different or in
addition to those available to the Indemnifying Person, the Indemnified Person or Persons 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 Person or Persons. The
Indemnified Person shall instruct its counsel to maintain reasonably detailed billing records for
fees and disbursements for which such Indemnified Person is seeking reimbursement hereunder and
shall submit copies of such detailed billing records to substantiate that such counsel’s fees and
disbursements are solely related to the
defense of a claim for which the Indemnifying Person is required hereunder to indemnify such
Indemnified Person. No Indemnifying Person shall be liable for the expenses of more than one (1)
such separate counsel unless such Indemnified Person shall have reasonably concluded that
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there may
be legal defenses available to it that are different from or additional to those available to
another Indemnified Person.
(e) Without the prior written consent of BSCMI (which consent shall not be unreasonably
withheld or delayed), no Indemnifying Person shall settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless the Indemnifying Person shall
have given BSCMI reasonable prior written notice thereof and shall have obtained an unconditional
release of each Indemnified Person hereunder from all liability arising out of such claim, action,
suit or proceedings. As long as an Indemnifying Person has complied with its obligations to defend
and indemnify hereunder, such Indemnifying Person shall not be liable for any settlement made by
any Indemnified Person without the consent of such Indemnifying Person (which consent shall not be
unreasonably withheld or delayed).
(f) The Indemnifying Persons agree that if any indemnification or reimbursement sought
pursuant to this Section 9.2 is finally judicially determined to be unavailable for any
reason or is insufficient to hold any Indemnified Person harmless (with respect only to the
Liabilities that are the subject of this Section 9.2), then the Indemnifying Persons, on
the one hand, and such Indemnified Person, on the other hand, shall contribute to the Liabilities
for which such indemnification or reimbursement is held unavailable or is insufficient: (x) in
such proportion as is appropriate to reflect the relative benefits to the Indemnifying Persons, on
the one hand, and such Indemnified Person, on the other hand, from the transactions to which such
indemnification or reimbursement relates; or (y) if the allocation provided by clause (x)
above is not permitted by applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (x) but also the relative faults of the
Indemnifying Persons, on the one hand, and all Indemnified Persons, on the other hand, as well as
any other equitable considerations. Notwithstanding the provisions of this Section 9.2,
(A) no party found liable for a fraudulent misrepresentation shall be entitled to contribution from
any other party who is not also found liable for such fraudulent misrepresentation, and (B) the
Indemnifying Persons agree that in no event shall the amount to be contributed by the Indemnified
Persons collectively pursuant to this paragraph exceed the amount of the fees actually received by
the Indemnified Persons in connection with the closing of the Loan.
(g) The Indemnifying Persons agree that the indemnification, contribution and reimbursement
obligations set forth in this Section 9.2 shall apply whether or not any Indemnified Person
is a formal party to any lawsuits, claims or other proceedings. The Indemnifying Persons further
agree that the Indemnified Persons are intended third party beneficiaries under this Section
9.2.
(h) The liabilities and obligations of the Indemnified Persons and the Indemnifying Persons
under this Section 9.2 shall survive the termination of this Agreement and the satisfaction
and discharge of the Debt.
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(i) Notwithstanding anything to the contrary contained herein, Borrower shall have no
obligation to act as depositor with respect to the Loan or an issuer or registrant with respect to
the Securities issued in any Securitization.
Section 9.3 Exculpation. Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrower to perform and observe the obligations contained
in the Note, this Agreement, the Mortgage or the other Loan Documents by any action or proceeding
wherein a money judgment shall be sought against Borrower, except that Lender may bring a
foreclosure action, an action for specific performance or any other appropriate action or
proceeding to enable Lender to enforce and realize upon its interest under the Note, this
Agreement, the Mortgage and the other Loan Documents, or in the Property, the Rents, or any other
collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as
specifically provided herein, any judgment in any such action or proceeding shall be enforceable
against Borrower only to the extent of Borrower’s interest in the Property, in the Rents and in any
other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Mortgage
and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency
judgment against Borrower in any such action or proceeding under or by reason of or under or in
connection with the Note, this Agreement, the Mortgage or the other Loan Documents. The provisions
of this Section shall not, however, (a) constitute a waiver, release or impairment of any
obligation evidenced or secured by any of the Loan Documents; (b) impair the right of Lender to
name Borrower as a party defendant in any action or suit for foreclosure and sale under the
Mortgage; (c) affect the validity or enforceability of or any guaranty made in connection with the
Loan or any of the rights and remedies of Lender thereunder; (d) impair the right of Lender to
obtain the appointment of a receiver; (e) impair the enforcement of the Assignment of Leases; (f)
constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to
fully realize the security granted by the Mortgage or to commence any other appropriate action or
proceeding in order for Lender to exercise its remedies against the Property; or (g) constitute a
waiver of the right of Lender to enforce the liability and obligation of Borrower, by money
judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other
obligation incurred by Lender (including attorneys’ fees and costs reasonably incurred) arising out
of or in connection with the following:
(i) fraud or intentional misrepresentation by Borrower or Guarantor in
connection with the Loan;
(ii) the gross negligence or willful misconduct of Borrower;
(iii) the breach of any representation, warranty, covenant or indemnification
provision in the Environmental Indemnity Agreement or in the Mortgage concerning
environmental laws, hazardous substances and asbestos and any indemnification of
Lender with respect thereto in either document;
(iv) the removal or disposal of any portion of the Property after an Event of
Default;
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(v) the misapplication or conversion by Borrower of (A) any Insurance
Proceeds paid by reason of any loss, damage or destruction to the Property, (B)
any Awards received in connection with a Condemnation of all or a portion of the
Property, (C) any Rents following an Event of Default, or (D) any Rents paid more
than one month in advance;
(vi) failure to pay charges for labor or materials or other charges that can
create Liens on any portion of the Property;
(vii) any security deposits, advance deposits or any other deposits collected
with respect to the Property which are not delivered to Lender upon a foreclosure
of the Property or action in lieu thereof, except to the extent any such security
deposits were applied in accordance with the terms and conditions of any of the
Leases prior to the occurrence of the Event of Default that gave rise to such
foreclosure or action in lieu thereof; or
(viii) the breach of any representation, warranty, covenant or
indemnification provision in the Guaranty of Completion or Guaranty of Recourse
Carveouts;
(ix) if (A) a breach or default by Borrower under any condition or obligation
contained in the Ground Lease is not cured within any applicable cure period
provided therein, (B) there occurs any event or condition that gives the Ground
Lessor under the Ground Lease a right to terminate or cancel the Ground Lease, or
(C) the Ground Lease shall be surrendered or the Ground Lease shall be terminated
or cancelled for any reason or under any circumstances whatsoever, or (D) any of
the terms, covenants or conditions of the Ground Lease shall in any manner be
modified, changed, supplemented, altered, or amended without the prior written
consent of Lender; or
(x) if (A) a breach or default by Borrower or Storage Facility Tenant under
any condition or obligation contained in the Storage Facility Master Lease occurs,
(B) there occurs any event or condition that gives the Borrower or Storage
Facility Tenant under the Storage Facility Master Lease a right to terminate or
cancel the Storage Facility Master Lease, (C) the Storage Facility Master Lease
shall be surrendered or the Storage Facility Master Lease shall be terminated or
cancelled for any reason or under any circumstances whatsoever without the prior
written consent of Lender, or (D) any of the terms, covenants or conditions of the
Storage Facility Master Lease shall in any manner be modified, changed,
supplemented, altered, or amended without the prior written consent of Lender.
Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan
Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under
Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for
the full amount of the Debt secured by the Mortgage or to require that all collateral shall
continue to secure all of the Debt owing to Lender in accordance with the Loan
147
Documents, and (B) the Debt shall be fully recourse to Borrower (i) in the event of: (a)
Borrower filing a voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (b) the filing of an involuntary petition against Borrower under the
Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, in which Borrower
colludes with, or otherwise assists such Person, or solicits or causes to be solicited petitioning
creditors for any involuntary petition against Borrower from any Person; (c) Borrower filing an
answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed
against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law; (d) Borrower consenting to or acquiescing in or joining in an application for
the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the
Property; or (e) Borrower making an assignment for the benefit of creditors, or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its debts as they become
due; (ii) if the first full monthly payment of interest on the Note is not paid when due; ; (iii)
if Borrower fails to maintain its status as a Single Purpose Entity, after the Guaranty Notice (as
defined in the Guaranty of Recourse Carveouts) if Borrower fails to permit on-site inspections of
the Property, fails to provide financial information, or fails to appoint a new property manager
upon the request of Lender as permitted under this Agreement, each as required by, and in
accordance with, the terms and provisions of this Agreement or the Mortgage; (iv) if Borrower fails
to obtain Lender’s prior written consent to any Indebtedness or voluntary Lien encumbering the
Property; or (v) if Borrower fails to obtain Lender’s prior written consent to any Transfer as
required by this Agreement or the Mortgage.
Section 9.4 Intentionally Omitted.
Section 9.5 Servicer. At the option of Lender, the Loan may be serviced by a
servicer/trustee (any such servicer/trustee, together with its agents, nominees or designees, are
collectively referred to as “Servicer”) selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Agreement and the other Loan Documents to Servicer
pursuant to a servicing agreement (the “Servicing Agreement”) between Lender and Servicer.
Borrower shall not be responsible for any set-up fees or any other initial costs relating to or
arising under the Servicing Agreement or the monthly servicing fee due to Servicer under the
Servicing Agreement; provided, however, that Borrower shall be responsible for expenses incurred by
Lender or Servicer as set forth in Section 10.13 hereof.
ARTICLE 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.
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Section 10.2 Lender’s Discretion. Whenever pursuant to this Agreement, Lender
exercises any right given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section 10.3 Governing Law.
(B) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND
ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN 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, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER 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 CONFLICTS OF 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 LIEN AND
SECURITY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE 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, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS
AGREEMENT, THE NOTE AND THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED
ON VENUE AND/OR FORUM NON
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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:
National Registered Agents, Inc.
875 Avenue of the Americas, Suite 501
New York, New York 10001
875 Avenue of the Americas, Suite 501
New York, New York 10001
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.
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Section 10.6 Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing and shall be
effective for all purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery, and by telecopier
(with answer back acknowledged), addressed as follows (or at such other address and Person as shall
be designated from time to time by any party hereto, as the case may be, in a written notice to the
other parties hereto in the manner provided for in this Section):
| If to Lender: | Bear Stearns Commercial Mortgage, Inc. 383 Madison Avenue New York, New York 10179 Attention: J. Christopher Hoeffel Facsimile No.: (212) 272-7047 |
|||
| with a copy to: | Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178 Attention: Paul A. Keenan, Esq. Facsimile No.: (212) 808-7897 |
|||
| If to Borrower: | P/A-Acadia Pelham Manor, LLC c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, New York 10605 Attention: Robert Masters, Esq., General Counsel Facsimile No.: (914) 288-2162 |
|||
| If to MERS: | MERS Commercial P.O. Box 2300 Flint, Michigan 48501-2300 |
|||
A notice shall be deemed to have been given: in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the
first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a
machine-generated confirmation of successful transmission after advice by telephone to recipient
that a telecopy notice is forthcoming.
Section 10.7 Trial by Jury.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
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KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
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 Preferences. Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of
Borrower hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of
such payment or proceeds received, the obligations hereunder or part thereof intended to be
satisfied shall be revived and
continue in full force and effect, as if such payment or proceeds had not been received by
Lender.
Section 10.11 Waiver of Notice. Borrower shall not be entitled to any notices of any
nature whatsoever from Lender except with respect to matters for which this Agreement or the other
Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower
and except with respect to matters for which Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right
to receive any notice from Lender with respect to any matter for which this Agreement or the other
Loan Documents do not specifically and expressly provide for the giving of notice by Lender to
Borrower.
Section 10.12 Remedies of Borrower. In the event that a claim or adjudication is made
that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where
by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may
be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its
agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree
that any action or proceeding to determine whether Lender has acted reasonably shall be determined
by an action seeking declaratory judgment.
Section 10.13 Expenses; Indemnity. (1) Borrower covenants and agrees to pay or, if
Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all
reasonable costs and expenses (including reasonable attorneys’ fees and disbursements) incurred
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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 and all the costs of furnishing all opinions by counsel for Borrower (including without
limitation any opinions requested by Lender as to any legal matters arising under this Agreement or
the other Loan Documents with respect to the Property); (ii) Borrower’s ongoing performance of and
compliance with Borrower’s respective agreements and covenants contained in this Agreement and the
other Loan Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and insurance requirements;
(iii) Lender’s ongoing performance and compliance with all agreements and conditions contained in
this Agreement and the other Loan Documents on its part to be performed or complied with after the
Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents
and any other documents or matters requested by Lender; (v) securing Borrower’s compliance with any
requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all
required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in
favor of Lender pursuant to this
Agreement and the other Loan Documents; (vii) enforcing or preserving any rights, in response
to third party claims or the prosecuting or defending of any action or proceeding or other
litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan
Documents, the Property, or any other security given for the Loan; and (viii) enforcing any
obligations of or collecting any payments due from Borrower under this Agreement, the other Loan
Documents or with respect to the Property (including any fees incurred by Servicer in connection
with the transfer of the Loan to a special servicer prior to a Default or Event of Default) or in
connection with any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided,
however, that Borrower shall not be liable for the payment of any such costs and expenses to the
extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct
of Lender. Any cost and expenses due and payable to Lender may be paid from any amounts in the
Clearing Account or Cash Management Account, as applicable.
(a) 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. To the extent that the undertaking to indemnify, defend and
hold harmless set forth in the preceding sentence may be unenforceable because it violates any law
or public policy, Borrower shall pay the maximum
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portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
(b) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender
for, any fees and expenses incurred by any Rating Agency in connection with any consent, approval,
waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of
this Agreement or any other Loan Document and Lender shall be entitled to require payment of such
fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver
or confirmation.
Section 10.14 Schedules and Exhibits Incorporated. The Schedules and Exhibits annexed
hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
Section 10.15 Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest
in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear
of all offsets, counterclaims or defenses
which are unrelated to such documents which Borrower may otherwise have against any assignor
of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by
Borrower in any action or proceeding brought by any such assignee upon such documents and any such
right to interpose or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrower and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee,
beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein or therein. All conditions to
the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the
benefit of Lender and no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Lender will refuse to make
the Loan in the absence of strict compliance with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may
be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it
advisable or desirable to do so.
Section 10.17 Publicity. All news releases, publicity or advertising by Borrower or
its Affiliates through any media intended to reach the general public which refers to the Loan
Documents or the financing evidenced by the Loan Documents, to Lender, BSCMI, or any of their
Affiliates shall be subject to the prior written approval of Lender.
154
Section 10.18 Waiver of Marshalling of Assets. 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 Property,
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 Property 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 Property in preference to every other claimant whatsoever.
Section 10.19 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a compulsory
counterclaim, in any action or proceeding brought against it by Lender or its agents.
Section 10.20 Conflict; Construction of Documents; Reliance. In the event of any
conflict between the provisions of this Agreement and any of the other Loan Documents, the
provisions of this Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting and execution of the
Loan Documents and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrower acknowledges that, with respect to
the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or recommendations of Lender or
any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the Loan by virtue of the ownership
by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may
acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take
any action on the basis of the foregoing with respect to Lender’s exercise of any such rights or
remedies. Borrower acknowledges that Lender engages in the business of real estate financings and
other real estate transactions and investments which may be viewed as adverse to or competitive
with the business of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors. Borrower hereby represents that it has
dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders, in
connection with the transactions contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any and all claims, liabilities, costs
and expenses of any kind (including Lender’s attorneys’ fees and expenses) in any way relating to
or arising from a claim by any Person that such Person acted on behalf of Borrower or Lender in
connection with the transactions contemplated herein. The provisions of this Section 10.21
shall survive the expiration and termination of this Agreement and the payment of the Debt.
Section 10.22 Prior Agreements. This Agreement and the other Loan Documents contain
the entire agreement of the parties hereto and thereto in respect of the transactions contemplated
hereby and thereby, and all prior agreements among or between such parties, whether oral or
written, including, without limitation, the Commitment Letter dated August 9,
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2007 between Borrower
and Lender are superseded by the terms of this Agreement and the other Loan Documents.
Section 10.23 Joint and Several Liability. If Borrower consists of more than one (1)
Person the obligations and liabilities of each Person shall be joint and several.
Section 10.24 Certain Additional Rights of Lender (VCOC). Notwithstanding anything to the
contrary contained in this Agreement, Lender shall have:
(a) the right to routinely consult with and advise Borrower’s management regarding the
significant business activities and business and financial developments of Borrower;
provided, however, that such consultations shall not include discussions of
environmental compliance programs or disposal of hazardous substances. Consultation meetings
should occur on a regular basis (no less frequently than quarterly) with Lender having the right to
call special meetings at any reasonable times and upon reasonable advance notice;
(b) the right, in accordance with the terms of this Agreement, to examine the books and
records of Borrower at any reasonable times upon reasonable notice;
(c) the right, in accordance with the terms of this Agreement, including, without limitation,
Section 5.1.11 hereof, to receive monthly, quarterly and year end financial reports,
including balance sheets, statements of income, shareholder’s equity and cash flow, a management
report and schedules of outstanding indebtedness; and
(d) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to approve any acquisition by Borrower of any other significant property (other
than personal property required for the day to day operation of the Property and/or construction of
the Project Improvements).
The rights described above in this Section 10.24 may be exercised by any entity which
owns and controls, directly or indirectly, substantially all of the interests in Lender.
Section 10.25 MERS. Mortgage Electronic Registration Systems, Inc., a Delaware
corporation (“MERS”), serves as mortgagee of record and secured party solely as nominee, in an
administrative capacity, for Lender and only holds legal title to the interests granted, assigned,
and transferred in the Mortgage and the Assignments of Leases. MERS shall at all times comply with
the instructions of Lender. If necessary to comply with law or custom, MERS (for the benefit of
Lender) may be directed by Lender to exercise any or all of those interests, including without
limitation, the right to foreclose and sell the Property, and take any action required of Lender,
including without limitation, a release, discharge or reconveyance of the Mortgage. Subject to the
foregoing, all references in the Loan Documents to “Mortgagee” shall include Lender and its
successors and assigns. The relationship of Mortgagor and Lender under the Mortgage and the other
Loan Documents is, and shall at all times remain, solely that of borrower and lender (the role of
MERS thereunder being solely that of nominee as set forth above and not that of a lender); and
Mortgagee neither undertakes nor assumes any responsibility or duty to Borrower or to any other
Person with respect to the Property.
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[SIGNATURE PAGE TO BUILDING LOAN AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above written.
| BORROWER P/A-ACADIA PELHAM MANOR, LLC, a Delaware limited liability company |
||||
| By: | , | |||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| LENDER BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York corporation |
||||
| By: | ||||
| Name: | ||||
| Title: | Authorized Signatory | |||
157
Exhibit 10.73
PROJECT LOAN AGREEMENT
Dated as of December 26, 2007
Between
ACADIA ATLANTIC AVENUE LLC,
as Borrower
as Borrower
and
BEAR STEARNS COMMERCIAL MORTGAGE, INC.,
as Lender
as Lender
MERS MIN: 8000101-0000007166-1
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION |
1 | |||||
Section 1.1 |
Definitions | 1 | ||||
Section 1.2 |
Principles of Construction | 5 | ||||
| ARTICLE II. GENERAL TERMS | 6 | |||||
Section 2.1 |
Loan Commitment; Disbursement to Borrower | 6 | ||||
Section 2.2 |
Interest Rate | 9 | ||||
Section 2.3 |
Loan Payment | 10 | ||||
Section 2.4 |
Prepayments | 11 | ||||
Section 2.5 |
Defeasance | 13 | ||||
Section 2.6 |
Release of Property | 15 | ||||
Section 2.7 |
Clearing Account/Cash Management | 16 | ||||
Section 2.8 |
Intentionally Omitted | 16 | ||||
Section 2.9 |
Payments Not Conditional | 16 | ||||
Section 2.10 |
Initial Advance | 16 | ||||
Section 2.11 |
Project Loan Advances | 18 | ||||
Section 2.12 |
Final Advance | 21 | ||||
Section 2.13 |
No Reliance | 24 | ||||
Section 2.14 |
Method of Disbursement of Loan Proceeds | 24 | ||||
Section 2.15 |
Interest Advances | 26 | ||||
| ARTICLE III. CONDITIONS PRECEDENT | 27 | |||||
Section 3.1 |
Conditions Precedent to Closing | 27 | ||||
| ARTICLE IV. REPRESENTATIONS AND WARRANTIES | 27 | |||||
Section 4.1 |
Borrower Representations | 27 | ||||
Section 4.2 |
Survival of Representations | 27 | ||||
| ARTICLE V. BORROWER COVENANTS | 27 | |||||
Section 5.1 |
Affirmative Covenants | 27 | ||||
Section 5.2 |
Negative Covenants | 27 | ||||
| ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS | 27 | |||||
Section 6.1 |
Insurance | 27 | ||||
Section 6.2 |
Casualty and Condemnation | 28 | ||||
Section 6.3 |
Application of Net Proceeds | 28 | ||||
| ARTICLE VII. RESERVE FUNDS | 28 | |||||
Section 7.1 |
Reserve Funds | 28 | ||||
Section 7.2 |
Other Loan Documents | 28 | ||||
Section 7.3 |
Reserve Funds, Generally | 26 | ||||
| ARTICLE VIII. DEFAULTS | 29 | |||||
Section 8.1 |
Event of Default | 29 | ||||
Section 8.2 |
Remedies | 32 | ||||
Section 8.3 |
Remedies Cumulative; Waivers | 33 | ||||
| ARTICLE IX. SPECIAL PROVISIONS | 34 | |||||
| ARTICLE X. MISCELLANEOUS | 34 | |||||
Section 10.1 |
Survival | 34 | ||||
Section 10.2 |
Lender’s Discretion | 34 | ||||
Section 10.3 |
Governing Law | 34 | ||||
Section 10.4 |
Modification, Waiver in Writing | 36 | ||||
Section 10.5 |
Delay Not a Waiver | 36 | ||||
Section 10.6 |
Notices | 36 | ||||
Section 10.7 |
Trial by Jury | 37 | ||||
Section 10.8 |
Headings | 37 | ||||
Section 10.9 |
Severability | 37 | ||||
Section 10.10 |
Preferences | 37 | ||||
Section 10.11 |
Waiver of Notice | 38 | ||||
Section 10.12 |
Remedies of Borrower | 38 | ||||
Section 10.13 |
Expenses; Indemnity | 38 | ||||
Section 10.14 |
Schedules and Exhibits Incorporated | 39 | ||||
Section 10.15 |
Offsets, Counterclaims and Defenses | 39 | ||||
Section 10.16 |
No Joint Venture or Partnership; No Third Party Beneficiaries | 39 | ||||
Section 10.17 |
Publicity | 40 | ||||
Section 10.18 |
Waiver of Marshalling of Assets | 40 | ||||
Section 10.19 |
Waiver of Counterclaim | 40 | ||||
Section 10.20 |
Identical Obligations; Conflict; Construction of Documents; Reliance | 40 | ||||
Section 10.21 |
Brokers and Financial Advisors | 41 | ||||
Section 10.22 |
Prior Agreements | 41 | ||||
Section 10.23 |
Joint and Several Liability | 41 | ||||
Section 10.24 |
Certain Additional Rights of Lender (VCOC) | 41 | ||||
Section 10.25 |
MERS | 42 | ||||
2
PROJECT LOAN AGREEMENT
THIS PROJECT LOAN AGREEMENT, dated as of December 26, 2007 (as amended, restated, replaced,
supplemented or otherwise modified from time to time, this “Agreement” or sometimes, this “Project
Loan Agreement”), is made by and between BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York
corporation, having an address at 383 Madison Avenue, New York, New York 10179 (“Lender”) and
ACADIA ATLANTIC AVENUE LLC, a Delaware limited liability company, having its principal place of
business c/o Acadia Realty Trust, 1311 Mamaroneck Avenue — Suite 260, White Plains, New York 10605
(“Borrower”).
WITNESSETH:
WHEREAS, Borrower desires to obtain the Project Loan (as hereinafter defined) from Lender; and
WHEREAS, Lender is willing to make the Project Loan to Borrower, subject to and in accordance
with the terms of this Agreement and the other Loan Documents (as hereinafter defined).
NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the parties hereto hereby
covenant, agree, represent and warrant as follows:
ARTICLE 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, all capitalized terms used herein but not otherwise
defined shall have their respective meanings set forth in the Building Loan Agreement and:
“Advance” or “Advances” shall mean any disbursement of the proceeds of the Project Loan by
Lender pursuant to the terms of this Agreement.
“Agreement” shall mean this Project Loan Agreement, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together
with its successors and permitted assigns.
“Building Loan” shall mean the loan made by Lender to Borrower pursuant to the Building Loan
Agreement in the principal amount of up to the Building Loan Amount.
“Building Loan Agreement” shall mean that certain Building Loan Agreement dated as of the date
hereof between Borrower and Lender as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
“Building Loan Amount” shall have the meaning set forth in the Building Loan Agreement.
“Building Loan Assignment of Leases” shall have the meaning set forth in the Building Loan
Agreement.
“Building Loan Documents” shall have the meaning set forth in the Building Loan Agreement.
“Building Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.2
hereof.
“Building Loan Mortgage” shall have the meaning set forth in the Building Loan Agreement.
“Building Loan Note” shall have the meaning set forth in the Building Loan Agreement.
“Contingency Excess” shall have the meaning set forth in Section 2.1.7(b) hereof.
“Debt” shall mean the outstanding principal amount of the Project Loan set forth in, and
evidenced by, this Agreement, the Project Loan Note and the other Project Loan Documents, together
with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the
Project Loan under the Project Loan Note, this Agreement, the Project Loan Mortgage or any other
Project Loan Document.
“Debt Service” shall mean, with respect to any particular period of time, the aggregate
scheduled principal and interest payments due under this Agreement and the Project Loan Note.
“Defeasance Date” shall have the meaning set forth in Section 2.5.1(a)(i) hereof.
“Defeasance Event” shall have the meaning set forth in Section 2.5.1(a) hereof.
“Earn Out Advances” shall have the meaning set forth in Section 2.12.2 hereof.
“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.
“Final Advance” shall have the meaning set forth in Section 2.12.1 hereof.
“Final Building Loan Advance” shall mean the Final Advance as defined in Section 2.12.1 of the
Building Loan Agreement.
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“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(a) hereof.
“Initial Advance” shall have the meaning set forth in Section 2.10 hereof.
“Initial Advance Conditions” shall have the meaning set forth in Section 2.10 hereof.
“Interest Period” shall mean: (a) the period commencing on the Closing Date and ending on
the last day of the month in which the Closing Date occurs, both dates inclusive; and (b) the
period commencing on and including the first day of each calendar month thereafter during the term
of Loan and ending and including the last day of such calendar month.
“Interest Rate” shall mean seven and one hundred forty-four one-thousandths percent (7.144%),
provided, however, in the event that on or before January 1, 2011, the Property shall have achieved
a Debt Service Coverage Ratio as determined by Lender of 1.15 to 1.0 using a debt service constant
of 7.50%, and Borrower delivers to Lender a MAI appraisal performed, at Borrower’s sole cost and
expense, by an appraiser approved by Lender and dated, or updated, to a date within 30 days of such
date made in compliance with FIRREA and reasonably satisfactory to Lender in all respects; the
appraisal value shall be subject to review and confirmation and updating as to valuation by
Lender’s internal appraisal staff, whose decision shall be final absent manifest error showing that
loan-to-value ratio for the Property is no greater than 75% assuming a fully advanced Loan, Lender
shall, upon Borrower’s written request, reduce the Interest Rate to a per annum rate equal to five
and seven hundred ninety-four one-thousandths percent (5.794%), commencing on the first Payment
Date after Borrower’s request. Any reduction in the Interest Rate as set forth above shall be
effective commencing on the first Payment Date after Borrower’s request for such reduction and
satisfaction of the conditions set forth above and no reduction in the Interest Rate shall be
retroactive. In the event that Borrower fails to satisfy the conditions for a reduction of the
Interest Rate within the time periods set forth above, time being of the essence, Borrower shall
have no further right to obtain a reduction in the Interest Rate. Notwithstanding anything to the
contrary contained herein, Lender shall have the right, in its sole discretion, at any time after
the expiration of the Construction Term and prior to a Securitization of the Loan, to increase the
Interest Rate by up to two-tenths of one percent (0.20%).
“Interest Reserve Line Item” shall mean the interest reserve Line Item of the Project Loan
Budget.
“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with
its successors and assigns.
“Loan” shall mean collectively, the Building Loan and the Project Loan.
“Loan Agreement” shall mean collectively, this Project Loan Agreement and the Building Loan
Agreement.
“Loan Documents” shall mean collectively, the Building Loan Documents and the Project Loan
Documents, the Environmental Indemnity, the Guaranty of Completion, the
3
Guaranty of Recourse
Carveouts, the Cash Management Agreement, the Clearing Account Agreement, the Assignment of
Contracts, the Administration Fee Agreement, the Rate Lock Agreement and all other documents
executed and/or delivered in connection with the Loan.
“Maturity Date” shall mean January 1, 2020 or such earlier date on which the final payment of
principal of the Project Loan Note becomes due and payable as therein or herein provided, whether
at such stated maturity date, by declaration of acceleration, or otherwise.
“MERS” shall have the meaning set forth in Section 10.25 hereof.
“Monthly Debt Service Payment Amount” shall mean (a) an amount equal to interest only on the
outstanding principal balance of the Building Loan, calculated in accordance with Section
2.2 hereof, for each Payment Date commencing with the Payment Date occurring in February, 2008
through and including the Payment Date occurring in January, 2015, and (b) a constant monthly
payment of $33,215.06 commencing with the Payment Date occurring in February, 2015 and on each
Payment Date thereafter, provided, however, that in the event that the Interest Rate is modified in
accordance with the provisions of the definition of “Interest Rate,” the Monthly Debt Service
Payment Amount shall be adjusted by Lender based upon the modified Interest Rate and a thirty (30)
year amortization schedule, Lender’s determination of the Monthly Debt Service Payment Amount being
binding absent manifest error.
“Open Period Date” shall have the meaning set forth in Section 2.4.1 hereof.
“Other Debt” shall mean the “Debt” as defined in both the Building Loan Agreement and the
Mezzanine Loan Documents, if applicable.
“Other Obligations” shall have the meaning as set forth in the Mortgage.
“Payment Date” shall mean February 1, 2008, and the 1st day of every month
thereafter during the term of the Loan until and including the Maturity Date or, if such day is not
a Business Day, the immediately preceding Business Day.
“Prepayment Date” shall have the meaning set forth in Section 2.4.4 hereof.
“Project Loan” shall mean the loan being made by Lender to Borrower pursuant to this Project
Loan Agreement in the principal amount of up to the Project Loan Amount.
“Project Loan Amount” shall mean Four Million, Nine Hundred Twenty Thousand, Seven Hundred
Thirty-Nine and 67/100 Dollars ($4,920,739.67).
“Project Loan Assignment of Leases” shall mean that certain Project Loan Assignment of Leases
and Rents, dated the date hereof, from Borrower, as assignor, to Lender, as assignee, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Project Loan Documents” shall mean, collectively, this Agreement, the Project Loan Note, the
Project Loan Mortgage, the Project Loan Assignment of Lease as well as all other documents not or
hereafter executed and/or delivered with respect to the Project Loan.
4
“Project Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.2
hereof.
“Project Loan Mortgage” shall mean that certain Project Loan Mortgage and Security Agreement
dated the date hereof, executed and delivered by Borrower to Lender as security for the Project
Loan and encumbering the Property, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
“Project Loan Note” shall mean that certain Project Loan Promissory Note, dated the date
hereof, in the principal amount of up to the Project Loan Amount made by Borrower in favor of
Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
“Required Equity Funds” shall have the meaning set forth in Section 2.11.13.
“Scheduled Defeasance Payments” shall have the meaning set forth in Section 2.5.1(b)
hereof.
“Security Agreement” shall have the meaning set forth in Section 2.5.1(a)(v) hereof.
“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c). hereof.
“Shortfall” shall have the meaning set forth in Section 2.1.10 hereof.
“Successor Borrower” shall have the meaning set forth in Section 2.5.3 hereof.
“Unsatisfied Initial Advance Conditions” shall have the meaning set forth in Section
2.1.20.
Section 1.2 Principles of Construction.
(a) All references to sections and schedules are to sections and schedules in or to this
Agreement unless otherwise specified. All uses of the word “including” shall mean “including,
without limitation” unless the context shall indicate otherwise. Any reference in this Agreement
or in any other Loan Document to any Loan Document shall be deemed to include references to such
documents as the same may hereafter be amended, modified, supplemented, extended, replaced and/or
restated from time to time (and, in the case of any note or other instrument, to any instrument
issued in substitution therefor). 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.
(b) With respect to any cross-reference to the Building Loan Documents or the Project Loan
Documents or any combination thereof, as the case may be, for terms defined therein or provisions
set forth therein or Schedules or Exhibits thereto, such cross-references
5
shall be to referenced
defined terms or provisions or Schedules or Exhibits, as the case may be, as the same are set forth
in the Building Loan Documents or the Project Loan Documents or any combination thereof, as the
case may be, as of the date hereof, and as the same may be amended, modified, supplemented,
extended, replaced or restated or any combination thereof from time to time, and shall survive the
repayment or satisfaction of the Building Loan or the Project Loan as the case may be, or the
termination of the Building Loan Agreement or this Agreement or any combination thereof, as the
case may be, for so long as the Project Loan remains outstanding.
ARTICLE II.
GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower.
2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions set forth
herein, Lender hereby agrees to make and Borrower hereby agrees to accept Advances in respect of
the Project Loan as more particularly set forth in Section 2.10.
2.1.2 No Reborrowings. Any amount borrowed and repaid hereunder in respect of the Building
Loan may not be reborrowed.
2.1.3 The Note, Mortgage and Loan Documents. The Project Loan shall be evidenced by the
Project Loan Note and secured by the Project Loan Mortgage, the Project Loan Assignment of Leases
and the other Project Loan Documents.
2.1.4 Use of Proceeds. Borrower hereby agrees that Borrower shall use the proceeds of the
Project Loan to pay or reimburse itself for Project-Loan Costs actually incurred in connection
with the construction of the Project Improvements if and to the extent that such Project-Loan Costs
are reflected in the Project Loan Budget, subject to reallocation pursuant to Sections
2.1.6 and 2.1.7 hereof, and 5.1.33 of the Building Loan Agreement (or other
reallocations approved by Lender in its sole discretion).
2.1.5 Advances. The Project Loan Budget shall reflect, by category and line item, the
purposes and amounts for which funds to be advanced by Lender under this Agreement are to be used.
Lender shall not be required to Advance funds hereunder for any category or line item of Project
Loan Costs in excess of the amount specified for such line item or category in the Project Loan
Budget, subject to Sections 2.1.6 and 2.1.7 hereof and 5.1.33 of the Building Loan Agreement (or
other reallocations approved by Lender in its sole discretion). No Advances shall be made to pay
for Affiliate Fees.
2.1.6 Cost Overruns. If Borrower becomes aware of any change in actual or projected Project
Loan Costs which will increase any one or more category or line item of costs reflected in the
Project Loan Budget, Borrower shall immediately notify Lender in writing and promptly submit to
Lender for its approval a revised Project Loan Budget. Any reallocation of any category or line
items in the Project Loan Budget in connection with cost overruns shall be subject to Lender’s
approval in Lender’s sole discretion except as set forth in Sections 2.1.7 hereof and
5.1.33 of the Building Loan Agreement, provided, however, under no circumstances shall
Borrower be permitted, or Lender obligated to approve, the reallocation of line items from
6
the
Building Loan Budget to the Project Loan Budget. Lender shall have no obligation to make any
further Advances unless and until the revised Project Loan Budget so submitted by Borrower is
approved by Lender and Borrower has satisfied its obligations with respect to any resulting
Shortfall under Section 2.1.10. Lender reserves the right to approve or disapprove any
revised Project Loan Budget in its sole and absolute discretion (except with respect to
reallocations in accordance with Sections 2.1.7 and 5.1.33).
2.1.7 Contingency Reserve.
(a) Following the satisfaction of the Initial Advance Conditions, and subject to the prior
approval of Lender in its sole discretion, Borrower may revise the Project Loan Budget to move
amounts available under any Line Item that are designated to “Contingency” to other Line Items in
the Project Loan Budget. In no event may the Contingency Line Item of the Building Loan Budget be
reallocated to any Line Item in the Project Loan Budget. Provided no Event of Default exists and
with Lender’s consent (which shall not be unreasonably withheld), after Completion of the
Improvements, Borrower may draw amounts available under the Contingency Line Item of the Project
Loan Budget to fund Shortfalls in monthly interest due, which amounts shall be deposited in the
Interest Reserve. Such drawing shall be in addition to any Interest Reserve Line Item advanced
under the Project Loan pursuant to Section 2.14.10 hereof.
(b) Following the occurrence of Final Completion, Lender shall reasonably cooperate with
Borrower to amend the Project Loan Budget, Building Loan Budget, Project Loan Documents and
Building Loan Documents such that: (x) the Building Loan Budget is amended to remove the amounts
then available under the Building Loan Budget either in the
contingency Line Item or as cost savings from other Line Items (the “Contingency Excess”) and
the Building Loan Amount is reduced by the Contingency Excess; and (y) the contingency line item of
the Project Loan Budget and the Project Loan Amount are increased by the Contingency Excess.
Borrower and Lender shall execute and deliver such documents, certificates and instruments as may
be reasonably required to effect the above described re-allocation, including, without limitation,
the filing of an amended Section 22 Affidavit and the modification of the Project Loan Documents
and Building Loan Documents to reflect the respective changes in the Project Loan Amount and the
Building Loan Amount and Borrower shall obtain such other evidence as Lender may reasonably request
to confirm that none of the foregoing shall adversely impact the validity or priority of its
security interests in the Property or otherwise adversely impact its rights and remedies under the
Loan Documents including, without limitation, appropriate endorsements to the title insurance
policy. Borrower shall pay any and all title insurance, recording and other charges and all
reasonable costs and expenses (including legal fees) incurred by Lender in connection with the
foregoing.
2.1.8 Intentionally Omitted.
2.1.9 Amount of Advances. In no event shall any Advance exceed the full amount of Project
Loan Costs theretofore paid or to be paid with the proceeds of such Advance plus any Project Loan
Costs incurred by Borrower through the date of the Draw Request for such Advance minus (i)
the applicable Retainage for each Contract and Subcontract, and (ii) the aggregate amount of any
Advances previously made by Lender. It is further understood that the
7
Retainage described above is
intended to provide a contingency fund protecting Lender against failure of Borrower or Guarantor
to fulfill any obligations under the Loan Documents, and that Lender may charge amounts to pay for
Project Loan Costs against such Retainage in the event Lender is required or elects to expend funds
to cure any Default or Event of Default, in either instance, in accordance with the terms of this
Agreement. No Advance of the Loan by Lender shall be deemed to be an approval or acceptance by the
Lender of any work performed thereon or the materials furnished with respect thereto.
2.1.10 Loan-In-Balance. As used herein, a “Shortfall” shall mean, as to any Line Item in the
Development Budget as of any date, the amount determined by Lender, in Lender’s sole but
reasonable judgment, by which (A) the cost of completing or satisfying such Line Item, exceeds
(B) the remaining undisbursed portion of the Loan allocated to such Line Item in the Development
Budget plus any sums deposited with Lender pursuant to this Section 2.1.10 to pay for such
Line Item and not previously disbursed plus any Reserve Funds to the extent such Reserve Funds are
available hereunder for the payment of such Line Item. From time to time and at any time during
the Construction Period, Lender shall have the right, but not the obligation, to notify Borrower
that it has determined a Shortfall exists as to any one or more Line Items. If Lender at any time
shall so notify Borrower, Borrower shall, at its option within five (5) days of Lender’s
notification as aforesaid, either: (i) deposit with Lender an amount equal to such
Shortfall, which Lender disburse to Borrower to the satisfaction of the costs of such Line
Item prior to advancing any further Loan proceeds on account of such costs; (ii) post an
irrevocable standby Letter of Credit in the amount of such Shortfall, in favor of Lender; (iii) to
the extent permitted under Sections 2.1.7 hereof and 5.1.33 of the Building Loan
Agreement, and following the satisfaction of the Initial Advance Conditions allocate the
Contingency Reserve, with respect to the Line Item(s) in question, to the Shortfall, and provided,
further that the amount of the remaining Contingency Reserve for such Line Item(s) (following the
allocation to the Shortfall) is sufficient for such Line Item(s), as determined by Lender in its
sole discretion; and (iv) to the extent permitted under Section 5.1.33 of the Building Loan
Agreement, and then only following the satisfaction of the Initial Advance Conditions, reallocate
cost savings from the Development Budget in respect of the Loan (or other reallocations which are
approved by Lender, in its sole discretion) in accordance with the terms of this Agreement, but
only to the extent such cost savings can be allocated to the related Line Items. Borrower hereby
agrees that Lender shall have a lien on and security interest in, for the benefit of Lender, any
sums deposited pursuant to clause (i) above and that Borrower shall have no right to withdraw any
such sums except for the payment of the aforesaid costs as approved by Lender. Lender shall have
no obligation to make any further Advances of proceeds of the Loan as to any Line Item until the
sums required to be deposited pursuant to clause (i) above as to such Line Item have been
exhausted, or until Borrower has posted an irrevocable standby Letter of Credit pursuant to clause
(iii) above, as the case may be, and, in any such case, the Loan is back “in balance”. Any such
sums not used as provided in said clause (i) shall be released to Borrower when and to the extent
that Lender reasonably determines that the amount thereof is more than the excess, if any, of the
remaining Project-Related Costs over the undisbursed balance of the Loan, provided, however, that
should an Event of Default occur, Lender, in its sole discretion, may apply such amounts either to
the remaining Project-Related Costs or to the immediate reduction of outstanding principal and/or
interest under the Note.
8
2.1.11 Quality of Work. No Advance or any portion thereof shall be made with respect to
defective work or to any contractor that has performed work that is defective and that has not been
cured, as confirmed by the report of the Construction Consultant, but Lender may disburse all or
part of any Advance before the sum shall become due if Lender believes it advisable to do so, and
all such Advances or parts thereof shall be deemed to have been made pursuant to this Agreement.
2.1.12 Required Equity Funds. All Required Equity Funds shall be contributed (i.e., expended
by Borrower and invested by Borrower in the Property, for Project Related Costs set forth on the
approved Development Budget) before the Closing Date.
2.1.13 Trust Fund. Pursuant to Section 13 of the New York Lien Law, Borrower shall receive
the Advances hereunder and shall hold the right to receive the Advances as a trust fund to be
applied first for the purpose of paying the Costs of the Improvements and shall apply the Advances
first to the payment of the Cost of the Improvements on the Property before using any part of the
total of the same for any other purpose.
2.1.14 Final Project Report and Development Budget. The provisions of Section 2.1.14
of the Building Loan Agreement are incorporated herein by reference as if fully set forth herein.
2.1.15 Miscellaneous.
(a) The making of an Advance by Lender shall not constitute Lender’s approval or acceptance of
the construction theretofore completed. Lender’s inspection and approval of the Plans and
Specifications, the construction of the Project Improvements, or the workmanship and materials used
therein, shall impose no liability of any kind on Lender, the sole obligation of Lender as the
result of such inspection and approval being to make the Advances if and to the extent, required by
this Agreement.
(b) ALL POTENTIAL LIENORS ARE HEREBY CAUTIONED TO EXERCISE SOUND BUSINESS JUDGMENT IN THE
EXTENSION OF CREDIT TO BORROWER. NO POTENTIAL LIENOR SHOULD EXPECT LENDER TO MAKE ADVANCES OF THE
LOAN IN AMOUNTS AND AT TIMES SUCH THAT IT WILL NOT BE NECESSARY FOR EACH SUCH POTENTIAL LIENOR TO
EXERCISE SOUND BUSINESS JUDGMENT IN THE EXTENSION OF CREDIT TO BORROWER. MOREOVER, ALL POTENTIAL
LIENORS ARE REMINDED THAT SUBDIVISION (3) OF SECTION 13 OF THE NEW YORK LIEN LAW PROVIDES THAT
“NOTHING IN THIS SUBDIVISION SHALL BE CONSIDERED AS IMPOSING UPON THE LENDER ANY OBLIGATION TO SEE
THE PROPER APPLICATION OF SUCH ADVANCES BY THE OWNER,” AND LENDER DOES NOT IMPOSE SUCH AN
OBLIGATION ON ITSELF.
Section 2.2 Interest Rate.
2.2.1 Interest Rate. Interest on the outstanding principal balance of the Loan shall accrue
from (and include) the Closing Date to but excluding the Maturity Date at the Interest Rate
calculated as set forth in Section 2.2.2 below.
9
2.2.2 Interest Calculation. Interest on the outstanding principal balance of the Loan shall
be calculated by multiplying (a) the actual number of days elapsed in the period for which the
calculation is being made by (b) a daily rate based on the Interest Rate and a three hundred sixty
(360) day year by (c) the outstanding principal balance.
2.2.3 Default Rate
In the event that, and for so long as, any Event of Default shall have occurred and be
continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, all
accrued and unpaid interest in respect of the Loan and any other amounts due pursuant to the Loan
Documents, shall accrue interest at the Default Rate, calculated from the date such payment was due
without regard to any grace or cure periods contained herein.
2.2.4 Usury Savings. This Agreement, the Note and the other Loan Documents are subject to
the express condition that at no time shall Borrower be obligated or required to pay interest on
the principal balance of the Loan at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this
Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the
Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to
the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be
deemed to have been payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of
the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the Loan until payment in full
so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal
Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is
outstanding.
Section 2.3 Loan Payment.
2.3.1 Monthly Debt Service Payments. Borrower shall pay to Lender (a) on the Closing Date,
an amount equal to interest only on the outstanding principal balance of the Loan from and
including the Closing Date up to and including December 31, 2007, which interest shall be
calculated in accordance with the provisions of Section 2.2 hereof, and (b) on each Payment
Date commencing on the Payment Date occurring in February, 2008, and thereafter up to and including
the Maturity Date, Borrower shall make a payment to Lender equal to the Monthly Debt Service
Payment Amount, which payments shall be applied first to interest due for the related Interest
Period at the Interest Rate, for such related Interest Period and then to the principal amount of
the Loan due in accordance with this Agreement, and lastly, to any other amounts due and unpaid
pursuant to the Loan Documents hereto. Borrower and Lender acknowledge and agree that, on the
15th calendar day of the month preceding each Payment Date during the Construction Term:
(a) if and to the extent undrawn funds remain available for Advance under the Project Loan from the
Interest Reserve Line Item of the Project Loan Budget, and provided that that no Event of Default
or monetary Default then exists under any of the Loan Documents or would occur as a result of such
Advance, the Monthly Debt Service Amount then due and owing shall be advanced by Lender by a
Advance under Interest Reserve Line Item of the Project Loan Budget; and (b) if no amount remains
available under the Interest Reserve Line
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Item but and to the extent Interest
Reserve Funds are on deposit in the Interest Reserve Account, and no Event of Default or
monetary Default then exists under any of the Loan Documents, the Monthly Debt Service Payment
Amount then due and payable shall be paid by application of funds from the Interest Reserve
Account. Borrower and Lender acknowledge and agree that Lender may automatically make an Advance
or apply Interest Reserve Funds on deposit in the Interest Reserve Account on each Payment Date
occurring during the Construction Term, in either instance, in accordance with this Section
2.3.1, without the need for Borrower to submit a Draw Request or otherwise request such an
Advance or application.
2.3.2 Payments Generally. The first Interest Period hereunder shall commence on and include
the Closing Date and shall end on and include December 31, 2007. Thereafter each Interest Period
shall commence on the first (1st) day of each calendar month during the term of this
Agreement and shall end on and include the final calendar date of such calendar month. For
purposes of making payments hereunder, but not for purposes of calculating Interest Periods, if the
day on which such payment is due is not a Business Day, then amounts due on such date shall be due
on the immediately preceding Business Day and with respect to payments of principal due on the
Maturity Date, interest shall be payable at the Interest Rate or the Default Rate, as the case may
be, through and including the day immediately preceding such Maturity Date. All amounts due under
this Agreement and the other Loan Documents shall be payable without setoff, counterclaim, defense
or any other deduction whatsoever.
2.3.3 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the
outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts
due hereunder and under the Note, the Mortgage and the other Loan Documents.
2.3.4 Late Payment Charge. If any principal, interest or any other sums due under the Loan
Documents (including the amounts due on the Maturity Date) are not paid by Borrower on or prior to
the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser
of five percent (5%) of such unpaid sum or the Maximum Legal Rate 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 Mortgage
and the other Loan Documents to the extent permitted by applicable law.
2.3.5 Method and Place of Payment. Except as otherwise specifically provided herein, all
payments and prepayments under this Agreement and the Note shall be made to Lender not later than
11:00 A.M., New York City time, on the date when due and shall be made in lawful money of the
United States of America in immediately available funds at Lender’s office or as otherwise directed
by Lender, and any funds received by Lender after such time shall, for all purposes hereof, be
deemed to have been paid on the next succeeding Business Day.
Section 2.4 Prepayments.
2.4.1 Voluntary Prepayments. Except as otherwise provided in this Section 2.4.1 and
Section 2.4.2, Borrower shall not have the right to prepay the Loan in whole or in part
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prior to the Maturity Date. If for any reason Borrower prepays the Loan on a date other than a
Payment Date, Borrower shall pay Lender, in addition to the Debt, all interest which would have
accrued on the amount of the Loan through and including the Payment Date next occurring following
the date of such prepayment. Notwithstanding anything to the contrary contained herein, commencing
after the Payment Date three (3) months prior to the Maturity Date (the “Open Period Date”), or on
any Payment Date thereafter (or on any date thereafter, provided that interest is paid through the
next Payment Date), Borrower may, at its option, prepay the Debt in whole, but not in part, without
payment of the Yield Maintenance Premium.
2.4.2 Mandatory Prepayments. On the next occurring Payment Date following the date on which
Lender actually receives any Net Proceeds, if Lender is not obligated to make such Net Proceeds
available to Borrower for the Restoration of the Property or otherwise remit such Net Proceeds to
Borrower pursuant to Section 6.4 of the Building Loan Agreement, Borrower shall prepay or authorize
Lender to apply Net Proceeds as a prepayment of all or a portion of the outstanding principal
balance of the Loan together with accrued interest through the end of the related Interest Period
and any other sums due hereunder in an amount equal to one hundred percent (100%) of such Net
Proceeds; provided, however, if an Event of Default has occurred and is continuing, Lender may
apply such Net Proceeds to the Debt (until paid in full) in any order or priority in its sole
discretion. Other than following an Event of Default, no Yield Maintenance Premium shall be due in
connection with any prepayment made pursuant to this Section 2.4.2.
2.4.3 Prepayments After Default. If following an Event of Default, payment of all or any
part of the Debt is tendered by Borrower or otherwise recovered by Lender, such tender or recovery
shall be (a) made on the next occurring Payment Date together with the Monthly Debt Service Payment
and (b) deemed a voluntary prepayment by Borrower in violation of the prohibition against
prepayment set forth in Section 2.4.1 hereof and Borrower shall pay, in addition to the
Debt, an amount equal to the Yield Maintenance Default Premium.
2.4.4 Prepayment Prior to Defeasance Expiration Date. If the Permitted Release Date has
occurred but the Defeasance Expiration Date has not occurred, the Debt may be prepaid in whole (but
not in part) prior to the date permitted under Section 2.4.1 hereof upon not less than thirty (30)
days prior written notice to Lender specifying the Payment Date on which prepayment is to be made
(a “Prepayment Date”) provided no Event of Default exists and upon payment of an amount equal to
the Yield Maintenance Premium. Lender shall notify Borrower of the amount and the basis of
determination of the required prepayment consideration. If any notice of prepayment is given, the
Debt shall be due and payable on the Prepayment Date.
Lender shall not be obligated to accept any prepayment of the Debt unless it is accompanied by
the prepayment consideration due in connection therewith. If for any reason Borrower prepays the
Loan on a date other than a Payment Date, Borrower shall pay Lender, in addition to the Debt, all
interest which would have accrued on the amount of the Loan through and including the Payment Date
next occurring following the date of such prepayment.
2.4.5 Application of Prepayments to Components. Any prepayment of the principal of
the Loan, in whole or in part, voluntary or involuntary, shall be applied (a) first, to the
reduction of the outstanding principal balance of the Project Loan until reduced to zero, and (b)
second, to the reduction of the outstanding principal balance of the Building Loan until
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reduced to
zero. Subsequent to any Event of Default, any payment of principal from whatever source may be
applied by Lender between the various components of the Loan in Lender’s sole discretion.
Section 2.5 Defeasance.
2.5.1 Voluntary Defeasance (a) Provided no Event of Default shall then exist, Borrower
shall have the right at any time after the Defeasance Expiration Date and prior to the date
voluntary prepayments are permitted under Section 2.4.1 hereof to voluntarily defease all, but not
part, of the Loan by and upon satisfaction of the following conditions (such event being a
“Defeasance Event”):
(i) Borrower shall provide not less than thirty (30) days prior written notice
to Lender specifying the Payment Date (the “Defeasance Date”) on which the
Defeasance Event is to occur;
(ii) Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Loan to and including the Defeasance Date. If for any
reason the Defeasance Date is not a Payment Date, the Borrower shall also pay
interest that would have accrued on the Note through and including the Payment Date
immediately preceding the next Payment Date, provided, however, if
the Defeasance Deposit shall include short-term interest computed from the date of
such prepayment through to the next succeeding Payment Date, Borrower shall not be
required to pay such short term interest pursuant to this sentence;
(iii) Borrower shall pay to Lender all other sums, not including scheduled
interest or principal payments, then due under the Note, this Agreement, the
Mortgage and the other Loan Documents;
(iv) Borrower shall use the Defeasance Deposit to purchase U.S. Obligations in
accordance with Section 2.5.1(b) below;
(v) Borrower shall execute and deliver a pledge and security agreement, in form
and substance that would be reasonably satisfactory to a
prudent lender creating a first priority lien on the Defeasance Deposit and the
U.S. Obligations purchased with the Defeasance Deposit in accordance with the
provisions of this Section 2.5 (the “Security Agreement”);
(vi) Borrower shall deliver an opinion of counsel for Borrower that is standard
in commercial lending transactions and subject only to customary qualifications,
assumptions and exceptions opining, among other things, that Borrower has legally
and validly transferred and assigned the U.S. Obligations and all obligations,
rights and duties under and to the Note to the Successor Borrower, that Lender has a
perfected first priority security interest in the Defeasance Deposit and the U.S.
Obligations delivered by Borrower and that any REMIC Trust formed pursuant to a
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result of
such Defeasance Event;
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(vii) Borrower shall deliver confirmation in writing from each of the
applicable Rating Agencies to the effect that such release will not result in a
downgrade, withdrawal or qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the Securities issued in connection
with the Securitization which are then outstanding. If required by the applicable
Rating Agencies, Borrower shall also deliver or cause to be delivered an Additional
Insolvency Opinion with respect to the Successor Borrower in form and substance
satisfactory to Lender and the applicable Rating Agencies;
(viii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1(a) have been satisfied;
(ix) Borrower shall deliver a certificate of Borrower’s independent certified
public accountant certifying that the U.S. Obligations purchased with the Defeasance
Deposit generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments;
(x) Borrower shall deliver such other certificates, documents or instruments as
Lender may reasonably request; and
(xi) Borrower shall pay all costs and expenses of Lender incurred in connection
with the Defeasance Event, including (A) any costs and expenses associated with a
release of the Lien of the Mortgage as provided in Section 2.6 hereof, (B)
reasonable attorneys’ fees and expenses incurred in connection with the Defeasance
Event, (C) the costs and expenses of the Rating Agencies, (D) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in connection
with the transfer of the Note, or otherwise required to accomplish the defeasance
and (E) the costs and expenses of Servicer and any trustee, including reasonable
attorneys’ fees.
(b) In connection with the Defeasance Event, Borrower shall use the Defeasance Deposit to
purchase U.S. Obligations which provide payments on or prior to, but as
close as possible to, all successive scheduled Payment Dates after the Defeasance Date upon
which interest and principal payments are required under this Agreement and the Note, and in
amounts equal to the scheduled payments due on such Payment Dates under this Agreement and the Note
(including, without limitation, scheduled payments of principal, interest, servicing fees (if any),
and any other amounts due under the Loan Documents on such Payment Dates) and assuming the Note is
prepaid in full on the Open Period Date (the “Scheduled Defeasance Payments”). Borrower, pursuant
to the Security Agreement or other appropriate document, shall authorize and direct that the
payments received from the U.S. Obligations may be made directly to the Clearing Account (unless
otherwise directed by Lender) and applied to satisfy the Debt Service obligations of Borrower under
this Agreement and the Note. Any portion of the Defeasance Deposit in excess of the amount
necessary to purchase the U.S. Obligations required by this Section 2.5 and satisfy
Borrower’s other obligations under this Section 2.5 and Section 2.6 shall be
remitted to Borrower.
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2.5.2 Collateral. Each of the U.S. Obligations that are part of the defeasance collateral
shall be duly endorsed by the holder thereof as directed by Lender or accompanied by a written
instrument of transfer in form and substance that would be satisfactory to a prudent lender
(including, without limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to effectuate book-entry
transfers and pledges through the book-entry facilities of such institution) in order to perfect
upon the delivery of the defeasance collateral a first priority security interest therein in favor
of Lender in conformity with all applicable state and federal laws governing the granting of such
security interests.
2.5.3 Successor Borrower. In connection with any Defeasance Event, Borrower shall establish
a successor entity (the “Successor Borrower”), which shall be a Special Purpose Entity, which shall
not own any other assets or have any other liabilities or operate other property (except in
connection with other defeased loans held in the same securitized loan pool with the Loan).
Borrower shall transfer and assign all obligations, rights and duties under and to the Note,
together with the pledged U.S. Obligations to such Successor Borrower. Such Successor Borrower
shall assume the obligations under the Note and the Security Agreement and Borrower shall be
relieved of its obligations under such documents. Borrower shall pay One Thousand and 00/100
Dollars ($1,000) to any such Successor Borrower as consideration for assuming the obligations under
the Note and the Security Agreement. Notwithstanding anything in this Agreement to the contrary,
no other assumption fee shall be payable upon a transfer of the Note in accordance with this
Section 2.5.3, but Borrower shall pay all costs and expenses incurred by Lender, including
Lender’s attorneys’ fees and expenses and any fees and expenses of any Rating Agencies, incurred in
connection therewith.
Section 2.6 Release of Property. Except as set forth in this Section 2.6, no repayment,
prepayment or defeasance of all or any portion of the Loan shall cause, give rise to a right to
require, or otherwise result in, the release of the Lien of the Mortgage on the Property.
2.6.1 Release of Property.
(a) If Borrower has elected to defease the Loan and the requirements of Section 2.5
and this Section 2.6 have been satisfied, all of the Property shall be released from the
Lien of the Mortgage and the U.S. Obligations, pledged pursuant to the Security Agreement, shall be
the sole source of collateral securing the Note.
(b) In connection with the release of the Mortgage, Borrower shall submit to Lender, not less
than thirty (30) days prior to the Defeasance Date, a release of Lien (and related Loan Documents)
for the Property for execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Property is located and that would be satisfactory to a prudent lender
and contains standard provisions, if any, protecting the rights of the releasing lender. In
addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered
by Borrower in connection with such release, together with an Officer’s Certificate certifying that
such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such
releases in accordance with the terms of this Agreement.
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2.6.2 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 due 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 Agreement, release the Lien of the Mortgage on the Property.
Section 2.7 Clearing Account/Cash Management. The provisions of Section 2.7 of the
Building Loan Agreement are incorporated herein by reference as if fully set forth herein
Section 2.8 Intentionally Omitted.
Section 2.9 Payments Not Conditional. All payments required to be made by Borrower hereunder or
under the Note or the other Loan Documents shall be made irrespective of, and without deduction
for, any setoff, claim or counterclaim and shall be made irrespective of any defense thereto.
Section 2.10 Initial Advance The obligation of Lender to make the initial Advance of the Project
Loan (the “Initial Advance”) shall be subject to the following conditions precedent (collectively,
the “Initial Advance Conditions”) on or prior to the Required Initial Advance Date, all of which
conditions precedent must be satisfied prior to Lender making any such Initial Advance:
2.10.1 Prior Conditions Satisfied. All conditions precedent to closing shall continue to be
satisfied as of the date of the Initial Advance (in the same manner in which they were satisfied
for the closing without reimposing any one-time condition).
2.10.2 Performance; No Default. Borrower shall have performed and complied with all terms
and conditions herein required to be performed or complied with by it at or prior to the date of
such Initial Advance, and on the date of such Initial Advance there shall exist no Default or Event
of Default.
2.10.3 Representations and Warranties. The representations and warranties made by Borrower
or Guarantor in the Loan Documents or otherwise made by or on behalf of Borrower or Guarantor in
connection therewith after the date thereof shall have been true and correct in all material
respects on the date on which made and shall also be true and correct in all material respects on
the date of the Initial Advance.
2.10.4 No Damage. The Project Improvements shall not have been injured or damaged by fire,
explosion, accident, flood or other casualty, unless Lender shall be satisfied that sufficient
insurance proceeds will be available in the reasonable judgment of Lender to effect the
satisfactory restoration of the Project Improvements and to permit the Completion of the
Improvements prior to the Required Completion Date.
2.10.5 Deliveries. Lender shall have received:
(a) Draw Request. A Draw Request complying with the requirements hereof;
(b) Intentionally Omitted;
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(c) Title Insurance Policy. A Title Insurance Policy for the full amount of the Loan,
which includes a pending disbursement clause to increase the coverage of the Title Insurance Policy
by the amount of the any Advance, insuring the lien of the Mortgage subject to no liens or
encumbrances other than the Permitted Encumbrances;
(d) Lien Waivers. Duly executed lien waivers, which shall be conditional lien waivers
or unconditional lien waivers, as determined by Lender in its sole discretion, and otherwise
substantially in the form set forth in Exhibit J to the Building Loan Agreement from the
General Contractor and all Contractors and Subcontractors who have performed work, for the work so
performed, and/or who have supplied labor and/or materials, for the labor and/or materials so
supplied, except for such work or labor and/or materials for which payment thereof is requested, as
to which duly executed lien waivers shall be delivered to Lender with the next request for an
Advance;
(e) Ratios. Evidence satisfactory to Lender that following the Initial Advance, the
Loan-to-Cost Ratio shall be no greater than 75%.
(f) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents;
(g) Anticipated Costs Report. An Anticipated Costs Report; and
(h) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.10.6 Initial Building Loan Advance. All conditions to the initial advance of the Building
Loan set forth in Section 2.10 of the Building Loan Agreement shall have been satisfied.
2.10.7 Rate Lock Agreement. Simultaneously with the Initial Advance, Lender shall return to
Borrower, a pro-rata portion of the deposit held by Lender pursuant to the Rate Lock Agreement in
such proportion as the amount of the Initial Advance bears to the Total Loan Amount.
2.10.8 Initial Reserve Deposits Borrower shall have deposited the Initial Tax and Insurance
Escrow Deposit and the Initial Interest Reserve Deposit with Lender. The Initial Tax and Insurance
Escrow Deposit and the Initial Interest Reserve Deposit shall be funded on the date of the Initial
Advance with a portion of the Initial Advance under the Project Loan.
2.10.9 Satisfaction of Initial Advance Conditions. . Borrower acknowledge that certain
Initial Advance Conditions, including, without limitation, [SUBJECT TO REVIEW BY LENDER] [(i)
delivery to and approval by Lender of final Plans and Specifications, (ii) delivery to and approval
by Lender of the final Development Budget, Building Loan Budget, and Project Loan Budget, (iii)
delivery to Lender of all permits required for the demolition of the existing improvements on the
Property, (iv) delivery to Lender of evidence that Borrower maintains the Policies required under
this Agreement, and (v) delivery to Lender of Borrower’s Requisition and
17
all required accompanying documents with respect to the Initial Advance in accordance with
Section 2.14.1 of this Agreement (the “Unsatisfied Initial Advance Conditions”)]. Borrower
covenants and agrees that, prior to the Required Initial Advance Date, time being of the essence,
it shall cause all of the Initial Advance Conditions, including, without limitation, the
Unsatisfied Initial Advance Conditions, to be satisfied. Borrower shall not perform any work at
the Property, including, without limitation, any demolition of the existing improvements, until all
of the Initial Advance Conditions have been satisfied. Borrower’s failure to satisfy, or cause the
satisfaction of, any of the Initial Advance Conditions on or prior to the Required Initial Advance
Date shall, at Lender’s election, constitute an Event of Default. In addition to any and all other
remedies that may be available to Lender hereunder, under the other Loan Documents, at law or in
equity, upon the occurrence of an Event of Default resulting from the failure of any Initial
Advance Condition to have been satisfied, Borrower hereby irrevocably empowers Lender, in the name
of Borrower as its true and lawful attorney-in-fact, with full power of substitution to complete or
undertake such steps as may be necessary, in Lender’s sole determination, to satisfy the Initial
Advance Condition in the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said attorney-in-fact as
follows: (i) to employ such contractors, subcontractors, agents, architects and inspectors as shall
be required for such purposes; (iii) to pay, settle or compromise all existing bills and claims
which are or may become Liens against the Property, or as may be necessary or desirable for the
completion of such Initial Advance Conditions, or for clearance of title; (v) to execute all
applications and certificates in the name of Borrower which may be required by any of the contract
documents; (vi) to prosecute and defend all actions or proceedings in connection with the Property
or the Project; and (vii) to do any and every act which Borrower might do in its own behalf to
fulfill the terms of this Agreement and the other Loan Documents. In addition, upon such Event of
Default,. Lender shall have the right to unwind any interest rate hedge entered into by Lender and
apply any deposits or other amounts held by Lender pursuant to the Rate Lock Agreement to costs and
expenses incurred by Lender under this Agreement, the Rate Lock Agreement or any of the other Loan
Documents.
2.10.10 Government Approvals. Borrower shall have delivered to Lender evidence satisfactory
to Lender that all Governmental Approvals necessary for the demolition of the existing improvements
as contemplated by the Plans and Specifications, have been obtained and are in full force and
effect.
Section 2.11 Project Loan Advances. The obligation of Lender to make the Advances of the Project
Loan after the Initial Advance shall be subject to the following conditions precedent, all of which
conditions precedent must be satisfied prior to Lender making any such Advance:
2.11.1
Prior Conditions Satisfied. All conditions precedent to any prior Advance (in the
same manner in which they were satisfied for the Initial Advance or prior Advance, as applicable,
and without reimposing any one-time requirement) shall continue to be satisfied as of the date of
such subsequent Advance.
2.11.2
Performance; No Default. Borrower shall have performed and complied with all terms
and conditions herein required to be performed or complied with by it at or prior to
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the date of such Advance, and on the date of such Advance there shall exist no Default or
Event of Default or Shortfall.
2.11.3 Representations and Warranties. The representations and warranties made by Borrower
and Guarantor in the Loan Documents or otherwise made by or on behalf of Borrower or Guarantor in
connection therewith after the date thereof shall have been true and correct in all material
respects on the date on which made and shall also be true and correct in all material respects on
the date of such Advance.
2.11.4 No Damage. The Improvements shall not have been injured or damaged by fire,
explosion, accident, flood or other casualty, unless Lender shall have received insurance proceeds
sufficient in the reasonable judgment of Lender to effect the satisfactory restoration of the
Improvements and to permit the Completion of the Improvements prior to the Required Completion
Date.
2.11.5
Deliveries. The following items or documents shall have been delivered to Lender:
(a) Anticipated Costs Report. An Anticipated Costs Report in the form set forth in
Exhibit I to the Building Loan Agreement executed by the General Contractor which sets
forth the anticipated costs to complete construction of the Project Improvements, after giving
effect to costs incurred during the previous month and any anticipated change orders;
(b) Endorsement to Title Insurance Policy. A “datedown” endorsement to Lender’s title
insurance policy as described in the form set forth in Exhibit C to the Building Loan
Agreement which continuation or endorsement shall increase the coverage of the Title Insurance
Policy by the amount of the Advance through the pending disbursement clause (but not the overall
policy amount which shall be for the full amount of the Loan), amend the effective date of the
Title Insurance Policy to the date of such Advance, continue to insure the lien of the Mortgage
subject to no liens or encumbrances other than the Permitted Encumbrances and which shall state
that since the last disbursement of the Loan there have been no changes in the state of title to
the Property (other than Permitted Encumbrances) and that there are no additional survey exceptions
not previously approved by Lender;
(c) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents.
(d) Draw Request. A Draw Request complying with the provisions of this Agreement
which shall constitute Borrower’s representation and warranty to Lender that: (a) any completed
construction is substantially in accordance with the Plans and Specifications, (b) all costs for
the payment of which Lender have previously advanced funds have in fact been paid, (c) all the
representations and warranties contained in Article IV of this Agreement continue to be true and
correct in all material respects, (d) no Event of Default shall have occurred and be continuing
hereunder, and (e) Borrower continues to be in compliance in all respects with all of the other
terms, covenants and conditions contained in this Agreement.
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(e) Affirmation of Payment. General Contractor’s Affirmation of Payment (AIA Form
G706) in the form attached as Exhibit E to the Building Loan Agreement.
(f) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.11.6
Construction Consultant Certificate. Each draw request relating to Hard Costs shall
be accompanied by a certificate or report of the Construction Consultant to Lender based upon a
site observation of the Property made by the Construction Consultant not more than thirty (30) days
prior to the date of such draw, in which the Construction Consultant shall in substance: (i)
verify that the portion of the Project Improvements completed as of the date of such site
observation has been completed substantially in accordance with the Plans and Specifications; and
(ii) state its estimate of (1) the percentages of the construction of the Project Improvements
completed as of the date of such site observation on the basis of work in place as part of the
Project Improvements and the Building Loan Budget, (2) the Hard Costs actually incurred for work in
place as part of the Improvements as of the date of such site observation, (3) the sum necessary to
complete construction of the Project Improvements in accordance with the Plans and Specifications,
and (4) the amount of time from the date of such inspection that will be required to achieve
Completion of the Improvements.
2.11.8
Certification Regarding Chattels. Lender shall have received a certification from the
Title Company or other service satisfactory to Lender or counsel satisfactory to Lender (which
shall be updated from time to time at Borrower’s expense upon request by Lender in connection with
future Advances) that a search of the public records disclosed no significant or material changes
since the Closing Date including no judgment or tax liens affecting Borrower or Guarantor, the
Property or the Personal Property, and no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements (other than those in favor of Lender) or title retention
agreements which affect the Property.
2.11.9
Lien Waivers. Borrower shall have delivered duly executed lien waivers, which shall
be conditional lien waivers or unconditional lien waivers, as applicable, and otherwise
substantially in the form set forth as Exhibit J to the Building Loan Agreement, from the
General Contractor, all Major Contractors and Major Subcontractors for all work performed, and all
labor or material supplied for which payment thereof has been made prior to the date of the
Advance.
2.11.10
Construction Consultant Approval. Lender has received advice from the Construction
Consultant, satisfactory to Lender, as to Construction Consultant’s determination, acting
seasonably, based on on-site inspections of the Improvements and the data submitted to and reviewed
by it as part of Borrower’s Requisition of the value of the labor and materials in place, that the
construction of the Project Improvements is proceeding satisfactorily and according to schedule and
that the work on account of which the Advance is sought has been completed in a good and
workmanlike manner to such Construction Consultant’s satisfaction and substantially in accordance
with the Plans and Specifications.
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2.11.11
Ratios. Following such Advance (and any Building Loan Advance being made on such
date), the Loan-to-Cost Ratio shall be no greater than 75%.
2.11.12
Administration Fee. Borrower shall have paid the Administration Fee in accordance
with the provisions of the Administration Fee Agreement.
2.11.13
Required Equity Funds. Borrower shall furnish Lender with evidence in form and content
satisfactory to Lender that, as of the date of each Advance, Borrower has invested Cash equity in
an amount equal to or greater than (a) $5,356,660.00 or (b) 25% of the Total Project Costs or (c)
the difference between the Development Budget and the maximum Loan amount of $16,150,000.00 for
approved Project-Related Costs (the “Required Equity Funds”). Notwithstanding the foregoing, if
the Borrower realizes cost savings from the development of the Project, either in the form of Hard
Costs or Soft Costs, Advances may be advanced to Borrower provided that (i) the Borrower would not
have less than $5,356,660.00 of cash equity in the Project through such Advance and (ii) the Debt
Service Coverage Ratio shall be equal to or greater than 1.70 to 1.0 assuming a fully advanced Loan
using a debt service constant of 7.50%, (iii) the Debt Service Coverage Ratio shall be equal to or
greater than 1.20 to 1.0 assuming a fully advanced Loan using a debt service constant of 10.65%,
and (iv) the loan-to-value ratio for the Property is greater than 75% assuming a fully advanced
Loan. If Borrower is in non-compliance solely with respect to condition (i) above, at
Borrower’s option, either (A) any excess cost savings (funds in excess of the amount so that the
Required Equity Funds shall continue to be satisfied) shall be deposited as follows: (1) 100% into
the Replacement Reserve Account, or (2) at Lender’s discretion, into any other Reserves required by
Lender pursuant to this Agreement, or (B) Borrower shall release Lender from its obligation to fund
the remaining amounts of the Loan and Borrower and any guarantor under the Rate Lock Agreement pays
for the breakage costs, if any, on the unfunded portion of the Loan payable pursuant to the Rate
Lock Agreement. If Borrower is in compliance with respect to condition (i) above but is
not in compliance with conditions (ii), (iii) and (iv) above, any excess
cost savings shall, at Borrower’s option, (A) be held back by Lender as additional collateral for
the Loan until satisfaction of each of the requirements are satisfied, or (B) be deposited as
follows: (1) 100% into the Replacement Reserve Account, or (2) at Lender’s discretion, into any
other Reserves required by Lender pursuant to this Agreement, or (C) Borrower shall release Lender
from its obligation to fund the remaining amounts of the Loan and Borrower and any guarantor under
the Rate Lock Agreement pays for the breakage costs, if any, on the unfunded portion of the Loan
payable pursuant to the Rate Lock Agreement.
2.11.14
Rate Lock Agreement. Simultaneously with each Construction Advance, Lender shall
return to Borrower, a pro-rata portion of the deposit held by Lender pursuant to the Rate Lock
Agreement in such proportion as the amount of the Construction Advance bears to the Total Loan
Amount, provided, however, that in the event that any of the conditions of Section 2.11.13
are not satisfied, Lender shall have the right to apply the portion of the deposit under the Rate
Lock Agreement to be returned to Borrower to satisfy the conditions of Section 2.11.13.
2.11.15
Government Approvals. Lender shall not be required to make Construction Advances for
any phase of the construction of the Project Improvements unless and until Borrower shall have
delivered to Lender evidence satisfactory to Lender that all Governmental Approvals necessary for
the construction of the phase of the Project
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Improvements to be constructed by Borrower as contemplated by the Plans and Specifications
have been obtained and are in full force and effect, including, without limitation, the final
approval of the Plans and Specifications by the City of New York for the Project Improvements and a
building permit(s) covering the entire scope of work contemplated by the Project Improvements in
accordance with the approved Plans and Specification “lawfully issued” to Borrower within the
meaning of Section 11-31(a) of the Zoning Resolution of the City of New York (the “Zoning
Resolution).
Section 2.12 Final Advance.
2.12.1 Conditions to Release of Final Advance. In addition to the conditions set forth in
Section 2.10 and Section 2.11, above, Lender’s obligation to make the final Advance
in the amount calculated pursuant to Section 2.12.2 of this Agreement (the “Final Advance”)
shall be subject to receipt by Lender of the following:
(a) Completion of Improvements. Evidence satisfactory to Lender and the Construction
Consultant that the Completion of the Improvements has occurred.
(b) Final Building Loan Advance. All conditions to the Final Building Loan Advance
have been satisfied and the Final Building Loan Advance shall have been made or will be made
simultaneously therewith.
(c) Lien Waivers. Duly executed final lien waivers, which shall be conditional lien
waivers or unconditional lien waivers, as determined by Lender in its sole discretion, and
otherwise substantially in the form as Exhibit J to the Building Loan Agreement from the
General Contractor and Major Contractors and Major Subcontractors who have performed work for the
work so performed, and/or who have supplied labor and/or materials for the labor and/or materials
so supplied.
(d) “As-Built” Plans and Specifications. A full and complete set of “as built” Plans
and Specifications certified to by Borrower’s Architect.
(e) Administration Fee. Borrower shall have paid the Administration Fee in accordance
with the provisions of the Administration Fee Agreement.
(f) Certificates. Completed AIA Form G704 (Certificate of Substantial Completion) and
completed AIA Form G707 (Consent of Surety to Final Payments) shall have been executed and
delivered by Borrower’s Architect, General Contractor and each surety issuing any of the Required
Construction Bonds. .
(g) Deposits to Reserves. All deposits to the Reserve Funds required under the
Building Loan Agreement have been made.
(h) Other Documents. Such documents, letters, affidavits, reports and assurances, as
Lender, Lender’s counsel and the Construction Consultant may reasonably require.
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(i) Required Ratios at Completion. Lender shall have determined that, following the
Final Advance (and taking into consideration the Final Building Loan Advance to be made
simultaneously under the Building Loan) the Required Ratios at Completion have been satisfied, or
Borrower shall have deposited with Lender Cash or a Letter of Credit to satisfy the Required Ratios
at Completion in accordance with Section 2.12.2.
(j) Tenant Estoppel Certificates. Borrower shall have delivered to Lender estoppel
certificates from all of the tenants at the Property in form and substance satisfactory to Lender.
(k) Required Equity Funds. Borrower shall furnish Lender with evidence in form and
content satisfactory to Lender that, as of the date of the Final Advance, Borrower has invested
Cash equity in an amount equal to or greater than the Required Equity Funds or has otherwise
complied with the provisions of Section 2.11.13 with respect thereto.
(l) Insolvency Opinion. The issuance of and delivery to Lender of six (6) original
counterparty Insolvency Opinions in the form attached hereto as Exhibit K to the Building
Loan Agreement from Wachtel & Masyr, LLP or another law firm reasonably acceptable to Lender.
(m) ICIP Eligibility. Evidence satisfactory to Lender that Borrower has obtained a
Certificate of Eligibility under the Industrial and Commercial Incentive Program.
2.12.2 Amount of Final Advance. Except as expressly provided for below, the amount of
the Final Advance shall be equal to the sum of: (a) any Retainage not previously released and
advanced to Borrower; plus (b) the amount of any Punch List and Deferred Maintenance Reserve
Deposit not funded pursuant to the Building Loan Agreement; plus (c) the positive difference, if
any, between, (i) the Building Loan Amount and (ii) all amounts previously Advanced under the
Building Loan (including the amounts described in clauses (a) and (b) of the sentence). The portion
of the Final Advance described in clause (c) of the foregoing sentence is referred to herein as the
“Project Loan Earn Out Advance” and the corresponding portion of the Final Building Loan Advance is
referred to herein as the “Building Loan Earn Out Advance” and together with the Project Loan Earn
Out Advance, the “Earn Out Advances”. Notwithstanding anything to the contrary provided for
herein, the Earn Out Advances shall be reduced, pro rata, but not below $0.00, if and to the extent
necessary for the Required Ratios at Completion to be achieved following the Final Advances. In
addition, if the Required Ratios at Completion cannot be achieved even if the Earn Out Advances are
reduced to $0.00, Lender shall have the right, but not the obligation, to apply any deposits held
by Lender pursuant to the Rate Lock Agreement and any Interest Reserve Funds to the payment of the
Building Loan and the Project Loan in such order and priority as Lender shall determine in its sole
discretion. If the Required Ratios at Completion cannot be achieved even if the Earn Out Advances
are reduced to $0.00 and the deposits, if any under the Rate Lock Agreement and the Interest
Reserve Funds are applied to the payment of the Loan, Borrower shall deposit with Lender Cash or a
Letter of Credit satisfactory to Lender in an amount equal to the amount which, if used to pay down
the Loan, would result in Stabilized Loan-to-Value Ratio of 75%, and a Debt Service Coverage Ratio
of 1.70 to 1.0, calculated based upon Lender’s determination on a pro-forma basis of Lender’s
Stabilized Net Cash Flow for the 12 months immediately following and
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assuming a thirty (30) year amortization schedule based upon a debt service constant equal to
the greater of the actual debt service constant and 7.50%, and a Debt Service Coverage Ratio of
1.20 to 1.0, calculated based upon Lender’s determination on a pro-forma basis of Lender’s
underwritten Net Operating Income for the 12 months immediately following and assuming a thirty
(30) year amortization schedule based upon a debt service constant equal to the greater of the
actual debt service constant and 10.65%.
2.12.3 Rate Lock Agreement. Upon satisfaction of all of the conditions to the Final Advance
set forth in Section 2.12.1, and subject to the provisions of Section 2.12.2,
Lender shall return to Borrower, the remaining deposits, if any, held by Lender under the Rate Lock
Agreement and not applied by Lender in accordance with the provisions of the Rate Lock Agreement
and any Interest Reserve Funds held by Lender pursuant to the Building Loan Agreement.
Section 2.13 No Reliance. All conditions and requirements of this Agreement are for the sole
benefit of Lender and no other person or party (including, without limitation, the Construction
Consultant, the General Contractor and subcontractors (including, without limitation, Major
Contractors and Major Subcontractors) and materialmen engaged in the construction of the
Improvements) shall have the right to rely on the satisfaction of such conditions and requirements
by Borrower. Lender shall have the right, in its sole and absolute discretion, to waive any such
condition or requirement.
Section 2.14 Method of Disbursement of Loan Proceeds.
2.14.1 Draw Request to Be Submitted to Lender. At such time as Borrower shall desire to
obtain an Advance, Borrower shall complete, execute and deliver to Lender a Borrower’s Requisition
in the form attached as Exhibit L to the Building Loan Agreement.
(a) Borrower’s Requisition shall be accompanied by a completed and itemized Application and
Certificate for Payment (AIA Document No. G702) attached as Exhibit M to the Building Loan
Agreement or similar form approved by Lender, containing the certification of the General
Contractor or contractor or subcontractor to whom such payment is made, as applicable, and
Borrower’s Architect as to the accuracy of same, together with invoices relating to all items of
Hard Costs covered thereby and accompanied by a cost breakdown showing the cost of work on, and the
cost of materials incorporated into, the Improvements to the date of the requisition. The cost
breakdown shall also show the percentage of completion of each line item on the Project Loan
Budget, and the accuracy of the cost breakdown shall be certified by Borrower and by Borrower’s
Architect. All such applications for payment shall also show all contractors and subcontractors,
including Major Contractors and Major Subcontractors, by name and trade, the total amount of each
contract or subcontract, the amount theretofore paid to each subcontractor as of the date of such
application, and the amount to be paid from the proceeds of the Advance to each contractor and
subcontractor;
(b) the completed construction will be reviewed by the Construction Consultant who will
certify to Lender as to the value of completed construction, percentage of completion and
compliance with Plans and Specifications;
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(c) lien waivers from each other Major Contractor and Major Subcontractors for work done and
materials supplied by them which were paid for pursuant to any prior Draw Request;
(d) a written request of Borrower for any necessary changes in the Plans and Specifications,
the Project Loan Budget, the Disbursement Schedule or the Construction Schedule;
(e) copies of all executed change orders, contracts and subcontracts, and, to the extent
requested by Lender, of all inspection or test reports and other documents relating to the
construction of the Project Improvements not previously delivered to Lender; and
(f) such other information, documentation and certification as Lender shall reasonably
request.
2.14.2 Procedure of Advances.
(a) Each Draw Request shall be submitted to Lender and Construction Consultant at least ten
(10) Business Days prior to the Requested Advance Date, and no more frequently than monthly.
Lender shall make the requested Advance on the Requested Advance Date so long as all conditions to
such Advance are satisfied or waived.
(b) Not later than 11:00 A.M. New York City time, on the Requested Advance Date, Lender shall
make such Advance available to Borrower in accordance with the terms of this Section 2.14.
(c) Each Advance (other than the Final Advance) shall be in an amount of not less than
$250,000.00.
(d) Each Advance shall be made on a Payment Date.
2.14.3 Funds Advanced. Each Advance shall be made by Lender by wire transfer to such
checking account of Borrower as specified to Lender in writing or as provided in Section
2.14.4 below. All proceeds of all Advances shall be used by Borrower only for the purposes for
which such Advances were made. Borrower shall not commingle such funds with other funds of
Borrower.
2.14.4 Direct Advances to Third Parties. Lender may make, at Lender’s option, any or all
Advances directly or through the Title Company to (i) any Contractor, as applicable, for
construction expenses which shall theretofore have been approved by Lender and for which Borrower
shall have failed to make payment after receipt by Borrower of such applicable Advance, (ii)
Borrower’s Architect to pay its fees to the extent funds are allocated thereto in the Building Loan
Budget if Borrower shall have failed to do so, (iii) the Construction Consultant to pay its fees,
(iv) Lender’s counsel to pay its fees, (v) to pay (x) any installment of interest due under the
Note, (y) any expenses incurred by Lender which are reimbursable by Borrower under the Loan
Documents (including, without limiting the generality of the foregoing, reasonable attorneys’ fees
and expenses and other fees and expenses incurred by Lender), provided that Borrower shall
theretofore have received notice from Lender that such expenses have been
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incurred and Borrower shall have failed to reimburse Lender for said expenses beyond any grace
periods provided for said reimbursement under the Note, this Agreement or any of the other Loan
Documents, or (z) following the occurrence and continuation of an Event of Default, any other sums
due to Lender under the Note, this Agreement or any of the other Loan Documents, all to the extent
that the same are not paid by the respective due dates thereof, and (vi) any other Person to whom
Lender in good faith determines payment is due and any portion of the Loan so disbursed by Lender
shall be deemed disbursed as of the date on which the Person to whom payment is made receives the
same. The execution of this Agreement by Borrower shall, and hereby does, constitute an
irrevocable authorization so to advance the proceeds of the Loan directly to any such Person or
through the Title Company to such Persons in accordance with this Section 2.14.4 as amounts
become due and payable to them hereunder and any portion of the Loan so disbursed by Lender shall
be deemed disbursed as of the date on which the Person to whom payment is made receives the same.
No further authorization from Borrower shall be necessary to warrant such direct Advances to such
relevant Person, and all such Advances shall satisfy pro tanto the obligations of Lender hereunder
and shall be secured by the Mortgage and the other Loan Documents as fully as if made directly to
Borrower.
2.14.5 One Advance Per Month. Lender shall have no obligation to make Advances of the Loan
more often than once in each calendar month except that Lender, in its sole discretion, shall have
the right but not the obligation, to make additional advances per month for interest, fees and
expenses due under the Loan Documents.
2.14.6 Advances Do Not Constitute a Waiver. No Advance shall constitute a waiver of any of
the conditions of Lender’s obligation to make further Advances nor, in the event Borrower is unable
to satisfy any such condition, shall any Advance have the effect of precluding Lender from
thereafter declaring such inability to be an Event of Default hereunder.
2.14.7 Trust Fund Provisions. All proceeds advanced hereunder shall be subject to the trust
fund provisions of Section 13 of the Lien Law. Nothing contained in this Agreement is
intended to constitute a promise by Borrower, express or implied, or to create any obligation,
express or implied, on the part of Borrower, to make an “improvement,” as such term is defined in
the Lien Law of the State of New York, and no advance of proceeds of the Loan shall at any time be
conditioned, directly or indirectly, upon the making of any such “improvement”.
2.14.8 Advances and Disbursements Under Completion Guaranty. Notwithstanding anything to the
contrary contained in this Agreement or in any other Loan Document, Borrower hereby irrevocably and
unconditionally authorizes Lender to make any disbursements of proceeds of the Loan or of any
Reserve Funds held by Lender to Guarantor in accordance with the Guaranty of Completion.
Section 2.15 Interest Advances. Notwithstanding the requirements contained in Section 2.10,
Section 2.11 and Section 2.12, and provided that no Event of Default shall have occurred, Lender
shall make an Advance on each Payment Date during the Construction Term from the Interest Reserve
Line Item, if and to the extent funds remain available under such line item, to pay interest then
due under the Note. Notwithstanding the foregoing, if and to the extent that funds are available
in the Additional Interest Reserve Deposit, Lender shall first apply funds
26
available in the Additional Interest Reserve Deposit to the payment of interest due, prior to
making an Advance for such purpose. Nothing contained in this Section 2.15 shall limit or
derogate from Borrower’s absolute and unconditional obligation to pay interest due under the Note.
ARTICLE 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 conditions precedent set forth
in Section 3.1 of the Building Loan Agreement no later than the Closing Date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations. The representations and warranties of Borrower set forth
in Section 4.1 of the Building Loan Agreement are incorporated herein by reference as if
fully set forth herein and remade by Borrower.
Section 4.2 Survival of Representations. Borrower agrees that all of the representations and
warranties of Borrower set forth in Section 4.1 hereof and elsewhere in this Agreement and
in the other Loan Documents shall survive for so long as any amount remains owing to Lender under
this Agreement or any of the other Loan Documents by Borrower. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be
deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf.
ARTICLE V.
BORROWER COVENANTS
Section 5.1
Affirmative Covenants. The affirmative covenants of Borrower set forth in Section
5.1 of the Building Loan Agreement are incorporated herein by reference as if fully set forth
herein and remade by Borrower.
Section 5.2 Negative Covenants. The negative covenants of Borrower set forth in Section
5.2 of the Building Loan Agreement are incorporated herein by reference as if fully set forth
herein and remade by Borrower.
ARTICLE VI.
INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
Section 6.1
Insurance. Borrower, at its sole cost and expense, shall obtain and maintain, or
cause to be maintained, insurance policies necessary to satisfy the requirements of Section
6.1 of the Building Loan Agreement.
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Section 6.2 Casualty and Condemnation. Section 6.2 of the Building Loan Agreement is
incorporated herein by reference as if fully set forth herein.
Section 6.3 Application of Net Proceeds. Section 6.3 of the Building Loan Agreement is
incorporated herein by reference as if fully set forth herein.
ARTICLE VII.
RESERVE FUNDS
Section 7.1
Reserve Funds. Borrower shall establish such accounts and make such deposits as are
required by Article VII of the Building Loan Agreement. The provisions of Article
VII of the Building Loan Agreement are incorporated herein by reference as if fully set forth
herein.
Section 7.2
Other Loan Documents. Borrower’s obligations under this Article VII shall be
suspended for so long as sufficient amounts are on deposit and reserved as required by the Building
Loan Agreement.
Section 7.3 Reserve Funds, Generally. Borrower grants to Lender a first-priority perfected
security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in
each Reserve Fund as additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Funds shall constitute additional security for the Debt. Upon the
occurrence of an Event of Default, Lender may, in addition to any and all other rights and remedies
available to Lender, apply any sums then present in any or all of the Reserve Funds to the payment
of the Debt in any order in its sole discretion. The Reserve Funds shall not constitute trust
funds and may be commingled with other monies held by Lender. All interest on a Reserve Fund shall
not be added to or become a part thereof and shall be the sole property of and shall be paid to
Lender. Borrower shall be responsible for payment of any federal, state or local income or other
tax applicable to the interest earned on the Reserve Funds credited or paid to Borrower. Borrower
shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant
any security interest in any Reserve Fund or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect thereto. Lender shall
not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds.
Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions,
suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including
litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the performance of the obligations for which the Reserve Funds were
established. Borrower shall assign to Lender all rights and claims Borrower may have against all
persons or entities supplying labor, materials or other services which are to be paid from or
secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
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ARTICLE VIII.
DEFAULTS
Section 8.1
Event of Default. (a) Each of the following events shall constitute an event of
default hereunder (an “Event of Default”):
(i) if any portion of the Debt is not paid within five (5) days of the date
when due (except that Borrower shall not be afforded such 5-day cure period for the
portion of the Debt due and payable on the Maturity Date);
(ii) if any of the Taxes (other than Taxes being contested pursuant to
Section 5.1.2 of this Agreement) are not paid when the same are due and
payable or Other Charges are not paid within five (5) days after Borrower receives
notice of same;
(iii) if the Policies are not kept in full force and effect, or if certified
copies of the Policies are not delivered to Lender upon request;
(iv) if Borrower Transfers or otherwise encumbers any portion of the Property
without Lender’s prior written consent in violation of the provisions of this
Agreement or the Mortgage;
(v) if any material representation or warranty made by Borrower or Guarantor
herein or in any other Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished to Lender shall have
been false or misleading in any material respect as of the date the representation
or warranty was made;
(vi) if Borrower, Mezzanine Borrower, Guarantor or any other guarantor under
any guaranty issued in connection with the Loan shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
Mezzanine Borrower, Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Mezzanine Borrower, Guarantor or such other
guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
or if any proceeding for the dissolution or liquidation of Borrower, Mezzanine
Borrower, Guarantor or such other guarantor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
upon the same not being discharged, stayed or dismissed within ninety (90) days;
29
(viii) if Borrower attempts to assign its rights under this Agreement or any of
the other Loan Documents or any interest herein or therein in contravention of the
Loan Documents;
(ix) if Borrower breaches any covenant contained in Section 4.1.30;
(x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if Borrower shall be in
default under such term, covenant or condition after the giving of such notice or
the expiration of such grace period;
(xi) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in any
material respect;
(xii) if Borrower fails to pay the Administration Fee, or any portion or
installment thereof, within five (5) days of the date when due;
(xiii) If Borrower fails to deposit with Lender the cash deposit or Letter of
Credit required in accordance with Section 2.12.2 hereof;
(xiv) if Borrower fails to materially comply with the Construction Schedule;
(xv) if the Completion of the Improvements has not occurred on or prior to the
Required Completion Date, subject to Force Majeure or if Lender or the Construction
Consultant determines that Completion of the Improvements cannot occur on or prior
to the Required Completion Date;
(xvi) if any voucher or invoice is fraudulently submitted by Borrower or in
connection with any Advance for services performed or for materials used in or
furnished for the Property;
(xvii) if there is any cessation at any time in construction of the Project
Improvements for more than twenty (20) consecutive Business Days, other than as a
result of Force Majeure;
(xviii) if Borrower expressly confesses in writing to Lender its inability to
continue or complete construction of the Project Improvements in accordance with
this Agreement;
(xix) if Lender, the Construction Consultant or their representatives are not
permitted at all reasonable times upon not less than three (3) Business Days notice
to enter upon the Property, inspect the Improvements and the construction thereof
and all materials, fixtures and articles used or to be used in the construction and
to examine all the Plans and Specifications, or if Borrower shall
30
fail to furnish to Lender or its authorized representative, when requested upon
not less than five (5) Business Days notice, copies of the Plans and Specifications;
(xx) if a material adverse change in Borrower’s financial condition shall occur
which would, in Lender’s reasonable determination, materially and adversely affect
Borrower’s ability to perform its obligations under this Agreement or any other
document evidencing or securing the Loan beyond any applicable notice and grace
periods expressly set forth in the Loan Documents;
(xxi) if the conditions precedent to the Final Advance have not been satisfied
on or prior to the Required Completion Date;
(xxii) If the Guarantor fails to maintain the Required Liquidity and the
Required Net Worth covenants specified in the Guaranty of Completion or if the
Guarantor shall default under the Guaranty of Completion or the Guaranty of Recourse
Carveouts;
(xxiii) if a material default has occurred and continues beyond any applicable
cure period under the Management Agreement (or any Replacement Management Agreement)
and if such default permits the Manager thereunder to terminate or cancel the
Management Agreement (or any Replacement Management Agreement);
(xxiv) if Borrower shall continue to be in Default under any of the terms,
covenants or conditions of Section 9.1 hereof, or fails to cooperate with
Lender in connection with a Securitization pursuant to the provisions of Section
9.1 hereof, in either case for three (3) Business Days after notice to Borrower
from Lender;
(xxv) if an Event of Default (as defined in the Building Loan Agreement) shall
have occurred;
(xxvi) if there shall be default by Borrower or Guarantor under any of the
other Loan Documents, beyond applicable cure periods, if any, contained in such
documents, whether as to Borrower, Guarantor or the Property, or if any other such
event shall occur or condition shall exist, if the effect of such other default,
event or condition is to accelerate the maturity of all or any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the Debt;
(xxvii) if Guarantor shall dissolve or cease to exist during the term of the
Loan, except in compliance with the provisions of Section 5.2.15 of the
Building Loan Agreement;
(xxviii) if all of the Initial Advance Conditions, including, without
limitation, the Unsatisfied Initial Advance Conditions, are not satisfied by the
Required Initial Advance Date; or
(xxix) 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)
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to (xxviii) above, for twenty (20) 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 thirty (30) day period and provided further
that Borrower shall have commenced to cure such Default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same, such
thirty (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 (60) days.
(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, in addition to any other rights or
remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in
equity, Lender may take such action, without notice or demand, that Lender deems advisable to
protect and enforce its rights against Borrower and the Property, including, without limitation,
declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any
or all rights or remedies provided in the Loan Documents against Borrower and any or all of the
Property, 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 Other
Obligations of Borrower hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and Borrower hereby expressly
waives any such notice or demand, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
Section 8.2
Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrower under this Agreement or any of
the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in
equity may be exercised by Lender at any time and from time to time, whether or not all or any of
the Debt shall be declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and remedies under any of
the Loan Documents with respect to all or any part of the Property. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender may determine in its
sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees
that if an Event of Default is continuing (i) Lender is not subject to any “one action” or
“election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges
provided to Lender shall remain in full force and effect until Lender has exhausted all of its
remedies against the Property and the Mortgage has been foreclosed, sold and/or otherwise realized
upon in satisfaction of the Debt or the Debt has been paid in full.
32
(b) With respect to Borrower and the Property, nothing contained herein or in any other Loan
Document shall be construed as requiring Lender to resort to the Property for the satisfaction of
any of the Debt in any preference or priority, and Lender may seek satisfaction out of the
Property, or any part thereof, in its absolute discretion in respect of the Debt. In addition,
Lender shall have the right from time to time to partially foreclose the Mortgage in any manner and
for any amounts secured by the Mortgage 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 the Mortgage 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 the Mortgage to recover so much of the principal balance of the Loan
as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage
to secure payment of sums secured by the Mortgage and not previously recovered.
(c) Lender shall have the right from time to time to sever the Note and the other Loan
Documents into one or more separate notes, mortgages and other security documents (the “Severed
Loan Documents”) in such denominations as Lender shall determine in its sole discretion for
purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall
execute and deliver to Lender from time to time, promptly after the request of Lender, a severance
agreement and such other documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.
Borrower hereby absolutely and irrevocably appoints Lender 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) Business Days after notice has been given to Borrower by Lender of Lender’s intent
to exercise its rights under such power. Borrower shall be obligated to pay any costs or expenses
incurred in connection with the preparation, execution, recording or filing of the Severed Loan
Documents and the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and warranties contained
in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative; Waivers. The rights, powers and remedies of Lender under this
Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at
law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singularly,
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.
33
ARTICLE IX.
SPECIAL PROVISIONS
Article 9 of the Building Loan Agreement is incorporated herein by reference as if
fully set forth herein.
ARTICLE X.
MISCELLANEOUS
Section 10.1 Survival. This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall survive the making
by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in
full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to include the legal
representatives, successors and assigns of such party. All covenants, promises and agreements in
this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal
representatives, successors and assigns of Lender.
Section 10.2 Lender’s Discretion. Whenever pursuant to this Agreement, Lender exercises any right
given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender,
the decision of Lender to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Lender and shall be final and conclusive.
Section 10.3 Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND
ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN 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, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER 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 CONFLICTS OF 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 LIEN AND
SECURITY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED
34
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT,
TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER
HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE
NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED
ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
BORROWER DOES HEREBY DESIGNATE AND APPOINT:
National Registered Agents, Inc.
875 Avenue of the Americas, Suite 501
New York, New York 10001
875 Avenue of the Americas, Suite 501
New York, New York 10001
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.
35
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, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) certified or registered United States mail, postage
prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or
United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back
acknowledged), addressed as follows (or at such other address and Person as shall be designated
from time to time by any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section):
If to Lender:
|
Bear Stearns Commercial Mortgage, Inc. 383 Madison Avenue New York, New York 10179 Attention: J. Christopher Hoeffel Facsimile No.: (212) 272-7047 |
|
with a copy to:
|
Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178 Attention: Paul A. Keenan, Esq. Facsimile No.: (212) 808-7897 |
|
If to Borrower:
|
Acadia Atlantic Avenue LLC c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, New York 10605 |
36
| Attention: Robert Masters, Esq., General Counsel Facsimile No.: (914) 288-2162 |
||
If to MERS:
|
MERS Commercial P.O. Box 2300 Flint, Michigan 48501-2300 |
A notice shall be deemed to have been given: in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the
first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a
machine-generated confirmation of successful transmission after advice by telephone to recipient
that a telecopy notice is forthcoming.
Section 10.7 Trial by Jury.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
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 Preferences. Lender shall have the continuing and exclusive right to apply or reverse
and reapply any and all payments by Borrower to any portion of the obligations of Borrower
hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such payment or
proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or proceeds had not been received
by Lender.
37
Section 10.11 Waiver of Notice. Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender to Borrower and
except with respect to matters for which Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right
to receive any notice from Lender with respect to any matter for which this Agreement or the other
Loan Documents do not specifically and expressly provide for the giving of notice by Lender to
Borrower.
Section 10.12 Remedies of Borrower. In the event that a claim or adjudication is made that Lender
or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or
under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall
be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an
action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action
or proceeding to determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
Section 10.13 Expenses; Indemnity. (1) Borrower covenants and agrees to pay or, if Borrower fails
to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable costs
and expenses (including reasonable attorneys’ fees and disbursements) incurred by Lender in
connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the
other Loan Documents and the consummation of the transactions contemplated hereby and thereby and
all the costs of furnishing all opinions by counsel for Borrower (including without limitation any
opinions requested by Lender as to any legal matters arising under this Agreement or the other Loan
Documents with respect to the Property); (ii) Borrower’s ongoing performance of and compliance with
Borrower’s respective agreements and covenants contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance requirements; (iii) Lender’s
ongoing performance and compliance with all agreements and conditions contained in this Agreement
and the other Loan Documents on its part to be performed or complied with after the Closing Date;
(iv) the negotiation, preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications to this Agreement and the other Loan Documents and any
other documents or matters requested by Lender; (v) securing Borrower’s compliance with any
requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all
required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in
favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing or
preserving any rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or affecting Borrower, this
Agreement, the other Loan Documents, the Property, or any other security given for the Loan; and
(viii) enforcing any obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the Property (including any fees incurred by
Servicer in connection with the transfer of the Loan to a special servicer prior to a Default or
Event of Default) 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
38
or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the
payment of any such costs and expenses to the extent the same arise by reason of the gross
negligence, illegal acts, fraud or willful misconduct of Lender. Any cost and expenses due and
payable to Lender may be paid from any amounts in the Clearing Account or Cash Management Account,
as applicable.
(a) 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. To the extent that the undertaking to indemnify, defend and
hold harmless set forth in the preceding sentence may be unenforceable because it violates any law
or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
(b) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender
for, any fees and expenses incurred by any Rating Agency in connection with any consent, approval,
waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of
this Agreement or any other Loan Document and Lender shall be entitled to require payment of such
fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver
or confirmation.
Section 10.14
Schedules and Exhibits Incorporated. The Schedules and Exhibits annexed to the
Building Loan Agreement are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.
Section 10.15
Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest in and to this
Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have
against any assignor of such documents, and no such unrelated counterclaim or defense shall be
interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon
such documents and any such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrower and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender. Nothing herein or
39
therein is intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Property
other than that of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein or therein. All conditions to
the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the
benefit of Lender and no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Lender will refuse to make
the Loan in the absence of strict compliance with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may
be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it
advisable or desirable to do so.
Section 10.17 Publicity. All news releases, publicity or advertising by Borrower or its Affiliates
through any media intended to reach the general public which refers to the Loan Documents or the
financing evidenced by the Loan Documents, to Lender, BSCMI, or any of their Affiliates shall be
subject to the prior written approval of Lender.
Section 10.18
Waiver of Marshalling of Assets. 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 Property, 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 Property 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 Property in preference to every other claimant whatsoever.
Section 10.19
Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or
its agents.
Section 10.20
Identical Obligations; Conflict; Construction of Documents; Reliance. To the extent
that Borrower has identical obligations under this Agreement and under any of the other Loan
Agreements, performance by Borrower of such obligations under this Agreement or any of the other
Loan Agreements shall be deemed performance by Borrower, as applicable, under all such Loan
Agreements and hereunder of such obligations. In the event of any conflict between the provisions
of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall
control. The parties hereto acknowledge that they were represented by competent counsel in
connection with the negotiation, drafting and execution of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning against the party which
drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on
its own judgment and advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of
40
Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any
limitation whatsoever in the exercise of any rights or remedies available to it under any of the
Loan Documents or any other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them
may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or
take any action on the basis of the foregoing with respect to Lender’s exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of real estate financings
and other real estate transactions and investments which may be viewed as adverse to or competitive
with the business of Borrower or its Affiliates.
Section 10.21
Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no
financial advisors, brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement. Borrower hereby agrees to indemnify, defend and
hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any
kind (including Lender’s attorneys’ fees and expenses) in any way relating to or arising from a
claim by any Person that such Person acted on behalf of Borrower or Lender in connection with the
transactions contemplated herein. The provisions of this Section 10.21 shall survive the
expiration and termination of this Agreement and the payment of the Debt.
Section 10.22 Prior Agreements. This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and
thereby, and all prior agreements among or between such parties, whether oral or written,
including, without limitation, the Commitment Letter dated June 28, 2007 between Borrower and
Lender are superseded by the terms of this Agreement and the other Loan Documents.
Section 10.23
Joint and Several Liability. If Borrower consists of more than one (1) Person the
obligations and liabilities of each Person shall be joint and several.
Section 10.24
Certain Additional Rights of Lender (VCOC). Notwithstanding anything to the contrary
contained in this Agreement, Lender shall have:
(a) the right to routinely consult with and advise Borrower’s management regarding the
significant business activities and business and financial developments of Borrower;
provided, however, that such consultations shall not include discussions of
environmental compliance programs or disposal of hazardous substances. Consultation meetings
should occur on a regular basis (no less frequently than quarterly) with Lender having the right to
call special meetings at any reasonable times and upon reasonable advance notice;
(b) the right, in accordance with the terms of this Agreement, to examine the books and
records of Borrower at any reasonable times upon reasonable notice;
(c) the right, in accordance with the terms of this Agreement, including, without limitation,
Section 5.1.11 hereof, to receive monthly, quarterly and year end financial
reports, including balance sheets, statements of income, shareholder’s equity and cash flow, a
management report and schedules of outstanding indebtedness; and
41
(d) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to approve any acquisition by Borrower of any other significant property (other
than personal property required for the day to day operation of the Property and/or construction of
the Project Improvements).
The rights described above in this Section 10.24 may be exercised by any entity which
owns and controls, directly or indirectly, substantially all of the interests in Lender.
Section 10.25 MERS. Mortgage Electronic Registration Systems, Inc., a Delaware corporation (“MERS”),
serves as mortgagee of record and secured party solely as nominee, in an administrative capacity,
for Lender and only holds legal title to the interests granted, assigned, and transferred in the
Mortgage and the Assignments of Leases. MERS shall at all times comply with the instructions of
Lender. If necessary to comply with law or custom, MERS (for the benefit of Lender) may be
directed by Lender to exercise any or all of those interests, including without limitation, the
right to foreclose and sell the Property, and take any action required of Lender, including without
limitation, a release, discharge or reconveyance of the Mortgage. Subject to the foregoing, all
references in the Loan Documents to “Mortgagee” shall include Lender and its successors and
assigns. The relationship of Mortgagor and Lender under the Mortgage and the other Loan Documents
is, and shall at all times remain, solely that of borrower and lender (the role of MERS thereunder
being solely that of nominee as set forth above and not that of a lender); and Mortgagee neither
undertakes nor assumes any responsibility or duty to Borrower or to any other Person with respect
to the Property.
42
[SIGNATURE PAGE TO PROJECT LOAN AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above written.
| BORROWER ACADIA ATLANTIC AVENUE LLC, a Delaware limited liability company |
||||
| By: | ||||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| LENDER BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York corporation |
||||
| By: | ||||
| Name: | ||||
| Title: | Authorized Signatory | |||
Exhibit 10.74
BUILDING LOAN AGREEMENT
Dated as of December 26, 2007
Between
ACADIA ATLANTIC AVENUE LLC,
as Borrower
and
BEAR STEARNS COMMERCIAL MORTGAGE, INC.,
as Lender
Between
ACADIA ATLANTIC AVENUE LLC,
as Borrower
and
BEAR STEARNS COMMERCIAL MORTGAGE, INC.,
as Lender
MERS MIN: 8000101-0000007166-1
TABLE OF CONTENTS
| ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION | 1 | |||||||
| Section 1.1 | Definitions | 1 | ||||||
| Section 1.2 | Principles of Construction | 34 | ||||||
| ARTICLE II. GENERAL TERMS | 34 | |||||||
| Section 2.1 | Loan Commitment; Disbursement to Borrower | 34 | ||||||
| Section 2.2 | Interest Rate | 38 | ||||||
| Section 2.3 | Loan Payment | 39 | ||||||
| Section 2.4 | Prepayments | 40 | ||||||
| Section 2.5 | Defeasance | 41 | ||||||
| Section 2.6 | Release of Property | 44 | ||||||
| Section 2.7 | Clearing Account/Cash Management | 44 | ||||||
| Section 2.8 | Intentionally Omitted | 47 | ||||||
| Section 2.9 | Payments Not Conditional | 47 | ||||||
| Section 2.10 | Initial Advance | 47 | ||||||
| Section 2.11 | Construction Advances | 51 | ||||||
| Section 2.12 | Final Advance | 55 | ||||||
| Section 2.13 | No Reliance | 57 | ||||||
| Section 2.14 | Method of Disbursement of Loan Proceeds | 57 | ||||||
| Section 2.15 | Plan Review Process | 59 | ||||||
| ARTICLE III. CONDITIONS PRECEDENT | 60 | |||||||
| Section 3.1 | Conditions Precedent to Closing | 60 | ||||||
| ARTICLE IV. REPRESENTATIONS AND WARRANTIES | 64 | |||||||
| Section 4.1 | Borrower Representations | 64 | ||||||
| Section 4.2 | Survival of Representations | 76 | ||||||
| ARTICLE V. BORROWER COVENANTS | 76 | |||||||
| Section 5.1 | Affirmative Covenants | 76 | ||||||
| Section 5.2 | Negative Covenants | 92 | ||||||
| ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS | 102 | |||||||
| Section 6.1 | Insurance | 102 | ||||||
| Section 6.2 | Casualty and Condemnation | 108 | ||||||
| Section 6.3 | Application of Net Proceeds | 114 | ||||||
| ARTICLE VII. RESERVE FUNDS | 114 | |||||||
| Section 7.1 | Tax and Insurance Escrow Fund | 114 | ||||||
| Section 7.2 | Interest Reserve | 116 | ||||||
| Section 7.3 | Replacements and Replacement Reserve | 116 | ||||||
| Section 7.4 | Punch List and Deferred Maintenance Reserve | 120 | ||||||
| Section 7.5 | Intentionally Omitted | 121 | ||||||
| Section 7.6 | Excess Cash Flow | 122 | ||||||
-i-
| Section 7.7 | Operating Reserve | 122 | ||||||
| Section 7.8 | Reserve Funds, Generally | 122 | ||||||
| Section 7.9 | Letter of Credit Rights | 123 | ||||||
| ARTICLE VIII. DEFAULTS | 123 | |||||||
| Section 8.1 | Event of Default | 123 | ||||||
| Section 8.2 | Remedies | 127 | ||||||
| Section 8.3 | Remedies Cumulative; Waivers | 128 | ||||||
| ARTICLE IX. SPECIAL PROVISIONS | 128 | |||||||
| Section 9.1 | Sale of Notes and Securitization | 128 | ||||||
| Section 9.2 | Securitization Indemnification | 131 | ||||||
| Section 9.3 | Exculpation | 134 | ||||||
| Section 9.4 | Intentionally Omitted | 136 | ||||||
| Section 9.5 | Servicer | 136 | ||||||
| ARTICLE X. MISCELLANEOUS | 136 | |||||||
| Section 10.1 | Survival | 136 | ||||||
| Section 10.2 | Lender’s Discretion | 136 | ||||||
| Section 10.3 | Governing Law | 136 | ||||||
| Section 10.4 | Modification, Waiver in Writing | 138 | ||||||
| Section 10.5 | Delay Not a Waiver | 138 | ||||||
| Section 10.6 | Notices | 138 | ||||||
| Section 10.7 | Trial by Jury | 139 | ||||||
| Section 10.8 | Headings | 139 | ||||||
| Section 10.9 | Severability | 139 | ||||||
| Section 10.10 | Preferences | 139 | ||||||
| Section 10.11 | Waiver of Notice | 140 | ||||||
| Section 10.12 | Remedies of Borrower | 140 | ||||||
| Section 10.13 | Expenses; Indemnity | 140 | ||||||
| Section 10.14 | Schedules and Exhibits Incorporated | 141 | ||||||
| Section 10.15 | Offsets, Counterclaims and Defenses | 141 | ||||||
| Section 10.16 | No Joint Venture or Partnership; No Third Party Beneficiaries | 142 | ||||||
| Section 10.17 | Publicity | 142 | ||||||
| Section 10.18 | Waiver of Marshalling of Assets | 142 | ||||||
| Section 10.19 | Waiver of Counterclaim | 142 | ||||||
| Section 10.20 | Conflict; Construction of Documents; Reliance | 142 | ||||||
| Section 10.21 | Brokers and Financial Advisors | 143 | ||||||
| Section 10.22 | Prior Agreements | 143 | ||||||
| Section 10.23 | Joint and Several Liability | 143 | ||||||
| Section 10.24 | Certain Additional Rights of Lender (VCOC) | 143 | ||||||
| Section 10.25 | MERS | 144 | ||||||
-ii-
SCHEDULES
Schedule I
|
— Organizational Chart of Borrower | |
Schedule II
|
— Development Budget | |
Schedule III
|
— Plans and Specifications | |
Schedule IV
|
— Construction Schedule | |
Schedule V
|
— Rent Roll |
EXHIBITS
Exhibit A
|
Legal Description of the Land | |
Exhibit B
|
Intentionally Omitted | |
Exhibit C
|
Form of Datedown Endorsement | |
Exhibit D
|
Section 22 Affidavit | |
Exhibit E
|
Affirmation of Payment (AIA Form G706) | |
Exhibit F
|
Architect’s Certificate | |
Exhibit G
|
General Contractor’s Certificate | |
Exhibit H
|
Form of Performance Letter | |
Exhibit I
|
Anticipated Cost Report Form | |
Exhibit J
|
Form of Lien Waivers | |
Exhibit K
|
Form of Insolvency Opinion -To Be Delivered Upon Completion | |
Exhibit L
|
Form of Borrower’s Requisition | |
Exhibit M
|
Application and Certificate for Payment (AIA Form G702) |
-iii-
BUILDING LOAN AGREEMENT
THIS BUILDING LOAN AGREEMENT, dated as of December 26, 2007 (as amended, restated, replaced,
supplemented or otherwise modified from time to time, this “Agreement” or sometimes, this “Building
Loan Agreement”), is made by and between BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York
corporation, having an address at 383 Madison Avenue, New York, New York 10179 (“Lender”) and
ACADIA ATLANTIC AVENUE LLC, a Delaware limited liability company, having its principal place of
business at c/o Acadia Realty Trust, 1311 Mamaroneck Avenue — Suite 260, White Plains, New York
10605, as Borrower (“Borrower”).
WITNESSETH:
WHEREAS, Borrower desires to obtain the Building Loan (as hereinafter defined) from Lender;
and
WHEREAS, Lender is willing to make the Building Loan to Borrower, subject to and in accordance
with the terms of this Agreement and the other Loan Documents (as hereinafter defined).
NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the parties hereto hereby
covenant, agree, represent and warrant as follows:
ARTICLE 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:
“ADA” shall mean the Americans with Disabilities Act of 1992, as amended from time to time.
“Additional Insolvency Opinion” shall have the meaning set forth in Section 4.1.30(c).
“Additional Interest Reserve Deposit” shall have the meaning set forth in Section
5.1.28 hereof.
“Additional Mezzanine Borrower” shall have the meaning set forth in Section 5.2.13(g)
hereof.
“Additional Mezzanine Loan” shall have the meaning set forth in Section 5.2.13 hereof.
“Additional Mezzanine Loan Documents” shall have the meaning set forth in Section
5.2.13(f) hereof.
“Administration Fee” shall have the meaning set forth in the Administration Fee Agreement.
“Administration Fee Agreement” shall mean that certain Administration Fee Agreement dated as
of the date hereof between Borrower and Lender.
“Advance” or “Advances” shall mean any disbursement of the proceeds of the Building Loan by
Lender pursuant to the terms of this Agreement.
“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.
“Affiliated Manager” shall mean any Manager in which Borrower or Guarantor has, directly or
indirectly, any legal, beneficial or economic interest.
“Affiliate Fees” shall mean collectively, any development fee, management fee, brokerage fee,
commission, distribution, reimbursement, salary, consideration sum or amount, however
characterized, payable to any Restricted Party with respect to the Property and/or the Project.
“Affirmation of Payment” shall have the meaning as set forth in Section 2.11.5(e).
“Aggregate Debt Service Coverage Ratio” shall have the meaning set forth in Section
5.2.13 hereof.
“Agreement” shall mean this Building Loan Agreement, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“ALTA” shall mean American Land Title Association, or any successor thereto.
“Annual Budget” shall mean the operating budget, including all planned Capital Expenditures,
for the Property prepared by Borrower in accordance with Section 5.1.11.(e) hereof for the
applicable Fiscal Year or other period.
“Anticipated Costs Report” shall have the meaning as set forth in Section 2.11.5(a).
“Approved Annual Budget” shall have the meaning set forth in Section 5.1.11(e) hereof.
2
“Approved Bank” shall mean a bank or other financial institution which has a minimum long term
unsecured debt rating of at least “AA” by S&P and Fitch and “Aa2” by Moody’s.
“Architect’s Certificate” shall have the meaning as set forth in Section 2.10.10.
“Architect’s Contract” shall mean that certain Professional Services Authorization between
Borrower and Borrower’s Architect dated as of March 16 2007, as the same may be amended from time
to time in compliance with the terms hereof.
“Assignment of Contracts” shall mean that certain Assignment of Agreement Permits and
Contracts dated as of the date hereof from Borrower, as assignor, to Lender, as assignee.
“Assignment of Leases” shall mean, collectively, the Building Loan Assignment of Leases and
the Project Loan Assignment of Leases.
“Assignment of Management Agreement” shall mean that certain Assignment of Management
Agreement and Subordination of Management Fees, dated as of the date hereof, among Lender, Borrower
and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
“Award” shall mean any compensation paid by any Governmental Authority in connection with a
Condemnation in respect of all or any part of the Property.
“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary
petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b)
the filing of an involuntary petition against such Person under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law, in which such Person colludes with, or otherwise
assists such Person, or causes to be solicited petitioning creditors for any involuntary petition
against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or
joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code
or any other Federal or state bankruptcy or insolvency law; (d) such Person consenting to or
acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee,
or examiner for such Person or any portion of the Property; (e) such Person making an assignment
for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency
or inability to pay its debts as they become due.
“Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C. §101, et
seq., as the same may be amended from time to time, and any successor statute or statutes
and all rules and regulations from time to time promulgated thereunder, and any comparable foreign
laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state
bankruptcy or insolvency law.
“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together
with its successors and permitted assigns.
“Borrower’s Architect” shall mean Butz Wilbern, Ltd..
3
“Borrower’s Requisition” shall have the meaning set forth in Section 2.14.1 hereof.
“BSCMI” shall mean Bear Stearns Commercial Mortgage, Inc., a New York corporation, and its
successors in interest.
“Budget Line” shall have the meaning set forth in Section 2.1.14 hereof.
“Building Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement in
the principal amount of up to the Building Loan Amount.
“Building Loan Amount” shall mean Eleven Million, Two Hundred Twenty-Nine Thousand, Two
Hundred Sixty and 33/100 Dollars ($11,229,260.33).
“Building Loan Assignment of Leases” shall mean that certain Building Loan Assignment of
Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee.
“Building Loan Budget” shall have the meaning set forth in Section 2.1.14 hereof.
“Building Loan Costs” shall mean all Project-Related Costs (including Hard Costs and Soft
Costs) that are Costs of the Improvements.
“Building Loan Documents” shall mean, collectively, this Agreement, the Building Loan Note,
the Building Loan Mortgage, the Building Loan Assignment of Leases, as well as all other documents
now or hereafter executed and/or delivered with respect to the Building Loan.
“Building Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.2
hereof.
“Building Loan Mortgage” shall mean that certain Building Loan Mortgage, Assignment of Leases
and Rents and Security Agreement dated the date hereof, executed and delivered by Borrower to
Lender as security for the Building Loan and encumbering the Property.
“Building Loan Note” shall mean that certain Building Loan Promissory Note, dated the date
hereof, in the principal amount of up to the Building Loan Amount made by Borrower in favor of
Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which
national banks in New York, New York, or the place of business of any Servicer are not open for
business.
4
“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized
under GAAP (including expenditures for building improvements or major repairs).
“Carrying Costs” shall mean, the sum of the following costs associated with the Property for
any specified period: (a) Taxes, (b) Other Charges, (c) Insurance Premiums and (d) Operating
Expenses.
“Cash” shall mean the legal tender of the United States of America.
“Cash and Cash Equivalents” shall mean any one or a combination of the following: (i) Cash,
and (ii) U.S. Obligations, and (iii) an irrevocable standby Letter of Credit.
“Cash Management Account” shall have the meaning set forth in Section 2.7.2(a) hereof.
“Cash Management Agreement” shall mean that certain Cash Management Agreement, dated as of the
date hereof, by and among Borrower, Manager, Cash Management Bank and Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to time.
“Cash Management Bank” shall mean Wells Fargo Bank, N.A., a national banking association, or
any successor Eligible Institution acting as Agent under the Cash Management Agreement.
“Cash Management Conditions” shall have the meaning set forth in Section 2.7 hereof.
“Cash Trap Event” shall mean the occurrence of any of the following: (a) an Event of Default;
(b) any Bankruptcy Action of Borrower or Mezzanine Borrower; (c) any Bankruptcy Action of Manager;
or (d) on or after the last day of the Construction Term, a DSCR Trigger.
“Cash Trap Event Cure” shall mean:
(a) if the Cash Trap Event is caused solely by the occurrence of:
(i) clause (a) in the definition of “Cash Trap Event”, a cure of the Event of Default
which gave rise to the Cash Trap Event which is accepted or waived in writing by Lender, in its
sole discretion, prior to Lender exercising any of its rights, to accelerate the Loan, move to
appoint a receiver, or commence a foreclosure action;
(ii) clause (c) in the definition of “Cash Trap Event”, either (A) if such Cash Trap
Event is as a result of the filing of an involuntary petition against Manager and not consented to
by Manager, upon the same being discharged, stayed or dismissed within thirty (30) days of such
filing and such filing (after dismissal or discharge), provided, that such dismissal or
discharge in Lender’s reasonable opinion does not adversely impact the Loan or the Property, or
5
(B) if Borrower replaces the Manager with a Qualified Manager pursuant to a Replacement
Management Agreement approved by Lender;
(iii) a DSCR Trigger Event, if the Debt Service Coverage Ratio is greater than 1.05 to 1:00
based upon the trailing six (6) month period annualized as of two (2) consecutive Debt Service
Coverage Ratio Determination Dates occurring thereafter.
(b) provided, that, each such Cash Trap Event Cure set forth in this definition shall be
subject to the following conditions, (i) no Event of Default (other than that giving rise to the
Cash Trap Event) shall have occurred and be continuing under this Agreement or any of the other
Loan Documents, (ii) Borrower shall have notified Lender in writing of its election to cure the
respective Cash Trap Event, (iii) a Cash Trap Event Cure under clauses (a)(i) and
(a)(ii) may occur no more than 3 times during the term of the Loan, (iv) Borrower shall
have paid all of Lender’s reasonable expenses incurred in connection with such cure including,
reasonable attorney’s fees and costs; and (v) in no event shall Borrower have the right to “cure” a
Cash Trap Event occurring by reason of a Bankruptcy Action of Borrower or Mezzanine Borrower.
“Cash Trap Period” shall mean each period commencing on the occurrence of a Cash Trap Event
and continuing until the earlier of (a) the Payment Date next occurring following the related Cash
Trap Event Cure, or (b) until payment in full of all principal and interest on the Loan and all
other amounts payable under the Loan Documents in accordance with the terms and provisions of the
Loan Documents.
“Casualty” shall have the meaning set forth in Section 6.2 hereof.
“Casualty Consultant” shall have the meaning set forth in Section 6.2.4(d) hereof.
“Casualty Retainage” shall have the meaning set forth in Section 6.2.4(e) hereof.
“Clearing Account” shall have the meaning set forth in Section 2.7 hereof.
“Clearing Account Agreement” shall have the meaning set forth in Section 2.7.1 hereof.
“Clearing Bank” shall have the meaning set forth in Section 2.7 hereof.
“Closing Date” shall mean the date of this Agreement.
“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended
from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
“Completion of the Improvements” shall mean the substantial completion (i.e., completion of
the Project Improvements other than Punch List Items) of the construction and renovation of the
Project Improvements substantially in accordance with all Plans and Specifications, all Legal
Requirements, all Permitted Encumbrances and this Agreement, and that all utilities necessary to
service the Project Improvements have been connected and are in
6
operation, such completion to be evidenced to the reasonable satisfaction of Lender and the
Construction Consultant; together with the delivery to Lender of:
(i) a permanent or temporary certificate(s) of occupancy for the Project Improvements and
evidence that all other Governmental Approvals have been issued and all other Legal Requirements
have been satisfied so as to allow the Project Improvements to be used and operated in accordance
with the Loan Documents and the Plans and Specifications; and
(ii) AIA Form G704 (Certificate of Substantial Completion) completed and executed by
Borrower’s Architect certifying the substantial completion of the Project Improvements in
accordance with the Plans and Specifications.
“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the
result or in lieu or in anticipation of the exercise of the right of condemnation or eminent
domain, of all or any part of the Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting the Property or any part
thereof.
“Condemnation Proceeds” shall have the meaning set forth in Section 6.2.1 hereof.
“Construction Advance Conditions” shall have the meaning set forth in Section 2.11
hereof.
“Construction Consultant” shall mean EMG Consulting Group, or such other Person as Lender may
designate and engage as a replacement to inspect the Project Improvements and the Property as
construction progresses and consult with and to provide advice to and to render reports to Lender,
which Person may be, at Lender’s option upon notice to Borrower, either an officer or employee of
Lender or consulting architects, engineers or inspectors appointed by Lender.
“Construction Schedule” shall mean the construction schedule attached hereto as Schedule
IV, broken down by trade, of Borrower’s best good faith estimate of the dates of commencement
and completion of the Project Improvements certified by Borrower to Lender in final form approved
by Lender and the Construction Consultant prior to the Closing.
“Construction Term” shall mean the period commencing on the date hereof and ending on the
first to occur of (i) the Maturity Date, whether by acceleration or otherwise, (ii) the
24th Payment Date, and (iii) the Final Advance.
“Contingency” shall mean the contingency Line Item in the Building Loan Budget and/or Project
Loan Budget.
“Contract” shall mean shall mean any agreement (including the General Contractor’s Agreement)
entered into by Borrower or by General Contractor, in which the Contractor or Subcontractor
thereunder agrees to provide services, labor and/or materials in connection with the Project
Improvements. All Contracts shall require that the Contractor or Subcontractor thereunder use
union labor.
7
“Contractor” shall mean any contractor hired by Borrower, including, without limitation, the
General Contractor (including subsidiaries and affiliates), supplying services, labor and/or
materials in connection with the Project.
“Control” shall mean the possession, directly or indirectly, of the power to direct or cause
the direction of management, policies or activities of a Person, whether through ownership of
voting securities, by contract or otherwise. “Controlled” and “Controlling” shall have correlative
meanings.
“Costs of the Improvement” shall mean those items defined as an “improvement” and/or a “cost
of improvement” under Section 2 of Article 1 the Lien Law.
“Covered Disclosure Information” shall have the meaning set forth in Section 9.2(b)
hereof.
“Debt” shall mean the outstanding principal amount of the Building Loan set forth in, and
evidenced by, this Agreement, the Building Loan Documents and the Building Loan Note, together with
all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Building
Loan under the Building Loan Note, this Agreement, the Building Loan Mortgage or any other Building
Loan Document.
“Debt Service” shall mean, with respect to any particular period of time, the aggregate
scheduled principal and interest payments due under this Building Loan Agreement and the Building
Loan Note.
“Debt Service Coverage Ratio” shall mean a ratio for the applicable period in which:
| (a) | the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, adjusted for a vacancy rate equal to the greater of the actual vacancy rate, the market vacancy rate and an assumed vacancy rate equal to five percent (5%), without deduction for (i) actual management fees incurred in connection with the operation of the Property less (A) management fees equal to the greater of (1) assumed management fees of six percent (6%) of Gross Income from Operations or (2) the actual management fees incurred, and (B) Replacement Reserve Fund contributions equal to $16,500.00 per annum; and | ||
| (b) | the denominator is the Total Debt Service for such period assuming a thirty (30) year amortization schedule. |
“Debt Service Coverage Ratio Determination Date” shall mean the earlier of the Required
Completion Date and the date of the Final Advance and the first day of each calendar month
thereafter.
8
“Default” shall mean the occurrence of any event hereunder or under any other Loan Document
which, but for the giving of notice or passage of time, or both, would be an Event of Default.
“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of
(a) the maximum rate permitted by applicable law or (b) five percent (5%) above the Interest Rate.
“Defeasance Date” shall have the meaning set forth in Section 2.5.1(a)(i) hereof.
“Defeasance Deposit” shall mean an amount equal to the remaining principal amount of the Note,
the Defeasance Payment Amount, any costs and expenses incurred or to be incurred in the purchase of
U.S. Obligations necessary to meet the Scheduled Defeasance Payments and any revenue, documentary
stamp or intangible taxes or any other tax or charge due in connection with the transfer of the
Note or otherwise required to accomplish the agreements of Section 2.5 hereof (including,
without limitation, any fees and expenses of accountants, attorneys and the Rating Agencies
incurred in connection therewith).
“Defeasance Event” shall have the meaning set forth in Section 2.5.1(a) hereof.
“Defeasance Expiration Date” shall mean the date that is two (2) years from the “startup day”
within the meaning of Section 860G(a)(9) of the Code for the REMIC Trust.
“Defeasance Payment Amount” shall mean the amount (if any) which, when added to the remaining
principal amount of the Note, will be sufficient to purchase U.S. Obligations providing the
required Scheduled Defeasance Payments.
“Deferred Maintenance Condition” shall have the meaning set forth in Section 7.4.1.
“Development Budget” shall have the meaning set forth in Section 2.1.14 hereof.
“Disbursement Schedule” shall mean the schedule of the amounts of Advances hereunder and
Project Loan Advances under the Project Loan anticipated to be requisitioned by Borrower each month
during the term of the Loan, attached hereto as part of the Development Budget and in final form
approved by Lender and the Construction Consultant prior to the Closing Date.
“Disclosure Document” shall mean a prospectus, prospectus supplement, private placement
memorandum, or similar offering memorandum or offering circular, or such other information
reasonably requested by Lender, in each case in preliminary or final form, used to offer Securities
in connection with a Securitization.
“Dollars” or “$” shall mean lawful money of the United States of America.
“Draw Request” shall mean, with respect to each Advance, Borrower’s Requisition for such
Advance, along with such other documents required by this Agreement to be furnished to Lender as a
condition to such Advance.
9
“DSCR Trigger Event” shall mean, that as of any Debt Service Coverage Ratio Determination
Date, the Debt Service Coverage Ratio as determined by Lender based on the trailing six (6) month
period (annualized) immediately preceding the date of such determination is less than 1.00 to 1.0.
“Earn Out Advance” shall have the meaning set forth in Section 2.12.2 hereof.
“Eligible Account” shall mean a separate and identifiable account from all other funds held by
the holding institution that is either (a) an account or accounts maintained with a federal or
state-chartered depository institution or trust company which complies with the definition of
Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or
state chartered depository institution or trust company acting in its fiduciary capacity which, in
the case of a state chartered depository institution or trust company, is subject to regulations
substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus
of at least Fifty Million and 00/100 Dollars ($50,000,000.00) and subject to supervision or
examination by federal and state authority. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.
“Eligible Institution” shall mean a depository institution or trust company, the short term
unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by
Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or
less (or, in the case of accounts in which funds are held for more than thirty (30) days, the
long-term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by
Moody’s).
“Embargoed Person” shall have the meaning set forth in Section 5.1.42 hereof.
“Environmental Engineer” shall mean such environmental engineering or similar inspection firms
approved by Lender.
“Environmental Indemnity” shall mean that certain Environmental Indemnification Agreement,
dated as of the date hereof, executed by Borrower and Acadia Strategic Opportunity Fund II, LLC in
connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Equipment” shall have the meaning as set forth in the granting clause of the Building Loan
Mortgage.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations promulgated and the rulings issued thereunder.
“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.
“Excess Cash Flow” shall have the meaning set forth in Section 3.4(i) of the Cash Management
Agreement.
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“Excess Cash Flow Funds” shall have the meaning set forth in Section 7.6 hereof.
“Excess Cash Flow Reserve” shall have the meaning set forth in Section 7.6 hereof.
“Exchange Act” shall have the meaning set forth in Section 9.2(a) hereof.
“Extraordinary Expense” shall have the meaning set forth in Section 5.1.11(f) hereof.
“Final Advance” shall have the meaning set forth in Section 2.12.1.
“Final Project Loan Advance” shall mean the Final Advance as defined in the Project Loan
Agreement.
“Final Project Report” shall mean the report to be prepared by the Construction Consultant of
its review of the Development Budget, Building Loan Budget, Project Loan Budget, the Plans and
Specifications, the Construction Schedule in final form, the Disbursement Schedule, all in final
form, the General Contractor’s Agreement, the Contracts, the Major Contracts and such other
documents and information reasonably required by the Construction Consultant.
“FIRREA” shall mean the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on
December 31 during each year of the term of the Loan.
“Fitch” shall mean Fitch, Inc.
“Fixtures” shall have the meaning set forth in the Mortgage.
“Force Majeure” shall mean, with respect to the obligations of any Person, actual delay beyond
the reasonable control of such Person, which is due to any of the following (a) natural disaster,
fire or other casualty, earthquake, flood, explosion, abnormally inclement weather for the season
in question (as reported by an appropriate authority) or any other act of God, (b) declared or
undeclared war, acts of domestic or international terrorism, riot, mob violence, insurrection or
sabotage, (c) the inability to procure labor, equipment, facilities, energy, materials or supplies,
the failure of transportation, any other labor disturbance, strikes, lockouts or actions of labor
unions, in each such case, so long as such cause is not within the reasonable control of such
Person, (d) condemnation, temporary restraining orders or injunctions, changes after the date
hereof in the requirements or interpretations of relevant laws, in each such case, so long as such
cause is not within the reasonable control of such Person, or (e) any other cause not within the
reasonable control of such Person; provided that, with respect to any of the circumstances
described in the foregoing clauses (a) through (e) inclusive: (i) for the purposes
of this Agreement, any period of Force Majeure shall apply only to such person’s performance of
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the obligations necessarily affected by such circumstance and shall continue only so long as
such person is continuously and diligently using all reasonable efforts to minimize the effect and
duration thereof; and (ii) notwithstanding the foregoing, Force Majeure shall not include (A) the
unavailability or insufficiency of funds as a result of the insolvency of such Person or any of its
Affiliates, (B) any breach of contract or default by Borrower’s Architect, the General Contractor
or any Major Contractor under their respective contracts and agreements concerning the Project
Improvements.
“GAAP” shall mean generally accepted accounting principles in the United States of America as
of the date of the applicable financial report.
“General Contractor” shall mean Designline Construction Services, Inc. or any other general
contractor or construction manager, as applicable, approved by Lender and the Construction
Consultant in accordance with the terms of this Agreement.
“General Contractor’s Agreement” shall have the meaning set forth in Section 2.10.9.
“General Contractor’s Certificate” shall have the meaning set forth in Section
2.10.10.
“Governmental Approvals” shall mean all approvals, consents, waivers, orders, acknowledgments,
authorizations, permits and licenses required under applicable Legal Requirements to be obtained
from any Governmental Authority for the performance of the demolition work and construction of the
Project Improvements and/or the use, occupancy and operation of the Project Improvements before the
commencement, during and following completion of construction and Building Loan, as the context
requires, including, without limitation, all land use, building, subdivision, zoning and similar
ordinances and regulations promulgated by any Governmental Authority.
“Governmental Authority” shall mean any court, board, agency, commission, office or other
authority of any nature whatsoever for any governmental unit (foreign, federal, state, county,
district, municipal, city or otherwise) whether now or hereafter in existence.
“Gross Income from Operations” shall mean, for any period, all sustainable income, computed in
accordance with GAAP, derived from the ownership and operation of the Property from whatever source
during such period, including, but not limited to, Rents from tenants in occupancy, open
for business and paying full contractual rent without right of offset or credit, utility charges,
escalations, forfeited security deposits, interest on credit accounts, service fees or charges,
license fees, parking fees, rent concessions or credits, business interruption or other loss of
income or rental insurance proceeds or other required pass-throughs and interest on Reserves, if
any, but excluding Rents from tenants that are included in any Bankruptcy Action, sales,
use and occupancy or other taxes on receipts required to be accounted for by Borrower to any
Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and
equipment, Insurance Proceeds (other than business interruption or other loss of income or rental
insurance), Awards, unforfeited security deposits, utility and other similar deposits and any
disbursements to Borrower from the Reserve Funds, if any.
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“Guarantor” shall mean, collectively, Acadia Strategic Opportunity Fund II, LLC, a Delaware
limited liability company, and Post Management, L.L.C., a Delaware limited liability company.
“Guaranty of Completion” shall mean that certain Guaranty of Completion, dated as of the date
hereof, executed and delivered by Acadia Strategic Opportunity Fund II, LLC in connection with the
Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
“Guaranty of Recourse Carveouts” shall mean that certain Guaranty of Recourse Carveouts, dated
as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for
the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Hard Costs” shall mean those Building Loan Costs which are for labor, materials, equipment
and fixtures.
“Improvements” shall have the meaning set forth in the granting clause of the Mortgage
“Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such
date of (a) all indebtedness or liability of such Person (including, without limitation, amounts
for borrowed money and indebtedness in the form of mezzanine debt or preferred equity); (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations
for the deferred purchase price of property or services (including trade obligations); (d)
obligations under letters of credit; (e) obligations under acceptance facilities; (f) all
guaranties, endorsements (other than for collection or deposit in the ordinary course of business)
and other contingent obligations to purchase, to provide funds for payment, to supply funds, to
invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations
secured by any Liens, whether or not the obligations have been assumed (other than the Permitted
Encumbrances).
“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(a) hereof.
“Indemnified Persons” shall have the meaning set forth in Section 9.2(b) hereof.
“Indemnifying Person” shall mean Borrower and Guarantor.
“Independent Director” shall mean a director of a corporation or a limited liability company
that is a Special Purpose Entity and “Independent Manager” shall mean a manager of a limited
liability company that is a Special Purpose Entity, in either case, who is not at the time of
initial appointment, or at any time while serving as an Independent Director or Independent
Manager, as applicable, and has not been at any time during the preceding five (5) years: (a) a
stockholder, director (with the exception of serving as the Independent Director or Independent
Manager of a Special Purpose Entity), officer, employee, partner, member, attorney or counsel of
Guarantor, Borrower, or any Affiliate of any of them (unless such natural person is an Independent
Director or Independent Manager provided by a nationally recognized company
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that provides professional independent managers and which also provides other corporate
services in the ordinary course of business, in which case such Person may receive reasonable fees
for servicing as Independent Director or Independent Manager of a Special Purpose Entity); (b) a
creditor, customer, supplier or other Person who derives any of its purchases or revenues from its
activities with Guarantor, Borrower or any Affiliate of any of them; (c) a Person controlling or
under common control with any such stockholder, director, officer, employee, partner, member,
creditor, customer, supplier or other Person; or (d) a member of the immediate family of any such
stockholder, director, officer, employee, partner, member, creditor, customer, supplier or other
person. As used in this definition, the term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of management, policies or activities of
a Person, whether through ownership of voting securities, by contract or otherwise.
“Initial Advance” shall have the meaning set forth in Section 2.10 hereof.
“Initial Advance Conditions” shall have the meaning set forth in Section 2.10 hereof.
“Initial Interest Reserve Deposit” shall have the meaning set forth in Section 7.2.1.
“Initial Tax and Insurance Escrow Deposit” shall have the meaning set forth in Section
7.1 hereof.
“Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated the date
hereof delivered by Wachtel & Masyr, LLP in connection with the Loan.
“Insurance Premiums” shall have the meaning set forth in Section 6.1.1(e) hereof.
“Insurance Proceeds” shall have the meaning set forth in Section 6.2.1.
“Intellectual Property” shall have the meaning set forth in Section 4.1.43 hereof.
“Interest Period” shall mean: (a) the period commencing on the Closing Date and ending on
the last day of the month in which the Closing Date occurs, both dates inclusive; and (b) the
period commencing on and including the first day of each calendar month thereafter during the term
of Loan and ending and including the last day of such calendar month.
“Interest Rate” shall mean seven and one hundred forty-four one-thousandths percent (7.144%),
provided, however, in the event that on or before January 1, 2011, the Property shall have achieved
a Debt Service Coverage Ratio as determined by Lender of 1.15 to 1.0 using a debt service constant
of 7.50%, and Borrower delivers to Lender a MAI appraisal performed, at Borrower’s sole cost and
expense, by an appraiser approved by Lender and dated, or updated, to a date within 30 days of such
date made in compliance with FIRREA and reasonably satisfactory to Lender in all respects; the
appraisal value shall be subject to review and confirmation and updating as to valuation by
Lender’s internal appraisal staff, whose decision shall be final absent manifest error showing that
loan-to-value ratio for the Property is no greater than 75% assuming a fully advanced Loan, Lender
shall, upon Borrower’s written
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request, reduce the Interest Rate to a per annum rate equal to five and seven hundred
ninety-four one-thousandths percent (5.794%), commencing on the first Payment Date after Borrower’s
request. Any reduction in the Interest Rate as set forth above shall be effective commencing on
the first Payment Date after Borrower’s request for such reduction and satisfaction of the
conditions set forth above and no reduction in the Interest Rate shall be retroactive. In the
event that Borrower fails to satisfy the conditions for a reduction of the Interest Rate within the
time periods set forth above, time being of the essence, Borrower shall have no further right to
obtain a reduction in the Interest Rate. Notwithstanding anything to the contrary contained
herein, Lender shall have the right, in its sole discretion, at any time after the expiration of
the Construction Term and prior to a Securitization of the Loan, to increase the Interest Rate by
up to two-tenths of one percent (0.20%).
“Interest Reserve Account” shall have the meaning set forth in Section 7.2.1.
“Interest Reserve Deposit” shall have the meaning set forth in Section 7.2.1.
“Interest Reserve Fund” shall have the meaning set forth in Section 7.2.1.
“Interest Reserve Line Item” shall mean the interest reserve Line Item of the Project Loan
Budget.
“Land” shall mean the land described on Exhibit “A” attached hereto.
“Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any
Person is granted a possessory interest in, or right to use or occupy all or any portion of any
space in the Property, and every modification, amendment or other agreement relating to such lease,
sublease, subsublease, or other agreement entered into in connection with such lease, sublease,
subsublease, or other agreement and every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the other party thereto.
“Legal Requirements” shall mean, all federal, state, county, municipal and other governmental
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting the 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 the Property or any part thereof, including,
without limitation, any which may (a) require repairs, modifications or alterations in or to the
Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.
“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with
its successors and assigns.
“Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean sight draft
letter of credit, as the same may be replaced, split, substituted, modified, amended,
15
supplemented, assigned or otherwise restated from time to time, (either an evergreen letter of
credit or a letter of credit which does not expire until at least two (2) Business Days after the
Maturity Date or such earlier date as such Letter of Credit is no longer required pursuant to the
terms of this Agreement) in favor of Lender and entitling Lender to draw thereon based solely on a
statement purportedly executed by an officer of Lender stating that it has the right to draw
thereon, and issued by a domestic Approved Bank or the U.S. agency or branch of a foreign Approved
Bank, or if there are no domestic Approved Banks or U.S. agencies or branches of a foreign Approved
Bank then issuing letters of credit, then such letter of credit may be issued by a domestic bank,
the long term unsecured debt rating of which is the highest such rating then given by the Rating
Agency or Rating Agencies, as applicable, to a domestic commercial bank.
“Liabilities” shall have the meaning set forth in Section 9.2(b) hereof.
“Lien” shall mean, any mortgage, deed of trust, lien, pledge, hypothecation, assignment,
security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, the
Property, any portion thereof or any interest therein, including, without limitation, any
conditional sale or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing statement, and
mechanic’s, materialmen’s and other similar liens and encumbrances.
“Lien Law” shall mean the Lien Law of the State of New York.
“Line Item” shall have the meaning set forth in Section 2.1.14 hereof.
“Liquidity” means unrestricted and unencumbered Cash and Cash Equivalents acceptable to
Lender.
“Loan” shall mean collectively, the Building Loan and the Project Loan.
“Loan Agreement” shall mean collectively, this Building Loan Agreement, and the Project Loan
Agreement.
“Loan Documents” shall mean collectively, the Building Loan Documents and the Project Loan
Documents, the Environmental Indemnity, the Guaranty of Completion, the Guaranty of Recourse
Carveouts, the Cash Management Agreement, the Clearing Account Agreement, the Assignment of
Contracts, the Administration Fee Agreement, the Rate Lock Agreement, and all other documents
executed and/or delivered in connection with the Loan.
“Loan-to-Cost Ratio” shall mean, as of any date, the ratio of (i) the Total Loan Amount to
(ii) the aggregate amount of Project-Related Costs (excluding any Affiliate Fees) actually paid as
of such date plus Project-Related Costs to be paid with the proceeds of the Advance(s)
being requested by Borrower on such date hereunder and under the Project Loan Agreement.
“Major Contractor” shall mean any contractor hired by Borrower, including, without limitation,
the General Contractor (including subsidiaries and affiliates), supplying services, labor and/or
materials in connection with the Project which is for an aggregate contract price equal to or
greater than $500,000, whether pursuant to one contract or agreement or
16
multiple contracts or agreements, after taking into account all change orders, or which
relates to major project elements such as steel, concrete, HVAC systems, windows, doors and other
similar items.
“Major Contracts” shall mean any Contract with a Major Contractor or Major Subcontractor.
“Major Subcontractor” shall mean any subcontractor supplying services, labor and/or materials
in connection with the Project which is for an aggregate contract price equal to or greater than
$500,000, whether pursuant to one contract or agreement or multiple contracts or agreements, after
taking into account all change orders, or which relates major project elements such as steel,
concrete, HVAC systems, windows, doors and other similar items.
“Management Agreement” shall mean the Management Agreement dated as of October 23, 2007 by and
between Borrower and Manager pursuant to which Manager is to provide management and other services
with respect to the Property, or, if the context requires, the Replacement Management Agreement.
“Manager” shall mean Post Management, L.L.C., a Delaware limited liability company, or, if the
context requires, a Qualified Manager who is managing the Property in accordance with the terms and
provisions of this Agreement pursuant to a Replacement Management Agreement.
“Material Action” means, with respect to any Person, to file any insolvency or reorganization
case or proceeding, to institute proceedings to have such Person be adjudicated bankrupt or
insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under
any law relating to relief from debts or the protection of debtors, to consent to the filing or
institution of bankruptcy or insolvency proceedings against such Person, to file a petition
seeking, or consent to, reorganization or relief with respect to such Person under any applicable
federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or
for such Person or a substantial part of its property, to make any assignment for the benefit of
creditors of such Person, to admit in writing such Person’s inability to pay its debts generally as
they become due, or to take action in furtherance of any of the foregoing.
“Maturity Date” shall mean January 1, 2020 or such earlier date on which the final payment of
principal of the Building Loan Note becomes due and payable as therein or herein provided, whether
at such stated maturity date, by declaration of acceleration, or otherwise.
“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any
time or from time to time may be contracted for, taken, reserved, charged or received on the
indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under
the laws of such state or states whose laws are held by any court of competent jurisdiction to
govern the interest rate provisions of the Loan.
“MERS” shall have the meaning set forth in Section 10.25 hereof.
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“Mezzanine Borrower” shall have the meaning set forth in Section 9.1.
“Mezzanine Loan Documents” shall have the meaning set forth in Section 9.1.
“Monthly Debt Service Payment Amount” shall mean (a) an amount equal to interest only on the
outstanding principal balance of the Building Loan, calculated in accordance with Section
2.2 hereof, for each Payment Date commencing with the Payment Date occurring in February, 2008
through and including the Payment Date occurring in January, 2015, and (b) a constant monthly
payment of $75,797.67 commencing with the Payment Date occurring in February, 2015 and on each
Payment Date thereafter, provided, however, that in the event that the Interest Rate is modified in
accordance with the provisions of the definition of “Interest Rate,” the Monthly Debt Service
Payment Amount shall be adjusted by Lender based upon the modified Interest Rate and a thirty (30)
year amortization schedule, Lender’s determination of the Monthly Debt Service Payment Amount being
binding absent manifest error.
“Moody’s” shall mean Moody’s Investors Service, Inc.
“Mortgage” shall mean, collectively, the Building Loan Mortgage and the Project Loan Mortgage,
as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Net Cash Flow” shall mean, for any period, the amount obtained by subtracting Operating
Expenses and Capital Expenditures for such period from Gross Income from Operations for such
period.
“Net Operating Income” shall mean the amount obtained by subtracting Operating Expenses from
Gross Income from Operations.
“Net Proceeds” shall have the meaning set forth in Section 6.2.1 hereof.
“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.2.4(g) hereof.
“Net Worth” means with respect to any Person for any period, assets less liabilities of such
Person, determined in accordance with GAAP.
“Note” shall mean, collectively, the Building Loan Note and the Project Loan Note.
“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower that is
signed by an authorized officer of the general partner or managing member of Borrower.
“Open Period Date” shall have the meaning set forth in Section 2.4.1 hereof.
“Operating Expenses” shall mean the total of all expenditures, computed in accordance with
GAAP, of whatever kind relating to the operation, maintenance and management of the Property that
are incurred on a regular monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance, license fees,
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property taxes and assessments, advertising expenses, management fees, payroll and related
taxes, computer processing charges, operational equipment or other lease payments as approved by
Lender, and other similar costs, but excluding depreciation, Debt Service, Capital Expenditures and
contributions to the Reserve Funds.
“Operating Reserve Account” shall have the meaning set forth in Section 7.7.1 hereof.
“Operating Reserve Deposit” shall have the meaning set forth in Section 7.7.1 hereof.
“Operating Reserve Funds” shall have the meaning set forth in Section 7.7.1 hereof.
“Other Charges” shall mean all 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 Property, now or hereafter levied or assessed or imposed
against the Property or any part thereof.
“Other Debt” shall mean the “Debt” as defined in both the Project Loan Agreement, and the
Mezzanine Loan Documents, if applicable.
“Other Design Professionals” shall mean all architects (other than Borrower’s Architect) and
engineers engaged by Borrower and/or Borrower’s agent to work on the Project Improvements.
“Other Obligations” shall have the meaning as set forth in the Mortgage.
“Payment Date” shall mean February 1, 2008, and the 1st day of every month
thereafter during the term of the Loan until and including the Maturity Date or, if such day is not
a Business Day, the immediately preceding Business Day.
“Performance Letter” shall have the meaning set forth in Section 2.10.11(a) hereof.
“Permitted Encumbrances” shall mean, with respect to the 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 Policy, (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent, unless and to the extent being contested by Borrower in
compliance with the terms of this Agreement, and (d) such other title and survey exceptions as
Lender has approved or may approve in writing in Lender’s sole discretion, which Permitted
Encumbrances in the aggregate do not materially adversely affect the value or use of the Property
or Borrower’s ability to complete the Project or repay the Loan.
“Permitted Investments” shall have the meaning set forth in the Cash Management Agreement.
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“Permitted Mezzanine Lender” shall have the meaning set forth in Section 5.2.13
hereof.
“Permitted Release Date” shall mean the earlier of (i) the Defeasance Expiration Date or (ii)
the date that is the third (3rd) anniversary of the Completion of the Improvements.
“Permitted Transfer” means any of the following:
(a) any transfer, directly as a result of the death of a natural Person, of stock, membership
interests, partnership interests or other ownership interests in any Restricted Party previously
held by the decedent in question to the spouse or any lineal descendant of such individual, or to a
trust for the benefit of any one or more of such individual, spouse or lineal descendant, so long
as Borrower delivers notice to Lender as soon as practicable thereafter and that such Restricted
Party is promptly reconstituted, if applicable, following the death of such member, partner or
shareholder and there is no change in Control of such Restricted Party as a result of such
transfer;
(b) any transfer, directly as a result of the legal incapacity of a natural Person, of stock,
membership interests, partnership interests or other ownership interests previously held by the
such natural Person to the spouse or any lineal descendant of such individual, or to a trust for
the benefit of any one or more of such individual, spouse or lineal descendant, so long as Borrower
delivers notice to Lender as soon as practicable thereafter and that such Restricted Party is
promptly reconstituted, if applicable, following the death of such member, partner or shareholder
and there is no change in Control of such Restricted Party as a result of such transfer,
(c) transfers for estate planning purposes of a natural Person’s stock, membership interests,
partnership interests or other ownership interests in a Restricted Party by the current partner(s),
shareholder(s) or member(s), as applicable, to the spouse or any lineal descendant of such
individual, or to a trust for the benefit of any one or more of such individual, spouse or lineal
descendant, so long as such Restricted Party is reconstituted, if required, following such transfer
and there is no change in Control of such Restricted Party as a result of such transfer;
(d) transfers permitted pursuant to Section 5.2.10(d) of this Agreement;
(e) the sale, transfer, or issuance of stock in Acadia Realty Trust, in the ordinary course
of business, provided such stock is listed on the NYSE or other nationally recognized stock
exchange; and
(f) a Transfer by Slayton Properties Atlantic, LLC of 100% of its membership interest in
Borrower to Acadia 3319 Atlantic Avenue LLC or an Affiliate of Acadia Strategic Opportunity Fund
II, LLC Controlled by Acadia Realty Trust.
“Person” shall mean any individual, corporation, partnership, joint venture, limited liability
company, estate, trust, unincorporated association, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.
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“Personal Property” shall have the meaning set forth in the granting clause of the Mortgage.
“Physical Conditions Report” shall mean, a structural engineering report prepared by a company
satisfactory to Lender regarding the physical condition of the Property, satisfactory in form and
substance to Lender in its sole discretion, which report shall, among other things, confirm that
the Property and its use complies, in all material respects, with all applicable Legal Requirements
(including, without limitation, zoning, subdivision and building laws).
“Plans and Specifications” shall mean the final plans and specifications for the performance
of the Project Improvements prepared by Borrower’s Architect and the Other Design Professionals and
approved by Lender, the Construction Consultant, as the same may be amended and supplemented from
time to time in accordance with the terms of this Agreement. The Preliminary Plans and
Specifications submitted to Lender are listed on Schedule III attached hereto
“Policies” shall have the meaning specified in Section 6.1.1(e) hereof.
“Policy” shall have the meaning specified in Section 6.1.1(e) hereof.
“Prepayment Date” shall have the meaning set forth in Section 2.4.4 hereof.
“Prepayment Rate” shall mean the bond equivalent yield (in the secondary market) on the United
States Treasury Security that as of the Prepayment Rate Determination Date has a remaining term to
maturity closest to, but not exceeding, the remaining term to the Maturity Date as most recently
published in the “Treasury Bonds, Notes and Bills” section in The Wall Street Journal as of such
Prepayment Rate Determination Date. If more than one issue of United States Treasury Securities
has the same remaining term to the Maturity Date, the “Prepayment Rate” shall be the yield on such
United States Treasury Security most recently issued as of the Prepayment Rate Determination Date.
The rate so published shall control absent manifest error. If the publication of the Prepayment
Rate in The Wall Street Journal is discontinued, Lender shall determine the Prepayment Rate on the
basis of “Statistical Release H.15 (519), Selected Interest Rates,” or any successor publication,
published by the Board of Governors of the Federal Reserve System, or on the basis of such other
publication or statistical guide as Lender may reasonably select.
“Prepayment Rate Determination Date” shall mean the date which is five (5) Business Days prior
to the date that such prepayment shall be applied in accordance with the terms and provisions of
Section 2.4.1 hereof.
“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power
Act, 50 U.S.C. §1701 et. seq. and (d) all other Legal Requirements relating to money laundering or
terrorism.
21
“Principal” shall mean the Special Purpose Entity that is the general partner of Borrower, if
Borrower is a limited partnership, or member of Borrower, if Borrower is a limited liability
company.
“Proceeds” shall mean Insurance Proceeds or Condemnation Proceeds.
“Project” shall mean the development and construction of Project Improvements, all in
accordance with the Plans and Specifications, all Legal Requirements, this Agreement and the other
Loan Documents.
“Project Improvements” shall mean the demolition of all existing improvements located on the
Land and the development and construction thereon by Borrower of a modern self-storage facility
containing approximately 110,000 square feet of floor area, substantially as depicted on the Plans
and Specifications, as the same will be developed, renovated and constructed in accordance with the
Plans and Specifications and all Legal Requirements.
“Project Loan” shall mean the loan being made by Lender to Borrower pursuant to the Project
Loan Agreement in the principal amount of up to the Project Loan Amount.
“Project Loan Advance” shall mean “Advance” as such term is defined in the Project Loan
Agreement.
“Project Loan Agreement” shall mean that certain Project Loan Agreement dated the date hereof
among, Lender and Borrower.
“Project Loan Amount” shall mean Four Million, Nine Hundred Twenty Thousand, Seven Hundred
Thirty-Nine and 67/100 Dollars ($4,920,739.67).
“Project Loan Assignment of Leases” shall mean that certain Project Loan Assignment of Leases
and Rents, dated the date hereof, from Borrower, as assignor, to Lender, as assignee.
“Project Loan Budget” shall have the meaning set forth in Section 2.1.14.
“Project Loan Costs” shall mean all Projected Related Costs that are not Costs of the
Improvements.
“Project Loan Documents” shall have the meaning as set forth in the Project Loan Agreement.
“Project Loan Earn Out Advance” shall have the meaning set forth in Section 2.12.1
hereof.
“Project Loan Mortgage” shall have the meaning as set forth in the Project Loan Agreement.
“Project Loan Note” shall have the meaning as set forth in the Project Loan Agreement.
22
“Project-Related Costs” shall mean all direct and indirect costs and expenses of acquiring the
Property, demolishing the existing improvements on the Property, designing, inspecting, renovating,
constructing and developing the Project Improvements, including, without limitation, Hard Costs and
Soft Costs, along with all Carrying Costs, Debt Service, financing charges, Operating Expense and
other costs and expenses associated with the Property during the Construction Term.
“Property” shall mean the Land, all Improvements now or hereafter located thereon, the
easements and other rights, licenses and privileges and appurtenance to the Land, and all personal
property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to
such property and Improvements, as more particularly described in the granting clauses of the
Mortgage and referred to therein as the “Mortgaged Property”.
“Provided Information” shall mean any and all financial and other information provided at any
time prepared by, or on behalf of, any Indemnifying Person with respect to the Property, Borrower,
Principal, Guarantor and/or Manager, including, without limitation, any financial data or financial
statements required under Section 5.1.11.
“Punch List and Deferred Maintenance Reserve Deposit” shall have the meaning set forth in
Section 7.4.1.
“Punch List and Deferred Maintenance Reserve Funds” shall have the meaning set forth in
Section 7.4.1.
“Punch List Items” shall mean, collectively, any Punch List items identified by the
Construction Consultant and other minor or insubstantial details of construction, decoration,
mechanical adjustment or installation, which do not hinder or impede the use, operation, or
maintenance of the Property or the ability to obtain a permanent certificate of occupancy with
respect thereto.
“Qualified Manager” shall mean in the reasonable judgment of Lender, a reputable and
experienced management organization (which may be an Affiliate of Borrower) possessing experience
in managing properties similar in size, scope, use and value as the Property, provided, that
Borrower shall have obtained (i) prior written confirmation from the applicable Rating Agencies
that management of the Property by such Person will not cause a downgrade, withdrawal or
qualification of the then current ratings of the Securities or any class thereof and (ii) if such
Person is an Affiliate of Borrower, an Additional Insolvency Opinion.
“Rate Lock Agreement” shall mean that certain Extended Rate Lock Agreement-Application Stage
dated April 23, 2007 between Borrower and Lender, as amended by that certain First Amendment to
Extended Rate Lock Agreement-Application Stage dated as of the date hereof.
“Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally
recognized statistical rating agency which has been approved by Lender.
“Related Entities” shall have the meaning set forth in Section 5.2.10(e).
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“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code that holds any portion of the Note.
“Rentable Space Percentage” shall have the meaning set forth in Section 6.2.4(a)
(B)(iii).
“Rents” shall mean, all rents (including percentage rents), rent equivalents, moneys payable
as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all
oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, all other amounts payable as rent under any Lease
or other agreement relating to the Property, including, without limitation, charges for
electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy,
telecommunication, telephone, utility or similar items or time use charges, HVAC equipment charges,
sprinkler charges, escalation charges, license fees, maintenance fees, charges for Taxes, Operating
Expenses or other reimbursables payable to Borrower (or to the Manager, for the account of
Borrower) under any Lease, and other consideration of whatever form or nature received by or paid
to or for the account of or benefit of Borrower or its agents or employees from any and all sources
arising from or attributable to the Property, and proceeds, if any, from business interruption or
other loss of income or insurance.
“Replacements” shall have the meaning set forth in Section 7.3.1.
“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management
agreement with a Qualified Manager substantially in the same form and substance as the Management
Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement
shall be reasonably acceptable to Lender in form and substance, provided, with respect to this
subclause (ii), Lender, at its option, may require that Borrower shall have obtained prior
written confirmation from the applicable Rating Agencies that such management agreement will not
cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any
class thereof and (b) an assignment of management agreement and subordination of management fees
substantially in the form then used by Lender (or of such other form and substance reasonably
acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at
Borrower’s expense.
“Replacement Reserve Account” shall have the meaning set forth in Section 7.3.1.
“Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1.
“Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section
7.3.1.
“Requested Advance Date” shall have the meaning set forth in Section 2.14.2(a).
hereof.
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“Required Completion Date” shall mean June 1, 2009, provided, however, that the Required
Completion Date may be extended by Lender to December 1, 2009 in Lender’s sole discretion.
“Required Equity Funds” shall have the meaning set forth in Section 2.11.13.
“Required Initial Advance Date” shall mean March 21, 2008, provided that Lender shall have the
right to extend the Required Initial Advance Date in Lender’s sole discretion.
“Required Ratios at Completion” shall have the meaning set forth in Section 2.12(j)
hereof.
“Reserve” or “Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the
Interest Reserve Funds, the Excess Cash Flow Reserve Funds, the Replacement Reserve Fund, the Punch
List and Deferred Maintenance Fund, the Operating Reserve Fund and any other escrow fund
established by the Loan Documents.
“Restoration” shall mean the repair and restoration of the Property after a Casualty or
Condemnation to substantially the condition the Property was in immediately prior to such Casualty
or Condemnation, with such alterations as may be reasonably approved by Lender.
“Restoration Threshold” shall have the meaning set forth in Section 6.2.3(a) hereof.
“Restricted Party” shall mean collectively, (a) Borrower, any Guarantor, and any Affiliated
Manager and (b) any shareholder, partner, member, non-member manager, any direct or indirect legal
or beneficial owner of, Borrower, any Guarantor, any Affiliated Manager or any non-member manager.
“Retainage” shall mean, for each Contract and Subcontract, the greater of (a) ten percent
(10%) of all costs funded to the Contractor or Subcontractor under the Contract or Subcontract, or
(b) the actual retainage required under such Contract or Subcontract.
“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.
“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer,
encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial
interest, whether direct or indirect.
“Scheduled Defeasance Payments” shall have the meaning set forth in Section 2.5.1(b)
“Second Tax and Insurance Escrow Deposit” shall have the meaning set forth in Section
7.1 hereof.
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“Securities” shall have the meaning set forth in Section 9.1 hereof.
“Securities Act” shall have the meaning set forth in Section 9.2(a) hereof.
“Securitization” shall have the meaning set forth in Section 9.1 hereof.
“Servicer” shall have the meaning set forth in Section 9.5 hereof.
“Servicing Agreement” shall have the meaning set forth in Section 9.5 hereof.
“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof.
“Shortfall” shall have the meaning set forth in Section 2.1.10.
“Soft Costs” shall mean those Building Loan Costs which are not Hard Costs, including but not
limited to, architect’s, engineer’s and general contractor’s fees, interest on the Building Loan,
recording taxes and title charges in respect of the Building Loan Mortgage and such other
non-construction costs as are part of the Cost of the Improvements.
“Special Purpose Entity” shall mean a corporation, limited partnership or limited liability
company that, since the date of its formation and at all times on and after the date thereof, has
complied with and shall at all times comply with the following requirements unless it has received
either prior consent to do otherwise from Lender or a permitted administrative agent thereof, or,
while the Loan is securitized, confirmation from each of the applicable Rating Agencies that such
noncompliance would not result in the requalification, withdrawal, or downgrade of the ratings of
any Securities or any class thereof:
(i) is and shall be organized solely for the purpose of (A) in the case of Borrower,
acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing
and operating the Property, entering into and performing its obligations under the Loan
Documents with Lender, refinancing the Property in connection with a permitted repayment of
the Loan, and transacting lawful business that is incident, necessary and appropriate to
accomplish the foregoing; or (B) in the case of a Principal, acting as a general partner of
the limited partnership that owns the Property or as member of the limited liability company
that owns the Property and transacting lawful business that is incident, necessary and
appropriate to accomplish the foregoing;
(ii) has not engaged and shall not engage in any business unrelated to (A) the
acquisition, development, ownership, management or operation of the Property, or (B) in the
case of a Principal, acting as general partner of the limited partnership that owns the
Property or acting as a member of the limited liability company that owns the Property, as
applicable;
(iii) has not owned and shall not own any real property other than, in the case of
Borrower, the Property;
26
(iv) does not have, shall not have and at no time had any assets other than (A) in the
case of Borrower, the Property and personal property necessary or incidental to its
ownership and operation of the Property or (B) in the case of a Principal, its partnership
interest in the limited partnership or the member interest in the limited liability company
that owns the Property and personal property necessary or incidental to its ownership of
such interests;
(v) has not engaged in, sought, consented or permitted to and shall not engage in,
seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or
merger, (B) any sale or other transfer of all or substantially all of its assets or any sale
of assets outside the ordinary course of its business, except as permitted by the Loan
Documents, or (C) in the case of a Principal, any transfer of its partnership or membership
interests;
(vi) shall not cause, consent to or permit any amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of formation,
operating agreement or other formation document or organizational document (as applicable)
with respect to the matters set forth in this definition;
(vii) if such entity is a limited partnership, has and shall have at least one general
partner and has and shall have, as its only general partners, Special Purpose Entities each
of which (A) is a corporation or single-member Delaware limited liability company, (B) has
two (2) Independent Directors, and (C) holds a direct interest as general partner in the
limited partnership of not less than 0.5% (or 0.1%, if the limited partnership is a Delaware
entity);
(viii) if such entity is a corporation, has and shall have at least two (2) Independent
Director, and shall not cause or permit the board of directors of such entity to take any
Material Action either with respect to itself or, if the corporation is a Principal, with
respect to Borrower or any action requiring the unanimous affirmative vote of one hundred
percent (100%) of the members of its board of directors unless two Independent Directors
shall have participated in such vote and shall have voted in favor of such action;
(ix) if such entity is a limited liability company (other than limited liability
company meeting all of the requirements applicable to a single-member limited liability
company set forth in this definition of “Special Purpose Entity”), has and shall have at
least one (1) member that is a Special Purpose Entity, that is a corporation, that has at
least two (2) Independent Directors and that directly owns at least one-half-of-one percent
(0.5%) of the equity of the limited liability company (or 0.1% if the limited liability
company is a Delaware entity);
(x) if such entity is a single-member limited liability company, (A) is and shall be a
Delaware limited liability company, (B) has and shall have at least two (2) Independent
Directors serving as a manager of such company, (C) shall not take any Material Action and
shall not cause or permit the members or managers of such entity to take any Material
Action, either with respect to itself or, if the company is a Principal,
27
with respect to Borrower, in each case unless one Independent Director then serving as
a manager of the company shall have participated and consented in writing to such action,
and (D) has and shall have either (1) a member which owns no economic interest in the
company, has signed the company’s limited liability company agreement and has no obligation
to make capital contributions to the company, or (2) two natural persons or one entity that
is not a member of the company, that has signed its limited liability company agreement and
that, under the terms of such limited liability company agreement becomes a member of the
company immediately prior to the withdrawal or dissolution of the last remaining member of
the company;
(xi) has not and shall not (and, if such entity is (a) a limited liability company, has
and shall have a limited liability agreement or an operating agreement, as applicable, (b) a
limited partnership, has a limited partnership agreement, or (c) a corporation, has a
certificate of incorporation or articles that, in each case, provide that such entity shall
not) (1) dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of its
assets; (3) amend its organizational documents with respect to the matters set forth in this
definition without the consent of Lender; or (4) without the affirmative vote of two (2)
Independent Directors or Independent Managers of itself or the consent of a Principal that
is a member or general partner in it: (A) file or consent to the filing of any bankruptcy,
insolvency or reorganization case or proceeding, institute any proceedings under any
applicable insolvency law or otherwise seek relief under any laws relating to the relief
from debts or the protection of debtors generally, file a bankruptcy or insolvency petition
or otherwise institute insolvency proceedings; (B) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for
the entity or a substantial portion of its property; (C) make an assignment for the benefit
of the creditors of the entity; or (D) take any action in furtherance of any of the
foregoing;
(xii) has at all times been and shall at all times remain solvent and has paid and
shall pay its debts and liabilities (including, a fairly-allocated portion of any personnel
and overhead expenses that it shares with any Affiliate) from its assets as the same shall
become due, and has maintained and shall 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;
(xiii) has not failed and shall not fail to correct any known misunderstanding
regarding the separate identity of such entity and has not identified and shall not identify
itself as a division of any other Person;
(xiv) has maintained and shall maintain its bank accounts, books of account, books and
records separate from those of any other Person and, to the extent that it is required to
file tax returns under applicable law, has filed and shall file its own tax returns, except
to the extent that it is required by law to file consolidated tax returns and, if it is a
corporation, has not filed and shall not file a consolidated federal income tax return with
any other corporation, except to the extent that it is required by law to file consolidated
tax returns;
28
(xv) has maintained and shall maintain its own records, books, resolutions and
agreements;
(xvi) has not commingled and shall not commingle its funds or assets with those of any
other Person and has not participated and shall not participate in any cash management
system with any other Person;
(xvii) has held and shall hold its assets in its own name;
(xviii) has conducted and shall conduct its business in its name or in a name
franchised or licensed to it by an entity other than an Affiliate of itself or of Borrower,
except for business conducted on behalf of itself by another Person under a business
management services agreement that is on commercially-reasonable terms, so long as the
manager, or equivalent thereof, under such business management services agreement holds
itself out as an agent of Borrower;
(xix) (A) has maintained and shall maintain its financial statements, accounting
records and other entity documents separate from those of any other Person; (B) has shown
and shall show, in its financial statements, its asset and liabilities separate and apart
from those of any other Person; and (C) has not permitted and shall not permit its assets to
be listed as assets on the financial statement of any of its Affiliates except as required
by GAAP; provided, however, that any such consolidated financial statement contains a note
indicating that the Special Purpose Entity’s separate assets and credit are not available to
pay the debts of such Affiliate and that the Special Purpose Entity’s liabilities do not
constitute obligations of the consolidated entity;
(xx) has paid and shall pay its own liabilities and expenses, including the salaries of
its own employees, out of its own funds and assets, and has maintained and shall maintain a
sufficient number of employees in light of its contemplated business operations;
(xxi) has observed and shall observe all partnership, corporate or limited liability
company formalities, as applicable;
(xxii) has not incurred any Indebtedness other than (i) acquisition financing with
respect to the Property; construction financing with respect to the Improvements and certain
off-site improvements required by municipal and other authorities as conditions to the
construction of the Improvements; and first mortgage financings secured by the Property; and
Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements
and other similar instruments executed and delivered in connection with such financings,
(ii) unsecured trade payables and operational debt not evidenced by a note, and (iii)
Indebtedness incurred in the financing of equipment and other personal property used on the
Property;
(xxiii) shall have no Indebtedness other than (i) the Loan, (ii) liabilities incurred
in the ordinary course of business relating to the ownership and operation of the Property
and the routine administration of Borrower, in amounts not to exceed $323,000, which
liabilities are not more than sixty (60) days past the date incurred, are not evidenced by a
29
note and are paid when due, and which amounts are normal and reasonable under the
circumstances, and (iii) such other liabilities that are permitted pursuant to this
Agreement;
(xxiv) has not assumed, guaranteed or become obligated and shall not assume or
guarantee or become obligated for the debts of any other Person, has not held out and shall
not hold out its credit as being available to satisfy the obligations of any other Person or
has not pledged and shall not pledge its assets for the benefit of any other Person, in each
case except as permitted pursuant to this Agreement;
(xxv) has not acquired and shall not acquire obligations or securities of its partners,
members or shareholders or any other owner or Affiliate;
(xxvi) has allocated and shall allocate fairly and reasonably any overhead expenses
that are shared with any of its Affiliates, constituents, or owners, or any guarantors of
any of their respective obligations, or any Affiliate of any of the foregoing (individually,
a “Related Party” and collectively, the “Related Parties”), including, but not limited to,
paying for shared office space and for services performed by any employee of an Affiliate;
(xxvii) has maintained and used and shall maintain and use separate stationery,
invoices and checks bearing its name and not bearing the name of any other entity unless
such entity is clearly designated as being the Special Purpose Entity’s agent;
(xxviii) has not pledged and shall not pledge its assets to or for the benefit of any
other Person other than with respect to loans secured by the Property and no such pledge
remains outstanding except to Lender to secure the Loan;
(xxix) has held itself out and identified itself and shall hold itself out and identify
itself as a separate and distinct entity under its own name or in a name franchised or
licensed to it by an entity other than an Affiliate of Borrower and not as a division or
part of any other Person;
(xxx) has maintained and shall maintain its assets in such a manner that it shall not
be costly or difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(xxxi) has not made and shall not make loans to any Person and has not held and shall
not hold evidence of indebtedness issued by any other Person or entity (other than cash and
investment-grade securities issued by an entity that is not an Affiliate of or subject to
common ownership with such entity);
(xxxii) has not identified and shall not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or part of it, and has not
identified itself and shall not identify itself as a division of any other Person;
(xxxiii) other than capital contributions and distributions permitted under the terms
of its organizational documents, has not entered into or been a party to, and shall not
30
enter into or be a party to, any transaction with any of its partners, members,
shareholders or Affiliates except in the ordinary course of its business and on terms which
are commercially reasonable terms comparable to those of an arm’s-length transaction with an
unrelated third party;
(xxxiv) has not had and shall not have any obligation to, and has not indemnified and
shall not indemnify its partners, officers, directors or members, as the case may be, in
each case unless such an obligation or indemnification is fully subordinated to the Debt and
shall not constitute a claim against it in the event that its cash flow is insufficient to
pay the Debt;
(xxxv) if such entity is a corporation, has considered and shall consider the interests
of its creditors in connection with all corporate actions;
(xxxvi) has not had and shall not have any of its obligations guaranteed by any
Affiliate except as provided by the Loan Documents;
(xxxvii) has not formed, acquired or held and shall not form, acquire or hold any
subsidiary, except that a Principal may acquire and hold its interest in Borrower;
(xxxviii) has complied and shall comply with all of the terms and provisions contained
in its organizational documents.
(xxxix) has conducted and shall conduct its business so that each of the assumptions
made about it and each of the facts stated about it in the Insolvency Opinion are true;
(xl) has not permitted and shall not permit any Affiliate or constituent party
independent access to its bank accounts;
(xli) is, has always been and shall continue to be duly formed, validly existing, and
in good standing in the state of its incorporation or formation and in all other
jurisdictions where it is qualified to do business;
(xlii) has paid all taxes which it owes and is not currently involved in any dispute
with any taxing authority;
(xliii) is not now, nor has ever been, party to any lawsuit, arbitration, summons, or
legal proceeding that resulted in a judgment against it that has not been paid in full;
(xliv) has no judgments or Liens of any nature against it except for tax liens not yet
due and the Permitted Encumbrances;
(xlv) has provided Lender with complete financial statements that reflect a fair and
accurate view of the entity’s financial condition; and
(xlvi) has no material contingent or actual obligations not related to the Property.
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“Stabilized Net Cash Flow” shall mean underwritten Gross Income from Operations calculated
using an vacancy rate equal to the greater of five percent (5%), the actual vacancy rate for the
Property and the market vacancy rate (“Effective Gross Income”), less (i) Operating Expenses
including a management fee of not less than six percent (6%) of Effective Gross Income and (ii) an
adjustment for Replacement Reserves of $16,500.00 per annum.
“Stabilized Value” shall mean the value of the Property, determined following the Completion
of the Improvements. The Stabilized Value shall be determined based upon an MAI appraisal
performed, at Borrower’s sole cost and expense, by an appraiser approved by Lender and dated, or
updated, to a date within 30 days or the date of the Completion of the Improvement occurs made in
compliance with FIRREA and reasonably satisfactory to Lender in all respects; the appraisal value
shall be subject to review and confirmation and updating as to valuation by Lender’s internal
appraisal staff, whose decision shall be final absent manifest error.
“Stabilized Loan-to-Value Ratio” shall mean the ratio of the Total Loan Amount to the
Stabilized Value.
“State” shall mean, the State or Commonwealth in which the Property or any part thereof is
located.
“Stored Materials” shall have the meaning set forth in Section 2.1.8 hereof.
“Subcontract” shall mean shall mean any agreement (other than the Architect’s Contract and the
General Contractor’s Agreement) entered into by Borrower or by General Contractor, in which the
Subcontractor thereunder agrees to provide services, labor and/or materials in connection with the
Project Improvements.
“Subcontractor” shall mean any subcontractor supplying services, labor and/or materials in
connection with the Project Improvements.
“Subordinate Financing” shall have the meaning set forth in Section 9.1.2(b).
“Successor Borrower” shall have the meaning set forth in Section 2.5.3 hereof.
“Survey” shall mean a survey of the Property prepared by a Surveyor licensed in the State and
satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and
containing a certification of such surveyor satisfactory to Lender.
“Surveyor” shall mean Control Point Associates, Inc., or such other land surveyor registered
as such in the State of New York.
“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.1
hereof.
“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 the Property or part thereof.
32
“Tenant” shall mean the tenant under any Lease.
“Threshold Amount” shall have the meaning set forth in Section 5.1.21(a) hereof.
“Title Company” shall have the meaning set forth in Section 3.1.3(b) hereof.
“Title Insurance Policy” shall mean, an ALTA mortgagee title insurance policy in the form
acceptable to Lender (or, if the Property is in a State which does not permit the issuance of such
ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with
respect to the Property and insuring the lien of the Mortgage.
“Total Debt” shall mean, collectively, the Debt and Other Debt.
“Total Debt Service” shall mean, with respect to any particular period of time, scheduled
payments of principal, if any, and interest under the Building Loan, the Project Loan and, if
applicable, the Subordinate Financing.
“Total Loan Amount” shall mean the sum of the Building Loan Amount, the Project Loan Amount
and the Subordinate Financing, if applicable.
“Transfer” shall have the meaning set forth in Section 5.2.10(b) hereof.
“Transferee” shall have the meaning set forth in Section 5.2.10(e).
“Transferee’s Principals” shall mean collectively, (A) Transferee’s managing members, general
partners or principal shareholders and (B) such other members, partners or shareholders which
directly or indirectly shall own a fifty-one percent (51%) or greater economic and voting interest
in Transferee.
“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the
State in which the Property is located.
“Unsatisfied Initial Advance Conditions” shall have the meaning set forth in Section
2.1.20.
“U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay
principal and/or interest in a full and timely manner that are (a) direct obligations of the United
States of America for the payment of which its full faith and credit is pledged, or (b) to the
extent acceptable to the Rating Agencies, other “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as amended.
“Yield Maintenance Default Premium” shall mean an amount equal to the greater of (a) five
percent (5%) of the outstanding principal balance of the Loan to be prepaid or satisfied and (b)
the Defeasance Payment Amount that would be required if a Defeasance Event were to occur at such
time (whether or not then permitted) in an amount equal to the outstanding principal amount of the
Loan to be prepaid or satisfied.
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Yield Maintenance Premium” shall mean an amount equal to the greater of (a) one percent (1%)
of the outstanding principal of the Loan to be prepaid or satisfied and (b) the excess, if any, of
(i) the sum of the present values of all then-scheduled payments of principal and interest under
the Note assuming that all outstanding principal and interest on the Loan is paid on the Open
Period Date (with each such payment and assumed payment discounted to its present value at the date
of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when
compounded semi-annually and deducting from the sum of such present values any short-term interest
paid from the date of prepayment to the next succeeding Payment Date in the event such payment is
not made on a Payment Date), over (ii) the principal amount being prepaid.
Section 1.2 Principles of Construction. All references to sections and schedules are
to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word
“including” shall mean “including, without limitation” unless the context shall indicate otherwise.
Any reference in this Agreement or in any other Loan Document to any Loan Document shall be deemed
to include references to such documents as the same may hereafter be amended, modified,
supplemented, extended, replaced and/or restated from time to time (and, in the case of any note or
other instrument, to any instrument issued in substitution therefor). 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.
ARTICLE II.
GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower.
2.1.1 Agreement to Lend and Borrow.
Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make
and Borrower hereby agrees to accept Advances in respect of the Building Loan as more particularly
set forth in Section 2.10.
2.1.2 No Reborrowings.
Any amount borrowed and repaid hereunder in respect of the Building Loan may not be
reborrowed.
2.1.3 The Note, Mortgage and Loan Documents. The Building Loan shall be evidenced by the Building Loan Note and secured by the Building
Loan Mortgage, the Building Loan Assignment of Leases and the other Building Loan Documents.
2.1.4 Use of Proceeds. Borrower hereby agrees that Borrower shall use the proceeds of the Building Loan to pay or
reimburse itself for Building Loan Costs actually incurred in connection with demolition and the
construction of the Project Improvements if and to the extent that such Building Loan Costs are
reflected in the Building Loan Budget, subject to reallocation pursuant to Sections 2.1.6,
2.1.7 and 5.1.33 (or other reallocations approved by Lender in its sole
discretion).
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2.1.5 Advances. Lender shall not be required to Advance funds hereunder for any category or line item of
Building Loan Costs in excess of the amount specified for such line item or category in the
Building Loan Budget, subject to Sections 2.1.6, 2.1.7 and 5.1.33 (or other
reallocations approved by Lender in its sole discretion). No Advances shall be made to pay for
Affiliate Fees.
2.1.6 Cost Overruns. If Borrower becomes aware of any change in actual or projected Project-Related Costs which
will increase any one or more category or line item of costs reflected in the Development Budget,
Borrower shall immediately notify Lender in writing and promptly submit to Lender for its approval
a revised Development Budget. Any reallocation of any category or line items in the Development
Budget in connection with cost overruns shall be subject to Lender’s approval in Lender’s sole
discretion except as set forth in Sections 2.1.7 and 5.1.33, provided, however,
under no circumstances shall Borrower be permitted, or Lender obligated to approve, the
reallocation of line items from the Building Loan Budget to the Project Loan Budget. Lender shall
have no obligation to make any further Advances unless and until the revised Development Budget so
submitted by Borrower is approved by Lender and Borrower has satisfied its obligations with respect
to any resulting Shortfall under Section 2.1.10. Lender reserves the right to approve or
disapprove any revised Development Budget in its sole and absolute discretion (except with respect
to reallocations in accordance with Sections 2.1.7 and 5.1.33).
2.1.7 Contingency Reserve. Following the satisfaction of the Initial Advance Conditions, and subject to the prior
approval of Lender in its sole discretion, Borrower may revise the Building Loan Budget to move (i)
amounts available under any Line Item for Hard Costs that are designated to “Contingency” to other
Line Items for Hard Costs in the Building Loan Budget, or (ii) amounts available under any Line
Item for Soft Costs that are designated “Contingency” to other Line Items for Soft Costs in the
Building Loan Budget. Any cost savings shall be allocated in accordance with Section
5.1.33 hereof. In no event may the Contingency Line Item of the Building Loan Budget be
reallocated to any Line Item in the Project Loan Budget. The Contingency Line Item in the Building
Loan Budget for Hard Costs shall contain at least five percent (5%) of the total projected Hard
Costs, separate from the Contingency Line Items in the Project Loan Budget.
2.1.8 Stored Materials. Lender shall not be required to disburse any funds for any materials, machinery or other
Personal Property not yet incorporated into the Project Improvements (the “Stored Materials”),
unless the following conditions are satisfied:
(a) Borrower shall deliver to Lender bills of sale or other evidence reasonably satisfactory
to Lender of the cost of, and, subject to the payment therefor, Borrower’s title in and to such
Stored Materials;
(b) The Stored Materials are identified to the Property and Borrower, are segregated so as to
adequately give notice to all third parties of Borrower’s title in and to such materials, and are
components in substantially final form ready for incorporation into the Project Improvements;
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(c) The Stored Materials are stored at the Property or at such other third-party owned and
operated site as Lender shall reasonably approve, and are protected against theft and damage in a
manner satisfactory to Lender, including, if requested by Lender, storage in a bonded warehouse in
the greater metropolitan area in which the Property is located;
(d) The Stored Materials will be paid for in full with the funds to be disbursed, and all lien
rights or claims of the supplier will be released upon full payment;
(e) Lender has or will have upon payment with disbursed funds a perfected, first priority
security interest in the Stored Materials;
(f) The Stored Materials are insured for an amount equal to their replacement costs in
accordance with Section 6.1 of this Agreement;
(g) The aggregate cost of Stored Materials stored at the Property is approved by the
Construction Consultant and, if required by Lender, the Construction Consultant shall certify that
it has inspected such Stored Materials and they are in good condition and suitable for use in
connection with the Project Improvements; and
(h) The aggregate cost of Stored Materials stored on the Property at any one time shall not
exceed ten percent (10%) of the maximum amount of the Loan and the aggregate cost of Stored
Materials stored off the Property at any one time shall not exceed five percent (5%) of the maximum
amount of the Loan.
2.1.9 Amount of Advances. In no event shall any Advance exceed the full amount of Building Loan Costs theretofore
paid or to be paid with the proceeds of such Advance plus any Building Loan Costs incurred by
Borrower through the date of the Draw Request for such Advance minus (i) the applicable
Retainage for each Contract and Subcontract, and (ii) the aggregate amount of any Advances
previously made by Lender. It is further understood that the Retainage described above is intended
to provide a contingency fund protecting Lender against failure of Borrower or Guarantor to fulfill
any obligations under the Loan Documents, and that Lender may charge amounts to pay for Building
Loan Costs against such Retainage in the event Lender is required or elects to expend funds to cure
any Default or Event of Default, in either instance, in
accordance with the terms of this Agreement. No Advance of the Loan by Lender shall be deemed
to be an approval or acceptance by the Lender of any work performed thereon or the materials
furnished with respect thereto.
2.1.10 Loan-In-Balance. As used herein, a “Shortfall” shall mean, as to any Line Item in the Development Budget as
of any date, the amount determined by Lender, in Lender’s sole but reasonable judgment, by which
(A) the cost of completing or satisfying such Line Item, exceeds (B) the remaining undisbursed
portion of the Loan allocated to such Line Item in the Development Budget plus any sums deposited
with Lender pursuant to this Section 2.1.10 to pay for such Line Item and not previously
disbursed plus any Reserve Funds to the extent such Reserve Funds are available hereunder for the
payment of such Line Item. From time to time and at any time during the Construction Period,
Lender shall have the right, but not the obligation, to notify Borrower that it has determined a
Shortfall exists as to any one or more Line Items. If Lender at any time shall so notify Borrower,
Borrower shall, at its option within
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five (5) days of Lender’s notification as aforesaid, either:
(i) deposit with Lender an amount equal to such Shortfall, which Lender disburse to Borrower to the
satisfaction of the costs of such Line Item prior to advancing any further Loan proceeds on account
of such costs; (ii) post an irrevocable standby Letter of Credit in the amount of such Shortfall,
in favor of Lender; (iii) to the extent permitted under Sections 2.1.7 and 5.1.33,
and following the satisfaction of the Initial Advance Conditions allocate the Contingency Reserve,
with respect to the Line Item(s) in question, to the Shortfall, and provided, further that the
amount of the remaining Contingency Reserve for such Line Item(s) (following the allocation to the
Shortfall) is sufficient for such Line Item(s), as determined by Lender in its sole discretion; and
(iv) to the extent permitted under Section 5.1.33, and then only following the satisfaction
of the Initial Advance Conditions, reallocate cost savings from the Development Budget in respect
of the Loan (or other reallocations which are approved by Lender, in its sole discretion) in
accordance with the terms of this Agreement, but only to the extent such cost savings can be
allocated to the related Line Items. Borrower hereby agrees that Lender shall have a lien on and
security interest in, for the benefit of Lender, any sums deposited pursuant to clause (i)
above and that Borrower shall have no right to withdraw any such sums except for the payment of the
aforesaid costs as approved by Lender. Lender shall have no obligation to make any further
Advances of proceeds of the Loan as to any Line Item until the sums required to be deposited
pursuant to clause (i) above as to such Line Item have been exhausted, or until Borrower
has posted an irrevocable standby Letter of Credit pursuant to clause (iii) above, as the
case may be, and, in any such case, the Loan is back “in balance”. Any such sums not used as
provided in said clause (i) shall be released to Borrower when and to the extent that
Lender reasonably determines that the amount thereof is more than the excess, if any, of the
remaining Project-Related Costs over the undisbursed balance of the Loan, provided, however, that
should an Event of Default occur, Lender, in its sole discretion, may apply such amounts either to
the remaining Project-Related Costs or to the immediate reduction of outstanding principal and/or
interest under the Note.
2.1.11 Quality of Work. No Advance or any portion thereof shall be made with respect to defective work or to any
contractor that has performed work that is defective and that has not been cured, as
confirmed by the report of the Construction Consultant, but Lender may disburse all or part of
any Advance before the sum shall become due if Lender believes it advisable to do so, and all such
Advances or parts thereof shall be deemed to have been made pursuant to this Agreement.
2.1.12 Required Equity Funds. All Required Equity Funds shall be contributed (i.e., expended by Borrower and invested by
Borrower in the Property, for Project—Related Costs set forth on the approved Development Budget)
before the Closing Date.
2.1.13 Trust Fund. Pursuant to Section 13 of the New York Lien Law, Borrower shall receive the Advances
hereunder and shall hold the right to receive the Advances as a trust fund to be applied first for
the purpose of paying the Costs of the Improvements and shall apply the Advances first to the
payment of the Cost of the Improvements on the Property before using any part of the total of the
same for any other purpose.
2.1.14 Final Project Report and Development Budget. Attached hereto as Schedule II is Borrower’s detailed and definitive budget of all
Project-Related Costs to be incurred by Borrower during the Construction Term and that will be
disbursed out of Loan
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proceeds subject to availability and satisfaction of all applicable
conditions to Advances hereunder and under the Project Loan Agreement, being so indicated,
delineated by each category of Project-Related Costs (each a “Line Item” or “Budget Line”) and
further broken down to segregate Building Loan Costs and Project Loan Costs, which budget has been
approved by Lender and Construction Consultant (the “Development Budget”). The portion of the
Development Budget that includes only Building Loan Costs is referred to herein as the “Building
Loan Budget” and the portion of the Development Budget that includes only Project Loan Costs is
referred to herein as the “Project Loan Budget.”
2.1.15 Miscellaneous.
(a) The making of an Advance by Lender shall not constitute Lender’s approval or acceptance of
the construction theretofore completed. Lender’s inspection and approval of the Plans and
Specifications, the construction of the Project Improvements, or the workmanship and materials used
therein, shall impose no liability of any kind on Lender, the sole obligation of Lender as the
result of such inspection and approval being to make the Advances if and to the extent, required by
this Agreement.
(b) ALL POTENTIAL LIENORS ARE HEREBY CAUTIONED TO EXERCISE SOUND BUSINESS JUDGMENT IN THE
EXTENSION OF CREDIT TO BORROWER. NO POTENTIAL LIENOR SHOULD EXPECT LENDER TO MAKE ADVANCES OF THE
LOAN IN AMOUNTS AND AT TIMES SUCH THAT IT WILL NOT BE NECESSARY FOR EACH SUCH POTENTIAL LIENOR TO
EXERCISE SOUND BUSINESS JUDGMENT IN THE EXTENSION OF CREDIT TO BORROWER. MOREOVER, ALL POTENTIAL
LIENORS ARE REMINDED THAT SUBDIVISION (3) OF SECTION 13 OF THE NEW YORK LIEN LAW PROVIDES THAT
“NOTHING IN THIS
SUBDIVISION SHALL BE CONSIDERED AS IMPOSING UPON THE LENDER ANY OBLIGATION TO SEE THE PROPER
APPLICATION OF SUCH ADVANCES BY THE OWNER,” AND LENDER DOES NOT IMPOSE SUCH AN OBLIGATION ON
ITSELF.
Section 2.2 Interest Rate.
2.2.1 Interest Rate. Interest on the outstanding principal balance of the Loan shall accrue from (and include)
the Closing Date to but excluding the Maturity Date at the Interest Rate calculated as set forth in
Section 2.2.2 below.
2.2.2 Interest Calculation. Interest on the outstanding principal balance of the Loan shall be calculated by multiplying
(a) the actual number of days elapsed in the period for which the calculation is being made by (b)
a daily rate based on the Interest Rate and a three hundred sixty (360) day year by (c) the
outstanding principal balance.
2.2.3 Default Rate. In the event that, and for so long as, any Event of Default shall have occurred and be
continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, all
accrued and unpaid interest in respect of the Loan and any other amounts due pursuant to the Loan
Documents, shall accrue interest at the Default Rate, calculated from the date such payment was due
without regard to any grace or cure periods contained herein.
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2.2.4 Usury Savings. This Agreement, the Note and the other Loan Documents are subject to the express condition
that at no time shall Borrower be obligated or required to pay interest on the principal balance of
the Loan at a rate which could subject Lender to either civil or criminal liability as a result of
being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan
Documents, Borrower is at any time required or obligated to pay interest on the principal balance
due hereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate or the Default Rate,
as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all
previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in
reduction of principal and not on account of the interest due hereunder. All sums paid or agreed
to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall,
to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout
the full stated term of the Loan until payment in full so that the rate or amount of interest on
account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect
and applicable to the Loan for so long as the Loan is outstanding.
Section 2.3 Loan Payment.
2.3.1 Monthly Debt Service Payments. Borrower shall pay to Lender (a) on the Closing Date, an amount equal to interest only on
the outstanding principal balance of the Loan from and including the Closing Date up to and
including December 31, 2007, which interest shall be calculated in accordance with the provisions
of Section 2.2 hereof, and (b) on each Payment Date commencing on the Payment Date
occurring in February, 2008 and thereafter up to and including the Maturity Date, Borrower shall
make a payment to Lender equal to the Monthly Debt Service Payment Amount, which payments shall be
applied first to interest due for the related Interest Period at the Interest Rate, for such
related Interest Period and then to the principal amount of the Loan due in accordance with this
Agreement, and lastly, to any other amounts due and unpaid pursuant to the Loan Documents hereto.
Borrower and Lender acknowledge and agree that, on the 15th calendar day of the month
preceding each Payment Date during the Construction Term: (a) if and to the extent undrawn funds
remain available for Advance under the Project Loan from the Interest Reserve Line Item of the
Project Loan Budget, and provided that that no Event of Default or monetary Default then exists
under any of the Loan Documents or would occur as a result of such Project Loan Advance, the
Monthly Debt Service Amount then due and owing shall be advanced by Lender by a Project Loan
Advance under Interest Reserve Line Item of the Project Loan Budget; and (b) if no amount remains
available under the Interest Reserve Line Item but and to the extent Interest Reserve Funds are on
deposit in the Interest Reserve Account, and no Event of Default or monetary Default then exists
under any of the Loan Documents, the Monthly Debt Service Payment Amount then due and payable shall
be paid by application of funds from the Interest Reserve Account. Borrower and Lender acknowledge
and agree that Lender may automatically make a Project Loan Advance or apply Interest Reserve Funds
on deposit in the Interest Reserve Account on each Payment Date occurring during the Construction
Term, in either instance, in accordance with this Section 2.3.1, without the need for
Borrower to submit a Draw Request or otherwise request such an Advance or application.
2.3.2 Payments Generally. The first Interest Period hereunder shall commence on and include the Closing Date and
shall end on and include December 31, 2007. Thereafter
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each Interest Period shall commence on the
first (1st) day of each calendar month during the term of this Agreement and shall end
on and include the final calendar date of such calendar month. For purposes of making payments
hereunder, but not for purposes of calculating Interest Periods, if the day on which such payment
is due is not a Business Day, then amounts due on such date shall be due on the immediately
preceding Business Day and with respect to payments of principal due on the Maturity Date, interest
shall be payable at the Interest Rate or the Default Rate, as the case may be, through and
including the day immediately preceding such Maturity Date. All amounts due under this Agreement
and the other Loan Documents shall be payable without setoff, counterclaim, defense or any other
deduction whatsoever.
2.3.3 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the
Loan, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the
Mortgage and the other Loan Documents.
2.3.4 Late Payment Charge. If any principal, interest or any other sums due under the Loan Documents (including the
amounts due on the Maturity Date) are not paid by Borrower on or prior to the date on which it is
due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of
such unpaid sum or the Maximum Legal Rate 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 Mortgage and the other Loan
Documents to the extent permitted by applicable law.
2.3.5 Method and Place of Payment. Except as otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 11:00 A.M., New York City time, on
the date when due and shall be made in lawful money of the United States of America in immediately
available funds at Lender’s office or as otherwise directed by Lender, and any funds received by
Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next
succeeding Business Day.
Section 2.4 Prepayments.
2.4.1 Voluntary Prepayments. Except as otherwise provided in this Section 2.4.1 and Section 2.4.2,
Borrower shall not have the right to prepay the Loan in whole or in part prior to the Maturity
Date. If for any reason Borrower prepays the Loan on a date other than a Payment Date, Borrower
shall pay Lender, in addition to the Debt, all interest which would have accrued on the amount of
the Loan through and including the Payment Date next occurring following the date of such
prepayment. Notwithstanding anything to the contrary contained herein, commencing after the
Payment Date three (3) months prior to the Maturity Date (the “Open Period Date”), or on any
Payment Date thereafter (or on any date thereafter, provided that interest is paid through the next
Payment Date), Borrower may, at its option, prepay the Debt in whole, but not in part, without
payment of the Yield Maintenance Premium.
2.4.2 Mandatory Prepayments. On the next occurring Payment Date following the date on which Lender actually receives any
Net Proceeds, if Lender is not
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obligated to make such Net Proceeds available to Borrower for the
Restoration of the Property or otherwise remit such Net Proceeds to Borrower pursuant to
Section 6.4 hereof, Borrower shall prepay or authorize Lender to apply Net Proceeds as a
prepayment of all or a portion of the outstanding principal balance of the Loan
together with accrued interest through the end of the related Interest Period and any other
sums due hereunder in an amount equal to one hundred percent (100%) of such Net Proceeds; provided,
however, if an Event of Default has occurred and is continuing, Lender may apply such Net Proceeds
to the Debt (until paid in full) in any order or priority in its sole discretion. Other than
following an Event of Default, no Yield Maintenance Premium shall be due in connection with any
prepayment made pursuant to this Section 2.4.2.
2.4.3 Prepayments After Default. If following an Event of Default, payment of all or any part of the Debt is tendered by
Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) made on the next
occurring Payment Date together with the Monthly Debt Service Payment and (b) deemed a voluntary
prepayment by Borrower in violation of the prohibition against prepayment set forth in Section
2.4.1 hereof and Borrower shall pay, in addition to the Debt, an amount equal to the Yield
Maintenance Default Premium.
2.4.4 Prepayment Prior to Defeasance Expiration Date. If the Permitted Release Date
has occurred but the Defeasance Expiration Date has not occurred, the Debt may be prepaid in whole
(but not in part) prior to the date permitted under Section 2.4.1 hereof upon not less than thirty
(30) days prior written notice to Lender specifying the Payment Date on which prepayment is to be
made (a “Prepayment Date”) provided no Event of Default exists and upon payment of an amount equal
to the Yield Maintenance Premium. Lender shall notify Borrower of the amount and the basis of
determination of the required prepayment consideration. If any notice of prepayment is given, the
Debt shall be due and payable on the Prepayment Date. Lender shall not be obligated to accept any
prepayment of the Debt unless it is accompanied by the prepayment consideration due in connection
therewith. If for any reason Borrower prepays the Loan on a date other than a Payment Date,
Borrower shall pay Lender, in addition to the Debt, all interest which would have accrued on the
amount of the Loan through and including the Payment Date next occurring following the date of such
prepayment.
2.4.5 Application of Prepayments to Components. Any prepayment of the principal of the Loan, in whole or in part, voluntary or involuntary,
shall be applied (a) first, to the reduction of the outstanding principal balance of the Project
Loan until reduced to zero, and (b) second, to the reduction of the outstanding principal balance
of the Building Loan until reduced to zero. Subsequent to any Event of Default, any payment of
principal from whatever source may be applied by Lender between the various components of the Loan
in Lender’s sole discretion.
Section 2.5 Defeasance.
2.5.1 Voluntary Defeasance
(a) Provided no Event of Default shall then exist, Borrower shall have the right at any time
after the Defeasance Expiration Date and prior to the date voluntary prepayments are
permitted under Section 2.4.1 hereof to voluntarily defease all, but not part, of the Loan by
and upon satisfaction of the following conditions (such event being a “Defeasance Event”)
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(i) Borrower shall provide not less than thirty (30) days prior written
notice to Lender specifying the Payment Date (the “Defeasance Date”) on which the
Defeasance Event is to occur;
(ii) Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Loan to and including the Defeasance Date. If for any
reason the Defeasance Date is not a Payment Date, the Borrower shall also pay
interest that would have accrued on the Note through and including the Payment
Date immediately preceding the next Payment Date, provided,
however, if the Defeasance Deposit shall include short-term interest
computed from the date of such prepayment through to the next succeeding Payment
Date, Borrower shall not be required to pay such short term interest pursuant to
this sentence;
(iii) Borrower shall pay to Lender all other sums, not including scheduled
interest or principal payments, then due under the Note, this Agreement, the
Mortgage and the other Loan Documents;
(iv) Borrower shall use the Defeasance Deposit to purchase U.S. Obligations
in accordance with Section 2.5.1(b) below;
(v) Borrower shall execute and deliver a pledge and security agreement, in
form and substance that would be reasonably satisfactory to a prudent lender
creating a first priority lien on the Defeasance Deposit and the U.S. Obligations
purchased with the Defeasance Deposit in accordance with the provisions of this
Section 2.5 (the “Security Agreement”);
(vi) Borrower shall deliver an opinion of counsel for Borrower that is
standard in commercial lending transactions and subject only to customary
qualifications, assumptions and exceptions opining, among other things, that
Borrower has legally and validly transferred and assigned the U.S. Obligations and
all obligations, rights and duties under and to the Note to the Successor
Borrower, that Lender has a perfected first priority security interest in the
Defeasance Deposit and the U.S. Obligations delivered by Borrower and that any
REMIC Trust formed pursuant to a Securitization will not fail to maintain its
status as a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code as a result of such Defeasance Event;
(vii) Borrower shall deliver confirmation in writing from each of the
applicable Rating Agencies to the effect that such release will not result in a
downgrade, withdrawal or qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the Securities issued in connection
with the Securitization which are then outstanding. If required by the applicable
Rating Agencies, Borrower shall also deliver or cause to be
delivered an Additional Insolvency Opinion with respect to the Successor
Borrower in form and substance satisfactory to Lender and the applicable Rating
Agencies;
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(viii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1(a) have been satisfied;
(ix) Borrower shall deliver a certificate of Borrower’s independent certified
public accountant certifying that the U.S. Obligations purchased with the
Defeasance Deposit generate monthly amounts equal to or greater than the Scheduled
Defeasance Payments;
(x) Borrower shall deliver such other certificates, documents or instruments
as Lender may reasonably request; and
(xi) Borrower shall pay all costs and expenses of Lender incurred in
connection with the Defeasance Event, including (A) any costs and expenses
associated with a release of the Lien of the Mortgage as provided in Section
2.6 hereof, (B) reasonable attorneys’ fees and expenses incurred in connection
with the Defeasance Event, (C) the costs and expenses of the Rating Agencies, (D)
any revenue, documentary stamp or intangible taxes or any other tax or charge due
in connection with the transfer of the Note, or otherwise required to accomplish
the defeasance and (E) the costs and expenses of Servicer and any trustee,
including reasonable attorneys’ fees.
(b) In connection with the Defeasance Event, Borrower shall use the Defeasance Deposit to
purchase U.S. Obligations which provide payments on or prior to, but as close as possible to, all
successive scheduled Payment Dates after the Defeasance Date upon which interest and principal
payments are required under this Agreement and the Note, and in amounts equal to the scheduled
payments due on such Payment Dates under this Agreement and the Note (including, without
limitation, scheduled payments of principal, interest, servicing fees (if any), and any other
amounts due under the Loan Documents on such Payment Dates) and assuming the Note is prepaid in
full on the Open Period Date (the “Scheduled Defeasance Payments”). Borrower, pursuant to the
Security Agreement or other appropriate document, shall authorize and direct that the payments
received from the U.S. Obligations may be made directly to the Clearing Account (unless otherwise
directed by Lender) and applied to satisfy the Debt Service obligations of Borrower under this
Agreement and the Note. Any portion of the Defeasance Deposit in excess of the amount necessary to
purchase the U.S. Obligations required by this Section 2.5 and satisfy Borrower’s other
obligations under this Section 2.5 and Section 2.6 shall be remitted to Borrower.
2.5.2 Collateral. Each of the U.S. Obligations that are part of the defeasance collateral shall be duly
endorsed by the holder thereof as directed by Lender or accompanied by a written instrument of
transfer in form and substance that would be satisfactory to a prudent lender (including, without
limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to effectuate book-entry
transfers and pledges through the book-entry facilities of such institution) in order to perfect
upon the delivery of the defeasance collateral a first priority security interest therein in favor
of Lender in conformity with all applicable state and federal laws governing the granting of such
security interests.
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2.5.3 Successor Borrower. In connection with any Defeasance Event, Borrower shall establish a successor entity (the
“Successor Borrower”), which shall be a Special Purpose Entity, which shall not own any other
assets or have any other liabilities or operate other property (except in connection with other
defeased loans held in the same securitized loan pool with the Loan). Borrower shall transfer and
assign all obligations, rights and duties under and to the Note, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower shall assume the obligations under
the Note and the Security Agreement and Borrower shall be relieved of its obligations under such
documents. Borrower shall pay One Thousand and 00/100 Dollars ($1,000) to any such Successor
Borrower as consideration for assuming the obligations under the Note and the Security Agreement.
Notwithstanding anything in this Agreement to the contrary, no other assumption fee shall be
payable upon a transfer of the Note in accordance with this Section 2.5.3, but Borrower
shall pay all costs and expenses incurred by Lender, including Lender’s attorneys’ fees and
expenses and any fees and expenses of any Rating Agencies, incurred in connection therewith.
Section 2.6 Release of Property. Except as set forth in this Section 2.6, no repayment, prepayment or defeasance of
all or any portion of the Loan shall cause, give rise to a right to require, or otherwise result
in, the release of the Lien of the Mortgage on the Property.
2.6.1 Release of Property.
(a) If Borrower has elected to defease the Loan and the requirements of Section 2.5
and this Section 2.6 have been satisfied, all of the Property shall be released from the
Lien of the Mortgage and the U.S. Obligations, pledged pursuant to the Security Agreement, shall be
the sole source of collateral securing the Note.
(b) In connection with the release of the Mortgage, Borrower shall submit to Lender, not less
than thirty (30) days prior to the Defeasance Date, a release of Lien (and related Loan Documents)
for the Property for execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Property is located and that would be satisfactory to a prudent lender
and contains standard provisions, if any, protecting the rights of the releasing lender. In
addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered
by Borrower in connection with such release, together with an Officer’s Certificate certifying that
such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such
releases in accordance with the terms of this Agreement.
2.6.2 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 due 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 Agreement, release the
Lien of the Mortgage on the Property.
Section 2.7 Clearing Account/Cash Management. On or prior to the Closing Date, Borrower shall, at its sole cost and expense, cause each
of the following to occur to the satisfaction of Lender (collectively, the “Cash Management
Conditions”): (a) Borrower shall establish an Eligible Account (the “Clearing Account”) with an
Eligible Institution selected by Borrower and approved by Lender (the “Clearing Bank”); (b)
Borrower shall cause the Clearing Bank to execute and deliver the Clearing Account Agreement in
accordance with Section
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2.7.1(b); (c) Borrower shall establish an Eligible Account (the
“Cash Management Account”) with an the Cash Management Bank designated by Lender pursuant to and
in accordance with the Cash Management Agreement and Section 2.7.2 hereof; (d) Borrower
shall deliver a Payment Direction Letter to the Tenant under any Lease then or thereafter in effect
and provide Lender with reasonably satisfactory evidence that the Tenant under such Lease has
confirmed that it shall comply with the terms thereof; (e) Borrower will take all actions necessary
to establish and maintain in favor of Lender a perfected first priority security interest in the
Clearing Account and Cash Management Account and all deposits at any time contained in either such
account and the proceeds thereof, including, without limitation, executing and filing UCC-1
Financing Statements; (f) Borrower shall deliver to Lender an opinion of Borrower’s counsel with
respect to the due execution, authority, enforceability of the Cash Management Agreement and
Clearing Account Agreement and confirming that Lender has first priority perfected security
interest in the Cash Management Account and Clearing Account and such other matters as Lender may
reasonably require, all such opinions in form, scope and substance satisfactory to Lender and
Lender’s counsel; and (g) Borrower shall reimburse Lender for any and all cost and expenses,
including reasonable attorney’s fees and disbursements, resulting form the foregoing.
2.7.1 Clearing Account.
(a) Borrower shall establish and maintain the Clearing Account with the Clearing Bank on or
prior to the Closing Date, and thereafter Borrower shall maintain the Clearing Account at all times
during the remainder of the term of the Loan. The Clearing Account shall be entitled “Acadia
Atlantic Avenue LLC, as Borrower and Bear Stearns Commercial Mortgage, Inc., as Lender, pursuant to
Loan Agreement dated as of December 26, 2007 — Clearing Account”. Borrower hereby grants to Lender
a first-priority security interest in the Clearing Account and all deposits at any time contained
therein and the proceeds thereof. All monies now or hereafter deposited into the Clearing Account
shall be deemed additional security for the Debt.
(b) Borrower shall obtain from the Clearing Bank and deliver to Lender an agreement, in form
and substance satisfactory to Lender (the “Clearing Account Agreement”), pursuant to which: (i)
Borrower and Clearing Bank acknowledge and agree that during a Cash Trap Period, Lender shall have
the sole right to make withdrawals from the Clearing Account and all costs and expenses for
establishing and maintaining the Clearing Account shall be paid by Borrower; (ii) upon notice from
Lender that a Cash Trap Period exists, the Clearing Bank agrees to transfer to the Cash Management
Account in immediately available funds by federal wire transfer all amounts on deposit in the
Clearing Account once every Business Day during the term of the Loan.
(c) Borrower shall (i) deliver irrevocable written instructions to all tenants under Leases to
deliver all Rents (including additional rent, payable thereunder directly to the Clearing Account,
and (ii) deliver irrevocable written instructions to each of the credit card companies or credit
card clearing banks with which Borrower or Manager has entered into merchant’s agreements to
deliver all receipts payable with respect to the Property directly to the Clearing Account
(collectively, the “Payment Direction Letters.”). Borrower and Manager shall deposit all amounts
received by Borrower or Manager constituting Rents into the Clearing Account within one (1)
Business Day after receipt thereof.
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(d) Upon the occurrence of an Event of Default, Lender may, in addition to any and all other
rights and remedies available to Lender, apply any sums then present in the Clearing Account to the
payment of the Debt in any order in its sole discretion.
(e) The Clearing Account shall be an Eligible Account and shall not be commingled with other
monies held by Borrower or Clearing Bank.
(f) Borrower shall not further pledge, assign or grant any security interest in the Clearing
Account or the monies deposited therein 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.
(g) Borrower shall indemnify Lender and hold Lender harmless from and against any and all
actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys fees and expenses) arising from or in any way
connected with the Clearing Account and/or the Clearing Account Agreement (unless arising from the
gross negligence or willful misconduct of Lender) or the performance of the obligations for which
the Clearing Account was established.
2.7.2 Cash Management Account.
(a) Pursuant to and in accordance with the Cash Management Agreement, Borrower shall establish
and maintain a segregated Eligible Account (the “Cash Management Account”) to be held by an
Eligible Institution selected by Lender (the “Cash Management Bank”) in trust and for the benefit
of Lender, which Cash Management Account shall be under the sole dominion and control of Lender.
The Cash Management Account shall be entitled “Acadia Atlantic Avenue LLC as Borrower and Bear
Stearns Commercial Mortgage, Inc., as
Lender, pursuant to Loan Agreement dated as of December 26, 2007 — Cash Management Account.”
Borrower hereby grants to Lender a first priority security interest in the Cash Management Account
and all deposits at any time contained therein and the proceeds thereof and will take all actions
necessary to maintain in favor of Lender a perfected first priority security interest in the Cash
Management Account, including, without limitation, executing and filing UCC-1 Financing Statements
and continuations thereof. Borrower will not in any way alter or modify the Cash Management
Account and will notify Lender of the account number thereof. Lender and Servicer shall have the
sole right to make withdrawals from the Cash Management Account and all costs and expenses for
establishing and maintaining the Cash Management Account shall be paid by Borrower.
(b) During a Cash Trap Period, and provided no Event of Default shall have occurred, on each
Payment Date (or, if such Payment Date is not a Business Day, on the immediately preceding Business
Day), all funds on deposit in the Cash Management Account shall be applied as set forth in the Cash
Management Agreement
(c) The insufficiency of funds on deposit in the Cash Management Account shall not relieve
Borrower from the obligation to make any payments, as and when due pursuant to this Agreement and
the other Loan Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
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(d) Borrower hereby agrees that Lender may modify the Cash Management Agreement for the
purpose of establishing additional sub-accounts in connection with any payments otherwise required
under this Agreement and the other Loan Documents and Lender shall provide notice thereof to
Borrower.
(e) All funds on deposit in the Cash Management Account following the occurrence of an Event
of Default may be applied by Lender in such order and priority as Lender shall determine.
(f) Notwithstanding anything to the contrary herein, all transfers of Borrower’s funds from
the Cash Management Account or other sources to or for the benefit of any mezzanine lender under
any Subordinate Financing pursuant to this Agreement or any of the other Loan Documents shall
constitute distributions from Borrower to the Mezzanine Borrower and must comply with the
requirements as to distributions of the Delaware Limited Liability Company Act. No provision of
any of the Loan Documents shall create a debtor-creditor relationship between Borrower and any
mezzanine or subordinate lender.
2.7.3 Payments Received Under the Cash Management Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan
Documents, and provided no Event of Default has occurred and is continuing, Borrower’s obligations
with respect to the payment of the Monthly Debt Service Payment Amount and amounts required to be
deposited on a monthly basis into the Reserve Funds, if any, shall be deemed satisfied to the
extent sufficient amounts are deposited in the Cash Management Account to satisfy such obligations
pursuant to the Cash Management Agreement on the dates
each such payment is required, regardless of whether any of such amounts are so applied by
Lender.
Section 2.8 Intentionally Omitted.
Section 2.9 Payments Not Conditional. All payments required to be made by Borrower hereunder or under the Note or the other Loan
Documents shall be made irrespective of, and without deduction for, any setoff, claim or
counterclaim and shall be made irrespective of any defense thereto.
Section 2.10 Initial Advance. The obligation of Lender to make the initial Advance of the Building Loan (the “Initial
Advance”) shall be subject to the following conditions precedent (collectively, the “Initial
Advance Conditions”) on or prior to the Required Initial Advance Date, all of which conditions
precedent must be satisfied prior to Lender making any such Initial Advance:
2.10.1 Prior Conditions Satisfied. All conditions precedent to closing shall continue to be satisfied as of the date of the
Initial Advance (in the same manner in which they were satisfied for the closing without reimposing
any one-time condition).
2.10.2 Performance; No Default. Borrower shall have performed and complied with all terms and conditions herein required to
be performed or complied with by it at or prior to the date of such Initial Advance, and on the
date of such Initial Advance there shall exist no Default or Event of Default.
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2.10.3 Representations and Warranties. The representations and warranties made by Borrower or Guarantor in the Loan Documents or
otherwise made by or on behalf of Borrower or Guarantor in connection therewith after the date
thereof shall have been true and correct in all material respects on the date on which made and
shall also be true and correct in all material respects on the date of the Initial Advance.
2.10.4 No Damage. The Project Improvements shall not have been injured or damaged by fire, explosion,
accident, flood or other casualty, unless Lender shall be satisfied that sufficient insurance
proceeds will be available in the reasonable judgment of Lender to effect the satisfactory
restoration of the Project Improvements and to permit the Completion of the Improvements prior to
the Required Completion Date.
2.10.5 Government Approvals. Borrower shall have delivered to Lender evidence satisfactory to Lender that all
Governmental Approvals necessary for the demolition of the existing improvements as contemplated by
the Plans and Specifications, have been obtained and are in full force and effect.
2.10.6 Final Project Report. The Final Project Report shall have been delivered to Lender by the Construction
Consultant.
2.10.7 Development Budget. Borrower shall have prepared and Lender and Construction Consultant shall have approved
the Development Budget (including both the Building Loan Budget and the Project Loan Budget) and
the Disbursement Schedule.
2.10.8 Plans and Specifications. Two (2) complete sets of the Plans and Specifications and any and all modifications and
amendments made thereto which have been reviewed and approved by (A) Lender, and (B) the
Construction Consultant. Borrower shall deliver to Lender a list identifying the Plans and
Specifications and any and all modifications and amendments made thereto.
2.10.9 General Contractor’s Agreement. Borrower and an unaffiliated General Contractor have entered into a Standard Form of
Agreement between Owner and Contractor (Where the basis for payment is a STIPULATED SUM), dated as
of October 18, 2007, that obligates the General Contractor to cause the Completion of the
Improvements to occur prior to the Required Completion Date at a fixed price, reasonably acceptable
to Lender and the Construction Consultant in both form and substance (once approved, the “General
Contractor’s Agreement”). The General Contractor’s Agreement, shall have been duly executed and
delivered by the parties thereto, shall be in full force and effect and Lender shall have received
a certified copy or a fully executed duplicate original thereof. The General Contractor shall have
duly executed and delivered to Lender a consent to the assignment of the General Contractor’s
Agreement, in form and substance reasonably satisfactory to Lender, and Lender shall have received
a certified copy or a fully executed duplicate original thereof. If General Contractor consist of
more than one Person, then each such Person shall deliver a consent to the assignment of the
General Contractor’s Agreement, in form and substance satisfactory to Lender, and Lender shall have
received a certified copy or a fully executed duplicate original thereof.
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2.10.10 Architect’s and General Contractor’s Certificates. Certificates from the Borrower’s Architect (the “Architect’s Certificate”)
substantially in the form attached hereto as Exhibit F and from the General Contractor (the
“General Contractor’s Certificate”) substantially in the form attached hereto as Exhibit G.
2.10.11 Contracts and Subcontracts. Borrower shall have delivered to Lender, and Lender and Construction Consultant shall have
approved a list, certified by Borrower, of all Contractors and Subcontractors who have been or, to
the extent identified by Borrower, will be supplying labor or materials for the Property. The list
of Contractors and Subcontractors may be amended from time to time subject to the approval of
Lender and Construction Consultant, in accordance with the terms hereof. Borrower shall have
delivered to Lender all Contract and Major Contracts for all of the work necessary for Completion
of the Improvements, and Lender and Construction Consultant shall have approved all such Major
Contracts. No Advance shall be made by Lender with regard to work done by or on behalf of any
Contractor or Subcontractor unless Borrower shall have delivered to Lender and Construction
Consultant originals of the following documents as to such Contractor or Subcontractor, each in
form and substance reasonably satisfactory to Lender:
(a) Performance Letters. if requested by Lender, a performance letter (“Performance
Letter”) substantially in the form attached hereto as Exhibit H from such Contractors
and/or Subcontractors as Lender shall designate.
(b) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.10.12 Contractors’ Consent to Assignment. Each Contractor, Sub-Contractor and Other Design Professionals shall have delivered a
consent to the assignment of each of their Contracts, in form and substance satisfactory to Lender,
and Lender shall have received a certified copy or a fully executed duplicate original of each such
Contract.
2.10.13 Cash Management. Lender has determined that the Cash Management Conditions have been satisfied.
2.10.14 Notices. All notices required by any Governmental Authority or by any applicable Legal Requirement
to be filed prior to commencement of construction of the Project Improvements shall have been
filed.
2.10.15 Deliveries. Lender shall have received:
(a) Draw Request. A Draw Request complying with the requirements hereof;
(b) Affirmation of Payment. An Affirmation of Payment;
(c) Title Insurance Policy. A Title Insurance Policy for the full amount of the Loan,
which includes a pending disbursement clause to increase the coverage of the Title Insurance Policy
by the amount of the any Construction Advance, insuring the lien of the Mortgage subject to no
liens or encumbrances other than the Permitted Encumbrances;
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(d) Lien Waivers. Duly executed lien waivers, which shall be conditional lien waivers
or unconditional lien waivers, as determined by Lender in its sole discretion, and otherwise
substantially in the form set forth in Exhibit J from the General Contractor and all
Contractors and Subcontractors who have performed work, for the work so performed, and/or who have
supplied labor and/or materials, for the labor and/or materials so supplied, except for such work
or labor and/or materials for which payment thereof is requested, as to which duly executed lien
waivers shall be delivered to Lender with the next request for an Advance;
(e) Ratios. Evidence satisfactory to Lender that following the Initial Advance, the
Loan-to-Cost Ratio shall be no greater than 75%;
(f) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents;
(g) Anticipated Costs Report. An Anticipated Costs Report; and
(h) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.10.16 Building Loan Agreement Filed. This Building Loan Agreement shall have been filed in the Kings County Clerk’s Office.
2.10.17 Initial Project Loan Advance. All conditions to the initial advance of the Project Loan set forth in Section 2.10 of the
Project Loan Agreement shall have been satisfied.
2.10.18 Rate Lock Agreement. Simultaneously with the Initial Advance, Lender shall return to Borrower, a pro-rata
portion of the deposit held by Lender pursuant to the Rate Lock Agreement in such proportion as the
amount of the Initial Advance bears to the Total Loan Amount.
2.10.19 Initial Reserve Deposits Borrower shall have deposited the Initial Tax and Insurance Escrow Deposit and the Initial
Interest Reserve Deposit with Lender. The Initial Tax and Insurance Escrow Deposit and the Initial
Interest Reserve Deposit shall be funded on the date of the Initial Advance with a portion of the
Initial Advance under the Project Loan.
2.10.20 Satisfaction of Initial Advance Conditions. Borrower acknowledge that certain Initial Advance Conditions, including, without
limitation, [SUBJECT TO REVIEW BY LENDER] [(i) delivery to and approval by Lender of final Plans
and Specifications, (ii) delivery to and approval by Lender of the final Development Budget,
Building Loan Budget, and Project Loan Budget, (iii) delivery to Lender of all permits required for
the demolition of the existing improvements on the Property, (iv) delivery to Lender of evidence
that Borrower maintains the Policies required under this Agreement, and (v) delivery to Lender of
Borrower’s Requisition and all required accompanying documents with respect to the Initial Advance
in accordance with Section 2.14.1 of this Agreement (the “Unsatisfied Initial Advance
Conditions”)]. Borrower covenants and agrees that, prior to the Required Initial Advance Date,
time being of the essence, it shall cause all of the Initial Advance Conditions, including, without
limitation, the Unsatisfied
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Initial Advance Conditions, to be satisfied. Borrower shall not perform any work at the
Property, including, without limitation, any demolition of the existing improvements, until all of
the Initial Advance Conditions including, without limitation, the Unsatisfied Initial Advance
Conditions, have been satisfied. Borrower’s failure to satisfy, or cause the satisfaction of, any
of the Initial Advance Conditions on or prior to the Required Initial Advance Date shall, at
Lender’s election, constitute an Event of Default. In addition to any and all other remedies that
may be available to Lender hereunder, under the other Loan Documents, at law or in equity, upon the
occurrence of an Event of Default resulting from the failure of any Initial Advance Condition to
have been satisfied, Borrower hereby irrevocably empowers Lender, in the name of Borrower as its
true and lawful attorney-in-fact, with full power of substitution to complete or undertake such
steps as may be necessary, in Lender’s sole determination, to satisfy the Initial Advance Condition
in the name of Borrower. Such power of attorney shall be deemed to be a power coupled with an
interest and cannot be revoked. Borrower empowers said attorney-in-fact as follows: (i) to employ
such contractors, subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iii) to pay, settle or compromise all existing bills and claims which are or may become
Liens against the Property, or as may be necessary or desirable for the completion of such Initial
Advance Conditions, or for clearance of title; (v) to execute all applications and certificates in
the name of Borrower which may be required by any of the contract documents; (vi) to prosecute and
defend all actions or proceedings in connection with the Property or the Project; and (vii) to do
any and every act which Borrower might do in its own behalf to fulfill the terms of this Agreement
and the other Loan Documents. In addition, upon such Event of Default,. Lender shall have the
right to unwind any interest rate hedge entered into by Lender and apply any deposits or other
amounts held by Lender pursuant to the Rate Lock Agreement to costs and expenses incurred by Lender
under this Agreement, the Rate Lock Agreement or any of the other Loan Documents.
Section 2.11 Construction Advances. The obligation of Lender to make the Advances of the Building Loan after the Initial
Advance shall be subject to the following conditions precedent (collectively, the “Construction
Advance Conditions”), all of which conditions precedent must be satisfied prior to Lender making
any such Advance:
2.11.1 Prior Conditions Satisfied. All conditions precedent to any prior Advance (in the same manner in which they were
satisfied for the Initial Advance or prior Advance, as applicable, and without reimposing any
one-time requirement) shall continue to be satisfied as of the date of such subsequent Advance.
2.11.2 Performance; No Default. Borrower shall have performed and complied with all terms and conditions herein required to
be performed or complied with by it at or prior to the date of such Advance, and on the date of
such Advance there shall exist no Default or Event of Default or Shortfall.
2.11.3 Representations and Warranties. The representations and warranties made by Borrower and Guarantor in the Loan Documents or
otherwise made by or on behalf of Borrower or Guarantor in connection therewith after the date
thereof shall have been true and correct in all material respects on the date on which made and
shall also be true and correct in all material respects on the date of such Advance.
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2.11.4 No Damage. The Improvements shall not have been injured or damaged by fire, explosion, accident, flood
or other casualty, unless Lender shall have received insurance proceeds sufficient in the
reasonable judgment of Lender to effect the satisfactory restoration of the Improvements and to
permit the Completion of the Improvements prior to the Required Completion Date.
2.11.5 Deliveries. The following items or documents shall have been delivered to Lender:
(a) Anticipated Costs Report. An anticipated cost report (“Anticipated Costs Report”)
in the form set forth in Exhibit I executed by the General Contractor which sets forth the
anticipated costs to complete construction of the Project Improvements, after giving effect to
costs incurred during the previous month and any anticipated change orders;
(b) Endorsement to Title Insurance Policy. A “datedown” endorsement to Lender’s title
insurance policy as described in the form set forth in Exhibit C hereto, which continuation
or endorsement shall increase the coverage of the Title Insurance Policy by the amount of the
Advance through the pending disbursement clause (but not the overall policy amount which shall be
for the full amount of the Loan), amend the effective date of the Title Insurance Policy to the
date of such Advance, continue to insure the lien of the Mortgage subject to no liens or
encumbrances other than the Permitted Encumbrances and which shall state that since the last
disbursement of the Loan there have been no changes in the state of title to the Property (other
than Permitted Encumbrances) and that there are no additional survey exceptions not previously
approved by Lender;
(c) Evidence of Sufficiency of Funds. Evidence satisfactory to Lender that the
proceeds of the Loan plus the Required Equity Funds will be sufficient to cover all Project-Related
Costs reasonably anticipated to be incurred and to satisfy the Obligations of Borrower to Lender
and under this Agreement and the other Loan Documents.
(d) Draw Request. A Draw Request complying with the provisions of this Agreement
which shall constitute Borrower’s representation and warranty to Lender that: (a) any completed
construction is substantially in accordance with the Plans and Specifications, (b) all costs for
the payment of which Lender have previously advanced funds have in fact been paid, (c) all the
representations and warranties contained in Article IV of this Agreement continue to be
true and correct in all material respects, (d) no Event of Default shall have occurred and be
continuing hereunder, and (e) Borrower continues to be in compliance in all respects with all of
the other terms, covenants and conditions contained in this Agreement.
(e) Affirmation of Payment. General Contractor’s Affirmation of Payment (“Affirmation
of Payment”) (AIA Form G706) in the form attached hereto as Exhibit E.
(f) Other Documents. Such other documents and certificates as Lender or its counsel
may reasonably require.
2.11.6 Construction Consultant Certificate. Each draw request relating to Hard Costs shall be accompanied by a certificate or report of
the Construction Consultant to Lender based upon a site observation of the Property made by the
Construction Consultant not more than
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thirty (30) days prior to the date of such draw, in which the Construction Consultant shall in
substance: (i) verify that the portion of the Project Improvements completed as of the date of
such site observation has been completed substantially in accordance with the Plans and
Specifications; and (ii) state its estimate of (1) the percentages of the construction of the
Project Improvements completed as of the date of such site observation on the basis of work in
place as part of the Project Improvements and the Building Loan Budget, (2) the Hard Costs actually
incurred for work in place as part of the Improvements as of the date of such site observation, (3)
the sum necessary to complete construction of the Project Improvements in accordance with the Plans
and Specifications, and (4) the amount of time from the date of such inspection that will be
required to achieve Completion of the Improvements.
2.11.7 Other Bids. If in the reasonable judgment of Lender and the Construction Consultant all Contracts,
Major Contracts, and the General Contractor’s Agreement do not cover all of the work necessary for
Completion of the Improvements, Borrower shall cause to be furnished firm bids from responsible
parties, or estimates and other information reasonably satisfactory to Lender, for the work not so
covered, to enable Lender to ascertain the total estimated cost of all work done and to be done.
2.11.8 Certification Regarding Chattels. Lender shall have received a certification from the Title Company or other service
satisfactory to Lender or counsel satisfactory to Lender (which shall be updated from time to time
at Borrower’s expense upon request by Lender in connection with future Advances) that a search of
the public records disclosed no significant or material changes since the Closing Date including no
judgment or tax liens affecting Borrower or Guarantor, the Property or the Personal Property, and
no conditional sales contracts, chattel mortgages, leases of personalty, financing statements
(other than those in favor of Lender) or title retention agreements which affect the Property.
2.11.9 Lien Waivers. Borrower shall have delivered duly executed lien waivers, which shall be conditional lien
waivers or unconditional lien waivers, as applicable, and otherwise substantially in the form set
forth in Exhibit J, from the General Contractor, all Major Contractors and Major
Subcontractors for all work performed, and all labor or material supplied for which payment thereof
has been made prior to the date of the Advance.
2.11.10 Construction Consultant Approval. Lender has received advice from the Construction Consultant, satisfactory to Lender, as to
Construction Consultant’s determination, acting reasonably, based on on-site inspections of the
Improvements and the data submitted to and reviewed by it as part of Borrower’s Requisition of the
value of the labor and materials in place, that the construction of the Project Improvements is
proceeding satisfactorily and according to schedule and that the work on account of which the
Advance is sought has been completed in a good and workmanlike manner to such Construction
Consultant’s satisfaction and substantially in accordance with the Plans and Specifications.
2.11.11 Ratios. Following such Advance (and any Project Loan Advance being made on such date), the
Loan-to-Cost Ratio shall be no greater than 75%.
2.11.12 Administration Fee. Borrower shall have paid the Administration Fee in accordance with the provisions of the
Administration Fee Agreement.
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2.11.13 Required Equity Funds. Borrower shall furnish Lender with evidence in form and content satisfactory to Lender that, as
of the date of each Advance, Borrower has invested Cash equity in an amount equal to or greater
than (a) $5,356,660.00 or (b) 25% of the Total Project Costs or (c) the difference between the
Development Budget and the maximum Loan amount of $16,150,000.00 for approved Project-Related Costs
(the “Required Equity Funds”). Notwithstanding the foregoing, if the Borrower realizes cost
savings from the development of the Project, either in the form of Hard Costs or Soft Costs,
Advances may be advanced to Borrower provided that (i) the Borrower would not have less than
$5,356,660.00 of cash equity in the Project through such Advance, (ii) the Debt Service Coverage
Ratio shall be equal to or greater than 1.70 to 1.0 assuming a fully advanced Loan using a debt
service constant of 7.50%, (iii) the Debt Service Coverage Ratio shall be equal to or greater than
1.20 to 1.0 assuming a fully advanced Loan using a debt service constant of 10.65%, and (iv) the
loan-to-value ratio for the Property is no greater than 75% assuming a fully advanced Loan. If
Borrower is in non-compliance solely with respect to condition (i) above, at Borrower’s
option, either (A) any excess cost savings (funds in excess of the amount so that the Required
Equity Funds shall continue to be satisfied) shall be deposited as follows: (1) 100% into the
Replacement Reserve Account, or (2) at Lender’s discretion, into any other Reserves required by
Lender pursuant to this Agreement, or (B) Borrower shall release Lender from its obligation to fund
the remaining amounts of the Loan and Borrower and any guarantor under the Rate Lock Agreement pays
for the breakage costs, if any, on the unfunded portion of the Loan payable pursuant to the Rate
Lock Agreement. If Borrower is in compliance with respect to condition (i) above but is
not in compliance with conditions (ii), (iii) and (iv) above, any excess
cost savings shall, at Borrower’s option, (A) be held back by Lender as additional collateral for
the Loan until satisfaction of each of the requirements are satisfied, or (B) be deposited as
follows: (1) 100% into the Replacement Reserve Account, or (2) at Lender’s discretion, into any
other Reserves required by Lender pursuant to this Agreement, or (C) Borrower shall release Lender
from its obligation to fund the remaining amounts of the Loan and Borrower and any guarantor under
the Rate Lock Agreement pays for the breakage costs, if any, on the unfunded portion of the Loan
payable pursuant to the Rate Lock Agreement.
2.11.14 Rate Lock Agreement. Simultaneously with each Construction Advance, Lender shall return to Borrower, a pro-rata
portion of the deposit held by Lender pursuant to the Rate Lock Agreement in such proportion as the
amount of the Construction Advance bears to the Total Loan Amount, provided, however, that in the
event that any of the conditions of Section 2.11.13 are not satisfied, Lender shall have
the right to apply the portion of the deposit under the Rate Lock Agreement to be returned to
Borrower to satisfy the conditions of Section 2.11.13.
2.11.15 Government Approvals. Lender shall not be required to make Construction Advances for any phase of the
construction of the Project Improvements unless and until Borrower shall have delivered to Lender
evidence satisfactory to Lender that all Governmental Approvals necessary for the construction of
the phase of the Project Improvements to be constructed by Borrower as contemplated by the Plans
and Specifications have been obtained and are in full force and effect, including, without
limitation, the final approval of the Plans and Specifications by the City of New York for the
Project Improvements and a building permit(s) covering the entire scope of work contemplated by the
Project Improvements in accordance with the approved Plans and Specification “lawfully issued” to
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Borrower within the meaning of Section 11-31(a) of the Zoning Resolution of the City of New
York (the “Zoning Resolution).
Section 2.12 Final Advance.
2.12.1 Conditions to Release of Final Advance. In addition to the conditions set forth in Section 2.10 and Section 2.11,
above, Lender’s obligation to make the final Advance in the amount calculated pursuant to
Section 2.12.2 of this Agreement (the “Final Advance”) shall be subject to receipt by
Lender of the following:
(a) Completion of Improvements. Evidence satisfactory to Lender and the Construction
Consultant that the Completion of the Improvements has occurred.
(b) Final Project Loan Advance. All conditions to the Final Project Loan Advance have
been satisfied and the Final Project Loan Advance shall have been made or will be made
simultaneously therewith.
(c) Lien Waivers. Duly executed final lien waivers, which shall be conditional lien
waivers or unconditional lien waivers, as determined by Lender in its sole discretion, and
otherwise substantially in the form attached hereto as Exhibit J from the General
Contractor and Major Contractors and Major Subcontractors who have performed work for the work so
performed, and/or who have supplied labor and/or materials for the labor and/or materials so
supplied.
(d) “As-Built” Plans and Specifications. A full and complete set of “as built” Plans
and Specifications certified to by Borrower’s Architect.
(e) Administration Fee. Borrower shall have paid the Administration Fee in accordance
with the provisions of the Administration Fee Agreement.
(f) Certificates. Completed AIA Form G704 (Certificate of Substantial Completion) and
completed AIA Form G707 (Consent of Surety to Final Payments) shall have been executed and
delivered by Borrower’s Architect and General Contractor.
(g) Deposits to Reserves. If Lender determines that any Punch List Work or Deferred
Maintenance Condition exists, the Punch List and Deferred Maintenance Deposit has been made, if
Lender determines that the deposits are required to the Operating Reserve Account, the Operating
Reserve Deposit has been made, and all other deposits to the Reserve Funds required by this
Agreement have been made.
(h) Other Documents. Such documents, letters, affidavits, reports and assurances, as
Lender, Lender’s counsel and the Construction Consultant may reasonably require.
(i) Required Ratios at Completion. Lender shall have determined that, following the
Final Advance (and taking into consideration the Final Project Loan Advance under the Project
Loan): (i) the Loan-to-Cost Ratio shall be no more than 75%; (ii) the Stabilized Loan-to-Value
Ratio shall be no more than 75%; (iii) the Stabilized Net Cash Flow for the entire
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Property shall be not less than $2,064,000; (iv) the Debt Service Coverage Ratio based on
Lender’s underwritten Net Operating Income and the greater of the actual debt service constant or
10.65% shall be 1.20 to 1.0 or greater; and (v) the Debt Service Coverage Ratio based on the
Stabilized Net Cash Flow and the greater of the actual debt service constant or 7.50.% shall be
1.70 to 1.0 or greater (the “Required Ratios at Completion”), or Borrower shall have deposited with
Lender Cash or a Letter of Credit to satisfy the Required Ratios at Completion in accordance with
Section 2.12.2.
(j) Tenant Estoppel Certificates. Borrower shall have delivered to Lender estoppel
certificates from all of the tenants at the Property in form and substance satisfactory to Lender.
(k) Required Equity Funds. Borrower shall furnish Lender with evidence in form and
content satisfactory to Lender that, as of the date of the Final Advance, Borrower has invested
Cash equity in an amount equal to or greater than the Required Equity Funds or has otherwise
complied with the provisions of Section 2.11.13 with respect thereto.
(l) Insolvency Opinion. The issuance of and delivery to Lender of six (6) original
counterparty Insolvency Opinions in the form attached hereto as Exhibit K from Wachtel &
Masyr, LLP or another law firm reasonably acceptable to Lender.
(m) ICIP Eligibility. Evidence satisfactory to Lender that Borrower has obtained a
Certificate of Eligibility under the Industrial and Commercial Incentive Program.
2.12.2 Amount of Final Advance. Except as expressly provided for below, the amount of
the Final Advance shall be equal to the sum of: (a) any Retainage not previously released and
advanced to Borrower; plus (b) the amount of any Punch List and Deferred Maintenance Reserve
Deposit; plus (c) the positive difference, if any, between, (i) the Building Loan Amount and (ii)
all amounts previously Advanced under the Building Loan (including the amounts described in
clauses (a) and (b) of the sentence). The portion of the Final Advance described in
clause (c) of the foregoing sentence is referred to herein as the “Building Loan Earn Out
Advance” and the corresponding portion of the Final Project Loan Advance is referred to herein as
the “Project Loan Earn Out Advance” and together with the Building Loan Earn Out Advance, the “Earn
Out Advances”. Notwithstanding anything to the contrary provided for herein, the Earn Out Advances
shall be reduced, pro rata, but not below $0.00, if and to the extent necessary for the Required
Ratios at Completion to be achieved following the Final Advances. In addition, if the Required
Ratios at Completion cannot be achieved even if the Earn Out Advances are reduced to $0.00, Lender
shall have the right, but not the obligation, to apply any deposits held by Lender pursuant to the
Rate Lock Agreement and any Interest Reserve Funds to the payment of the Building Loan and the
Project Loan in such order and priority as Lender shall determine in its sole discretion. If the
Required Ratios at Completion cannot be achieved even if the Earn Out Advances are reduced to $0.00
and the deposits, if any under the Rate Lock Agreement and the Interest Reserve Funds are applied
to the payment of the Loan, Borrower shall deposit with Lender Cash or a Letter of Credit
satisfactory to Lender in an amount equal to the amount which, if used to pay down the Loan, would
result in Stabilized Loan-to-Value Ratio of 75%, and a Debt Service Coverage Ratio of 1.70 to 1.0,
calculated based upon Lender’s determination on a pro-forma basis of Lender’s Stabilized Net Cash
Flow for the
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12 months immediately following and assuming a thirty (30) year amortization schedule based
upon a debt service constant equal to the greater of the actual debt service constant and 7.50% and
a Debt Service Coverage Ratio of 1.20 to 1.0, calculated based upon Lender’s determination on a
pro-forma basis of Lender’s underwritten Net Operating Income for the 12 months immediately
following and assuming a thirty (30) year amortization schedule based upon a debt service constant
equal to the greater of the actual debt service constant and 10.65%.
2.12.3 Rate Lock Agreement. Upon satisfaction of all of the conditions to the Final Advance set forth in Section
2.12.1, and subject to the provisions of Section 2.12.2, Lender shall return to
Borrower, the remaining deposits, if any, held by Lender under the Rate Lock Agreement and not
applied by Lender in accordance with the provisions of the Rate Lock Agreement and any Interest
Reserve Funds held by Lender pursuant to this Agreement.
Section 2.13 No Reliance. All conditions and requirements of this Agreement are for the sole benefit of Lender and no
other person or party (including, without limitation, the Construction Consultant, the General
Contractor and subcontractors (including, without limitation, Major Contractors and Major
Subcontractors) and materialmen engaged in the construction of the Improvements) shall have the
right to rely on the satisfaction of such conditions and requirements by Borrower. Lender shall
have the right, in its sole and absolute discretion, to waive any such condition or requirement.
Section 2.14 Method of Disbursement of Loan Proceeds.
2.14.1 Draw Request to Be Submitted to Lender. At such time as Borrower shall desire to obtain an Advance, Borrower shall complete,
execute and deliver to Lender a Borrower’s Requisition in the form attached hereto as Exhibit
L (“Borrower’s Requisition”).
(a) Borrower’s Requisition shall be accompanied by a completed and itemized Application and
Certificate for Payment (AIA Document No. G702) attached hereto as Exhibit M or similar
form approved by Lender, containing the certification of the General Contractor or contractor or
subcontractor to whom such payment is made, as applicable, and Borrower’s Architect as to the
accuracy of same, together with invoices relating to all items of Hard Costs covered thereby and
accompanied by a cost breakdown showing the cost of work on, and the cost of materials incorporated
into, the Improvements to the date of the requisition. The cost breakdown shall also show the
percentage of completion of each line item on the Building Loan Budget, and the accuracy of the
cost breakdown shall be certified by Borrower and by Borrower’s Architect. All such applications
for payment shall also show all contractors and subcontractors, including Major Contractors and
Major Subcontractors, by name and trade, the total amount of each contract or subcontract, the
amount theretofore paid to each subcontractor as of the date of such application, and the amount to
be paid from the proceeds of the Advance to each contractor and subcontractor;
(b) the completed construction will be reviewed by the Construction Consultant who will
certify to Lender as to the value of completed construction, percentage of completion and
compliance with Plans and Specifications;
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(c) lien waivers from each other Major Contractor and Major Subcontractors for work done and
materials supplied by them which were paid for pursuant to any prior Draw Request;
(d) a written request of Borrower for any necessary changes in the Plans and Specifications,
the Building Loan Budget, the Disbursement Schedule or the Construction Schedule;
(e) copies of all executed change orders, contracts and subcontracts, and, to the extent
requested by Lender, of all inspection or test reports and other documents relating to the
construction of the Project Improvements not previously delivered to Lender; and
(f) such other information, documentation and certification as Lender shall reasonably
request.
2.14.2 Procedure of Advances.
(a) Each Draw Request shall be submitted to Lender and Construction Consultant at least ten
(10) Business Days prior to the date of the requested Advance (the “Requested Advance Date”), and
no more frequently than monthly. Lender shall make the requested Advance on the Requested Advance
Date so long as all conditions to such Advance are satisfied or waived.
(b) Not later than 11:00 A.M. New York City time, on the Requested Advance Date, Lender shall
make such Advance available to Borrower in accordance with the terms of this Section 2.14.
(c) Each Advance (other than the Final Advance) shall be in an amount of not less than
$250,000.00.
(d) Each Advance shall be made on a Payment Date.
2.14.3 Funds Advanced. Each Advance shall be made by Lender by wire transfer to such checking account of Borrower
as specified to Lender in writing or as provided in Section 2.14.4 below. All proceeds of
all Advances shall be used by Borrower only for the purposes for which such Advances were made.
Borrower shall not commingle such funds with other funds of Borrower.
2.14.4 Direct Advances to Third Parties. Lender may make, at Lender’s option, any or all Advances directly or through the Title
Company to (i) any Contractor, as applicable, for construction expenses which shall theretofore
have been approved by Lender and for which Borrower shall have failed to make payment after receipt
by Borrower of such applicable Advance, (ii) Borrower’s Architect to pay its fees to the extent
funds are allocated thereto in the Building Loan Budget if Borrower shall have failed to do so,
(iii) the Construction Consultant to pay its fees, (iv) Lender’s counsel to pay its fees, (v) to
pay (x) any installment of interest due under the Note, (y) any expenses incurred by Lender which
are reimbursable by Borrower under the Loan Documents (including, without limiting the generality
of the foregoing, reasonable attorneys’ fees and expenses and other fees and expenses incurred by
Lender), provided that
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Borrower shall theretofore have received notice from Lender that such expenses have been
incurred and Borrower shall have failed to reimburse Lender for said expenses beyond any grace
periods provided for said reimbursement under the Note, this Agreement or any of the other Loan
Documents, or (z) following the occurrence and continuation of an Event of Default, any other sums
due to Lender under the Note, this Agreement or any of the other Loan Documents, all to the extent
that the same are not paid by the respective due dates thereof, and (vi) any other Person to whom
Lender in good faith determines payment is due and any portion of the Loan so disbursed by Lender
shall be deemed disbursed as of the date on which the Person to whom payment is made receives the
same. The execution of this Agreement by Borrower shall, and hereby does, constitute an
irrevocable authorization so to advance the proceeds of the Loan directly to any such Person or
through the Title Company to such Persons in accordance with this Section 2.14.4 as amounts
become due and payable to them hereunder and any portion of the Loan so disbursed by Lender shall
be deemed disbursed as of the date on which the Person to whom payment is made receives the same.
No further authorization from Borrower shall be necessary to warrant such direct Advances to such
relevant Person, and all such Advances shall satisfy pro tanto the obligations of Lender hereunder
and shall be secured by the Mortgage and the other Loan Documents as fully as if made directly to
Borrower.
2.14.5 One Advance Per Month. Lender shall have no obligation to make Advances of the Loan more often than once in each
calendar month except that Lender, in its sole discretion, shall have the right but not the
obligation, to make additional advances per month for interest, fees and expenses due under the
Loan Documents.
2.14.6 Advances Do Not Constitute a Waiver. No Advance shall constitute a waiver of any of the conditions of Lender’s obligation to
make further Advances nor, in the event Borrower is unable to satisfy any such condition, shall any
Advance have the effect of precluding Lender from thereafter declaring such inability to be an
Event of Default hereunder.
2.14.7 Trust Fund Provisions. All proceeds advanced hereunder shall be subject to the trust fund provisions of
Section 13 of the Lien Law. The affidavit attached hereto as Exhibit D is made
pursuant to and in compliance with Section 22 of the Lien Law, and, if so indicated in said
affidavit, Building Loan proceeds will be used, in part, for reimbursement for payments made by the
Borrower prior to the Initial Advance hereunder but subsequent to the commencement of the
construction and equipping of the Improvements for items constituting Costs of the Improvement.
2.14.8 Advances and Disbursements Under Completion Guaranty. Notwithstanding anything to the contrary contained in this Agreement or in any other Loan
Document, Borrower hereby irrevocably and unconditionally authorizes Lender to make any
disbursements of proceeds of the Loan or of any Reserve Funds held by Lender to Guarantor in
accordance with the Guaranty of Completion.
Section 2.15 Plan Review Process.
(a) Borrower hereby acknowledges and agrees that neither Lender nor the Construction
Consultant’s approval of any Plans and Specifications (or any revisions thereto), nor its
inspection of the performance of the construction, nor its right to inspect such work, shall
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impose upon Lender and/or Construction Consultant any obligation or liability whatsoever with
respect thereto, including, without limitation, any obligation or liability that might arise as a
result of such work not being performed in accordance with applicable laws and/or requirements of
public authorities or with the Plans and Specifications (and revisions thereto) approved by Lender
and Construction Consultant or otherwise. The review or approval by Lender and Construction
Consultant of any Plans and Specifications or any revisions thereto is solely for Lender’s benefit,
and is without any representation or warranty whatsoever with respect to the adequacy, correctness
or efficiency thereof or otherwise. The granting by Lender and/or Construction Consultant of its
approval of any Plans and Specifications or any revisions thereto, shall not in any manner
constitute or be deemed to constitute a judgment or acknowledgment by Lender as to their legality
or compliance with laws and/or requirements of public authorities.
ARTICLE III.
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Closing. The obligation of Lender to make the Loan hereunder is subject to the fulfillment by
Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date:
3.1.1 Representations and Warranties; Compliance with Conditions. The representations and warranties of Borrower contained in this Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on and as of such date, and no Default or an Event of Default shall
have occurred and be continuing; and Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each other Loan Document on its part to
be observed or performed.
3.1.2 Loan Agreement and Note. Lender shall have received a copy of this Agreement and the Note, in each case, duly
executed and delivered on behalf of Borrower.
3.1.3 Delivery of Loan Documents; Title Insurance; Reports; Leases.
(a) Mortgage, Assignment of Leases. Lender shall have received from Borrower fully
executed and acknowledged counterparts of the Mortgage and the Assignment of Leases and evidence
that counterparts of the Mortgage and Assignment of Leases have been delivered to the Title Company
for recording, in the reasonable judgment of Lender, so as to effectively create upon such
recording valid and enforceable Liens upon the Property, of the requisite priority, in favor of
Lender or Lender’s nominee (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
other Loan Documents.
(b) Title Insurance. Lender shall have received the Title Insurance Policy issued by
a title company acceptable to Lender (the “Title Company”) and dated as of the Closing Date, with
reinsurance and direct access agreements acceptable to Lender. Such Title Insurance Policy shall
(i) provide coverage in amounts satisfactory to Lender, (ii) insure Lender
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that the Mortgage creates a valid lien on the Property of the requisite priority, free and
clear of all exceptions from coverage other than Permitted Encumbrances and standard exceptions and
exclusions from coverage (as modified by the terms of any endorsements), (iii) contain such
endorsements and affirmative coverages as Lender may reasonably request, and (iv) name Lender as
the insured. The Title Insurance Policy shall be assignable. Lender also shall have received
evidence that all premiums in respect of such Title Insurance Policy have been paid.
(c) Survey. Lender shall have received a title survey for the 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 Accuracy Standards for ALTA/ACSM Land Title Surveys as adopted by American Land
Title Association, American Congress on Surveying & Mapping and National Society of Professional
Surveyors in 1999 or in such other form as Lender shall approve (the “Survey”). The Survey shall
reflect the same legal description contained in the Title Insurance Policy referred to in
clause (b) above and shall include, among other things, a metes and bounds description of
the real property comprising part of the Property reasonably satisfactory to Lender. The
surveyor’s seal shall be affixed to the Survey and the surveyor shall provide a certification for
the Survey in form and substance acceptable to Lender.
(d) 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.
(e) Environmental Reports. Lender shall have received a Phase I environmental report
(and, if recommended by the Phase I environmental report, a Phase II environmental report) in
respect of the Property, in each case satisfactory in form and substance to Lender.
(f) Zoning. Evidence reasonably acceptable to Lender confirming that the Project
Improvements can be developed and constructed in accordance with the Plans and Specifications “as
of right” without requiring the issuance of any zoning variance or other discretionary permit
and/or approval and such other matters as Lender may reasonably require.
(g) Encumbrances. Borrower shall have taken or caused to be taken such actions in
such a manner so that Lender has a valid and perfected first priority Lien as of the Closing Date
with respect to the Mortgage, subject only to applicable Permitted Encumbrances and such other
Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory
evidence thereof.
3.1.4 Related Documents. Each additional document not specifically referenced herein, but relating to the
transactions contemplated herein, shall be in form and substance reasonably satisfactory to Lender,
and shall have been duly authorized, executed and delivered by all parties thereto and Lender shall
have received and approved certified copies thereof.
3.1.5 Delivery of Organizational Documents. On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender
copies certified by Borrower of all
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organizational documentation related to Borrower and/or the formation, structure, existence,
good standing and/or qualification to do business, as Lender may request in its sole discretion,
including, without limitation, amendments (as requested by Lender), good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions authorizing the
entering into of the Loan and incumbency certificates as may be requested by Lender.
3.1.6 Opinions of Borrower’s Counsel. Lender shall have received opinions from Borrower’s counsel with respect to due
execution, authority, enforceability of the Loan Documents and such other matters as Lender may
reasonably require, including, without limitation, the Insolvency Opinion, all such opinions in
form, scope and substance satisfactory to Lender and Lender’s counsel in their sole discretion.
3.1.7 Development Budget. Borrower shall have delivered, and Lender and Construction Consultant shall have
approved, the Development Budget and the Disbursement Schedule attached thereto, and certified by
Borrower as being true, correct and complete.
3.1.8 Carrying Costs. Borrower shall have paid all Carrying Costs relating to the Property then due and payable
including without limitation, (a) accrued but unpaid Insurance Premiums due pursuant to the
Policies, (b) currently due Taxes (including any in arrears) relating to the Property, and (c)
currently due Other Charges relating to the Property, which amounts shall be funded with proceeds
of the Loan.
3.1.9 Completion of Proceedings. All organizational 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 satisfactory to Lender, and Lender shall have
received all such counterpart originals or certified copies of such documents as Lender may
reasonably request.
3.1.10 Payments. All payments, deposits or escrows required to be made or established by Borrower under this
Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been
paid.
3.1.11
Payment of Fees. Payment by Borrower of all fees and expenses required by this Agreement and/or the other
Loan Documents, to the extent due and payable, including, without limitation, Lender’s reasonable
attorneys’ fees and expenses, all origination fees, and brokerage commissions.
3.1.12 Transaction Costs. Borrower shall have paid or reimbursed Lender for all title insurance premiums, recording
and filing fees, costs of environmental reports, Physical Conditions Report, appraisals and other
reports, the fees and costs of Lender’s counsel, and all other third party out-of-pocket expenses
incurred in connection with the origination and closing of the Loan.
3.1.13 Material Adverse Change. There shall have been no material adverse change in the financial condition or business
condition of Borrower, any one or more of the Persons comprising Guarantor that, in the aggregate,
constitutes a material adverse change in the financial condition of the Guarantor collectively, or
a material adverse change in the Property since the date of the most recent financial statements delivered to Lender. The income and
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expenses of the Property, the occupancy thereof, and all other features of the transaction shall be
as represented to Lender without material adverse change. Neither Borrower, Guarantor nor any of
their respective constituent Persons shall be the subject of any bankruptcy, reorganization, or
insolvency proceeding.
3.1.14 Required Equity Funds. Borrower shall furnish Lender with evidence in form and content satisfactory to Lender
that Borrower has contributed the Required Equity Funds for approved Project-Related Costs.
3.1.15 Ratios. Following the Initial Advance, the Loan-to-Cost Ratio shall be no greater than 75%.
3.1.16 Intentionally Omitted
3.1.17 Physical Conditions Report. Lender shall have received a Physical Conditions Report with respect to the Property, which
report shall be issued by an engineer selected by Lender and shall be reasonably satisfactory in
form and substance to Lender.
3.1.18 The Architect’s Contract. The Architect’s Contract in form and substance satisfactory to Lender, shall have been duly
executed and delivered by the parties thereto, shall be in full force and effect and Lender shall
have received a certified copy or a fully executed duplicate original thereof. Borrower’s
Architect shall have duly executed and delivered to Lender a consent to the assignment of the
Architect’s Contract, in form and substance satisfactory to Lender, and Lender shall have received
a certified copy or a fully executed duplicate original thereof. If Borrower’s Architect consists
of more than one Person, then each such Person shall deliver a consent to the assignment of the
Architect’s Contract in form and substance satisfactory to Lender, and Lender shall have received
a certified copy or a fully executed duplicate original thereof. All Other Design Professionals
shall deliver a consent to the assignment to each of their Contracts, in form and substance
satisfactory to Lender, and Lender shall have received a certified copy or a fully executed
duplicate original of each such Contract.
3.1.19 Appraisal. Lender shall have received an appraisal of the Property, from an appraiser selected by
Lender, which appraisal shall be satisfactory in form and substance to Lender.
3.1.20 Deliveries. The following items or documents shall have been delivered to Lender:
(a) Plans and Specifications. Two (2) complete sets of the Plans and Specifications
and any and all modifications and amendments made thereto which have been reviewed and approved by
Lender and the Construction Consultant. Borrower shall deliver to Lender a list identifying the
Plans and Specifications and any and all modifications and amendments made thereto.
(b) Insurance. All Policies of insurance (or certificates thereof) required by
Section 6.1 of this Agreement or any other Loan Document.
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(c) Final Project Report. The Final Project Report shall have been delivered to
Lender by the Construction Consultant.
(d) Certification Regarding Chattels. Lender shall have received a certification from
the Title Company or other service satisfactory to Lender or counsel satisfactory to Lender (which
shall be updated from time to time at Borrower’s expense upon request by Lender in connection with
future Advances) that a search of the public records disclosed no significant or material changes
since the Closing Date including no judgment or tax liens affecting Borrower or Guarantor, the
Property or the Personal Property, and no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements (other than those in favor of Lender) or title retention
agreements which affect the Property.
(e) Construction Schedule. The Construction Schedule, certified by Borrower as being
true, correct and complete, which shall have been approved by Lender and the Construction
Consultant.
(f) Evidence of Vacancy. Evidence that the Property and Existing Improvements are
free of tenants, occupants and any claims of tenancy or a right of occupancy.
(g) ICIP Eligibility. Evidence satisfactory to Lender that Borrower has applied for a
Certificate of Eligibility under the Industrial and Commercial Incentive Program.
3.1.21 Management Agreement. Lender shall have received a certified copy of each Management
Agreement with respect to the Property which shall be satisfactory in form and substance to Lender.
3.1.22 Subordination. Lender shall have received the Subordination of Affiliate Fee executed
by Borrower, Guarantor, each member of Borrower or any other Affiliate of Borrower entitled to an
Affiliate Fee.
3.1.23 Conditional Use Permit.. Borrower shall have delivered to Lender evidence
satisfactory to Lender that Borrower has obtained an extension or renewal of the conditional use
permit for the Property permitting the Property to be used for a self-storage facility.
3.1.24 Further Documents. Lender or its counsel shall have received such other documents and
further approvals, opinions, documents and information as Lender or its counsel may have reasonably
requested including the Loan Documents in form and substance satisfactory to Lender and its
counsel.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations. Borrower represents and warrants as of the date hereof and
as of the Closing Date that:
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4.1.1 Organization. Borrower has been duly organized and is validly existing and in good
standing with requisite power and authority to own its properties and to transact the businesses in
which it is now engaged. Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its properties, businesses
and operations. Borrower possesses all rights, licenses, permits and authorizations, governmental
or otherwise, necessary to entitle it to own its properties and to transact the businesses in which
it is now engaged, and the sole business of Borrower is the ownership, management and operation of
the Property. The ownership interests in Borrower are as set forth on the organizational chart
attached hereto as Schedule I.
4.1.2 Proceedings. Borrower has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the other Loan Documents. This Agreement and such
other Loan Documents have been duly executed and delivered by or on behalf of Borrower and
constitute legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject only to applicable bankruptcy, insolvency and
similar laws affecting rights of creditors generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at
law).
4.1.3 No Conflicts. The execution, delivery and performance of this Agreement and the other
Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or
assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement, management agreement or other agreement or instrument to which Borrower is a
party or by which any of Borrower’s property or assets is subject, nor will such action result in
any violation of the provisions of any statute or any order, rule or regulation of any Governmental
Authority having jurisdiction over Borrower or any of Borrower’s properties or assets, and any
consent, approval, authorization, order, registration or qualification of or with any court or any
such Governmental Authority required for the execution, delivery and performance by Borrower of
this Agreement or any other Loan Documents has been obtained and is in full force and effect.
4.1.4 Litigation. There are no actions, suits or proceedings at law or in equity by or
before any Governmental Authority or other agency now pending, or threatened against or affecting
Borrower, Guarantor or the Property, which actions, suits or proceedings, if determined against
Borrower, Guarantor or the Property, might materially adversely affect the condition (financial or
otherwise) or business of Borrower, Guarantor or the condition or ownership of the Property.
4.1.5 Agreements. Borrower is not a party to any agreement or instrument or subject to any
restriction which might materially and adversely affect Borrower or the Property, or Borrower’s
business, properties or assets, operations or condition, financial or otherwise. Borrower is not
in default in any material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to which it is a
party or by which Borrower or the Property is bound. Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other
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agreement or instrument to which Borrower is a party or by which Borrower or the Property is
otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the
Property as permitted pursuant to clause (xx) of the definition of “Special Purpose Entity”
set forth in Section 1.1 hereof and (b) obligations under the Loan Documents.
4.1.6 Title. Borrower has good, marketable and insurable fee simple title to the real
property comprising part of the Property and good title to the balance of the Property, free and
clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted
pursuant to the Loan Documents and the Liens created by the Loan Documents. The Permitted
Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of
the Property (as currently used) or Borrower’s ability to repay the Loan. The Mortgage, when
properly recorded in the appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (a) a valid, perfected first
priority lien on the Property, subject only to Permitted Encumbrances and the Liens created by the
Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments
of, all 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. There are no claims for payment
for work, labor or materials affecting the Property which are or may become a Lien prior to, or of
equal priority with, the Liens created by the Loan Documents.
4.1.7 Solvency. Borrower has (a) not entered into this transaction or executed the Note,
this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any
creditor and (b) received reasonably equivalent value in exchange for its obligations under such
Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds
and will, immediately following the making of the Loan, exceed Borrower’s total liabilities,
including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.
The fair saleable value of Borrower’s assets is and will, immediately following the making of the
Loan, be greater than Borrower’s probable liabilities, including the maximum amount of its
contingent liabilities on its debts as such debts become absolute and matured. Borrower’s assets
do not and, immediately following the making of the Loan will not, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted. Borrower does not
intend to, and does not believe that it will, incur debt and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such debt and liabilities as they
mature (taking into account the timing and amounts of cash to be received by Borrower and the
amounts to be payable on or in respect of obligations of Borrower). No petition in bankruptcy has
been filed against Borrower or any Guarantor in the last seven (7) years, and neither Borrower nor
any Guarantor in the last seven (7) years has ever made an assignment for the benefit of creditors
or taken advantage of any insolvency act for the benefit of debtors. Neither Borrower nor any
Guarantor 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 Borrower’s assets or
property, and Borrower has no knowledge of any Person contemplating the filing of any such petition
against it or such constituent Persons.
4.1.8 Full and Accurate Disclosure. No statement of fact made by Borrower in this Agreement
or in any of the other Loan Documents contains any untrue statement of a
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material fact or omits to state any material fact necessary to make statements contained
herein or therein not misleading. There is no material fact presently known to Borrower which has
not been disclosed to Lender which adversely affects, nor as far as Borrower can foresee, might
adversely affect, the Property or the business, operations or condition (financial or otherwise) of
Borrower.
4.1.9 No Plan Assets. Borrower does not sponsor, is not obligated to contribute to, and is
not itself an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of
ERISA or Section 4975 of the Code, and none of the assets of Borrower constitutes or will
constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section
2510.3-101. In addition, (a) Borrower is not a “governmental plan” within the meaning of Section
3(32) of ERISA and (b) transactions by or with Borrower are not subject to any state or other
statute , regulation or other restriction regulating investments of, or fiduciary obligations with
respect to, governmental plans within the meaning of Section 3(32) of ERISA which is similar to the
provisions of Section 406 of ERISA or Section 4975 of the Code and which prohibit or otherwise
restrict the transactions contemplated by this Agreement, including but not limited to the exercise
by Lender of any of its rights under the Loan Documents.
4.1.10 Compliance. Borrower and the Property and the use thereof comply in all material
respects with all applicable Legal Requirements, including, without limitation, building and zoning
ordinances and codes. To the best of Borrower’s knowledge, Borrower is not in default or violation
of any order, writ, injunction, decree or demand of any Governmental Authority. There has not been
committed by Borrower or any other Person in occupancy of or involved with the operation or use of
the Property any act or omission affording the federal government or any other Governmental
Authority the right of forfeiture as against the Property or any part thereof or any monies paid in
performance of Borrower’s obligations under any of the Loan Documents.
4.1.11 Financial Information. All financial data, including, without limitation, the
statements of cash flow and income and operating expense, that have been delivered to Lender in
connection with the Loan (i) are true, complete and correct in all material respects, (ii)
accurately represent the financial condition of Borrower and the Property, as applicable, as of the
date of such reports, and (iii) to the extent prepared or audited by an independent certified
public accounting firm, have been prepared in accordance with GAAP throughout the periods covered,
except as disclosed therein. Except for Permitted Encumbrances, Borrower does not have any
contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on the Property or the operation thereof as a
self-storage facility, except as referred to or reflected in said financial statements. Since the
date of such financial statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in said financial statements.
4.1.12 Condemnation. No Condemnation or other proceeding has been commenced or, to
Borrower’s best knowledge, is threatened or contemplated with respect to all or any portion of the
Property or for the relocation of roadways providing access to the Property.
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4.1.13 Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the
purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the
other Loan Documents.
4.1.14 Utilities and Public Access. The Property has rights of access to public ways and is
served by water, sewer, sanitary sewer and storm drain facilities adequate to service the Property
for its intended uses. All public utilities necessary or convenient to the full use and enjoyment
of the Property are located either in the public right-of-way abutting the Property (which are
connected so as to serve the Property without passing over other property) or in recorded easements
serving the Property and such easements are set forth in and insured by the Title Insurance Policy.
All roads necessary for the use of the Property for its current purposes have been completed and
dedicated to public use and accepted by all Governmental Authorities.
4.1.15 Not a Foreign Person. Borrower is not a “foreign person” within the meaning of
§1445(f)(3) of the Code.
4.1.16 Separate Lots. The Property is comprised of one (1) or more parcels which constitute
a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of the
Property.
4.1.17 Assessments. There are no pending or proposed special or other assessments for public
improvements or otherwise affecting the Property, nor are there any contemplated improvements to
the Property that may result in such special or other assessments.
4.1.18 Enforceability. The Loan Documents are not subject to any right of rescission,
set-off, counterclaim or defense by Borrower or Guarantor, 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 (subject to principles of equity and
bankruptcy, insolvency and other laws generally affecting creditors’ rights and the enforcement of
debtors’ obligations), and neither Borrower nor Guarantor have asserted any right of rescission,
set-off, counterclaim or defense with respect thereto.
4.1.19 No Prior Assignment. There are no prior assignments of the Leases or any portion of
the Rents due and payable or to become due and payable which are presently outstanding.
4.1.20 Insurance. Borrower has obtained and has delivered to Lender certified copies of the
Policies reflecting the insurance coverages, amounts and other requirements set forth in this
Agreement. No claims have been made or are currently pending, outstanding or otherwise remain
unsatisfied under any such Policy, and neither Borrower nor any other Person, has done, by act or
omission, anything which would impair the coverage of any such Policy.
4.1.21 Management Agreement. The Management Agreement is in full force and effect and there
is no default thereunder by any party thereto and no event has occurred that,
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with the passage of time and/or the giving of notice would constitute a default thereunder.
The Management Agreement was entered into on commercially reasonable terms.
4.1.22 ICIP Eligibility. Borrower has obtained a Certificate of Eligibility under the
Industrial and Commercial Incentive Programs and Borrower shall comply with all of the requirements
of the Industrial and Commercial Incentive Program in order to maintain such eligibility.
4.1.23 Flood Zone. None of the Improvements on the Property is located in an area as
identified by the Federal Emergency Management Agency as an area having special flood hazards and,
if so located, the flood insurance required pursuant to Section 6.1.1(a)(A) is in full
force and effect with respect to the Property.
4.1.24 Required Equity Funds. Borrower represents and warrants to Lender that Borrower has
contributed the Required Equity Funds for approved Project-Related Costs.
4.1.25 Boundaries. All of the improvements which were included in determining the appraised
value of the Property lie wholly within the boundaries and building restriction lines of the
Property, and no improvements on adjoining properties encroach upon the Property, and no easements
or other encumbrances upon the Property encroach upon any of the Improvements, so as to affect the
value or marketability of the Property except those which are insured against by the Title
Insurance Policy.
4.1.26 Leases. The Property is not subject to any leases other than the Leases described in
the rent roll attached hereto as Schedule V and made a part hereof. Borrower is the owner
and lessor of landlord’s interest in the Leases. No Person has any possessory interest in the
Property or right to occupy the same except under and pursuant to the provisions of the Leases.
The current Leases are in full force and effect and, to the best of Borrower’s knowledge, (a) there
are no defaults thereunder by either party and (b) there are no conditions that, with the passage
of time or the giving of notice, or both, would constitute defaults thereunder. No Rent (including
security deposits) has been paid more than one (1) month in advance of its due date. To the best
of Borrower’s knowledge, all work to be completed by Borrower prior to the date hereof under each
Lease has been performed as required and has been accepted by the applicable tenant, and any
payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or
abatements required to be given by Borrower to any tenant has already been received by such tenant.
There has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of
the Rents received therein. To the best of Borrower’s knowledge, no tenant listed on Schedule
I has assigned its Lease or sublet all or any portion of the premises demised thereby, no such
tenant holds its leased premises under assignment or sublease, nor does anyone except such tenant
and its employees occupy such leased premises. No Tenant under any Lease has a right or option
pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the
building of which the leased premises are a part. No Tenant has no right or option for additional
space in the Improvements. Except as otherwise disclosed by the Environmental Report (as defined
in the Mortgage), no hazardous wastes or toxic substances, as defined by applicable federal, state
or local statutes, rules and regulations, have been disposed, stored or treated by any tenant under
any Lease on or about the Property nor does Borrower have any knowledge of any Tenant’s intention
to use its premises for any activity which, directly or
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indirectly, involves the use, generation, treatment, storage, disposal or transportation of
any petroleum product or any toxic or hazardous chemical, material, substance or waste. True,
correct and complete copies of the Leases have been provided to Lender and such Leases have not
been modified or amended in any way.
4.1.27 Survey. The Survey for the Property delivered to Lender in connection with this
Agreement has been prepared in accordance with the provisions of Section 3.1.3(c) hereof,
and does not fail to reflect any material matter affecting the Property or the title thereto.
4.1.28 Inventory. Borrower is the owner of all of the Equipment, Fixtures and Personal
Property (as such terms are defined in the Mortgage) located on or at the Property and shall not
lease any Equipment, Fixtures or Personal Property other than as permitted hereunder. All of the
Equipment, Fixtures and Personal Property are sufficient to operate the Property in the manner
required hereunder and in the manner in which it is currently operated.
4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or
other amounts in the nature of transfer taxes required to be paid by any Person under applicable
Legal Requirements currently in effect in connection with the transfer of the Property to Borrower
have been 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 Mortgage, have been paid, and, under current
Legal Requirements, the Mortgage is enforceable in accordance with its terms by Lender (or any
subsequent holder thereof), subject to principles of equity and bankruptcy, insolvency and other
laws generally applicable to creditors’ rights and the enforcement of debtors’ obligations.
4.1.30 Special Purpose Entity/Separateness.
(a) Until the Total Debt has been paid in full, Borrower hereby represents, warrants and
covenants, that Borrower is, shall be and shall continue to be a Special Purpose Entity.
(b) The representations, warranties and covenants set forth in Section 4.1.30(a) shall
survive for so long as any amount remains payable to Lender under this Agreement or any other Loan
Document.
(c) All of the facts stated and all of the assumptions made in the Insolvency Opinion,
including, but not limited to, in any exhibits attached thereto, are true and correct in all
respects and all facts stated and all assumptions made in any subsequent non-consolidation opinion
required to be delivered in connection with the Loan Documents (an “Additional Insolvency
Opinion”), including, but not limited to, any exhibits attached thereto, will have been and shall
be true and correct in all respects. Borrower has complied and will comply with, all of the
assumptions made with respect to Borrower in the Insolvency Opinion. Borrower will have complied
and will comply with all of the assumptions made with respect to Borrower in any Additional
Insolvency Opinion. Each entity other than Borrower with respect to which an assumption shall be
made in any Additional Insolvency Opinion will have complied and will
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comply with all of the assumptions made with respect to it in any Additional Insolvency
Opinion.
4.1.31 Property Management Agreement. The Management Agreement is in full force and effect
and there is no default thereunder by any party thereto and no event has occurred that, with the
passage of time and/or the giving of notice would constitute a default thereunder. The Management
Agreement was entered into on commercially reasonable terms.
4.1.32 Illegal Activity. No portion of the Property has been or will be purchased with
proceeds of any illegal activity.
4.1.33 No Change in Facts or Circumstances; Disclosure. All information submitted by and on
behalf of Borrower to Lender and in all financial statements, rent rolls (including the Rent Roll
attached hereto as Schedule V), reports, certificates and other documents submitted in
connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by
Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all
material respects. There has been no material adverse change in any condition, fact, circumstance
or event that would make any such information inaccurate, incomplete or otherwise misleading in any
material respect or that otherwise materially and adversely affects or might materially and
adversely affect the use, operation or value of the Property or the business operations or the
financial condition of Borrower. Borrower has disclosed to Lender all material facts and has not
failed to disclose any material fact that could cause any Provided Information or representation or
warranty made herein to be materially misleading.
4.1.34 Investment Company Act. Borrower is not (a) an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940,
as amended; (b) a “holding company” or a “subsidiary company” of a “holding company” or an
“affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or
state law or regulation which purports to restrict or regulate its ability to borrow money.
4.1.35 Embargoed Person. As of the date hereof and at all times throughout the term of the
Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a)
none of the funds or other assets of Borrower and Guarantor constitute property of, or are
beneficially owned, directly or indirectly, by any Embargoed Person; (b) no Embargoed Person has
any interest of any nature whatsoever in Borrower or Guarantor, as applicable, with the result that
the investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower or
Guarantor, as applicable have been derived from any unlawful activity with the result that the
investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is prohibited
by law or the Loan is in violation of law.
4.1.36 Principal Place of Business; State of Organization. Borrower’s principal place of
business as of the date hereof is the address set forth in the introductory paragraph of this
Agreement. The Borrower is organized under the laws of the State of Delaware.
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4.1.37 Conditional Use Permit.. Borrower has obtained an extension or renewal of the
conditional use permit for the Property permitting the Property to be used for a self-storage
facility.
4.1.38 Mortgage Taxes. As of the date hereof, Borrower represents that it has paid all
state, county and municipal recording and all other taxes imposed upon the execution and
recordation of the Mortgage.
4.1.39 Zoning.. The Project Improvements can be developed and constructed in accordance with
the Plans and Specifications “as of right” without requiring the issuance of any zoning variance or
other discretionary permit and/or approval.
4.1.40 ICIP Eligibility.. Borrower has applied for a Certificate of Eligibility under
the Industrial and Commercial Incentive Program and has submitted all documents necessary to obtain
such Certificate of Eligibility.
4.1.41 Single Purpose; Borrower’s Prior Acts. Borrower hereby represents and warrants to
Lender that:
(a) Since its formation, Borrower has not owned any asset or property other than (i) the
Property, and (ii) incidental personal property necessary for the ownership or operation of the
Property.
(b) Since its formation, Borrower has not engaged in any business other than the ownership,
management and operation of the Property and Borrower has conducted and operated its business as
presently conducted and operated.
(c) Since its formation, Borrower has not entered into any contract or agreement with any of
its Affiliates, any of its constituent parties or any Affiliate of any constituent party, except
those (i) in the ordinary course of its business and on terms which are intrinsically fair,
commercially reasonable and are substantially similar to those that would be obtained in a
comparable arm’s-length transaction with an unrelated third party, and (ii) in connection with this
Agreement.
(d) Since its formation, Borrower has not incurred any Indebtedness.
(e) Since its formation, Borrower has not made any loans to any Person or held evidence of
indebtedness issued by any other Person or entity (other than cash and investment-grade securities
issued by an entity that is not an Affiliate of or subject to common ownership with such entity).
(f) Since its formation, Borrower has remained solvent and has paid its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its own assets and
generally as the same have became due.
(g) Since its formation, Borrower, has done or caused to be done all things necessary to
observe its respective organizational formalities applicable to a business entity of its
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type and to preserve their respective existence or has promptly taken curative action with
respect thereto.
(h) Since its formation, (i) Borrower has maintained all of its respective accounts (including
bank accounts), books and records separate from those of its Affiliates and any constituent party;
(ii) Borrower has maintained separate financial statements and its respective assets have not been
listed as assets on the financial statement of any other entity except as required by GAAP;
provided, however, that any such consolidated financial statement shall contain a
note indicating that its separate assets and liabilities are neither available to pay the debts of
the consolidated entity nor constitute obligations of the consolidated entity; (iii) Borrower has
filed its own tax returns and has not filed a consolidated federal income tax return with any other
Person, except to the extent that Borrower was required to file consolidated tax returns by law;
and (iv) Borrower has maintained books, records, resolutions and agreements as official records.
(i) Since its formation, Borrower has been, and at all times has held itself out and
identified itself and will hold itself out and identify itself as a separate and distinct entity
under its own name or in a name franchised or licensed to it by an entity other than an Affiliate
of Borrower and not as a division or part of any other Person, except for services rendered under a
business management services agreement with an Affiliate that complies with the terms contained in
Subsection (h) above, so long as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent of Borrower, has conducted business in
its own name; has not identified itself or any of its Affiliates as a division or part of the
other; and has used separate stationery, invoices and checks bearing its own name and not the name
of any Affiliate.
(j) Since its formation, Borrower has maintained adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of its contemplated
business operations.
(k) Since its formation, neither Borrower has, nor have any of its constituent parties, have
sought or effected the liquidation, dissolution, winding up, liquidation, consolidation or merger,
in whole or in part, of Borrower.
(l) Since its formation, Borrower has not commingled its funds or other assets with those of
any Affiliate or constituent party or any other Person, and Borrower, has held all of its assets in
its own name.
(m) Since its formation, Borrower has maintained its assets in such a manner that it would not
be costly or difficult to segregate, ascertain or identify their respective individual assets from
those of any Affiliate or constituent party or any other Person.
(n) Since its formation, Borrower has not guaranteed or become obligated for the debts of any
other Person and has not held itself out to be responsible for or to have their respective credit
available to satisfy the debts or obligations of any other Person.
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(o) Borrower is presently conducting its business so that the assumptions made with respect to
Borrower in the Insolvency Opinion are currently true and correct in all material respects.
(p) Since its formation, Borrower has not permitted any Affiliate or constituent party
independent access to its bank accounts.
(q) Since its formation, Borrower has paid the salaries of its own employees (if any) from its
own funds and has maintained a sufficient number of employees (if any) in light of their respective
contemplated business operations.
(r) Since its formation, Borrower has compensated each of its consultants and agents from its
own funds for services provided to it and pay from its own respective assets all obligations of any
kind incurred.
(s) Since its date of formation, Borrower has not acquired any obligations or securities of
any of its Affiliates.
(t) Since the date of its formation, Borrower has not acquired or held any interest in or
formed any entity or subsidiary.
4.1.42 Cash Management Account. Borrower hereby represents and warrants to Lender that:
(a) This Agreement, together with the other Loan Documents, create a valid and continuing
security interest (as defined in the Uniform Commercial Code of the State of Delaware) in the
Clearing Account and Cash Management Account in favor of Lender, which security interest is prior
to all other Liens, other than Permitted Encumbrances, and is enforceable as such against creditors
of and purchasers from Borrower. Other than in connection with the Loan Documents and except for
Permitted Encumbrances, Borrower has not sold, pledged, transferred or otherwise conveyed the
Clearing Account and Cash Management Account;
(b) Each of the Clearing Account and Cash Management Account constitutes a “deposit account”
within the meaning of the Uniform Commercial Code of the State of Delaware;
(c) Pursuant and subject to the terms hereof, the Clearing Bank and the Cash Management Bank
have agreed to comply with all instructions originated by Lender, without further consent by
Borrower, directing disposition of the Clearing Account and Cash Management Account and all sums at
any time held, deposited or invested therein, together with any interest or other earnings thereon,
and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts,
general intangibles, chattel paper, deposit accounts, instruments, documents or securities; and
(d) The Clearing Account and Cash Management Account are not in the name of any Person other
than Borrower, as pledgor, or Lender, as pledgee. Borrower has not consented to the Clearing Bank
and the Cash Management Bank complying with instructions
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with respect to the Clearing Account and Cash Management Account from any Person other than
Lender.
4.1.43 Trade Name; Other Intellectual Property. Borrower owns and possesses or licenses (as
the case may be) all such patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, websites, domain names and copyrights, as Borrower
considers necessary for the conduct of its business as now conducted without, individually or in
the aggregate, any infringement upon rights of other Persons, in each case except as could not
reasonably be expected to (i) materially and adversely affect the value of the Property, (ii)
impair the use and operation of the Property or (iii) impair Borrower’s ability to pay its
obligations in a timely manner, and there is no individual patent, patent right, trademark,
trademark right, trade name, trade name right, service mark, service mark right or copyright the
loss of which would (i) materially and adversely affect the value of the Property, (ii) impair the
use and operation of the Property or (iii) impair Borrower’s ability to pay its obligations in a
timely manner (collectively, the “Intellectual Property”).
4.1.44 General Contractor’s Agreement. As of the date hereof, (i) the General Contractor’s
Agreement is in full force and effect; (ii) Borrower and General Contractor are in full compliance
with their respective obligations under the General Contractor’s Agreement; (iii) the work to be
performed by General Contractor under the General Contractor’s Agreement is the work called for by
the Plans and Specifications; and (iv) all work on the Project Improvements heretofore completed
has been completed in accordance with the Plans and Specifications in a good and workmanlike manner
and is free of any defects. Borrower shall from time to time, upon request by Lender, cause
General Contractor to provide Lender with reports in regard to the status of construction of the
Project Improvements, in such form and detail as reasonably requested by Lender.
4.1.45 Architect’s Contract. As of the date hereof, (i) the Architect’s Contract is in full
force and effect; (ii) both Borrower and, to the best of Borrower’s knowledge, Borrower’s Architect
are in compliance in all material respects with their respective obligations under the Architect’s
Contract; (iii) the work to be performed by Borrower’s Architect under the Architect’s Contract is
the architectural services required to design the Project Improvements to be built in accordance
with the Plans and Specifications and all architectural services required to complete the Project
Improvements in accordance with the Plans and Specifications is provided for under the Architect’s
Contract; and (iv) all work on the Project Improvements heretofore completed has been completed in
accordance with the Plans and Specifications in a good and workmanlike manner and is free of any
defects. Upon request by Lender, Borrower shall or Borrower shall cause Borrower’s Architect to
provide Lender with reports in regard to the status of construction of the Project Improvements, in
such form and detail as reasonably requested by Lender.
4.1.46 Plans and Specifications. As of the date hereof, Borrower has furnished Lender true
and complete sets of the preliminary Plans and Specifications. The preliminary Plans and
Specifications comply with all applicable Legal Requirements, all Governmental Approvals, and all
restrictions, covenants and easements affecting the Property, and have been approved by each such
Governmental Authority as is required for construction and renovation of the Project Improvements
and the General Contractor, Guarantor and Borrower’s Architect,.
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4.1.47 Budget. The Development Budget accurately reflects all anticipated Project-Related
Costs. Upon the making of the Advances requested in Borrower’s Requisition in the manner set forth
therein, all materials and labor therefore supplied or performed in connection with the Property
will have been paid for in full (subject to the Retainage).
4.1.48 Feasibility. Each of the Construction Schedule and the Disbursement Schedule is
accurate.
Section 4.2 Survival of Representations. Borrower agrees that all of the representations and
warranties of Borrower set forth in Section 4.1 hereof and elsewhere in this Agreement and
in the other Loan Documents shall survive for so long as any amount remains owing to Lender under
this Agreement or any of the other Loan Documents by Borrower. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be
deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf.
ARTICLE V.
BORROWER COVENANTS
Section 5.1 Affirmative Covenants. From the date hereof and until payment and performance in full
of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the
Mortgage encumbering the Property (and all related obligations) in accordance with the terms of
this Agreement and the other Loan Documents, Borrower hereby covenants and agrees with Lender that:
5.1.1 Existence; Compliance with Legal Requirements. Borrower shall do or cause to be done
all things necessary to preserve, renew and keep in full force and effect its existence, rights,
licenses, permits and franchises and comply with all Legal Requirements applicable to it and the
Property. There shall never be committed by Borrower, and Borrower shall never permit any other
Person in occupancy of or involved with the operation or use of the Property to commit any act or
omission affording the federal government or any state or local government the right of forfeiture
against the Property or any part thereof or any monies paid in performance of Borrower’s
obligations under any of the Loan Documents. Borrower hereby covenants and agrees not to commit,
permit or suffer to exist any act or omission affording such right of forfeiture. Borrower shall
at all times maintain, preserve and protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of its business and shall keep the Property
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 Mortgage. Borrower shall keep the Property 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. 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 validity of any Legal
Requirement, the applicability of any Legal Requirement to Borrower or the Property or any alleged
violation of any Legal Requirement, provided that (i) no Default or Event of Default has occurred
and remains uncured; (ii) Borrower is permitted to do
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so under the provisions of any mortgage or deed of trust superior in lien to the Mortgage;
(iii) such proceeding shall be permitted under and be conducted in accordance with the provisions
of any 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) neither the Property nor any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, cancelled or lost; (v) Borrower shall promptly upon final determination
thereof comply with any such Legal Requirement determined to be valid or applicable or cure any
violation of any Legal Requirement; (vi) such proceeding shall suspend the enforcement of the
contested Legal Requirement against Borrower or the Property; and (vii) Borrower shall furnish such
security as may be required in the proceeding, or as may be requested by Lender, to insure
compliance with such Legal Requirement, together with all interest and penalties payable in
connection therewith. Lender may apply any such security, as necessary to cause compliance with
such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity,
applicability or violation of such Legal Requirement is finally established or the Property (or any
part thereof or interest therein) shall be in danger of being sold, forfeited, terminated,
cancelled or lost.
5.1.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges now or
hereafter levied or assessed or imposed against the Property or any part thereof as the same become
due and payable; provided, however, Borrower’s obligation to directly pay Taxes shall be suspended
for so long as Borrower complies with the terms and provisions of Section 7.1 hereof.
Borrower will deliver to Lender receipts for payment or other evidence satisfactory to Lender that
the Taxes and Other Charges have been so paid or are not then delinquent no later than ten (10)
days prior to the date on which the Taxes and/or Other Charges would otherwise be delinquent if not
paid. Borrower shall furnish to Lender receipts for the payment of the Taxes and the Other Charges
prior to the date the same shall become delinquent (provided, however, Borrower is not required to
furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Lender
pursuant to Section 7.1 hereof). Borrower shall not suffer and shall promptly cause to be
paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against
the Property, and shall promptly pay for all utility services provided to the Property. 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
Default or 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 superior in lien to the Mortgage; (iii) such
proceeding shall be permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iv)
neither the Property nor any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, cancelled or lost; (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; (vi) such proceeding shall suspend the
collection of such contested Taxes or Other Charges from the Property; and (vii) Borrower shall
furnish 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
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entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant
is established or the Property (or part thereof or interest therein) shall be in danger of being
sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of the
Mortgage being primed by any related Lien.
5.1.3 Litigation. Borrower shall give prompt written notice to Lender of any litigation or
governmental proceedings pending or threatened against Borrower and/or Guarantor which, might
materially adversely affect Borrower’s or Guarantor’s condition (financial or otherwise) or
business or the Property.
5.1.4 Access to Property. Borrower shall permit agents, representatives and employees of
Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance
notice and subject to the rights of Tenants under Leases.
5.1.5 Notice of Default. Borrower shall promptly advise Lender of any material adverse
change in Borrower’s condition, financial or otherwise, or of the occurrence of any Default or
Event of Default of which Borrower has knowledge.
5.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully with Lender with
respect to any proceedings before any court, board or other Governmental Authority which may in any
way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other
Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any
such proceedings.
5.1.7 Perform Loan Documents. Borrower shall observe, perform and satisfy all the terms,
provisions, covenants and conditions of, and shall pay when due all costs, fees and reasonable
expenses to the extent required under the Loan Documents executed and delivered by, or applicable
to, Borrower.
5.1.8 Award and Insurance Benefits. Borrower shall cooperate with Lender in obtaining for
Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection
with the Property, and Lender shall be reimbursed for any expenses incurred in connection therewith
(including attorneys’ fees and disbursements, and the payment by Borrower of the expense of an
appraisal on behalf of Lender in case of Casualty or Condemnation affecting the Property or any
part thereof) out of such Insurance Proceeds.
5.1.9 Further Assurances. Borrower shall, at Borrower’s sole cost and expense:
(a) furnish to Lender all instruments, documents, boundary surveys, footing or foundation
surveys, certificates, plans and specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and instrument required to be
furnished by Borrower pursuant to the terms of the Loan Documents or which are reasonably requested
by Lender in connection therewith;
(b) execute and deliver to Lender such documents, instruments, certificates, assignments and
other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect
the collateral at any time securing or intended to secure the obligations of
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Borrower under the Loan Documents, as Lender may reasonably require including, without
limitation, the execution and delivery of all such writings necessary to transfer any licenses with
respect to the Property into the name of Lender or its designee after the occurrence of an Event of
Default; and
(c) do and execute all and such further lawful and reasonable acts, conveyances and assurances
for the better and more effective carrying out of the intents and purposes of this Agreement and
the other Loan Documents, as Lender shall reasonably require from time to time.
5.1.10 Principal Place of Business, State of Organization. Borrower will not cause or permit
any change to be made in its name, identity (including its trade name or names), place of
organization or formation (as set forth in Section 4.1.36 hereof) or Borrower’s corporate
or partnership structure unless Borrower shall have first notified Lender in writing of such change
at least thirty (30) days prior to the effective date of such change, and shall have first taken
all reasonable action required by Lender for the purpose of perfecting or protecting the lien and
security interests of Lender pursuant to this Agreement, the Cash Management Agreement and the
other Loan Documents and, in the case of a change in Borrower’s structure, without first obtaining
the prior consent of Lender. Upon Lender’s request, Borrower shall execute and deliver additional
financing statements, security agreements and other instruments which may be necessary to
effectively evidence or perfect Lender’s security interest in the Property as a result of such
change of principal place of business or place of organization. Borrower’s principal place of
business and chief executive office, and the place where Borrower keeps its books and records,
including recorded data of any kind or nature, regardless of the medium or recording, including
software, writings, plans, specifications and schematics, has been for the preceding four months
(or, if less, the entire period of the existence of Borrower) and will continue to be the address
of Borrower set forth at the introductory paragraph of this Agreement (unless Borrower notifies
Lender in writing at least thirty (30) days prior to the date of such change). Borrower’s
organizational identification number, if any, assigned by the state of incorporation or
organization is correctly set forth in the introductory paragraph of this Agreement. Borrower
shall promptly notify Lender of any change in its organizational identification number. If
Borrower does not now have an organizational identification number and later obtains one, Borrower
promptly shall notify Lender of such organizational identification number.
5.1.11 Financial Reporting.
(a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year
basis, in accordance with GAAP (or such other accounting basis acceptable to Lender), proper and
accurate books, records and accounts reflecting all of the financial affairs of Borrower and all
items of income and expense in connection with the operation of the Property. Lender shall have
the right from time to time at all times during normal business hours upon reasonable notice to
examine such books, records and accounts at the office of Borrower or any other Person maintaining
such books, records and accounts and to make such copies or extracts thereof as Lender shall desire
at Lender’s expense unless an Event of Default shall have occurred. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower’s accounting records with respect to the Property, as Lender shall determine to be
necessary or appropriate in the protection of Lender’s
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interest. Upon Lender’s reasonable request, Borrower shall deliver to Lender such other
information necessary and sufficient to fairly represent the financial condition of Borrower and
the Property.
(b) Borrower will furnish to Lender annually, within one hundred twenty (120) days following
the end of each Fiscal Year of Borrower, a complete copy of Borrower’s annual financial statements
covering the Property for such Fiscal Year audited by a “Big Four” accounting firm or other
independent certified public accountant acceptable to Lender in accordance with GAAP and containing
statements of profit and loss for Borrower and the Property and a balance sheet for Borrower. Such
statements shall set forth the financial condition and the results of operations for the Property
for such Fiscal Year, and shall include, but not be limited to, amounts representing annual Net
Cash Flow, Net Operating Income, Gross Income from Operations and Operating Expenses. Borrower’s
annual financial statements shall be accompanied by (i) a comparison of the budgeted income and
expenses and the actual income and expenses for the prior Fiscal Year, (ii) an Officer’s
Certificate stating that each such annual financial statement presents fairly the financial
condition and the results of operations of Borrower and the Property being reported upon and has
been prepared in accordance with GAAP; (iii) a list of tenants, if any, occupying more than twenty
percent (20%) of the total floor area of the Improvements, (iv) a breakdown showing the year in
which each Lease then in effect expires and the percentage of total floor area of the Improvements
and the percentage of base rent with respect to which Leases shall expire in each such year, each
such percentage to be expressed on both a per year and cumulative basis, and (v) a schedule audited
by such independent certified public accountant reconciling Net Operating Income to Net Cash Flow
(the “Net Cash Flow Schedule”), which shall itemize all adjustments made to Net Operating Income to
arrive at Net Cash Flow deemed material by such independent certified public accountant. Together
with Borrower’s annual financial statements, Borrower shall furnish to Lender an Officer’s
Certificate certifying as of the date thereof whether there exists an event or circumstance which
constitutes a Default or Event of Default under the Loan Documents executed and delivered by, or
applicable to, Borrower, and if such Default or Event of Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy the same.
(c) Borrower will furnish, or cause to be furnished, to Lender on or before thirty (30) days
after the end of each calendar month throughout the term of the Loan the following items,
accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and
complete and fairly present the financial condition and results of the operations of Borrower and
the Property (subject to normal year-end adjustments) as applicable: monthly and year-to-date
operating statements (including Capital Expenditures) prepared for each calendar month, noting all
Net Operating Income, Gross Income from Operations and Operating Expenses (not including any
contributions to the Reserve Funds) and other information necessary and sufficient to fairly
represent the financial position and results of operation of the Property during such calendar
month, and containing (i) a comparison of budgeted income and expenses and the actual income and
expenses together with a detailed explanation of any variances of five percent (5%) or more between
budgeted and actual amounts for such periods, for any individual items in excess of $10,000, all in
form satisfactory to Lender, (ii) a calculation reflecting the annual Debt Service Coverage Ratio
for the immediately preceding twelve (12) month period as of the last day of such month accompanied
by an Officers’ Certificate with respect thereto; and (iii) a Net
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Cash Flow Schedule. In addition, such Officer’s Certificate shall also state that the
representations and warranties of Borrower set forth in Section 4.1.30 and Section 4.1.35 are true and correct as of the date of such certificate and that there are no trade
payables outstanding for more than sixty (60) days.
(d) Borrower will furnish, or cause to be furnished, to Lender on or before thirty (30) days
after the end of each calendar month throughout the term of the Loan, an rent roll for the subject
month, accompanied by an Officer’s Certificate stating that such rent roll is true, correct,
accurate, and complete and fairly presents the financial condition and results of the operations of
Borrower and the Property (subject to normal year-end adjustments) as applicable.
(e) For the partial year period commencing on the date of the Closing Date, and for each
Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget not later than thirty (30)
days prior to the commencement of such period or Fiscal Year in form reasonably satisfactory to
Lender. The Annual Budget shall be subject to Lender’s written approval (each such Annual Budget,
an “Approved Annual Budget”). In the event that Lender objects to a proposed Annual Budget
submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15) days
after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender.
Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days
after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise the same in accordance with the process described in
this subsection until Lender approves the Annual Budget. Until such time that Lender approves a
proposed Annual Budget, the most recent Approved Annual Budget shall apply; provided that, such
Approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums
and Other Charges.
(f) In the event that, Borrower must incur an extraordinary operating expense or capital
expense not set forth in the Approved Annual Budget (each an “Extraordinary Expense”), then
Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender’s approval, except in the case of emergency (provided that
Borrower will notify Lender promptly after such emergency).
(g) Any reports, statements or other information required to be delivered under this Agreement
shall be delivered (i) in paper form, (ii) on a diskette, and (iii) if requested by Lender and
within the capabilities of Borrower’s data systems without change or modification thereto, in
electronic form and prepared using a Microsoft Word for Windows or WordPerfect for Windows files
(which files may be prepared using a spreadsheet program and saved as word processing files).
Borrower agrees that Lender may disclose information regarding the Property and Borrower that is
provided to Lender pursuant to this Section 5.1.11 in connection with the Securitization to
such parties requesting such information in connection with such Securitization.
5.1.12 Business and Operations. Borrower will continue to engage in the businesses presently
conducted by it as and to the extent the same are necessary for the ownership, maintenance,
management and operation of the Property. Borrower will qualify to do business and will remain in
good standing under the laws of all relevant jurisdictions as and to the extent the same are
required for the ownership, maintenance, management and operation of
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the Property. Borrower shall at all times during the term of the Loan, continue to own and/or
maintain all of the Equipment, Fixtures and Personal Property which are necessary to operate the
Property in the manner required hereunder and in the manner in which it is currently operated.
5.1.13 Title to the Property. Borrower will warrant and defend (a) the title to the Property
and every part thereof, subject only to Liens permitted hereunder (including Permitted
Encumbrances) and (b) the validity and priority of the Lien of the Mortgage and the Assignment of
Leases on the Property, 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 the Property, other than as permitted hereunder, is
claimed by another Person.
5.1.14 Costs of Enforcement. In the event (a) that the Mortgage encumbering the Property is
foreclosed in whole or in part or that the Mortgage is put into the hands of an attorney for
collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage encumbering the
Property prior to or subsequent to the Mortgage in which proceeding Lender is made a party, or (c)
of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or
any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for
the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and
agrees to pay all costs of collection and defense, including attorneys’ fees and costs, incurred by
Lender or Borrower in connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, together with all required service or use taxes.
5.1.15 Estoppel Statement.
(a) After written request by Lender, Borrower shall within ten (10) days furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, (iv) the
date installments of interest and/or principal were last paid, (v) any offsets or defenses to the
payment of the Debt, if any, and (vi) that the Note, this Agreement, the Mortgage and the other
Loan Documents are valid, legal and binding obligations and have not been modified or if modified,
giving particulars of such modification.
(b) Borrower shall deliver to Lender upon written request, tenant estoppel certificates from
each tenant paying base rent in an amount equal to or exceeding five percent (5%) of the Gross
Income from Operations from the Property occupied by such tenant in form and substance reasonably
satisfactory to Lender provided that Borrower shall not be required to deliver such certificates
more frequently than two (2) times in any calendar year.
(c) After written request by Borrower, Lender shall within ten (10) days furnish Borrower with
a statement, duly acknowledged and certified, setting forth (i) the original principal amount of
the Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, and
(iv) the date installments of interest and/or principal were last paid.
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5.1.16 Loan Proceeds. Borrower shall use the proceeds of the Loan solely and exclusively for
the purposes of constructing and renovating the Project Improvements in accordance herewith and in
accordance with the Building Loan Budget which shall be subject to no change except as permitted
hereby. Borrower will receive the Advances to be made hereunder and will hold the right to receive
the same as a trust fund for the purpose of paying the Costs of the Improvement and it will apply
the same first to such payment before using any part thereof for any other purpose.
5.1.17 Performance by Borrower. Borrower shall in a timely manner observe, perform and
fulfill each and every covenant, term and provision of each Loan Document executed and delivered
by, or applicable to, Borrower, and shall not enter into or otherwise suffer or permit any
amendment, waiver, supplement, termination or other modification of any Loan Document executed and
delivered by, or applicable to, Borrower without the prior written consent of Lender.
5.1.18 Confirmation of Representations. Borrower shall deliver, in connection with any
Securitization, (a) one (1) or more Officer’s Certificates certifying as to the accuracy of all
representations made by Borrower in the Loan Documents as of the date of the closing of such
Securitization in all relevant jurisdictions, and (b) certificates of the relevant Governmental
Authorities in all relevant jurisdictions indicating the good standing and qualification of
Borrower and Guarantor as of the date of the Securitization.
5.1.19 ICIP Eligibility. Borrower shall take all actions necessary to obtain a
Certificate of Eligibility under the Industrial and Commercial Incentive Program as soon as
possible.
5.1.20 Leasing Matters. Borrower may not enter into a Lease, license or other occupancy
agreement for any portion of the Property without Lender’s prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed, provided, however, that after the
Property shall have achieved the Required Ratios at Completion, Borrower shall not be required to
obtain Lender’s approval of Leases for less than 15,000 square feet that otherwise satisfy the
requirements of this Agreement. Upon request, Borrower shall furnish Lender with executed copies
of all Leases. All renewals of Leases and all proposed Leases shall provide for rental rates
comparable to existing local market rates. All proposed Leases shall be on commercially reasonable
terms and shall not contain any terms which would materially affect Lender’s rights under the Loan
Documents. All Leases executed after the date hereof shall provide that they are subordinate to
the Mortgage and that the lessee agrees to attorn to Lender or any purchaser at a sale by
foreclosure or power of sale. Borrower (i) shall observe and perform the obligations imposed upon
the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend
or terminate the terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner
not to impair the value of the Property involved except that no termination by Borrower or
acceptance of surrender by a tenant of any Leases shall be permitted unless by reason of a tenant
default and then only in a commercially reasonable manner to preserve and protect the Property;
provided, however, that no such termination or surrender of any Lease will be permitted without the
written consent of Lender, provided, further, that after the Property shall have achieved the
Required Ratios at Completion, Borrower
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shall not be required to obtain Lender’s approval for termination of Leases for less than
15,000 square feet that otherwise satisfy the requirements of this Agreement; (iii) shall not
collect any of the rents more than one (1) month in advance (other than security deposits); (iv)
shall not execute any other assignment of lessor’s interest in the Leases or the Rents (except as
contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases
in a manner inconsistent with the provisions of the Loan Documents without Lender’s prior written
consent which shall not be unreasonably withheld; and (vi) shall execute and deliver at the request
of Lender all such further assurances, confirmations and assignments in connection with the Leases
as Lender shall from time to time reasonably require. Notwithstanding anything to the contrary
contained herein, Borrower shall not enter into a lease of all or substantially all of the Property
without Lender’s prior written consent.
5.1.21 Alterations.
(a) Following the Completion of the Improvements, Borrower shall obtain Lender’s prior written
consent to any subsequent alterations to any Improvements, which consent shall not be unreasonably
withheld or delayed except with respect to alterations that may have a material adverse effect on
Borrower’s financial condition or the value of the Property or the Net Operating Income.
Notwithstanding the foregoing, Lender’s consent shall not be required in connection with (i) any
alterations that will not have a material adverse effect on Borrower’s financial condition or the
value of the Property or the Net Operating Income, and not adversely affecting any structural
component of any Improvements, any utility or HVAC system contained in any Improvements or the
exterior of any building constituting a part of any Improvements, or (ii) alterations performed in
connection with the Restoration of the Property after the occurrence of a Casualty or Condemnation
in accordance with the terms and provisions of this Agreement. If the total unpaid amounts due and
payable with respect to alterations to the Improvements at the Property (other than such amounts to
be paid or reimbursed by tenants under the Leases) shall at any time exceed Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00) (the “Threshold Amount”), Borrower shall promptly deliver
to Lender as security for the payment of such amounts and as additional security for Borrower’s
obligations under the Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C)
other securities having a rating acceptable to Lender and that the applicable Rating Agencies have
confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification
of the initial, or, if higher, then current ratings assigned to any Securities or any class thereof
in connection with any Securitization, (D) a completion and performance bond, or (E) a Letter of
Credit. 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 Property (other than such amounts to be paid or
reimbursed by tenants under the Leases) over the Threshold Amount and Lender may apply such
security from time to time at the option of Lender to pay for such alterations.
(b) Notwithstanding anything contained herein to the contrary, the construction, Building Loan
and alteration of the Improvements in accordance with the Plans and Specifications shall not
constitute “alterations” to the Improvements and will not be subject to the terms of this
Section 5.1.21.
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5.1.22 No Fees or Payments to Affiliates. In no event shall Borrower pay any fees or make
any payments to any Affiliates without Lender’s approval, which may be withheld in its sole
discretion.
5.1.23 Payment of Administration Fee. Borrower shall pay to Lender on the first
(1st) day of each calendar month the Administration Fee in advance.
5.1.24 General Contractor’s Agreement. Borrower shall (a) enforce the General Contractor’s
Agreement in the best interests of the Improvements using sound business judgment, (b) waive none
of the material obligations of any of the parties thereunder, (c) do no act which would relieve the
General Contractor from its material obligations to construct the Project Improvements according to
the Plans and Specifications, (d) make no amendments to or change orders under the General
Contractor’s Agreement, except as permitted under this Agreement, without the prior approval of
Lender, (e) ensure that the work to be performed by General Contractor under the General
Contractor’s Agreement is the work called for by the Plans and Specifications, and (f) ensure that
all work on the Improvements shall be completed in accordance with the Plans and Specifications in
a good and workmanlike manner and shall be free of any defects. Borrower shall from time to time,
upon request by Lender, use reasonable efforts to cause General Contractor to provide Lender with
reports in regard to the status of construction of the Project Improvements, in such form and
detail as reasonably requested by Lender.
5.1.25 Architect’s Contract. Borrower shall enforce the Architect’s Contract in the best
interests of Borrower consistent with the construction of the Project Improvements using sound
business judgment, (b) waive none of the material obligations of Borrower’s Architect thereunder,
(c) do no act which would relieve Borrower’s Architect from its material obligations under the
Architect’s Contract and (d) make no amendments to the Architect’s Contract without the prior
approval of Lender. Upon request by Lender, Borrower shall cause Borrower’s Architect to provide
Lender with reports in regard to the status of construction of the Project Improvements, in such
form and detail as reasonably requested by Lender.
5.1.26 Building Loan Costs and Expenses. Borrower shall promptly pay when due all Building
Loan Costs.
5.1.27 Fees. Borrower shall pay when due the reasonable fees of the Construction Consultant,
all reasonable costs and expenses, including, without limitation, appraisal fees (only if required
by law after the initial appraisal) recording fees and charges, abstract fees, title policy fees,
escrow fees, reasonable attorneys’ fees, fees of inspecting architects and engineers to the extent
provided hereunder in connection with Advances, fees of environmental consultants to the extent
provided in the Mortgage, and all other reasonable and customary costs and expenses which have been
incurred or which may hereafter be incurred by Lender in connection with the preparation and
execution of the Loan Documents, including any extension, amendment or modification thereof; the
funding of the Loan, the administration and enforcement of this Agreement, the Mortgage, the Note,
and the other Loan Documents, including, without limitation, reasonable attorneys’ fees in any
action for the foreclosure of the Mortgage and the collection of the Loan, and all such fees
incurred in connection with any bankruptcy or insolvency proceeding; and Borrower will, within
twenty (20) days after demand
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by Lender, reimburse Lender for all such expenses which have been incurred; and Borrower will
indemnify and hold harmless Lender from and against, and reimburse it for all claims, demands,
liabilities, losses, damages, judgments, penalties, costs, and expenses (including, without
limitation, reasonable attorneys’ fees) which may be imposed upon, asserted against, or incurred or
paid by Lender by reason of, on account of or in connection with any bodily injury or property
damage occurring in or upon or in the vicinity of the Property through any cause whatsoever or
asserted against Lender or Borrower on account of any act performed or omitted to be performed
hereunder by Borrower or on account of any transaction arising out of or in any way connected with
the Property, or with this Agreement or any of the indebtedness evidenced by the Note, provided
that the foregoing indemnity shall not apply to any such liabilities, losses, damages and expenses
of Lender to the extent arising from the willful misconduct or gross negligence of Lender. All
amounts incurred or paid by Lender under this Section 5.1.27, together with interest
thereon at the Default Rate from the due date until paid by Borrower, shall be added to the Debt
and shall be secured by the lien of the Mortgage.
5.1.28 Completion of Construction.
(a) Borrower shall cause the Project Improvements to be constructed in accordance with the
Plans and Specifications and any Permitted Encumbrance and in full compliance with the Building
Loan Budget, as the same may be amended from time to time in accordance with the terms hereof.
(b) Borrower shall cause the Completion of the Improvements to occur on or before the Required
Completion Date.
(c) Borrower shall diligently pursue construction of the entire Project Improvements to cause
the Complete of the Improvements and obtain a temporary or permanent certificate of occupancy (and
to the extent the same are conditional or require performance by Borrower, satisfy all conditions
to the issuance of and/or performed all obligations required for the continued validity of the
same) for the Property on or prior to the Required Completion Date, in accordance with the Plans
and Specifications and in compliance with all restrictions, covenants and easements affecting the
Property, all applicable Legal Requirements, and all Governmental Approvals, and with all terms and
conditions of the Loan Documents; pay all sums and to perform such duties as may be necessary to
complete such construction of the Project Improvements substantially in accordance with the Plans
and Specifications and in compliance with all restrictions, covenants and easements affecting the
Property, all Legal Requirements and all Governmental Approvals, and with all terms and conditions
of the Loan Documents, all of which shall be accomplished on or before the Required Completion
Date, free from any liens, claims or assessments (actual or contingent) asserted against the
Property for any material, labor or other items furnished in connection therewith unless bonded and
removed as a Lien on the Property. The renovation of the Project Improvements shall include all
work necessary to put the Property in conformity with, and eliminate any breaches from, the ADA.
Evidence of satisfactory compliance with all of the foregoing shall be furnished by Borrower to
Lender on or before the Required Completion Date. In addition, if such certificate of occupancy or
other Governmental Approvals are temporary in nature, Borrower shall diligently pursue procuring
final Governmental Approvals. In addition, Borrower shall diligently pursue
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construction of the entire Project Improvements to Final Completion after the Required
Completion Date.
(d) If at any time prior to the Completion of the Improvements and satisfaction of the
conditions to the Final Advance Lender determines in its sole discretion that the undrawn funds
then available under the Interest Reserve Line Item of the Project Loan Budget and the amount of
Interest Reserve Funds on deposit with Lender is insufficient to pay the Debt Service on the Loan,
then, Borrower shall deposit with Lender, on demand, either (i) an amount reasonably determined by
Lender to pay interest on the Loan as it comes due prior to the Completion of the Improvements and
the satisfaction of the conditions to the Final Advance (the “Additional Interest Reserve
Deposit”), or (ii) a Letter of Credit in such amount (the “Additional Interest Reserve Letter of
Credit”). In determining the amount of the Additional Interest Reserve Deposit or Additional
Interest Reserve Letter of Credit, Lender will consider, among other things, (i) the degree of
completion of the Improvements on such date, and (ii) the amount, if any, of undrawn funds then
available under the Interest Reserve Line Item of the Project Loan Budget. In addition, and
subject to the applicable terms hereof and the applicable terms of the Project Loan Agreement
regarding the re-allocation of Line Items, Lender shall not unreasonably withhold its consent to
Borrower’s request at the time of the deposit of the Additional Interest Reserve Deposit or the
Additional Interest Reserve Letter of Credit to re-allocate a portion of the then undrawn
Contingency Line Item (or any other Line Item within the Building Loan Budget) from the Project
Loan Budget to the Interest Reserve Line Item of the Project Loan Budget, provided,
however, under no circumstances may any portion of the Contingency Line Item of the
Building Loan Budget be reallocated to the Interest Reserve Line Item. The Additional Interest
Reserve Deposit or Additional Interest Reserve Letter of Credit shall be a Reserve Fund for all
purposes hereunder. Lender shall apply the Additional Interest Reserve Deposit or Additional
Interest Reserve Letter of Credit in accordance with Section 7.2 hereof.
5.1.29 Inspection of Property. Borrower shall permit Lender, the Construction Consultant and
their respective representatives, to enter upon the Property, inspect the Project Improvements and
all materials to be used in the construction and Building Loan thereof and to examine the Plans and
Specifications which are or may be kept at the construction site and will cooperate, and cause the
General Contractor, the Major Contractors and the Major Subcontractors to cooperate with the
Construction Consultant to enable him or her to perform his or her functions hereunder.
5.1.30 Construction Consultant. Borrower acknowledges that (i) the Construction Consultant
has been retained by Lender to act as a consultant and only as a consultant to Lender in connection
with the construction of the Project Improvements and has no duty to Borrower, (ii) the
Construction Consultant shall in no event have any power or authority to give any approval or
consent or to do any other act or thing which is binding upon Lender, (iii) Lender reserves the
right to make any and all decisions required to be made by Lender under this Agreement and to give
or refrain from giving any and all consents or approvals required to be given by Lender under this
Agreement and to accept or not accept any matter or thing required to be accepted by Lender under
this Agreement, and without being bound or limited in any manner or under any circumstance
whatsoever by any opinion expressed or not expressed, or advice given or not given, or information,
certificate or report provided or not provided, by the
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Construction Consultant with respect thereto, (iv) Lender reserves the right in its sole and
absolute discretion to disregard or disagree, in whole or in part, with any opinion expressed,
advice given or information, certificate or report furnished or provided by the Construction
Consultant to Lender or any other person or party, and (v) Lender reserves the right to replace the
Construction Consultant with another construction consultant at any time and without prior notice
to or approval by Borrower.
5.1.31 Construction Consultant/Duties and Access. Borrower shall permit Lender to retain the
Construction Consultant at the reasonable cost of Borrower to perform the following services on
behalf of Lender:
(a) Prepare the Final Project Report;
(b) To review and advise Lender whether, in the opinion of the Construction Consultant, the
Plans and Specifications are satisfactory;
(c) To review Draw Requests and change orders; and
(d) To make periodic inspections in accordance with Section 5.1.29 (approximately at
the date of each Draw Request) for the purpose of assuring that construction of the Project
Improvements to date is in accordance with the Plans and Specifications and to approve Borrower’s
then current Draw Request as being consistent with Borrower’s Obligations under this Agreement.
The fees of the Construction Consultant shall be paid by Borrower within thirty (30) days after
billing therefor and expenses incurred by Lender on account thereof shall be reimbursed to Lender
within thirty (30) days after request therefor, but neither Lender nor the Construction Consultant
shall have any liability to Borrower on account of (i) the services performed by the Construction
Consultant, (ii) any neglect or failure on the part of the Construction Consultant to properly
perform its services or (iii) any approval by the Construction Consultant of construction of the
Project Improvements. Neither Lender nor the Construction Consultant assumes any obligation to
Borrower or any other Person concerning the quality of construction of the Project Improvements or
the absence therefrom of defects.
5.1.32 Correction of Defects. Borrower shall promptly correct all material defects in the
Project Improvements or any material departure from the Plans and Specifications not previously
approved by Lender to the extent required hereunder. Borrower agrees that the advance of any
proceeds of the Loan whether before or after such defects or departures from the Plans and
Specifications are discovered by, or brought to the attention of, Lender shall not constitute a
waiver of Lender’s right to require compliance with this covenant.
5.1.33 Approval of Change Orders; Cost Savings. Borrower shall permit no deviations from the
Plans and Specifications during construction without the prior approval of Lender; provided,
however, that Borrower may make changes without Lender’s prior written approval so long as (a) with
respect to any Major Contract or Major Subcontract, such changes do not exceed two percent (2%) of
the amount of the applicable contract, (b) such changes do not exceed in the aggregate $250,000.00,
provided that changes which have been approved by Lender either before or after such changes have
been made shall be disregarded in calculating
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said $250,000.00 threshold, (c) such changes do not cause any line item in the Building Loan
Budget to be exceeded (after taking into account use of the Contingency Reserve to the extent
permitted under Section 2.1.7, reallocations under this Section 5.1.33 and other
reallocations approved by Lender in its sole discretion), (d) Borrower uses reasonable efforts to
deliver to Lender and Construction Consultant prior notice of such change orders or, if Borrower is
unable to deliver prior notice, Borrower shall submit to Lender and Construction Consultant copies
of all change orders entered into with respect to the Project Improvements within fifteen (15) days
after the same are entered into, irrespective of whether the same require the prior approval of
Lender and Construction Consultant pursuant to this Agreement, (e) such changes will not materially
change the gross square feet or the net rentable square feet of commercial space to be contained in
the Improvements, or the basic layout of the Improvements, or involve the use of materials,
furniture, fixtures and equipment that will not be at least equal in quality to the materials,
furniture, fixtures and equipment originally specified in or required by the approved Plans and
Specifications, and (f) such change will not prevent Borrower from completing the Project
Improvements by the Required Completion Date. The foregoing to the contrary notwithstanding,
Borrower may allocate cost savings actually achieved and verifiable in any line item of the
Building Loan Budget to other line items of the Building Loan Budget, provided that if such costs
savings are being allocated from a line item of the Building Loan Budget, (i) such Building Loan
Budget line item has a firm contract or sub-contract in place, (ii) the work has commenced and is
proceeding in accordance with the Construction Schedule and (iii) the Construction Consultant is
satisfied with said contract or sub-contract, including, without limitation, with regard to the
scope of said contract or sub-contract.
5.1.34 Building Permits.. Prior to commencing any phase of the demolition or construction of
the Project Improvements, Borrower shall obtain and deliver to Lender all building permits and
other Governmental Approvals required for the phase of construction of the Project Improvements to
be undertaken by Borrower.
5.1.35 Easements and Restrictions; Zoning. Borrower shall submit to Lender for Lender’s
approval prior to the execution thereof by Borrower all proposed easements, restrictions,
covenants, permits, licenses, and other instruments which would affect the title to the Property,
accompanied by a Survey showing the exact proposed location thereof and such other information as
Lender shall reasonably require. Borrower shall not subject the Property or any part thereof to
any easement, restriction or covenant (including any restriction or exclusive use provision in any
lease or other occupancy agreement) without the prior approval of Lender (not to be unreasonably
withheld or delayed in the case of utility easements only). Notwithstanding the foregoing, Lender
shall consent to a reciprocal easement agreement in connection with the future development of the
adjacent development site provided that such reciprocal easement agreement is reasonably acceptable
to Lender. With respect to any and all existing easements, restrictions, covenants or operating
agreements which benefit or burden the Property and any easement, restriction or covenant to which
the Property may hereafter be subjected in accordance with the provisions hereof, Borrower shall:
(a) observe and perform in all material respects the obligations imposed upon Borrower or the
Property; (b) not alter, modify or change the same in any material respect without the prior
approval of Lender; (c) enforce its rights thereunder in a commercially reasonable manner so as to
preserve for the benefit of the Property the full benefits of the same; and (d) deliver to Lender a
copy of any
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notice of default or other material notice received by Borrower in respect of the same
promptly after Borrower’s receipt of such notice.
5.1.36 Laborers, Subcontractors and Materialmen. Borrower shall notify Lender promptly, and
in writing, if Borrower receives any default notice, notice of lien or demand for past due payment,
written or oral, from any laborer, subcontractor or materialmen. Borrower will also furnish to
Lender at any time and from time to time upon reasonable demand by Lender, lien waivers in form
reasonably satisfactory to Lender bearing a then current date from the Major Contractors and the
Major Subcontractors.
5.1.37 Ownership of Personalty. Borrower shall furnish to Lender, if Lender so requests,
photocopies of the fully executed contracts, bills of sale, receipted vouchers and agreements, or
any of them, under which Borrower claims title to the materials, articles, fixtures and other
personal property used or to be used in the construction or operation of the Improvements.
5.1.38 Comply with Other Loan Documents. Borrower shall perform all of Borrower’s
Obligations under the Note and the other Loan Documents.
5.1.39 Purchase of Material Under Conditional Sale Contract. Borrower shall not permit any
materials, equipment, fixtures or any other part of the Improvements to be purchased or installed
under any security agreement or other arrangements wherein the seller reserves or purports to
reserve the right to remove or to repossess any such items or to consider them personal property
after their incorporation in the Property, unless authorized by Lender in writing and in advance.
5.1.40 Further Assurance of Title. If at any time Lender has reason to believe in its
reasonable opinion that any Advance is not secured or will or may not be secured by the Mortgage as
a first priority lien or security interest on the Improvements (subject only to the Permitted
Encumbrances and the Loan Documents), then Borrower shall, within ten (10) days after written
notice from Lender, do all things and matters necessary (including execution and delivery to Lender
of all further documents and performance of all other acts which Lender reasonably deems necessary
or appropriate) to assure to the reasonable satisfaction of Lender that any Advance previously made
hereunder or to be made hereunder is secured or will be secured by the Mortgage as a first priority
lien or security interest with respect to the Improvements (subject only to the Permitted
Encumbrances and the Loan Documents). Lender, at Lender’s option, may decline to make further
Advances hereunder until Lender has received such assurance.
5.1.41 Management Agreement.
(a) From and after Final Completion, Borrower shall cause the Property to be operated, in all
material respects, in accordance with the Management Agreement (or Replacement Management
Agreement, as applicable). In the event that the Management Agreement expires or is terminated
(without limiting any obligation of Borrower to obtain Lender’s consent to any termination or
modification of the Management Agreement in accordance with the terms and provisions of this
Agreement), Borrower shall promptly enter into
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a Replacement Management Agreement with Manager or another Qualified Manager, as applicable.
(b) Borrower shall: (i) promptly perform and/or observe, in all material respects, all of the
covenants and agreements required to be performed and observed by it under the Management Agreement
and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii)
promptly notify Lender of any material default under the Management Agreement of which it is aware;
(iii) promptly deliver to Lender a copy of each financial statement, business plan, capital
expenditures plan, notice, report and estimate received by it under the Management Agreement; and
(iv) enforce the performance and observance of all of the covenants and agreements required to be
performed and/or observed by Manager under the Management Agreement, in a commercially reasonable
manner.
(c) If: (a) an Event of Default shall have occurred and be continuing, (b) Manager shall
become bankrupt or insolvent; (c) a default beyond any applicable notice and/or cure period, if
any, occurs under the Management Agreement, or (d) following the Completion of the Improvements,
the Debt Service Coverage Ratio (based upon the trailing six (6) month period, annualized) as of
any Debt Service Coverage Determination Date is less than 1.05 to 1.0, then, in any such event,
Borrower shall, at the request of Lender, terminate the Management Agreement and replace the
Manager with a Qualified Manager pursuant to a Replacement Management Agreement, it being
understood and agreed that the management fee for such Qualified Manager shall not exceed then
prevailing market rates.
5.1.42 Embargoed Person. Borrower has performed and shall perform reasonable due diligence
to insure that at all times throughout the term of the Loan, including after giving effect to any
Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of
Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to trade restrictions under U.S. law,
including, but not limited to, The USA PATRIOT Act (including the anti-terrorism provisions
thereof), the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading
with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated
thereunder including those related to Specially Designated Nationals and Specially Designated
Global Terrorists, with the result that the investment in Borrower, Principal or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan made by the Lender is
in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature
whatsoever in Borrower, Principal or Guarantor, as applicable, with the result that the investment
in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited
by law or the Loan is in violation of law; and (c) none of the funds of Borrower, Principal or
Guarantor, as applicable, have been derived from, or are the proceeds of, any unlawful activity,
including money laundering, terrorism or terrorism activities, with the result that the investment
in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited
by law or the Loan is in violation of law, or may cause the Property to be subject to forfeiture or
seizure.
5.1.43 Environmental Covenants. Borrower shall remove all underground storage tanks (“USTs”)
and above-ground storage tanks (“ASTs”) as part of the proposed construction of the Project
Improvements in accordance with all applicable Legal Requirements
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of all Governmental Authorities having jurisdiction over the Property. In addition, all
documented and suspected impacted soil and groundwater will be addressed by Borrower in conjunction
with the proposed construction. Upon removal of the USTs and AST, all impacted soil and all free
product and the residual contamination sources, Borrower shall monitoring the natural attenuation
of groundwater contamination in accordance with a monitoring plan approved by Lender. Borrower
shall install a sub-slab ventilation system and vapor barrier in conjunction with the Project
Improvements as set forth in the Plane and Specifications, Following removal of the ASTs and USTs,
Borrower shall notify the United State Environmental Protection Agency and takes all action
necessary to de-list the former Riteway Laundry Company as a RCRIS SQG. Borrower shall perform
asbestos abatement in accordance with all applicable Legal Requirements of all Governmental
Authorities having jurisdiction over the Property prior to the demolition of the existing
structures on the Property. Lender shall not be required to make any advances of the Building Loan
for any phase of the construction beyond thee demolition of the existing improvements on the
Property until the removal of the USTs and ASTs, impacted soil and all asbestos and asbestos
containing material has been completed in accordance with this Section 5.1.34.
Section 5.2 Negative Covenants. From the date hereof until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Mortgage
and any other collateral in accordance with the terms of this Agreement and the other Loan
Documents, Borrower covenants and agrees with Lender that it will not do, directly or indirectly,
any of the following:
5.2.1 Intentionally Omitted.
5.2.2 Liens. Borrower shall not create, incur, assume or suffer to exist any Lien on any
portion of the Property or permit any such action to be taken, except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan Documents; and
(iii) Liens for Taxes or Other Charges not yet due.
5.2.3 Dissolution. Borrower shall not (a) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (b) engage in any business activity
not related to the ownership and operation of the Property, (c) transfer, lease or sell, in one
transaction or any combination of transactions, the assets or all or substantially all of the
properties or assets of Borrower except to the extent permitted by the Loan Documents, or (d)
modify, amend, waive or terminate its organizational documents or its qualification and good
standing in any jurisdiction in each case, without obtaining the prior written consent of Lender or
Lender’s designee.
5.2.4 Change In Business. Borrower shall not enter into any line of business other than the
ownership and operation of the Property, or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in activities other than
the continuance of its present business.
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5.2.5 Debt Cancellation. Borrower shall not cancel or otherwise forgive or release any claim or debt (other than
termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate
consideration and in the ordinary course of Borrower’s business.
5.2.6 Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of the
Property or seek any variance under any existing zoning ordinance or use or permit the use of any
portion of the Property in any manner that could result in such use becoming a non-conforming use
under any zoning ordinance or any other applicable land use law, rule or regulation, without the
prior consent of Lender.
5.2.7 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of the Property with (a)
any other real property constituting a tax lot separate from the Property, or (b) any portion of
the Property which may be deemed to constitute personal property, or any other procedure whereby
the Lien of any taxes which may be levied against such personal property shall be assessed or
levied or charged to the Property.
5.2.8 Intentionally Omitted.
5.2.9 ERISA.
(a) Borrower shall not engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note,
this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative
class exemption) prohibited transaction under ERISA.
(b) Borrower further covenants and agrees to deliver to Lender such certifications or other
evidence from time to time throughout the term of the Loan, as requested by Lender in its sole
discretion, that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the
meaning of Section 3(32) of ERISA; (B) Borrower is not subject to any state statute regulating
investment of, or fiduciary obligations with respect to governmental plans and (C) one or more of
the following circumstances is true:
(i) Equity interests in Borrower are publicly offered securities, within the
meaning of 29 C.F.R. §2510.3-101(b)(2);
(ii) Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower are held by “benefit plan investors” within the meaning of
29 C.F.R. §2510.3-101(f)(2); or
(iii) Borrower qualifies as an “operating company” or a “real estate
operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).
5.2.10 Transfers.
(a) Borrower acknowledges that Lender has examined and relied on the experience of Borrower
and its general partners, members, principals and (if Borrower is a trust)
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beneficial owners in owning and operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the
Property as security for repayment of the Debt and the performance of the Other Obligations.
Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so
as to ensure that, should Borrower default in the repayment of the Debt or the performance of the
Other Obligations, Lender can recover the Debt by a sale of the Property.
(b) Without the prior written consent of Lender, and except to the extent otherwise set forth
in this Section 5.2.10, Borrower shall not, and shall not permit any Restricted Party do
any of the following (collectively, a “Transfer”): (i) sell, convey, mortgage, grant, bargain,
encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of
(directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) the Property or any part thereof or any legal or
beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party,
other than (A) pursuant to Leases of space in the Improvements to tenants in accordance with the
provisions of Section 5.1.20 and (B) Permitted Transfers.
(c) A Transfer shall include, but not be limited to, (i) an installment sales agreement
wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower’s right, title and interest in and to any
Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or
Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any merger or consolidation
or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the
partnership interest of any general partner or any profits or proceeds relating to such partnership
interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds
relating to such limited partnership interest or the creation or issuance of new limited
partnership interests; (v) if a Restricted Party is a limited liability company, any merger or
consolidation or the change, removal, resignation or addition of a managing member or non-member
manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of
a managing member (or if no managing member, any member) or any profits or proceeds relating to
such membership interest, or the Sale or Pledge of non-managing membership interests or the
creation or issuance of new non-managing membership interests; (vi) if a Restricted Party is a
trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial
interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or
(vii) the removal or the resignation of the managing agent (including, without limitation, an
Affiliated Manager) other than in accordance with Section 5.1.22 hereof.
(d) Notwithstanding the provisions of this Section 5.2.10, Lender’s consent shall not
be required in connection with one or a series of Transfers, of not more than forty-nine percent
(49%) of the stock, the limited partnership interests or non-managing membership interests (as the
case may be) in a Restricted Party; provided, however, no such Transfer shall result in the change
of Control in a Restricted Party, and as a condition to each such Transfer, Lender shall receive
not less than thirty (30) days prior notice of such proposed Transfer. If after
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giving effect to any such Transfer, more than forty-nine percent (49%) in the aggregate of direct or indirect
interests in a Restricted Party are owned by any Person and its Affiliates that owned less than
forty-nine percent (49%) direct or indirect interest in such Restricted Party as of the Closing
Date, Borrower shall, no less than thirty (30) days prior to the effective date of any such
Transfer, deliver to Lender an Additional Insolvency Opinion acceptable to Lender and the Rating
Agencies. In addition, at all times, (a) Guarantor must continue to Control, and own, directly or
indirectly, in the aggregate, at least a 51% legal and beneficial interest in, Borrower, and (b)
Acadia Realty Trust must continue to Control, and own, directly or indirectly, at least a 20% legal
and beneficial interest in, each of Guarantor and any Affiliated Manager.
(e) No consent to any assumption of the Loan shall occur on or before the date that is twelve
(12) Payment Dates after the Completion of the Improvements. Thereafter, Lender’s consent to a
Transfer of the Property and assumption of the Loan shall not be unreasonably withheld provided
that Lender receives sixty (60) days prior written notice of such Transfer and no Event of Default
has occurred and is continuing, and further provided that the following additional requirements are
satisfied for all Transfers other than those described in subsection (d) above:
(i) Borrower shall pay Lender at the time of such Transfer a transfer fee
equal to one half of one percent (0.5%) of the outstanding principal balance of
the Loan for the first Transfer and one percent (1.0%) of the outstanding
principal balance of the Loan for each subsequent Transfer;
(ii) Borrower shall pay any and all reasonable out-of-pocket costs incurred
in connection with such Transfer (including, without limitation, Lender’s counsel
fees and disbursements and all recording fees, title insurance premiums and
mortgage and intangible taxes and the fees and expenses of the Rating Agencies
pursuant to clause (x) below);
(iii) The proposed transferee (the “Transferee”) or Transferee’s Principals
must have demonstrated expertise in owning and operating properties similar in
location, size, class and operation to the Property, which expertise shall be
reasonably determined by Lender;
(iv) Transferee and Transferee’s Principals shall, as of the date of such
transfer, have an aggregate Net Worth and Liquidity reasonably acceptable to
Lender;
(v) Transferee, Transferee’s Principals and all other entities which may be
owned or Controlled directly or indirectly by Transferee’s Principals (“Related
Entities”) must not have been party to any bankruptcy proceedings, voluntary or
involuntary, made an assignment for the benefit of creditors or taken advantage of
any insolvency act, or any act for the benefit of debtors within seven (7) years
prior to the date of the proposed Transfer;
(vi) Transferee shall assume all of the obligations of Borrower under the
Loan Documents in a manner satisfactory to Lender in all respects,
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including, without limitation, by entering into an assumption agreement in form and substance
satisfactory to Lender;
(vii) There shall be no material litigation or regulatory action pending or
threatened against Transferee, Transferee’s Principals or Related Entities which
is not reasonably acceptable to Lender;
(viii) Transferee, Transferee’s Principals and Related Entities shall not
have defaulted under its or their obligations with respect to any other
Indebtedness in a manner which is not reasonably acceptable to Lender;
(ix) Transferee and Transferee’s Principals must be able to satisfy all the
representations and covenants set forth in Sections 4.1.30, 4.1.35, 5.1.46
and 5.2.10 of this Agreement, no Default or Event of Default shall
otherwise occur as a result of such Transfer, and Transferee and Transferee’s
Principals shall deliver (A) all organizational documentation reasonably requested
by Lender, which shall be reasonably satisfactory to Lender and (B) all
certificates, agreements and covenants reasonably required by Lender;
(x) Transferee shall be approved by the Rating Agencies selected by Lender,
which approval, if required by Lender, shall take the form of a confirmation in
writing from such Rating Agencies to the effect that such Transfer will not result
in a requalification, reduction, downgrade or withdrawal of the ratings in effect
immediately prior to such assumption or transfer for the Securities or any class
thereof issued in connection with a Securitization which are then outstanding;
(xi) Borrower or Transferee, at its sole cost and expense, shall deliver to
Lender an Additional Insolvency Opinion reflecting such Transfer satisfactory in
form and substance to Lender;
(xii) Prior to any release of Guarantor, one (1) or more substitute
guarantors reasonably acceptable to Lender shall have assumed all of the
liabilities and obligations of Guarantor under the Guaranty of Completion, the
Guaranty of Recourse Carveouts and the Environmental Indemnity executed by
Guarantor or execute replacement guaranties and environmental indemnity
reasonably satisfactory to Lender;
(xiii) Borrower shall deliver, at its sole cost and expense, an endorsement
to the Title Insurance Policy, as modified by the assumption agreement, as a valid
first lien on the Property and naming the Transferee as owner of the Property,
which endorsement shall insure that, as of the date of the recording of the
assumption agreement, the Property shall not be subject to any additional
exceptions or liens other than those contained in the Title Policy issued on the
date hereof and the Permitted Encumbrances; and
(xiv) The Property shall be managed by a Qualified Manager pursuant to a
Replacement Management Agreement.
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Immediately upon a Transfer to such Transferee and the satisfaction of all of the above
requirements, the named Borrower and Guarantor herein shall be released from all liability under
this Agreement, the Note, the Mortgage and the other Loan Documents accruing after such Transfer.
The foregoing release shall be effective upon the date of such Transfer, but Lender agrees to
provide written evidence thereof reasonably requested by Borrower.
5.2.11 No Distributions. Until Completion of the Improvements and satisfaction of the conditions to the Final
Advance, Borrower shall not make any distributions or other disbursements to its partners,
shareholders, members or Persons owned by or related to any of its partners, shareholders or
members. Borrower shall use any and all Rents collected from the Property to pay operating
expenses of and real property taxes on the Property.
5.2.12 Management Agreement. Borrower shall not, without Lender’s prior written consent (which consent shall not be
unreasonably withheld): (i) surrender, terminate, cancel, amend or modify the Management Agreement;
provided, that Borrower may, without Lender’s consent, replace the Manager so long as the
replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement; (ii)
reduce or consent to the reduction of the term of the Management Agreement; (iii) increase or
consent to the increase of the amount of any charges under the Management Agreement; or (iv)
otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and
remedies under, the Management Agreement in any material respect. Following the occurrence and
during the continuance of an Event of Default, Borrower shall not exercise any rights, make any
decisions, grant any approvals or otherwise take any action under the Management Agreement without
the prior written consent of Lender, which consent may be granted, conditioned or withheld in
Lender’s sole discretion.
5.2.13 Permitted Additional Mezzanine Indebtedness. Notwithstanding anything the contrary contained in this Agreement, but subject to the
rights of Lender to convert a portion of the Loan to a mezzanine loan pursuant to Section
9.1.2 hereof, an Additional Mezzanine Borrower (as defined below) shall have the right to
pledge its direct and/or indirect equity interests in Borrower or Mezzanine Borrower, as
applicable (but not of any direct interest in the Property, or Borrower, if there is Subordinate
Financing in the form of a mezzanine loan) to a Permitted Mezzanine Lender (as defined below) as
security for a loan to such Additional Mezzanine Borrower (an “Additional Mezzanine Loan”) provided
that the following terms and conditions are satisfied:
(a) no Event of Default shall then exist;
(b) Lender shall have received at least thirty (30) and no more than sixty (60) days’ prior
written notice of the proposed Additional Mezzanine Loan;
(c) the Completion of the Improvements shall have occurred and all of the conditions to the
Final Advance shall have been satisfied;
(d) the aggregate amounts of the outstanding principal amount of the Total Debt (calculated
without regard to any scheduled amortization paid under the Building Loan or the Project Loan) and
the maximum principal amount of the Additional Mezzanine Loan
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(as of the effective date of the Additional Mezzanine Loan) shall not exceed eighty-five percent (85%) of the fair market value of
the Property as determined by an MAI appraisal performed, at Borrower’s sole cost and expense, by
an appraiser approved by Lender acting reasonably and dated, or updated, to a date within 30 days
of the effective date of the Additional Mezzanine Loan, made in compliance with FIRREA and
reasonably satisfactory to Lenders in all respects; the appraisal value shall be subject to review
and confirmation and updating as to valuation by Lender’s internal appraisal staff, whose decision
shall be final absent manifest error.
(e) the Aggregate Debt Service Coverage Ratio is at least 1.15 to 1.0;
(f) Borrower shall not be obligated to repay the Additional Mezzanine Loan nor incur any
obligation or liability to the Permitted Mezzanine Lender or any other Person with respect to the
Additional Mezzanine Loan, and the terms and conditions of the Additional Mezzanine Loan, the
collateral pledged as security therefor, and the documents evidencing the Additional Mezzanine Loan
(the “Additional Mezzanine Loan Documents”), shall be reasonably satisfactory to Lender;
(g) a new Single-Purpose Entity shall have been formed that will directly or indirectly own
100% of the Equity Interests in Borrower, or Mezzanine Borrower, as applicable (the “Additional
Mezzanine Borrower”), the organizational documents of Borrower, Mezzanine Borrower, if any, such
Additional Mezzanine Borrower, and their respective constituent owners shall be reasonably
satisfactory to Lender, and Borrower, Mezzanine Borrower, if any and such Additional Mezzanine
Borrower shall otherwise satisfy all applicable Rating Agency criteria for single-purpose entities,
bankruptcy remoteness, and mezzanine borrowers;
(h) the Permitted Mezzanine Lender shall have executed and delivered to Lender a
subordination, standstill and intercreditor agreement acceptable to Lender in its sole and absolute
discretion, which shall provide among other things that the Permitted Mezzanine Lender shall not
have the right to foreclose on its interest in Borrower or Mezzanine Borrower, as applicable, or
otherwise exercise its rights under the Additional Mezzanine Loan Documents
unless and until the Loan is paid in full and that the Additional Mezzanine Loan shall not be
transferable except to a Qualified Transferee;
(i) Borrower and Guarantor shall have executed such additional Loan Documents and such
amendments to and reaffirmations of the existing Loan Documents as Lender may require , including
entering into a new cash management arrangement with Lender (or modifying any existing cash
management requirement) to provide for, among other things, the payment of Lender-approved
operating expenses and capital expenses prior to the payment of debt service on the Additional
Mezzanine Loan;
(j) Lender shall have received (i) such opinions of counsel to Borrower as Lender may require,
in form and content acceptable to Lender (including a new non-consolidation opinion if one was
required to be delivered in connection with the Loan); and (ii) confirmation by each of the
applicable Rating Agencies that the incurrence of the Additional Mezzanine Loan will not result in
any qualification, withdrawal or downgrading of any existing ratings of securities created in any
applicable Securitization; and
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(k) Borrower shall have paid or reimbursed Lender for all of its costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred in connection with the foregoing.
Notwithstanding anything herein to the contrary, none of BSCMI, Lender or their respective
Affiliates shall have any obligation to provide an Additional Mezzanine Loan or any other
financing.
For purposes hereof, the following terms shall have the following respective meanings:
“Aggregate Debt Service Coverage Ratio” shall mean a ratio for the applicable period in
which:,
| (a) | the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, adjusted for a vacancy rate equal to the greater of the actual vacancy rate, the market vacancy rate and an assumed vacancy rate equal to five percent (5%), without deduction for (i) actual management fees incurred in connection with the operation of the Property less (A) management fees equal to the greater of (1) assumed management fees of six percent (6%) of Gross Income from Operations or (2) the actual management fees incurred, (B) Replacement Reserve Fund contributions equal to $16,500.00 per annum; and | ||
| (b) | the denominator is the Total Debt Service for such period assuming a thirty (30) year amortization schedule (and calculated without regard to any scheduled amortization paid under the Building Loan or the Project Loan, or the Subordinate Financing, if applicable), plus all principal and interest payable for such period under the Additional Mezzanine Loan (assuming the Additional Mezzanine Loan had been fully advanced at the beginning of such period) (provided, however, with respect to the Additional Mezzanine Loan, such ratio shall be determined utilizing a debt service constant calculated with the interest rate payable with respect to the Additional Mezzanine Loan and an assumed amortization period of thirty (30) years). |
“Permitted Mezzanine Lender” shall mean a Qualified Transferee.
“Qualified Transferee” means (i) BSCMI or an Affiliate of BSCMI, or (ii) one or more of the
following:
(A) a real estate investment trust, bank, saving and loan association, investment bank,
insurance company, trust company, commercial credit corporation, pension plan, pension fund
or pension advisory firm, mutual fund, government entity or
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plan, provided that any such
Person referred to in this clause (A) satisfies the Eligibility Requirements;
(B) an investment company, money management firm or “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an
institutional “accredited investor” within the meaning of Regulation D under the Securities
Act of 1933, as amended, provided that any such Person referred to in this clause
(B) satisfies the Eligibility Requirements;
(C) an institution substantially similar to any of the foregoing entities described in
clause (ii)(A), (ii)(B) or (ii)(F) that satisfies the Eligibility
Requirements;
(D) any entity Controlled by, Controlling or under common Control with any of the
entities described in clause (i) or clause (ii)(A) or (ii)(C) above
or clause (ii)(F) below;
(E) a Qualified Trustee in connection with (aa) a securitization of, or (bb) the
creation of collateralized debt obligations (“CDO”) secured by, or (cc) a financing through
an “owner trust” of, the Mezzanine Loan or any interest therein (any of the foregoing, a
“Securitization Vehicle”), provided, that (1) one or more classes of securities issued by
such Securitization Vehicle is initially rated at least investment grade by each of the
Rating Agencies which assigned a rating to one or more classes of securities issued in
connection with a Securitization (it being understood that with respect to any Rating Agency
that assigned such a rating to the securities issued by such Securitization Vehicle, a
Rating Agency Confirmation will not be required in connection with a transfer of the
Additional Mezzanine Loan or any interest therein to such Securitization Vehicle, except
that if one or more classes of securities issued in connection with a Securitization is
rated by Moody’s, the transferee may not rely on this clause (1) with respect to Moody’s);
(2) in the case of a Securitization Vehicle that is not a CDO, the special servicer of such
Securitization Vehicle has the Required Special Servicer Rating at the time of Transfer and
the related transaction documents for such Securitization Vehicle require that any successor have the Required Special Servicer
Rating (such entity, an “Approved Servicer”) and such Approved Servicer is required to
service and administer such Additional Mezzanine Loan or any interest therein in accordance
with servicing arrangements for the assets held by the Securitization Vehicle which require
that such Approved Servicer act in accordance with a servicing standard notwithstanding any
contrary direction or instruction from any other Person; or (3) in the case of a
Securitization Vehicle that is a CDO, the CDO Asset Manager and, if applicable, each
Intervening Trust Vehicle that is not administered and managed by a CDO Asset Manager which
is a Qualified Transferee, are each a Qualified Transferee under clauses (ii)(A), (B), (C),
(D), (F) or (G) of this definition;
(F) an investment fund, limited liability company, limited partnership or general
partnership (a “Permitted Investment Fund”) where a Permitted Fund Manager acts as general
partner, managing member or fund manager and at least fifty percent (50%) of the equity
interests in such investment vehicle are owned, directly or indirectly, by one or more of
the following: the Mezzanine Lender, a Qualified Transferee, an
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institutional “accredited
investor”, within the meaning of Regulation D promulgated under the Securities Act of 1933,
as amended, and/or a “qualified institutional buyer” or both within the meaning of Rule 144A
promulgated under the Securities Exchange Act of 1934, as amended, provided such
institutional “accredited investors” or “qualified institutional buyers” that are used to
satisfy the 50% test set forth above in this clause (F) satisfy the financial tests
in clause (i) of the definition of Eligibility Requirements; or
(G) any Person for which the Rating Agencies have issued a Rating Agency Confirmation
with respect to such Transfer.
“Eligibility Requirements” means, with respect to any Person, that such Person (i) has total
assets (in name or under management) in excess of $650,000,000 and (except with respect to a
pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity of
$250,000,000 and (ii) is regularly engaged in the business of making or owning commercial real
estate loans or loans similar in type as the Mezzanine Loan or operating commercial mortgage
properties.
“CDO Asset Manager” with respect to any Securitization Vehicle (hereinafter defined) that is a
CDO, shall mean the entity that is responsible for managing or administering the Additional
Mezzanine Loan (or any interest therein) as an underlying asset of such Securitization Vehicle or,
if applicable, as an asset of any Intervening Trust Vehicle (including, without limitation, the
right to exercise any consent and control rights available to the holder of the Additional
Mezzanine Loan).
“Intervening Trust Vehicle” shall mean with respect to any Securitization Vehicle that is a
CDO, a trust vehicle or entity which holds the Additional Mezzanine Loan (or any interest therein)
as collateral securing (in whole or in part) any obligation or security held by such Securitization
Vehicle as collateral for the CDO.
“Permitted Fund Manager” means any Person that on the date of determination is not subject to
a Proceeding and is either (i) a nationally-recognized manager of investment
funds investing in debt or equity interests relating to commercial real estate, or (ii) an
entity that is a Qualified Transferee pursuant to clause (i) or clauses (ii)(A),
(B), (C), (D) or (G) of the definition thereof, in each case, which
is investing through a fund with committed capital of at least $250,000,000.
“Qualified Trustee” means (i) a corporation, national bank, national banking association or a
trust company, organized and doing business under the laws of any state or the United States of
America, authorized under such laws to exercise corporate trust powers and to accept the trust
conferred, having a combined capital and surplus of at least $100,000,000 and subject to
supervision or examination by federal or state authority, (ii) an institution insured by the
Federal Deposit Insurance Corporation or (iii) an institution whose long-term senior unsecured debt
is rated either of the then in effect top two (2) rating categories of S&P and either Fitch or
Moody’s (provided, however, if the Loan has been securitized, the rating requirement of any agency
not a Rating Agency will be disregarded).
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“Required Special Servicer Rating” means a special servicer that (i) has a rating of “CSS3” in
the case of Fitch, (ii) is on the S&P’s select servicer list as a “U.S. Commercial Mortgage Special
Servicer” in the case of S&P and (iii) in the case of Moody’s, such special servicer is acting as
special servicer in a commercial mortgage loan securitization that was rated by Moody’s within the
twelve (12) month period prior to the date of determination and Moody’s has not downgraded or
withdrawn the then-current rating on any class of commercial mortgage securities or placed any
class of commercial mortgage securities on watch citing the continuation of such special servicer
as special servicer of such commercial mortgage securities. The requirement of any agency not a
Rating Agency shall be disregarded.
“Rating Agency Confirmation” means a written affirmation from each of the Rating Agencies that
the credit rating of the Certificates assigned by such Rating Agency immediately prior to the
occurrence of the event with respect to which such Rating Agency Confirmation is sought will not be
qualified, downgraded or withdrawn as a result of the occurrence of such event. In the event that
no Certificates are outstanding or the Loan is not part of a Securitization, any action that would
otherwise require a Rating Agency Confirmation shall instead require the consent of Lender. All
fees and expenses of the Rating Agencies incurred in connection with any Rating Agency Confirmation
required pursuant to this Agreement as the result of a request or action of Borrower shall be paid
by Borrower.
5.2.14 Guarantor. Notwithstanding anything to the contrary in the organizational documents of Guarantor,
Guarantor shall not dissolve unless and until each of the following conditions have been satisfied:
(i) an appropriate winding down of and disposition of its assets and liabilities, satisfaction of
all claims, creditors and liabilities, and retention of adequate reserves to satisfy future
contingent liabilities, including, without limitation, its liabilities under the Guaranty and the
Environmental Indemnity; (ii) compliance with all organizational and applicable Legal Requirements
relating to dissolution and winding up of Guarantor, and (iii) replacement of the Guarantor with a
replacement guarantor acceptable to Lender in its sole discretion and as to which Lender has
received a Rating Agency Confirmation.
ARTICLE VI.
INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
Section 6.1 Insurance.
6.1.1 Insurance Policies. Borrower, at its sole cost and expense, shall obtain and maintain, or cause to be
maintained, the following insurance policies:
(a) At all times prior to Completion of the Improvements and at any time thereafter during
which construction work is being performed at the Property:
(A) Builder’s Risk “All Risk” insurance in such amount as Lender shall require but in no event
less than one hundred percent (100%) of the replacement cost value of the completed Project
Improvements, but excluding foundations and any other improvements not subject to physical damage).
Such policy shall be written on a Builder’s Risk Completed Value Form (100% non-reporting) or its
equivalent and shall include, without
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limitation, coverage for loss by testing, collapse, theft,
flood, and earth movement. Such insurance Policy shall also include coverage for:
(i) Loss suffered with respect to materials, equipment, heating and air
conditioning machinery, machinery, and supplies, in each case owned by Borrower or
required to be insured by Borrower, whether on-site, in transit, or stored offsite
and with respect to temporary structures, hoists, sidewalks, retaining walls, and
underground property in each case owned by Borrower or required to by insured by
Borrower;
(ii) Soft costs that are recurring costs, which shall include, without
limitation, delayed opening loss of income/revenue coverage for a period of
recovery of not less than twelve (12) months commencing from the date the Project
Improvements are as to be completed agreed to by Lender in its sole
discretion, as well as costs to reproduce plans, specifications, blueprints
and models in connection with any restoration following a casualty;
(iii) Demolition, debris removal and increased cost of construction,
including, without limitation, increased costs arising out of changes in
applicable laws and codes; and
(iv) Operation of building laws.
(B) Borrower shall cause the Borrower’s Architect to obtain and maintain Architect’s or
Professional Liability insurance during the period commencing on the date of the Architect’s
Contract respectively, and expiring no earlier than five (5) years after the Completion of the
Improvements. Such insurance shall be in an amount equal to at least $1,000,000 per claim or as
otherwise acceptable to Lender.
(C) Commercial General Liability insurance (vacant building) naming Lender as an additional
insured with a minimum liability of $10,000,000 including “Umbrella Liability,” of like amount per
occurrence and in the aggregate per location.
(D) Workers Compensation, Employer’s Liability coverage and Disability insurance as required
by law covering Borrower.
(E) Prior to or simultaneously with its entering into the General Contractor’s Agreement,
Borrower shall, or shall cause the General Contractor to, obtain and maintain Commercial General
Liability coverage, including, without limitation, products and completed operations and containing
no “X”, “C”, “U” exclusion if excavation and/or demolition is to be provided, and Automobile
Liability insurance with no less than $10,000,000 in limits per occurrence and in the aggregate per
project through primary and umbrella liability coverages. Such insurance shall name Borrower as
the insured and Lender as additional insured. Borrower shall also require that all Contractors
cause all of their respective subcontractors to maintain similar coverage with limits of no less
than $1,000,000 per occurrence and shall include Borrower and Lender as additional insureds. All
Persons engaged in work on the improvements at the Property shall maintain statutory Workers
Compensation and Disability insurance in force for all workers on the job. The liability insurance
to be maintained by Borrower and/or the
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General Contractor pursuant to this subsection (E)
shall include coverage for products and completed operations and coverage for construction defects
for a period of five (5) years after Completion of the Improvements.
(b) At all times after Completion of the Improvements:
(i) comprehensive all risk insurance (“Special Form”) including, but not limited to,
loss caused by any type of windstorm or hail on the Improvements and the Personal Property,
(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 or to be written on a no co-insurance form; (C) providing for no deductible
in excess of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) for all such insurance
coverage excluding windstorm and earthquake and (D) if any of the Improvements or the use
of the Property shall at any time constitute legal non-conforming structures or uses,
coverage for loss due to operation of law in an amount equal to the full Replacement Cost,
coverage for demolition costs and coverage for increased costs of construction. In
addition, Borrower shall obtain: (x) 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 (y) earthquake insurance in amounts and in form and substance satisfactory to
Lender in the event the Property is located in an area with a high degree of seismic
activity;
(ii) 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) in an
amount equal to one hundred percent (100%) of the projected gross revenues from the
operation of the Property (as reduced to reflect expenses not incurred during a period of
Restoration) for a period of at least eighteen (18) months after the date of the Casualty;
and (D) 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 six (6) 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. 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 revenues from the Property
for the succeeding eighteen (18) month period. Notwithstanding the provisions of Section
2.7.1 hereof, all proceeds payable to Lender pursuant to this subsection shall be held by
Lender and shall be applied to the obligations secured by the Loan Documents from time to
time
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due and payable hereunder and under the Note; provided, however, that nothing herein
contained shall be deemed to relieve Borrower of its obligations to pay the obligations
secured by the Loan Documents on the respective dates of payment provided for in this
Agreement and the other Loan Documents except to the extent such amounts are actually paid
out of the proceeds of such business income insurance; and
(iii) comprehensive boiler and machinery insurance, if steam boilers or other
pressure-fixed vessels are in operation, in amounts as shall be reasonably required by
Lender on terms consistent with the commercial property insurance policy required under
subsection (i) above.
(c) At all times during the term of the Loan:
(i) commercial general liability insurance against claims for personal injury, bodily
injury, death or property damage occurring upon, in or about the Property, such insurance
(A) to be on the so-called “occurrence” form with a combined limit of not less than Two
Million and 00/100 Dollars ($2,000,000.00) in the aggregate and One Million and 00/100
Dollars ($1,000,000.00) per occurrence; (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 written contracts and (5)
contractual liability covering the indemnities contained in Article 9 of the Mortgage to the
extent the same is available;
(ii) automobile liability coverage for all owned and non-owned vehicles, including
rented and leased vehicles containing minimum limits per occurrence of One Million Dollars
and 00/100 Dollars ($1,000,000.00);
(iii) worker’s compensation and employee’s liability subject to the worker’s
compensation laws of the applicable state;
(iv) umbrella and excess liability insurance in an amount not less than Fifty Million
and 00/100 Dollars ($50,000,000.00) per occurrence on terms consistent with the commercial
general liability insurance policy required under subsection (v) above, including, but not
limited to, supplemental coverage for employer liability and automobile liability, which
umbrella liability coverage shall apply in excess of the automobile liability coverage in
clause (ii) above;
(v) Insurance covering the decrease or diminution in value of the Property resulting
from the enforcement of any law, building code, zoning regulation or other Legal Requirement
or act of any Governmental Authority to the extent that the Property cannot legally be
restored to a condition that existed prior to the Casualty (which insurance shall be in a
stipulated sum amount reasonably acceptable to Lender in its sole discretion);
(vi) the insurance required under this Sections 6.1(a)(A) and 6.1(b)(i)
above shall cover perils of terrorism and acts of terrorism and Borrower shall maintain
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insurance for loss resulting from perils and acts of terrorism on terms (including amounts)
consistent with those required under Sections 6.1(a)(A) and 6.1(b)(i) above
at all times during the term of the Loan; and
(vii) upon sixty (60) days written notice, such other reasonable insurance, including,
but not limited to, sinkhole or land subsidence insurance, and in such reasonable amounts as
Lender from time to time may reasonably request against such other insurable hazards which
at the time are commonly insured against for property similar to the Property located in or
around the region in which the Property is located.
(d) Intentionally Omitted.
(e) All insurance provided for in this Section 6.1 shall be obtained under valid and
enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and, to the
extent not specified above, shall be subject to the approval of Lender as to deductibles, loss
payees and insureds. The Policies described in Section 6.1 hereof (other than those strictly
limited to liability protection) shall designate Lender as loss payee. Not less than fifteen (15)
days prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of
insurance evidencing the Policies and within thirty (30) days after commencement of the new or
renewal Policy evidence satisfactory to Lender of payment of the premiums due thereunder (the
“Insurance Premiums”), shall be delivered by Borrower to Lender.
(f) Prior to the renewal or replacement of any Policy (the “Existing Policy”), any required
insurance may be procured under a blanket insurance Policy covering the Property and other
properties or assets of Borrower or its affiliates, provided that any such blanket insurance Policy
shall specifically allocate to the 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 this Article VI. Lender, in its
reasonable discretion, shall determine whether such blanket Policies provide sufficient limits of
insurance.
(g) Unless otherwise specified, all Policies of insurance provided for or contemplated by this
Article VI shall, in the case of property damage, builder’s risk, boiler and machinery,
flood and earthquake insurance, name Borrower as the insured and Lender (for the ratable benefit of
Lenders and their successors and/or assigns) as the additional insured and shall contain a
so-called New York standard non-contributing mortgagee clause or its equivalent in favor of Lender
(including Lender as mortgagee and loss payee) providing that the loss thereunder shall be payable
to Lender for the ratable benefit of Lenders and providing thirty (30) days’ advance notice of
cancellation to Lender.
(h) All Property insurance also shall include a co-insurance waiver and Agreed Amount
Endorsement. The amount of any deductible under any Policy must be reasonably acceptable to
Lender. Without the Lender’s prior written consent, Borrower shall not name any Person other than
the Lender, as loss payee, as it pertains to the Property, nor shall Borrower carry separate or
additional insurance coverage covering the improvements at the Property concurrent in form or
contributing in the event of loss with that required by this Agreement or; provided that, if
blanket policies are obtained, this sentence shall not apply to
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property covered by such blanket
policies other than the improvements at the Property and such tenant improvements and betterments
that Borrower is required to insure pursuant to the applicable Lease.
(i) Each Policy shall contain a provision whereby the insurer: (i) agrees that such Policy
shall not be canceled or terminated, the coverage, deductible, and limits of such Policy shall not
be modified, other provisions of such Policy shall not be modified if such Policy, after giving
effect to such modification, would not satisfy the requirements of this Agreement, and such Policy
shall not be so modified, canceled or fail to be renewed, without in each case, at least thirty
(30) days prior written notice to Lender, (ii) waives any right to claim any Insurance Premiums and
commissions against Lender or any Lender, provided that the Policy need not waive the requirement
that the Insurance Premiums be paid in order for a claim to be paid to the
insured and (iii) provides that Lender is permitted to make payments to effect the
continuation of such policy upon notice of cancellation due to non-payment of premiums. In the
event any Policy (except for general public and other liability and Workers Compensation insurance)
shall contain breach of warranty provisions, such Policy shall not be invalidated by and shall
insure Lender for the benefit of Lenders regardless of (A) any act, failure to act or negligence of
or violation of warranties, declarations or conditions contained in such Policy by any named
insured, (B) the occupancy or use of the Property for purposes more hazardous than permitted by the
terms thereof, or (C) any foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage or any other Loan Document.
(j) Borrower shall pay the Insurance Premiums for the Policies as the same become due and
payable. Borrower shall deliver to Lender certified copies of the Policies required to be
maintained pursuant to this Article VI; provided, however, Lender shall not
be deemed by reason of the custody of such Policies to have knowledge of the contents thereof.
Borrower also shall deliver to Lender within ten (10) days after Lender’s request, a statement
setting forth the particulars as to all such Policies, indicating that all Insurance Premiums due
thereon have been paid and that the same are in full force and effect. Not later than fifteen (15)
days prior to the expiration date of each Policy, Borrower shall deliver to Lender a certificate of
insurance evidencing renewal of coverage as required herein. Not later than thirty (30) days after
the renewal or replacement of each of the Policies, Borrower shall deliver to Lender evidence of
payment of Insurance Premiums for such renewal or replacement Policies satisfactory to the Lender
and not later than sixty (60) days after the renewal or replacement of each of the Policies,
Borrower shall deliver to Lender an original or certified copy (as required pursuant to this
paragraph) of a renewal or replacement Policy or Policies.
(k) If at any time Lender is not in receipt of written evidence that all insurance required
hereunder is maintained in full force and effect, Lender shall have the right (but not the
obligation), upon notice to Borrower, to take such action as Lender deems necessary to protect
Lenders’ interest in the Property, including, without limitation, the obtaining of such insurance
coverage as Lender in its sole discretion deems appropriate after three (3) Business Days notice to
Borrower if prior to the date upon which any such coverage will lapse or at any time Lender deems
necessary (regardless of prior notice to Borrower) to avoid the lapse of any such coverage. All
Insurance 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 Building Loan Mortgage and shall bear interest at the Default Rate.
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(l) In the event of foreclosure of the Building Loan Mortgage and/or the Project Loan Mortgage
or other transfer of title to the Property in extinguishment in whole or in part of the Total Debt,
all right, title and interest of Borrower in and to the Policies that are not blanket Policies then
in force concerning the 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.
6.1.2 Insurance Company. 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 “A/VII” or better by A.M. Best Company, Inc. and “A- or better
(and the equivalent thereof) by at least two (2) of the Rating Agencies rating the Securities (one
of which shall be S&P if they are rating the Securities and one of which will be Moody’s if they
are rating the Securities), or if only one (1) Rating Agency is rating the Securities, then only by
such Rating Agency.
Section 6.2 Casualty and Condemnation.
6.2.1 Casualty. The term “Net Proceeds” for purposes of this Agreement shall mean: (i) the net amount of
all insurance proceeds received by Lender pursuant to Section 6.1.1 (b)(1), (b)(iii),
(c)(ii) and (c)(iv) 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. If the Property shall be
damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall
give prompt notice of such Casualty to Lender and Borrower shall promptly commence and diligently
prosecute to completion the repair and restoration of the Property as nearly as possible to the
condition the Property was in immediately prior to such Casualty with such alterations as may be
reasonably approved by Lender (a “Restoration”) and otherwise in accordance with this Agreement.
Borrower shall pay all costs of such Restoration whether or not such costs are covered by the Net
Proceeds. Lender may, but shall not be obligated to, make proof of loss if not made promptly by
Borrower. In addition, Lender may participate in any settlement discussions with any insurance
companies (and shall approve the final settlement, which approval shall not be unreasonably
withheld or delayed) with respect to any Casualty in which the Net Proceeds or the costs of
completing the Restoration are equal to or greater than One Million and 00/100 Dollars
($1,000,000.00) and Borrower shall deliver to Lender all instruments required by Lender to permit
such participation.
6.2.2 Condemnation. Borrower shall give Lender prompt notice of any actual or threatened commencement of any
proceeding for the Condemnation by any Governmental Authority of all or any part of the Property
and shall deliver to Lender a copy 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 Lender 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 Condemnation, Borrower shall continue to pay the Total Debt at
the time and in the manner provided for its
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payment in the Building Loan Note and the Project Loan
Note and in this Agreement and the Project Loan Agreement. Lenders shall not be limited to the
interest paid on the Award by any Governmental Authority but shall be entitled to receive out of
the Award interest and additional interest (if any)
at the rate or rates provided in this Agreement or in the Building Loan Note or in the Project
Loan Agreement or in the Project Loan Note, as applicable and the Debt shall not be reduced until
any Award shall have been actually received and applied by Lender, after the deduction of expenses
of collection, to the reduction or discharge of the Debt. If the Property or any portion thereof
is taken by any Governmental Authority, Borrower shall promptly commence and diligently prosecute
the Restoration of the Property pursuant to this Section 6.2 and otherwise comply with the
provisions of hereof. 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 Building Loan Note or the Project Loan Note shall have been sought, recovered or denied, to
receive the Award, or a portion thereof sufficient to pay the Total Debt. Notwithstanding anything
contained in this Section 6.2 or this Agreement to the contrary, Lender may, in its sole
discretion, elect to (y) apply the net proceeds of any Condemnation Proceeds (after deduction of
Lender’s reasonable costs and expenses, if any, in collecting the same) in reduction of the Total
Debt in such order and manner as Lender may elect, whether due or not, or (z) make the proceeds
available to Borrower for the restoration or repair of the Property. Any implied covenant in this
Agreement restricting the right of Lender to make such an election is waived by Borrower. If the
Condemnation Proceeds are made available to Borrower for restoration or repair, the Condemnation
Proceeds shall be disbursed upon satisfaction of and in accordance with the terms and conditions
set forth in this Section 6.2.
6.2.3 Application of Net Proceeds.
(a) Minor Casualty or Condemnation. If a Casualty or Condemnation has occurred to the
Property, Borrower’s right, title and interest in and to all Proceeds are, except as otherwise
herein provided, hereby assigned by Borrower to Lender and all Net Proceeds shall, except as
otherwise herein provided, be paid to Lender. Borrower shall, in good faith and in a commercially
reasonable manner, file and prosecute the adjustment, compromise or settlement of any claim for
Proceeds and, subject to Borrower’s right to receive the direct payment of any Net Proceeds as
herein provided, will cause the same to be paid directly to Lender to be held and applied in
accordance with the provisions of this Agreement. Except upon the occurrence and during the
continuance of an Event of Default, Borrower may settle any insurance claim with respect to Net
Proceeds which do not One Million and 00/100 Dollars ($1,000,000.00) (the “Restoration Threshold”).
Whether or not an Event of Default shall have occurred and be continuing, Lender shall have the
right to approve, such approval not to be unreasonably withheld, any settlement which would in
Lender’s reasonable judgment result in Net Proceeds which exceed the Restoration Threshold and
Borrower shall deliver or cause to be delivered to Lender all instruments reasonably requested by
Lender to permit such approval. Borrower shall pay all reasonable out-of-pocket costs, fees and
expenses incurred by Lender on behalf of Lenders (including all reasonable attorneys’ fees and
expenses, the reasonable fees of insurance experts and adjusters and reasonable costs incurred in
any litigation or arbitration), and interest thereon at the Default Rate to the extent not paid
within fifteen (15) Business Days after delivery of a request for reimbursement by Lender,
accompanied by reasonable back-up documentation, in connection with the settlement of any claim for
Proceeds and the seeking and obtaining of any payment on account thereof in accordance with the
foregoing provisions. If any Proceeds are
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received by Borrower and may be retained by Borrower
pursuant to this Section 6.2, such Proceeds shall, until the completion of the related Work, be held in trust for Lender for the
ratable benefit of Lenders and shall be segregated from other funds of Borrower to be used to pay
for the cost of the Restoration in accordance with the terms hereof, and to the extent such
Proceeds exceed the Restoration Threshold, such Proceeds shall be forthwith paid directly to and
held by Lender to be applied or disbursed in accordance with this Article VI. If an Event
of Default shall have occurred and be continuing, or if Borrower fails to file any insurance claim
for a period of fifteen (15) Business Days, or to prosecute same with commercially reasonable
diligence following Borrower’s receipt of written notice to do so from Lender, Borrower hereby
irrevocably empowers Lender, in the name of Borrower as its true and lawful attorney-in-fact, to
file and prosecute such claim (including settlement thereof) with counsel satisfactory to Lender
and to collect and to make receipt for any such payment, all at Borrower’s expense (including
payment of interest at the Default Rate for any amounts advanced by Lender pursuant to this
sentence). Notwithstanding anything to the contrary set forth in this Agreement, but excluding all
situations requiring prepayment of the Note, to the extent any Proceeds (either singly or when
aggregated with all other then unapplied Proceeds with respect to the Property) do not exceed the
Restoration Threshold, such Proceeds are to be paid directly to Borrower to be applied to
restoration of the Property in accordance with the terms hereof. As soon as reasonably practicable
after receipt of the Net Proceeds Borrower shall commence and satisfactorily complete with due
diligence: (x) the Completion of the Improvements in accordance with the terms of this Agreement,
if such Casualty or Condemnation occurs prior to the Completion of the Improvements; of (y) the
Restoration in accordance with the terms of this Agreement, if such Casualty or Condemnation occurs
after the Completion of the Improvements.
6.2.4 Major Casualty or Condemnation.
(a) If a Casualty or Condemnation has occurred to the Property, Borrower shall commence and
satisfactorily complete with due diligence the Restoration in accordance with the terms of this
Agreement and the Project Loan Agreement. If the Net Proceeds are equal to or greater than the
Restoration Threshold or the costs of completing the Restoration, or Completion of the
Improvements, as applicable, is equal to or greater than the Restoration Threshold, Lender shall
make the Net Proceeds available for the Restoration, provided that each of the following conditions
are met:
(A) If the Casualty or Condemnation occurs prior to the Completion of the Improvements:
(ii) No Event of Default shall have occurred and be continuing;
(iii) Lender is reasonably satisfied that the Net Proceeds plus any Advances
available under this Building Loan Agreement and Project Loan Agreement is
sufficient to cause the Completion of the Improvements and pay all Project-Related
Costs to be incurred in connection therewith;
(iv) Lender shall be reasonably satisfied that Completion of the Improvements
will be achieved on or prior to the Required Completion Date as
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such date may be
extended by Force Majeure (which may include the Casualty giving rise to the Net
Proceeds).
(B) If the Casualty or Condemnation occurs following the Completion of the Improvements:
(i) No Event of Default shall have occurred and be continuing;
(ii) In the event the Net Proceeds are Insurance Proceeds, less than
thirty-five percent (35%) of the total floor area of the Improvements at the
Property has been damaged, destroyed or rendered unusable as a result of such
Casualty or (B) in the event the Net Proceeds are Condemnation :Proceeds, less
than ten percent (10%) of the land constituting the Property is taken, and such
land is located along the perimeter or periphery of the Property, and no portion
of the Improvements is the subject of the Condemnation;
(iii) Leases demising in the aggregate a percentage amount equal to or
greater than the Rentable Space Percentage of the total rentable space in the
Property which has been demised under executed and delivered Leases in effect as
of the date of the occurrence of such Casualty or Condemnation, 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 Casualty or
Condemnation, whichever the case may be, and Borrower and/or Tenant, as applicable
under the respective Lease, will make all necessary repairs and restorations
thereto at their sole cost and expense. The term “Rentable Space Percentage”
shall mean (1) in the event the Net Proceeds are Insurance Proceeds, a percentage
amount equal to ninety percent (90%) and (2) in the event the Net Proceeds are
Condemnation Proceeds, a percentage amount equal to ninety percent (90%);
(iv) Borrower shall commence the Restoration as soon as reasonably
practicable (but in no event later than sixty (60) days after such Casualty or
Condemnation, whichever the case may be) and Borrower and shall diligently pursue
the same to satisfactory completion;
(v) Lender shall be satisfied that any operating deficit, including all
scheduled all payments of principal and interest under the Note which will be
incurred with respect to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be paid during the
period required for Restoration from (A) the Net Proceeds, (B) the insurance
coverage referred to in Section 6.1.1(b)(ii) hereof, if applicable, or (C)
other funds of Borrower;
(vi) Lender shall be satisfied that the Restoration will be achieved, on or
before the earliest to occur of (A) the date six (6) months prior to the Maturity
Date, (B) such time as may be required under applicable Legal Requirements in
order to repair and restore the Property to the condition it was
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in immediately
prior to such Casualty or to as nearly as possible the condition it was in
immediately prior to such Condemnation, as applicable or (C) the expiration of the
insurance coverage referred to above;
(vii) The Property and the use thereof after the Restoration will be in
compliance with and permitted under all applicable Legal Requirements;
(viii) The Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
Requirements; and
(ix) Such Casualty or Condemnation, as applicable, does not result in the
permanent loss of access to the Property or the related Improvements
(x) the Debt Service Coverage Ratio for the Property, after giving effect to
the Restoration, shall be equal to or greater than 1.20 to 1.0;
(xi) Borrower shall deliver, or cause to be delivered, to Lender a signed
detailed budget approved in writing by Borrower’s architect or engineer stating
the entire cost of completing the Restoration, which budget shall be acceptable to
Lender; and
(xii) the Net Proceeds together with any Cash or Cash Equivalent deposited by
Borrower with Lender are sufficient in Lender’s discretion to cover the cost of
the Restoration.
(b) The Net Proceeds shall be paid directly to Lender and held by Lender in an
interest-bearing account and, until disbursed in accordance with the provisions of this Section
6.2.4 shall constitute additional security for the Total Debt and the Other Obligations under
the Loan documents.
(c) 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 requirements set forth in Section 6.2.4(a) have been satisfied, (B) all relevant
conditions to the making of Advances of the Building Loan shall have been satisfied with respect to
disbursements of Net Proceeds for Restoration as though such disbursements were of Loan Proceeds
rather than Net Proceeds, it being understood however that disbursements of Net Proceeds shall not
be deemed to be advances of the Loan, (C) 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 (D) 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
of any nature whatsoever on the 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.
(d) All plans and specifications required in connection with the Restoration shall be subject
to prior approval by Lender and by an independent architect selected by Lender
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(which shall be the Construction Consultant if the Casualty or Condemnation occurs prior to the Completion of the
Improvements) (the “Casualty Consultant”). 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 approval by Lender and the Casualty Consultant. All costs and expenses incurred by
Lender in connection with recovering, holding and advancing the Net Proceeds for the Restoration
including, without limitation, reasonable attorneys’ fees and disbursements and the Casualty
Consultant’s reasonable fees and disbursements, shall be paid by Borrower.
(e) 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, less 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, be less than the amount actually held back by Borrower
from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty
Retainage shall not be released until the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of this Section 6.2 and
all applicable Legal Requirements and that all approvals necessary for the re-occupancy and use of
the Property have been obtained from all appropriate Governmental Authorities, and Lender receives
evidence reasonably 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 such 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 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.
(f) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently
than once every calendar month.
(g) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the
opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to be incurred in connection
with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds
Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made. The
Net Proceeds Deficiency deposited with Lender shall be held by Lender and
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shall be disbursed for
costs actually incurred in connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.2.4
shall constitute additional security for the Debt.
(h) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net
Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that
the Restoration has been completed in accordance with the provisions of this Section 6.2.4,
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 deposited in the Cash Management Account to
be disbursed in accordance with the Cash Management Agreement provided no Event of Default shall
have occurred and shall be continuing under any of the Loan Documents.
(i) 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 this Article VI may be retained and
applied by Lender toward the payment of the Total Debt in accordance with Section 2.4.2 whether or
not then due and payable in such order, priority and proportions as Lender in its sole discretion
shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in
part, to Borrower for such purposes as Lender shall approve, in its discretion.
Section 6.3 Application of Net Proceeds. Upon the occurrence and continuation of an Event of Default, Lender, at its option, may
withdraw all the Net Proceeds or the undisbursed balance thereof and the remaining balance, if any,
of the Net Proceeds Deficiency deposited with Lender and may apply the such Net Proceeds and Net
Proceeds Deficiency either to the payment of Restoration or to payment of the Total Debt in such
order, proportion and priority as Lender may determine in its sole discretion. Lender’s right to
withdraw and apply such Net Proceeds and Net Proceeds Deficiency shall be in addition to all other
rights and remedies provided to Lender under the Building Loan Documents.
ARTICLE VII.
RESERVE FUNDS
Section 7.1 Tax and Insurance Escrow Fund. Simultaneously with the Initial Advance of the Project Loan, Borrower shall deposit with
Lender an amount (the “Initial Tax and Insurance Escrow Deposit”) equal to the Taxes, Insurance
Premiums and Other Charges that Lender estimates will be payable from and after the Closing Date
through and including the date that the Second Tax and Insurance Escrow Deposit is payable, which
shall be funded from the Project Loan Advance. At least thirty (30) day prior to the first
anniversary of the date hereof, Borrower shall deposit with Lender an amount (the “Second Tax and
Insurance Escrow Deposit”) equal to the Taxes, Insurance Premiums and Other Charges that Lender
estimates will be payable from and after the first anniversary of the date hereof through and
including the last day of the Construction Term. Subject to the terms and conditions of the
Project Loan Agreement concerning Advances, the Second Tax and Insurance Escrow Deposit shall be
funded from an Advance of like amount under the Project Loan. Simultaneously with the Final
Advance, Borrower shall pay to Lender an amount that, when added to the amounts payable under the
next sentence, will be sufficient to accumulate with Lender sufficient funds to pay all
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Taxes and
Other Charges payable on the next due date thereof at least thirty (30) days prior to their
respective due dates, and to pay all Insurance
Premiums that Lender estimates will be payable for the next renewal of the coverage afforded
by the Policies upon the expiration thereof at least thirty (30) days prior to the expiration of
the Policies. In addition, Borrower shall pay to Lender (or shall cause Lender to advance) on each
Payment Date occurring after the Construction Term (a) one-twelfth (1/12) of the Taxes and Other
Charges 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 and Other Charges at least thirty
(30) days prior to their respective due dates, and (b) one-twelfth (1/12) of the Insurance Premiums
that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon
the expiration thereof in order to accumulate with Lender sufficient funds to pay all such
Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (said amounts
in (a) and (b) above hereinafter called the “Tax and Insurance Escrow Fund”). The Tax and
Insurance Escrow Fund and the Monthly Debt Service Payment Amount, 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 5.1.2 hereof and under the Mortgage. In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from
the appropriate public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes, Other Charges
and Insurance Premiums pursuant to Section 5.1.2 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. If at any time Lender
reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to
pay Taxes, Other Charges and Insurance Premiums by the dates set forth in (a) and (b) above, Lender
shall notify Borrower of such determination and Borrower shall increase its monthly payments (or,
if such determination is made during the Construction Term, Borrower shall deposit the full amount
of such deficiency within 5 days of such notice) to Lender by the amount that Lender estimates is
sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Taxes
and Other Charges and/or thirty (30) days prior to expiration of the Policies, as the case may be.
Notwithstanding the foregoing, Borrower’s obligation to make monthly deposits with Lender for
Insurance Premiums shall be suspended for so long as no Event of Default has occurred and is
continuing and Borrower provides Lender with written evidence reasonably satisfactory to Lender
that all insurance coverages required to be maintained by Borrower pursuant to the terms of this
Agreement are being maintained in full force and effect through one or more blanket insurance
policies (provided that any such blanket insurance policies provide the same level of coverage
which would otherwise be provided by a stand-alone policy). Borrower shall provide evidence
reasonably acceptable to Lender on an annual basis thirty (30) days prior to the expiration of the
existing insurance that the insurance has been renewed and will provide notice of cancellation for
non-payment. In the event Borrower fails to provide such evidence or an Event of Default occurs,
however, Borrower will thereafter be required to make deposits with Lender for Insurance Premiums
as provided herein.
Section 7.2 Interest Reserve.
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7.2.1 Deposit of Interest Reserve Funds. Simultaneously with the Initial Advance of
the Project Loan, Borrower shall deposit the sum of $[_________] with Lender (the “Initial
Interest Reserve Deposit”), which shall be funded from the Initial Advance of the Project Loan. In
addition, pursuant to Section 5.1.28(d), Borrower may be obligated to deposit an Additional
Interest Reserve Deposit and in the event that Lender determines in its sole discretion that the
Interest Reserve Funds on deposit in the Interest Reserve Account are insufficient, Borrower shall
deposit with Lender an amount equal to the deficiency in the Interest Reserve Funds as determined
by Lender (each an “Interest Reserve Deposit”, each such amount so deposited shall hereinafter be
referred to as the “Interest Reserve Fund”). The account in which the Interest Reserve Fund are
held shall hereinafter be referred to as Borrower’s “Interest Reserve Account”. In lieu of making
the Interest Reserve Deposits with Lender, Borrower shall have the right to deliver to Lender an
irrevocable Letter of Credit acceptable to Lender in the amount of the Interest Reserve Deposit.
7.2.2 Release of Interest Reserve Funds. Provided no Event of Default or monetary
Default exists and no amounts remain available for Advance under the Interest Reserve Line Item of
the Project Loan Budget, on each Payment Date, Lender shall apply the Interest Reserve Funds to
payments of the Monthly Debt Service Payment due on such date.
7.2.3 Application of Interest Reserve Funds. Upon the occurrence of an Event of
Default, Lender, at its option, may withdraw all the Interest Reserve Funds and if Lender does so,
shall apply the Interest Reserve Funds either to the payment of interest due on the Loan or toward
payment of the Total Debt in such order, proportion and priority as Lender may determine in its
sole discretion. Lender’s right to withdraw and apply the Interest Reserve Funds shall be in
addition to all other rights and remedies provided to Lender under the Loan Documents.
Section 7.3 Replacements and Replacement Reserve.
7.3.1 Replacement Reserve Fund. From and after Completion of the Improvements, Borrower shall pay to Lender on each Payment
Date an amount equal to $1,375.00 (the “Replacement Reserve Monthly Deposit”) for replacements and
repairs required to be made to the Property (collectively, the “Replacements”). Amounts so
deposited shall hereinafter be referred to as Borrower’s “Replacement Reserve Fund” and the account
in which such amounts are held shall hereinafter be referred to as Borrower’s “Replacement Reserve
Account”. Lender may reassess its estimate of the amount necessary for the Replacement Reserve
Fund from time to time, and may increase the monthly amounts required to be deposited into the
Replacement Reserve Fund upon thirty (30) days notice to Borrower if Lender determines in its
reasonable discretion that an increase is necessary to maintain the proper maintenance and
operation of the Property.
7.3.2 Disbursements from Replacement Reserve Account. (a) Lender shall make disbursements from the Replacement Reserve Account to pay Borrower
only for the costs of the Replacements. Lender shall not be obligated to make disbursements from
the Replacement Reserve Account to reimburse Borrower for the costs of routine maintenance to the
Property, replacements of inventory or for costs which are a Tenant’s obligation.
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(b) Lender shall, upon written request from Borrower and satisfaction of the requirements set
forth in this Section 7.3.2, disburse to Borrower amounts from the Replacement Reserve
Account necessary to pay for the actual approved costs of Replacements or to reimburse Borrower
therefor, upon completion of such Replacements (or, upon partial completion in the case of
Replacements made pursuant to Section 7.3.2(e) hereof) as determined by Lender. In no
event shall Lender be obligated to disburse funds from the Replacement Reserve Account if a Default
or an Event of Default exists.
(c) Each request for disbursement from the Replacement Reserve Account shall be in a form
specified or approved by Lender and shall specify (i) the specific Replacements for which the
disbursement is requested, (ii) the quantity and price of each item purchased, if the Replacement
includes the purchase or replacement of specific items, (iii) the price of all materials (grouped
by type or category) used in any Replacement other than the purchase or replacement of specific
items, and (iv) the cost of all contracted labor or other services applicable to each Replacement
for which such request for disbursement is made. With each request Borrower shall certify that all
Replacements have been made in accordance with all applicable Legal Requirements of any
Governmental Authority having jurisdiction over the Property. Each request for disbursement shall
include copies of invoices for all items or materials purchased and all contracted labor or
services provided and, unless Lender has agreed to issue joint checks as described below in
connection with a particular Replacement, each request shall include evidence satisfactory to
Lender of payment of all such amounts. Except as provided in Section 7.3.2(e) hereof, each
request for disbursement from the Replacement Reserve Account shall be made only after completion
of the Replacement for which disbursement is requested. Borrower shall provide Lender evidence of
completion of the subject Replacement satisfactory to Lender in its reasonable judgment.
(d) Borrower shall pay all invoices in connection with the Replacements with respect to which
a disbursement is requested prior to submitting such request for disbursement from the Replacement
Reserve Account or, at the request of Borrower, Lender will issue joint checks, payable to Borrower
and the contractor, supplier, materialman, mechanic, subcontractor or other party to whom payment
is due in connection with a Replacement. In the case of payments made by joint check, Lender may
require a waiver of lien from each Person receiving payment prior to Lender’s disbursement from the
Replacement Reserve Account. In addition, as a condition to any disbursement, Lender may require
Borrower to obtain lien waivers from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than Twenty-Five Thousand and
00/100 Dollars ($25,000.00) for completion of its work or delivery of its materials. Any lien
waiver delivered hereunder shall conform to the requirements of applicable law and shall cover all
work performed and materials supplied (including equipment and fixtures) for the Property by that
contractor, supplier, subcontractor, mechanic or materialman through the date covered by the
current reimbursement request (or, in the event that payment to such contractor, supplier,
subcontractor, mechanic or
materialmen is to be made by a joint check, the release of lien shall be effective through the
date covered by the previous release of funds request).
(e) If (i) the cost of a Replacement exceeds Twenty-Five Thousand and 00/100 Dollars
($25,000.00), (ii) the contractor performing such Replacement requires periodic payments pursuant
to terms of a written contract, and (iii) Lender has approved in writing in
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advance such periodic
payments, a request for reimbursement from the Replacement Reserve Account may be made after
completion of a portion of the work under such contract, provided (A) such contract requires
payment upon completion of such portion of the work, (B) the materials for which the request is
made are on site at the Property and are properly secured or have been installed in the Property,
(C) all other conditions in this Agreement for disbursement have been satisfied, (D) funds
remaining in the Replacement Reserve Account are, in Lender’s judgment, sufficient to complete such
Replacement and other Replacements when required, and (E) if required by Lender, each contractor or
subcontractor receiving payments under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.
(f) Borrower shall not make a request for disbursement from the Replacement Reserve Account
more frequently than once in any calendar month and (except in connection with the final
disbursement) the total cost of all Replacements in any request shall not be less than Ten Thousand
and 00/100 Dollars ($10,000.00).
7.3.3 Performance of Replacements. (a) Borrower shall make Replacements when required in order to keep the Property in
condition and repair consistent with other first class, self-storage facilities in the same market
segment in the metropolitan area in which the Property is located, and to keep the Property or any
portion thereof from deteriorating. Borrower shall complete all Replacements in a good and
workmanlike manner as soon as practicable following the commencement of making each such
Replacement.
(b) Lender reserves the right, at its option, to approve all contracts or work orders over
Twenty-five Thousand and 00/100 Dollars ($25,000.00) with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in connection with the
Replacements. Upon Lender’s request, Borrower shall assign any contract or subcontract to Lender.
(c) In the event Lender determines in its reasonable discretion that any Replacement is not
being performed in a workmanlike or timely manner or that any Replacement has not been completed in
a workmanlike or timely manner, after notice and a reasonable period to cure, Lender shall have the
option to withhold disbursement for such unsatisfactory Replacement and to proceed under existing
contracts or to contract with third parties to complete such Replacement and to apply the
Replacement Reserve Fund toward the labor and materials necessary to complete such Replacement,
upon reasonable prior notice to Borrower and to exercise any and all other remedies available to
Lender upon an Event of Default hereunder.
(d) In order to facilitate Lender’s completion or making of such Replacements pursuant to
Section 7.3.3(c) above, Borrower grants Lender the right to enter onto the Property and
perform any and all work and labor necessary to complete or make such Replacements and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender, to the extent not
from the Replacement Reserve Fund, shall be deemed to have been advanced under the Loan to Borrower
and secured by the Mortgage. For this purpose Borrower constitutes and appoints Lender its true
and lawful attorney-in-fact with full power of substitution to complete or undertake such
Replacements in the name of Borrower. Such power of attorney shall be deemed to be a power coupled
with an interest and cannot be revoked.
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Borrower empowers said attorney-in-fact as follows: (i)
to use any funds in the Replacement Reserve Account for the purpose of making or completing such
Replacements; (ii) to make such additions, changes and corrections to such Replacements as shall be
necessary or desirable to complete such Replacements; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to
pay, settle or compromise all existing bills and claims which are or may become Liens against the
Property, or as may be necessary or desirable for the completion of such Replacements, or for
clearance of title; (v) to execute all applications and certificates in the name of Borrower which
may be required by any of the contract documents; (vi) to prosecute and defend all actions or
proceedings in connection with the Property or the rehabilitation and repair of the Property; and
(vii) to do any and every act which Borrower might do in its own behalf to fulfill the terms of
this Agreement.
(e) Nothing in this Section 7.3.3 shall: (i) make Lender responsible for making or
completing any Replacements; (ii) require Lender to expend funds in addition to the Replacement
Reserve Fund to make or complete any Replacement; (iii) obligate Lender to proceed with any
Replacements; or (iv) obligate Lender to demand from Borrower additional sums to make or complete
any Replacement.
(f) Borrower shall permit Lender and Lender’s agents and representatives (including, without
limitation, Lender’s engineer, architect, or inspector) or third parties making Replacements
pursuant to this Section 7.3.3 to enter onto the Property during normal business hours
(subject to the rights of tenants under their Leases) to inspect the progress of any Replacements
and all materials being used in connection therewith, to examine all plans and shop drawings
relating to such Replacements which are or may be kept at the Property, and to complete any
Replacements made pursuant to this Section 7.3.3. Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender’s representatives or such other persons described
above in connection with inspections described in this Section 7.3.3(f) or the completion
of Replacements pursuant to this Section 7.3.3.
(g) Lender may require an inspection of the Property at Borrower’s expense prior to making a
monthly disbursement from the Replacement Reserve Account in order to verify completion of the
Replacements for which reimbursement is sought. Lender may require that such inspection be
conducted by an appropriate independent qualified professional selected by Lender and/or may
require a copy of a certificate of completion by an independent qualified professional acceptable
to Lender prior to the disbursement of any amounts from the Replacement Reserve Account. Borrower
shall pay the expense of the inspection as required hereunder, whether such inspection is conducted
by Lender or by an independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or any other item comprising a
part of any Replacement shall be constructed, installed or completed, as applicable, free and clear
of all mechanic’s, materialmen’s or other liens (except for those Liens existing on the date of
this Agreement which have been approved in writing by Lender).
(i) Before each disbursement from the Replacement Reserve Account, Lender may require Borrower
to provide Lender with a search of title to the Property effective to the date of the disbursement,
which search shows that no mechanic’s or materialmen’s liens or other
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liens of any nature have been
placed against the Property since the date of recordation of the related Mortgage and that title to
the Property is free and clear of all Liens (other than the lien of the related Mortgage and any
other Liens previously approved in writing by Lender, if any).
(j) All Replacements shall comply with all applicable Legal Requirements of all Governmental
Authorities having jurisdiction over the Property and applicable insurance requirements including,
without limitation, applicable building codes, special use permits, environmental regulations, and
requirements of insurance underwriters.
(k) In addition to any insurance required under the Loan Documents, Borrower shall provide or
cause to be provided workmen’s compensation insurance, builder’s risk, and public liability
insurance and other insurance to the extent required under applicable law in connection with a
particular Replacement. All such policies shall be in form and amount reasonably satisfactory to
Lender. All such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such policies shall be
delivered to Lender.
7.3.4 Failure to Make Replacements. (a) It shall be an Event of Default under this Agreement if Borrower fails to comply with
any provision of this Section 7.3 and such failure is not cured within thirty (30) days
after notice from Lender. Upon the occurrence of such an Event of Default, Lender may use the
Replacement Reserve Fund (or any portion thereof) for any purpose, including but not limited to
completion of the Replacements as provided in Section 7.3.3, or for any other repair or
replacement to the Property or toward payment of the Total Debt in such order, proportion and
priority as Lender may determine in its sole discretion. Lender’s right to withdraw and apply the
Replacement Reserve Fund shall be in addition to all other rights and remedies provided to Lender
under this Agreement and the other Loan Documents.
(a) Nothing in this Agreement shall obligate Lender to apply all or any portion of the
Replacement Reserve Fund on account of an Event of Default to payment of the Total Debt or in any
specific order or priority.
7.3.5 Balance in the Replacement Reserve Account. The insufficiency of any balance in the Replacement Reserve Account shall not relieve
Borrower from its obligation to fulfill all preservation and maintenance covenants in the Loan
Documents.
Section 7.4 Punch List and Deferred Maintenance Reserve.
7.4.1 Establishment of Deferred Maintenance Reserve. In the event that, following the Completion of the Improvements but prior to the Final
Advance, Lender determines that any Punch List Items remain to be completed or if Lender determines
that any condition (a “Deferred Maintenance Condition”) exists at the Property which requires
maintenance or correction, Borrower shall deposit with Lender an amount equal to 150% of Lender’s
good faith estimate of the cost to perform any Punch List Items plus 125% of Lender’s good
faith estimate of the cost of performing such Deferred Maintenance Condition (the “Punch List and
Deferred Maintenance Reserve Deposit”, such amounts so deposited shall hereinafter be referred to
as the “Punch List and Deferred Maintenance Reserve Funds”).
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7.4.2 Performance of Punch List Items and Deferred Maintenance. Borrower shall correct the Punch List Items and Deferred Maintenance Conditions in a
diligent, workmanlike manner and shall complete the same within a reasonable time period. Upon the
request of Borrower from time to time (but not more often than once per calendar month), Lender
shall cause disbursements to Borrower from the Punch List and Deferred Maintenance Reserve Funds to
reimburse Borrower for reasonable costs and expenses incurred in order to correct Punch List Items
and Deferred Maintenance Conditions, upon satisfaction by Borrower of each of the following
conditions: (a) Borrower shall submit a written request for payment to Lender at least thirty (30)
days prior to the date on which Borrower requests such payment be made and specifies the Punch List
Items and Deferred Maintenance Conditions to be paid, (b) on the date such request is received by
Lender and on the date such payment is to be made, no Default or Event of Default shall exist and
remain uncured, (c) Lender shall have received an Officers’ Certificate (i) stating that all the
Punch List Items and Deferred Maintenance Conditions to be funded by the requested disbursement
have been completed in good and workmanlike manner and in accordance with all applicable federal,
state and local laws, rules and regulations, such certificate to be accompanied by a copy of any
license, permit or other approval by any Governmental Authority required to commence and/or
complete the Punch List Items and Deferred Maintenance Conditions, (ii) identifying each Person
that supplied materials or labor in connection with the Punch List Items and Deferred Maintenance
Conditions to be funded by the requested disbursement, and (iii) stating that each such Person has
been paid in full or will be paid in full upon such disbursement, such Officers’ Certificate to be
accompanied by lien waivers or other evidence of payment satisfactory to Lender, (d) at Lender’s
option, a title search for the Property indicating that the Property is free from all liens, claims
and other encumbrances not previously approved by Lender, and (e) Lender shall have received such
other evidence as Lender shall reasonably request that the Required Repairs to be funded by the
requested disbursement have been completed and are paid for or will be paid upon such disbursement
to Borrower. Lender may condition the making of a requested disbursement on (1) reasonable
evidence establishing that Borrower has applied any amounts previously received by it in accordance
with this Section 7.4 for the expenses to which specific draws made hereunder relate, (2)
reasonably satisfactory site inspections, and (3) receipt
of lien releases and waivers from any contractors, subcontractors and others with respect to
such amounts. Lender shall not be required to make disbursements from the Required Repair Account
with respect to the Property unless such requested disbursement is in an amount greater than
Twenty-five Thousand and 00/100 Dollars ($25,000.00) (or a lesser amount if the total amount in the
Required Repair Account is less than Twenty-five Thousand and 00/100 Dollars ($25,000.00), in which
case only one disbursement of the amount remaining in the account shall be made) and such
disbursement shall be made only upon satisfaction of each condition contained in this Section
7.4.2.
7.4.3 Release of Deferred Maintenance Funds. Upon substantial completion (as reasonably determined by Lender) of any Punch List Item or
Deferred Maintenance Condition, and provided no Event of Default is then continuing, Lender shall,
on the first following Payment Date, release to Borrower the remainder of the portion of the Punch
List and Deferred Maintenance Reserve Funds held for such Punch List Item or Deferred Maintenance
Condition.
Section 7.5
Intentionally Omitted.
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Section 7.6 Excess Cash Flow. Any Excess Cash Flow that, pursuant to the Cash
Management Agreement, is required to be deposited to the Excess Cash Flow Reserve (such funds
“Excess Cash Flow Funds”) shall be deposited in an
account (the “Excess Cash Flow Reserve Account”)
and held by Lender as additional security for the payment and performance by Borrower of its
obligations hereunder and other the other Loan Documents.
Section 7.7 Operating Reserve.
7.7.1 Deposit of Operating Reserve Funds. In the event that, following the Completion
of the Improvements, Lender determines that the Gross Income from Operations is not sufficient to
pay the Operating Expenses of the Property and the Total Debt Service, Borrower shall deposit with
Lender an amount equal Lender’s good faith estimate of the shortfall in Gross Income from
Operations until such time that Lender determines that the Property will achieve a Debt Service
Coverage Ratio of 1.20 to 1.0 (the “Operating Reserve Deposit”, such amounts so deposited shall
hereinafter be referred to as the “Operating Reserve Funds”). The account in which the Interest
Reserve Fund are held shall hereinafter be referred to as the “Operating Reserve Account”.
7.7.2 Release of Operating Reserve Funds. Provide no Event of Default or monetary
Default exists, in the event that the amounts on deposit in the Cash Management Account are not
sufficient to make the payments required under Section 3.4(a) through (g), of the
Cash Management Agreement on each Payment Date, Lender shall apply the Operating Reserve Funds to
payments of the such items.
7.7.3 Application of Operating Reserve Funds. Upon the occurrence of an Event of
Default, Lender, at its option, may withdraw all the Operating Reserve Funds and if Lender does so,
shall apply the Operating Reserve Funds toward payment of the Total Debt in such order, proportion
and priority as Lender may determine in its sole discretion. Lender’s right to withdraw and apply
the Operating Reserve Funds shall be in addition to all other rights and remedies provided to
Lender under the Loan Documents.
7.7.4 Release of Operating Reserve Funds. Provided that no Event of Default or
Monetary Default then exists if Lender determines that the Property has achieved a Debt Service
Coverage Ratio of 1.20 to 1.0 for two consecutive Debt Service Coverage Ratio Determination Dates,
Lender shall release to Borrower any amount remaining in the Operating Reserve Account.
Section 7.8 Reserve Funds, Generally. Borrower grants to Lender a first-priority perfected security interest in each of the
Reserve Funds and any and all monies now or hereafter deposited in each Reserve Fund as additional
security for payment of the Debt. Until expended or applied in accordance herewith, the Reserve
Funds shall constitute additional security for the Debt. Upon the occurrence of an Event of
Default, Lender may, in addition to any and all other rights and remedies available to Lender,
apply any sums then present in any or all of the Reserve Funds to the payment of the Total Debt in
any order in its sole discretion. The Reserve Funds shall not constitute trust funds and may be
commingled with other monies held by Lender. The Reserve Funds shall be held in an Eligible
Account in Permitted Investments in accordance with the terms and provisions of the Cash Management
Agreement. Interest earned on the
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Replacement Reserve Funds shall be added to and become a part of such Reserve Fund and shall
be disbursed in the same manner as other monies deposited in such Reserve Fund. Any interest on
the Cash Collateral Reserve Funds, the Punch List and Deferred Maintenance Reserve Funds, the
Operating Reserve Funds, the Interest Reserve Funds and the Tax and Insurance Escrow Funds shall
not be added to or become a part thereof and shall be the sole property of and shall be paid to
Lender. Borrower shall be responsible for payment of any federal, state or local income or other
tax applicable to the interest earned on the Reserve Funds credited or paid to Borrower. Borrower
shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant
any security interest in any Reserve Fund or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect thereto. Lender shall
not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds.
Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions,
suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including
litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the performance of the obligations for which the Reserve Funds were
established. Borrower shall assign to Lender all rights and claims Borrower may have against all
persons or entities supplying labor, materials or other services which are to be paid from or
secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
Section 7.9 Letter of Credit Rights. Any Letter of Credit delivered to Lender pursuant to this Agreement shall be held by Lender
as additional security for the Loan. Lender shall have the right to draw upon any Letter of Credit
immediately and without further notice:
(a) upon the occurrence and during the continuance of an Event of Default;
(b) if Borrower fails to deliver to Lender, no less than thirty (30) days prior to the
expiration of any Letter of Credit (including any renewal or extension thereof), a renewal or
extension of such Letter of Credit or a replacement Letter of Credit; or
(c) if the institution issuing the Letter of Credit ceases to be an Approved Bank and Borrower
fails to deliver to Lender a replacement Letter of Credit from an Approved Bank within thirty (30)
days of the date that such institution ceased to be an Approved Bank.
ARTICLE VIII.
DEFAULTS
Section 8.1 Event of Default. (a) Each of the following events shall constitute an event of default hereunder (an “Event
of Default”):
(i) if any portion of the Debt is not paid within five (5) days of the date
when due (except that Borrower shall not be afforded such 5-day cure period for the
portion of the Debt due and payable on the Maturity Date);
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(ii) if any of the Taxes (other than Taxes being contested pursuant to
Section 5.1.2 of this Agreement) are not paid when the same are due and
payable or Other Charges are not paid within five (5) days after Borrower receives
notice of same;
(iii) if the Policies are not kept in full force and effect, or if certified
copies of the Policies are not delivered to Lender upon request;
(iv) if Borrower Transfers or otherwise encumbers any portion of the Property
without Lender’s prior written consent in violation of the provisions of this
Agreement or the Mortgage;
(v) if any material representation or warranty made by Borrower or Guarantor
herein or in any other Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished to Lender shall have
been false or misleading in any material respect as of the date the representation
or warranty was made;
(vi) if Borrower, Mezzanine Borrower, Guarantor or any other guarantor under
any guaranty issued in connection with the Loan shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
Mezzanine Borrower, Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Mezzanine Borrower, Guarantor or such other
guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
or if any proceeding for the dissolution or liquidation of Borrower, Mezzanine
Borrower, Guarantor or such other guarantor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Mezzanine Borrower, Guarantor or such other guarantor,
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 breaches any covenant contained in Section 4.1.30;
(x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if Borrower shall be in
default under such term, covenant or condition after the giving of such notice or
the expiration of such grace period;
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(xi) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in any
material respect;
(xii) if Borrower fails to pay the Administration Fee, or any portion or
installment thereof, within five (5) days of the date when due;
(xiii) If Borrower fails to deposit with Lender the cash deposit or Letter of
Credit required in accordance with Section 2.12.2 hereof;
(xiv) if Borrower fails to materially comply with the Construction Schedule;
(xv) if the Completion of the Improvements has not occurred on or prior to the
Required Completion Date, subject to Force Majeure or if Lender or the Construction
Consultant determines that Completion of the Improvements cannot occur on or prior
to the Required Completion Date;
(xvi) if any voucher or invoice is fraudulently submitted by Borrower or in
connection with any Advance for services performed or for materials used in or
furnished for the Property;
(xvii) if there is any cessation at any time in construction of the Project
Improvements for more than twenty (20) consecutive Business Days, other than as a
result of Force Majeure;
(xviii) if Borrower expressly confesses in writing to Lender its inability to
continue or complete construction of the Project Improvements in accordance with
this Agreement;
(xix) if Lender, the Construction Consultant or their representatives are not
permitted at all reasonable times upon not less than three (3) Business Days notice
to enter upon the Property, inspect the Improvements and the construction thereof
and all materials, fixtures and articles used or to be used in the construction and
to examine all the Plans and Specifications, or if Borrower shall fail to furnish to
Lender or its authorized representative, when requested upon not less than five (5)
Business Days notice, copies of the Plans and Specifications;
(xx) if a material adverse change in Borrower’s financial condition shall occur
which would, in Lender’s reasonable determination, materially and adversely affect
Borrower’s ability to perform its obligations under this Agreement or any other
document evidencing or securing the Loan beyond any applicable notice and grace
periods expressly set forth in the Loan Documents;
(xxi) if the conditions precedent to the Final Advance have not been satisfied
on or prior to the Required Completion Date;
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(xxii) If the Guarantor fails to maintain the Required Liquidity and the
Required Net Worth covenants specified in the Guaranty of Completion or if the
Guarantor shall default under the Guaranty of Completion or the Guaranty of Recourse
Carveouts;
(xxiii) if a material default has occurred and continues beyond any applicable
cure period under the Management Agreement (or any Replacement Management Agreement)
and if such default permits the Manager thereunder to terminate or cancel the
Management Agreement (or any Replacement Management Agreement);
(xxiv) if Borrower shall continue to be in Default under any of the terms,
covenants or conditions of Section 9.1 hereof, or fails to cooperate with
Lender in connection with a Securitization pursuant to the provisions of Section
9.1 hereof, in either case for three (3) Business Days after notice to Borrower
from Lender;
(xxv) if an Event of Default (as defined in the Project Loan Agreement) shall
have occurred;
(xxvi) if there shall be default by Borrower or Guarantor under any of the
other Loan Documents, beyond applicable cure periods, if any, contained in such
documents, whether as to Borrower, Guarantor or the Property, or if any other such
event shall occur or condition shall exist, if the effect of such other default,
event or condition is to accelerate the maturity of all or any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the Debt;
(xxvii) if Guarantor shall dissolve or cease to exist during the term of the
Loan, except in compliance with the provisions of Section 5.2.15 hereof;
(xxviii) if all of the Initial Advance Conditions, including, without
limitation, the Unsatisfied Initial Advance Conditions, are not satisfied by the
Required Initial Advance Date; or
(xxix) 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
(xxviii) above, for twenty (20) 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 thirty (30) day period and provided further
that Borrower shall have commenced to cure such Default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same, such
thirty (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 (60) days.
(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, in
addition to
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any other rights or remedies available to it pursuant to this Agreement and the other Loan
Documents or at law or in equity, Lender may take such action, without notice or demand, that
Lender deems advisable to protect and enforce its rights against Borrower and the Property,
including, without limitation, declaring the Debt to be immediately due and payable, and Lender may
enforce or avail itself of any or all rights or remedies provided in the Loan Documents against
Borrower and any or all of the Property, 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 Other Obligations of Borrower hereunder and
under the other Loan Documents shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
Section 8.2 Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrower under this Agreement or any of
the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in
equity may be exercised by Lender at any time and from time to time, whether or not all or any of
the Debt shall be declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and remedies under any of
the Loan Documents with respect to all or any part of the Property. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender may determine in its
sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees
that if an Event of Default is continuing (i) to Lender is not subject to any “one action” or
“election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges
provided to Lender shall remain in full force and effect until Lender has exhausted all of its
remedies against the Property and the Mortgage has been foreclosed, sold and/or otherwise realized
upon in satisfaction of the Debt or the Debt has been paid in full.
(b) With respect to Borrower and the Property, nothing contained herein or in any other Loan
Document shall be construed as requiring Lender to resort to the Property for the satisfaction of
any of the Debt in any preference or priority, and Lender may seek satisfaction out of the
Property, or any part thereof, in its absolute discretion in respect of the Debt. In addition,
Lender shall have the right from time to time to partially foreclose the Mortgage in any manner and
for any amounts secured by the Mortgage 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 the Mortgage 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 the Mortgage to recover so much of the principal balance of the Loan
as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the
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Property shall remain subject to the Mortgage to secure payment of sums secured by the
Mortgage and not previously recovered.
(c) Lender shall have the right from time to time to sever the Note and the other Loan
Documents into one or more separate notes, mortgages and other security documents (the “Severed
Loan Documents”) in such denominations as Lender shall determine in its sole discretion for
purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall
execute and deliver to Lender from time to time, promptly after the request of Lender, a severance
agreement and such other documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.
Borrower hereby absolutely and irrevocably appoints Lender 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) Business Days after notice has been given to Borrower by Lender of Lender’s intent
to exercise its rights under such power. Borrower shall be obligated to pay any costs or expenses
incurred in connection with the preparation, execution, recording or filing of the Severed Loan
Documents and the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and warranties contained
in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative; Waivers. The rights, powers and remedies of Lender under this Agreement shall be cumulative and not
exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to
this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender’s
rights, powers and remedies may be pursued singularly, 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.
ARTICLE IX.
SPECIAL PROVISIONS
Section 9.1 Sale of Notes and Securitization. Borrower acknowledges and agrees that Lender may sell all or any portion of the Loan and
the Loan Documents, or issue one or more participations therein, or consummate one or more private
or public securitizations of rated single- or multi-class securities (the “Securities”) secured by
or evidencing ownership interests in all or any portion of the Loan and the Loan Documents or a
pool of assets that include the Loan and the Loan Documents (such sales, participations and/or
securitizations, collectively, a “Securitization”). At the request of Lender, and to the extent
not already required to be provided by or on behalf of Borrower under this Agreement, Borrower
shall use reasonable
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efforts to provide information not in the possession of Lender or which may be reasonably
required by Lender or take other actions reasonably required by Lender, in each case in order to
satisfy the market standards to which Lender customarily adheres or which may be reasonably
required by prospective investors and/or the Rating Agencies in connection with any such
Securitization including, without limitation, to:
(a) provide additional and/or updated Provided Information, together with appropriate
verification and/or consents related to the Provided Information through letters of auditors or
opinions of counsel of independent attorneys reasonably acceptable to Lender, prospective investors
and/or the Rating Agencies;
(b) assist in preparing descriptive materials for presentations to any or all of the Rating
Agencies, and work with, and if requested, supervise, third-party service providers engaged by
Borrower and approved by Lender, Guarantor and their respective affiliates to obtain, collect, and
deliver information requested or required by Lender, prospective investors and/or the Rating
Agencies;
(c) deliver (i) an Additional Insolvency Opinion and an opinion with respect to, due execution
and enforceability with respect to the Property, Borrower, Guarantor and their respective
Affiliates and the Loan Documents, and such other legal opinions as Lender may request including,
without limitation, a so called “10b-5” opinion, and (ii) revised organizational documents for
Borrower, which counsel opinions and organizational documents shall be reasonably satisfactory to
Lender, prospective investors and/or the Rating Agencies;
(d) if required by any prospective investor and/or any Rating Agency, use commercially
reasonable efforts to deliver such additional tenant estoppel letters, subordination agreements or
other agreements from parties to agreements that affect the Property, which estoppel letters,
subordination agreements or other agreements shall be reasonably satisfactory to Lender,
prospective investors and/or the Rating Agencies;
(e) make such representations and warranties as of the closing date of the Securitization with
respect to the Property, Borrower, Guarantor and the Loan Documents as may be reasonably requested
by Lender, prospective investors and/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;
(f) execute such amendments to the Loan Documents as may be requested by Lender, prospective
investors and/or the Rating Agencies to effect the Securitization;
(g) if requested by Lender, review any information regarding the Property, Borrower,
Guarantor, and the Loan which is contained in a preliminary or final private placement memorandum,
prospectus, prospectus supplement (including any amendment or supplement to either thereof), or
other disclosure document to be used by Lender or any affiliate thereof; and
(h) supply to Lender such documentation, financial statements and reports in form and
substance required in order to comply with any applicable securities laws.
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9.1.2 Loan Components.
(a) Borrower covenants and agrees that in connection with any Securitization of the Loan, upon
Lender’s request, Borrower shall deliver one or more new component notes to replace the original
note or modify the original note to reflect multiple components of the Loan (and such new notes or
modified note shall initially have the same fully funded weighted average interest rate as the
original note, but such new notes or modified note may subsequently change the weighted average
spread and apply principal, interest rates and amortization of the Loan between the components in a
manner specified by Lender in its sole discretion) and modify the Cash Management Agreement with
respect to the newly created components such that the pricing and marketability of the Securities
and the size of each class of Securities and the rating assigned to each such class by the Rating
Agencies shall provide the most favorable rating levels and achieve the optimum rating levels for
the Loan, provided that the same do not materially increase Borrower’s obligations and/or
liabilities under the Loan Documents or materially decrease Borrower’s rights under the Loan
Documents.
(b) Borrower covenants and agrees that Lender may hereafter convert any portion of the Loan to
subordinate financing, including one or more tranches of mezzanine debt, preferred equity,
subordinate debt or participation in such loan, subordinate to such loan (collectively,
“Subordinate Financing”), provided, however, such Subordinate Financing and the Loan following the
creation of the Subordinate Financing shall, in the aggregate, initially have the same fully funded
weighted average interest rate as the fully funded interest rate of the Loan prior to the creation
of such Subordinate Financing, but such Subordinate Financing may subsequently change the weighted
average spread and Lender may apply principal, interest rates and amortization of the Loan and the
Subordinate Financing in a manner specified by Lender in its sole discretion. If the Subordinate
Financing takes the form of a mezzanine loan, a mezzanine borrower (the “Mezzanine Borrower”) may
be created which will own one hundred percent (100%) of the equity interests in the Borrower. One
hundred percent (100%) of the ownership and economic interests in the Mezzanine Borrower may, at
Lender’s discretion, be required to be pledged as security for such tranches of Subordinate
Financing, if any. A default with the related Loan shall be a default under the respective
Subordinate Financing. Such Subordinate Financing shall be subject to an intercreditor agreement
by and between the Lender and the subordinate lender(s).
9.1.3 Costs of Subordinate Financing. Borrower shall be responsible for all costs and expenses incurred by Lender in connection
with any Subordinate Financing, (including reasonable attorneys’ fees and disbursements) including
without limitation (i) the preparation, negotiation, execution and delivery of any mezzanine loan
documents (“Mezzanine Loan Documents”) and the consummation of the transactions contemplated
thereby and all the costs of furnishing all opinions by counsel for Borrower and Mezzanine
Borrower; (ii) Mezzanine Borrower’s and Lender’s ongoing performance under and compliance with the
Mezzanine Loan Documents, including confirming compliance with environmental and insurance
requirements; (iii) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications of or under any Mezzanine Loan Document and
any other documents or matters requested by Lender; (iv) filing and recording of any Mezzanine Loan
Documents; (v) title insurance (including any applicable mezzanine endorsements or UCC endorsements
or policies), surveys, inspections and appraisals; (vi) the creation, perfection or
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protection of Lender’s Liens in the collateral securing the Mezzanine Loan Documents
(including fees and expenses for title and lien searches, intangibles taxes, personal property
taxes, recording taxes, due diligence expenses, travel expenses, accounting firm fees, costs of
appraisals, environmental reports and Construction Consultant, surveys and engineering reports);
and (vii) fees charged by Rating Agencies in connection with the creation of the Subordinate
Financing, or any modification of the Loan or the Subordinate Financing.
Section 9.2 Securitization Indemnification. (a) Borrower understands that certain of the Provided Information may be included in
Disclosure Documents in connection with the Securitization 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 Exchange Act of 1934, as amended (the “Exchange Act”), or
provided or made available to investors or prospective investors in the Securities, the Rating
Agencies, and service providers relating to the Securitization. In the event that the Disclosure
Document is required to be revised prior to the sale of all Securities, Borrower will cooperate
with the holder of the 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) The Indemnifying Persons agree to provide, in connection with the Securitization, an
indemnification agreement (A) certifying that (i) the Indemnifying Persons have carefully examined
the Disclosure Documents, including without limitation, the sections entitled “Risk Factors,”
“Special Considerations,” “Description of the Mortgages,” “Description of the Mortgage Loans and
Mortgaged Property,” “The Manager,” “The Borrower” and “Certain Legal Aspects of the Mortgage
Loan,” and (ii) such sections and such other information in the Disclosure Documents (to the extent
such information relates to or includes any Provided Information or any information regarding the
Properties, Borrower, Manager and/or the Loan) (collectively with the Provided Information, the
“Covered Disclosure Information”) 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) jointly and severally indemnifying
Lender, BSCMI (whether or not it is the Lender), any Affiliate of BSCMI that has filed any
registration statement relating to the Securitization or has acted as the sponsor or depositor in
connection with the Securitization, any Affiliate of BSCMI that acts as an underwriter, placement
agent or initial purchaser of Securities issued in the Securitization, any other co-underwriters,
co-placement agents or co-initial purchasers of Securities issued in the Securitization, and each
of their respective officers, directors, partners, employees, representatives, agents and
Affiliates and each Person or entity who Controls any such Person within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively, the “Indemnified Persons”),
for any losses, claims, damages, liabilities, costs or expenses (including without limitation legal
fees and expenses for enforcement of these obligations (collectively, the “Liabilities”) to which
any such Indemnified Person may become subject insofar as the Liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact contained in the Covered
Disclosure Information or arise out of or are based upon the omission or alleged omission to state
in the Covered Disclosure Information a material fact required to be stated therein or necessary in
order to make the statements in the Covered Disclosure Information, in light of the circumstances
under which they were made, not misleading and (C) agreeing to reimburse each Indemnified Person
for any legal or other expenses incurred by such Indemnified Person, as they
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are incurred, in connection with investigating or defending the Liabilities. This indemnity agreement will
be in addition to any liability which Borrower may otherwise have. Moreover, the indemnification
and reimbursement obligations provided for in clauses (B) and (C) above shall be
effective, valid and binding obligations of the Indemnifying Persons whether or not an
indemnification agreement described in clause (A) above is provided.
(c) In connection with Exchange Act Filings, the Indemnifying Persons jointly and severally
agree to indemnify (i) the Indemnified Persons for Liabilities to which any such Indemnified Person
may become subject insofar as the Liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact in the Covered Disclosure Information, or the
omission or alleged omission to state in the Covered Disclosure Information a material fact
required to be stated therein or necessary in order to make the statements in the Covered
Disclosure Information, in light of the circumstances under which they were made, not misleading
and (ii) reimburse each Indemnified Person for any legal or other expenses incurred by such
Indemnified Persons, as they are incurred, in connection with defending or investigating the
Liabilities.
(d) Promptly after receipt by an Indemnified Person of notice of any claim or the commencement
of any action, the Indemnified Person shall, if a claim in respect thereof is to be made against
any Indemnifying Person, notify such Indemnifying Person in writing of the claim or the
commencement of that action; provided, however, that the failure to notify such Indemnifying Person
shall not relieve it from any liability which it may have under the indemnification provisions of
this Section 9.2 except to the extent that it has been materially prejudiced by such
failure and, provided further that the failure to notify such Indemnifying Person shall not relieve
it from any liability which it may have to an Indemnified Person otherwise than under the
provisions of this Section 9.2. If any such claim or action shall be brought against an
Indemnified Person, and it shall notify any Indemnifying Person thereof, such Indemnifying Person
shall be entitled to participate therein and, to the extent that it wishes, assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Person. After notice from any
Indemnifying Person to the Indemnified Person of its election to assume the defense of such claim
or action, such Indemnifying Person shall not be liable to the Indemnified Person for any legal or
other expenses subsequently incurred by the Indemnified Person in connection with the defense
thereof except as provided in the following sentence; provided, however, if the defendants in any
such action include both an Indemnifying Person, on the one hand, and one or more Indemnified
Persons on the other hand, and an Indemnified Person shall have reasonably concluded that there are
any legal defenses available to it and/or other Indemnified Persons that are different or in
addition to those available to the Indemnifying Person, the Indemnified Person or Persons 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 Person or Persons. The
Indemnified Person shall instruct its counsel to maintain reasonably detailed billing records for
fees and disbursements for which such Indemnified Person is seeking reimbursement hereunder and
shall submit copies of such detailed billing records to substantiate that such counsel’s fees and
disbursements are solely related to the defense of a claim for which the Indemnifying Person is
required hereunder to indemnify such Indemnified Person. No Indemnifying Person shall be liable
for the expenses of more than one (1) such separate counsel unless such Indemnified Person shall
have reasonably concluded
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that there may be legal defenses available to it that are different from or additional to those
available to another Indemnified Person.
(e) Without the prior written consent of BSCMI (which consent shall not be unreasonably
withheld or delayed), no Indemnifying Person shall settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless the Indemnifying Person shall
have given BSCMI reasonable prior written notice thereof and shall have obtained an unconditional
release of each Indemnified Person hereunder from all liability arising out of such claim, action,
suit or proceedings. As long as an Indemnifying Person has complied with its obligations to defend
and indemnify hereunder, such Indemnifying Person shall not be liable for any settlement made by
any Indemnified Person without the consent of such Indemnifying Person (which consent shall not be
unreasonably withheld or delayed).
(f) The Indemnifying Persons agree that if any indemnification or reimbursement sought
pursuant to this Section 9.2 is finally judicially determined to be unavailable for any
reason or is insufficient to hold any Indemnified Person harmless (with respect only to the
Liabilities that are the subject of this Section 9.2), then the Indemnifying Persons, on
the one hand, and such Indemnified Person, on the other hand, shall contribute to the Liabilities
for which such indemnification or reimbursement is held unavailable or is insufficient: (x) in
such proportion as is appropriate to reflect the relative benefits to the Indemnifying Persons, on
the one hand, and such Indemnified Person, on the other hand, from the transactions to which such
indemnification or reimbursement relates; or (y) if the allocation provided by clause (x)
above is not permitted by applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (x) but also the relative faults of the
Indemnifying Persons, on the one hand, and all Indemnified Persons, on the other hand, as well as
any other equitable considerations. Notwithstanding the provisions of this Section 9.2,
(A) no party found liable for a fraudulent misrepresentation shall be entitled to contribution from
any other party who is not also found liable for such fraudulent misrepresentation, and (B) the
Indemnifying Persons agree that in no event shall the amount to be contributed by the Indemnified
Persons collectively pursuant to this paragraph exceed the amount of the fees actually received by
the Indemnified Persons in connection with the closing of the Loan.
(g) The Indemnifying Persons agree that the indemnification, contribution and reimbursement
obligations set forth in this Section 9.2 shall apply whether or not any Indemnified Person
is a formal party to any lawsuits, claims or other proceedings. The Indemnifying Persons further
agree that the Indemnified Persons are intended third party beneficiaries under this Section
9.2.
(h) The liabilities and obligations of the Indemnified Persons and the Indemnifying Persons
under this Section 9.2 shall survive the termination of this Agreement and the satisfaction
and discharge of the Debt.
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(i) Notwithstanding anything to the contrary contained herein, Borrower shall have no
obligation to act as depositor with respect to the Loan or an issuer or registrant with respect to
the Securities issued in any Securitization.
Section 9.3 Exculpation. Subject to the qualifications below, Lender shall not enforce the liability and obligation
of Borrower to perform and observe the obligations contained in the Note, this Agreement, the
Mortgage or the other Loan Documents by any action or proceeding wherein a money judgment shall be
sought against Borrower, except that Lender may bring a foreclosure action, an action for specific
performance or any other appropriate action or proceeding to enable Lender to enforce and realize
upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in
the Property, the Rents, or any other collateral given to Lender pursuant to the Loan Documents;
provided, however, that, except as specifically provided herein, any judgment in any such action or
proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the
Property, in the Rents and in any other collateral given to Lender, and Lender, by accepting the
Note, this Agreement, the Mortgage and the other Loan Documents, agrees that it shall not sue for,
seek or demand any deficiency judgment against Borrower in any such action or proceeding under or
by reason of or under or in connection with the Note, this Agreement, the Mortgage or the other
Loan Documents. The provisions of this Section shall not, however, (a) constitute a waiver,
release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b)
impair the right of Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under the Mortgage; (c) affect the validity or enforceability of or any
guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder;
(d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement
of the Assignment of Leases; (f) constitute a prohibition against Lender to seek a deficiency
judgment against Borrower in order to fully realize the security granted by the Mortgage or to
commence any other appropriate action or proceeding in order for Lender to exercise its remedies
against the Property; or (g) constitute a waiver of the right of Lender to enforce the liability
and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage,
cost, expense, liability, claim or other obligation incurred by Lender (including attorneys’ fees
and costs reasonably incurred) arising out of or in connection with the following:
(i) fraud or intentional misrepresentation by Borrower or Guarantor in
connection with the Loan;
(ii) the gross negligence or willful misconduct of Borrower;
(iii) the breach of any representation, warranty, covenant or indemnification
provision in the Environmental Indemnity Agreement or in the Mortgage concerning
environmental laws, hazardous substances and asbestos and any indemnification of
Lender with respect thereto in either document;
(iv) the removal or disposal of any portion of the Property after an Event of
Default;
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(v) the misapplication or conversion by Borrower of (A) any Insurance
Proceeds paid by reason of any loss, damage or destruction to the Property, (B)
any Awards received in connection with a Condemnation of all or a portion of the
Property, (C) any Rents following an Event of Default, or (D) any Rents paid more
than one month in advance;
(vi) failure to pay charges for labor or materials or other charges that can
create Liens on any portion of the Property;
(vii) any security deposits, advance deposits or any other deposits collected
with respect to the Property which are not delivered to Lender upon a foreclosure
of the Property or action in lieu thereof, except to the extent any such security
deposits were applied in accordance with the terms and conditions of any of the
Leases prior to the occurrence of the Event of Default that gave rise to such
foreclosure or action in lieu thereof; or
(viii) the breach of any representation, warranty, covenant or
indemnification provision in the Guaranty of Completion or Guaranty of Recourse
Carveouts.
Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan
Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under
Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for
the full amount of the Debt secured by the Mortgage or to require that all collateral shall
continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B)
the Debt shall be fully recourse to Borrower (i) in the event of: (a) Borrower filing a voluntary
petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b)
the filing of an involuntary petition against Borrower under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law, in which Borrower colludes with, or otherwise
assists such Person, or solicits or causes to be solicited petitioning creditors for any
involuntary petition against Borrower from any Person; (c) Borrower filing an answer consenting to
or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other
Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (d)
Borrower consenting to or acquiescing in or joining in an application for the appointment of a
custodian, receiver, trustee, or examiner for Borrower or any portion of the Property; or (e)
Borrower making an assignment for the benefit of creditors, or admitting, in writing or in any
legal proceeding, its insolvency or inability to pay its debts as they become due; (ii) if the
first full monthly payment of interest on the Note is not paid when due; ; (iii) if Borrower fails
to maintain its status as a Single Purpose Entity, after the Guaranty Notice (as defined in the
Guaranty of Recourse Carveouts) if Borrower fails to permit on-site inspections of the Property,
fails to provide financial information, or fails to appoint a new property manager upon the request
of Lender as permitted under this Agreement, each as required by, and in accordance with, the terms
and provisions of this Agreement or the Mortgage; (iv) if Borrower fails to obtain Lender’s prior
written consent to any Indebtedness or voluntary Lien encumbering the Property; or (v) if Borrower
fails to obtain Lender’s prior written consent to any Transfer as required by this Agreement or the
Mortgage.
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Section 9.4 Intentionally Omitted.
Section 9.5
Servicer. At the option of Lender, the Loan may be serviced by a servicer/trustee (any such
servicer/trustee, together with its agents, nominees or designees, are collectively referred to as
“Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities
under this Agreement and the other Loan Documents to Servicer pursuant to a servicing agreement
(the “Servicing Agreement”) between Lender and Servicer. Borrower shall not be responsible for any
set-up fees or any other initial costs relating to or arising under the Servicing Agreement or the
monthly servicing fee due to Servicer under the Servicing Agreement; provided, however, that
Borrower shall be responsible for expenses incurred by Lender or Servicer as set forth in
Section 10.13 hereof.
ARTICLE X.
MISCELLANEOUS
Section 10.1 Survival. This Agreement and all covenants, agreements, representations and warranties made herein
and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan
and the execution and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set
forth herein or in the other Loan Documents. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the legal representatives, successors and
assigns of such party. All covenants, promises and agreements in this Agreement, by or on behalf
of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of
Lender.
Section 10.2 Lender’s Discretion. Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive.
Section 10.3 Governing Law.
(B) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND
ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN 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, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER 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
136
TO PRINCIPLES OF CONFLICTS OF 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 LIEN
AND SECURITY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE 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, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED
ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
BORROWER DOES HEREBY DESIGNATE AND APPOINT:
National Registered Agents, Inc.
875 Avenue of the Americas, Suite 501
New York, New York 10001
875 Avenue of the Americas, Suite 501
New York, New York 10001
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
137
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, consents, approvals and requests required or permitted hereunder or under any
other Loan Document shall be given in writing and shall be effective for all purposes if hand
delivered or sent by (a) certified or registered United States mail, postage prepaid, return
receipt requested or (b) expedited prepaid delivery service, either commercial or United States
Postal Service, with proof of attempted delivery, and by telecopier (with answer back
acknowledged), addressed as follows (or at such other address and Person as shall be designated
from time to time by any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section):
If to Lender:
|
Bear Stearns Commercial Mortgage, Inc. | |
| 383 Madison Avenue | ||
| New York, New York 10179 | ||
| Attention: J. Christopher Hoeffel
Facsimile No.: (212) 272-7047 |
||
with a copy to:
|
Kelley Drye & Warren LLP | |
| 101 Park Avenue | ||
| New York, New York 10178 | ||
| Attention: Paul A. Keenan, Esq. | ||
| Facsimile No.: (212) 808-7897 |
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If to Borrower:
|
Acadia Atlantic Avenue LLC | |
| c/o Acadia Realty Trust | ||
| 1311 Mamaroneck Avenue, Suite 260 | ||
| White Plains, New York 10605 | ||
| Attention: Robert Masters, Esq., General Counsel | ||
| Facsimile No.: (914) 288-2162 | ||
If to MERS:
|
MERS Commercial | |
| P.O. Box 2300 | ||
| Flint, Michigan 48501-2300 |
A notice shall be deemed to have been given: in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the
first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a
machine-generated confirmation of successful transmission after advice by telephone to recipient
that a telecopy notice is forthcoming.
Section 10.7 Trial by Jury.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
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 Preferences. Lender shall have the continuing and exclusive right to apply or reverse and reapply any
and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the
extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, receiver or any other party under
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any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent
of such payment or proceeds received, the obligations hereunder or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender.
Section 10.11 Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except
with respect to matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by Lender to Borrower and except with respect to matters
for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving
of notice. Borrower hereby expressly waives the right to receive any notice from Lender with
respect to any matter for which this Agreement or the other Loan Documents do not specifically and
expressly provide for the giving of notice by Lender to Borrower.
Section 10.12 Remedies of Borrower. In the event that a claim or adjudication is made that Lender or its agents have acted
unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the
other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably
or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary
damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive
relief or declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action seeking declaratory
judgment.
Section 10.13 Expenses; Indemnity. (1) Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse,
Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and
the consummation of the transactions contemplated hereby and thereby and all the costs of
furnishing all opinions by counsel for Borrower (including without limitation any opinions
requested by Lender as to any legal matters arising under this Agreement or the other Loan
Documents with respect to the Property); (ii) Borrower’s ongoing performance of and compliance with
Borrower’s respective agreements and covenants contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance requirements; (iii) Lender’s
ongoing performance and compliance with all agreements and conditions contained in this Agreement
and the other Loan Documents on its part to be performed or complied with after the Closing Date;
(iv) the negotiation, preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications to this Agreement and the other Loan Documents and any
other documents or matters requested by Lender; (v) securing Borrower’s compliance with any
requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all
required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in
favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing or
preserving any rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or affecting Borrower, this
Agreement, the other Loan Documents, the Property, or any other security given for the Loan;
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and (viii) enforcing any obligations of or collecting any payments due from Borrower under
this Agreement, the other Loan Documents or with respect to the Property (including any fees
incurred by Servicer in connection with the transfer of the Loan to a special servicer prior to a
Default or Event of Default) or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a “work-out” or of any insolvency or
bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any
such costs and expenses to the extent the same arise by reason of the gross negligence, illegal
acts, fraud or willful misconduct of Lender. Any cost and expenses due and payable to Lender may
be paid from any amounts in the Clearing Account or Cash Management Account, as applicable.
(a) 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. To the extent that the undertaking to indemnify, defend and
hold harmless set forth in the preceding sentence may be unenforceable because it violates any law
or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
(b) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender
for, any fees and expenses incurred by any Rating Agency in connection with any consent, approval,
waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of
this Agreement or any other Loan Document and Lender shall be entitled to require payment of such
fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver
or confirmation.
Section 10.14 Schedules and Exhibits Incorporated. The Schedules and Exhibits annexed hereto are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
Section 10.15 Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest in and to this Agreement, the Note and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or defenses which are
unrelated to such documents which Borrower may otherwise have against any assignor of such
documents, and no such unrelated counterclaim or defense shall be interposed or asserted by
Borrower in any action or proceeding brought by any such assignee upon such documents and any such
right to interpose or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.
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Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrower and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee,
beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein or therein. All conditions to
the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the
benefit of Lender and no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Lender will refuse to make
the Loan in the absence of strict compliance with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may
be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it
advisable or desirable to do so.
Section 10.17 Publicity. All news releases, publicity or advertising by Borrower or its Affiliates through any media
intended to reach the general public which refers to the Loan Documents or the financing evidenced
by the Loan Documents, to Lender, BSCMI, or any of their Affiliates shall be subject to the prior
written approval of Lender.
Section 10.18 Waiver of Marshalling of Assets. 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 Property, 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 Property 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 Property in preference to every
other claimant whatsoever.
Section 10.19 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a compulsory
counterclaim, in any action or proceeding brought against it by Lender or its agents.
Section 10.20 Conflict; Construction of Documents; Reliance. In the event of any conflict between the provisions of this Agreement and any of the other
Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge
that they were represented by competent counsel in connection with the negotiation, drafting and
execution of the Loan Documents and that such Loan Documents shall not be subject to the principle
of construing their meaning against the party which drafted same. Borrower acknowledges that, with
respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into
the Loan without relying in any manner on any statements, representations or
142
recommendations of Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not
be subject to any limitation whatsoever in the exercise of any rights or remedies available to it
under any of the Loan Documents or any other agreements or instruments which govern the Loan by
virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity
interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to
raise any defense or take any action on the basis of the foregoing with respect to Lender’s
exercise of any such rights or remedies. Borrower acknowledges that Lender engages in the business
of real estate financings and other real estate transactions and investments which may be viewed as
adverse to or competitive with the business of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders, in connection with the transactions contemplated
by this Agreement. Borrower hereby agrees to indemnify, defend and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind (including Lender’s
attorneys’ fees and expenses) in any way relating to or arising from a claim by any Person that
such Person acted on behalf of Borrower or Lender in connection with the transactions contemplated
herein. The provisions of this Section 10.21 shall survive the expiration and termination
of this Agreement and the payment of the Debt.
Section 10.22 Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties
hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written, including, without limitation,
the Commitment Letter dated June 28, 2007 between Borrower and Lender are superseded by the terms
of this Agreement and the other Loan Documents.
Section 10.23 Joint and Several Liability. If Borrower consists of more than one (1) Person the obligations and liabilities of each
Person shall be joint and several.
Section 10.24 Certain Additional Rights of Lender (VCOC). Notwithstanding anything to the contrary contained in this Agreement, Lender shall have:
(a) the right to routinely consult with and advise Borrower’s management regarding the
significant business activities and business and financial developments of Borrower;
provided, however, that such consultations shall not include discussions of
environmental compliance programs or disposal of hazardous substances. Consultation meetings
should occur on a regular basis (no less frequently than quarterly) with Lender having the right to
call special meetings at any reasonable times and upon reasonable advance notice;
(b) the right, in accordance with the terms of this Agreement, to examine the books and
records of Borrower at any reasonable times upon reasonable notice;
(c) the right, in accordance with the terms of this Agreement, including, without limitation,
Section 5.1.11 hereof, to receive monthly, quarterly and year end financial reports,
including balance sheets, statements of income, shareholder’s equity and cash flow, a management
report and schedules of outstanding indebtedness; and
143
(d) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to approve any acquisition by Borrower of any other significant property (other
than personal property required for the day to day operation of the Property and/or construction of
the Project Improvements).
The rights described above in this Section 10.24 may be exercised by any entity which
owns and controls, directly or indirectly, substantially all of the interests in Lender.
Section 10.25 MERS. Mortgage Electronic Registration Systems, Inc., a Delaware corporation (“MERS”), serves as
mortgagee of record and secured party solely as nominee, in an administrative capacity, for Lender
and only holds legal title to the interests granted, assigned, and transferred in the Mortgage and
the Assignments of Leases. MERS shall at all times comply with the instructions of Lender. If
necessary to comply with law or custom, MERS (for the benefit of Lender) may be directed by Lender
to exercise any or all of those interests, including without limitation, the right to foreclose and
sell the Property, and take any action required of Lender, including without limitation, a release,
discharge or reconveyance of the Mortgage. Subject to the foregoing, all references in the Loan
Documents to “Mortgagee” shall include Lender and its successors and assigns. The relationship of
Mortgagor and Lender under the Mortgage and the other Loan Documents is, and shall at all times
remain, solely that of borrower and lender (the role of MERS thereunder being solely that of
nominee as set forth above and not that of a lender); and Mortgagee neither undertakes nor assumes
any responsibility or duty to Borrower or to any other Person with respect to the Property.
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[SIGNATURE PAGE TO BUILDING LOAN AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above written.
| BORROWER ACADIA ATLANTIC AVENUE LLC, a Delaware limited liability company |
||||
| By: | , | |||
| Name: | Robert Masters | |||
| Title: | Senior Vice President | |||
| LENDER BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York corporation |
||||
| By: | ||||
| Name: | ||||
| Title: | Authorized Signatory | |||
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LIST OF AFFILIATES OF
ACADIA REALTY TRUST
ACADIA REALTY TRUST
Last Revised 2/12/08
Acadia Realty Trust
Acadia Realty Limited Partnership
Acadia Realty Limited Partnership
ACRS, Inc.
Acadia Bartow Avenue, LLC
Acadia Mad River Property LLC
Acadia Merrillville Realty, L.P.
Acadia Town Line, LLC
Blackman Fifty L.P.
Heathcote Associates, L.P.
Mark Plaza Fifty L.P.
Mark Twelve Associates, L.P.
Pacesetter/Ramapo Associates
RD Abington Associates Limited Partnership
RD Absecon Associates, L.P.
RD Bloomfield Associates Limited Partnership
RD Branch Associates L.P.
RD Elmwood Associates, L.P.
RD Hobson Associates, L.P.
RD Methuen Associates Limited Partnership
RD Smithtown, LLC
RD Village Associates Limited Partnership
RD Woonsocket Associates Limited Partnership
Acadia 239 Greenwich Avenue, LLC
Acadia Heathcote, LLC
Acadia Merrillville Realty, Inc.
Acadia Pacesetter LLC
Acadia Property Holdings, LLC
Blackman Fifty Realty Corp.
Mark Plaza Fifty Realty Corp.
New Castle Fifty Realty Corp.
RD Absecon, Inc.
239 Greenwich Associates Limited Partnership
Crossroads II
Crossroads Joint Venture
Crossroads II
Crossroads Joint Venture
Acadia Realty Acquisition I, LLC
Acadia Strategic Opportunity Fund, LP
Acadia Amherst, LLC
Acadia Granville, LLC
Acadia Sheffield Crossing, LLC
Acadia Brandywine Condominium, LLC
Acadia Brandywine Subsidiary, LLC
Acadia Brandywine Town Center, LLC
Acadia Market Square, LLC
Acadia K-H, LLC
AmCap Acadia 8th Addition, LLC
AmCap Acadia 9th Addition, LLC
AmCap Acadia Agent, LLC
AmCap Acadia Atlanta LP
AmCap Acadia Batesville, LLC
AmCap Acadia Benton, LLC
AmCap Acadia Carthage LP
AmCap Acadia Cary, LLC
AmCap Acadia Cincinnati, LLC
AmCap Acadia Conroe LP
AmCap Acadia Great Bend, LLC
AmCap Acadia Hanrahan, LLC
AmCap Acadia Indianapolis, LLC
AmCap Acadia Irving LP
AmCap Acadia K-H Holding, LLC
AmCap Acadia K-H, LLC
AmCap Acadia Little Rock, LLC
AmCap Acadia Longview, LLC
AmCap Acadia Mustang, LLC
AmCap Acadia Pratt, LLC
AmCap Acadia Roanoke, LLC
AmCap Acadia Roswell, LLC
AmCap Acadia Ruidoso, LLC
AmCap Acadia San Ramon, LLC
AmCap Acadia Shreveport, LLC
AmCap Acadia Springerville, LLC
AmCap Acadia Tucson, LLC
AmCap Acadia Tulsa, LLC
AmCap Acadia Springerville, LLC
AmCap Acadia Tucson, LLC
AmCap Acadia Tulsa, LLC
Acadia Tarrytown, LLC
Acadia D.R. Management, Inc.
Acadia Hendon Hitchcock Plaza, LLC
Acadia Haygood, LLC
Acadia Sterling Heights, LLC
Acadia Realty Acquisition II, LLC
Acadia Strategic Opportunity Fund II, LLC
Acadia Crossroads, LLC
Crossroads Joint Venture, LLC
Crossroads II, LLC
Acadia New Loudon, LLC
Acadia Mervyn I, LLC
Acadia Mervyn II, LLC
Acadia Mervyn Investors I, LLC
Acadia Mervyn Investors II, LLC
Acadia Mervyn Promote Member I, LLC
Acadia Mervyn Promote Member II, LLC
Acadia-PA East Fordham Acquisitions, LLC
P/A-Acadia Pelham Manor, LLC
Acadia-P/A Holding Company, LLC
Acadia Crescent Plaza LLC
Acadia-P/A Canarsie, LLC
Acadia-P/A Sherman Avenue, LLC
Acadia Berlin LLC
Acadia Boonton LLC
ABR Amboy Road LLC
APA 216st Street LLC
Acadia-P/A 161st Street LLC
Acadia-P/A Liberty LLC
Acadia Oakbrook LLC
Acadia Clark-Diversey LLC
Acadia Naamans Road LLC
Acadia Elmwood Park LLC
Acadia Chestnut LLC
Acadia Chestnut Hill LLC
Acadia-P/A GWB LLC
George Washington Bridge Bus Station Development Venture LLC
Acadia Shore Road LLC
Secor Pelham LLC
Acadia Albertsons Investors LLC
Acadia Shopko Investors LLC
Acadia Cub Foods Investors LLC
Acadia Walnut Hill LLC
Acadia Marsh Investors LLC
Acadia 2914 Third Avenue LLC
Albee Development LLC
Acadia-P/A/T Albee LLC
Acadia-P/A Albee LLC
Albee Office Development LLC
Albee Retail Development LLC
Acadia Atlantic Avenue LLC
Acadia West Shore Expressway LLC
Acadia West 54th Street LLC
Fordham Place Office LLC
Acadia Strategic Opportunity Fund III LLC
Acadia Realty Acquisition III LLC
Acadia Investors III, Inc.
Acadia-P/A Holding Company II LLC
Acadia 3319 Atlantic Avenue LLC
Canarsie Plaza LLC
Acadia-Storage Post Byram LLC
Acadia Byram LLC
Acadia Byram LLC
Acadia Rex LLC
Acadia-P/A Management Services LLC
Acadia Westport LLC
125 Main Street Associates LLC
Acadia-P/A Sheepshead Bay LLC
Acadia Storage Post LLC
Acadia Storage Company LLC
Acadia Self Storage LLC
Acadia Storage Post Metropolitan Avenue LLC
Acadia Storage Post Portfolio Company LLC
Acadia Suffern LLC
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements (Form S-8 Nos.
33-95966 and 333-87993) pertaining to the 1999 Share Incentive Plan of Acadia Realty Trust; in the
Registration Statement (Form S-3 No. 33-31630) of Acadia Realty Trust; in the Registration
Statement (Form S-3 No. 333-139950) of Acadia Realty Trust in the Registration Statement (Form S-3
No. 333-114785) of Acadia Realty Trust; in the Registration Statement (Form S-3 No. 333-126712) of
Acadia Realty Trust; and in the Registration Statement (Form S-8 No. 333-106758) pertaining to the
2003 Employee Share Incentive Plan of Acadia Realty Trust of our reports dated February 29, 2008,
related to the consolidated financial statements and schedule and the effectiveness of internal
control over financial reporting of Acadia Realty Trust included in this Annual Report on Form 10-K
for the year ended December 31, 2007.
| /s/ BDO Seidman, LLP
|
||||
New York, New York
February 29, 2008
February 29, 2008
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a — 14(a) (SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002)
I, Kenneth F. Bernstein, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Acadia Realty Trust; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Kenneth F. Bernstein | ||||
| Kenneth F. Bernstein | ||||
| President and Chief Executive Officer | ||||
| February 29, 2008 | ||||
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a — 14(a) (SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002)
I, Michael Nelsen, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Acadia Realty Trust; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Michael Nelsen | ||||
| Michael Nelsen | ||||
| Senior Vice President and Chief Financial Officer |
||||
| February 29, 2008 | ||||
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 (SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002)
In connection with the Annual Report of Acadia Realty Trust (the “Company”) on Form 10-K for the
year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), I, Kenneth F. Bernstein, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.
| /s/ Kenneth F. Bernstein | ||||
| Kenneth F. Bernstein | ||||
| President and Chief Executive Officer | ||||
| February 29, 2008 | ||||
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 (SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002)
In connection with the Annual Report of Acadia Realty Trust (the “Company”) on Form 10-K for the
year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), I, Michael Nelsen, Sr. Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.
| /s/ Michael Nelsen | ||||
| Michael Nelsen | ||||
| Senior Vice President and Chief Financial Officer |
||||
| February 29, 2008 | ||||