EXHIBIT 10.6
ASSUMPTION OF BORROWER'S
OBLIGATIONS UNDER LOAN DOCUMENTS,
INCLUDING LENDER'S CONSENT THERETO AND
AMENDMENT OF LOAN AGREEMENT
THIS ASSUMPTION OF BORROWER'S OBLIGATIONS UNDER LOAN
DOCUMENTS, INCLUDING LENDER'S CONSENT THERETO AND AMENDMENT OF
LOAN AGREEMENT (this "Agreement), is entered into as of the 6th
day of August, 1997, by and among: (i) KRCV Corp., a Kansas
corporation ("KRCV"); (ii) Venture Stores, Inc., a Delaware
corporation ("Venture"); and (iii) Principal Mutual Life
Insurance Company, an Iowa corporation ("Lender").
WITNESSETH
A. Venture and Lender are parties to a certain Loan
Agreement dated July 3, 1990, as amended by: (i) that certain
Letter Agreement dated April 17, 1995; (ii) that certain Second
Amendment to the Loan Agreement dated October 28, 1995: and (iii)
that certain Third Amendment to the Loan Agreement dated July 11,
1997 (as so amended, the "Loan Agreement");
B. Capitalized terms used herein shall have the same
meaning ascribed to them as in the Loan Agreement, unless
otherwise expressly provided;
C. Venture and KRCV propose to enter into and consummate
an agreement whereby Venture sells to KRCV certain shopping
center properties, including all of the real and personal
property (the "Security Property") which secures Venture's
obligations to Lender under the Loan, and leases back such
properties, including the Security Property to Venture, pursuant
to that certain Unitary Lease of even date herewith, between
KRCV, as Lessor and Venture, as Lessee (the "Unitary Lease");
D. Such proposed sale and lease back would, if undertaken
without Lender's consent, constitute a default of Venture's
obligations under the Loan Agreement and the Loan Documents (as
defined in Section 1.1 of the Loan Agreement) including the
Mortgages, Deeds of Trust, Assignments of Leases and other
security instruments encumbering the Security Property,
including, without limitation, the instruments listed on Schedule
A attached hereto (collectively hereinafter the "Security
Documents");
E. Lender has agreed to consent to such sale and
leaseback, subject to the terms and conditions provided below;
F. KRCV desires and intends to assume the obligations of
Venture under the Loan Documents, including without limitation,
the payment obligations of Venture under: (i) that certain First
Amended and Restated Secured Promissory Note A, dated July 3,
1990 in the original principal amount of $55,000,000.00; (ii)
that certain First Amended and Restated Secured Promissory Note
B, dated July 3, 1990, in the original principal amount of
$10,000,000.00; (iii) that certain First Amended and Restated
Secured Promissory Note C, dated July 3, 1990, in the original
principal amount of $10,000,000.00 (collectively the "Notes"),
and Venture intends and desires to remain liable as Borrower
under the Loan Documents;
G. Lender has required, and KRCV and Venture have agreed
to deliver a guaranty of their obligations under the Loan
Documents in the form of a certain Continuing Unlimited Guaranty
Agreement of even date herewith executed by Kimco Realty
Corporation, a Maryland corporation in favor of Lender (the
"Kimco Guaranty"); and
H. The parties desire to amend certain provisions of the
Loan Agreement in connection with the foregoing recitals.
NOW, THEREFORE, in consideration of the foregoing and the
payment by Venture to Lender of the sum of Two Hundred Ninety-Six
Thousand One Hundred Seventy-Five Dollars and Ninety-Six Cents
($296,175.96), the receipt of which is hereby acknowledged by
Lender, the parties agree as follows:
1. Assumption of Borrower's Obligations. KRCV hereby
assumes all of Venture's obligations under the Loan Documents,
including, without limitation, the payment of all principal,
interest and the Make Whole Premium under the Notes, in
accordance with the terms thereof, and agrees to be bound by each
of the terms thereof.
2. Lender's Consent; No Release of Venture or Lender's
Liens; Confirmation of Assignment of KRCV's Rights Under the
Unitary Lease.
(a) Lender consents to the transfer of even date herewith
of all of Venture's right, title and interest in the Security
Property to KRCV, subject, however, to the security interest of
Lender in the Security Property. Lender further consents to the
foregoing assumption of Venture's obligations and waives the
default under the Loan Documents that would, absent Lender's
consent arise out of such transfer and assumption; provided,
however, that nothing herein is intended to or shall be construed
to affect or impair the first lien priority of the Security
Documents. Such consent shall not be deemed to be a waiver of
Lender's requirements for consents for any future transfer and is
not intended to and shall not be deemed to be a release of
Venture from its obligations under the Loan Documents. Venture
expressly agrees that it remains jointly and severally liable
with KRCV under the Loan Documents, that the Loan Documents are
in full force and effect and that there is no default by Lender
thereunder. Except as expressly permitted by the Loan Documents,
the Loan Documents shall not be amended by Lender and Venture
without the written consent of KRCV.
(b) KRCV acknowledges that the Unitary Lease is a lease
subject to Lender's existing Assignments of Leases as listed on
Schedule A hereto and hereby ratifies, affirms and restates the
assignment to Lender, to secure KRCV's obligations under the Loan
Documents, of all of its right, title and interest as lessor
under the Unitary Lease as a lease subject to such Assignments.
3. Payment to Lender. Simultaneously with the execution
of this Agreement, Venture has paid to Lender by wire transfer
the sum of Two Hundred Ninety-Six Thousand One Hundred Seventy-
Five Dollars and Ninety-Six Cents ($296,175.96), plus all fees
and expenses incurred by Lender in connection herewith,
including, without limitation, its attorneys' fees and expenses.
4. Amendment of Loan Agreement. Lender, KRCV and Venture
amend the Loan Agreement as follows:
(a) Section 8.9 of the Loan Agreement is deleted.
(b) Notwithstanding anything in this Agreement to the
contrary, Lender and KRCV agree that Article VI of the Loan
Agreement shall apply only to Venture and not to KRCV and KRCV
shall not be bound by the covenants of Venture provided in such
Article.
(c) Any default under, or the invalidity or termination of
the Kimco Guaranty shall constitute a Default under the Loan
Documents.
(d) Section 8.8 of the Loan Agreement is amended to delete
the word "5,000" throughout such Section and replace it with the
term "10,000".
5. Notices; Defaults. All notices to KRCV hereunder shall
be provided in accordance with Section 14.9 of the Loan Agreement
to the following address:
KRCV Corp.
c/o KRCV Realty Corporation
3333 New Hyde Park Road
New Hyde Park, New York 11042
Telefax No.: 516-869-7201
Attention: Bruce M. Kauderer
Vice President--Legal
Contemporaneously with any notice from Lender to Venture, Lender
shall provide notice to KRCV of all claims of default under the
Loan Documents, and KRCV shall have the right to cure all such
defaults within the cure periods, if any provided in the Loan
Documents. Notwithstanding anything in this Agreement to the
contrary, in the event of any Default under the Loan Documents
which arises solely and exclusively out of the financial
condition of Venture, Lender shall forbear from exercising its
remedies under the Loan Documents arising out of such Default,
provided there is no other Default by either KRCV or Venture
under the Loan Documents, provided further, however, that the
foregoing shall not prohibit Lender from pursuing its rights in
any Bankruptcy Proceeding or Reorganization Proceeding (as
defined in paragraph 8(f) below).
6. Lender's Certification. Lender hereby certifies to
KRCV as follows:
(a) The Loan is in good standing, there are no outstanding
Defaults by the Borrower under the Loan Documents and Lender
expressly waives any prior Defaults to the date hereof.
(b) The outstanding balances under the Notes are as
follows:
Note A: $47,251,995.22
Note B: $ 8,752,300.73
Note C: $ 3,230,895.95
(c) Payments scheduled under the Notes through August 1,
1997 have been made;
(d) The current interest rates under the Notes are as
follows:
Note A: 10.316%
Note B: 11.866%
Note C: 10.194%
(e) Interest accrues under the Notes in the following per
diem amounts:
Note A: $13,540.32
Note B: $ 2,884.86
Note C: $ 914.88
(f) The maturity dates under the Notes are as follows:
Note A: July 1, 2000
Note B: July 1, 2000
Note C: July 1, 2000
(g) The current monthly debt service payments under the
Notes are as follows:
Note A: $495,556.26
Note B: $101,830.96
Note C: $ 89,194.10
(h) The balloon payments at maturity under the Notes are as
follows:
Note A: $44,117,056.91
Note B: $ 8,218,608.79
Note C: $ 815,562.03
(i) Under each of the Notes, monthly interest payments are
made in arrears, on the first day of each month; and
(j) There are no current escrow funds held by Lender in
connection with the Loan Documents.
7. Lender's Representation and Warranty. Lender hereby
represents and warrants to KRCV that Lender has received the Pre-
payment (as defined in the Loan Agreement), pertaining to Note C,
and that Section 12.1(1) of the Loan Agreement is therefore of no
further force and effect.
8. Subordination of Unitary Lease to the Security
Documents.
(a) The Unitary Lease is hereby expressly acknowledged to
be subordinate to the interests of Lender under the Security
Documents and shall remain subordinate, at the option of Lender.
Lender may, at any time, upon written notice to KRCV and Venture,
at its sole option, waive such subordination and elect to
subordinate its interests to the interest of KRCV under the
Unitary Lease. The subordination of the Unitary Lease to the
interests of Lender under the Security Documents shall be fully
effective irrespective of any lack of validity or enforceability
of any of the Loan Documents.
(b) Notwithstanding Lender's consent to the subordinated
Unitary Lease, in the event of any conflict between the
provisions of the Unitary Lease applicable to the Security
Property and the Security Documents, the Unitary Lease shall be
deemed modified to the extent necessary to prevent such conflict
and in all events the terms of the Security Documents shall
control.
(c) In the event that the Unitary Lease is construed by a
court to constitute a security instrument and the applicable
documents conveying the premises thereunder to KRCV from Venture
are held to constitute mortgages, deeds of trust or other
security instruments, as the case may be, such interests shall
remain subordinate to the interests of Lender under the Security
Documents.
(d) KRCV shall provide written notice to Lender of any
default by Venture under the Unitary Lease to the extent that
such default affects the Security Property.
(e) KRCV shall not consent to any assignment by Venture of
its rights or delegation of its obligations under the Unitary
Lease without the prior express written consent of Lender.
(f) (1) In any case commenced by or against Venture under
Chapter 11 of the United States Bankruptcy Code or any similar
federal or state statute (a "Reorganization Proceeding"), Lender
shall have the exclusive right to exercise any voting rights in
respect of the Loan Documents, and KRCV shall have the exclusive
right to exercise any voting rights in respect of the Unitary
Lease, except that, without the consent of Lender, KRCV shall not
have the right to vote to accept any plan of reorganization
unless the Lender gives KRCV permission to do so, or Lender votes
to accept such plan.
(2) In any bankruptcy, reorganization, readjustment of
debt or any dissolution, receivership, liquidation or insolvency
proceedings with respect to Venture (a "Bankruptcy Proceeding"),
KRCV shall file a proof of claim in respect of KRCV's claims
against the Venture and shall send to Lender a copy of such proof
of claim, together with evidence of its filing with the
appropriate court or other authority. If KRCV should fail to
file such proof of claim by the tenth (10th) business day before
the last day for filing of proofs of claim, or if Lender
reasonably believes that the proof of claim so filed is less than
the proper amount thereof, then Lender may file such proof of
claim, or corrected proof of claim, on behalf of KRCV. If
objection is made to the allowance of any claim of KRCV, Lender
shall have the right to intervene and fully participate in such
proceedings, and if such rights are denied and KRCV fails to
defend such claim, then Lender may defend such claim in the name
of KRCV. Lender is hereby appointed the attorney-in-fact of KRCV
for the purpose of taking any of the actions specified in this
Section (f). The foregoing power of attorney is coupled with an
interest and cannot be revoked.
(3) In any Bankruptcy Proceeding, KRCV shall not
contest or dispute any claim made by Lender in respect of the
Loan Documents, otherwise contest the indebtedness evidenced by
the Loan Documents or oppose or object to any position taken by
Lender concerning the Security Property.
(4) In any Bankruptcy Proceedings, the person or
person authorized to pay any claim in respect of the Unitary
Lease in respect of the Security Property shall pay the amount
payable thereon to Lender to be applied under the Loan Documents,
and to the full extent necessary for that purpose, KRCV hereby
assigns to Lender all of KRCV's rights to any such payments or
distributions to which KRCV would otherwise be entitled.
9. Borrower's Representations, Warranties and Covenant as
to Title and Unitary Lease. KRCV and Venture jointly represent
and warrant to Lender that the Security Property shall not have
been encumbered by any mortgages, liens, deeds of trust, security
interests or other encumbrances or claims securing any
indebtedness of any kind as a result of the sale to KRCV of the
Security Property and that the interests of Lender in the
Security Property are the sole mortgages, liens, deeds of trust,
security interests or other encumbrances or claims encumbering
the Security Property. Specifically and not by way of limitation
of the foregoing, KRCV and Venture jointly represent and warrant
to Lender that other than the interests of Lender therein, there
are no mortgages, liens, deeds of trust, security interests or
other encumbrances or claims of any kind encumbering the Unitary
Lease. KRCV and Venture jointly covenant that except with
respect to the interests of Lender therein, and except to the
extent expressly permitted pursuant to paragraph 10 below, they
shall not grant or create any mortgages, liens, deeds of trust,
security interests or other encumbrances or claims of any kind
with respect to the Unitary Lease or the Security Property,
except as expressly permitted by the Loan Documents.
10. Subordination of Assignment of Third-Party Leases.
(a) Lender consents to the collateral assignment by Venture
to KRCV, to secure Venture's obligations to KRCV under the
Unitary Lease, of Venture's license interest, if any, as lessor
or sublessor under certain third-party leases between Venture and
other tenants pertaining to retail sites operated by Venture to
the extent listed on Schedule B hereto; provided, however that
KRCV's rights under any such assignment shall at all times remain
subordinate to the assignments by Venture to Lender of its rights
under such third-party leases pursuant to the Security Documents.
(b) Lender consents to the direct assignment by Venture to
KRCV of certain third-party leases between Venture and other
tenants pertaining to retail sites operated by Venture to the
extent listed on Schedule C hereto; provided, however that KRCV's
rights under any such assignment shall at all times remain
subject to the assignments by Venture to Lender of its rights
under such third-party leases pursuant to the Security Documents.
11. Amendment of Unitary Lease. KRCV and Venture may not
amend the Unitary Lease at any time in the event such amendment
would in any way affect or relate to the Security Property or the
interests of Lender under the Loan Documents. KRCV and Venture
covenant to provide to Lender thirty days advance written notice
of any proposed amendment to the Unitary Lease.
12. Counterparts. This Agreement may be executed in
multiple counterparts and by telefax, each of which shall be
deemed an original, but all which together shall constitute one
and the same instrument.
13. No Implied Modification. Except as expressly provided
hereunder, the Loan Documents shall remain in full force and
effect as written.
14. Governing Law. This Agreement shall be governed by the
Laws of the State of Illinois.
15. Authority of KRCV. KRCV represents and warrants to
Lender that: (i) it is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Kansas; (ii) it has full power and authority to conduct its
business as presently conducted and to own the property
encumbered by the Security Documents; (iii) it has full power and
authority to enter into this Agreement and to perform all of its
duties and obligations hereunder; and (iv) the execution and
performance of this Agreement have been duly authorized by all
necessary corporate action.
16. Recordable Memoranda. Upon request of Lender,
Venture and KRCV shall execute memoranda recordable in the
counties and states in which the various parcels of the Security
Property are located, evidencing this Agreement and such
provisions hereof as Lender shall deem appropriate.
IN WITNESS WHEREOF, the parties have signed this Agreement
as of the date first above written.
KRCV CORP.
By: /s/Milton Cooper
Name: Milton Cooper
Title: Chairman
VENTURE STORES, INC.
By: /s/Russell Solt
Name: Russell Solt
Title: EVP - Finance & Admin.
LENDER:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/John D. Cleavenger
Name: John D. Cleavenger
Title:
and
By: /s/Clarence R. Bell
Name: Clarence R. Bell
Title: Counsel