LOAN AGREEMENT
Dated as of October 4, 1996
by and between
SMC-SPE-1, INC., a Delaware corporation,
as Borrower
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
a national banking association,
as Lender
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.....................................................................................4
1.1 Definitions.....................................................................................4
1.2 Principles of Construction.....................................................................11
ARTICLE 2 GENERAL TERMS..................................................................................11
2.1 Loan Commitment; Disbursement to Borrower......................................................11
2.1.1 The Loans.............................................................................11
2.1.2 The Notes.............................................................................11
2.2 Loan Repayment/Prepayment......................................................................12
2.2.1 Loan Repayment........................................................................12
2.2.2 Prepayment............................................................................12
2.3 Total Sale.....................................................................................16
2.4 Transfer of Individual Property................................................................18
2.5 Substitution of a Property.....................................................................18
2.6 TI Reserve.....................................................................................21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.................................................................22
3.1 Borrower's Representations.....................................................................22
3.2 Survival of Representations....................................................................23
ARTICLE 4 DEFAULTS.......................................................................................23
4.1 Event of Default...............................................................................23
4.2 Remedies.......................................................................................24
ARTICLE 5 MISCELLANEOUS..................................................................................25
5.1 Survival.......................................................................................25
5.2 Lender's Discretion............................................................................25
5.3 Governing Law..................................................................................25
5.4 Modification; Waiver in Writing................................................................25
5.5 Notices........................................................................................25
ARTICLE 6 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL...............................................26
6.1 Headings.......................................................................................26
6.2 Successors and Assigns; Assignment.............................................................27
6.3 Severability...................................................................................27
6.4 Expenses; Indemnity............................................................................27
6.5 Exhibits Incorporated..........................................................................27
6.6 No Joint Venture or Partnership................................................................27
6.7 Borrower's Waivers.............................................................................27
6.8 Construction of Documents......................................................................28
6.9 Prior Agreements...............................................................................28
6.10 Exculpation....................................................................................28
6.11 Maximum Interest...............................................................................28
EXHIBIT A Initial Allocated Loan Amounts.................................................................31
LOAN AGREEMENT
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THIS LOAN AGREEMENT (this "Agreement"), dated as of October 4, 1996, by and
between FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association, having an address at One First Union Center, DC6, Charlotte, North
Carolina 28288- 0166 (together with its successors and assigns, "Lender"), and
SMC-SPE-1, a Delaware corporation, having an address at c/o Service Merchandise
Company, Inc., 7100 Service Merchandise Drive, Brentwood, Tennessee 37027
("Borrower"). All capitalized terms used herein shall have the respective
meanings set forth in Section 1.1 hereof.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Borrower desires to obtain mortgage loan financing in the
aggregate principal amount of FIFTY-TWO MILLION EIGHT HUNDRED THIRTY THOUSAND
AND 00/100 DOLLARS ($52,830,000.00) (collectively, the "Loans") in connection
with the acquisition or financing of nineteen (19) Service Merchandise locations
(individually, a "Property" and collectively, the "Properties"), as more
specifically described in the "Mortgages" (as hereinafter defined); and
WHEREAS, the Loans are evidenced by nineteen (19) Promissory Notes and
secured by nineteen (19) Mortgages on the Properties;
WHEREAS, Lender is willing to make the Loans to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents.
NOW, THEREFORE, in consideration of the covenants, agreements,
representations and warranties set forth in this Agreement, and other good and
valuable consideration, the parties hereto hereby covenant, agree, represent and
warrant as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:
"Affiliate" of any specified Person shall mean any Person or entity (i)
which owns beneficially, directly or indirectly, more than fifty percent (50%)
of the outstanding shares of common stock or which is otherwise in control of
Borrower, (ii) of which more than fifty percent (50%) of the outstanding voting
securities are owned beneficially, directly or indirectly, by any entity
described in clause (i) above, or (iii) which is controlled by an entity
described in clause (i) above; provided that for the purposes of this definition
the term "control" and "controlled by" shall have the meanings assigned to them
in Rule 405 under the Securities Act of 1933, as amended.
"Allocated Loan Amount" shall mean the Initial Allocated Loan Amount of
each Property, as such amount may be adjusted from time to time as hereinafter
set forth. Upon each adjustment in the principal portion of the Indebtedness
(each, a "Total Adjustment"), whether as a result of amortization, prepayment or
as otherwise expressly provided herein or in any other Loan Document, each
Allocated Loan Amount shall be increased or decreased, as the case may be, by an
amount equal to the product of (i) the Total Adjustment, and (ii) a fraction,
the numerator of which is the applicable Allocated Loan Amount (prior to the
adjustment in question) and the denominator of which is the aggregate of the
Allocated Loan Amounts (prior to the adjustment in question). However, when the
principal portion of the Indebtedness is reduced as a result of Lender's receipt
of (i) a Release Price, the Allocated Loan Amount for the Property being
released and discharged from the encumbrance of the applicable Mortgage shall be
reduced to zero (the amount by which such Allocated Loan Amount is reduced being
referred to as the "Released Allocated Amount"), the applicable Mortgage,
Assignment of Leases and other Collateral Documents with respect to such Loan
shall be satisfied and discharged (of record, if applicable), and each other
Allocated Loan Amount shall be decreased by an amount equal to the product of
(1) the excess of (a) the Release Price over (b) the Released Allocated Amount,
and (2) a fraction, the numerator of which is the applicable Allocated Loan
Amount for each Property (prior to the adjustment in question) and the
denominator of which is the aggregate of all of the Allocated Loan Amounts
(prior to the adjustment in question) other than the Allocated Loan Amount
applicable to the Property for which the Release Price was received or (ii) the
sum of Net Proceeds (which term for the purposes of computing the Allocated Loan
Amount only shall be deemed to include casualty and condemnation proceeds that
are applied towards the reduction of the Indebtedness as set forth in Section
1.9 of the Mortgages) and Borrower's Contribution (if any), the Allocated Loan
Amount for the Property with respect to which such sum was received shall be
reduced to zero (the amount by which such Allocated Loan Amount is reduced being
referred to as the "Foreclosed Allocated Amount"), the applicable Mortgage,
Assignment of Leases and other Collateral Documents with respect to such Loan
shall be satisfied and discharged (of record, if applicable), and each other
Allocated Loan Amount shall (x) if the Net Proceeds exceed the Foreclosed
Allocated Loan Amount (such excess being referred to as the "Surplus Net
Proceeds"), be decreased by an amount equal to the product of (1) the Surplus
Net Proceeds and (2) a fraction, the numerator of which is the applicable
Allocated Loan Amount for each Property (prior to the adjustment in question)
and the denominator of which is the aggregate of all of the Allocated Loan
Amounts, (prior to the adjustment in question) other than the Allocated Loan
Amount applicable to the Property with respect to which the Net Proceeds were
received (such fraction being referred to as the "Net Proceeds Adjustment
Fraction"), (y) if the Foreclosed Allocated Amount exceeds the sum of Net
Proceeds and any Borrower's Contribution (such excess being referred to as the
"Net Proceeds Deficiency"), be increased by an amount equal to the product of
(1) the Net Proceeds Deficiency and (2) the Net Proceeds Adjustment Fraction, or
(z) if the sum of Net Proceeds and any Borrower's Contribution equals the
Foreclosed Allocated Amount, remain unadjusted.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"Annual Release Limit" shall have the meaning specified in Section
2.2.2(c)(4).
"Assignment of Leases" shall mean, with respect to each Loan, that certain
first priority Assignment of Leases and Rents, dated as of the date hereof, from
Borrower, as assignor, to Lender, as assignee, with respect to the Property that
is encumbered by the applicable Mortgage, assigning to Lender all of Borrower's
interest in and to the Leases and Rents of such Property as security for the
Loan, as such Assignment of Leases may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Borrower" shall have the meaning specified in the first Paragraph hereof.
"Borrower's Contribution" shall have the meaning specified in Section 1.9
of the Mortgages.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in North Carolina are not open for business.
"Closing Date" shall mean the date hereof.
"Code" shall mean the Internal Revenue Code of 1986.
"Collateral Security Documents" shall mean, with respect to each Loan, any
document or instrument given as security for the Note evidencing such Loan,
including, without limitation, the Mortgage and the Assignment of Leases, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"Conditional Commitment" shall mean the Conditional Commitment Letter from
Lender and accepted by SMC dated September 9, 1996, together with the Special
Stipulations Rider and Exhibit A and Exhibit B attached thereto.
"Debt Service" shall mean, with respect to each Loan, the amount of
interest, principal and reserve payments due and payable in respect of such Loan
in accordance with the applicable Note and the other Loan Documents during an
applicable period.
"DSCR" shall mean the quotient obtained by dividing (i) the product of
Store Sales at a Property (or Properties) for the twelve (12) month period
immediately prior to the date for which the computation is made, multiplied by
four (4%) per cent, by (ii) Debt Service for the corresponding period.
"Environmental Indemnity" shall mean that certain Hazardous Substances
Indemnity Agreement of even date herewith, by Borrower and Indemnitor in favor
of Lender with respect to environmental conditions on the Properties, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"Event of Default" shall have the meaning specified in Section 4.1.
"Fiscal Year" shall mean each annual period commencing on the first (1st)
day after the end of the immediately preceding such annual period and ending the
Sunday nearest the end of each calendar year of the term of this Agreement, or
such other fiscal year of Borrower as Borrower may select from time to time with
the prior written consent of Lender.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"Governmental Authority" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence.
"Improvements" shall have the meaning specified in the applicable Mortgage
with respect to each Property.
"Indebtedness" shall mean the aggregate indebtedness in the original
principal amounts set forth in, and evidenced by, the Notes, together with all
other obligations and liabilities of Borrower due or to become due to Lender
pursuant to the Notes, this Agreement or any other Loan Document, including,
without limitation, all interest thereon.
"Indemnitor" shall mean SMC-HC, Inc., a Delaware corporation.
"Indemnity" shall mean that certain Indemnity and Guaranty Agreement of
even date herewith, by Indemnitor in favor of Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"Initial Allocated Loan Amount" shall mean, with respect to each Loan, the
principal amount of the applicable Note evidencing such Loan, as set forth on
Exhibit A attached hereto and by this reference a part hereof.
"Lease" shall mean, with respect to each Loan and the applicable Property,
all leases, licenses, tenancies, concessions and occupancy agreements of such
Property or the Improvements or the fixtures or equipment or any portion thereof
or any interest therein, now or hereafter entered into.
"Lender" shall have the meaning specified in the first Paragraph hereof.
"Lien" shall mean, with respect to each Loan and the applicable Property,
any mortgage, deed of trust, deed to secure debt, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer of,
on or affecting such Property or 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, any financing statement, and mechanic's, materialmen's and
other similar liens.
"Loan" shall mean one of the Loans, which shall be evidenced by a Note and
secured by the Mortgages and the other Collateral Security Documents with
respect to such Loan, to be made by Lender to Borrower pursuant hereto.
"Loans" shall have the meaning specified in the recitals hereof, and shall
refer, collectively, to each Loan.
"Loan Documents" shall mean, collectively, shall mean this Agreement, the
Mortgages, the Notes, the Assignments of Leases, the Environmental Indemnity,
the Indemnity, the Loan Application submitted by SMC to Lender dated August 16,
1996, the Conditional Commitment and all other agreements, instruments,
certificates or documents executed and delivered by Borrower or any Affiliate of
Borrower in connection with the Loans.
"Maturity Date" shall mean November 30, 2011.
"Mortgage" shall mean, with respect to each Loan and the applicable
Property, that certain first priority (i) Mortgage and Security Agreement, (ii)
Leasehold Mortgage and Security Agreement, (iii) Deed of Trust and Security
Agreement or (iv) Deed to Secure Debt and Security Agreement, as applicable,
executed and delivered by Borrower as security for such Loan and the other Loans
and encumbering such Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Net Proceeds" shall mean, with respect to each Loan and the applicable
Property, the excess of (i)(x) the purchase price (at foreclosure or otherwise)
actually received by Lender with respect to such Property as a result of the
exercise by Lender of its rights, powers, privileges and other remedies after
the occurrence of an Event of Default, or (y) if Lender (or Lender's nominee) is
the purchaser at foreclosure by credit bid, then the amount of such credit bid,
in either case, over (ii) all costs and expenses, including, without limitation,
all reasonable attorneys' fees and disbursements and any brokerage fees, if
applicable, incurred by Lender in connection with the exercise of such remedies,
including the sale of such Property after a foreclosure against the Property.
"Note" shall mean, with respect to each Loan, the Promissory Note of even
date herewith made by Borrower in favor of Lender in the Initial Allocated Loan
Amount of such Loan, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Prepayment Date" shall have the meaning specified in Section 2.2.2.
"Property" shall mean, with respect to each Loan, the parcel of real
property and the Improvements thereon encumbered by the Mortgage specifically
corresponding to such Loan, together with all rights and property pertaining to
such real property and Improvements, as more particularly described in the
granting clauses of such Mortgage and referred to therein as the "Property".
"Rating Agency" shall mean any nationally recognized statistical agency
selected by Lender including, without limitation, Duff & Phelps Rating Co.,
Fitch Investors Services, Inc., Moody's Investors Services, Inc., and/or
Standard and Poors Corporation, collectively, and any successor to any of them;
provided, however, that at any time during which a Loan is an asset of a
securitization or is otherwise an asset of any rated transaction, "Rating
Agency" shall mean the rating agency or rating agencies that from time to time
rate the securities, certificates or other instruments issued in connection with
such securitization or other transaction.
"Release" shall have the meaning specified in Section 2.2.2.
"Release Price" shall have the meaning specified in Section 2.2.2.
"Released Property" shall have the meaning specified in Section 2.2.2.
"REMIC" shall mean a "real estate mortgage investment conduit" within the
meaning of the Code.
"REMIC Provisions" shall mean the provisions of the federal income tax law
relating to REMICs, which appear at Sections 860A through 860G of the Code, and
any related provisions and proposed, temporary and final Treasury regulations
and published rulings, notices and announcements promulgated thereunder, as the
foregoing may be in effect from time to time.
"REMIC Trust" shall have the meaning specified in Section 2.5.2.
"Rents" shall mean, with respect to the Property, all rents, royalties,
issues, profits, revenue, income and other benefits arising from the Leases and
renewals thereof.
"Satisfaction" shall have the meaning specified in Section 2.2.2.
"Secondary Market Transaction" shall have the meaning specified in Section
2.3(14).
"SMC" shall mean Service Merchandise Company, Inc., a Tennessee
corporation.
"Startup Date" shall have the meaning specified in Section 2.5.2.
"State" shall mean, with respect to each Property, the State or
Commonwealth in which such Property or any part thereof is located.
"Store Sales" shall mean, with respect to each Property, the aggregate
selling prices of all merchandise sold or delivered in, at, on or from any part
of such Property and the charges for all services of any sort (including
receipts from vending machines and revenues from the rental of merchandise),
sold or performed in, at, on or from any part of the Property. Store Sales
includes sales and charges for cash or credit, regardless of collection in the
case of the latter. Store Sales excludes (i) refunds made by the retail operator
at such Property to its customers for merchandise returned to such retail
operator, (ii) exchanges of merchandise between stores of Borrower or such
retail operator (or Borrower's or such retail operator's affiliates) where such
exchanges are made solely for the convenient operation of such retail operator's
business and not for the purpose of consummating a sale at another location that
has been made, in fact, at, in, on or from the Property, and (iii) the amount of
any city, county or state sales tax on such sales paid to a taxing authority by
Borrower or such retail operator (but not by any vendor of such retail
operator). A Store Sale shall be deemed to be made in the Property if (x) an
order therefor is secured or received in the Property, or (y) pursuant to mail,
telegraph, telephone or other similar means, orders are received or filled at or
from the Property.
"TI Costs" shall mean costs and expenses incurred by Borrower for the
payment of leasing commissions and expenditures related to repairs, replacements
and improvements (including any tenant work allowance) in connection with the
leasing of a Property or any portion thereof to a new tenant or the renewal or
extension of a Lease to an existing tenant.
"TI Reserve" shall have the meaning specified in Section 2.4 hereof.
"Title Insurance Policy" shall mean, with respect to each Property, the
ALTA extended coverage mortgagee title insurance policy (1992 Loan Policy or
other loan policy acceptable to Lender) issued with respect to such Property and
insuring the lien of the Mortgage encumbering such Property and containing such
endorsements and affirmative assurances as Lender shall reasonably require (to
the extent authorized in the State).
"Total Sale" shall have the meaning specified in Section 2.3 hereof.
"Yield Maintenance" shall mean, with respect to each Loan and the
corresponding Note, the positive excess of (1) the present value ("PV") of all
future installments of principal and interest due under the Note including the
principal amount due at maturity (collectively, "All Future Payments"),
discounted at an interest rate per annum equal to the Treasury Constant Maturity
Yield Index published during the second full week preceding the date for which
the calculation is made for the U.S. Treasury security having a maturity
coterminous with the remaining term of such Note, over (2) the principal amount
of such Loan outstanding immediately before such prepayment [(PV of All Future
Payments) - (principal balance at time of prepayment) = Yield Maintenance].
"Treasury Constant Maturity Yield Index" shall mean the average yield for "This
Week" as reported by the Federal Reserve Board in Federal Reserve Statistical
Release H.15(519). If there is no Treasury Constant Maturity Yield Index for a
U.S. Treasury security having a maturity coterminous with the remaining term of
such Note, then the index shall be equal to the weighted average yield to
maturity of the Treasury Constant Maturity Yield Indices with maturities next
longer and shorter than such remaining average life to maturity, calculated by
averaging (and rounding upward to the nearest whole multiple of 1/100 of 1% per
annum, if the average is not such a multiple) the yields of the relevant
Treasury Constant Maturity Yield Indices (rounded, if necessary, to the nearest
1/100 of 1% with any figure of 1/200 of 1% or above rounded upward).
1.2 Principles of Construction.
All references to sections, schedules and exhibits are to sections,
schedules and exhibits in or to this Agreement unless otherwise specified.
Unless otherwise specified, the words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Unless otherwise specified, all meanings attributed to defined terms herein
shall be equally applicable to both the singular and plural forms of the terms
so defined. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP, as modified herein.
ARTICLE 2
GENERAL TERMS
2.1 Loan Commitment; Disbursement to Borrower.
2.1.1 The Loans. Subject to and upon the terms and conditions set forth
herein, Lender hereby agrees to make the Loans to Borrower on the Closing Date,
in the Initial Allocated Loan Amounts set forth in the Notes, which Loans shall
mature on the Maturity Date. Borrower hereby agrees to accept the Loans on the
Closing Date, subject to and upon the terms and conditions set forth herein.
2.1.2 The Notes. Each Loan shall be evidenced by a Note in the Initial
Allocated Loan Amount of such Loan. The Loan evidenced by each Note shall bear
interest as provided in such Note, and shall be subject to repayment and
prepayment as provided in such Note and in Section 2.2 hereof. The Loan
evidenced by each Note shall be entitled to the benefits of this Agreement and
shall be secured by the Mortgages, Assignments of Leases and the other
Collateral Security Documents.
2.2 Loan Repayment/Prepayment.
2.2.1 Loan Repayment. Borrower shall repay each Loan in accordance with the
provisions of the Note evidencing such Loan.
2.2.2 Prepayment.
(a) Except as set forth in Sections 2.2.2(b) and (c) hereof, no prepayment
of the Indebtedness may be made in whole or in part.
(b) With respect to each Loan and each Note evidencing such Loan, the
following prepayment terms and conditions shall apply:
(1) The Loan may be prepaid in whole or in part at any time after the first
(1st) anniversary of the Note provided (i) written notice of such prepayment is
received by Lender not more than sixty (60) days and not less than thirty (30)
days prior to the date of such prepayment, (ii) such prepayment is accompanied
by all unpaid interest accrued thereunder and all other sums then due thereunder
and under the other Loan Documents (including this Agreement), and (iii) if such
prepayment occurs prior to the date that is six (6) months prior to the Maturity
Date, Lender is paid a prepayment fee in an amount equal to the following:
(i) during the period from and including the first (1st) anniversary of the
Note until the date that is nine (9) years and six (6) months after the date of
the Note, the greater of (i) one percent (1.0%) of the principal amount being
prepaid, or, in the event of a Release, one percent (1%) of the then Allocated
Loan Amount for the Property to be Released, or (ii) Yield Maintenance;
(ii) during the period from and including the date that is nine (9) years
and six (6) months after the date of the Note until the date that is ten (10)
years and six (6) months after the date of the Note, five percent (5%) of the
principal amount being prepaid, or, in the event of a Release, five percent (5%)
of the then Allocated Loan Amount for the Property to be Released;
(iii) during the period from and including the date that is ten (10) years
and six (6) months after the date of the Note until the date that is eleven (11)
years and six (6) months after the date of the Note, four percent (4%) of the
principal amount being prepaid, or, in the event of a Release, four percent (4%)
of the then Allocated Loan Amount for the Property to be Released;
(iv) during the period from and including the date that is eleven (11)
years and six (6) months after the date of the Note until the date that is
twelve (12) years and six (6) months after the date of the Note, three percent
(3%) of the principal amount being prepaid, or, in the event of a Release, three
percent (3%) of the then Allocated Loan Amount for the Property to be Released;
(v) during the period from and including the date that is twelve (12) years
and six (6) months after the date of the Note until the date that is thirteen
(13) years and six (6) months after the date of the Note, two percent (2%) of
the principal amount being prepaid, or, in the event of a Release, two percent
(2%) of the then Allocated Loan Amount for the Property to be Released; and
(vi) during the period from and including the date that is thirteen (13)
years and six (6) months after the date of the Note until the date that is
fourteen (14) years and six (6) months after the date of the Note, one percent
(1%) of the principal amount being prepaid, or, in the event of a Release, one
percent (1%) of the then Allocated Loan Amount for the Property to be Released.
In the event that any prepayment fee is due hereunder, Lender shall deliver
to Borrower a statement setting forth the amount and determination of the
prepayment fee, and, provided that Lender shall have in good faith applied the
formula described above, Borrower shall not have the right to challenge the
calculation or the method of calculation set forth in any such statement in the
absence of manifest error. Lender shall not be obligated or required to have
actually reinvested the prepaid principal balance at the Treasury Constant
Maturity Yield or otherwise as a condition to receiving the prepayment fee. No
prepayment fee or shall be due or payable in connection with any prepayment of
the indebtedness evidenced by the Note, in whole, made on or after the date that
is six (6) months prior to the Maturity Date, or upon prepayment resulting from
application of insurance or condemnation proceeds and any related Borrower's
Contribution as provided in the Mortgage at any time during the Loan term. In
addition to the aforesaid prepayment fee, if, upon any such prepayment (whether
prior to or after the date that is six (6) months prior to the Maturity Date),
the aforesaid prior written notice has not been received by Lender, the
prepayment fee shall be increased by an amount equal to the lesser of (i) thirty
(30) days' unearned interest computed on the outstanding principal balance of
the Note so prepaid and (ii) unearned interest computed on the outstanding
principal balance of the Note so prepaid for the period from, and including, the
date of prepayment through the Maturity Date.
(2) Partial prepayments of the indebtedness evidenced by a Note shall not
be permitted, except partial prepayments resulting from Lender applying
insurance or condemnation proceeds and any related Borrower's Contribution to
reduce the outstanding principal balance of the Loan evidenced by such Note as
provided in the corresponding Mortgage, in which event no prepayment fee shall
be due. No notice of prepayment shall be required under the circumstance
specified in the preceding sentence. No principal amount repaid may be
reborrowed. Partial payments of principal of any Loan shall be applied to the
unpaid principal balance thereof, but such application shall not reduce the
amount of the fixed monthly installments required to be paid pursuant to Section
1.01 of the corresponding Note.
(3) Except as otherwise expressly provided in Section 2.2.2(b)(2) above,
the prepayment fees provided above shall be due, to the extent permitted by
applicable law, under any and all circumstances where all or any portion of the
Note is paid prior to the Maturity Date, whether such prepayment is voluntary or
involuntary, even if such prepayment results from Lender's exercise of its
rights upon Borrower's default and acceleration of the maturity date of the Note
(irrespective of whether foreclosure proceedings have been commenced), and shall
be in addition to any other sums due hereunder or under any of the other Loan
Documents. No tender of a prepayment of the Note with respect to which a
prepayment fee is due shall be effective unless such prepayment is accompanied
by the prepayment fee. Any tender of prepayment of any Loan made prior to the
first (1st) anniversary of the corresponding Note, whether voluntary or
involuntary (except partial prepayments resulting from Lender applying insurance
or condemnation proceeds to reduce the outstanding principal balance of the Loan
evidenced by such Note as provided in the corresponding Mortgage), must include
a prepayment fee computed as provided in Section 2.2.2(b) above plus an
additional prepayment fee of one percent (1%) of the principal balance of the
Note.
(4) Except in the case of a prepayment resulting from Lender applying
insurance or condemnation proceeds and any related Borrower's Contribution to
the repayment of a Loan in whole, Borrower may not prepay any one Loan in whole
pursuant to this Section 2.2.2(b) without prepaying all Loans in whole.
(c) Notwithstanding anything to the contrary contained in Section 2.2.2(b)
above, Borrower may prepay any Loan(s) in whole in accordance with this Section
2.2.2(c) without prepaying all Loans in whole. If Borrower desires to make a
prepayment pursuant to this Section 2.2.2(c), and sends a notice to Lender
indicating that such prepayment is being made in connection with a release of a
Property from the lien of a Mortgage pursuant to this clause (c) (the "Released
Property"), then, upon the request of Borrower, Lender shall, upon satisfaction
of all the following terms and conditions, execute, acknowledge and deliver to
Borrower a satisfaction of such Mortgage or other reconveyance of the Released
Property in form and substance reasonably satisfactory to Borrower and Lender (a
"Satisfaction"), whereby Lender acknowledges and agrees to release such Released
Property from the lien of such Mortgage (a "Release"):
(1) Lender shall have received in immediately available federal funds on
the date proposed for such prepayment (the "Prepayment Date") any prepayment fee
payable pursuant to clause (b) above, plus an amount equal to one hundred ten
(110%) percent of the then Allocated Loan Amount for the Property to be released
(the "Release Price") accompanied by all unpaid interest accrued under the
Loan(s) being prepaid, which Release Price shall be applied to the repayment of
the Loans as provided in the definition of
"Allocated Loan Amount";
(2) Either (a) the DSCR for the Property to be released shall be less than
the aggregate DSCR for all of the Properties (excluding the Released Property),
provided that the aggregate DSCR for all of the Properties (excluding the
Released Property) is at least 1.25 or (b) the aggregate DSCR for all of the
Properties (excluding the Released Property) for the twelve (12) month period
immediately prior to such Release is not less than 1.30; provided, however, that
neither this clause (2) nor clauses (3) or (4) below shall be applicable to a
Release obtained by Borrower pursuant to Section 1.9 of a Mortgage, or a Release
in connection with the exercise by Borrower of its cure rights under Section
4.1(g) hereof. Notwithstanding the foregoing, this clause (2) shall be
applicable to a Release in connection with the exercise by Borrower of its cure
rights under Section 4.1(g) hereof if, in Lender's reasonable judgment, Borrower
allowed the Property that is subject to such cure rights to become vacant for
the purpose of obtaining a Release that does not meet the conditions of this
clause (2).
(3) Borrower shall, at its expense, provide all financial and other
information to substantiate Store Sales to Lender's reasonable satisfaction,
including updated sales information as provided herein.
(4) Borrower shall not be permitted to obtain Releases for more than twenty
percent (20%) (rounded up or down to the nearest whole number) of the Properties
in any Fiscal Year (the "Annual Release Limit"); provided, however, that (i) in
any Fiscal Year Borrower shall be permitted a Release of one (1) additional
Property over the Annual Release Limit in connection with the exercise by
Borrower of its cure rights under Section 4.1(g) hereof; provided, that, in
Lender's reasonable judgment, Borrower did not allow the Property that is
subject to such cure rights to become vacant for the purpose of obtaining an
additional Release within such Fiscal Year, and (ii) any Release obtained by
Borrower pursuant to Section 1.9 of a Mortgage shall not be included in the
calculation of the Annual Release Limit.
(5) The Released Property shall be transferred to a Person that is not the
immediate parent of Borrower; provided, however, that title may pass through
such immediate parent to another entity in a series of transfers that occur on
the same day, and Borrower shall provide Lender with evidence reasonably
satisfactory to Lender confirming the foregoing, including, without limitation,
a copy of the deed conveying title to the Released Property, certified to be
true and complete by Borrower, and a certificate of Borrower confirming the
name, address and non-parent status of such ultimate transferee.
(6) Borrower shall, at its sole expense, prepare any and all documents and
instruments necessary to effect the Release, or otherwise reasonably required by
Lender in connection therewith, all of which shall be subject to the approval of
Lender, and Borrower shall pay all reasonable costs incurred by Lender
(including, but not limited to, attorneys' fees and disbursements, title
endorsements acceptable to Lender insuring that the lien of the mortgages on the
remaining Properties shall continue in effect with first lien priority and shall
be unaffected by the release of such Property, and all other reasonable costs
incurred by Lender in connection with the review, execution and delivery of such
documents and the Release transaction. Without limitation to the foregoing,
Borrower shall deliver or cause to be delivered, at Borrower's sole expense, a
re-affirmation of any guaranty or indemnification delivered to Lender relative
to any Loan, in form and substance satisfactory to Lender.
(7) No Event of Default shall have occurred and be continuing at the time
of the request for the Release or on the Prepayment Date.
(8) Lender shall have received not less than forty-five (45) days' prior
written notice.
2.3 Total Sale. Subject to the terms of this Section 2.3, Lender shall
consent to a one time sale, conveyance or transfer of all of the Properties
(hereinafter, a "Total Sale") to any person or entity provided that each of the
following terms and conditions are satisfied:
(a) Event of Default shall have occurred and be continuing at the time of
the request for the prospective Total Sale or on the date of the Total Sale;
(b) Borrower gives Lender written notice of the terms of such prospective
Total Sale not less than sixty (60) days before the date on which such Total
Sale is scheduled to close and, concurrently therewith, gives Lender all such
information concerning the proposed transferee of the Properties (hereinafter,
"Buyer") as Lender would require in evaluating an initial extension of credit to
a borrower and pays to Lender a non-refundable application fee in the amount of
$5,000.00. Lender, acting in good faith, shall have the right to approve or
disapprove the proposed Buyer. In determining whether to give or withhold its
approval of the proposed Buyer, Lender shall consider Buyer's experience and
track record in owning and operating facilities similar to the Properties,
Buyer's entity structure, Buyer's financial strength, Buyer's general business
standing and Buyer's relationships and experience with contractors, vendors,
tenants, lenders and other business entities; provided, however, that,
notwithstanding Lender's agreement to consider the foregoing factors in
determining whether to give or withhold such approval, such approval shall be
given or withheld based on what Lender in good faith determines to be
commercially reasonable in Lender's sole discretion and, if given, may be given
subject to such conditions as Lender may in good faith deem appropriate;
(c) Borrower pays Lender, concurrently with the closing of such Total Sale,
all out-of- pocket costs and expenses, including, without limitation, attorneys'
fees, reasonably incurred by Lender in connection with the Total Sale plus a
non-refundable assumption fee equal to one percent (1.0%) of the then
outstanding aggregate principal balance of the then Allocated Loan Amount for
the Properties;
(d) Buyer assumes and agrees to pay the Indebtedness subject to the
provisions of Section 5.16 hereof and, prior to or concurrently with the closing
of such Total Sale, Buyer executes, without any cost or expense to Lender,
including, without limitation, attorneys' fees, such documents and agreements as
Lender shall reasonably require to evidence and effectuate said assumption and
delivers such legal opinions as Lender may reasonably require;
(e) Borrower and Buyer execute, without any cost or expense to Lender,
including, without limitation attorneys' fees, new financing statements or
financing statement amendments and any additional documents as may be reasonably
requested by Lender;
(f) Buyer and Lender execute, without any cost or expense to Lender,
including without limitation attorneys' fees, such amendments to the Loan
Documents and any additional documents as may be reasonably requested by Lender.
(g) Borrower shall cause to be delivered to Lender, without any cost or
expense to Lender, including without limitation attorneys' fees, such
endorsements to Lender's title insurance policy, hazard insurance endorsements
or certificates and other similar materials as Lender may reasonably deem
necessary at the time of the Total Sale, all in form and substance reasonably
satisfactory to Lender, including, without limitation, an endorsement or
endorsements to Lender's title insurance policy insuring the liens of the
Mortgages, extending the effective date of such policy to the date of execution
and delivery (or, if later, of recording) of the assumption agreement referenced
above in subparagraph (4) of this Section with no additional exceptions added to
such policy and insuring that fee simple title to the Properties is vested in
Buyer;
(h) Borrower executes and delivers to Lender, without any cost or expense
to Lender, including, without limitation, attorneys' fees, a release of Lender,
its officers, directors, employees and agents, from all claims and liability
relating to the transactions evidenced by the Loan Documents through and
including the date of the closing of the Total Sale, which agreement shall be in
form and substance reasonably satisfactory to Lender and shall be binding upon
Borrower and Buyer;
(i) Such Total Sale is not construed so as to relieve any current guarantor
or indemnitor of its obligations under any guaranty or indemnity agreement
executed in connection with the Loans and each such current guarantor and
indemnitor executes, without any cost or expense to Lender, including, without
limitation, attorneys' fees, such documents and agreements as Lender shall
reasonably require to evidence and effectuate the ratification of each such
guaranty and indemnity agreement, provided that if Buyer or a party associated
with Buyer in good faith approved by Lender in its sole discretion assumes the
obligations of the current guarantor or indemnitor under its guaranty or
indemnity agreement and Buyer or such party associated with Buyer, as
applicable, executes, without any cost or expense to Lender, including, without
limitation, attorneys' fees, a new guaranty or indemnity agreement in form and
substance satisfactory to Lender, then Lender shall release the current
guarantor or indemnitor from all obligations arising under its guaranty or
indemnity agreement after the closing of such Total Sale;
(j) Subject to the provisions of Section 5.16 hereof, such Total Sale is
not construed so as to relieve Borrower of any personal liability under this
Agreement or any of the other Loan Documents for any acts or events occurring or
obligations arising prior to or simultaneously with the closing of such Total
Sale and Borrower executes, at Borrower's sole cost and expense, such documents
and agreements as Lender shall reasonably require to evidence and effectuate the
ratification of said personal liability;
(k) Buyer shall furnish, if Buyer is a corporation, partnership or other
entity, all appropriate papers evidencing Buyer's capacity and good standing,
and the qualification of the signers to execute the assumption of the
Indebtedness, which papers shall include certified copies of all documents
relating to the organization and formation of Buyer and of the entities, if any,
which are partners of Buyer. Buyer and such constituent partners, members or
shareholders of Buyer (as the case may be), as Lender shall require, shall be a
single purpose entity, whose formation documents shall be approved by counsel to
Lender;
(l) Buyer shall assume the obligations of Borrower under any management
agreements pertaining to the Properties;
(m) Buyer shall furnish an opinion of counsel reasonably satisfactory to
Lender and its counsel (i) that Buyer's formation documents provide for the
matters described in subparagraph (11) of this Section, (ii) that the assumption
of the Indebtedness has been duly authorized, executed and delivered, and that
the Loan Documents are valid, binding and enforceable against Buyer in
accordance with their terms, (iii) that Buyer and any entity that is a
controlling stockholder or general partner of Buyer, have been duly organized,
and are in existence and good standing, and (v) with respect to such other
matters, as Lender may request; and
(n) Lender shall have received evidence in writing from the Rating Agencies
to the effect that the proposed transfer will not result in a re-qualification,
reduction or withdrawal of any rating initially assigned or to be assigned in a
Secondary Market Transaction. For purposes hereof, a "Secondary Market
Transaction" shall be (a) any sale of a Mortgage or Mortgages, a Note or Notes
and other applicable Loan Documents to one or more investors as a whole loan;
(b) a participation of a Loan or Loans to one or more investors, (c) any deposit
of a Mortgage or Mortgages, a Note or Notes and other applicable Loan Documents
with a trust or other entity that may sell certificates or other instruments to
investors evidencing an ownership interest in the assets of such trust or other
entity, or (d) any other sale or transfer of a Loan or any interest therein to
one or more investors.
2.4 Transfer of Individual Property. Lender shall consent to a one time
sale, conveyance or transfer of an individual Property encumbered by a Mortgage
subject to, and in accordance with, the terms, provisions and conditions of
Section 1.13(c) of the applicable Mortgage.
2.5 Substitution of a Property. Subject to the terms of this Section 2.5,
Borrower may substitute for a Property (the "Substituted Property") a property
that is not encumbered by a Mortgage (the "Substitution Property") to serve as
the collateral for the applicable Loan (a "Substitution") provided that each of
the following terms and conditions are satisfied:
(a) No Event of Default shall have occurred and be continuing at the time
of the request for the proposed Substitution or on the date of the Substitution;
(b) Such Substitution shall only be permitted prior to the date that is
ninety (90) days after the date on which an election to treat the Loan that is
secured by such Property, along with other assets, if any, as a REMIC (such
assets pool, the "REMIC Trust") is made (the "Startup Date"); provided, however,
that such ninety (90) day period is based on the REMIC Provisions in effect as
of the date hereof, and is subject to adjustment by Lender based upon any
changes to such REMIC Provisions. The Substitution must be acceptable to (i)
Lender, if prior to the Startup Date, or (ii) any assignee of Lender and the
then current servicer of such Loan, if subsequent to the Startup Date (either,
the "Approving Party"), as well as the Rating Agencies, which approval shall
include consideration of, but not be limited to, the appraised value of the
proposed Substitution Property (which shall be at least equal to the appraised
value of the Substituted Property as of the date hereof), the type and location
of the proposed Substitution Property, and the operating income and Store Sales
of the proposed Substitution Property (which shall be at least equal to the
operating income and the Store Sales of the Substituted Property as of the date
hereof). Without limiting the generality of the foregoing, Borrower must satisfy
the following conditions:
(1) Borrower shall provide to the Approving Party written notice of the
terms of such prospective Substitution not less than sixty (60) days before the
date on which such Substitution is scheduled to be effected, together with (x)
all such information concerning the proposed Substitution Property as Lender
would require in evaluating an initial extension of credit to a borrower to be
secured by such Substitution Property and as may be required by the Approving
Party and (y) payment of a non-refundable application fee in the amount of
$5,000.00. The Approving Party shall have the right to approve or disapprove the
proposed Substitution Property; provided, however, that, such approval shall be
given or withheld based on what the Approving Party in good faith determines to
be commercially reasonable in the Approving Party's sole discretion and, if
given, may be given subject to such conditions as the Approving Party in good
faith may deem appropriate;
(2) Borrower pays to the Approving Party, concurrently with the effecting
of such Substitution, a non-refundable assumption fee in an amount equal to all
out- of-pocket costs and expenses, including, without limitation, attorneys'
fees, reasonably incurred by such Approving Party in connection with the
Substitution;
(3) Borrower executes and delivers, without any cost or expense to the
Approving Party, including, without limitation, attorneys' fees, a Mortgage,
Assignment of Leases and Rents, financing statements and any additional loan
documents as the Approving Party in good faith may, in its sole discretion, deem
necessary or expedient, including amendments and ratifications to the
Environmental Indemnity and the Indemnity and such amendments to the other Loan
Documents as the Approving Party may reasonably require, all in form and
substance reasonably satisfactory to the Approving Party;
(4) Borrower shall cause to be delivered to the Approving Party, without
any cost or expense to the Approving Party, including without limitation,
attorneys' fees, an ALTA title insurance policy, with any endorsements the
Approving Party in good faith may require in its sole discretion, insuring the
Approving Party, in an amount at least equal to the Allocated Loan Amount to be
secured by the Substitution Property, which policy shall provide that the
Mortgage constitutes a first lien or charge upon the Substitution Property
subject only to such items as shall have been approved in writing by the
Approving Party and its attorneys;
(5) Borrower shall cause to be delivered to the Approving Party hazard
insurance endorsements or certificates and other similar materials as the
Approving Party may reasonably deem necessary at the time of the Substitution,
all in form and substance reasonably satisfactory to the Approving Party;
(6) Borrower shall cause to be delivered to the Approving Party all
documents and information required by the Conditional Commitment with respect to
the Approving Party's review and approval of a Substitution Property and
Borrower shall comply with all conditions with respect to a Property set forth
in the Conditional Commitment;
(7) Borrower executes and delivers to the Approving Party, without any cost
or expense to the Approving Party, including, without limitation, attorneys'
fees, a release of the Approving Party, its officers, directors, employees and
agents, from all claims and liability relating to the transactions evidenced by
the Substituted Property through and including the date of the effecting of the
Substitution, which agreement shall be in form and substance reasonably
satisfactory to the Approving Party and shall be binding upon Borrower;
(8) Borrower shall furnish an opinion of counsel reasonably satisfactory to
the Approving Party and its counsel to the effect that (i) the Substitution does
not violate any, and is in compliance with all, REMIC Provisions, will not
endanger the status of the REMIC Trust as a REMIC, or result in the imposition
of a tax upon the REMIC Trust (including, but not limited to, the tax on
prohibited transactions as defined in Section 860F(a)(2) of the Code and the tax
on contributions to a REMIC set forth in Section 860G(d) of the Code), (ii) that
Borrower's formation documents provide for the Substitution, (iii) that the
Substitution has been duly authorized, executed and delivered, and that the Loan
Documents (including, without limitation, any amendments thereto or any new Loan
Documents executed in connection with the Substitution) are valid, binding and
enforceable against Borrower in accordance with their terms, (iv) that Borrower
and any entity that is a controlling stockholder of Borrower, have been duly
organized, and are in existence and good standing, and (v) with respect to such
other matters as the Approving Party may request;
(9) The Approving Party shall have received evidence in writing from the
Rating Agencies to the effect that the proposed Substitution will not result in
a re-qualification, reduction or withdrawal of any rating initially assigned or
to be assigned in a Secondary Market Transaction;
(10) Such Substitution is not construed so as to relieve any current
guarantor or indemnitor of its obligations under any guaranty or indemnity
agreement executed in connection with the Loans; and
(11) Subject to the provisions of Section 5.16 hereof, such Substitution is
not construed so as to relieve Borrower of any personal liability under this
Agreement or any of the other Loan Documents for any acts or events occurring or
obligations arising prior to or simultaneously with the effecting of such
Substitution and Borrower executes, at Borrower's sole cost and expense, such
documents and agreements as the Approving Party shall reasonably require to
evidence and effectuate the ratification of said personal liability.
2.6 TI Reserve.
(a) As additional security for the Loan, on the date hereof Borrower has
established, and Borrower shall maintain at all times while any portion of the
Loan remains outstanding, a TI Costs reserve (the "TI Reserve") with Lender for
payment of TI Costs in the amount of One Million One Hundred Seventy-Five
Thousand and 00/100 Dollars ($1,175,000.00), which amount shall be reduced
proportionately with reductions in the Indebtedness upon the transfer or Release
of a Property in accordance with the terms of the this Agreement and the other
Loan Documents. Borrower hereby agrees to pay all TI Costs with respect to each
Property (without regard to the amount of money then available in the TI
Reserve). So long as no Event of Default hereunder or under the other Loan
Documents has occurred and is continuing, all sums in the TI Reserve shall be
held by Lender to pay TI Costs. Provided that (i) Lender has received written
notice from Borrower requesting funds from the TI Reserve at least ten (10)
Business Days prior to the due date of any requested disbursement relating to TI
Costs, or if Borrower makes timely payment therefor, not more than forty-five
(45) days after Borrower has made such payment, (ii) no Event of Default has
occurred and is continuing, (iii) Borrower furnishes Lender with a written
disbursement request for the payment or reimbursement of such TI Costs, not more
frequently than once every ninety (90) day period, (iv) there are sufficient
funds available in the TI Reserve with respect to Borrower's disbursement
request, (v) Borrower shall have theretofore complied with the requirements of
the Mortgages relative to (1) new leases, licenses and/or occupancy agreements
with respect to the Properties and (2) the performance of improvements and
alterations to the Properties, (vi) Borrower shall have theretofore furnished
Lender with reasonably satisfactory evidence of the progress and/or completion
of tenant improvement work, the cost of tenant improvement work, reasonably
satisfactory evidence that any and all completed tenant improvement work
complies with law, lien waivers for lienable work, copies of bills, invoices and
other reasonable documentation as may be required by Lender to substantiate the
use of such funds and establish that the TI Costs that are the subject of such
disbursement request represent completed or partially completed tenant
improvement work performed at all or any portion of the Property, and (vii)
Borrower has replenished the TI Reserve in the amount of any previous
withdrawals therefrom in accordance with this Section, then Lender shall make
such payments out of the TI Reserve. In making any payment from the TI Reserve,
Lender shall be entitled to rely on such request from Borrower without any
inquiry into the accuracy, validity or contestability of any such amount.
Borrower shall deposit the amount of any funds withdrawn from the TI Reserve
within ten (10) days after the date of such withdrawal. The TI Reserve shall
not, unless otherwise explicitly required by applicable law, be or be deemed to
be escrow or trust funds, but, at Lender's option and in Lender's discretion,
may either be held in a separate account or be commingled by Lender with the
general funds of Lender. Interest on the funds contained in the TI Reserve shall
be credited to Borrower. The TI Reserve is solely for the protection of Lender
and entails no responsibility on Lender's part beyond the payment of the costs
and expenses described in this Section in accordance with the terms hereof and
beyond the allowing of due credit for the sums actually received. In the event
that the amounts on deposit or available in the TI Reserve are inadequate to pay
the TI Costs, Borrower shall pay the amount of such deficiency. Upon assignment
of this Agreement by Lender, any funds in the TI Reserve shall be turned over to
the assignee and any responsibility of Lender, as assignor, with respect thereto
shall terminate. If there is an Event of Default under this Agreement, Lender
may, but shall not be obligated to, apply at any time the balance then remaining
in the TI Reserve against the indebtedness secured by the Mortgages in whatever
order Lender shall subjectively determine. No such application of the TI Reserve
shall be deemed to cure any default hereunder.
(b) At Borrower's option, the TI Reserve can be deposited with Lender in
the form of a letter of credit (a "Letter of Credit"). The Letter of Credit
shall be unconditional and irrevocable, issued by a commercial bank having a
rating of "AA" or higher by Moody's Investors Services, Inc. and Standard and
Poors Corporation at the time of issuance, the letter of credit payment window
of which bank is located in New York County, New York and otherwise satisfactory
to Lender in its sole discretion. The Letter of Credit shall be payable (x) to
Lender upon presentation solely of a sight draft stating that an event under
this Agreement has occurred that entitles Lender to such draw and (y) in
multiple drafts. The Letter of Credit shall be for a period expiring not earlier
than one (1) year after the date of delivery of the Letter of Credit to Lender.
The Letter of Credit shall be replaced not less than thirty (30) days prior to
the expiration date of the Letter of Credit. If Borrower fails to replace timely
the Letter of Credit with either (i) a cash deposit meeting the requirements of
Section 2.6(a), or (ii) a new Letter of Credit meeting the requirements of this
clause (b), Lender may draw on the then expiring Letter of Credit and apply all
or any portion of the proceeds therefrom to (x) the indebtedness secured by the
Mortgages or (y) the funding of the TI Reserve, in Lender's sole discretion.
Otherwise, Lender may draw upon the Letter of Credit only in respect of any
amount that Lender would be entitled to use, apply or retain the proceeds of the
TI Reserve under this Section.
(c) In the event that the Letter of Credit bank shall at any time cease to
have a long-term rating of at least "A" or higher by any one of the Rating
agencies, Borrower shall, within five (5) Business Days after notice of the
occurrence of such event, replace the Letter of Credit with either (i) a cash
deposit meeting the requirements of Section 2.6(a), or (ii) a letter of credit
(the "Replacement Letter of Credit") issued by a commercial bank having a
long-term rating of "AA" or higher by Moody's Investors Services, Inc. and
Standard and Poors Corporation, the letter of credit window of which bank is
located in New York County, New York and otherwise satisfactory to Lender in its
sole discretion. Simultaneously with the furnishing of such Replacement Letter
of Credit, Lender shall surrender to Borrower the Letter of Credit which is
being replaced and thereupon the Replacement Letter of Credit shall be deemed to
be the Letter of Credit for all purposes of this Agreement. If Borrower shall
fail to furnish such Replacement Letter of Credit within such five (5) Business
Day period, Lender may draw upon the then Letter of Credit and apply all or any
portion of the proceeds therefrom to (x) the indebtedness secured by the
Mortgages or (y) the funding of the TI Reserve, in Lender's sole discretion.
(d) Upon the full repayment of the Loans, the unexpended portion of the TI
Reserve (including any corresponding Letter(s) of Credit) shall be returned to
Borrower.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Borrower's Representations. The representations and warranties of
Borrower set forth in the Mortgages are hereby incorporated herein in full.
3.2 Survival of Representations. Borrower agrees that all of the
representations and warranties of Borrower incorporated in Section 3.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any amount remains owing to Lender under the Notes, the Mortgages, this
Agreement or any of the other Loan Documents. 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 4
DEFAULTS
4.1 Event of Default. Each of the following events occurring with respect
to Borrower, or any Property shall constitute an "Event of Default" hereunder:
(a) if Borrower fails to punctually perform any covenant, agreement,
obligation, term or condition hereof that requires payment of any money to
Lender (except those regarding payments to be made under the Notes, which
failure is subject to any grace periods set forth in the Notes) for ten (10)
days after written notice thereof from Lender to Borrower.
(b) if Borrower fails to perform any other covenant, agreement, obligation,
term or condition set forth herein other than those otherwise described
elsewhere in this Section 4.1 and, to the extent such failure or default is
susceptible of being cured, the continuance of such failure or default for
thirty (30) days after written notice thereof from Lender to Borrower; provided,
however, that, if such default is susceptible of cure but such cure cannot be
accomplished with reasonable diligence within said period of time, and if
Borrower commences to cure such default promptly after receipt of notice thereof
from Lender, and thereafter prosecutes the curing of such default with
reasonable diligence, such period of time shall be extended for such period of
time as may be necessary to cure such default with reasonable diligence, but not
to exceed an additional ninety (90) days (the "Additional Cure Period");
provided, further, that if such default is susceptible of cure but such cure
cannot be accomplished with reasonable diligence within said Additional Cure
Period and Borrower notifies Lender not later than ten (10) days prior to the
end of such Additional Cure Period of its intention to continue to cure such
default with all due diligence and thereafter continuously prosecutes the curing
of such default with all due diligence, such Additional Cure Period shall be
extended for such period of time as may be necessary to cure such default with
all due diligence, but not to exceed an additional sixty (60) days.
(c) if any representation or warranty made herein, in or in connection with
any application or commitment relating to the Loans, or in any of the other Loan
Documents to Lender by Borrower or by any indemnitor or guarantor under any
indemnity or guaranty executed in connection with the Loans is determined by
Lender to have been false or misleading in any material respect at the time
made.
(d) if a default occurs under any of the other Loan Documents that is not
cured within any applicable grace or cure period therein provided.
(e) if Borrower attempts to (i) assign its respective rights under this
Agreement or any of the other Loan Documents or any interest herein or therein
or (ii) transfer the Properties or any interest therein, in either case in
contravention of the Loan Documents.
(f) if greater than twenty percent (20%) (rounded up or down to the nearest
whole number) of the Properties at any one time are each two-thirds (2/3) or
more vacant for a period of six (6) consecutive months excluding any periods of
time during which restorations, alterations or improvements are being diligently
performed on any such Properties either following any casualty or condemnation
or as otherwise permitted under the Loan Documents.
(g) if (i) a Property becomes vacant, (ii) as a result thereof, a
termination option and/or purchase option is exercised by the counterparty to a
ground lease, reciprocal easement agreement or other agreement affecting
Borrower's right to occupy and operate such Property, and (iii) prior to the
earlier to occur of (i) thirty (30) days thereafter or (2) the date that such
termination or purchase, as applicable, becomes effective, Borrower fails to
effect the Release of such Property pursuant to Section 2.2.2(c) hereof;
provided, however, that Borrower shall not have the right to effect such a
Release prior to the first (1st) anniversary of the applicable Note.
4.2 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 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 Indebtedness 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 the Properties. Any such actions taken by Lender shall
be cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents.
(b) The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower pursuant to this Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Lender's rights, powers
and remedies may be pursued singly, concurrently or otherwise, at such time and
in such order as Lender may determine in Lender's sole discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of one default or
Event of Default with respect to Borrower shall not be construed to be a waiver
with respect to any subsequent default or Event of Default by Borrower, or to
impair any remedy, right or power consequent thereon.
ARTICLE 5
MISCELLANEOUS
5.1 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 Loans and the execution and delivery
to Lender of the Notes, and shall continue in full force and effect so long as
all or any of the Indebtedness is outstanding and unpaid.
5.2 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.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina, provided that to the
extent that any of such laws may now or hereafter be preempted by Federal law,
such Federal law shall so govern and be controlling.
5.4 Modification; Waiver in Writing. Lender may waive any single default by
Borrower hereunder without waiving any other prior or subsequent default. Lender
may remedy any default by Borrower hereunder without waiving the default
remedied. Neither the failure by Lender to exercise, nor the delay by Lender in
exercising, any right, power or remedy upon any default by Borrower hereunder
shall be construed as a waiver of such default or as a waiver of the right to
exercise any such right, power or remedy at a later date. No single or partial
exercise by Lender of any right, power or remedy hereunder shall exhaust the
same or shall preclude any other or further exercise thereof, and every such
right, power or remedy hereunder may be exercised at any time and from time to
time. No modification or waiver of any provision hereof nor consent to any
departure by Borrower therefrom shall in any event be effective unless the same
shall be in writing and signed by Lender, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose given.
No notice to nor demand on Borrower in any case shall of itself entitle Borrower
to any other or further notice or demand in similar or other circumstances
unless otherwise expressly provided herein. Acceptance by Lender of any payment
in an amount less than the amount then due on any of the Indebtedness shall be
deemed an acceptance on account only and shall not in any way affect the
existence of a default hereunder. In case Lender shall have proceeded to invoke
any right, remedy or recourse permitted hereunder or under the other Loan
Documents and shall thereafter elect to discontinue or abandon the same for any
reason, Lender shall have the unqualified right to do so and, in such an event,
Borrower and Lender shall be restored to their former positions with respect to
the Indebtedness, the Loan Documents, the Properties and otherwise, and the
rights, remedies, recourses and powers of Lender shall continue as if the same
had never been invoked.
5.5 Notices. All notices, demands, requests or other communications to be
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next Business Day
delivery, or by depositing the same in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, in any event addressed
to the intended addressee at its address set forth on the first page of this
Agreement or at such other address as may be designated by such party as herein
provided. All notices, demands and requests to be sent to Lender shall be
addressed to the attention of the Capital Markets Group. All notices, demands
and requests shall be effective upon such personal delivery, or one (1) Business
Day after being deposited with the private courier service, or two (2) Business
Days after being deposited in the United States mail as required above.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given as herein required shall be deemed
to be receipt of the notice, demand or request sent. By giving to the other
party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America.
ARTICLE 6
SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL
(a) BORROWER AND LENDER EACH, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, (i) SUBMITS TO PERSONAL JURISDICTION
IN THE STATE OF NORTH CAROLINA OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON
ARISING FROM OR RELATING TO THE NOTE, THIS AGREEMENT OR ANY OTHER OF THE LOAN
DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN MECKLENBURG
COUNTY, NORTH CAROLINA, AND (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS.
BORROWER AND LENDER EACH FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO BORROWER OR LENDER, AS
THE CASE MAY BE, AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5.5 HEREOF, AND
CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(b) BORROWER AND LENDER EACH, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WAIVES, RELINQUISHES AND FOREVER
FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO THE INDEBTEDNESS OR ANY CONDUCT, ACT
OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH LENDER OR BORROWER, IN EACH OR THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
6.1 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.
6.2 Successors and Assigns; Assignment. The terms, provisions, indemnities,
covenants and conditions hereof shall be binding upon and inure to the benefit
of Borrower and the successors and assigns of Borrower, including all successors
in interest of Borrower in and to all or any part of the Properties, and shall
be binding upon and inure to the benefit of Lender, its directors, officers,
shareholders, employees and agents and their respective successors and assigns.
All references in this Agreement to Borrower or Lender shall be deemed to
include all such parties' successors and assigns, and the term "Lender" as used
herein shall also mean and refer to any lawful holder or owner, including
pledgees and participants, of any of the Indebtedness. If Borrower consists of
more than one person or entity, each will be jointly and severally liable to
perform the obligations of Borrower.
6.3 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.
6.4 Expenses; Indemnity. Borrower covenants and agrees to reimburse Lender
upon receipt of written notice from Lender for all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees and disbursements)
incurred by Lender in connection with (i) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement and/or the other Loan Documents and any
other documents or matters requested by Borrower; (ii) enforcing or preserving
any rights, in response to third party claims or the prosecuting or defending of
any action or proceeding or other litigation, in each case against, under or
affecting Borrower, this Agreement, the other Loan Documents, the Properties, or
any other security given for the Loans; and (iii) enforcing any obligations of
or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or with respect to the Properties or in connection with any
refinancing or restructuring of the credit arrangement 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.
6.5 Exhibits Incorporated. The Exhibits and Schedules annexed hereto are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
6.6 No Joint Venture or Partnership. The relationship between Borrower and
Lender is that of a borrower and a lender only and neither of those parties is,
nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.
6.7 Borrower's Waivers. 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.
6.8 Construction of Documents. The parties hereto acknowledge that they
were represented by counsel in connection with the negotiation and drafting of
this Agreement and the other Loan Documents and that this Agreement and such
Loan Documents shall not be subject to the principle of construing their meaning
against the party which drafted same.
6.9 Prior Agreements. This Agreement and the other Loan Documents contain
the entire agreements between the parties relating to the subject matter hereof
and thereof and all prior agreements relative hereto and thereto that are not
contained herein or therein are terminated. This Agreement and the other Loan
Documents may not be amended, revised, waived, discharged, released or
terminated orally but only by a written instrument or instruments executed by
the party against which enforcement of the amendment, revision, waiver,
discharge, release or termination is asserted. Any alleged amendment, revision,
waiver, discharge, release or termination which is not so documented shall not
be effective as to any party.
6.10 Exculpation. Notwithstanding anything to the contrary contained in
this Agreement, the liability of Borrower for the Indebtedness and for the
performance of the other agreements, covenants and obligations contained herein
and in the other Loan Documents shall be limited as set forth in Section 1.05 of
the Notes, which Section is incorporated herein by reference as fully as if set
forth herein at length; provided, however, that nothing herein shall be deemed
to be a waiver of any right that Lender may have under Sections 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for
the full amount of the Indebtedness in any bankruptcy proceeding in which
Borrower is a debtor or to require that all collateral shall continue to secure
all Indebtedness owing to Lender in accordance with this Agreement, the Notes,
the Mortgages and the other Loan Documents.
6.11 Maximum Interest. The provisions of this Agreement and of all
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Notes or otherwise, shall the amount paid, or agreed to be
paid, regardless of how denominated (herein "Interest"), to Lender for or in
respect of the use, forbearance or retention of the money loaned under the Notes
exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, performance or fulfillment of any provision hereof or
of any agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for Interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit, and if, from any circumstance whatsoever, Lender
shall ever receive anything of value deemed Interest by applicable law in excess
of the maximum lawful amount, an amount equal to any excessive Interest shall be
applied to the reduction of the principal balance owing under the applicable
Note in the inverse order of its maturity (whether or not then due) or at the
option of Lender be paid over to Borrower, and not to the payment of Interest.
To the fullest extent permitted by applicable law, all Interest (including any
amounts or payments deemed to be Interest) paid or agreed to be paid to Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal balance of the applicable Note so that the Interest thereon for such
full period will not exceed the maximum amount permitted by applicable law. This
Section will control all agreements between Borrower and Lender.
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.
LENDER:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/
----------------------------
Name:
----------------------------
Title:
----------------------------
BORROWER:
SMC-SPE-1, a Delaware corporation,
By: /s/ Wade Smith
----------------------------
Name: Wade Smith
----------------------------
Title: Vice President
----------------------------
EXHIBIT A
---------
INITIAL ALLOCATED LOAN AMOUNTS
Store #316 = $2,810,000.00
Store #202 = $2,848,000.00
Store #452 = $2,810,000.00
Store #343 = $2,773,000.00
Store #309 = $2,698,000.00
Store #441 = $2,735,000.00
Store #214 = $2,286,000.00
Store #532 = $2,660,000.00
Store #389 = $2,848,000.00
Store #190 = $2,398,000.00
Store #259 = $2,735,000.00
Store #359 = $2,885,000.00
Store #353 = $3,110,000.00
Store #042 = $2,585,000.00
Store #276 = $3,073,000.00
Store #277 = $2,623,000.00
Store #360 = $3,447,000.00
Store #348 = $3,220,000.00
Store #440 = $2,286,000.00