1
Exhibit 4.04 (e)
Loan No. 94-0903604
Taxpayer ID No. 38-1561374
Store No. 25
CERTIFIED TO BE A
TRUE COPY
BY MAXINE J. LIEVOIS
ESCROW AGREEMENT
THIS AGREEMENT, made as of this 14th day of March, 1996, between
Midland Loan Services, L.P., a Missouri limited partnership, in its capacities
as lender and escrow agent ("MLS"), and Frank's Nursery & Crafts, Inc., a
Michigan corporation ("Borrower").
WITNESSETH:
WHEREAS, contemporaneously herewith, MLS is making a loan to Borrower
in the amount of $682,878.00 (the "Loan"), which Loan is secured in part by a
Mortgage, Security Agreement, and Assignment of Leases and Rents (the
"Mortgage") encumbering certain property located in Grand Rapids, Michigan (the
"Property"); and
WHEREAS, as a condition to making the Loan, MLS has required that
Borrower deposit with MLS (a) Three Thousand Seven Hundred Fifty and NO/100
Dollars ($3,750.00 (the "Repair Funds" and (b) a monthly payment as provided
in paragraph 1 (the "Tenant Funds").
NOW, THEREFORE, in consideration of the premises and the due
performance of the commitments and agreements hereinafter set forth, and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Escrow of Funds. Borrower has deposited with MLS Three Thousand
Seven Hundred Fifty and NO/100 Dollars ($3,750.00) which represents the Repair
Funds and Borrower agrees to deposit with MLS on the first day of May, 1996 and
on the first day of each calendar month during the term of this Loan, an
additional Seven Hundred Forty Two and NO/100 Dollars ($742.00) which amount is
referred to as the Tenant Funds. All of the funds now or hereafter deposited
with MLS pursuant to this Agreement shall be held in escrow by MLS (the
"Escrow") according to the terms of this Agreement. MLS agrees to hold such
funds in an interest bearing Eligible Account (as hereinafter defined) selected
by MLS from time to time in the exercise of its sole discretion (the "Escrow
Account"). The amount deposited hereunder is hereinafter referred to as the
"Escrow Funds". Interest on the Escrow Funds shall be deemed part of the
Escrow Funds. The
1
2
Escrow Account shall be held in the name of MLS, all funds deposited therein
shall be for the account of MLS, and Borrower shall have no right thereto or
interest therein and shall have no authority to withdraw funds from the Escrow
Account, such account to be within the sole and exclusive control of MLS. The
funds on deposit in the Escrow Account shall be disbursed or applied only as
specified in this Agreement. Without limitation of the foregoing provisions,
Borrower hereby acknowledges and agrees that MLS has taken all actions
necessary to obtain, and MLS now has, a valid and perfected first priority lien
on, and security interest in, any funds now or hereafter held in the Escrow
Account in which Borrower may have an interest. An Eligible Account shall mean
either (i) an account maintained with a depository institution or trust
company, the long term unsecured debt obligations of which are rated in one of
the three highest rating categories by either Standard & Poor's Rating Group,
Fitch Investors Service, L.P., Moody's Investors Service, Inc. or Duff and
Phelps Credit Rating Co. at the time of any deposit therein or (ii) a
segregated trust account maintained with a federally or state-chartered
depository institution or trust company acting in its fiduciary capacity,
subject to regulations regarding fiduciary funds on deposit similar to 12
C.F.R. Section 9.10(b).
2. Repairs. Borrower agrees, within six (6) months from the date hereof,
to make the repairs to the Property which are specified under Section 8.1
titled "Immediate Repairs" of Section 8 titled "Cost Estimates" of the Property
Condition Assessment of Frank's Nursery & Crafts Store # 25 (Grand Rapids,
Michigan) dated September 9, 1995 prepared by Aaron & Wright Technical Services
Incorporated (the "Repairs"). Subject to the provisions of this Agreement, at
such time as Borrower has completed the Repairs, then MLS shall disburse the
Repair Funds as provided in paragraph 4 hereof. Borrower's failure to complete
the Repairs within the time period hereinabove provided shall constitute an
"Event of Default" hereunder and under the Loan Documents (as hereinafter
defined).
3. Tenant Leases. MLS shall have the right to continue to hold the
Tenant Funds until the Loan has been paid in full at which time any amount
remaining shall be returned to Borrower. Borrower shall have the right to be
reimbursed from the Tenant Funds for the amounts paid by Borrower for tenant
improvements and leasing commissions in connection with a new lease(s) of all
or part of the Property, as provided in paragraph 5 hereof, when Borrower has
delivered to MLS the following:
(a) Evidence satisfactory to MLS that Borrower has vacated the
portion of the Property being leased and is no longer
conducting its business thereon; and
(b) A new lease(s) for part or all of the space currently occupied
by Borrower which is (i) for a term acceptable to MLS,
(ii) at an effective gross rent of no less than $8.00 per
square foot for the space currently occupied by Borrower,
(iii) pursuant to a written lease(s) approved by MLS and (iv)
in compliance with the Mortgage and the Other Security
Documents; and
2
3
(c) an estoppel certificate from each tenant, which shall be in a
form acceptable to MLS.
4. Disbursement of Repair Funds to Borrower. MLS shall disburse the
Repair Funds, in whole or in part, to Borrower as provided in paragraph 2 upon
satisfaction of the following terms and conditions:
(a) The Repair Funds shall not be disbursed until Borrower has
provided to MLS an affidavit from Borrower certifying that the
Borrower has completed the Repairs and that all costs in
connection therewith have been paid. Simultaneously with
submitting such affidavit Borrower shall also submit copies
of lien waivers from the general contractor, any
subcontractors and all materialmen and suppliers showing that
they have been paid for all work and that no liens are claimed.
(b) MLS shall have the right, but not the obligation, at
Borrower's cost and expense, to inspect the Property to verify
that the repairs for which reimbursement is being sought have
been completed in a good and workmanlike manner and otherwise
acceptable to MLS.
(c) Borrower shall also furnish to MLS, at Borrower's cost, copies
of building permits, any Certificate of Occupancy or
other certificates issued by governmental authorities in
connection with any work performed for which reimbursement is
being sought under this Agreement and an endorsement to MLS's
loan policy of title insurance obtained in connection with the
Loan, insuring MLS against any mechanic's liens in connection
with such improvements.
(d) Borrower has delivered to MLS such other documents as MLS
shall reasonably require to confirm the satisfaction of
the conditions contained herein and the completion of the work
required to be done under this Agreement.
(e) Within fifteen (15) days of Borrower submitting all items
required in this paragraph 4, MLS shall advise Borrower
if any additional information is needed to satisfy the
requirements hereof. When MLS has approved the items
submitted, MLS shall disburse to Borrower from the Escrow
Funds the Repair Funds.
5. Disbursement of Tenant Funds to Borrower. MLS shall disburse the
Tenant Funds to Borrower as provided in paragraph 3 upon satisfaction of the
conditions provided in said paragraph 3 and upon satisfaction of the following
terms and conditions:
3
4
(a) Borrower has provided to MLS an affidavit from Borrower
certifying that Borrower has satisfied the requirements
of paragraph 3 above, which affidavit shall include a copy of
the executed lease and shall summarize the rental payable
under such lease.
(b) MLS shall have the right, but not the obligation, at
Borrower's cost and expense, to verify the execution of
the lease(s) which is being used to satisfy the requirements
of paragraph 3 above and that the tenant under the lease(s)
has taken possession of the leased property and is paying
rent.
(c) Borrower has delivered to MLS evidence reasonably satisfactory
to MLS that (i) Borrower has completed all tenant
finish for any of such space which is required to be done by
Borrower and has paid all costs in connection therewith, (ii)
the tenant has any tenant finish required to be completed by
tenant the cost of which is to be paid by Borrower and that
Borrower has paid such cost, and (ii) all leasing commissions
in connection with such lease have been paid.
(d) Borrower has delivered to MLS such other documents as MLS
shall reasonably require to confirm the satisfaction of
the conditions contained in paragraph 3 and herein.
(e) Within fifteen (15) days of Borrower submitting all items
required in this paragraph 5 for a disbursement, MLS
shall advise Borrower if such information satisfies the
requirements hereof. When all the requirements of this
paragraph 5 have been satisfied to MLS's reasonable
satisfaction, MLS shall disburse from the Tenant Funds an
amount equal to the total paid by Borrower for tenant finish
and leasing commission in connection with such lease provided
no such disbursement shall be made more often than once in any
calendar month.
6. Alterations and Improvements. In addition to the right to receive the
Tenant Funds contained in paragraph 3, Borrower shall have the right to use the
Tenant Funds for alterations and improvements to the Property provided MLS has
approved, in its sole discretion, the use of the Tenant Funds for such
alterations and improvements, the cost thereof, the contractor and all other
terms of the contract and completion of such work. Borrower shall have the
right to receive a partial disbursement from the Tenant Funds for amounts owed
under this paragraph 6 provided Borrower shall otherwise have satisfied all the
conditions of paragraph 4 and of this paragraph 6. Notwithstanding anything
contained herein to the contrary, Borrower shall only be entitled to one
disbursement
4
5
from the Tenant Funds in any calendar month whether such disbursement is
pursuant to this paragraph, paragraph 3 hereof or both.
7. Restrictions on Disbursement. MLS shall have no duty or obligation to
disburse the Escrow Funds except in accordance with this Agreement and only
upon satisfaction of all obligations of Borrower in connection therewith.
8. Default by Borrower. Upon the occurrence and during the continuation
of an Event of Default (as defined in the Mortgage), MLS shall have the right,
but not the obligation, to disburse and apply the Escrow Funds to the
satisfaction of any of Borrower's obligations hereunder or under the Promissory
Note evidencing the Loan (the "Note") or any of the Other Security Documents
(as defined in the Mortgage) (all such instruments, agreements and documents,
as amended from time to time, shall be referred to herein as the "Loan
Documents"). Any disbursement made by MLS shall continue to be part of the
Loan and secured by the Loan Documents. No further direction or authorization
from Borrower shall be necessary to warrant such direct disbursement by MLS and
all such disbursements shall satisfy the obligation of MLS hereunder and shall
be secured by the Loan Documents as fully as if made directly to Borrower.
9. Indemnity. Borrower represents and warrants to MLS that as of the
date hereof, any work which has been performed on the Property has been paid or
will be paid in the ordinary course and there are no liens or outstanding claims
for which a lien could be recorded against the Property. Borrower hereby agrees
to indemnify and hold MLS harmless of and from any and all loss, costs, damage
and expense of every kind, including attorneys' fees, which MLS shall or may
suffer or incur or become liable for due to any breach of this Agreement or any
breach of the foregoing representation and warranty. Borrower agrees to
indemnify and hold MLS harmless of and from any and all claims, liens or damages
alleged against MLS of the Property arising due any capital improvements
performed on the Property.
10. Disbursement of Disputed Escrow Funds. If any disagreement or dispute
shall arise between the parties hereto and/or any other person resulting in
adverse claims and demands being made of MLS for the Escrow Funds, then, at
MLS's option (a) MLS shall not deliver the Escrow Funds to any person and shall
refuse to comply with any claims or demands on it and shall continue to hold
the Escrow Funds until (i) MLS, Borrower and any other person who may have
asserted a claim to, or made a demand for, the Escrow Funds shall agree in
writing to a delivery of the Escrow Funds, in which event MLS shall then
deliver the Escrow Funds in accordance with such written agreement, or (ii) MLS
receives a certified copy of a final and nonappealable judgment or order of a
court of competent jurisdiction directing the delivery of the Escrow Funds, in
which event MLS shall then deliver the Escrow Funds in accordance with such
judgment or order, or (b) if MLS shall receive a written notice advising that
litigation over entitlement to the Escrow Funds has been commenced, MLS may
deposit the Escrow Funds with the Clerk of the
5
6
Court in which such litigation is pending; or (c) MLS may take such affirmative
steps as it may, in its sole discretion, elect, to substitute for itself an
impartial party reasonably satisfactory to MLS and Borrower, to deposit the
Escrow Funds with a court of competent jurisdiction, or to commence an action
for interpleader, the costs thereof to be borne by Borrower.
11. Limitation of Liability of MLS.
(a) MLS shall not be or become liable to any person for any
damages, losses or expenses that may be incurred as a result
of MLS's error in judgment, the performance of its duties
under this Agreement, upon the claimed failure to perform its
duties hereunder or for any act done or step taken or omitted
in good faith or for any mistake of fact or law; provided that
MLS shall be liable for damages arising out of its willful
misconduct or bad faith under this Agreement. MLS shall be
automatically released from all obligation, responsibility and
liability hereunder upon MLS's disbursement, delivery or
deposit of the Escrow Funds in accordance with the provisions
of this Agreement.
(b) It is expressly understood that in its capacity as escrow
agent hereunder, MLS acts as a stakeholder for the convenience
and accommodation of Borrower and as a depository only and is
not responsible or liable in any manner whatsoever for the
sufficiency, correctness, genuineness or validity of any
instrument received by or deposited with MLS and reasonably
believed by MLS to be genuine, or for the form of execution of
such instruments, or for the identity, authority or right of
any person executing or depositing the same, or for the terms
and conditions of any instrument pursuant to which MLS may
act.
(c) The duties of MLS in its capacity as escrow agent
hereunder are purely ministerial. MLS shall not have
any duties or responsibilities in respect of the Escrow Funds
except those set forth in this Agreement and shall not incur
any liability in acting upon any signature, notice, request,
waiver, consent, receipt or other paper or document reasonably
believed by MLS to be genuine, and MLS may assume that any
person purporting to give it any notice on behalf of Borrower
in accordance with the provisions hereof has been duly
authorized to do so.
(d) MLS shall not be responsible in any manner for the validity or
sufficiency of any cash, instruments, wire transfer or
any other property delivered to it hereunder, or for the value
or collectibility of any check or other instrument so
delivered or for any representation made or obligations
assumed by Borrower or any other party to the Loan Documents.
Nothing herein
6
7
contained shall be deemed to obligate MLS to deliver
any cash or any other funds or property referred to herein,
unless the same shall have first been received by MLS pursuant
to this Agreement.
(e) In no event whatsoever shall MLS be liable for the loss
of principal or interest resulting from an investment
of Escrow Funds made pursuant to and in accordance with the
terms hereof.
12. Assignment. Borrower hereby collaterally assigns to MLS, as
additional security for the Note and the other Loan Documents, its rights under
any contract entered into by Borrower for completion of any repairs or
remediation on any of the Property for which reimbursement will be sought by
Borrower under this Agreement. Any such contract shall provide that MLS shall
have the right to require performance of such contract but shall have no
liability for any amounts owed by Borrower and incurred prior to the date MLS
exercises its rights herein provided to require performance.
13. Notices. Any notice or other communication required or permitted
under or given in connection with this Agreement shall be in writing and shall
be given in the manner provided for in the Mortgage and shall be deemed given
in the manner therein provided.
14. Governing Law. The terms and provisions hereof shall be governed by
and construed in accordance with the laws of the State of Michigan.
15. Binding Agreement. This Agreement shall be binding upon the heirs,
executors, administrators, personal representatives, successors and assigns of
the parties hereto, including any assignee of the Note or any of the other Loan
Documents; provided, however, the foregoing shall not be deemed or construed to
(i) permit the assignment by Borrower of any of Borrower's rights or
obligations hereunder or (ii) confer any right, title, benefit, cause of action
or remedy upon any person or entity not a party hereto except for assignees of
the Note or any of the other Loan Documents.
16. Captions. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit, amplify
or modify the terms and provisions hereof.
17. Rule of Construction. The parties acknowledge that each party and its
counsel have reviewed and have had input in the drafting of this Agreement, and
the parties hereby agree that normal rules of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or exhibits
hereto. For purposes of this Agreement the word "person" shall include an
individual, corporation, limited liability company, partnership, trust,
unincorporated association, government, governmental authority and any other
entity.
7
8
18. No Third Party Beneficiaries. No person not a party to this Agreement
shall have any third party beneficiary claim or other right hereunder or with
respect thereto.
19. Amendment. This Agreement shall not be amended except by a writing
signed by the party to be bound thereby.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective the day and year set forth above.
BORROWER:
FRANK'S NURSERY & CRAFTS, INC.,
a Michigan corporation
By: Robert M. Lovejoy, Jr.
--------------------------------
Print Name: Robert M. Lovejoy, Jr.
Title: Vice President and Treasurer
MLS:
MIDLAND LOAN SERVICES, L.P., a Missouri
limited partnership
By: Midland Data Systems, Inc.,
a Missouri corporation, its
sole General Partner
By: Clarence A. Krantz
------------------------------
Print Name: Clarence A. Krantz
Title: Senior Vice President
8