UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11718
MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 36-3857664
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TWO NORTH RIVERSIDE PLAZA SUITE 60606
800, CHICAGO, ILLINOIS (Zip Code)
(Address of principal executive offices)
(312) 279-1400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock, $.01 Par Value The New York Stock Exchange
(Title of Class) (Name of exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates was
approximately $640.1 million as of February 11, 2002 based upon the closing
price of $32.55 on such date using beneficial ownership of stock rules adopted
pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting
stock owned by Directors and Officers, some of whom may not be held to be
affiliates upon judicial determination.
At March 15, 2002, 21,740,248 shares of the Registrant's Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates by reference the Registrant's Proxy Statement relating to
the Annual Meeting of Stockholders to be May 8, 2002.
MANUFACTURED HOME COMMUNITIES, INC.
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business................................................................................. 3
Item 2. Properties............................................................................... 8
Item 3. Legal Proceedings........................................................................ 13
Item 4. Submission of Matters to a Vote of Security Holders...................................... 16
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................ 17
Item 6. Selected Financial Data and Operating Information........................................ 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 20
Item 7A. Quantitative and Qualitative Disclosure About Market Risk................................ 30
Item 8. Financial Statements and Supplementary Data.............................................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..... 30
PART III
Item 10. Directors and Executive Officers of the Registrant....................................... 30
Item 11. Executive Compensation................................................................... 30
Item 12. Security Ownership of Certain Beneficial Owners and Management........................... 30
Item 13. Certain Relationships and Related Transactions........................................... 30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 31
2
PART I
ITEM 1. BUSINESS
THE COMPANY
GENERAL
Manufactured Home Communities, Inc. (together with its consolidated
subsidiaries, the "Company") is a fully integrated company which owns and
operates manufactured home communities ("Communities"). Communities are
residential developments designed and improved for the placement of detached,
single-family manufactured homes which are produced off-site and installed and
set on residential sites ("Site Set") within the Community. The owner of each
home leases the site on which it is located. Modern Communities are similar to
typical residential subdivisions, containing centralized entrances, paved
streets, curbs and gutters and parkways. In addition, these Communities often
provide a clubhouse for social activities and recreation and other amenities,
which may include swimming pools, shuffleboard courts, tennis courts, laundry
facilities and cable television service. In some cases, utilities are provided
or arranged for by the owner of the Community, otherwise, the resident contracts
the utility directly. Some Communities provide water and sewer service through
municipal or regulated utilities, while others provide these services to
residents from on-site facilities.
Each Community is generally designed to attract, and is marketed to one of
two types of residents -- (1) retirees and empty nesters or (2) families and
first-time homeowners. The Company believes both types of Communities are
attractive investments and focuses on owning Communities in or near large
metropolitan markets and retirement destinations.
The Company was formed to continue the property operations, business
objectives and acquisition strategies of an entity that had owned and operated
Communities since 1969. As of December 31, 2001, the Company owned or had an
ownership interest in a portfolio of 148 Communities and recreational vehicle
("RV") resorts (the "Properties") located throughout the United States
containing 50,761 residential sites. The Properties are located in 23 states
(with the number of Properties in each state shown parenthetically) -- Florida
(49), California (25), Arizona (17), Michigan (11), Colorado (10), Delaware (7),
Nevada (5), Indiana (3), Oregon (3), Illinois (2), Iowa (2), New York (2), Utah
(2), Pennsylvania (1), Maryland (1), Minnesota (1), Montana (1), New Mexico (1),
Ohio (1), Texas (1), Virginia (1), West Virginia (1), and Washington (1). As of
December 31, 2001, the Company also owned a commercial building located in
California.
The Company has approximately 800 full-time employees dedicated to carrying
out the Company's operating philosophy and strategies of value enhancement and
service to residents. The Company typically utilizes a one or two-person
management team for the on-site management of each of the Properties. Typically,
clerical and maintenance workers are employed to assist these individuals in the
management and care of the Properties. Direct supervision of on-site management
is the responsibility of the Company's regional vice presidents and regional and
district managers. These individuals have significant experience in addressing
the needs of residents and in finding or creating innovative approaches to
maximize value and increase cash flow from property operations. Complementing
this field management staff are approximately 60 corporate employees who assist
on-site management in all property functions.
FORMATION OF THE COMPANY
The Company, formed in March 1993, is a Maryland corporation which has
elected to be taxed as a real estate investment trust ("REIT"). The Company
generally will not be subject to Federal income tax to the extent it distributes
its REIT taxable income to its stockholders. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT, its income is taxable at regular corporate rates. Even if the Company
qualifies for taxation as a REIT, the Company is subject to certain state and
local taxes on its income and property and Federal income and excise taxes on
its undistributed income.
The operations of the Company are conducted through certain entities which
are owned or controlled by the Company. MHC Operating Limited Partnership (the
"Operating Partnership") is the entity through which the Company conducts
substantially all of its operations. Subsidiaries of the Operating Partnership
have been created to: (i) facilitate mortgage financing (the "Financing
Partnerships"); (ii) facilitate the Company's ability to provide financing to
the owners of Communities ("Lending Partnership"); and (iii) own the assets and
operations of certain utility companies which service the Properties ("MHC
Systems"). The financial results of the Operating Partnership and subsidiaries
(together, the "Subsidiaries") are consolidated in the Company's consolidated
financial statements. The operations of the Company are managed on a
property-by-property basis therefor the results of our financing, lending and
property management and utility operations are not reviewed separately by
management to make decisions regarding allocation of resources or to assess
performance.
3
In addition, since certain activities, if performed by the Company, may not
have been qualifying REIT activities under the Internal Revenue Code of 1986, as
amended (the "Code"), the Company has invested in the non-voting preferred stock
of various corporations which engage in such activities. Realty Systems, Inc.
("RSI") is a preferred stock subsidiary of the Company that, doing business as
Carefree Sales, is engaged in the business of purchasing, selling, leasing and
financing manufactured homes that are located or will be located in Properties
owned and managed by the Company. Carefree Sales also provides brokerage
services to residents at such Properties. Typically, residents move from a
Community but do not relocate their homes. Carefree Sales may provide brokerage
services, in competition with other local brokers, by seeking buyers for the
homes. Carefree Sales also leases homes to prospective residents with the
expectation that the tenant eventually will purchase the home. LP Management
Corp. leases from the Operating Partnership certain real property within or
adjacent to certain of the Properties consisting of golf courses, pro shops,
restaurants and RV areas. The Company believes that the activities of RSI and LP
Management Corp. (collectively, "Affiliates") benefit the Company by maintaining
and enhancing occupancy at the Properties. The Company accounts for its
investment in and advances to Affiliates using the equity method of accounting.
BUSINESS OBJECTIVES AND OPERATING STRATEGIES
The Company seeks to maximize both current income and long-term growth in
income. The Company focuses on Communities that have strong cash flow and
expects to hold such Properties for long-term investment and capital
appreciation. In determining cash flow potential, the Company evaluates the
Community's ability to attract and retain high quality residents who take pride
in their Community and in their home. These business objectives and their
implementation are determined by the Company's Board of Directors and may be
changed at any time. The Company's investment and operating approach includes:
- Providing consistently high levels of services and amenities in
attractive surroundings to foster a strong sense of community and
pride of home ownership;
- Efficiently managing the Properties to increase operating margins by
controlling expenses, increasing occupancy and maintaining
competitive market rents;
- Increasing income and property values by continuing the strategic
expansion and, where appropriate, renovation of the Properties;
- Utilizing management information systems to evaluate potential
acquisitions, identify and track competing properties and monitor
resident satisfaction; and
- Selectively acquiring Communities that have potential for long-term
cash flow growth and to create property concentrations in and around
major metropolitan areas and retirement destinations to capitalize
on operating synergies and incremental efficiencies.
The Company is committed to enhancing its reputation as the most respected
brand name in the industry. Its strategy is to own and operate the highest
quality Communities in major metropolitan areas and retirement destinations
across the United States. The focus is on creating an attractive residential
environment for homeowners by providing a well-maintained, comfortable Community
with a variety of organized recreational and social activities and superior
amenities. In addition, the Company regularly surveys rental rates of
competing properties and conducts satisfaction surveys of residents to determine
the factors residents consider most important in choosing a manufactured home
community.
FUTURE ACQUISITIONS
The Company acquired or gained a controlling interest in eighty-eight
Properties during 1997 through 1999, more than doubling its portfolio. The
Company believes that opportunities for property acquisitions are still
available and in general consolidation within the industry will continue
(see -- The Industry -- Industry Consolidation). However, the Company believes
that transactions occurring during 1999 and 2000 in the private marketplace are
at valuations significantly in excess of the Company's current public market
valuation. As a result, during 1999 and 2000 the Company accelerated its stock
repurchase program. The Company's Board of Directors continues to review the
conditions under which the Company will repurchase its stock. These conditions
include, but are not limited to, market price, balance sheet flexibility, other
opportunities and capital requirements. (For more information on the Company's
stock repurchase program see Note 4 to the accompanying financial
4
statements.) Increasing acceptability of and demand for Site Set homes and
continued constraints on development of new Communities continue to add to their
attractiveness as an investment. The Company believes it has a competitive
advantage in the acquisition of new Communities due to its experienced
management, significant presence in major real estate markets and substantial
capital resources. The Company is actively seeking to acquire additional
Communities and currently is engaged in various stages of negotiations relating
to the possible acquisition of a number of Communities.
The Company anticipates that newly acquired properties will be located in
the United States. The Company utilizes market information systems to identify
and evaluate acquisition opportunities, including a market database to review
the primary economic indicators of the various locations in which the Company
expects to expand its operations. Acquisitions will be financed from the most
appropriate sources of capital, which may include undistributed funds from
operations, issuance of additional equity securities, sales of investments,
collateralized and uncollateralized borrowings and issuance of debt securities.
In addition, the Company may cause the Operating Partnership to issue units of
limited partnership interest ("OP Units") to finance acquisitions. The Company
believes that an ownership structure which includes the Operating Partnership
will permit the Company to acquire additional Communities in transactions that
may defer all or a portion of the sellers' tax consequences.
When evaluating potential acquisitions, the Company will consider such
factors as: (i) the replacement cost of the property; (ii) the geographic area
and type of property; (iii) the location, construction quality, condition and
design of the property; (iv) the current and projected cash flow of the property
and the ability to increase cash flow; (v) the potential for capital
appreciation of the property; (vi) the terms of tenant leases, including the
potential for rent increases; (vii) the potential for economic growth and the
tax and regulatory environment of the community in which the property is
located; (viii) the potential for expansion of the physical layout of the
property and the number of sites; (ix) the occupancy and demand by residents for
properties of a similar type in the vicinity and the residents profile; (x) the
prospects for liquidity through sale, financing or refinancing of the property;
and (xi) competition from existing Communities and the potential for the
construction of new Communities in the area. The Company expects to purchase
Communities with physical and market characteristics similar to the Properties
in its current portfolio.
PROPERTY EXPANSIONS
Several of the Company's Properties have available land for expanding the
number of sites available to be leased to residents. Development of these sites
("Expansion Sites") is predicated by local market conditions and permitted by
zoning and other applicable laws. When justified, development of Expansion Sites
allows the Company to leverage existing facilities and amenities to increase the
income generated from the Properties. Where appropriate, facilities and
amenities may be upgraded or added to certain Properties in order to make those
Properties more attractive in their markets. The Company's acquisition
philosophy has included the desire to own Properties with potential Expansion
Site development, and the Company has been successful in acquiring a number of
such Properties. Several examples of these Properties include the 1994
acquisition of Bulow Village with potential development of approximately 725
Expansion Sites, the 1997 acquisition of Golf Vista Estates with potential
development of approximately 128 Expansion Sites and the acquisition in 1999
of Coquina Crossing with potential development of approximately 393 Expansion
Sites, and the acquisition in 2001 of Grand Island and The Lakes at
Countrywood with combined potential Expansion Sites of 224 sites.
Of the Company's 148 Properties, ten may be expanded consistent with
existing zoning regulations. In 2002, the Company expects to develop an
additional 141 Expansion Sites within three of these Properties. As of December
31, 2001, the Company had approximately 817 Expansion Sites available for
occupancy in 24 of the Properties. The Company filled 205 Expansion Sites in
2001 and expects to fill an additional 200 to 250 Expansion Sites in 2002.
LEASES
The typical lease entered into between the resident and the Company for the
rental of a site is for a month-to-month or year-to-year term, renewable upon
the consent of both parties or, in some instances, as provided by statute. These
leases are cancelable, depending on applicable law, for non-payment of rent,
violation of community rules and regulations or other specified defaults.
Non-cancelable long-term leases, with remaining terms ranging up to ten years,
are in effect at certain sites within 22 of the Properties. These leases are
subject to rental rate increases based on the Consumer Price Index ("CPI"), in
some instances taking into consideration certain floors and ceilings and
allowing for pass-throughs of certain items such as real estate taxes, utility
expenses and capital expenditures. Generally, market rate adjustments are made
on an annual basis.
5
REGULATIONS AND INSURANCE
General. Communities are subject to various laws, ordinances and
regulations, including regulations relating to recreational facilities such as
swimming pools, clubhouses and other common areas. The Company believes that
each Property has the necessary permits and approvals to operate.
Rent Control Legislation. State and local rent control laws, principally
in California and Florida, limit the Company's ability to increase rents and to
recover increases in operating expenses and the costs of capital improvements at
certain Properties. Enactment of such laws has been considered from time to time
in other jurisdictions. The Company presently expects to continue to maintain
Communities, and may purchase additional properties, in markets that are either
subject to rent control or in which rent-limiting legislation exists or may be
enacted. For example, Florida has enacted a law that generally provides that
rental increases must be reasonable. Also, certain jurisdictions in California
in which the Company owns Properties limit rent increases to changes in the CPI
or some percentage thereof.
Insurance. Management believes that the Properties are covered by adequate
fire, flood, property, earthquake and business interruption insurance (where
appropriate) provided by reputable companies and with commercially reasonable
deductibles and limits. Due to the lack of available commercially reasonable
coverage, the company is self-insured for terrorist incidents. The Company
believes its insurance coverage is adequate based on the Company's assessment of
the risks to be insured, the probability of loss and the relative cost of
available coverage. The Company has obtained title insurance insuring fee title
to the Properties in an aggregate amount which the Company believes to be
adequate.
INDUSTRY
THE INDUSTRY
The Company believes that modern Communities, such as the Properties,
provide an opportunity for increased cash flows and appreciation in value. These
may be achieved through increases in occupancy rates and rents, as well as
expense controls, expansion of existing Properties and opportunistic
acquisitions, for the following industry specific reasons:
- Barriers to Entry: The Company believes that the supply of new
Communities will be constrained due to barriers to entry into the
industry. The most significant barrier has been the difficulty in
securing zoning from local authorities. This has been the result of
(i) the public's historically poor perception of the industry, and
(ii) the fact that Communities generate less tax revenue because the
homes are treated as personal property (a benefit to the home owner)
rather than real property. Another factor that creates substantial
barriers to entry is the length of time between investment in the
Community's development and the attainment of stabilized occupancy
and the generation of revenues. The initial development of the
infrastructure may take up to two or three years. Once the Community
is ready for occupancy, it may be difficult to attract residents to
an empty Community. Substantial occupancy levels may take several years
to achieve.
- Industry Consolidation: According to an industry analyst's industry
report, there are approximately 50,000 Communities in the United States,
and approximately 6.5% or 3,250 of the Communities have more than 200
sites and would be considered "investment-grade" properties. The five
public REITs that own Communities own approximately 532 or about 16% of
the "investment-grade" Communities. In addition, based on a report
prepared by one analyst, the top 150 owners of Communities own
approximately 69% of the "investment-grade" assets. The Company believes
that this relatively high degree of fragmentation in the industry
provides the Company, as a national organization with experienced
management and substantial financial resources, the opportunity to
purchase additional Communities.
- Stable Tenant Base: The Company believes that Communities tend to
achieve and maintain a stable rate of occupancy due to the following
factors: (i) residents own their own homes, (ii) Communities tend to
foster a sense of community as a result of amenities such as clubhouses,
recreational and social activities and (iii) since moving a Site Set home
from one Community to another involves substantial cost and effort,
residents often sell their home in-place (similar to site-built
residential housing) with no interruption of rental payments.
6
SITE SET HOUSING
Based on the current growth in the number of individuals living in Site Set
homes, the Company believes that Site Set homes are increasingly viewed by the
public as an attractive and economical form of housing. According to the
industry's trade association, nearly one in four new single family homes sold in
the United States today is Site set.
The Company believes that the growing popularity of Site Set housing is
primarily the result of the following factors:
- Importance of Home Ownership. According to the Fannie Mae ("FNMA") 2000
National Housing Survey renters' desire to own a home continues to be a
top priority. According to the report, "A home is more than merely
shelter. Owning a home provides a sense of financial security...Americans
view owning a home as the second most important action a person can take
to achieve financial security, behind stating an IRA [401(k)] or other
type of retirement account.
- Affordability. For a significant number of persons, Site Set housing
represents the only means of achieving home ownership. In addition, the
total cost of housing in a Community (home cost, site rent and related
occupancy costs) is competitive with and often lower than the total cost
of alternative housing, such as apartments and condominiums, and
generally substantially lower than "stick-built" residential
alternatives.
- Lifestyle Choice. As the average age of the United States population has
increased, Site Set housing has become an increasingly popular housing
alternative for retirement and "empty-nest" living. According to FNMA,
the surviving baby-boom generation -- the 80 million people born between
1945 and 1964 -- will constitute 18% of the U.S. population within the
next 30 years and more than 32 million will reach age 55 within the next
ten years. Among those people who are nearing retirement (age 40 to 54),
approximately 33% plan on moving upon retirement. The Company believes
that Site Set housing is especially attractive to such individuals when
located within a Community that offers an appealing amenity package,
close proximity to local services, social activities, low maintenance
and a secure environment.
- Construction Quality. Since 1976, all Site Set housing has been required
to meet stringent Federal standards, resulting in significant increases
in the quality of the industry's product. The Department of Housing and
Urban Development's standards for Site Set housing construction quality
are the only Federally regulated standards governing housing quality of
any type in the United States. Site Set homes produced since 1976 have
received a "red and silver" government seal certifying that they were
built in compliance with the Federal code. The code regulates Site Set
home design and construction, strength and durability, fire resistance
and energy efficiency, and the installation and performance of heating,
plumbing, air conditioning, thermal and electrical systems. In newer
homes, top grade lumber and dry wall materials are common. Also,
manufacturers are required to follow the same fire codes as builders of
site-built structures.
- Comparability to Site-Built Homes. The Site Set housing industry has
experienced a recent trend towards multi-section homes. Many modern Site
Set homes are longer (up to 80 feet compared to 50 feet in the 1960's)
and wider than earlier models. Many homes have vaulted ceilings,
fireplaces and as many as four bedrooms, and closely resemble single
family ranch style site-built homes.
7
ITEM 2. PROPERTIES
The Company believes that the Properties provide attractive amenities and
common facilities that create a comfortable and attractive Community for the
residents, with most offering a clubhouse, a swimming pool, laundry facilities
and cable television service. Many also offer additional amenities such as
sauna/whirlpool spas, golf courses, tennis, shuffleboard and basketball courts
and exercise rooms. Since residents own their homes, it is their responsibility
to maintain their homes and the surrounding area. It is management's role to
ensure that residents comply with Community policies and to provide maintenance
of the common areas, facilities and amenities. The Company holds periodic
meetings of its property management personnel for training and implementation of
the Company's strategies. The Properties historically have had, and the Company
believes they will continue to have, low turnover and high occupancy rates.
The distribution of the Properties throughout the United States reflects
the Company's belief that geographic diversification helps insulate the
portfolio from regional economic influences. The Company intends to target new
acquisitions in or near markets where the Properties are located and will also
consider acquisitions of properties outside such markets. The Company's five
largest markets of Properties owned are Florida (49 Properties), California (25
Properties), Arizona (17 Properties), Michigan (11 Properties) and Colorado (10
Properties). These markets accounted for 36%, 17%, 9%, 3%, and 10%,
respectively, of the Company's total revenues for the year ended December 31,
2001. The Company also has Properties located in the following markets:
Northeast, Northwest, Midwest, and Nevada/Utah/New Mexico. The Company's largest
Property, Bay Indies, located in Venice, Florida, accounted for 3% of the
Company's total revenues for the year ended December 31, 2001.
8
The following tables set forth certain information relating to the
Properties owned by the Company as of December 31, 2001, categorized by the
Company's major markets. "Core Portfolio" represents an analysis of Properties
owned throughout both years of comparison. The table excludes the following RV
resort Properties (2,687 sites) at which rents and occupancy vary based on
seasonality: Sherwood Forest RV (Kissimmee, Florida); Southern Palms (Eustis,
Florida); and Fun & Sun (San Benito, Texas). The table excludes five Properties
(1,521 sites) in which the Company has a non-controlling joint venture interest
and accounts for using the equity method of accounting.
NUMBER MONTHLY MONTHLY
OF SITES OCCUPANCY OCCUPANCY BASE RENT BASE RENT
LOCATION AS OF AS OF AS OF AS OF AS OF
PROPERTY CITY, STATE 12/31/01 12/31/01 12/31/00 12/31/01 12/31/00
-------- ----------------------- -------- --------- --------- --------- ---------
FLORIDA
NORTHERN, CENTRAL & EASTERN FLORIDA:
Maralago Cay Lantana FL 602 96.3% 95.7% $417 $405
Brittany Estates Tallahassee FL 299 84.6% 93.6% $285 $270
Bulow Plantation FLagler Beach FL 276 99.4%(b) 97.8%(b) $258 $244
Carriage Cove Daytona Beach FL 418 97.4% 98.3% $399 $370
Coquina Crossing St Augustine FL 361 91.1%(b) 86.8%(b) $317 $305
Coral Cay Margate FL 819 93.4% 96.3% $428 $411
Countryside North Vero Beach FL 646 95.7%(b) 95.5%(b) $315 $298
Fernwood Deland FL 92 94.6% 95.7% $260 $250
Grand Island Grand Island FL(a) 309 76.4% $282
Heritage Village Vero Beach FL 436 97.0% 97.2% $346 $308
Holiday Village, FL Vero Beach FL 128 78.1% 79.7% $286 $281
Indian Oaks Rockledge FL 211 96.2%(b) 94.8%(b) $243 $234
Lakewood Village Melbourne FL 349 95.1% 95.7% $359 $345
Mid-Florida Lakes Leesburg FL 1,226 91.1%(b) 93.2%(b) $325 $313
Oak Bend Ocala FL 262 87.4%(b) 84.4%(b) $250 $239
Pickwick Port Orange FL 432 97.2% 94.9% $310 $296
Sherwood Forest Kissimmee FL 769 96.6%(b) 94.7%(b) $334 $319
Spanish Oaks Ocala FL 459 93.9% 93.7% $301 $281
The Landings Port Orange FL 433 88.9%(b) 89.4%(b) $308 $293
The Meadows, FL Palm Beach Gardens FL 380 82.6%(b) 81.1%(b) $331 $314
TAMPA/NAPLES:
Bay Indies Venice FL 1,309 98.9% 99.9% $323 $314
Bay Lake Estates Nokomis FL 228 96.1% 98.2% $370 $354
Boulevard Estates Clearwater FL 297 89.2% 89.6% $349 $333
Buccaneer N. Ft. Myers FL 971 99.1% 99.3% $331 $317
Chalet Village Tampa FL 60 90.0% 90.0% $327 $309
Country Place New Port Richey FL 515 97.9%(b) 90.9%(b) $237 $230
Down Yonder Largo FL 361 99.4% 98.9% $375 $356
East Bay Oaks Largo FL 328 97.3% 97.0% $367 $351
Eldorado Village Largo FL 227 96.0% 96.9% $370 $356
Friendly Village of Kapok Clearwater FL 236 84.3% 84.7% $349 $341
Hillcrest Clearwater FL 279 84.2% 80.3% $345 $322
Holiday Ranch Largo FL 150 92.7% 94.0% $341 $333
Lake Fairways N. Ft. Myers FL 896 99.1% 99.4% $364 $348
Lake Haven Dunedin FL 379 92.9% 97.6% $382 $376
Lakes at Countrywood Plant City FL(a) 421 96.5% $246
Meadows at Countrywood Plant City FL 736 98.9% 98.8% $285 $277
Oaks at Countrywood Plant City FL 168 67.9%(b) 64.9%(b) $248 $231
Pine Lakes N. Ft. Myers FL 584 99.1% 99.8% $439 $421
Satellite Clearwater FL 87 90.8% 90.8% $302 $292
The Heritage N. Ft. Myers FL 455 83.5%(b) 79.6%(b) $306 $290
Windmill Manor Bradenton FL 292 95.9% 96.2% $357 $340(d)
Windmill Village -- Ft. Myers N. Ft. Myers FL 491 98.0% 98.6% $310 $297
Windmill Village North Sarasota FL 471 98.5% 99.8% $332 $320
Windmill Village South Sarasota FL 306 99.3% 100.0% $332 $321
------- ----- ------ ---- ----
TOTAL FLORIDA MARKET 19,154 94.3% 94.7% $333 $323
------- ----- ------ ---- ----
FLORIDA MARKET -- CORE PORTFOLIO 18,424 94.6% 95.1% $336 $323
------- ----- ------ ---- ----
9
NUMBER MONTHLY MONTHLY
OF SITES OCCUPANCY OCCUPANCY BASE RENT BASE RENT
LOCATION AS OF AS OF AS OF AS OF AS OF
PROPERTY CITY, STATE 12/31/01 12/31/01 12/31/00 12/31/01 12/31/00
-------- ----------------------- -------- --------- --------- --------- ---------
CALIFORNIA
NORTHERN CALIFORNIA:
California Hawaiian San Jose CA 419 98.1%(b) 98.1%(b) $636 $600
Colony Park Ceres CA 186 86.0% 76.9% $353 $345
Concord Cascade Pacheco CA 283 98.9% 98.9% $544 $521
Contempo Marin San Rafael CA 396 98.7% 98.7% $644 $631
Coralwood Modesto CA 194 97.4% 92.8% $413 $403
Four Seasons Fresno CA 242 73.6% 71.5% $254 $244
Laguna Lake San Luis Obispo CA 290 99.7% 99.7% $344 $328
Monte del Lago Castroville CA 314 97.8%(b) 99.4%(b) $513 $485
Quail Meadows Riverbank CA 146 100.0% 98.6% $363 $340
Royal Oaks Visalia CA 149 81.9% 83.2% $273 $258
DeAnza Santa Cruz Santa Cruz CA 198 99.5% 100.0% $526 $514
Sea Oaks Los Osos CA 125 100.0% 100.0% $349 $344
Sunshadow San Jose CA 121 100.0% 100.0% $605 $583
Westwinds (4 Properties) San Jose CA 723 98.9% 99.9% $656 $615
SOUTHERN CALIFORNIA:
Date Palm Country Club Cathedral City CA 538 95.9% 93.9% $640 $631
Lamplighter Spring Valley CA 270 98.1% 99.6% $565 $535
Meadowbrook Santee CA 332 99.1% 99.4% $603 $590
Rancho Mesa El Cajon CA 158 99.4% 99.4% $535 $510
Rancho Valley El Cajon CA 140 98.6% 99.3% $550 $518
Royal Holiday Hemet CA 179 64.2% 72.6% $277 $259
Santiago Estates Sylmar CA 299 96.0% 94.6% $617 $591
------- ----- ------ ---- ----
TOTAL CALIFORNIA MARKET 5,702 95.4% 95.2% $538 $516
------- ----- ------ ---- ----
CALIFORNIA MARKET -- CORE PORTFOLIO 5,702 95.4% 95.2% $538 $516
------- ----- ------ ---- ----
ARIZONA
Apollo Village Phoenix AZ 237 91.6%(b) 92.8%(b) $371 $356
Brentwood Manor Mesa AZ 274 93.8% 94.9% $456 $431
Carefree Manor Phoenix AZ 128 97.7% 99.2% $322 $303
Casa del Sol #1 Peoria AZ 246 86.6% 94.7% $422 $407
Casa del Sol #2 Glendale AZ 239 94.1% 97.9% $455 $438
Casa del Sol #3 Glendale AZ 238 94.1% 96.2% $439 $420
Central Park Phoenix AZ 293 95.2% 96.9% $386 $373
Desert Skies Phoenix AZ 164 97.6% 97.0% $317 $293
Fairview Manor Tucson AZ 235 91.1% 92.8% $326 $311
Hacienda de Valencia Mesa AZ 365 85.2% 94.2% $377 $361
Palm Shadows Glendale AZ 294 90.8% 94.9% $355 $336
Sedona Shadows Sedona AZ 198 91.4% 88.0% $327 $306
Sunrise Heights Phoenix AZ 199 90.5% 95.5% $358 $347
The Mark Mesa AZ 410 91.7% 95.9% $383 $361
The Meadows Tempe AZ 391 92.3% 98.0% $439 $416
Whispering Palms Phoenix AZ 116 94.8% 99.1% $282 $267
------- ----- ------ ---- ----
TOTAL ARIZONA MARKET 4,027 91.9% 95.4% $385 $367
------- ----- ------ ---- ----
ARIZONA MARKET -- CORE PORTFOLIO 4,027 91.9% 95.4% $385 $367
------- ----- ------ ---- ----
10
NUMBER MONTHLY MONTHLY
OF SITES OCCUPANCY OCCUPANCY BASE RENT BASE RENT
LOCATION AS OF AS OF AS OF AS OF AS OF
PROPERTY CITY, STATE 12/31/01 12/31/01 12/31/00 12/31/01 12/31/00
-------- ----------------------- -------- --------- --------- --------- ---------
MICHIGAN
Americana Estate Kalamazoo MI 162 88.9% 93.2% $306 $294
Appletree Walker MI 239 94.1% 96.7% $334 $318
Brighton Village Brighton MI 197 98.0% 99.0% $384 $369
College Heights Auburn Hills MI 162 98.8% 98.1% $392 $372
Creekside Wyoming MI 165 94.5% 97.6% $374 $356
Groveland Manor Holly MI 186 89.2% 91.4% $358 $346
Hillcrest Acres Kalamazoo MI 150 94.0% 96.0% $319 $307
Metro Romulus MI 227 99.6% 98.7% $364 $384
Riverview Estates Bay City MI 197 78.2% 78.2% $259 $249
South Lyon Woods South Lyon MI 211 98.6% 98.1% $455 $439
Timberland Ypsilianti MI 185 91.9% 91.4% $343 $332
------- ----- ------ ---- ----
TOTAL MICHIGAN MARKET 2,081 93.4% 94.4% $359 $344
------- ----- ------ ---- ----
MICHIGAN MARKET -- CORE
PORTFOLIO 2,081 93.4% 94.4% $359 $344
------- ----- ------ ---- ----
COLORADO
Bear Creek Sheridan CO 124 97.6% 100.0% $409 $385
Cimarron Broomfield CO 327 98.2% 99.1% $417 $391
Golden Terrace Golden CO 265 98.6% 99.2% $464 $431
Golden Terrace South Golden CO 80 96.3% 100.0% $441 $407
Golden Terrace West Golden CO 316 98.1% 100.0% $454 $424
Hillcrest Village Aurora CO 602 95.5% 96.3% $445 $422
Holiday Hills Denver CO 737 95.4% 97.1% $437 $412
Holiday Village Co. Springs CO 240 96.7% 96.3% $427 $403
Pueblo Grande Pueblo CO 252 96.8% 96.8% $281 $265
Woodland Hills Denver CO 434 97.9% 98.6% $418 $390
------- ----- ------ ---- ----
TOTAL COLORADO MARKET 3,377 96.8% 97.9% $424 $399
------- ----- ------ ---- ----
COLORADO MARKET -- CORE PORTFOLIO 3,377 96.8% 97.9% $424 $399
------- ----- ------ ---- ----
NORTHEAST
Aspen Meadows Rehoboth DE 200 99.5% 100.0% $262 $250
Camelot Meadows Rehoboth DE 319 99.9% 100.0% $265 $252
Mariners Cove Millsboro DE 375 89.3%(b) 88.5%(b) $381 $356
McNicol Rehoboth DE 93 98.9% 97.8% $258 $248
Sweetbriar Rehoboth DE 142 98.6% 100.0% $199 $187
Waterford Estates Bear DE 731 97.4%(b) 96.9%(b) $398 $379
Whispering Pines Lewes DE 393 95.2% 96.9% $269 $258
Pheasant Ridge Mt. Airy MD 101 97.0% 99.0% $453 $424
Brook Gardens Lackawanna NY 424 96.5% 97.2% $435 $423
Greenwood Village Manorville NY 486 99.4%(b) 97.3%(b) $389 $366
Green Acres Breinigsville PA 595 96.1% 97.3% $420 $408
Meadows of Chantilly Chantilly VA 500 96.6% 92.0% $512 $493
Independence Hill Morgantown WV 203 88.2% 90.1% $214 $204
------- ----- ------ ---- ----
TOTAL NORTHEAST MARKET 4,562 96.3% 96.0% $372 $355
------- ----- ------ ---- ----
NORTHEAST MARKET -- CORE PORTFOLIO 4,562 96.3% 96.0% $372 $355
------- ----- ------ ---- ----
11
NUMBER MONTHLY MONTHLY
OF SITES OCCUPANCY OCCUPANCY BASE RENT BASE RENT
LOCATION AS OF AS OF AS OF AS OF AS OF
PROPERTY CITY, STATE 12/31/01 12/31/01 12/31/00 12/31/01 12/31/00
-------- ----------------------- -------- --------- --------- --------- ---------
MIDWEST
Five Seasons Cedar Rapids IA 390 79.0%(b) 79.7%(b) $253 $240
Holiday Village, IA Soux City IA 519 80.5% 87.7% $248 $241
Golf Vista Estates Monee IL 371 88.4%(b) 90.6%(b) $387 $344
Willow Lake Estates Elgin IL 617 96.8% 97.4% $624 $583
Burns Harbor Estates Chesterton IN 227 83.7% 89.0% $305 $287
Oak Tree Village Portage IN 379 90.0% 93.1% $302 $283
Windsong Indianapolis IN 268 84.0% 91.4% $292 $277
Camelot Acres Burnsville MN 302 99.8% 99.3% $417 $390
Royal Village Toledo OH 233 90.1% 89.3% $319 $300
------- ----- ------ ---- ----
TOTAL MIDWEST MARKET 3,306 88.3% 91.9% $377 $350
------- ----- ------ ---- ----
MIDWEST MARKET -- CORE PORTFOLIO 3,306 88.3% 91.9% $377 $350
------- ----- ------ ---- ----
NEVADA, UTAH, NEW MEXICO
Del Rey Albuquerque NM 407 84.5% 90.9% $328 $328
Bonanza Las Vegas NV 353 75.9% 81.6% $465 $465
Boulder Cascade Las Vegas NV 298 86.9% 89.3% $417 $394
Cabana Las Vegas NV 263 97.3% 98.9% $432 $415
Flamingo West Las Vegas NV 258 84.1%(b) 80.2%(b) $430 $406
Villa Borega Las Vegas NV 293 91.1% 95.9% $421 $402(d)
All Seasons Salt Lake City UT 121 98.3% 97.5% $328 $315
Westwood Village Farr West UT 314 96.5%(b) 95.2%(b) $237 $232
------- ----- ------ ---- ----
TOTAL NEVADA, UTAH, NEW MEXICO
MARKET 2,307 88.1% 90.6% $380 $369
------- ----- ------ ---- ----
NEVADA, UTAH, NEW MEXICO MARKET --
CORE PORTFOLIO 2,307 88.1% 90.6% $380 $369
------- ----- ------ ---- ----
NORTHWEST
Casa Village Billings MT 491 92.3% 98.0% $282 $272
Falcon Wood Village Eugene OR 183 98.9% 98.4% $363 $345
Quail Hollow Fairview OR 137 97.8% 98.6% $442 $426
Shadowbrook Clackamas OR 156 98.7% 99.4% $444 $429
Kloshe Illahee Federal Way WA 258 99.6% 99.2% $478 $454
------- ----- ------ ---- ----
TOTAL NORTHWEST MARKET 1,225 96.3% 98.5% $376 $359
------- ----- ------ ---- ----
NORTHWEST MARKET -- CORE
PORTFOLIO 1,225 96.3% 98.5% $376 $359
------- ----- ------ ---- ----
GRAND TOTAL ALL MARKETS 45,741 93.6% 94.7% $388 $367
======= ===== ====== ==== ====
GRAND TOTAL ALL MARKETS -- CORE
PORTFOLIO 45,011 93.9%(c) 94.9%(c) $384 $367
======= ===== ====== ==== ====
- ---------------
(a) Represents a Property that is not part of the Core Portfolio.
(b) The process of filling Expansion Sites at these Properties is ongoing. A
decrease in occupancy may reflect development of additional Expansion Sites.
(c) Changes in total portfolio occupancy include the impact of acquisitions and
expansion programs and are therefore not comparable.
(d) During 2001, at certain Properties the amounts charged to residents for
utilities were separated ("Unbundled") from their rent charges and recorded
as utility income. For comparison purposes an adjustment was made to base
rental income for 2000. This adjustment is reflected on this table in the
monthly base rent per site amounts for 2000.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
12
ITEM 3. LEGAL PROCEEDINGS
DEANZA SANTA CRUZ MOBILE ESTATES
The residents of DeAnza Santa Cruz Mobile Estates, a property located in
Santa Cruz, California (the "City") previously brought several actions opposing
certain fees and charges in connection with water service at the Property. This
summary provides the history and reasoning underlying the Company's defense of
the residents' claims and explains the Company's decision to continue to defend
its position, which the Company believes is fair and accurate.
DeAnza Santa Cruz Mobile Estates is a 198-site Community overlooking the
Pacific Ocean. It is subject to the City's rent control ordinance which limits
annual rent increases to 75% of CPI. The Company purchased this Property in
August 1994 from certain unaffiliated DeAnza entities ("DeAnza"). Prior to the
Company's purchase in 1994, DeAnza made the decision to submeter and separately
bill tenants at the Property for both water and sewer in 1993 in the face of the
City's rapidly rising utility costs.
Under California Civil Code Section 798.41, DeAnza was required to reduce
rent by an amount equal to the average cost of usage over the preceding 12
months. This was done. With respect to water charges, because DeAnza did not
want to be regulated by the California Public Utility Commission ("CPUC"),
DeAnza relied on California Public Utilities Code Section 2705.5 ("CPUC Section
2705.5") to determine what rates would be charged for water on an ongoing basis
without becoming a public utility. DeAnza and the Company interpreted the
statute as providing that in a submetered mobile home park, the property owner
is not subject to regulation and control of the CPUC so long as the users are
charged what they would be charged by the utility company if users received
their water directly from the utility company. In Santa Cruz, customers
receiving their water directly from the City's water utility were charged a
certain lifeline rate for the first 400 ccfs of water and a greater rate for
usage over 400 ccfs of water, a readiness to serve charge of $7.80 per month and
tax on the total. In reliance on CPUC Section 2705.5, DeAnza implemented its
billings on this schedule notwithstanding that it did not receive the discount
for the first 400 ccfs of water because it was a commercial and not a
residential customer.
A dispute with the residents ensued over the readiness to serve charge and
tax thereon. The residents argued that California Civil Code Section 798.41
required that the Property owner could only pass through its actual costs of
water (and that the excess charges over the amount of the rent rollback were an
improper rent increase) and that CPUC Section 2705.5 was not applicable. DeAnza
unbundled the utility charges from rent consistent with California Civil Code
Section 798.41 and it has generally been undisputed that the rent rollback was
accurately calculated.
In August 1994, when the Company acquired the Property, the Company
reviewed the respective legal positions of the Santa Cruz Homeowners Association
("HOA") and DeAnza and concurred with DeAnza. DeAnza's reliance on CPUC Section
2705.5 made both legal and practical sense in that residents paid only what they
would pay if they lived in a residential neighborhood within the City and
permitted DeAnza to recoup part of the expenses of operating a submetered system
through the readiness to serve charge.
Over a period of 18 months from 1993 into May of 1995, a series of
complaints were filed by the HOA and Herbert Rossman, a resident, against
DeAnza, and later, the Company. DeAnza and the Company demurred to each of these
complaints on the grounds that the CPUC had exclusive jurisdiction over the
setting of water rates and that residents under rent control had to first
exhaust their administrative remedies before proceeding in a civil action. At
one point, the case was dismissed (with leave to amend) on the basis that
jurisdiction was with the CPUC and, at another point, Mr. Rossman was dismissed
from the case because he had not exhausted his administrative remedies.
On June 29, 1995, a hearing was held before a City rent control officer on
billing and submetering issues related to both water and sewer. The Company and
DeAnza prevailed on all issues related to sewer and the rent rollback related to
water, but the hearing officer determined that the Company could only pass
through its actual cost of water, i.e., a prorated readiness to serve charge and
tax thereon. The hearing officer did not deal with the subsidy being given to
residents through the quantity charge and ordered a rebate in a fixed amount per
resident. The Company and DeAnza requested reconsideration on this issue, among
others, which reconsideration was denied by the hearing officer.
13
The Company then took a writ of mandate (an appeal from an administrative
order) to the Superior Court and, pending this appeal, the residents, the
Company and the City agreed to stay the effect of the hearing officer's decision
until the Court rendered judgment.
In July 1996, the Superior Court affirmed the hearing officer's decision
without addressing concerns about the failure to take the subsidy on the
quantity charge into account.
The Company requested that the City and the HOA agree to a further stay
pending appeal to the court of appeal, but they refused and the appeal court
denied the Company's request for a stay in late November 1996. Therefore, on
January 1, 1997, the Company reduced its water charges at this Property to
reflect a pass-through of only the readiness to serve charge and tax at the
master meter (approximately $0.73) and to eliminate the subsidy on the water
charges. On their March 1, 1997 rent billings, residents were credited for
amounts previously "overcharged" for readiness to serve charge and tax. The
amount of the rebate given by the Company and DeAnza was $36,400. In calculating
the rebate, the Company and DeAnza took into account the previous subsidy on
water usage although this issue had not yet been decided by the court of appeal.
The Company and DeAnza felt legally safe in so doing based on language in the
hearing officer's decision that actual costs could be passed through.
On March 12, 1997, the Company also filed an application with the CPUC to
dedicate the water system at this Property to public use and have the CPUC set
cost-based rates for water usage. The Company believed it was obligated to take
this action because of its consistent reliance on CPUC Section 2705.5 as a safe
harbor from CPUC jurisdiction. That is, when the Company could no longer charge
for water as the local serving utility would charge, it was no longer exempt
from the CPUC's jurisdiction and control under CPUC Section 2705.5.
On March 20, 1998, the court of appeal issued the writ of mandate requested
by the Company on the grounds that the hearing officer had improperly calculated
the amount of the rebate (meaning the Company had correctly calculated the rent
credits), but also ruling that the hearing officer was correct when he found
that the readiness to serve charge and tax thereon as charged by DeAnza and the
Company were an inappropriate rent increase. The decision primarily reflected
the court of appeal's view that CPUC Section 2705.5 operated as a ceiling and
that California Civil Code Section 798.41 allowed for a charge based on actual
costs, including costs of administration, operation and maintenance of the
system, but that the Company had not to provide evidence of such costs. The
court of appeal further agreed with the Company that the City's hearing officer
did not have the authority under California Civil Code Section 798.41 to
establish rates that could be charged in the future.
Following this decision, the CPUC granted the Company its certificate of
convenience and necessity on December 17, 1998 and approved cost-based rates and
charges for water that exceed what residents were paying under the Company's
reliance on CPUC Section 2705.5. Concurrently, the CPUC also issued an Order
Instituting Investigation ("OII") confirming its exclusive jurisdiction over the
issue of water rates in a submetered system and commencing an investigation into
the confusion and turmoil over billings in submetered properties. Specifically,
the OII states: "The Commission has exclusive and primary jurisdiction over the
establishment of rates for water and sewer services provided by private
entities."
Specifically, the CPUC ruling regarding the Company's application stated:
"The ultimate question of what fees and charges may or may not be assessed,
beyond external supplier pass-through charges, for in-park facilities when a
mobile home park does not adhere to the provisions of CPUC Section 2705.5, must
be decided by the Commission."
After the court of appeal decision, the HOA brought all of its members back
into the underlying civil action for the purpose of determining damages,
including punitive damages, against the Company. The trial was continued from
July 1998 to January 1999 to give the CPUC time to act on the Company's
application. Notwithstanding the action taken by the CPUC in issuing the OII in
December 1998, the trial court denied the Company's motion to dismiss on
jurisdictional grounds and trial commenced before a jury on January 11, 1999.
Not only did the trial court not consider the Company's motion to dismiss,
the trial court refused to allow evidence of the OII or the Company's CPUC
approval to go before the jury. Notwithstanding the Company's strenuous
objections, the judge also allowed evidence of the Company's and DeAnza's
litigation tactics to be used as evidence of bad faith and oppressive actions
(including evidence of the application to the CPUC requesting a $22.00 readiness
to serve charge). The Company's motion for a mistrial based upon these
evidentiary rulings was denied. On January 22, 1999, the jury returned a verdict
awarding $6.0 million of punitive damages against the Company and DeAnza. The
Company had previously agreed to indemnify DeAnza on the matter.
14
On April 19, 1999, the trial court denied all of the Company's and DeAnza's
post-trial motions for judgement notwithstanding the verdict, new trial and
remittur. The trial court also awarded $700,000 of attorneys' fees to
plaintiffs. The Company appealed the jury verdict and attorneys' fees award
(which also accrues interest at the statutory rate of 10.0% per annum). The
Company bonded the judgment pending appeal in accordance with California
procedural rules, which require a bond equal to 150% of the amount of the
judgment. Post-judgment interest will accrue at the statutory rate of 10.0% per
annum.
On December 21, 2001 the California Court of Appeal for the Sixth District
reversed the $6.0 million punitive damage award, the related award of attorneys'
fees, and, as a result, all post-judgement interest thereon, on the basis that
punitive damages are not available as a remedy for a statutory violation of the
MRL. The decision of the appellate court left the HOA with the right to seek a
new trial in which it must prove its entitlement to either the statutory penalty
and attorneys' fees available under the MRL or punitive damages based on causes
of action for fraud, misrepresentation or other tort. The HOA has filed in
Superior Court, seeking statutory penalties and attorneys' fees, which may be
heard in late March, 2002. The Company intends to vigorously defend itself
against these claims.
In two related appeals, the Company had argued that the trial court's
ability to enter an award of attorneys' fees in favor of the HOA and to take
certain other actions was preempted by the exercise of exclusive jurisdiction by
the CPUC over the issue of how to set rates for water in a submetered mobile
home park. During 2000, the California court of appeal rejected the Company's
preemption argument with respect to these prior rulings in favor of plaintiffs,
one of which had awarded plaintiffs approximately $100,000 of attorneys' fees.
The California Supreme Court declined to accept the case for review and the
Company paid the judgment, including post-judgment interest thereon, and settled
the matter for approximately $200,000 late in 2000.
In a separate matter, in December 2000 the HOA and certain individual
residents of the Property filed a complaint in the Superior Court of California,
County of Santa Cruz (No. CV 139825) against the Company, certain affiliates of
the Company and certain employees of the Company. The new lawsuit seeks damages,
including punitive damages, for intentional infliction of emotional distress,
unfair business practices, and unlawful retaliation purportedly arising from
allegedly retaliatory rent increases which were noticed by the Company to
certain residents in September 2000. The Company believes that the residents who
received rent increase notices with respect to rent increases above those
permitted by the local rent control ordinance were not covered by the ordinance
either because they did not comply with the provisions of the ordinance or
because they are exempted by state law. On December 29, 2000, the Superior Court
of California, County of Santa Cruz enjoined such rent increases. The Company
intends to vigorously defend the matter, which may go to trial in the summer of
2002.
ELLENBURG COMMUNITIES
The Company and certain other parties entered into a settlement agreement
("the Settlement"), which was approved by the Los Angeles County Superior Court
in April 2000. The Settlement resolved substantially all of the litigation and
appeals involving the Ellenburg Properties, and transactions arising out of the
settlement closed on May 22, 2000 (see Note 5). Only the appeals of the two
entities remain, neither of which is expected to materially affect the Company.
In connection with the Ellenburg Acquisition, on September 8, 1999,
Ellenburg Fund 20 ("Fund 20") filed a cross complaint in the Ellenburg
dissolution proceeding against the Company and certain of its affiliates
alleging causes of action for fraud and other claims in connection with the
Ellenburg acquisition. The Company subsequently successfully had the cross
complaint against the Company and its affiliates dismissed with prejudice by the
California Superior Court. However, Fund 20 has appealed. This appeal was one
not resolved by the Settlement. The Company believes Fund 20's allegations are
without merit and will vigorously defend itself.
In October 2001, Fund 20 sued the Company and certain of its affiliates
again, this time in Almeda County, California making substantially the same
allegations. The Company obtained an injunction preventing the case from
proceeding until the Fund 20 appeal is decided and other related proceedings in
Arizona (from which the Company has already been dismissed with prejudice) are
concluded.
15
CANDLELIGHT PROPERTIES, L.L.C
In 1996, 1997 and 1998, the Lending Partnership made loans to Candlelight
Properties, L.L.C. ("Borrower") in the aggregate principal amount of $8,050,000
(collectively, the "Loan". The Loan was secured by a mortgage on Candlelight
Village ("Candlelight"), a Property in Columbus, Indiana, and was guaranteed by
Ronald E. Farren, the 99% owner of Borrower. The Company accounted for the Loan
as an investment in real estate and, accordingly, Candlelight's rental revenues
and operating costs were included with the Company's rental revenues and
operating costs for financial reporting purposes. Concurrently with the funding
of the Loan, Borrower granted the Operating Partnership the option to acquire
Candlelight upon the maturity of the Loan. The Operating Partnership notified
Borrower that it was exercising its option to acquire Candlelight in March 1999,
and the Loan subsequently matured on May 3, 1999. However, Borrower failed to
repay the Loan and refused to convey Candlelight to the Operating Partnership.
Borrower filed suit in the Circuit Court of Bartholomew County, Indiana
("Court") on May 5, 1999, seeking declaratory judgment on the validity of the
exercise of the option. The Lending Partnership filed suit in the Court the next
day, seeking to foreclose its mortgage, and the suits were consolidated by the
Court.
On September 20, 2001, the parties entered into a settlement agreement
providing for a cash payment of $10.8 million to the Lending Partnership and
dismissal with prejudice of all litigation among the parties and their
affiliates, among other terms. The closing under the Settlement Agreement
occurred on October 5, 2001. The Company accounted for the Settlement as a
disposition of the property.
WESTWINDS
The Operating Partnership is the ground lessee ("Lessee") of certain
property in San Jose, California under ground leases ("Leases") from the
Nicholson Family Trust ("Lessor"). On February 13, 2001, Lessor filed a petition
for arbitration of disputes over whether certain items constitute "gross
revenue" under the Leases in which petition Lessor seeks damages and termination
of the Leases. Lessee responded on March 12, 2001 disputing Lessor's
contentions. Lessor claims that "gross revenue" for the purpose of calculating
percentage rent owing to Lessor under the ground leases includes certain amounts
Lessee has recouped from tenants of the Property (who are protected by rent
control) related to ground rent already paid to Lessor. Lessee has successfully
been able to pass-through to tenants at the property increases in ground rent
under the Leases. Lessee contends that this pass-through results in
reimbursement of lease expense, not "gross revenue." Lessor also contends that
the "net income" of RSI. from the Property should be included in the gross
revenue calculation. Lessee disputes this for many reasons, including, but not
limited to, the fact that RSI is not a lessee under the Leases, the sales
activity is not conducted by Lessee, and RSI is a separate company from Lessee.
Lessor's motion for summary judgment on the pass-through issue was denied
by an arbitration panel on November 2, 2001. Lessor and Lessee have agreed to
mediate the dispute prior to arbitration. The Company does not believe that the
amounts in question are material even if resolved against the Lessee and, based
upon advice of counsel, does not believe that the Lessor will be successful in
terminating the Leases.
OTHER
The Company is involved in various other legal proceedings arising in the
ordinary course of business. Management believes that all proceedings herein
described or referred to, taken together, are not expected to have a material
adverse impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth for the period indicated, the high and low
sales prices for the Company's common stock as reported by The New York Stock
Exchange under the trading symbol MHC.
DISTRIBUTIONS RETURN OF CAPITAL
CLOSE HIGH LOW MADE GAAP BASIS(A)
-------- -------- -------- ------------- -----------------
2001
1st Quarter $27.0000 $28.7500 $25.8800 $ .4450 $ .00
2nd Quarter 28.1000 28.2000 26.4800 .4450 .16
3rd Quarter 30.4200 30.4200 28.0500 .4450 .16
4th Quarter 31.2100 31.6400 30.0000 .4450 .11
2000
1st Quarter $23.1250 $25.7500 $22.2500 $ .4150 $ .14
2nd Quarter 23.9375 25.7500 23.0625 .4150 .00
3rd Quarter 25.0000 25.2500 23.5000 .4150 .17
4th Quarter 29.0000 29.1250 24.3125 .4150 .12
(a) Represents distributions per share in excess of net income per share-basic
on a GAAP basis and is not the same as return of capital on a tax basis.
The number of beneficial holders of the Company's common stock at December
31, 2001 was approximately 4,400.
17
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AND PROPERTY DATA)
ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial and operating information
on a historical basis for the Company. The following information should be read
in conjunction with all of the financial statements and notes thereto included
elsewhere in this Form 10-K. The historical operating data for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 have been derived from the
historical Financial Statements of the Company audited by Ernst & Young LLP,
independent auditors.
(1) YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
OPERATING DATA:
REVENUES
Base rental income........................................... $195,644 $189,481 $181,672 $165,340 $108,984
RV base rental income........................................ 5,748 7,414 9,526 7,153 --
Utility and other income..................................... 22,014 20,366 20,096 18,219 11,785
Equity in income of affiliates............................... 1,811 2,408 2,065 1,070 800
Interest income.............................................. 639 1,009 1,669 3,048 1,941
-------- -------- -------- -------- --------
Total revenues............................................. 225,856 220,678 215,028 194,830 123,510
-------- -------- -------- -------- --------
EXPENSES
Property operating and maintenance........................... 62,008 59,199 58,038 53,064 32,343
Real estate taxes............................................ 17,420 16,888 16,460 14,470 8,352
Property management.......................................... 8,984 8,690 8,337 7,108 5,079
General and administrative................................... 6,687 6,423 6,092 5,411 4,559
Interest and related amortization............................ 51,305 53,280 53,775 49,693 21,753
Depreciation on corporate assets............................. 1,243 1,139 1,005 995 590
Depreciation on real estate assets and other costs........... 34,833 34,411 34,486 28,426 17,365
-------- -------- -------- -------- --------
Total expenses............................................. 182,480 180,030 178,193 159,167 90,041
-------- -------- -------- -------- --------
Income from operations....................................... 43,376 40,648 36,835 35,663 33,469
Gain on sale of property and other........................... 8,168 12,053 -- -- --
-------- -------- -------- -------- --------
Income before allocation to minority interests
and extraordinary loss on early extinguishment of debt..... 51,544 52,701 36,835 35,663 33,469
(Income) allocated to Common OP Units........................ (8,209) (8,463) (6,219) (6,733) (4,373)
(Income) allocated to Perpetual Preferred OP Units........... (11,252) (11,252) (2,844) -- --
-------- -------- -------- -------- --------
Income before extraordinary loss on early
extinguishment of debt..................................... 32,083 32,986 27,772 28,930 29,096
Extraordinary loss on early extinguishment of
debt (net of $264 and $105 allocated to
minority interests)........................................ -- (1,041) -- -- (451)
-------- -------- -------- -------- --------
NET INCOME................................................. $ 32,083 $ 31,945 $ 27,772 $ 28,930 $ 28,645
======== ======== ======== ======== ========
Net income per Common Share before extraordinary
item -- basic.............................................. $ 1.53 $ 1.54 $ 1.10 $ 1.13 $ 1.18
======== ======== ======== ======== ========
Net income per Common Share before extraordinary
item -- diluted............................................ $ 1.49 $ 1.51 $ 1.09 $ 1.12 $ 1.16
======== ======== ======== ======== ========
Net income per Common Share -- basic......................... $ 1.53 $ 1.49 $ 1.10 $ 1.13 $ 1.16
======== ======== ======== ======== ========
Net income per Common Share -- diluted....................... $ 1.49 $ 1.46 $ 1.09 $ 1.12 $ 1.15
======== ======== ======== ======== ========
Dividend declared per Common Share........................... $ 1.78 $ 1.66 $ 1.55 $ 1.45 $ 1.32
======== ======== ======== ======== ========
Weighted average Common Shares outstanding -- basic.......... 21,036 21,469 25,224 25,626 24,689
Weighted average Common OP Units outstanding................. 5,466 5,592 5,704 5,955 3,749
Weighted average Common Shares outstanding -- diluted........ 27,010 27,408 31,252 31,962 28,762
18
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AND PROPERTY DATA)
(1) AS OF DECEMBER 31,
------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- ----------
BALANCE SHEET DATA:
Real estate, before accumulated depreciation(2)... $1,238,138 $1,218,176 $1,264,343 $1,237,431 $ 936,318
Total assets...................................... 1,099,963 1,104,304 1,160,338 1,176,841 864,365
Total mortgages and loans......................... 708,857 719,684 725,264 750,849 495,172
Minority interests................................ 171,147 171,271 179,397 70,468 67,453
Stockholders' equity.............................. 175,150 168,095 211,401 310,441 280,575
OTHER DATA:
Funds from operations(3).......................... $ 66,957 $ 63,807 $ 68,477 $ 64,089 $ 50,834
Net cash flow:
Operating activities........................... $ 80,708 $ 68,001 $ 72,580 $ 71,977 $ 54,581
Investing activities........................... $ (23,067) $ 23,102 $ (37,868) $ (262,762) $(239,445)
Financing activities........................... $ (59,134) $ (94,932) $ (41,693) $ 203,533 $ 185,449
Total Properties (at end of period)(4)............ 148 154 157 154 121
Total sites (at end of period).................... 50,761 51,452 54,002 53,009 44,108
Total sites (weighted average)(5)................. 46,243 46,964 46,914 43,932 29,323
- ---------------
(1) See the Consolidated Financial Statements of the Company included elsewhere
herein.
(2) The Company believes that the book value of the Properties, which reflects
the historical costs of such real estate assets less accumulated
depreciation, is less than the current market value of the Properties.
(3) The Company generally considers Funds From Operations ("FFO") to be an
appropriate measure of the performance of an equity Real Estate Investment
Trust ("REIT"). FFO was redefined by the National Association of Real Estate
Investment Trusts ("NAREIT") in October 1999, effective January 1, 2000, as
net income (computed in accordance with generally accepted accounting
principles ["GAAP"]), before allocation to minority interests, excluding
gains (or losses) from sales of property, plus real estate depreciation and
after adjustments for unconsolidated partnerships and joint ventures. For
purposes of presenting FFO, the revised definition of FFO has been given
retroactive treatment. The Company believes that FFO is helpful to investors
as a measure of the performance of an equity REIT because, along with cash
flows from operating activities, financing activities and investing
activities, it provides investors an understanding of the ability of the
Company to incur and service debt and to make capital expenditures. The
Company computes FFO in accordance with the NAREIT definition which may
differ from the methodology for calculating FFO utilized by other equity
REITs and, accordingly, may not be comparable to such other REITs
computations. FFO in and of itself does not represent cash generated from
operating activities in accordance with GAAP and therefore should not be
considered an alternative to net income as an indication of the Company's
performance or to net cash flows from operating activities as determined by
GAAP as a measure of liquidity and is not necessarily indicative of cash
available to fund cash needs.
(4) During the year ended December 31, 1997, 39 Properties were acquired; net
operating income attributable to such Properties during 1997 was
approximately $3.8 million, which included approximately $1.7 million of
depreciation and amortization expense. During the year ended December 31,
1998, 41 Properties were acquired; net operating income attributable to such
Properties during 1998 was approximately $7.6 million, which included
approximately $3.9 million of depreciation and amortization expense. During
the year ended December 31, 1999, two Properties were acquired; net
operating income attributable to such Properties during 1999 was
approximately $87,000, which included approximately $104,000 of depreciation
expense. During the year ended December 31, 2000, three Properties and a
water and wastewater treatment company were sold; net operating income
attributable to such Properties during 2000 was approximately $1.6 million,
which included approximately $623,000 of depreciation expense. During the
year ended December 31, 2001, two Properties were purchased; net operating
income attributable to such Properties during 2001 was approximately $1.3
million, which included approximately $396,000 of depreciation expense. Also
during the year ended December 31, 2001, eight Properties were sold; net
operating income attributable to such Properties during 2001 was $1.0
million, which included approximately $235,000 of depreciation expense.
(5) Excludes recreational vehicle sites and sites held through unconsolidated
joint ventures.
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and the historical Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Form 10-K. The following discussion may
contain certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 which reflect management's current
views with respect to future events and financial performance. Such
forward-looking statements are subject to certain risks and uncertainties,
including, but not limited to, the effects of future events on the Company's
financial performance; the adverse impact of external factors such as inflation
and consumer confidence; and the risks associated with real estate ownership.
RESULTS OF OPERATIONS
PROPERTY ACQUISITIONS, JOINT VENTURES AND DISPOSITIONS
The following chart lists the Properties acquired or sold since January 1,
1999. The Company defines its core Community portfolio ("Core Portfolio") as
Properties owned throughout both periods of comparison. Excluded from the Core
Portfolio are any Properties acquired or sold during the period and also any
recreational vehicle ("RV") Properties which, together, are referred to as the
"Non-Core" Properties.
PROPERTY TRANSACTION DATE SITES
-------- ---------------- ------
TOTAL SITES AS OF JANUARY 1, 1999......................... 53,009
ACQUISITIONS:
The Meadows............................................. April 1, 1999 380
Coquina Crossing........................................ July 23, 1999 270
Grand Island (f.k.a. Golden Lakes)...................... January 3, 2001 421
Lakes at Countrywood (f.k.a. Chain O' Lakes)............ January 3, 2001 309
Bulow Resort RV......................................... July 1, 2001 352
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES:
Lakeshore Communities (2 properties).................... 1999 343
EXPANSION SITE DEVELOPMENT:
Sites added in 1999..................................... --
Sites added in 2000..................................... 108
Sites added in 2001..................................... 143
DISPOSITIONS:
Garden West Office Plaza................................ October 26, 1999 --
FFEC-Six (water and wastewater service company)......... February 29, 2000 --
Mesa Regal RV Resort.................................... May 22, 2000 (2,005)
Naples Estates.......................................... May 22, 2000 (484)
Mon Dak................................................. May 22, 2000 (219)
Dellwood Estates........................................ February 13, 2001 (136)
Briarwood............................................... February 13, 2001 (166)
Bonner Springs.......................................... February 13, 2001 (211)
Carriage Park........................................... February 13, 2001 (143)
North Star.............................................. February 13, 2001 (219)
Quivira Hills........................................... February 13, 2001 (142)
Rockwood................................................ February 13, 2001 (264)
Candlelight............................................. October 5, 2001 (585)
------
TOTAL SITES AS OF DECEMBER 31, 2001.......................................... 50,761
======
20
TRENDS
Occupancy in the Company's Properties as well as the ability to increase
rental rates directly affects revenues. In 2001, occupancy in the Company's Core
Portfolio has remained relatively stable. Also during 2001, average monthly base
rental rates for the Core Portfolio increased approximately 4.5%. The Company
believes these trends will continue through 2002.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States,
which require the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related
disclosures. The Company believes that the following critical accounting
policies, among others, affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements.
The Company periodically evaluates its long-lived assets, including its
investments in real estate for impairment indicators. The judgments regarding
the existence of impairment indicators, are based on factors such as operational
performance, market conditions and legal factors. Future events could occur
which would cause us to conclude that impairment indicators exist and an
impairment loss is warranted.
The valuation of financial instruments under SFAS No. 107 and SFAS No. 133
requires the Company to make estimates and judgments that affect the fair value
of the instruments. The Company, where possible, bases the fair values of its
financial instruments, including its derivative instrument, on listed market
prices and third party quotes. Where these are not available, the Company bases
its estimates on other factors relevant to the financial instrument.
21
COMPARISON OF YEAR ENDED DECEMBER 31, 2001 TO YEAR ENDED DECEMBER 31, 2000
Since December 31, 1999, the gross investment in real estate increased from
$1,264 million to $1,238 million as of December 31, 2001, due primarily to the
aforementioned acquisitions and dispositions of Properties during the period.
The total number of sites owned or controlled decreased from 54,002 as of
December 31, 1999 to 50,761 as of December 31, 2001.
The following table summarizes certain financial and statistical data for
the Core Portfolio and the Total Portfolio for the years ended December 31, 2001
and 2000.
CORE PORTFOLIO TOTAL PORTFOLIO
----------------------------------------- -----------------------------------------
INCREASE/ % INCREASE/ %
(dollars in thousands) 2001 2000 (DECREASE) CHANGE 2001 2000 (DECREASE) CHANGE
-------- -------- ---------- ------ -------- -------- ---------- ------
(DOLLARS IN THOUSANDS)
Base rental income(1)............ $192,160 $183,615 $8,545 4.7% $195,644 $189,064 $ 6,580 3.5%
Utility and other income......... 20,222 18,664 1,558 8.3% 27,762 28,197 (435) (1.5%)
Equity in income of affiliates... -- -- -- -- 1,811 2,408 (597) (24.8%)
Interest income.................. -- -- -- -- 639 1,009 (370) (36.7%)
-------- -------- ------ ------ -------- -------- ------- ------
Total revenues................. 212,382 202,279 10,103 5.0% 225,856 220,678 5,178 2.3%
Property operating and
maintenance.................... 57,787 54,150 3,637 6.7% 62,008 59,199 2,809 4.7%
Real estate taxes................ 16,773 16,321 452 2.8% 17,420 16,888 532 3.2%
Property management.............. 8,594 8,121 473 5.8% 8,984 8,690 294 3.4%
General and administrative....... -- -- -- -- 6,687 6,423 264 4.1%
-------- -------- ------ ------ -------- -------- ------- ------
Total operating expenses....... 83,154 78,592 4,562 5.8% 95,099 91,200 3,899 4.3%
-------- -------- ------ ------ -------- -------- ------- ------
Income from operations before
interest, depreciation and
amortization expenses.......... 129,228 123,687 5,541 4.5% 130,757 129,478 1,279 1.0%
Interest and related
amortization................... -- -- -- -- 51,305 53,280 (1,975) (3.7%)
Depreciation on corporate
assets......................... -- -- -- -- 1,243 1,139 104 9.1%
Property depreciation and
other.......................... 32,243 30,792 1,451 4.7% 34,833 34,411 422 1.2%
-------- -------- ------ ------ -------- -------- ------- ------
Income from operations(2)...... $ 96,985 $ 92,895 $4,090 4.4% $ 43,376 $ 40,648 $ 2,728 6.7%
======== ======== ====== ====== ======== ======== ======= ======
Site and Occupancy
Information(3):
Average total sites.............. 44,966 44,828 138 0.3% 46,243 46,964 (721) (1.5%)
Average occupied sites........... 42,384 42,320 61 0.2% 43,576 44,325 (749) (1.7%)
Occupancy %...................... 94.3% 94.4% (0.1%) (0.1%) 94.2% 94.4% (0.2%) (0.2%)
Monthly base rent per site....... $ 377.82 $ 361.47 $16.35 4.5% $ 374.15 $ 355.45 $ 18.70 5.3%
Total sites as of December 31,... 45,011 44,868 143 0.3% 45,743 46,734 (991) (2.1%)
Total occupied sites as of
December 31,................... 42,243 42,529 (286) (0.7%) 42,887 44,270 (1,383) (3.1%)
- ---------------
(1) During 2001, at certain Properties the amounts charged to residents for
utilities were separated ("Unbundled") from their base rent charges and
recorded as utility income. For comparison purposes, a reclassification was
made to base rental income for 2000 on this table. This reclassification is
also reflected in the monthly base rent per site amounts for 2000.
(2) Income from operations for the Core Portfolio does not include an allocation
of income from affiliates, interest income, corporate general and
administrative expense, interest expense and related amortization or
depreciation on corporate assets.
(3) Site and occupancy information does not include the Properties owned through
unconsolidated joint ventures or the RV Properties.
22
Revenues
The 4.7% increase in base rental income for the Core Portfolio reflects a
4.5% increase in monthly base rent per site coupled with a 0.2% increase in
average occupied sites. The increase in utility and other income for the Core
Portfolio is due primarily to increases in pass through items such as utilities
and real estate taxes -- which resulted from higher expenses for these items.
For the Total Portfolio, changes in base rental income and utility and other
income generally reflect those of the Core Portfolio and the effect of
acquisition and disposition of the Non-Core Properties.
Equity in income of affiliates decreased 24.8%, reflecting lower sales
volumes. Combined home sales revenue decreased approximately $4.0 million, of
which $3.3 million is attributable to a decline in new home inventory sales
volume. Sales volumes for new home inventory, used home inventory and brokered
home sales were 485, 250 and 1,114, respectively, for the year ended December
31, 2001, and 535, 290 and 1,271, respectively, for the year ended December 31,
2000.
The decrease in interest income is primarily due to the repayment of
certain notes receivable, fewer short-term investments and lower interest rates.
Short-term investments had average balances for the years ended December 31,
2001 and 2000 of approximately $1.9 million and $1.5 million, respectively,
which earned interest income at an effective rate of 3.8% and 6.0% per annum,
respectively.
Operating Expenses
The increase in property operating and maintenance expense for the Core
Portfolio is due primarily to increases in utility expenses passed through and
included in utility income. Expenses for the Core Portfolio also reflect
increases in payroll and property insurance expenses. Core Portfolio real estate
taxes increased 2.8% generally due to higher assessed values on certain
Properties. The increase in Total Portfolio property operating and maintenance
expense and real estate taxes is also impacted by acquisition and disposition of
Non-Core Properties. Property management expense allocated to the Core
Portfolio, which reflects costs of managing the Properties and is estimated
based on a percentage of Property revenues, increased 5.8%.
General and administrative expenses ("G&A") increased 4.1% due to increased
public company costs and related expenses and promotional costs. G&A for 2001
includes a charge for additional amortization of deferred compensation offset by
a reversal of legal expenses previously accrued related to the Ellenburg
settlement.
Interest and related amortization decreased due to lower interest rates
during the period. The weighted average outstanding debt balances for the years
ended December 31, 2001 and 2000 were $713.2 million and $707.5 million,
respectively. The effective interest rate was 7.0% and 7.4% per annum for the
years ended December 31, 2001 and 2000, respectively.
Depreciation on corporate assets increased due to fixed asset additions
related to information and communication systems. Depreciation on real estate
assets and other costs increased due primarily to the acquisition and
disposition of Non-Core Properties.
23
COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO YEAR ENDED DECEMBER 31, 1999
Since December 31, 1998, the gross investment in real estate decreased from
$1,237 million to $1,218 million as of December 31, 2000, due primarily to the
aforementioned acquisitions and dispositions of Properties during the period.
The total number of sites owned or controlled decreased from 53,009 as of
December 31, 1998 to 51,452 as of December 31, 2000.
The following table summarizes certain financial and statistical data for
the Core Portfolio and the Total Portfolio for the years ended December 31, 2000
and 1999.
CORE PORTFOLIO TOTAL PORTFOLIO
----------------------------------------- -----------------------------------------
INCREASE/ % INCREASE/ %
(dollars in thousands) 2000 1999 (DECREASE) CHANGE 2000 1999 (DECREASE) CHANGE
-------- -------- ---------- ------ -------- -------- ---------- ------
(DOLLARS IN THOUSANDS)
Base rental income............... $186,148 $178,095 $8,053 4.5% $189,481 $181,672 $ 7,809 4.3%
Utility and other income......... 17,986 17,436 550 3.2% 27,780 29,622 (1,842) (6.2%)
Equity in income of affiliates... -- -- -- -- 2,408 2,065 343 16.6%
Interest income.................. -- -- -- -- 1,009 1,669 (660) (39.5%)
-------- -------- ------ ------ -------- -------- ------- ------
Total revenues................. 204,134 195,531 8,603 4.4% 220,678 215,028 5,650 2.6%
Property operating and
maintenance.................... 54,358 52,096 2,262 4.3% 59,199 58,038 1,161 2.0%
Real estate taxes................ 16,186 15,811 375 2.4% 16,888 16,460 428 2.6%
Property management.............. 8,194 7,725 469 6.1% 8,690 8,337 353 4.2%
General and administrative....... -- -- -- -- 6,423 6,092 331 5.4%
-------- -------- ------ ------ -------- -------- ------- ------
Total operating expenses....... 78,738 75,632 3,106 4.1% 91,200 88,927 2,273 2.6%
-------- -------- ------ ------ -------- -------- ------- ------
Income from operations before
interest, depreciation and
amortization expenses.......... 125,396 119,899 5,497 4.6% 129,478 126,101 3,377 2.7%
Interest and related
amortization................... -- -- -- -- 53,280 53,775 (495) (0.9%)
Depreciation on corporate
assets......................... -- -- -- -- 1,139 1,005 134 13.3%
Property depreciation and
other.......................... 31,366 30,912 454 1.5% 34,411 34,486 (75) (0.2%)
-------- -------- ------ ------ -------- -------- ------- ------
Income from operations(1)...... $ 94,030 $ 88,987 $5,043 5.7% $ 40,648 $ 36,835 $ 3,813 10.4%
======== ======== ====== ====== ======== ======== ======= ======
Site and Occupancy
Information(2):
Average total sites.............. 45,894 45,810 84 0.2% 46,964 46,914 50 0.1%
Average occupied sites........... 43,410 43,138 272 0.6% 44,325 44,110 215 0.5%
Occupancy %...................... 94.6% 94.2% 0.4% 0.4% 94.4% 94.0% 0.4% 0.4%
Monthly base rent per site....... $ 357.35 $ 344.04 $13.31 3.9% $ 356.24 $ 343.22 $ 13.02 3.8%
Total sites as of December 31,... 45,902 45,808 94 0.2% 46,734 47,284 (550) (1.2%)
Total occupied sites as of
December 31,................... 43,595 43,289 306 0.7% 44,270 44,555 (285) (0.6%)
- ---------------
(1) Income from operations for the Core Portfolio does not include an allocation
of income from affiliates, interest income, corporate general and
administrative expense, interest expense and related amortization or
depreciation on corporate assets.
(2) Site and occupancy information does not include the five Properties owned
through joint ventures or the three RV properties.
24
Revenues
The 4.5% increase in base rental income for the Core Portfolio reflects a
3.9% increase in monthly base rent per site coupled with a 0.6% increase in
average occupied sites. The 4.3% increase in base rental income for the Total
Portfolio reflects a 3.8% increase in monthly base rent per site coupled with a
0.5% increase in average occupied sites and also reflects the acquisition and
disposition of Non-Core Properties. The increase in utility and other income for
the Core Portfolio is due primarily to increases in pass through items such as
utilities and real estate taxes -- which resulted from higher expenses for these
items. The decrease in Total Portfolio utility and other income is due primarily
to the sale of Mesa Regal RV resort and other changes in the Non-Core
Properties. Also included in other income is a gain on the sale of the FFEC-Six
water and wastewater treatment company of $719,000, partially offset by an
impairment loss on the DeAnza Santa Cruz water and wastewater service company of
$701,000.
The decrease in interest income is primarily due to the repayment of
certain notes receivable and fewer short-term investments. Short-term
investments had average balances for the years ended December 31, 2000
and 1999 of approximately $1.5 million and $2.8 million, respectively, which
earned interest income at an effective rate of 6.0% and 6.3% per annum,
respectively.
Operating Expenses
The increase in property operating and maintenance expense for the Core
Portfolio is due primarily to increases in utility expenses passed through and
included in utility income. Expenses for the Core Portfolio also reflect
increases in repairs and maintenance expense, payroll and property general and
administrative expenses partially offset by decreased insurance and other
expenses. Core Portfolio real estate taxes increased 2.4% generally due to
higher property assessments on certain Properties. The increase in Total
Portfolio property operating and maintenance expense and real estate taxes is
also impacted by acquisition and disposition of Non-Core Properties. Property
management expense for the Core Portfolio, which reflects costs of managing the
Properties and is estimated based on a percentage of Property revenues,
increased 6.1%.
General and administrative expenses increased primarily due to increased
payroll resulting from salary increases and increased public company related
expenses.
Interest and related amortization decreased due to lower weighted average
outstanding debt balances during the period. The weighted average outstanding
debt balances for the years ended December 31, 2000 and 1999 were $707.5 million
and $738.1 million, respectively. The effective interest rate was 7.4% and 7.2%
per annum for the years ended December 31, 2000 and 1999, respectively.
Depreciation on corporate assets increased due to fixed asset additions
related to information and communication systems. Depreciation on real estate
assets and other costs decreased due primarily to the acquisition and
disposition of Non-Core Properties.
25
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
As of December 31, 2001, the Company had $1.4 million in cash and cash
equivalents and $133.8 million available on its line of credit. The Company
expects to meet its short-term liquidity requirements, including its
distributions, generally through its working capital, net cash provided by
operating activities and availability under the existing line of credit. The
Company expects to meet certain long-term liquidity requirements such as
scheduled debt maturities, property acquisitions and capital improvements by
long-term collateralized and uncollateralized borrowings including borrowings
under its existing line of credit and the issuance of debt securities or
additional equity securities in the Company, in addition to working capital.
In order to qualify as a REIT for federal income tax purposes, the Company
must distribute 95% or more of its taxable income (excluding capital gains). The
following distributions have been declared and/or paid to common stockholders
and minority interests since January 1, 1999.
DISTRIBUTION FOR THE SHAREHOLDER
AMOUNT PER SHARE QUARTER ENDING RECORD DATE PAYMENT DATE
----------------- ------------------ ------------------ ----------------
$0.3875 March 31, 1999 March 26, 1999 April 9, 1999
$0.3875 June 30, 1999 June 25, 1999 July 9, 1999
$0.3875 September 30, 1999 September 24, 1999 October 8, 1999
$0.3875 December 31, 1999 December 31, 1999 January 14, 2000
- -----------------------------------------------------------------------------------------------
$0.4150 March 31, 2000 March 31, 2000 April 14, 2000
$0.4150 June 30, 2000 June 30, 2000 July 14, 2000
$0.4150 September 30, 2000 September 29, 2000 October 13, 2000
$0.4150 December 31, 2000 December 29, 2000 January 12, 2001
- -----------------------------------------------------------------------------------------------
$0.4450 March 31, 2001 March 30, 2001 April 13, 2001
$0.4450 June 30, 2001 June 29, 2001 July 13, 2001
$0.4450 September 30, 2001 September 28, 2001 October 12, 2001
$0.4450 December 31, 2001 December 28, 2001 January 11, 2002
The Operating Partnership paid distributions of 9.0% per annum on the $125
million of Series D Cumulative Redeemable Perpetual Preferred Units ("Preferred
Units"). Distributions on the Preferred Units were paid quarterly on the last
calendar day of each quarter beginning December 31, 1999. The Company expects to
continue to make regular quarterly distributions and has set its 2002
distribution to common stockholders at $1.90 per share per annum.
MORTGAGES AND CREDIT FACILITIES
On October 29, 2001, the Company entered into an interest rate swap
agreement, fixing the London Interbank Offered Rate ("LIBOR") on $100 million of
the Company's floating rate debt at approximately 3.7% per annum for the period
October 2001 through August 2004. The terms of the swap require monthly
settlements on the same dates interest payments are due on the debt. In
accordance with SFAS No. 133 as herein defined, the interest rate swap will be
reflected at market value. The Company believes the swap is a perfectly
effective cash flow hedge, under SFAS No. 133 and there will be no effect on net
income as a result of the mark-to-market adjustments.
During the year ended December 31, 2001, the Company borrowed $46.0 million
on its line of credit and paid down $89.7 million on the line of credit. The
line of credit bears interest at a per annum rate of LIBOR plus 1.125%.
In July of 2001, the Company paid off three maturing mortgages in the
amount of $12.1 million. The payoffs were funded with borrowings on the line of
credit.
26
On August 3, 2001, the Company entered into a $50.0 million mortgage note
(the "Stagecoach Mortgage") collateralized by 7 Properties beneficially owned by
MHC Stagecoach, L.L.C. The Stagecoach Mortgage bears interest at a rate of 6.98%
per annum, amortizes beginning September 1, 2001 over 10 years and matures
August 31, 2011. Proceeds from the financing were used to reduce borrowings on
the line of credit by $37.9 million.
On February 24, 2000, the Company entered into mortgage agreements
collateralizing two Properties for a total of $14.6 million. The mortgage notes
mature on March 1, 2010, amortize beginning March 1, 2000 over 30 years and bear
interest at a rate of approximately 8.3% per annum.
On April 3, 2000, the Company extended to April 3, 2002 the maturity of its
$100 million unsecured term loan (the "Term Loan") with a group of banks with
interest only payable monthly at a per annum rate of LIBOR plus 1.0%. On
February 8, 2002, the Company entered into a term loan credit agreement with the
same group of banks, which extended the Term Loan to August 9, 2005.
On June 30, 2000, the Company obtained $110 million in debt financing
consisting of two mortgage notes -- one for $94.3 million and one for $15.7
million -- secured by seven Properties. The proceeds of the financing were used
to repay $60 million of mortgage debt secured by the seven Properties, to repay
amounts outstanding under the Company's line of credit and for working capital
purposes. The Company recorded a $1.0 million extraordinary loss (net of
$264,000 allocated to Minority Interests) in connection with the early repayment
of the $60 million of mortgage debt.
On August 9, 2000, the Company amended its unsecured line of credit with a
bank (the "Credit Agreement") bearing interest at a per annum rate of LIBOR plus
1.125%. Among other things, the amendment lowered the total facility under the
Credit Agreement to $150 million and extended the maturity to August 9, 2003.
The Company pays a quarterly fee on the average unused amount of such credit
equal to 0.15% of such amount. As of December 31, 2001, $133.8 million was
available under the Credit Agreement.
Certain of the Company's mortgage and credit agreements contain covenants
and restrictions including restrictions as to the ratio of secured or unsecured
debt versus encumbered or unencumbered assets, the ratio of fixed
charges-to-earnings before interest, taxes, depreciation and amortization
("EBITDA"), limitations on certain holdings and other restrictions.
ACQUISITIONS, DISPOSITIONS AND INVESTMENTS
On September 4, 1997, the Company entered into a portfolio purchase
agreement (as amended by a supplemental agreement on December 17, 1997) to
acquire 37 manufactured home communities (the "Ellenburg Communities") from
partnerships having Ellenburg Capital Corporation ("ECC") as the general
partner, for a purchase price in excess of $300 million. During 1997 and 1998,
the Company closed on the acquisition of 31 of the Ellenburg Communities for an
aggregate purchase price of approximately $278 million and gained control of an
additional five Ellenburg Communities with acquisition advances of approximately
$57 million to the partnerships which owned such Ellenburg Communities. All
fundings related to the acquisition were funded by the Company with borrowings
under the Company's line of credit, term bank facilities, assumed debt and the
issuance of Common OP Units.
During 1998, the Company received approximately $14.3 million, including
approximately $365,000 of interest income, which was being held subject to the
completion of due diligence procedures on the Ellenburg Communities. The $14.3
million was initially recorded as a liability until 1999 when a settlement of
certain related issues was substantially complete and accordingly, in a non-cash
transaction, relieved the liability and adjusted the purchase price of the
Ellenburg Communities.
In April 2000, the California Superior Court approved a settlement
agreement (the "Settlement") in connection with the dissolution proceeding of
ECC and its affiliated partnerships. As part of the Settlement, the Company
received $13.5 million previously held in escrow in connection with the purchase
of the Ellenburg Communities and recorded $3.0 million of interest income
related to these funds. In connection with the Settlement, the Company sold
three communities -- Mesa Regal RV Resort, Mon Dak and Naples Estates -- for an
aggregate sales price of $59.0 million, including cash proceeds of $40.0 million
and assumption of debt by the purchaser of $19.0 million. The Company recorded a
$9.1 million gain on the sale of these Properties. Proceeds from the Settlement
and property sales were used to pay down the Company's line of credit.
27
On January 6, 1998, the Company funded a $12.3 million loan (the "Meadows
Loan") to Meadows Preservation, Inc. The Meadows Loan was collateralized by The
Meadows manufactured home community located in Palm Beach Gardens, Florida. On
April 1, 1999, the Company effectively exchanged the Meadows Loan for an equity
and debt interest in the partnership that owns The Meadows. The Company includes
The Meadows in investment in real estate and the related results of operations
in the Statement of Operations.
On July 23, 1999, the Company acquired Coquina Crossing, located in St.
Augustine, Florida, for a purchase price of approximately $10.4 million. The
acquisition was funded with a borrowing under the Company's line of credit.
Coquina Crossing is a 748-site senior community with 274 developed sites and
zoned expansion potential for 479 sites. In addition, Realty Systems, Inc.
("RSI"), an affiliate of the Company, purchased the model home inventory at the
community for approximately $1.1 million.
On February 29, 2000, MHC Systems, Inc., a consolidated subsidiary of the
Company, disposed of the water and wastewater service company and facilities
known as FFEC-Six in a cash sale. Net proceeds from the sale of approximately
$4.2 million were used to pay down the Company's line of credit .
On December 28, 2000, the Company, through its joint venture with Meadows
Management Company, acquired a 50% economic interest in Voyager RV Resort, a
1,576 site RV resort in Tucson, Arizona, for total consideration of $8.0
million. The Company's investment included cash of $3.0 million, its 50%
interest in land held through the joint venture valued at $2.0 million and notes
receivable from the principals of Meadows Management Company totaling $3.0
million.
On January 3, 2001, the Company acquired two Florida Properties, totaling
730 sites, for an aggregate purchase price of approximately $16.3 million. The
Lakes at Countrywood is a 421-site community in Plant City, near Tampa, Florida,
and includes approximately 23 acres for expansion. Grand Island is a 309-site
community in Grand Island, near Orlando, Florida, and includes a marina with 50
boat docks. The acquisition was funded with a borrowing under the Company's line
of credit.
On February 13, 2001, the Company completed the disposition of seven
Properties, totaling 1,281 sites, in Kansas, Missouri and Oklahoma, for a total
sale price of approximately $17.4 million. A gain of $8.1 million was recorded
on the accompanying consolidated statements of operations. Proceeds from the
sale were used to reduce the amount outstanding on the Company's line of credit.
On October 5, 2001, the Company finalized a settlement agreement between
the Lending Partnership, the Operating Partnership and the limited liability
partnership which owns Candlelight Village in Columbus, Indiana. In 1996, the
Company funded a recourse loan to the owner of Candlelight Village and accounted
for the loan as an investment in real estate. The Company received $10.8 million
in proceeds from the settlement, which was accounted for as a sale of real
estate and recorded a $75,000 gain on the sale. Proceeds from the sale were used
as working capital.
CAPITAL IMPROVEMENTS
Capital expenditures for improvements are identified by the Company as
recurring capital expenditures ("Recurring CapEx"), site development costs and
corporate headquarters costs. Recurring CapEx was approximately $12.7 million
and $7.9 million for the years ended December 31, 2001 and 2000, respectively.
Of these expenditures, the Company believes that approximately $7.1 million or
$142 per site for 2001 and $6.5 million or $130 per site for 2000 are
non-revenue producing improvements which are necessary in order to increase
and/or maintain occupancy levels and maintain competitive market rents for new
and renewing residents. Site development costs were approximately $9.7 million
and $7.9 million for the years ended December 31, 2001 and 2000, respectively,
and represent costs to develop expansion sites at certain of the Company's
Properties.
EQUITY TRANSACTIONS
On March 26, 1999, the Operating Partnership repurchased and cancelled
200,000 OP Units from a limited partner of the Operating Partnership.
28
On September 30, 1999, the Operating Partnership completed a $125 million
private placement of 9.0% Series D Cumulative Perpetual Preferred Units ("POP
Units") to two institutional investors. The POP Units, which are callable by the
Company after five years, have no stated maturity or mandatory redemption. Net
proceeds from the offering of $121 million were used to repay amounts
outstanding under the Company's line of credit facility and for other corporate
purposes.
In March 1997, the Company's Board of Directors approved a common stock
repurchase plan whereby the Company was authorized to repurchase and retire
shares of its common stock. No shares of Common Stock were repurchased during
the year ended December 31, 2001. However, under the plan, the Company
repurchased approximately 2.2 million shares of Common Stock at an average price
of $24.06 per share during the year ended December 31, 2000 and 4.1 million
shares of Common Stock at an average price of $23.40 per share during the year
ended December 31, 1999, using proceeds from borrowings on the line of credit.
INFLATION
Substantially all of the leases at the Properties allow for monthly or
annual rent increases which provide the Company with the opportunity to achieve
increases, where justified by the market, as each lease matures. Such types of
leases generally minimize the risk of inflation to the Company.
FUNDS FROM OPERATIONS
FFO was redefined by NAREIT in October 1999, effective January 1, 2000, as
net income (computed in accordance with GAAP), before allocation to minority
interests, excluding gains (or losses) from sales of property, plus real estate
depreciation and after adjustments for unconsolidated partnerships and joint
ventures. The Company computes FFO in accordance with the NAREIT definition,
which may differ from the methodology for calculating FFO utilized by other
equity REITs and, accordingly, may not be comparable to such other REIT's
computations. Funds available for distribution ("FAD") is defined as FFO less
non-revenue producing capital expenditures and amortization payments on mortgage
loan principal. The Company believes that FFO and FAD are useful to investors as
a measure of the performance of an equity REIT because, along with cash flows
from operating activities, financing activities and investing activities, they
provide investors an understanding of the ability of the Company to incur and
service debt and to make capital expenditures. FFO and FAD in and of themselves
do not represent cash generated from operating activities in accordance with
GAAP and therefore should not be considered an alternative to net income as an
indication of the Company's performance or to net cash flows from operating
activities as determined by GAAP as a measure of liquidity and are not
necessarily indicative of cash available to fund cash needs.
The following table presents a calculation of FFO and FAD for the years
ended December 31, 2001, 2000 and 1999 (amounts in thousands):
2001 2000 1999
-------- -------- -------
COMPUTATION OF FUNDS FROM OPERATIONS:
Income before extraordinary loss on early Extinguishment
of debt................................................ $ 32,083 $ 32,986 $27,772
Income allocated to Common OP Units....................... 8,209 8,463 6,219
Depreciation on real estate assets and other costs........ 34,833 34,411 34,486
Gain on sale of Properties and other...................... (8,168) (12,053) --
-------- -------- -------
Funds from operations.................................. $ 66,957 $ 63,807 $68,477
======== ======== =======
Weighted average Common Stock outstanding -- diluted...... 27,010 27,408 31,252
======== ======== =======
COMPUTATION OF FUNDS AVAILABLE FOR DISTRIBUTION:
Funds from operations..................................... $ 66,957 $ 63,807 $68,477
Non-revenue producing improvements to real estate......... (12,689) (7,855) (8,656)
-------- -------- -------
Funds available for distribution....................... $ 54,268 $ 55,952 $59,821
======== ======== =======
Weighted average Common Stock outstanding -- diluted...... 27,010 27,408 31,252
======== ======== =======
29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The Company's earnings are affected by changes in interest rates, as a
portion of the Company's outstanding indebtedness is at variable rates based on
LIBOR. The Company's $150 million line of credit ($16.3 million outstanding at
December 31, 2001) bears interest at LIBOR plus 1.125% per annum and the
Company's $100 million Term Loan bears interest at LIBOR plus 1.0% per annum. If
LIBOR increased/decreased by 1.0% during 2001, interest expense would have
increased/decreased by approximately $1.4 million based on the combined average
balance outstanding under the Company's line of credit and Term Loan for the
year ended December 31, 2001.
In July 1998, the Company entered into an interest rate swap agreement (the
"1998 Swap") fixing LIBOR on $100 million of the Company's floating rate debt at
6.4% for the period 1998 through 2003. The cost of the 1998 Swap consisted only
of legal costs that were deemed immaterial. The value of the 1998 Swap was
impacted by changes in the market rate of interest. Had the 1998 Swap been
entered into on December 31, 1999, the applicable LIBOR swap rate would have
been approximately 6.57%. Each 0.01% increase or decrease in the applicable swap
rate for the 1998 Swap increases or decreases the value of the 1998 Swap versus
its current value by approximately $28,000. The Company accounted for the 1998
Swap as a hedge. Payments and receipts under the 1998 Swap were accounted for as
an adjustment to interest expense. On January 10, 2000, the Company unwound the
1998 Swap and received $1.0 million of proceeds which is amortized into interest
expense through March 2003.
On October 29, 2001, the Company entered into an interest rate swap
agreement, fixing LIBOR on $100 million of the Company's floating rate debt at
approximately 3.7% for the period October 2001 through August 2004. The terms of
the swap require monthly settlements on the same dates that interest payments
are due on the debt. In accordance with SFAS No. 133, the interest rate swap is
reflected at market value. The Company believes the swap is a perfectly
effective cash flow hedge per SFAS No. 133 and there will be no effect on net
income as a result of the mark-to-market adjustment. The value of the hedge as
of December 31, 2001 was approximately $489,000 and is recorded as an asset and
included in other assets. Mark-to-market change in the value of the swap are
included in other comprehensive income.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and
Hedging Activities" and its amendments, Statements 137 and 138 in June 1999 and
June 2000, respectively. SFAS No. 133 permits early adoption as of the beginning
of any fiscal quarter after its issuance. In June 1999, the FASB issued
Statement No. 137 which deferred the effective date of SFAS No. 133 to all
fiscal quarters for fiscal years beginning after June 15, 2000. The Company
adopted SFAS No. 133 effective January 1, 2001. SFAS No. 133 requires the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Combined Financial Statements on page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12, 13.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE COMPENSATION,
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 10, Item 11, Item 12, and Item 13 will be
contained in a definitive proxy statement which the Registrant anticipates
will be filed no later than April 28, 2002, and thus this Part has been
omitted in accordance with General Instruction G(3) to Form 10-K.
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a)
(1&2) See Index to Financial Statements and Schedules on page F-1 of this
Form 10-K.
(3) Exhibits:
2(a) Admission Agreement between Equity Financial and Management Co.,
Manufactured Home Communities, Inc. and MHC Operating
Partnership
3.1(a) Articles of Incorporation of Manufactured Home Communities, Inc.
3.2(a) Articles of Amendment and Restatement of Manufactured Home
Communities, Inc.
3.3(g) Amended Bylaws of Manufactured Home Communities, Inc.
4 Not applicable
9 Not applicable
10.1(a) Amended and Restated Agreement of Limited Partnership of MHC
Operating Limited Partnership
10.2(a) Agreement of Limited Partnership of MHC Financing Limited
Partnership
10.3(a) Agreement of Limited Partnership of MHC Management Limited
Partnership
10.4(a) Property Management and Leasing Agreement between MHC Financing
Limited Partnership and MHC Management Limited Partnership
10.5(a) Property Management and Leasing Agreement between MHC Operating
Limited Partnership and MHC Management Limited Partnership
10.6(a) Services Agreement between Realty Systems, Inc. and MHC
Management Limited Partnership
10.7(a) Rate Protection Agreement
10.8(a) Revolving Credit Note made by Realty Systems, Inc. to Equity
Financial and Management Co.
10.9(a) Assignment to MHC Operating Limited Partnership of Revolving
Credit Note made by Realty Systems, Inc. to Equity Financial and
Management Co.
10.10(a) Stock Option Plan
10.11A(a) Indenture of Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Rents
10.11B(a) Promissory Note
10.11C(a) Assignment of Loan Documents
10.11D(a) Assignment of Leases, Rents and Security Deposits
10.11E(a) Swap Agreement Pledge and Security Agreement
10.11F(a) Cash Collateral Account Security, Pledge and Assignment
Agreement
10.11G(a) Assignment of Property Management and Leasing Agreement
10.11H(a) Trust Agreement
10.12(a) Form of Noncompetition Agreement
10.13(a) Form of Noncompetition Agreement
10.13A(a) Form of Noncompetition Agreement
10.14(a) General Electric Credit Corporation Commitment Letter
10.15(a) Administrative Services Agreement between Realty Systems, Inc.
and Equity Group Investments, Inc.
10.16(a) Registration Rights and Lock-Up Agreement with the Company (the
Original Owners, EF&M, Directors, Officers and Employees)
10.17(a) Administrative Services Agreement between the Company and Equity
Group Investments, Inc.
10.18(a) Form of Subscription Agreement between the Company and certain
officers and other individuals dated March 3, 1993
10.19(a) Form of Secured Promissory Note payable to the Company by
certain officers dated March 3, 1993
10.20(a) Form of Pledge Agreement between the Company and certain
officers dated March 3, 1993
10.21(a) Loan and Security Agreement between Realty Systems, Inc. and MHC
Operating Limited Partnership
10.22(a) Equity and Registration Rights Agreement with the Company (the
GM Trusts)
10.23(b) Agreement of Limited Partnership of MHC Lending Limited
Partnership
10.23(c) Agreement of Limited Partnership of MHC-Bay Indies Financing
Limited Partnership
10.24(c) Agreement of Limited Partnership of MHC-De Anza Financing
Limited Partnership
10.25(c) Agreement of Limited Partnership of MHC-DAG Management Limited
Partnership
10.26(d) Amendment No. 2 to MHC Operating Limited Partnership Amended and
Restated Partnership Agreement dated February 15, 1996
10.27(d) Form of Subscription Agreement between the Company and certain
members of management of the Company dated January 2, 1996
31
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
10.28(d) Form of Secured Promissory Note payable to the Company by
certain members of management of the Company dated January 2,
1996
10.29(d) Form of Pledge Agreement between the Company and certain members
of management of the Company dated January 2, 1996
10.30(e) Second Amended and Restated MHC Operating Limited Partnership
Agreement of Limited Partnership, dated as of March 15, 1996
10.31(f) Agreement of Limited Partnership of MHC Financing Limited
Partnership Two
10.32(g) $265,000,000 Mortgage Note dated December 12,1997
10.33(g) Second Amended and Restated Credit Agreement (Revolving
Facility) between the Company, MHC Operating Limited
Partnership, and certain lenders and agents, dated April 28,
1998
10.34(g) First Amendment to Second Amended and Restated Credit Agreement
(Revolving Facility) between the Company, MHC Operating Limited
Partnership, and certain lenders and agents, dated December 18,
1998
10.35(h) Second Amendment to Second Amended and Restated Credit Agreement
(Revolving Facility) between the Company, MHC Operating Limited
Partnership, and certain lenders and agents, dated August 9,
2000
10.36(g) Amended and Restated Credit Agreement (Term Loan) between the
Company, MHC Operating Limited Partnership, and certain lenders
and agent, dated April 28, 1998
10.36(h) First Amendment to Amended and Restated Credit Agreement (Term
Loan) between the Company, MHC Operating Limited Partnership,
and certain lenders and agent, dated November 21, 2000
10.36(g) Letter Agreement between the Company and Bank of America
National Trust and Savings Association confirming the $100
million swap transaction, dated July 11, 1995
10.39(h) $110,000,000 Amended, Restated and Consolidated Promissory Note
dated June 28, 2000
10.40(h) $15,750,000 Promissory Note Secured by Leasehold Deed of Trust
dated July 13, 2000
10.41(i) Credit Agreement (Term Loan) between the Company, MHC Operating
Limited Partnership and certain lenders and agents dated
February 9, 2002.
10.42(i) Third Amendment to Second Amended and Restated Credit Agreement
(Revolving Facility) between the Company, MHC Operating Limited
Partnership, and certain lenders and agents, dated February 9,
2002
10.43(i) $50,000,000 Promissory Note secured by Leasehold Deeds of Trust
(Stagecoach Mortgage) dated December 2, 2001.
11 Not applicable
12(i) Computation of Ratio of Earnings to Fixed Charges
13 Not applicable
16 Not applicable
18 Not applicable
21(i) Subsidiaries of the registrant
22 Not applicable
23(i) Consent of Independent Auditors
24.1(i) Power of Attorney for John F. Podjasek, Jr. dated March 27, 2002
24.2(i) Power of Attorney for Michael A. Torres dated March 19, 2002
24.3(i) Power of Attorney for Thomas E. Dobrowski dated March 15, 2002
24.4(i) Power of Attorney for Gary Waterman dated March 27, 2002
24.5(i) Power of Attorney for Donald S. Chisholm dated March 19, 2002
24.6(i) Power of Attorney for Louis H. Masotti dated March 15, 2002
27 Not applicable
28 Not applicable
(a) Included as an exhibit to the Company's Form S-11 Registration
Statement, File No. 33-55994, and incorporated herein by reference.
(b) Included as an exhibit to the Company's Report on Form 10-K dated
December 31, 1993, and incorporated herein by reference.
(c) Included as an exhibit to the Company's Report on Form 10-K dated
December 31, 1994, and incorporated herein by reference.
(d) Included as an exhibit to the Company's Report on Form 10-Q for the
quarter ended March 31, 1996, and incorporated herein by reference.
32
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(e) Included as an exhibit to the Company's Report on Form 10-Q for the
quarter ended June 30, 1996, and incorporated herein by reference.
(f) Included as an exhibit to the Company's Report on Form 10-K dated
December 31, 1997, and incorporated herein by reference.
(g) Included as an exhibit to the Company's Form S-3 Registration
Statement, File No. 333-90813, and incorporated herein by reference.
(h) Included as an exhibit to the Company's Report on Form 10-K dated
December 31, 2000, and incorporated herein by reference.
(i) Filed herewith.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Index to Financial Statements attached hereto on page F-1 of this Form
10-K.
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
MANUFACTURED HOME COMMUNITIES, INC.,
a Maryland corporation
Date: March 29, 2002 By: /s/ HOWARD WALKER
-------------- ------------------------------------
Howard Walker
Chief Executive Officer
Date: March 29, 2002 By: /s/ JOHN ZOELLER
-------------- ------------------------------------
John Zoeller
Executive Vice President, Treasurer
and Chief Financial Officer
Date: March 29, 2002 By: /s/ MARK HOWELL
-------------- ------------------------------------
Mark Howell
Principal Accounting Officer
34
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ HOWARD WALKER Chief Executive Officer March 29, 2002
------------------------------------------ *Attorney-in-Fact --------------
Howard Walker
/s/ JOHN ZOELLER Vice President, Treasurer March 29, 2002
------------------------------------------ and Chief Financial Officer --------------
John Zoeller *Attorney-in-Fact
/s/ SAMUEL ZELL Chairman of the Board March 29, 2002
------------------------------------------ --------------
Samuel Zell
/s/ SHELI Z. ROSENBERG Director March 29, 2002
------------------------------------------ --------------
Sheli Z. Rosenberg
/s/ DAVID A. HELFAND Director March 29, 2002
------------------------------------------ --------------
David A. Helfand
*DONALD S. CHISHOLM Director March 29, 2002
------------------------------------------ --------------
Donald S. Chisholm
*THOMAS E. DOBROWSKI Director March 29, 2002
------------------------------------------ --------------
Thomas E. Dobrowski
*LOUIS H. MASOTTI Director March 29, 2002
------------------------------------------ --------------
Louis H. Masotti
*JOHN F. PODJASEK, JR. Director March 29, 2002
------------------------------------------ --------------
John F. Podjasek, Jr.
*MICHAEL A. TORRES Director March 29, 2002
------------------------------------------ --------------
Michael A. Torres
*GARY L. WATERMAN Director March 29, 2002
------------------------------------------ --------------
Gary L. Waterman
35
INDEX TO FINANCIAL STATEMENTS
MANUFACTURED HOME COMMUNITIES, INC.
PAGE
----
Report of Independent Auditors....................................................................................... F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000......................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999........................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999...... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999........................... F-6
Notes to Consolidated Financial Statements........................................................................... F-7
Schedule II -- Valuation and Qualifying Accounts..................................................................... S-1
Schedule III -- Real Estate and Accumulated Depreciation............................................................. S-2
Certain schedules have been omitted as they are not applicable to the
Company.
F-1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Manufactured Home Communities, Inc.
We have audited the accompanying consolidated balance sheets of
Manufactured Home Communities, Inc. as of December 31, 2001 and 2000, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2001. We have also audited the related financial statement schedules listed in
the accompanying index. These financial statements and schedules are the
responsibility of the management of Manufactured Home Communities, Inc. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Manufactured
Home Communities, Inc. at December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
January 29, 2002, except for Note 10
as to which the date is February 8, 2002 and
except for Note 18
as to which the date is February 22, 2002
F-2
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2001 and 2000
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
2001 2000
---------- ----------
ASSETS
Investment in real estate:
Land...................................................... $ 271,871 $ 271,822
Land improvements......................................... 855,296 839,725
Buildings and other depreciable property.................. 110,971 106,629
---------- ----------
1,238,138 1,218,176
Accumulated depreciation.................................. (211,878) (181,580)
---------- ----------
Net investment in real estate.......................... 1,026,260 1,036,596
Cash and cash equivalents................................... 1,354 2,847
Notes receivable............................................ 1,506 4,984
Investment in and advances to affiliates.................... 34,387 21,215
Investment in joint ventures................................ 11,853 13,267
Rents receivable............................................ 1,966 1,440
Deferred financing costs, net............................... 5,867 6,344
Prepaid expenses and other assets........................... 16,770 17,611
---------- ----------
Total assets.............................................. $1,099,963 $1,104,304
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable.................................... $ 590,371 $ 556,578
Unsecured term loan....................................... 100,000 100,000
Unsecured line of credit.................................. 16,250 59,900
Other notes payable....................................... 2,236 3,206
Accounts payable and accrued expenses..................... 23,000 23,822
Accrued interest payable.................................. 4,582 5,116
Rents received in advance and security deposits........... 5,133 5,184
Distributions payable..................................... 12,062 11,100
Due to affiliates......................................... 32 32
---------- ----------
Total liabilities...................................... 753,666 764,938
Commitments and contingencies
Minority Interest -- Common OP Units and other.............. 46,147 46,271
Minority Interest -- Perpetual Preferred OP Units........... 125,000 125,000
Stockholders' equity:
Preferred stock, $.01 par value 10,000,000 shares
authorized; none issued................................ -- --
Common Stock, $.01 par value 50,000,000 shares authorized;
21,562,343 and 21,064,785 shares issued and outstanding
for 2001 and 2000, respectively........................ 215 210
Paid-in capital........................................... 245,827 235,681
Deferred compensation..................................... (4,062) (5,969)
Employee notes............................................ (3,841) (4,205)
Distributions in excess of accumulated earnings........... (63,478) (57,622)
Accumulated other comprehensive income.................... 489 --
---------- ----------
Total stockholders' equity............................. 175,150 168,095
Total liabilities and stockholders' equity................ $1,099,963 $1,104,304
========== ==========
The accompanying notes are an integral part of the financial statements
F-3
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
2001 2000 1999
-------- -------- --------
REVENUES
Base rental income............................................ $195,644 $189,481 $181,672
RV base rental income......................................... 5,748 7,414 9,526
Utility and other income...................................... 22,014 20,366 20,096
Equity in income of affiliates................................ 1,811 2,408 2,065
Interest income............................................... 639 1,009 1,669
-------- -------- --------
Total revenues............................................. 225,856 220,678 215,028
-------- -------- --------
EXPENSES
Property operating and maintenance............................ 62,008 59,199 58,038
Real estate taxes............................................. 17,420 16,888 16,460
Property management........................................... 8,984 8,690 8,337
General and administrative.................................... 6,231 5,955 5,550
General and administrative -- affiliates...................... 456 468 542
Interest and related amortization............................. 51,305 53,280 53,775
Depreciation on corporate assets.............................. 1,243 1,139 1,005
Depreciation on real estate assets and other costs............ 34,833 34,411 34,486
-------- -------- --------
Total expenses............................................. 182,480 180,030 178,193
-------- -------- --------
Income from operations........................................ 43,376 40,648 36,835
Gain on sale of Properties and other.......................... 8,168 12,053 --
-------- -------- --------
Income before allocation to Minority Interests
and extraordinary loss on early extinguishment of debt... 51,544 52,701 36,835
(Income) allocated to Common OP Units......................... (8,209) (8,463) (6,219)
(Income) allocated to Perpetual Preferred OP Units............ (11,252) (11,252) (2,844)
-------- -------- --------
Income before extraordinary loss on early extinguishment
of debt.................................................... 32,083 32,986 27,772
Extraordinary loss on early extinguishment of debt
(net of $264 allocated to Minority Interests).............. -- 1,041 --
-------- -------- --------
NET INCOME................................................. $ 32,083 $ 31,945 $ 27,772
======== ======== ========
Net income per Common Share before extraordinary
item -- basic.............................................. $ 1.53 $ 1.54 $ 1.10
======== ======== ========
Net income per Common Share before extraordinary
item -- diluted............................................ $ 1.49 $ 1.51 $ 1.09
======== ======== ========
Net income per Common Share -- basic.......................... $ 1.53 $ 1.49 $ 1.10
======== ======== ========
Net income per Common Share -- diluted........................ $ 1.49 $ 1.46 $ 1.09
======== ======== ========
Weighted average Common Shares outstanding -- basic........... 21,036 21,469 25,224
======== ======== ========
Weighted average Common Shares outstanding -- diluted
(Note 3)................................................... 27,010 27,408 31,252
======== ======== ========
Distributions declared per Common Share outstanding........... $ 1.78 $ 1.66 $ 1.55
======== ======== ========
Tax status of distributions paid during the year:
Ordinary income............................................ $ 1.31 $ 1.32 $ 1.16
======== ======== ========
Capital gain............................................... $ -- $ -- $ --
======== ======== ========
Return of capital.......................................... $ 0.44 $ 0.31 $ --
======== ======== ========
The accompanying notes are an integral part of the financial statements
F-4
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(AMOUNTS IN THOUSANDS)
2001 2000 1999
--------- --------- ---------
PREFERRED STOCK, $.01 PAR VALUE............................. $ -- $ -- $ --
======== ======== ========
COMMON STOCK, $.01 PAR VALUE
Balance, beginning of year.................................. $ 210 $ 229 $ 262
Issuance of Common Stock through restricted stock
grants................................................. 1 1 1
Exercise of options....................................... 4 1 1
(Repurchase) issuance of Common Stock..................... -- (21) (35)
-------- -------- --------
Balance, end of year........................................ $ 215 $ 210 $ 229
======== ======== ========
PAID -- IN CAPITAL
Balance, beginning of year.................................. $235,681 $275,664 $364,603
Issuance of Common Stock for employee notes............... -- -- --
Conversion of OP Units to Common Stock.................... 599 494 1,525
Issuance of Common Stock through exercise of options...... 7,743 2,719 2,034
Issuance of Common Stock through restricted stock
grants................................................. 1,627 3,310 1,507
Issuance of Common Stock through employee stock purchase
plan................................................... 2,365 1,435 1,195
Repurchase of Common Stock................................ -- (53,112) (98,160)
Adjustment for Common OP Unitholders in the Operating
Partnership............................................ (2,188) 5,171 2,960
-------- -------- --------
Balance, end of year........................................ $245,827 $235,681 $275,664
======== ======== ========
DEFERRED COMPENSATION
Balance, beginning of year.................................. $ (5,969) $ (6,326) $ (7,442)
Issuance of Common Stock through restricted stock
grants................................................. (1,628) (3,311) (536)
Recognition of deferred compensation expense.............. 3,535 3,668 1,652
-------- -------- --------
Balance, end of year........................................ $ (4,062) $ (5,969) $ (6,326)
======== ======== ========
EMPLOYEE NOTES
Balance, beginning of year.................................. $ (4,205) $ (4,540) $ (4,654)
Notes received for issuance of Common Stock............... -- -- --
Principal payments........................................ 364 335 114
-------- -------- --------
Balance, end of year........................................ $ (3,841) $ (4,205) $ (4,540)
======== ======== ========
DISTRIBUTIONS IN EXCESS OF ACCUMULATED EARNINGS
Balance, beginning of year.................................. $(57,622) $(53,626) $(42,328)
Net income................................................ 32,083 31,945 27,772
Other comprehensive income:
Unrealized holding gains on derivative instruments..... 489 -- --
-------- -------- --------
Comprehensive income................................. 32,572 31,945 27,772
-------- -------- --------
Distributions............................................. (37,939) (35,941) (39,070)
-------- -------- --------
Balance, end of year........................................ $(62,989) $(57,622) $(53,626)
======== ======== ========
The accompanying notes are an integral part of the financial statements
F-5
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(AMOUNTS IN THOUSANDS)
2001 2000 1999
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 32,083 $ 31,945 $ 27,772
Adjustments to reconcile net income to cash provided by
operating activities:
Income allocated to minority interests................ 19,461 19,451 9,063
Gain on sale of Properties and other.................. (8,168) (12,053) --
Depreciation and amortization expense................. 37,184 36,511 33,871
Equity in income of affiliates and joint ventures..... (2,782) (2,928) (2,065)
Amortization of deferred compensation and other....... 3,535 3,668 2,623
Increase in rents receivable.......................... (526) (102) (667)
Decrease (increase) in prepaid expenses and other
assets............................................. 1,330 (9,389) (844)
(Decrease) increase in accounts payable and accrued
expenses........................................... (1,358) 2,545 2,491
(Decrease) increase in rents received in advance and
security deposits.................................. (51) (1,647) 336
--------- --------- ---------
Net cash provided by operating activities................. 80,708 68,001 72,580
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Contributions to and distributions from Affiliates, net... (11,493) (7,250) (1,959)
Collections (funding) of notes receivable................. 3,478 (700) 11,426
Distribution from (investment in) joint ventures.......... 1,697 (3,758) (2,279)
Proceeds from dispositions of assets...................... 24,209 46,490 --
(Funding) return of escrow for acquisition of rental
properties -- net....................................... (17,770) 4,581 (30,640)
Improvements:
Improvements -- corporate............................... (840) (498) (878)
Improvements -- rental properties....................... (12,689) (7,855) (8,656)
Site development costs.................................. (9,659) (7,908) (4,882)
--------- --------- ---------
Net cash (used in) provided by investing activities....... (23,067) 23,102 (37,868)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from stock options and employee stock
purchase plan........................................... 10,112 4,142 3,229
Net proceeds from issuance of Perpetual Preferred OP
Units................................................... -- -- 121,890
Distributions to Common Stockholders, Common OP
Unitholders and Perpetual Preferred OP Unitholders...... (58,111) (56,298) (40,445)
Repurchase of Common Stock and OP Units................... (41) (54,595) (99,847)
Collection of principal payments on employee notes........ 364 335 114
Line of credit:
Proceeds................................................ 46,000 103,900 113,400
Repayments.............................................. (89,650) (151,900) (150,500)
Refinancing -- net proceeds............................... 37,870 65,998 16,248
Principal payments........................................ (5,047) (4,249) (4,733)
Debt issuance costs....................................... (631) (2,265) (1,049)
--------- --------- ---------
Net cash used in financing activities..................... (59,134) (94,932) (41,693)
--------- --------- ---------
Net (decrease) in cash and cash equivalents................. (1,493) (3,829) (6,981)
Cash and cash equivalents, beginning of year................ 2,847 6,676 13,657
--------- --------- ---------
Cash and cash equivalents, end of year...................... $ 1,354 $ 2,847 $ 6,676
========= ========= =========
SUPPLEMENTAL INFORMATION
Cash paid during the year for interest...................... $ 50,781 $ 52,947 $ 52,323
========= ========= =========
The accompanying notes are an integral part of the financial statements
F-6
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION
Manufactured Home Communities, Inc. (together with its consolidated
subsidiaries, the "Company"), formed in March 1993, is a Maryland corporation
which has elected to be taxed as a real estate investment trust ("REIT"). The
Company owns or has a controlling interest in 148 manufactured home communities
(the "Properties") located in 23 states, consisting of 50,761 sites. The Company
generally will not be subject to Federal income tax to the extent it distributes
its REIT taxable income to its stockholders.
The operations of the Company are conducted through certain entities that
are owned or controlled by the Company. MHC Operating Limited Partnership (the
"Operating Partnership") is the entity through which the Company conducts
substantially all of its operations. The Company contributed the proceeds from
its initial public offering to the Operating Partnership for a general
partnership interest. The limited partners of the Operating Partnership (the
"Common OP Unitholders") receive an allocation of net income which is based on
their respective ownership percentage of the Operating Partnership which is
shown on the Consolidated Financial Statements as Minority Interests -- Common
OP Units. As of December 31, 2001, the Minority Interests -- Common OP Units
represented 5,426,374 units of limited partnership interest ("OP Units") which
are convertible into an equivalent number of shares of the Company's Common
stock. The issuance of additional shares of common stock or common OP Units
changes the respective ownership of the Operating Partnership for both the
Minority Interests and the Company.
Subsidiaries of the Operating Partnership have been created to (i)
facilitate mortgage financing (the "Financing Partnerships"); (ii) facilitate
the Company's ability to provide financing to owners of manufactured home
communities ("Lending Partnership"); (iii) own the management operations of the
Company ("Management Partnership"); and (iv) own the assets and operations of
certain utility companies which service the Company's Properties ("MHC
Systems").
The accompanying financial statements represent the consolidated financial
information of the Company and its subsidiaries. Due to the Company's ability as
general partner to control either through ownership or by contract the Operating
Partnership, the Financing Partnerships, the Lending Partnership, the Management
Partnership and MHC Systems, each such subsidiary has been consolidated with the
Company for financial reporting purposes.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131") requires
certain disclosures of selected information about operating segments in the
annual financial statements and related disclosures about products and services,
geographic areas, and major customers. The adoption of SFAS No. 131, in June
1998, did not affect the results of operations or financial position of the
Company. The Company manages operations on a property by property basis. Since
each property has similar economic and operational characteristics, the Company
has one reportable segment, which is the operation of manufactured home
communities. The Company has concentrations of Properties within the following
states: Florida (49 Properties), California (25 Properties), Arizona (17
Properties), Michigan (11 Properties) and Colorado (10 Properties). These
concentrations of Properties accounted for 36%, 19%, 8%, 4% and 8%,
respectively, of the Company's total revenues for the year ended December 31,
2001. The Company also has Properties located in the following areas of the
United States: Northeast, Northwest, Midwest, and Nevada/Utah/New Mexico. The
Company's largest Property, Bay Indies, located in Venice, Florida, accounted
for 3% of the Company's total revenues for the year ended December 31, 2001. The
distribution of the Properties throughout the United States reflects the
Company's belief that geographic diversification helps insulate the portfolio
from regional economic influences. The Company intends to target new
acquisitions in or near markets where the Properties are located and will also
consider acquisitions of properties outside such markets.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Consolidation
The Company consolidates all majority owed subsidiaries due to its ability
to control the operations of the subsidiaries. All inter-company transactions
have been eliminated in consolidation.
F-7
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(c) Real Estate
Real estate is recorded at cost less accumulated depreciation. The Company
evaluates rental Properties for impairment when conditions exist which may
indicate that it is probable that the sum of expected future cash flows
(undiscounted) from a Property is less than its carrying value. Upon
determination that a permanent impairment has occurred, rental Properties are
reduced to fair value. For the year ended December 31, 2001, permanent
impairment conditions did not exist at any of the Company's Properties. During
the year ended December 31, 2000, MHC Acquisition One L.L.C., a consolidated
subsidiary of the Company, recorded an impairment loss on the DeAnza Santa Cruz
water and wastewater service company business (see Notes 5 and 17). In August
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment of Long-Lived
Assets" which is effective for fiscal years beginning after December 15, 2001.
The application of the provisions of this Statement is not expected to affect
the earnings and financial position of the Company.
Certain costs, including legal costs, relative to efforts by the Company to
effectively change the use and operations of several Properties are currently
recorded in other assets. These costs, to the extent these efforts are
successful, are capitalized to the extent of the established value of the
revised project and included in the net investment in real estate for the
appropriate Properties. To the extent these efforts are not successful, these
costs will be expensed.
Depreciation is computed on the straight-line basis over the estimated
useful lives of the assets. The Company uses a 30-year estimated life for
buildings acquired and structural and land improvements, a ten-to-fifteen-year
estimated life for building upgrades and a three-to-seven-year estimated life
for furniture, fixtures and equipment. Expenditures for ordinary maintenance
and repairs are expensed to operations as incurred and significant renovations
and improvements that improve the asset and extend the useful life of the asset
are capitalized over their estimated useful life. Initial direct leasing costs
are expensed as incurred. Total depreciation expense was $36.1 million, $35.6
million and $35.5 million for the years ended December 31, 2001, 2000 and 1999,
respectively.
(d) Cash and Cash Equivalents
The Company considers all demand and money market accounts and certificates
of deposit with a maturity when purchased of three months or less to be cash
equivalents.
(e) Notes Receivable
Notes receivable generally are stated at their outstanding unpaid principal
balances net of any deferred fees or costs on originated loans, or unamortized
discounts or premiums. Interest income is accrued on the unpaid principal
balance. Discounts or premiums are amortized to income using the interest
method.
(f) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" requires disclosures about the fair value
of financial instruments whether or not such instruments are recognized in the
balance sheet. The Company's financial instruments include short-term
investments, notes receivable, accounts receivable, accounts payable, other
accrued expenses, mortgage notes payable and interest rate hedge arrangements.
The fair values of all financial instruments, including notes receivable, were
not materially different from their carrying values at December 31, 2001 and
2000.
F-8
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain
long-term financing. The costs are being amortized over the terms of the
respective loans on a level yield basis. Unamortized deferred financing fees
are written-off when debt is retired before the maturity date. Accumulated
amortization for such costs was $3.0 million and $1.9 million at December 31,
2001 and 2000, respectively.
(h) Revenue Recognition
Rental income attributable to leases is recorded when earned from tenants.
The Company will reserve for receivables when the Company believes the ultimate
collection is less than probable.
(i) Minority Interests
Net income is allocated to Common OP Unitholders based on their respective
ownership percentage of the Operating Partnership. An ownership percentage is
represented by dividing the number of Common OP Units held by the Common OP
Unitholders (5,426,374 and 5,514,330 at December 31, 2001 and 2000,
respectively) by OP Units and Common Stock outstanding. Issuance of additional
shares of Common Stock or common OP Units changes the percentage ownership of
both the Minority Interests and the Company. Due in part to the exchange rights
(which provide for the conversion of Common OP Units into Common Stock on a
one-for-one basis), such transactions and the proceeds therefrom are treated as
capital transactions and result in an allocation between stockholders' equity
and Minority Interests to account for the change in the respective percentage
ownership of the underlying equity of the Operating Partnership.
On September 30, 1999, the Operating Partnership completed a $125 million
private placement of 9.0% Series D Cumulative Perpetual Preferred Units ("POP
Units") with two institutional investors. The POP Units, which are callable by
the Company after five years, have no stated maturity or mandatory redemption,
have no voting rights and are not convertible into OP Units or Common Stock.
Income is allocated to the POP Units at a preferred rate per annum of 9.0% on
the original capital contribution of $125 million. Costs related to the
placement of $3.1 million were recorded as a reduction to additional paid-in
capital.
(j) Income Taxes
Due to the structure of the Company as a REIT, the results of operations
contain no provision for Federal income taxes. However, the Company may be
subject to certain state and local income, excise or franchise taxes. The
Company paid state and local taxes of approximately $50,000, $78,000 and
$85,000 during the years ended December 31, 2001, 2000 and 1999, respectively.
As of December 31, 2001, net investment in real estate and notes receivable had
a Federal tax basis of approximately $710 million and $20 million,
respectively.
(k) Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and
Hedging Activities" and its amendments, Statements 137 and 138 in June of 1999
and June of 2000, respectively. The Company adopted SFAS No. 133 effective
January 1, 2001. SFAS No. 133 requires the Company to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will
either be offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. On
October 29, 2001, the Company entered into a swap agreement. (see Note 10)
F-9
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 -- EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of
common shares outstanding during each year. Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128") defines the
calculation of basic and fully diluted earnings per share. Basic and fully
diluted earnings per share are based on the weighted average shares outstanding
during each year and basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. The conversion of OP Units has
been excluded from the basic earnings per share calculation. The conversion of
an OP Unit to a share of common stock has no material effect on earnings per
common share.
The following table sets forth the computation of basic and diluted
earnings per share for the years ended December 31, 2001, 2000, 1999 (amounts
in thousands):
2001 2000 1999
------- ------- -------
NUMERATOR:
Numerator for basic earnings per share -- Net
income............................................. $32,083 $31,945 $27,772
Effect of dilutive securities:
Income allocated to Common OP Units (net of
extraordinary loss on early extinguishment of
debt)............................................ 8,209 8,199 6,219
------- ------- -------
Numerator for diluted earnings per share --
Income available to Common Stockholders
After assumed conversions........................ $40,292 $40,144 $33,991
======= ======= =======
DENOMINATOR:
Denominator for basic earnings per share -- Weighted
average Common Stock outstanding................... 21,036 21,469 25,224
Effect of dilutive securities:
Weighted average Common OP Units................... 5,466 5,592 5,704
Employee stock options............................. 508 347 324
------- ------- -------
Denominator for diluted earnings per share --
Adjusted weighted average Common Stock Outstanding
after assumed conversions........................ 27,010 27,408 31,252
======= ======= =======
NOTE 4 -- COMMON STOCK AND OTHER EQUITY RELATED TRANSACTIONS
The following table presents the changes in the Company's outstanding
Common Stock for the years ended December 31, 2001, 2000 and 1999 (excluding OP
Units of 5,426,374, 5,514,330 and 5,633,183 outstanding at December 31, 2001,
2000 and 1999, respectively):
2001 2000 1999
---------- ---------- ----------
Shares outstanding at January 1,.............................. 21,064,785 22,813,357 26,417,029
Common Stock issued through conversion of OP Units.......... 87,956 59,190 143,637
Common Stock issued through exercise of Options............. 387,115 138,029 126,565
Common Stock issued through stock grants.................... 57,000 92,070 95,666
Common Stock issued through Employee Stock Purchase Plan.... 98,987 68,739 59,060
Common Stock repurchased and retired........................ (133,500) (2,106,600) (4,028,600)
---------- ---------- ----------
Shares outstanding at December 31,............................ 21,562,343 21,064,785 22,813,357
========== ========== ==========
As of December 31, 2001, the Company's percentage ownership of the
Operating Partnership was approximately 80%. The remaining 20% is owned by the
Common OP Unitholders.
F-10
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 -- COMMON STOCK AND OTHER EQUITY RELATED TRANSACTIONS (CONTINUED)
In March 1997, the Company's Board of Directors approved a Common Stock
repurchase plan whereby the Company was authorized to repurchase and retire
shares of its Common Stock. No shares of Common Stock were repurchased during
the year ended December 31, 2001. However, under the plan, the Company
repurchased approximately 2.1 million shares of Common Stock at an average price
of $24.06 per share during the year ended December 31, 2000 and approximately
4.0 million shares of Common Stock at an average price of $23.40 per share
during the year ended December 31, 1999, using proceeds from borrowings on the
line of credit.
During the year ended December 31, 2000, the Operating Partnership
repurchased and cancelled approximately 60,000 OP Units from various holders. On
March 26, 1999, the Operating Partnership repurchased and cancelled 200,000 OP
Units from a limited partner of the Operating Partnership.
On September 30, 1999, the Operating Partnership completed a $125 million
private placement of 9.0% Series D Cumulative Perpetual Preferred Units ("POP
Units") with two institutional investors. The POP Units, which are callable by
the Company after five years, have no stated maturity or mandatory redemption.
Net proceeds from the offering of $121 million were used to repay amounts
outstanding under the Company's line of credit facility and for other corporate
purposes.
The following distributions have been declared and/or paid to common
stockholders and Minority Interests since January 1, 1999.
DISTRIBUTION FOR THE QUARTER SHAREHOLDER
AMOUNT PER SHARE ENDING RECORD DATE PAYMENT DATE
------------------- ---------------------- ------------------ ----------------
$0.3875 March 31, 1999 March 26, 1999 April 9, 1999
$0.3875 June 30, 1999 June 25, 1999 July 9, 1999
$0.3875 September 30, 1999 September 24, 1999 October 8, 1999
$0.3875 December 31, 1999 December 31, 1999 January 14, 2000
- -----------------------------------------------------------------------------------------------
$0.4150 March 31, 2000 March 31, 2000 April 14, 2000
$0.4150 June 30, 2000 June 30, 2000 July 14, 2000
$0.4150 September 30, 2000 September 29, 2000 October 13, 2000
$0.4150 December 31, 2000 December 29, 2000 January 12, 2001
- -----------------------------------------------------------------------------------------------
$0.4450 March 31, 2001 March 30, 2001 April 13, 2001
$0.4450 June 30, 2001 June 29, 2001 July 13, 2001
$0.4450 September 30, 2001 September 28, 2001 October 12, 2001
$0.4450 December 31, 2001 December 28, 2001 January 11, 2002
- -----------------------------------------------------------------------------------------------
The Operating Partnership pays distributions of 9.0% per annum on the $125
million of POP Units. Distributions on the POP Units were paid quarterly on the
last calendar day of each quarter beginning December 31, 1999.
The Company adopted, effective July 1, 1997, the 1997 Non-Qualified
Employee Stock Purchase Plan ("ESPP"). Pursuant to the ESPP, certain employees
and directors of the Company may each annually acquire up to $250,000 of Common
Stock of the Company. The aggregate number of shares of Common Stock available
under the ESPP shall not exceed 1,000,000, subject to adjustment by the Board of
Directors. The Common Stock may be purchased monthly at a price equal to 85% of
the lesser of: (a) the closing price for a share of Common Stock on the last day
of such month; and (b) the greater of: (i) the closing price for a share of
Common Stock on the first day of such month, and (ii) the average closing price
for a share of Common Stock for all the business days in the month. Shares of
Common Stock issued through the ESPP for the years ended December 31, 2001, 2000
and 1999 were 96,485, 68,739 and 59,060, respectively.
F-11
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 -- INVESTMENT IN REAL ESTATE
Land improvements consist primarily of improvements such as grading,
landscaping and infrastructure items such as streets, sidewalks or water mains.
Depreciable property consists of permanent buildings in the Properties such as
clubhouses, laundry facilities, maintenance storage facilities, and furniture,
fixtures and equipment.
On September 4, 1997, the Company entered into a portfolio purchase
agreement (as amended by a supplemental agreement on December 17, 1997) to
acquire 37 manufactured home communities (the "Ellenburg Communities") from
partnerships having Ellenburg Capital Corporation ("ECC") as the general
partner, for a purchase price in excess of $300 million. During 1997 and 1998,
the Company closed on the acquisition of 31 of the Ellenburg Communities for an
aggregate purchase price of approximately $278 million and gained control of an
additional five Ellenburg Communities with acquisition advances of approximately
$57 million to the partnerships which owned such Ellenburg Communities. All
fundings related to the acquisition were funded by the Company with borrowings
under the Company's line of credit, term bank facilities, assumed debt and the
issuance of Common OP Units.
During 1998, the Company received approximately $14.3 million, including
approximately $365,000 of interest income, which was being held subject to the
completion of due diligence procedures on the Ellenburg Communities. The $14.3
million was initially recorded as a liability until 1999 when a settlement of
certain related issues was substantially complete and accordingly, in a non-cash
transaction, relieved the liability and adjusted the purchase price of the
Ellenburg Communities.
In April 2000, the California Superior Court approved a settlement
agreement (the "Settlement") in connection with the dissolution proceeding of
ECC and its affiliated partnerships. As part of the Settlement, the Company
received $13.5 million previously held in escrow in connection with the purchase
of the Ellenburg Communities and recorded $3.0 million of interest income
related to these funds. In connection with the Settlement, the Company sold
three communities -- Mesa Regal RV Resort, Mon Dak and Naples Estates -- for an
aggregate sales price of $59.0 million, including cash proceeds of $40.0 million
and assumption of debt by the purchaser of $19.0 million. The Company recorded a
$9.1 million gain on the sale of these Properties. Proceeds from the Settlement
and property sales were used to pay down the Company's line of credit. See Note
17 for further discussion of the Settlement.
On January 6, 1998, the Company funded a $12.3 million loan (the "Meadows
Loan") to Meadows Preservation, Inc. The Meadows Loan was collateralized by The
Meadows manufactured home community located in Palm Beach Gardens, Florida. On
April 1, 1999, the Company effectively exchanged the Meadows Loan for an equity
and debt interest in the partnership that owns The Meadows. The Company includes
The Meadows in investment in real estate and the related results of operations
in the statement of operations.
On July 23, 1999, the Company acquired Coquina Crossing, located in St.
Augustine, Florida, for a purchase price of approximately $10.4 million. The
acquisition was funded with a borrowing under the Company's line of credit.
Coquina Crossing is a 748-site senior community with 269 developed sites and
zoned expansion potential for 479 sites. In addition, Realty Systems, Inc.
purchased the model home inventory at the community for approximately $1.1
million.
In March 2000, in accordance with SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of ",
MHC Acquisition One L.L.C., a consolidated subsidiary of the Company, recorded
an impairment loss on the DeAnza Santa Cruz water and wastewater service company
business. Management's estimates indicated that the undiscounted future cash
flows from the business would be less than the carrying value of the business
and its related assets. The Company recorded an asset impairment loss of
$701,000 (or $0.03 per fully diluted share) which is included as a reduction of
other income in the accompanying statement of operations for the year ended
December 31, 2000. This loss represents the difference between the carrying
value of the DeAnza Santa Cruz water and wastewater service company business and
its related assets and their estimated fair market value.
On February 29, 2000, MHC Systems, Inc., a consolidated subsidiary of the
Company, disposed of the water and wastewater service company known as FFEC-Six
in a cash sale. Net proceeds from the sale of approximately $4.2 million were
used to pay down the Company's line of credit and a gain on the sale of $719,000
(or $0.03 per fully diluted share) was recorded in other income on the
accompanying statement of operations for the year ended December 31, 2000.
F-12
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 -- INVESTMENT IN REAL ESTATE (CONTINUED)
On January 3, 2001, the Company acquired two Florida communities, totaling
730 sites, for an aggregate purchase price of approximately $17.3 million. The
Lakes at Countrywood is a 422-site community in Plant City, near Tampa, Florida
and includes approximately 23 acres for expansion. Grand Island is a 308-site
community in Grand Island, near Orlando, Florida, and includes a marina with 50
boat docks. The acquisition was funded with a borrowing under the Company's line
of credit.
On February 13, 2001, the Company completed the disposition of the
following seven communities, totaling 1,281 sites, in Kansas, Missouri and
Oklahoma, for a total sale price of approximately $17.4 million:
Dellwood Estates........ 136 sites
Briarwood............... 166 sites
Bonner Springs.......... 211 sites
Carriage Park........... 143 sites
North Star.............. 219 sites
Quivira Hills........... 142 sites
Rockwood................ 264 sites
A gain of $8.1 million was recorded on the sale. Proceeds from the sale were
used to reduce the amount outstanding on the Company's line of credit.
Effective June 30, 2001, the Company terminated its lease to a third-party
operator for the campground and RV resort facilities at the Property known as
Bulow Plantation in Flagler Beach, Florida, and assumed operation of these
facilities directly. Beginning July 1, 2001 the Company no longer records lease
income from Bulow RV Resort, however, the results of operations for Bulow RV
Resort are included in the Company's results of operations.
On October 5, 2001, the Company finalized a settlement agreement between
MHC Lending Partnership, the Operating Partnership and the limited liability
company which owns Candlelight in Columbus, Indiana. In 1996, the Company funded
a recourse loan to the owner of Candlelight Village and accounted for the loan
as an investment in real estate. The Company received $10.8 million in proceeds
from the settlement, which was accounted for as a sale of real estate and
recorded a $75,000 gain on the sale. Proceeds from the sale were used as working
capital.
The acquisitions have been accounted for utilizing the purchase method of
accounting and, accordingly, the results of operations of acquired assets are
included in the statements of operations from the dates of acquisition. The
Company acquired all of the Properties from unaffiliated third parties.
During the year ended December 31, 2001, the Company capitalized
approximately $2.4 million of costs, including legal costs, relative to efforts
by the Company to effectively change the use and operations of several
Properties which are currently recorded in other assets. These costs will be
expensed if management determines these efforts will not be successful.
The Company is actively seeking to acquire additional manufactured home
communities and currently is engaged in negotiations relating to the possible
acquisition of a number of communities. At any time these negotiations are at
varying stages which may include contracts outstanding to acquire certain
manufactured home communities which are subject to satisfactory completion of
the Company's due diligence review.
F-13
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 -- INVESTMENT IN JOINT VENTURE
On March 18, 1998, the Company joined Plantation Company, L.L.C. and Trails
Associates, L.L.C., two 50% joint venture investments with the principals of
Meadows Management Company, to own two manufactured home communities known as
"Plantation on the Lake" and "Trails West", for approximately $6.5 million.
Plantation on the Lake is located in Riverside, California and consists of 385
developed sites and 122 expansion sites. Trails West is located in Tucson,
Arizona and consists of 488 developed sites. The Company's investments were
funded with a $3.9 million borrowing under the Company's line of credit and with
the issuance of approximately $2.6 million in OP Units.
On December 28, 2000, the Company, through a joint venture with the
principals of Meadows Management Company (the "Voyager Joint Venture"), acquired
a 25% interest in Voyager RV Resort, a 1,576 site RV resort in Tucson, Arizona,
for total consideration of $4.0 million. Voyager RV Resort is adjacent to Trails
West. The Company's investment included cash of $3.0 million and its 50%
interest in land held through the Trails West joint venture valued at $2.0
million.
Due to the Company's inability to control the joint ventures, the Company
accounts for its investment in the joint ventures using the equity method of
accounting. The Company recorded approximately $283,000 and $8,000 of net income
from joint ventures in the years ended December 31, 2001 and 2000, respectively;
and received approximately $1.6 million and $400,000 in distributions.
NOTE 7 -- INVESTMENT IN AND ADVANCES TO AFFILIATES
Investment in and advances to affiliates consists principally of preferred
stock of Realty Systems, Inc. ("RSI") and its subsidiaries (collectively
"Affiliates") and advances under a line of credit between the Company and RSI.
The Company accounts for the investment in and advances to Affiliates using the
equity method of accounting.
Following is unaudited financial information for the Affiliates for the
years ended December 31, 2001 and 2000 (amounts in thousands):
2001 2000
-------- --------
Assets $ 51,619 $ 37,501
Liabilities, net of amounts due
to the Company (17,232) (16,286)
-------- --------
Net investment in Affiliates $ 34,387 $ 21,215
======== ========
Home sales $ 38,621 $ 39,952
Cost of sales (30,657) (31,837)
Other revenues and expenses, net (6,153) (5,707)
-------- --------
Equity in income of Affiliates $ 1,811 $ 2,408
======== ========
F-14
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 -- NOTES RECEIVABLE
At December 31, 2001 and 2000, the Company had approximately $1.5 million
and $5.0 million in notes receivable, respectively.
On May 12, 1998, the Company entered into an agreement to loan $5.9 million
to Trails Associates, L.L.C. (the "Trails West Loan") for development of the
Property known as Trails West. Subsequently, the Company funded $3.2 million
under the Trails West Loan. In December 2000, $1.2 million of the Trails West
Loan was repaid and during 2001, the remaining balance on the Trails West Loan
was repaid.
On December 28, 2000, the Company, in connection with the Voyager Joint
Venture, entered into an agreement to loan $3.0 million to certain principals of
Meadows Management Company. The notes are collateralized with a combination of
Common OP Units and partnership interests in this and other joint ventures. The
notes bear interest at prime plus 0.5% per annum, require quarterly interest
payments and mature on December 31, 2011. The outstanding balance on these notes
as of December 31, 2001 is $1.5 million.
NOTE 9 -- EMPLOYEE NOTES RECEIVABLE
As of December 31, 2001 and 2000, the Company had employee notes receivable
of approximately $3.8 million and $4.2 million respectively, collateralized by
the Company's Common Stock. These notes are presented as a reduction of
Stockholder's Equity.
In December 1992, certain directors, officers and other individuals each
entered into subscription agreements with the Company to acquire a total of
440,000 shares of the Company's common stock at $7.25 per share. The Company
received from these individuals notes (the "1993 Employee Notes") in exchange
for their shares. The 1993 Employee Notes accrue interest at 6.77% per annum,
mature on March 2, 2003, and are recourse against the employees in the event the
pledged shares are insufficient to repay the obligations.
On January 2, 1996, certain members of management of the Company entered
into subscription agreements with the Company to acquire a total of 270,000
shares of the Company's Common Stock at $17.375 per share, the market price on
that date. The Company received from these individuals notes (the "1996 Employee
Notes") in exchange for their shares. The 1996 Employee Notes accrue interest at
5.91% per annum, mature on January 2, 2005, and are recourse against the
employees in the event the pledged shares are insufficient to repay the
obligations.
F-15
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 -- LONG-TERM BORROWINGS
As of December 31, 2001 and December 31, 2000, the Company had outstanding
mortgage indebtedness of approximately $590.4 million and $556.6 million,
respectively, encumbering 77 and 73 of the Company's Properties, respectively.
As of December 31, 2001 and December 31, 2000, the carrying value of such
Properties was approximately $693 million and $631 million, respectively.
On August 3, 2001, the Company entered into a $50.0 million mortgage note
(the "Stagecoach Mortgage") collateralized by 7 Properties. The proceeds were
used to repay amounts under the Company's line of credit and for working capital
purposes.
The outstanding mortgage indebtedness as of December 31, 2001 consists of:
- A $265.0 million mortgage note (the "$265 Million Mortgage")
collateralized by 29 Properties beneficially owned by MHC Financing
Limited Partnership. The $265 Million Mortgage has a maturity date of
January 2, 2028 and pays interest at 7.015%. There is no principal
amortization until February 1, 2008, after which principal and interest
are to be paid from available cash flow and the interest rate will be
reset at a rate equal to the then 10-year U.S. Treasury obligations plus
2.0%. The $265 Million Mortgage is presented net of a settled hedge of
$3.0 million (net of accumulated amortization of $137,000) which is being
amortized into interest expense over the life of the loan.
- A $65.9 million mortgage note (the "College Heights Mortgage")
collateralized by 18 Properties. The College Heights Mortgage bears
interest at a rate of 7.19%, amortizes beginning July 1, 1999 over 30
years and matures July 1, 2008.
- A $93.0 million mortgage note (the "DeAnza Mortgage") collateralized by 6
Properties beneficially owned by MHC-DeAnza Financing Limited
Partnership. The DeAnza Mortgage bears interest at a rate of 7.82%,
amortizes beginning August 1, 2000 over 30 years and matures July 1,
2010.
- A $49.9 million mortgage note (the "Stagecoach Mortgage") collateralized
by 7 Properties beneficially owed by MHC Stagecoach L.L.C. The Stagecoach
Mortgage bears interest at a rate of 6.98%, amortizes beginning September
1, 2001 over 10 years and matures September 1, 2011.
- A $22.5 million mortgage note (the "Bay Indies Mortgage") collateralized
by one Property beneficially owned by MHC-Bay Indies Financing Limited
Partnership. The Bay Indies Mortgage bears interest at a rate of 7.48%,
amortizes beginning August 1, 1994 over 27.5 years and matures July 1,
2004.
- A $15.6 million mortgage note (the "Date Palm Mortgage") collateralized
by one Property beneficially owned by MHC Date Palm, L.L.C. The Date Palm
Mortgage bears interest at a rate of 7.96%, amortizes beginning August 1,
2000 over 30 years and matures July 1, 2010.
- Approximately $78.5 million of mortgage debt on 15 other various
Properties, which was recorded at fair market value with the related
discount or premium being amortized over the life of the loan using the
effective interest rate. Scheduled maturities for the outstanding
indebtedness are at various dates through November 30, 2020, and fixed
interest rates range from 7.15% to 8.75%. Included in this debt, the
Company has a $2.4 million loan recorded to account for a direct
financing lease entered into in May 1997.
On August 9, 2000, the Company amended its unsecured line of credit with a
group of banks (the "Credit Agreement") bearing interest at the London Interbank
Offered Rate ("LIBOR") plus 1.125%. Among other things, the amendment lowered
the total facility under the Credit Agreement to $150 million and extended the
maturity to August 9, 2003. The Company pays a quarterly fee on the average
unused amount of such credit equal to 0.15% of such amount. As of December 31,
2001, $133.8 million was available under the Credit Agreement.
F-16
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 -- LONG-TERM BORROWINGS (CONTINUED)
The Company has a $100 million unsecured term loan (the "Term Loan") with a
group of banks with interest only payable monthly at a rate of LIBOR plus 1.0%.
The Term Loan maturity has been extended to April 3, 2002. On February 8, 2002,
the Company entered into a term loan credit agreement with the same group of
banks, which extended the Term Loan to August 9, 2005.
On October 29, 2001, the Company entered into an interest rate swap
agreement, fixing at LIBOR on $100 million of the Company's floating rate debt
at approximately 3.7% for the period October 2001 through August 2004. The terms
of the swap require monthly settlements on the same dates interest payments are
due on the debt. In accordance with SFAS No. 133, the interest rate swap will be
reflected at market value. The Company believes the swap is a perfectly
effective cash flow hedge under SFAS No. 133 and there will be no effect on net
income as a result of the mark-to-market adjustment. As of December 31, 2001 the
swap had a market value of $489,000 which is included in other assets. The
effect of the mark-to-market adjustment, is reflected in other comprehensive
income.
In July 1998, the Company entered into an interest rate swap agreement (the
"1998 Swap") fixing LIBOR on $100 million of the Company's floating rate debt at
6.4% for the period 1998 through 2003. The value of the 1998 Swap was impacted
by changes in the market rate of interest. The Company accounted for the 1998
Swap as a hedge. Payments and receipts under the 1998 Swap were accounted for as
an adjustment to interest expense. On January 10, 2000, the Company terminated
the 1998 Swap and received $1.0 million of proceeds which is being amortized as
an adjustment to interest expense through March 2003.
The Company has approximately $2.2 million of installment notes payable,
secured by a letter of credit, each with an interest rate of 6.5%, maturing
September 1, 2002. Approximately $900,000 of the notes pay principal annually
and interest quarterly and the remaining $1.3 million of the notes pay interest
only quarterly.
Aggregate payments of principal on long-term borrowings for each of the
next five years and thereafter are as follows (amounts in thousands):
YEAR AMOUNT
---------- --------
2002 $ 6,190
2003 30,275
2004 33,231
2005 109,018
2006 20,384
Thereafter 509,759
--------
Total $708,857
========
F-17
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 -- LEASE AGREEMENTS
The leases entered into between the tenant and the Company for the rental
of a site are month-to-month or for a period of one to ten years, renewable upon
the consent of the parties or, in some instances, as provided by statute.
Noncancelable long-term leases are in effect at certain sites within 22 of the
Properties. Rental rate increases at these Properties are primarily a function
of increases in the Consumer Price Index, taking into consideration certain
floors and ceilings. Additionally, periodic market rate adjustments are made as
deemed necessary. Future minimum rents are scheduled to be received under
noncancelable tenant leases at December 31, 2001 as follows (amounts in
thousands):
YEAR AMOUNT
---------- --------
2002 $ 41,906
2003 29,654
2004 26,574
2005 25,339
2006 17,372
Thereafter 45,120
--------
Total $185,965
========
NOTE 12 -- GROUND LEASES
The Company leases land under noncancellable operating leases at certain of
the Properties expiring in various years from 2022 to 2031 with terms which
require twelve equal payments per year plus additional rents calculated as a
percent of gross revenues. For the years ended December 31, 2001, 2000 and 1999,
ground lease rent was $1.6 million. Minimum future rental payments under the
ground leases are $1.6 million for each of the next five years and $27.9 million
thereafter.
NOTE 13 -- TRANSACTIONS WITH RELATED PARTIES
Equity Group Investments, Inc. ("EGI"), an entity controlled by Mr. Samuel
Zell, Chairman of the Board of Directors, and certain of its affiliates have
provided services such as administrative support, investor relations, corporate
secretarial, real estate tax evaluation services, market consulting and research
services. Fees paid to EGI and its affiliates amounted to approximately $2,000,
$26,000 and $74,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. There were no significant amounts due to these affiliates as of
December 31, 2001 and 2000, respectively.
Certain related entities, owned by persons affiliated with Mr. Zell, have
provided services to the Company. These entities include, but are not limited
to, Rosenberg & Liebentritt, P.C. which provided legal services including
property acquisition services in 1999; The Riverside Agency, Inc. which provided
insurance brokerage services. In addition, Equity Office Properties Trust, of
which Mr. Zell is the Chairman of the Board, provides office space to the
Company. Fees paid to these entities amounted to approximately $454,000,
$442,000 and $473,000 for the years December 31, 2001, 2000 and 1999,
respectively. Amounts due to these affiliates were approximately $32,000 as of
both December 31, 2001 and 2000, respectively.
Related party agreements or fee arrangements are generally for a term of
one year and approved by independent members of the Board of Directors.
F-18
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 -- STOCK OPTION PLAN AND STOCK GRANTS
A Stock Option Plan (the "Plan") was adopted by the Company in December
1992. Pursuant to the Plan, certain officers, directors, employees and
consultants of the Company may be offered the opportunity to acquire shares of
Common Stock through the grant of stock options ("Options"), including
non-qualified stock options and, for key employees, incentive stock options
within the meaning of Section 422 of the Internal Revenue Code. The Compensation
Committee will determine the vesting schedule, if any, of each Option and the
term, which term shall not exceed ten years from the date of grant. As to the
Options that have been granted through December 31, 2001, generally, one-third
are exercisable one year after the initial grant, one-third are exercisable two
years following the date such Options were granted and the remaining one-third
are exercisable three years following the date such Options were granted. The
Plan allows for 10,000 Options to be granted annually to each director. The
Common Stock with respect to which the Options may be granted during any
calendar year to any grantee shall not exceed 250,000 shares. In addition, the
Plan provides for the granting of stock appreciation rights ("SARs") and
restricted stock grants ("Stock Grants"). A maximum of 4,000,000 shares of
Common Stock were available for grant under the Plan as of December 31, 2001.
In 2001, 2000 and 1999, the Company issued 0, 19,181 and 14,666 shares
related to Stock Grants, respectively, which represented a portion of certain
employee bonuses. The fair market value of these Stock Grants of approximately
$0, $525,000 and $352,000 at the date of grant was recorded as compensation
expense by the Company in 2001, 2000 and 1999, respectively.
In 1998, the Company awarded 233,500 Stock Grants to certain members of
senior management of the Company. These Stock Grants vest over five years, but
may be restricted for a period of up to ten years depending upon certain
performance benchmarks tied to increases in funds from operations being met. The
fair market value of these Stock Grants of approximately $5.7 million as of the
date of grant was treated in 1998 as deferred compensation. The Company
amortized approximately $2.0 million and $593,000 related to these Stock Grants
in 2001 and 2000, respectively. The balance of unamortized deferred compensation
related to these Stock Grants is $2,206,000 as of December 31, 2001.
In 1999, the Company awarded 65,000 Stock Grants to certain members of
senior management of the Company. These Stock Grants vest over three years with
one-half vesting in 1999. The fair market value of these Stock Grants of
approximately $1.5 million as of the date of grant was treated in 1999 as
deferred compensation. The Company amortized approximately $386,000 and $385,000
related to these Stock Grants in 2001 and 2000, respectively.
In 2000, the Company awarded 69,750 Stock Grants to certain members of
senior management of the Company. These Stock Grants vest over three years with
one-half vesting in 2000. The fair market value of these Stock Grants of
approximately $1.9 million as of the date of grant was treated in 2000 as
deferred compensation. The Company amortized approximately $478,000 and $955,000
related to these Stock Grants in 2001 and 2000 respectively. The balance of
unamortized deferred compensation related to these Stock Grants is $478,000 as
of December 31, 2001.
In 2001, the Company awarded 43,000 Stock Grants to certain members of
senior management of the Company. These Stock Grants vest over five years, but
may be restricted for a period of up to ten years depending upon certain
performance benchmarks tied to increases in funds from operations being met. The
fair market value of these Stock Grants of approximately $1.2 million as of the
date of grant was treated in 2001 as deferred compensation. The Company
amortized approximately $239,000 related to these Stock Grants in 2001. The
balance of unamortized deferred compensation related to these Stock Grants is
approximately $957,000 as of December 31, 2001.
In 1999, the Plan was amended to provide a Stock Grant of 2,000 shares
vesting over three years in lieu of the 10,000 Options granted after the
amendment to each director, if the director so elects. The fair market value of
Stock Grants awarded to directors of approximately $386,000, $401,000 and
$432,000 in 1999, 2000 and 2001 respectively, were treated as deferred
compensation. The Company amortized approximately $406,280 related to these
Stock Grants in 2001. The balance of unamortized deferred compensation
related to the 1999, 2000, and 2001 Stock Grants is $0, $134,000 and $288,000
respectively as of December 31, 2001.
F-19
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 -- STOCK OPTION PLAN AND STOCK GRANTS (CONTINUED)
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its Options and Stock Grants because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123")
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's Options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized. Additionally, the amount
recognized as expense for the Stock Grants during any given year of the
performance period is dependent on certain performance benchmarks being met.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its Options and Stock Grants under the fair value method of that
Statement. The fair value for the Options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 2001, 2000 and 1999, respectively: risk-free interest rates of
3.5%, 5.5% and 6.3%; dividend yields of 6.3%, 6.3% and 6.3%; volatility factors
of the expected market price of the Company's common Stock of .19, .20 and .21;
and a weighted-average expected life of the Options of 5 years. The fair value
of the Stock Grants granted in 2001, 2000 and 1999 has been estimated at
approximately 30% below the calculated fair market value on the date of grant
because these Stock Grants may remain restricted even after they become fully
vested.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's Options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of the Company's Options. In addition, the existing
models are not representative of the effects on reported net income for future
years.
For purposes of pro forma disclosures, the estimated fair value of the
Options is amortized to expense over the Options' vesting period and the
estimated fair value of the Stock Grants is amortized to expense over the same
period. The pro forma effect of SFAS No. 123 on the Company's net income for the
years ended December 31, 2001, 2000 and 1999 was $648,000 ($0.02 per share),
$134,000 ($0.0 per share) and $138,000 ($0.0 per share), respectively.
A summary of the Company's stock option activity, and related information
for the years ended December 31, 2001, 2000 and 1999 follows:
WEIGHTED AVERAGE
SHARES SUBJECT EXERCISE PRICE
TO OPTIONS PER SHARE
-------------- ----------------
Balance at December 31, 1998 1,899,379 $21.08
Options granted 313,400 23.91
Options exercised (126,565) 19.25
Options canceled (66,767) 24.08
---------
Balance at December 31, 1999 2,019,447 21.72
Options granted 440,077 25.94
Options exercised (250,092) 23.17
Options canceled (101,227) 24.33
---------
Balance at December 31, 2000 2,108,205 22.30
Options granted 234,150 29.44
Options exercised (387,115) 19.98
Options canceled (69,891) 25.05
---------
Balance at December 31, 2001 1,885,349 23.57
=========
F-20
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 -- STOCK OPTION PLAN AND STOCK GRANTS (CONTINUED)
On March 23, 2001, the Company's Board of Directors approved resolutions
amending and restating the Plan effective March 23, 2001 (the "Amended Plan") to
increase the number of Common Shares issuable thereunder by 2,000,000 shares of
Common Stock to an aggregate of 6,000,000 shares. On May 8, 2001, the Company's
shareholder's approved the Amended Plan.
As of December 31, 2001, 2000 and 1999, 1,252,344 shares, 416,603 shares
and 747,258 shares remained available for grant, respectively, and 1,422,211
shares, 1,562,074 shares and 1,426,072 shares were exercisable, respectively.
Exercise prices for Options outstanding as of December 31, 2001 ranged from
$12.88 to $30.65, with the substantial majority of the exercise prices exceeding
$17.25. The remaining weighted-average contractual life of those Options was 6.2
years. The weighted average exercise price of outstanding and exercisable
options was $22.39 as of December 31, 2001.
NOTE 15 -- PREFERRED STOCK
The Company's Board of Directors is authorized under the Company's charter,
without further stockholder approval, to issue, from time to time, in one or
more series, 10,000,000 shares of $.01 par value preferred stock (the "Preferred
Stock"), with specific rights, preferences and other attributes as the Board may
determine, which may include preferences, powers and rights that are senior to
the rights of holders of the Company's Common Stock. However, under certain
circumstances, the issuance of preferred stock may require stockholder approval
pursuant to the rules and regulations of The New York Stock Exchange. As of
December 31, 2001 and 2000, no Preferred Stock was issued by the Company.
NOTE 16 -- SAVINGS PLAN
The Company has a qualified retirement plan, with a salary deferral feature
designed to qualify under Section 401 of the Code (the "401(k) Plan"), to cover
its employees and those of its Subsidiaries, if any. The 401(k) Plan permits
eligible employees of the Company and those of any Subsidiary to defer up to 19%
of their eligible compensation on a pre-tax basis subject to certain maximum
amounts. In addition, the Company will match dollar-for-dollar the participant's
contribution up to 4% of the participant's eligible compensation.
In addition, amounts contributed by the Company will vest, on a prorated
basis, according to the participant's vesting schedule. After five years of
employment with the Company, the participants will be 100% vested for all
amounts contributed by the Company. Additionally, a discretionary profit sharing
component of the 401(k) Plan provides for a contribution to be made annually for
each participant in an amount, if any, as determined by the Company. All
employee contributions are 100% vested. The Company's contribution to the 401(k)
Plan was approximately $353,000, $315,000 and $385,000, for the years ended
December 31, 2001, 2000 and 1999, respectively. The Company's plan contribution
for the profit sharing component of the 401(k) Plan is $139,000 for the year
ended December 31, 2001.
NOTE 17 -- COMMITMENTS AND CONTINGENCIES
DEANZA SANTA CRUZ MOBILE ESTATES
The residents of DeAnza Santa Cruz Mobile Estates, a property located in
Santa Cruz, California (the "City") previously brought several actions opposing
certain fees and charges in connection with water service at the Property. This
summary provides the history and reasoning underlying the Company's defense of
the residents' claims and explains the Company's decision to continue to defend
its position, which the Company believes is fair and accurate.
DeAnza Santa Cruz Mobile Estates is a 198-site Community overlooking the
Pacific Ocean. It is subject to the City's rent control ordinance which limits
annual rent increases to 75% of CPI. The Company purchased this Property in
August 1994 from certain unaffiliated DeAnza entities ("DeAnza"). Prior to the
Company's purchase in 1994, DeAnza made the decision to submeter and separately
bill tenants at the Property for both water and sewer in 1993 in the face of the
City's rapidly rising utility costs.
F-21
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Under California Civil Code Section 798.41, DeAnza was required to reduce
rent by an amount equal to the average cost of usage over the preceding 12
months. This was done. With respect to water charges, because DeAnza did not
want to be regulated by the California Public Utility Commission ("CPUC"),
DeAnza relied on California Public Utilities Code Section 2705.5 ("CPUC Section
2705.5") to determine what rates would be charged for water on an ongoing basis
without becoming a public utility. DeAnza and the Company interpreted the
statute as providing that in a submetered mobile home park, the property owner
is not subject to regulation and control of the CPUC so long as the users are
charged what they would be charged by the utility company if users received
their water directly from the utility company. In Santa Cruz, customers
receiving their water directly from the City's water utility were charged a
certain lifeline rate for the first 400 ccfs of water and a greater rate for
usage over 400 ccfs of water, a readiness to serve charge of $7.80 per month and
tax on the total. In reliance on CPUC Section 2705.5, DeAnza implemented its
billings on this schedule notwithstanding that it did not receive the discount
for the first 400 ccfs of water because it was a commercial and not a
residential customer.
A dispute with the residents ensued over the readiness to serve charge and
tax thereon. The residents argued that California Civil Code Section 798.41
required that the Property owner could only pass through its actual costs of
water (and that the excess charges over the amount of the rent rollback were an
improper rent increase) and that CPUC Section 2705.5 was not applicable. DeAnza
unbundled the utility charges from rent consistent with California Civil Code
Section 798.41 and it has generally been undisputed that the rent rollback was
accurately calculated.
In August 1994, when the Company acquired the Property, the Company
reviewed the respective legal positions of the Santa Cruz Homeowners Association
("HOA") and DeAnza and concurred with DeAnza. DeAnza's reliance on CPUC Section
2705.5 made both legal and practical sense in that residents paid only what they
would pay if they lived in a residential neighborhood within the City and
permitted DeAnza to recoup part of the expenses of operating a submetered system
through the readiness to serve charge.
Over a period of 18 months from 1993 into May of 1995, a series of
complaints were filed by the HOA and Herbert Rossman, a resident, against
DeAnza, and later, the Company. DeAnza and the Company demurred to each of these
complaints on the grounds that the CPUC had exclusive jurisdiction over the
setting of water rates and that residents under rent control had to first
exhaust their administrative remedies before proceeding in a civil action. At
one point, the case was dismissed (with leave to amend) on the basis that
jurisdiction was with the CPUC and, at another point, Mr. Rossman was dismissed
from the case because he had not exhausted his administrative remedies.
On June 29, 1995, a hearing was held before a City rent control officer on
billing and submetering issues related to both water and sewer. The Company and
DeAnza prevailed on all issues related to sewer and the rent rollback related to
water, but the hearing officer determined that the Company could only pass
through its actual cost of water, i.e., a prorated readiness to serve charge and
tax thereon. The hearing officer did not deal with the subsidy being given to
residents through the quantity charge and ordered a rebate in a fixed amount per
resident. The Company and DeAnza requested reconsideration on this issue, among
others, which reconsideration was denied by the hearing officer.
The Company then took a writ of mandate (an appeal from an administrative
order) to the Superior Court and, pending this appeal, the residents, the
Company and the City agreed to stay the effect of the hearing officer's decision
until the Court rendered judgment.
In July 1996, the Superior Court affirmed the hearing officer's decision
without addressing concerns about the failure to take the subsidy on the
quantity charge into account.
F-22
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company requested that the City and the HOA agree to a further stay
pending appeal to the court of appeal, but they refused and the appeal court
denied the Company's request for a stay in late November 1996. Therefore, on
January 1, 1997, the Company reduced its water charges at this Property to
reflect a pass-through of only the readiness to serve charge and tax at the
master meter (approximately $0.73) and to eliminate the subsidy on the water
charges. On their March 1, 1997 rent billings, residents were credited for
amounts previously "overcharged" for readiness to serve charge and tax. The
amount of the rebate given by the Company and DeAnza was $36,400. In calculating
the rebate, the Company and DeAnza took into account the previous subsidy on
water usage although this issue had not yet been decided by the court of appeal.
The Company and DeAnza felt legally safe in so doing based on language in the
hearing officer's decision that actual costs could be passed through.
On March 12, 1997, the Company also filed an application with the CPUC to
dedicate the water system at this Property to public use and have the CPUC set
cost-based rates for water usage. The Company believed it was obligated to take
this action because of its consistent reliance on CPUC Section 2705.5 as a safe
harbor from CPUC jurisdiction. That is, when the Company could no longer charge
for water as the local serving utility would charge, it was no longer exempt
from the CPUC's jurisdiction and control under CPUC Section 2705.5.
On March 20, 1998, the court of appeal issued the writ of mandate requested
by the Company on the grounds that the hearing officer had improperly calculated
the amount of the rebate (meaning the Company had correctly calculated the rent
credits), but also ruling that the hearing officer was correct when he found
that the readiness to serve charge and tax thereon as charged by DeAnza and the
Company were an inappropriate rent increase. The decision primarily reflected
the court of appeal's view that CPUC Section 2705.5 operated as a ceiling and
that California Civil Code Section 798.41 allowed for a charge based on actual
costs, including costs of administration, operation and maintenance of the
system, but that the Company had not to provide evidence of such costs. The
court of appeal further agreed with the Company that the City's hearing officer
did not have the authority under California Civil Code Section 798.41 to
establish rates that could be charged in the future.
Following this decision, the CPUC granted the Company its certificate of
convenience and necessity on December 17, 1998 and approved cost-based rates and
charges for water that exceed what residents were paying under the Company's
reliance on CPUC Section 2705.5. Concurrently, the CPUC also issued an Order
Instituting Investigation ("OII") confirming its exclusive jurisdiction over the
issue of water rates in a submetered system and commencing an investigation into
the confusion and turmoil over billings in submetered properties. Specifically,
the OII states: "The Commission has exclusive and primary jurisdiction over the
establishment of rates for water and sewer services provided by private
entities."
Specifically, the CPUC ruling regarding the Company's application stated:
"The ultimate question of what fees and charges may or may not be assessed,
beyond external supplier pass-through charges, for in-park facilities when a
mobile home park does not adhere to the provisions of CPUC Section 2705.5, must
be decided by the Commission."
After the court of appeal decision, the HOA brought all of its members back
into the underlying civil action for the purpose of determining damages,
including punitive damages, against the Company. The trial was continued from
July 1998 to January 1999 to give the CPUC time to act on the Company's
application. Notwithstanding the action taken by the CPUC in issuing the OII in
December 1998, the trial court denied the Company's motion to dismiss on
jurisdictional grounds and trial commenced before a jury on January 11, 1999.
Not only did the trial court not consider the Company's motion to dismiss,
the trial court refused to allow evidence of the OII or the Company's CPUC
approval to go before the jury. Notwithstanding the Company's strenuous
objections, the judge also allowed evidence of the Company's and DeAnza's
litigation tactics to be used as evidence of bad faith and oppressive actions
(including evidence of the application to the CPUC requesting a $22.00 readiness
to serve charge). The Company's motion for a mistrial based upon these
evidentiary rulings was denied. On January 22, 1999, the jury returned a verdict
awarding $6.0 million of punitive damages against the Company and DeAnza. The
Company had previously agreed to indemnify DeAnza on the matter.
F-23
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company bonded the judgment pending appeal in accordance with
California procedural rules, which require a bond equal to 150% of the amount of
the judgment. Post-judgment interest will accrue at the statutory rate of 10.0%
per annum.
On April 19, 1999, the trial court denied all of the Company's and DeAnza's
post-trial motions for judgement notwithstanding the verdict, new trial and
remittur. The trial court also awarded $700,000 of attorneys' fees to
plaintiffs. The Company appealed the jury verdict and attorneys' fees award
(which also accrues interest at the statutory rate of 10.0% per annum).
On December 21, 2001 the California Court of Appeal for the Sixth District
reversed the $6.0 million punitive damage award and the related award of
attorneys' fees on the basis that punitive damages are not available as a remedy
for a statutory violation of the MRL. The decision of the appellate court left
the HOA with the right to seek a new trial in which it must prove its
entitlement to either the statutory penalty and attorneys' fees available under
the MRL or punitive damages based on causes of action for fraud,
misrepresentation or other tort. The Company expects the HOA to seek a new trial
during 2002. The Company intends to vigorously defend itself.
In two related appeals, the Company had argued that the trial court's
ability to enter an award of attorneys' fees in favor of the HOA and to take
certain other actions was preempted by the exercise of exclusive jurisdiction by
the CPUC over the issue of how to set rates for water in a submetered mobile
home park. During 2000, the California court of appeal rejected the Company's
preemption argument with respect to these prior rulings in favor of plaintiffs,
one of which had awarded plaintiffs approximately $100,000 of attorneys' fees.
The California Supreme Court declined to accept the case for review and the
Company paid the judgment, including post-judgment interest thereon, and
settled the matter for approximately $200,000 late in 2000.
In a separate matter, in December 2000 the HOA and certain individual
residents of the Property filed a complaint in the Superior Court of California,
County of Santa Cruz (No. CV 139825) against the Company, certain affiliates of
the Company and certain employees of the Company. The new lawsuit seeks damages,
including punitive damages, for intentional infliction of emotional distress,
unfair business practices, and unlawful retaliation purportedly arising from
allegedly retaliatory rent increases which were noticed by the Company to
certain residents in September 2000. The Company believes that the residents who
received rent increase notices with respect to rent increases above those
permitted by the local rent control ordinance were not covered by the ordinance
either because they did not comply with the provisions of the ordinance or
because they are exempted by state law. On December 29, 2000, the Superior Court
of California, County of Santa Cruz enjoined such rent increases. The Company
intends to vigorously defend the matter, which may go to trial in the summer of
2002.
ELLENBURG COMMUNITIES
The Company and certain other parties entered into a settlement agreement
("the Settlement"), which was approved by the Los Angeles County Superior Court
in April 2000. The Settlement resolved substantially all of the litigation and
appeals involving the Ellenburg Properties, and transactions arising out of the
settlement closed on May 22, 2000 (see Note 5). Only the appeals of the two
entities remain, neither of which is expected to materially affect the Company.
In connection with the Ellenburg Acquisition, on September 8, 1999,
Ellenburg Fund 20 ("Fund 20") filed a cross complaint in the Ellenburg
dissolution proceeding against the Company and certain of its affiliates
alleging causes of action for fraud and other claims in connection with the
Ellenburg acquisition. The Company subsequently successfully had the cross
complaint against the Company and its affiliates dismissed with prejudice by the
California Superior Court. However, Fund 20 has appealed. This appeal was one
not resolved by the Settlement. The Company believes Fund 20's allegations are
without merit and will vigorously defend itself.
F-24
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
In October 2001, Fund 20 sued the Company and certain of its affiliates
again, this time in Almeda County, California making substantially the same
allegations. The Company obtained an injunction preventing the case from
proceeding until the Fund 20 appeal is decided and other related proceedings in
Arizona (from which the Company has already been dismissed with prejudice) are
concluded.
CANDLELIGHT PROPERTIES, L.L.C
In 1996, 1997 and 1998, the Lending Partnership made loans to Candlelight
Properties, L.L.C. ("Borrower") in the aggregate principal amount of $8,050,000
(collectively, the "Loan". The Loan was secured by a mortgage on Candlelight
Village ("Candlelight"), a Property in Columbus, Indiana, and was guaranteed by
Ronald E. Farren, the 99% owner of Borrower. The Company accounted for the Loan
as an investment in real estate and, accordingly, Candlelight's rental revenues
and operating costs were included with the Company's rental revenues and
operating costs for financial reporting purposes. Concurrently with the funding
of the Loan, Borrower granted the Operating Partnership the option to acquire
Candlelight upon the maturity of the Loan. The Operating Partnership notified
Borrower that it was exercising its option to acquire Candlelight in March 1999,
and the Loan subsequently matured on May 3, 1999. However, Borrower failed to
repay the Loan and refused to convey Candlelight to the Operating Partnership.
Borrower filed suit in the Circuit Court of Bartholomew County, Indiana
("Court") on May 5, 1999, seeking declaratory judgment on the validity of the
exercise of the option. The Lending Partnership filed suit in the Court the next
day, seeking to foreclose its mortgage, and the suits were consolidated by the
Court.
On September 20, 2001, the parties entered into a settlement agreement
providing for a cash payment of $10.8 million to the Lending Partnership and
dismissal with prejudice of all litigation among the parties and their
affiliates, among other terms. The closing under the Settlement Agreement
occurred on October 5, 2001. The Company accounted for the Settlement as a
disposition of the property.
WESTWINDS
The Operating Partnership is the ground lessee ("Lessee") of certain
property in San Jose, California under ground leases ("Leases") from the
Nicholson Family Trust ("Lessor"). On February 13, 2001, Lessor filed a petition
for arbitration of disputes over whether certain items constitute "gross
revenue" under the Leases in which petition Lessor seeks damages and termination
of the Leases. Lessee responded on March 12, 2001 disputing Lessor's
contentions. Lessor claims that "gross revenue" for the purpose of calculating
percentage rent owing to Lessor under the ground leases includes certain amounts
Lessee has recouped from tenants of the Property (who are protected by rent
control) related to ground rent already paid to Lessor. Lessee has successfully
been able to pass-through to tenants at the property increases in ground rent
under the Leases. Lessee contends that this pass-through results in
reimbursement of lease expense, not "gross revenue." Lessor also contends that
the "net income" of RSI from the Property should be included in the gross
revenue calculation. Lessee disputes this for many reasons, including, but not
limited to, the fact that RSI is not a lessee under the Leases, the sales
activity is not conducted by Lessee, and RSI is a separate company from Lessee.
Lessor's motion for summary judgment on the pass-through issue was denied
by an arbitration panel on November 2, 2001. Lessor and Lessee have agreed to
mediate the dispute prior to arbitration. The Company does not believe that the
amounts in question are material even if resolved against the Lessee and, based
upon advice of counsel, does not believe that the Lessor will be successful in
terminating the Leases.
OTHER
The Company is involved in various other legal proceedings arising in the
ordinary course of business. Management believes that all proceedings herein
described or referred to, taken together, are not expected to have a material
adverse impact on the Company.
F-25
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 -- SUBSEQUENT EVENTS
Effective January 1, 2002, the Company purchased all of the outstanding
Common Stock of RSI from affiliated and non-affiliated owners for approximately
$675,000. As a result, the Company owns and controls RSI and will consolidate
RSI as of January 1, 2002.
F-26
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is unaudited quarterly data for 2001, 2000 and 1999 (amounts
in thousands, except for per share amounts):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2001 3/31 6/30 9/30 12/31
---- ------- ------- ------- -------
Total Revenues......................................... $57,532 $56,218 $55,536 $56,570
Income before allocation to Minority Interests and
extraordinary loss on early extinguishment of debt... $18,739 $10,512 $10,468 $11,825
Net income available to common shareholders............ $12,644 $ 6,135 $ 6,097 $ 7,207
Weighted average Common Shares outstanding -- Basic.... 20,793 20,969 21,108 21,266
Weighted average Common Shares outstanding -- Diluted.. 26,771 26,898 27,071 27,293
Net income per Common Share outstanding -- Basic....... $ 0.61 $ 0.29 $ 0.29 $ 0.34
Net income per Common Share outstanding -- Diluted..... $ 0.59 $ 0.29 $ 0.28 $ 0.33
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2000 3/31 6/30 9/30 12/31
---- ------- ------- ------- -------
Total Revenues......................................... $57,148 $54,271 $53,875 $55,384
Income before allocation to Minority Interests......... $10,743 $21,547 $ 9,715 $10,696
Net income available to common shareholders............ $ 6,331 $13,921 $ 5,451 $ 6,244
Weighted average Common Shares outstanding -- Basic.... 22,297 21,871 21,166 20,559
Weighted average Common Shares outstanding -- Diluted.. 28,242 27,809 27,077 26,520
Net income per Common Share outstanding -- Basic....... $ 0.28 $ 0.64 $ 0.26 $ 0.30
Net income per Common Share outstanding -- Diluted..... $ 0.28 $ 0.63 $ 0.25 $ 0.30
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1999 3/31 6/30 9/30 12/31
---- ------- ------- ------- -------
Total Revenues......................................... $54,390 $52,446 $53,537 $54,654
Income before allocation to Minority Interests......... $10,078 $ 8,477 $ 8,417 $ 7,056
Net income available to common shareholders............ $ 8,234 $ 6,968 $ 6,877 $ 5,693
Weighted average Common Shares outstanding -- Basic.... 26,157 25,773 25,613 23,381
Weighted average Common Shares outstanding -- Diluted.. 32,340 31,829 31,586 29,281
Net income per Common Share outstanding -- Basic....... $ 0.31 $ 0.27 $ 0.27 $ 0.24
Net income per Common Share outstanding -- Diluted..... $ 0.31 $ 0.27 $ 0.27 $ 0.24
F-27
SCHEDULE II
MANUFACTURED HOME COMMUNITIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 21, 2001
ADDITIONS
--------------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING CHARGED TO OTHER AT END OF
OF PERIOD INCOME ACCOUNTS DEDUCTIONS(1) PERIOD
---------- ---------- ---------- ------------- ---------
For the year ended December 31, 1999:
Allowance for doubtful accounts..... $250,000 $413,573 $ -- ($363,573) $300,000
For the year ended December 31, 2000:
Allowance for doubtful accounts..... $300,000 $322,574 $ -- ($322,574) $300,000
For the year ended December 31, 2001:
Allowance for doubtful accounts..... $300,000 $426,579 $ -- ($426,579) $300,000
- ---------------
(1) Deductions represent tenant receivables deemed uncollectible.
S-1
SCHEDULE III
MANUFACTURED HOME COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
COMPANY (IMPROVEMENTS)
------------------------ --------------------
DEPRECIABLE DEPRECIABLE
REAL ESTATE LOCATION ENCUMBRANCES LAND PROPERTY LAND PROPERTY
- ----------- ----------------- ---- ------------ -------- ----------- ------ -----------
Apollo Village Phoenix AZ 5,284 932 3,219 0 446
Brentwood Manor Mesa AZ 4,575 1,998 6,024 (1) 292
Carefree Manor Phoenix AZ 0 706 3,307 0 (135)
Casa del Sol #1 Peoria AZ 6,786 2,215 6,467 0 329
Casa del Sol #2 Glendale AZ 6,920 2,104 6,283 (1) 270
Casa del Sol #3 Glendale AZ 6,631 2,450 7,452 0 166
Central Park Phoenix AZ 7,185 1,612 3,784 0 452
Desert Skies Phoenix AZ 0 792 3,629 0 (432)
Fairview Manor Tucson AZ 0 1,674 4,708 0 875
Hacienda De Valencia Mesa AZ 8,421 833 2,701 0 850
Palm Shadows Glendale AZ 3,121 1,400 4,218 0 356
Sedona Shadows Sedona AZ 2,645 1,096 3,431 0 286
Sunrise Heights Phoenix AZ 0 1,000 3,016 0 269
The Mark Mesa AZ 0 1,354 4,660 6 718
The Meadows Tempe AZ 9,260 2,613 7,887 0 439
Whispering Palms Phoenix AZ 0 670 2,399 0 (138)
California Hawaiian San Jose CA 17,976 5,825 17,755 0 813
Colony Park Ceres CA 0 890 4,513 0 (1,610)
Concord Cascade Pacheco CA 10,381 985 3,016 0 682
Contempo Marin San Rafael CA 16,149 4,788 16,379 (1) 1,851
Coralwood Modesto CA 0 0 5,047 0 148
Date Palm Country Club Cathedral City CA 15,608 4,138 14,064 (23) 1,796
Four Seasons Fresno CA 0 756 2,348 0 126
Laguna Lake San Luis Obispo CA 5,570 2,845 7,640 1 (959)
Lamplighter Spring Valley CA 9,393 633 2,201 0 502
Meadowbrook Santee CA 0 4,345 12,528 0 924
Monte del Lago Castroville CA 8,160 3,150 9,469 0 629
Quail Meadows Riverbank CA 0 1,155 3,469 0 149
Nicholson Plaza San Jose CA 0 -- 4,512 0 44
Rancho Mesa El Cajon CA 0 2,130 6,616 0 (173)
Rancho Valley El Cajon CA 4,645 685 1,902 0 469
Royal Holiday Hemet CA 0 778 0 2,840
Royal Oaks Visalia CA 0 602 1,921 0 146
DeAnza Santa Cruz Santa Cruz CA 5,581 2,103 7,201 0 2,103
Santiago Estates Sylmar CA 0 3,562 14,205 0 (3,098)
Sea Oaks Los Osos CA 0 871 2,703 0 128
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD
12/31/01
-------------------------
DEPRECIABLE ACCUMULATED DATE OF
REAL ESTATE LAND PROPERTY TOTAL DEPRECIATION ACQUISITION
- ----------- -------- ----------- ---------- ------------ -----------
Apollo Village 932 3,665 4,597 (883) 1994
Brentwood Manor 1,997 6,316 8,313 (1,846) 1993
Carefree Manor 706 3,172 3,878 (425) 1998
Casa del Sol #1 2,215 6,796 9,011 (936) 1996
Casa del Sol #2 2,103 6,553 8,656 (875) 1996
Casa del Sol #3 2,450 7,618 10,068 (909) 1998
Central Park 1,612 4,236 5,848 (2,442) 1983
Desert Skies 792 3,197 3,989 (419) 1998
Fairview Manor 1,674 5,583 7,257 (720) 1998
Hacienda De Valencia 833 3,551 4,384 (1,931) 1984
Palm Shadows 1,400 4,574 5,974 (1,324) 1993
Sedona Shadows 1,096 3,717 4,813 (550) 1997
Sunrise Heights 1,000 3,285 4,285 (861) 1994
The Mark 1,360 5,378 6,738 (1,284) 1994
The Meadows 2,613 8,326 10,939 (2,204) 1994
Whispering Palms 670 2,261 2,931 (300) 1998
California Hawaiian 5,825 18,568 24,393 (2,880) 1997
Colony Park 890 2,903 3,793 (375) 1998
Concord Cascade 985 3,698 4,683 (2,019) 1983
Contempo Marin 4,787 18,230 23,017 (4,319) 1994
Coralwood 0 5,195 5,195 (760) 1997
Date Palm Country Club 4,115 15,860 19,975 (3,774) 1994
Four Seasons 756 2,474 3,230 (370) 1997
Laguna Lake 2,846 6,681 9,527 (1,004) 1998
Lamplighter 633 2,703 3,336 (1,510) 1983
Meadowbrook 4,345 13,452 17,797 (1,677) 1998
Monte del Lago 3,150 10,098 13,248 (1,468) 1997
Quail Meadows 1,155 3,618 4,773 (454) 1998
Nicholson Plaza 0 4,556 4,556 (658) 1997
Rancho Mesa 2,130 6,443 8,573 (821) 1998
Rancho Valley 685 2,371 3,056 (1,320) 1983
Royal Holiday 778 2,840 3,618 (97) 1998
Royal Oaks 602 2,067 2,669 (301) 1997
DeAnza Santa Cruz 2,103 9,304 11,407 (1,677) 1994
Santiago Estates 3,562 11,107 14,669 (1,233) 1998
Sea Oaks 871 2,831 3,702 (409) 1997
S-2
SCHEDULE III
MANUFACTURED HOME COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
COMPANY (IMPROVEMENTS)
------------------------ ----------------------
DEPRECIABLE DEPRECIABLE
REAL ESTATE LOCATION ENCUMBRANCES LAND PROPERTY LAND PROPERTY
- ----------- ---------------------- ------------ -------- ----------- ------ -----------
Sunshadow San Jose CA 0 0 5,707 0 89
Westwinds (4 properties) San Jose CA 0 0 17,616 0 4,131
Bear Creek Sheridan CO 0 1,100 31,559 0 (28,094)
Cimarron Broomfield CO 8,086 863 2,790 0 464
Golden Terrace Golden CO 8,041 826 2,415 0 436
Golden Terrace South Golden CO 2,400 750 2,265 0 477
Golden Terrace West Golden CO 9,737 1,694 5,065 0 750
Hillcrest Village Aurora CO 15,476 1,912 5,202 290 1,967
Holiday Hills Denver CO 19,437 2,159 7,780 1 3,156
Holiday Village CO Co. Springs CO 6,264 567 1,759 0 588
Pueblo Grande Pueblo CO 3,476 241 1,069 0 334
Woodland Hills Denver CO 11,765 1,928 4,408 0 2,192
Aspen Meadows Rehoboth DE 0 1,148 4,543 0 (948)
Camelot Acres Rehoboth DE 7,003 527 2,058 0 574
Mariners Cove Millsboro DE 0 990 2,971 0 2,949
McNicol Rehoboth DE 0 563 2,106 0 (347)
Sweetbriar Rehoboth DE 0 498 3,027 1 (1,337)
Waterford Estates Bear DE 0 5,250 16,202 0 370
Whispering Pines Lewes DE 0 1,536 4,609 0 724
Maralago Cay Lantana FL 0 5,325 15,420 0 1,090
Bay Indies Venice FL 22,525 10,483 3,390 0 29,549
Bay Lake Estates Nokomis FL 4,651 990 3,304 0 495
Buccaneer N. Ft. Myers FL 19,532 4,207 14,410 0 756
Bulow Village Flagler Beach FL 1,110 3,637 949 0 4,186
Carriage Cove Daytona Beach FL 8,221 2,914 10,176 0 (1,168)
Coral Cay Margate FL 16,742 5,890 20,211 0 1,580
Coquina St Augustine FL 0 5,286 5,545 0 2,363
Meadows at Countrywood Plant City FL 0 4,514 13,175 0 1,442
Country Place New Port Richey FL 4,008 663 0 18 6,288
Country Side North Vero Beach FL 0 3,711 14,751 0 (2,646)
East Bay Oaks Largo FL 6,674 1,240 3,322 0 377
Eldorado Village Largo FL 4,576 778 0 0 2,669
Grand Island Grand island FL 0 1,723 5,208 38 629
Heritage Village Vero Beach FL 0 2,403 7,259 0 327
Hillcrest Clearwater FL 0 1,278 5,850 0 (1,624)
Holiday Ranch Largo FL 0 925 3,142 0 (155)
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD
12/31/01
------------------------
DEPRECIABLE ACCUMULATED DATE OF
REAL ESTATE LAND PROPERTY TOTAL DEPRECIATION ACQUISITION
- ----------- -------- ----------- ---------- ------------ -----------
Sunshadow 0 5,796 5,796 (848) 1997
Westwinds (4 properties) 0 21,747 21,747 (3,185) 1997
Bear Creek 1,100 3,465 4,565 (460) 1998
Cimarron 863 3,254 4,117 (1,864) 1983
Golden Terrace 826 2,851 3,677 (1,515) 1983
Golden Terrace South 750 2,742 3,492 (399) 1997
Golden Terrace West 1,694 5,815 7,509 (2,753) 1986
Hillcrest Village 2,202 7,169 9,371 (3,903) 1983
Holiday Hills 2,160 10,936 13,096 (5,705) 1983
Holiday Village CO 567 2,347 2,914 (1,236) 1983
Pueblo Grande 241 1,403 1,644 (780) 1983
Woodland Hills 1,928 6,600 8,528 (1,767) 1994
Aspen Meadows 1,148 3,595 4,743 (495) 1998
Camelot Acres 527 2,632 3,159 (1,449) 1983
Mariners Cove 990 5,920 6,910 (2,071) 1987
McNicol 563 1,759 2,322 (232) 1998
Sweetbriar 499 1,690 2,189 (211) 1998
Waterford Estates 5,250 16,572 21,822 (1,969) 1996
Whispering Pines 1,536 5,333 6,869 (2,232) 1998
Maralago Cay 5,325 16,510 21,835 (2,291) 1997
Bay Indies 10,483 32,939 43,422 (8,621) 1994
Bay Lake Estates 990 3,799 4,789 (965) 1994
Buccaneer 4,207 15,166 19,373 (3,709) 1994
Bulow Village 3,637 5,135 8,772 (768) 1994
Carriage Cove 2,914 9,008 11,922 (1,199) 1998
Coral Cay 5,890 21,791 27,681 (5,185) 1994
Coquina 5,286 7,908 13,194 (404) 1999
Meadows at Countrywood 4,514 14,617 19,131 (1,948) 1998
Country Place 681 6,288 6,969 (1,973) 1986
Country Side North 3,711 12,105 15,816 (1,597) 1998
East Bay Oaks 1,240 3,699 4,939 (2,156) 1983
Eldorado Village 778 2,669 3,447 (1,541) 1983
Grand Island 1,761 5,837 7,598 (170) 2001
Heritage Village 2,403 7,586 9,989 (1,946) 1994
Hillcrest 1,278 4,226 5,504 (537) 1998
Holiday Ranch 925 2,987 3,912 (396) 1998
S-3
SCHEDULE III
MANUFACTURED HOME COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
COMPANY (IMPROVEMENTS)
------------------------ ----------------------
DEPRECIABLE DEPRECIABLE
REAL ESTATE LOCATION ENCUMBRANCES LAND PROPERTY LAND PROPERTY
- ----------- ------------------------ ------------ -------- ----------- ------ -----------
Holiday Village FL Vero Beach FL 0 350 1,792 0 (313)
Indian Oaks Rockledge FL 3,091 1,089 4,527 0 (518)
Lake Fairways N. Ft. Myers FL 0 6,075 18,134 0 810
Lake Haven Dunedin FL 8,071 1,135 4,047 0 763
Lakewood Village Melbourne FL 0 1,863 5,627 (1) 385
Landings Port Orange FL 0 2,446 8,496 0 (576)
Mid-Florida Lakes Leesburg FL 25,112 5,997 20,635 0 2,683
Oak Bend Ocala FL 0 850 2,572 0 605
Pickwick Port Orange FL 8,375 2,803 8,870 0 46
Pine Lakes N. Ft. Myers FL 0 6,306 14,579 0 4,770
Sherwood Forest Kissimmee FL 9,637 4,852 19,642 0 (2,849)
Sherwood Forest RV Park Kissimmee FL 0 2,870 3,621 568 636
Southern Palms Eustis FL 0 2,169 5,884 0 1,013
Spanish Oaks Ocala FL 7,445 2,250 6,922 0 509
Oaks at Countrywood Plant City FL 0 1,111 2,513 (340) 188
The Heritage N. Ft. Myers FL 0 1,438 4,371 249 2,046
The Lakes at Countrywood Plant city FL 0 2,377 7,086 37 627
The Meadows, FL Palm Beach Gardens FL 6,202 3,229 9,870 0 220
Windmill Manor Bradenton FL 6,282 2,153 6,125 (1) 874
Windmill Village -- Ft. Myers N. Ft. Myers FL 9,406 1,417 5,440 0 942
Windmill Village North Sarasota FL 9,069 1,523 5,063 0 580
Windmill Village South Sarasota FL 5,563 1,106 3,162 0 311
Five Seasons Cedar Rapids IA 0 1,053 5,361 0 (1,440)
Holiday Village, IA Sioux City IA 0 313 3,744 0 351
Golf Vistas Monee IL 0 2,843 4,719 0 3,529
Willow Lake Estates Elgin IL 21,392 6,138 21,033 0 1,953
Burns Harbor Estates Chesterton IN 0 916 2,909 0 1,469
Oak Tree Village Portage IN 6,092 0 0 569 3,465
Windsong Indianapolis IN 0 1,482 6,509 0 (1,916)
Pheasant Ridge Mt. Airy MD 0 376 1,779 0 356
Creekside Wyoming MI 0 1,109 3,646 0 (19)
Camelot Acres Burnsville MN 0 1,778 6,577 0 (901)
Casa Village Billings MT 8,040 1,011 3,109 181 1,913
Del Rey Albuquerque NM 0 1,926 5,800 0 677
Bonanza Las Vegas NV 9,988 908 2,643 0 613
Boulder Cascade Las Vegas NV 7,878 2,995 12,413 0 (2,756)
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD
12/31/01
------------------------
DEPRECIABLE ACCUMULATED DATE OF
REAL ESTATE LAND PROPERTY TOTAL DEPRECIATION ACQUISITION
- ----------- -------- ----------- ---------- ------------ -----------
Holiday Village FL 350 1,479 1,829 (176) 1998
Indian Oaks 1,089 4,009 5,098 (518) 1998
Lake Fairways 6,075 18,944 25,019 (4,500) 1994
Lake Haven 1,135 4,810 5,945 (2,645) 1983
Lakewood Village 1,862 6,012 7,874 (1,537) 1994
Landings 2,446 7,920 10,366 (1,068) 1998
Mid-Florida Lakes 5,997 23,318 29,315 (5,489) 1994
Oak Bend 850 3,177 4,027 (853) 1993
Pickwick 2,803 8,916 11,719 (1,161) 1998
Pine Lakes 6,306 19,349 25,655 (4,505) 1994
Sherwood Forest 4,852 16,793 21,645 (2,048) 1998
Sherwood Forest RV Park 3,438 4,257 7,695 (506) 1998
Southern Palms 2,169 6,897 9,066 (654) 1998
Spanish Oaks 2,250 7,431 9,681 (2,003) 1993
Oaks at Countrywood 771 2,701 3,472 (285) 1998
The Heritage 1,687 6,417 8,104 (1,657) 1993
The Lakes at Countrywood 2,414 7,713 10,127 (226) 2001
The Meadows, FL 3,229 10,090 13,319 (824) 1999
Windmill Manor 2,152 6,999 9,151 (939) 1998
Windmill Village -- Ft. Myers 1,417 6,382 7,799 (3,575) 1983
Windmill Village North 1,523 5,643 7,166 (3,230) 1983
Windmill Village South 1,106 3,473 4,579 (2,025) 1983
Five Seasons 1,053 3,921 4,974 (579) 1998
Holiday Village, IA 313 4,095 4,408 (2,074) 1986
Golf Vistas 2,843 8,248 11,091 (1,071) 1997
Willow Lake Estates 6,138 22,986 29,124 (5,432) 1994
Burns Harbor Estates 916 4,378 5,294 (1,236) 1993
Oak Tree Village 569 3,465 4,034 (1,268) 1987
Windsong 1,482 4,593 6,075 (621) 1998
Pheasant Ridge 376 2,135 2,511 (1,198) 1988
Creekside 1,109 3,627 4,736 (481) 1998
Camelot Acres 1,778 5,676 7,454 (761) 1998
Casa Village 1,192 5,022 6,214 (2,398) 1983
Del Rey 1,926 6,477 8,403 (1,883) 1993
Bonanza 908 3,256 4,164 (1,806) 1983
Boulder Cascade 2,995 9,657 12,652 (1,183) 1998
S-4
SCHEDULE III
MANUFACTURED HOME COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
COMPANY (IMPROVEMENTS)
------------------------ ----------------------
DEPRECIABLE DEPRECIABLE
REAL ESTATE LOCATION ENCUMBRANCES LAND PROPERTY LAND PROPERTY
- ----------- ------------------------ ------------ -------- ----------- ------ -----------
Cabana Las Vegas NV 8,425 2,648 7,989 0 174
Flamingo West Las Vegas NV 0 1,730 5,266 0 688
Villa Borega Las Vegas NV 7,470 2,896 8,774 0 186
Brook Gardens Lackawanna NY 0 3,828 10,310 0 1,099
Greenwood Village Manorville NY 0 3,667 9,414 485 2,814
Falcon Wood Village Eugene OR 4 1,112 3,426 0 109
Quail Hollow Fairview OR 0 0 3,249 0 102
Shadowbrook Clackamas OR 0 1,197 3,693 0 102
Green Acres Breinigsville PA 16,014 2,680 7,479 0 2,149
Fun n Sun RV Park San Benito TX 0 2,533 0 0 8,414
All Seasons Salt Lake City UT 0 510 1,623 0 163
Westwood Village Farr West UT 0 1,346 4,179 0 1,030
Meadows of Chantilly Chantilly VA 0 5,430 16,440 0 1,627
Kloshe Illahee Federal Way WA 6,469 2,408 7,286 0 83
Independence Hill Morgantown WV 0 299 898 0 259
College Heights Consolidated
(18 properties) Various 65,914 17,045 71,382 0 493
Management Business Chicago IL 0 0 436 0 7,542
-------- -------- -------- ------ -------
$589,954 $269,795 $871,001 $2,076 $95,266
======== ======== ======== ====== =======
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD
12/31/01
------------------------
DEPRECIABLE ACCUMULATED DATE OF
REAL ESTATE LAND PROPERTY TOTAL DEPRECIATION ACQUISITION
- ----------- -------- ----------- ---------- ------------ -----------
Cabana 2,648 8,163 10,811 (2,075) 1994
Flamingo West 1,730 5,954 7,684 (1,416) 1994
Villa Borega 2,896 8,960 11,856 (1,315) 1997
Brook Gardens 3,828 11,409 15,237 (1,575) 1998
Greenwood Village 4,152 12,228 16,380 (1,482) 1998
Falcon Wood Village 1,112 3,535 4,647 (512) 1997
Quail Hollow 0 3,351 3,351 (490) 1997
Shadowbrook 1,197 3,795 4,992 (577) 1997
Green Acres 2,680 9,628 12,308 (4,016) 1988
Fun n Sun RV Park 2,533 8,414 10,947 (1,155) 1998
All Seasons 510 1,786 2,296 (274) 1997
Westwood Village 1,346 5,209 6,555 (745) 1997
Meadows of Chantilly 5,430 18,067 23,497 (4,707) 1994
Kloshe Illahee 2,408 7,369 9,777 (1,072) 1997
Independence Hill 299 1,157 1,456 (450) 1990
College Heights Consolidated
(18 properties) 17,045 71,875 88,920 (8,387) 1998
Management Business 0 7,978 7,978 (5,700) 1990
-------- -------- ---------- ---------
$271,871 $966,267 $1,238,138 $(211,878)
======== ======== ========== =========
- ---------------
NOTES:
(1) For depreciable property, the Company uses a 30-year estimated life for
buildings acquired and structural and land improvements, a ten-to-fifteen
year estimated life for building upgrades and a three-to-seven year
estimated life for furniture and fixtures.
(2) The schedule excludes five Properties in which the Company has a
non-controlling joint venture interest and accounts for using the equity
method of accounting.
(3) The balance of furniture and fixtures included in the total amounts was
approximately $12.2 million as of December 31, 2001.
(4) The aggregate cost of land and depreciable property for Federal income tax
purposes was approximately $1.1 billion, as of December 31, 2001.
(5) All Properties were acquired, except for Country Place Village, which was
constructed.
S-5
SCHEDULE III
MANUFACTURED HOME COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
The changes in total real estate for the years ended December 31, 2001,
2000 and 1999 were as follows:
2001 2000 1999
---------- ---------- ----------
Balance, beginning of year.... $1,218,176 $1,264,343 $1,237,431
Acquisitions(1)............. 17,770 (4,581) 12,496
Improvements................ 23,140 16,261 16,700
Dispositions(2) and other... (20,948) (57,847) (2,284)
---------- ---------- ----------
Balance, end of year.......... $1,238,138 $1,218,176 $1,264,343
========== ========== ==========
- ---------------
(1) Acquisitions for the year ended December 31, 2000 include return of escrow
proceeds.
(2) Dispositions for 2000 include the non-cash assumption of $19.0 million of
debt by the purchaser of a Property.
The changes in accumulated depreciation for the years ended December 31,
2001, 2000 and 1999 were as follows:
2001 2000 1999
-------- -------- --------
Balance, beginning of year.... $181,580 $150,757 $118,021
Depreciation expense........ 35,205 35,548 35,020
Dispositions and other...... (4,907) (4,725) (2,284)
-------- -------- --------
Balance, end of year.......... $211,878 $181,580 $150,757
======== ======== ========
S-6
Exhibit 10.41
TERM LOAN CREDIT AGREEMENT
AMONG
MHC OPERATING LIMITED PARTNERSHIP,
AN ILLINOIS LIMITED PARTNERSHIP,
AS BORROWER,
MANUFACTURED HOME COMMUNITIES, INC.,
A MARYLAND CORPORATION,
THE REIT,
WELLS FARGO BANK, N.A.,
BANK OF AMERICA, N.A.,
COMMERZBANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH,
AND
JP MORGAN CHASE BANK
(SUCCESSOR BY MERGER TO MORGAN GUARANTY TRUST COMPANY OF NEW YORK)
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 10.11, AS LENDERS,
WELLS FARGO BANK, N.A.,
AS AGENT AND SOLE LEAD ARRANGER
BANK OF AMERICA, N.A., AS SYNDICATION AGENT,
COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH, AS
DOCUMENTATION AGENT
AND
JP MORGAN CHASE BANK,
AS DOCUMENTATION AGENT
DATED AS OF FEBRUARY 11, 2002
RECITALS..........................................................................................................1
ARTICLE I - DEFINITIONS...........................................................................................1
1.01 CERTAIN DEFINED TERMS.......................................................................................1
1.02 COMPUTATION OF TIME PERIODS................................................................................21
1.03 TERMS......................................................................................................21
ARTICLE II - LOAN................................................................................................22
2.01 MAKING OF LOAN AND REPAYMENT...............................................................................22
2.02 BORROWING AND INTEREST RATE ELECTION AUTHORIZATION.........................................................23
2.03 INTEREST ON THE LOAN.......................................................................................24
2.04 FEES.......................................................................................................28
2.05 PAYMENTS...................................................................................................29
2.06 INCREASED CAPITAL..........................................................................................30
2.07 NOTICE OF INCREASED COSTS..................................................................................30
2.08 OPTION TO REPLACE LENDERS..................................................................................30
2.09 EXTENSION OPTIONS..........................................................................................31
ARTICLE III - CONDITIONS TO LOAN.................................................................................33
3.01 CONDITIONS TO DISBURSEMENT OF LOAN.........................................................................33
ARTICLE IV - REPRESENTATIONS AND WARRANTIES......................................................................35
4.01 REPRESENTATIONS AND WARRANTIES AS TO BORROWER..............................................................35
4.02 REPRESENTATIONS AND WARRANTIES AS TO THE REIT..............................................................40
ARTICLE V - REPORTING COVENANTS..................................................................................43
5.01 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION.........................................43
5.02 PRESS RELEASES; SEC FILINGS AND FINANCIAL STATEMENTS.......................................................46
5.03 ENVIRONMENTAL NOTICES......................................................................................46
5.04 QUALIFYING UNENCUMBERED PROPERTIES.........................................................................46
ARTICLE VI - AFFIRMATIVE COVENANTS...............................................................................47
6.01 WITH RESPECT TO BORROWER:..................................................................................47
6.02 WITH RESPECT TO THE REIT:..................................................................................49
ARTICLE VII - NEGATIVE COVENANTS.................................................................................50
7.01 WITH RESPECT TO BORROWER:..................................................................................50
7.02 WITH RESPECT TO THE REIT:..................................................................................55
ARTICLE VIII - FINANCIAL COVENANTS...............................................................................57
8.01 TOTAL LIABILITIES TO GROSS ASSET VALUE.....................................................................57
8.02 SECURED DEBT TO GROSS ASSET VALUE..........................................................................57
8.03 EBITDA TO INTEREST EXPENSE RATIO...........................................................................57
8.04 EBITDA TO FIXED CHARGES RATIO..............................................................................57
8.05 UNENCUMBERED NET OPERATING INCOME TO UNSECURED INTEREST EXPENSE............................................57
8.06 UNENCUMBERED POOL..........................................................................................57
8.07 MINIMUM NET WORTH..........................................................................................57
8.08 PERMITTED HOLDINGS.........................................................................................57
8.09 CALCULATION................................................................................................59
ARTICLE IX - EVENTS OF DEFAULT; RIGHTS AND REMEDIES..............................................................59
9.01 EVENTS OF DEFAULT..........................................................................................59
9.02 RIGHTS AND REMEDIES........................................................................................63
9.03 RESCISSION.................................................................................................64
ARTICLE X - AGENCY PROVISIONS....................................................................................64
10.01 APPOINTMENT...............................................................................................64
10.02 NATURE OF DUTIES..........................................................................................65
10.03 LOAN CONTINUATION/CONVERSION..............................................................................65
10.04 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS................................................................66
10.05 RIGHTS, EXCULPATION, ETC..................................................................................66
10.06 RELIANCE..................................................................................................67
10.07 INDEMNIFICATION...........................................................................................67
10.08 AGENT INDIVIDUALLY........................................................................................68
10.09 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT...................................................68
10.10 CONSENTS AND APPROVALS....................................................................................69
10.11 ASSIGNMENTS AND PARTICIPATIONS............................................................................70
10.12 RATABLE SHARING...........................................................................................73
10.13 DELIVERY OF DOCUMENTS.....................................................................................73
10.14 NOTICE OF EVENTS OF DEFAULT...............................................................................74
ARTICLE XI - MISCELLANEOUS.......................................................................................74
11.01 EXPENSES..................................................................................................74
11.02 INDEMNITY.................................................................................................75
11.03 CHANGE IN ACCOUNTING PRINCIPLES...........................................................................76
11.04 SETOFF....................................................................................................76
11.05 AMENDMENTS AND WAIVERS....................................................................................77
ii
11.06 INDEPENDENCE OF COVENANTS.................................................................................78
11.07 NOTICES AND DELIVERY......................................................................................78
11.08 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS........................................................79
11.09 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.....................................................79
11.10 MARSHALING; RECOURSE TO SECURITY; PAYMENTS SET ASIDE......................................................79
11.11 SEVERABILITY..............................................................................................79
11.12 HEADINGS..................................................................................................79
11.13 GOVERNING LAW.............................................................................................79
11.14 LIMITATION OF LIABILITY...................................................................................80
11.15 SUCCESSORS AND ASSIGNS....................................................................................80
11.16 USURY LIMITATION..........................................................................................80
11.17 CONFIDENTIALITY...........................................................................................80
11.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL; WAIVER OF PERMISSIVE COUNTERCLAIMS..81
11.19 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES..............................................................82
11.20 CONSTRUCTION..............................................................................................82
11.21 ENTIRE AGREEMENT..........................................................................................82
11.22 AGENT'S ACTION FOR ITS OWN PROTECTION ONLY................................................................82
11.23 LENDERS' ERISA COVENANT...................................................................................83
11.24. SOLE LEAD ARRANGER, DOCUMENTATION AGENT AND SYNDICATION AGENT............................................83
EXHIBITS
A - Assignment and Assumption
B - Closing Checklist
C - [Intentionally Deleted]
D - Loan Note
E-1 - Notice of Borrowing
E-2 - Notice of Continuation
F - Qualifying Unencumbered Properties
SCHEDULES
4.01(c) - Ownership of Borrower
4.01(r) - Environmental Matters
4.01(v) - Subsidiaries and Investment Affiliates
iii
TERM LOAN CREDIT AGREEMENT
THIS TERM LOAN CREDIT AGREEMENT is dated as of February __,
2002, (as amended, supplemented or modified from time to time, the "Agreement")
and is among MHC Operating Limited Partnership, an Illinois limited partnership
("Borrower"), Manufactured Home Communities, Inc., a Maryland corporation (the
"REIT"), each of the Lenders, as hereinafter defined, and Wells Fargo Bank, N.A.
("Wells Fargo") in its capacity as Agent, as Sole Lead Arranger and as a Lender,
Bank of America, N.A. , as Syndication Agent and as a Lender, Commerzbank
Aktiengesellschaft, New York Branch, as Documentation Agent and as a Lender, and
JP Morgan Chase Bank (successor by merger to Morgan Guaranty Trust Company of
New York), as Documentation Agent and as a Lender.
RECITALS
A. Borrower desires to borrow, and the Lenders desire to lend,
One Hundred Million Dollars ($100,000,000) in accordance with the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms used in this
Agreement shall have the following meanings (such meanings to be applicable,
except to the extent otherwise indicated in a definition of a particular term,
both to the singular and the plural forms of the terms defined):
"Accommodation Obligations" as applied to any Person, means
any obligation, contingent or otherwise, of that Person in respect of which that
Person is liable for any Indebtedness or other obligation or liability of
another Person, including without limitation and without duplication (i) any
such Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or to make payment other than for
value received and (ii) any obligation of such Person arising through such
Person's status as a general partner of a general or limited
partnership with respect to any Indebtedness, obligation or liability of such
general or limited partnership.
"Accountants" means any nationally recognized independent
accounting firm.
"Adjusted Asset Value" means, as of any date of determination,
(i) for any Property for which an acquisition or disposition by Borrower or any
Subsidiary has not occurred in the Fiscal Quarter most recently ended as of such
date, the product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to such Property in a manner reasonably
acceptable to Agent, and the denominator of which is eight hundred seventy-five
ten-thousandths (0.0875), and (ii) for any Property which has been acquired by
Borrower or any Subsidiary in the Fiscal Quarter most recently ended as of such
date, the Net Price of the Property paid by Borrower or such Subsidiary for such
Property.
"Affiliates" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, (b) the ownership of a general partnership interest in such Person
or (c) the ownership of twenty-five percent (25%) or more of the limited
partnership interests (or other ownership interests with similarly limited
voting rights) in such Person; provided, however, that in no event shall the
Affiliates of Borrower or any Subsidiary or any Investment Affiliate include
Persons holding direct or indirect ownership interests in the REIT or any other
real estate investment trust which holds a general partnership interest in
Borrower if such Person does not otherwise constitute an "Affiliate" hereunder;
provided, further, that the REIT and Borrower shall at all times be deemed
Affiliates of each other.
"Agent" means Wells Fargo in its capacity as administrative
agent for the Lenders under this Agreement, and shall include any successor
Agent appointed pursuant hereto and shall be deemed to refer to Wells Fargo in
its individual capacity as a Lender where the context so requires.
"Agreement" has the meaning ascribed to such term in the
preamble hereto.
"Agreement Party" means any Person, other than the REIT and
Borrower, which concurrently with the execution of this Agreement or hereafter
executes and delivers a guaranty in connection with this Agreement, which as of
the date of determination, is in force and effect.
"Assignment and Assumption" means an Assignment and Assumption
in the form of Exhibit A hereto (with blanks appropriately filled in) delivered
to Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to Section 10.11.
2
"Applicable Margin" means, for any day, the rate per annum set
forth below opposite the applicable Level Period then in effect:
Level Period Applicable Margin
------------ -----------------
Level I Period 1.25%
Level II Period 1.375%
The Applicable Margin shall be adjusted for all purposes quarterly as soon as
reasonably practicable, but not later than five (5) days after the date of
receipt by Agent of the quarterly financial information in accordance with the
provisions of Section 5.01(a) hereof, together with a calculation by Borrower of
the ratio of Total Liabilities to the sum of Gross Asset Values for Borrower and
each of its Subsidiaries as of the end of the applicable Fiscal Quarter. No
adjustment in the Applicable Margin shall be made retroactively.
"Balloon Payment" means, with respect to any loan constituting
Indebtedness, any required principal payment of such loan which is either (i)
payable at the maturity of such loan or (ii) in an amount which exceeds
twenty-five percent (25%) of the original principal amount of such loan;
provided, however, that the final payment of a fully amortizing loan shall not
constitute a Balloon Payment.
"Base Rate" means, on any day, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall at all times be
equal to the higher of (a) the base rate of interest per annum established from
time to time by Wells Fargo, and designated as its prime rate and in effect on
such day, and (b) the Federal Funds Rate as announced by the Federal Reserve
Bank of New York in effect on such day plus one half percent (0.5%) per annum.
Each change in the Base Rate shall become effective automatically as of the
opening of business on the date of such change in the Base Rate, without prior
written notice to Borrower or Lenders. The Base Rate may not be the lowest rate
of interest charged by any bank, Agent or Lender on similar loans.
"Base Rate Loans" means that portion of the Loan bearing
interest at the Base Rate.
"Base Rent" means the aggregate rent received, on a
consolidated basis, by Borrower or any Subsidiary from tenants which lease
manufactured home community sites owned by Borrower or any Subsidiary minus any
amounts specifically identified as and representing payments for trash removal,
cable television, water, electricity, other utilities, taxes, and other rent
which reimburses expenses related to the tenant's occupancy.
"Benefit Plan" means any employee pension benefit plan as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which a
Person or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the immediately
3
preceding five (5) years, maintained, administered, contributed to or was
required to contribute to, or under which a Person or any ERISA Affiliate may
have any liability.
"Borrower" has the meaning ascribed to such term in the
preamble hereto.
"Borrower Plan" shall mean any Plan (A) which Borrower, any of
its Subsidiaries or any of its ERISA Affiliates maintains, administers,
contributes to or is required to contribute to, or, within the five years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which Borrower, any of its Subsidiaries or any of its
ERISA Affiliates may incur any liability and (B) which covers any employee or
former employee of Borrower, any of its Subsidiaries or any of its ERISA
Affiliates (with respect to their relationship with such entities).
"Borrower's Share" means Borrower's and/or the REIT's
collective direct or indirect share of the assets, liabilities, income, expenses
or expenditures, as applicable, of an Investment Affiliate based upon Borrower's
and/or the REIT's percentage ownership (whether direct or indirect) of such
Investment Affiliate, as the case may be.
"Business Day" means (a) with respect to any payment or rate
determination of LIBOR Loans, a day, other than a Saturday or Sunday, on which
Agent is open for business in Chicago and San Francisco and on which dealings in
Dollars are carried on in the London inter bank market, and (b) for all other
purposes any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the States of California and Illinois, or is a day on which
banking institutions located in California and Illinois are required or
authorized by law or other governmental action to close.
"Capital Expenditures" means, as applied to any Person for any
period, the aggregate of all expenditures (whether paid in cash or accrued as
liabilities during that period and including that portion of Capital Leases
which is capitalized on the balance sheet of a Person) by such Person during
such period that, in conformity with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
reflected in the balance sheet of such Person, excluding any expenditures
reasonably determined by such Person as having been incurred for expansion of
the number of manufactured home sites at a manufactured home community owned by
such Person.
"Capital Leases," as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by an agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one (1) year after the date of acquisition
thereof; (b) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two
4
nationally recognized rating services reasonably acceptable to Agent; (c)
domestic corporate bonds, other than domestic corporate bonds issued by Borrower
or any of its Affiliates, maturing no more than 2 years after the date of
acquisition thereof and, at the time of acquisition, having a rating of at least
A or the equivalent from two nationally recognized rating service reasonably
acceptable to Agent; (d) variable-rate domestic corporate notes or medium term
corporate notes, other than notes issued by Borrower or any of its Affiliates,
maturing or resetting no more than 1 year after the date of acquisition thereof
and having a rating of at least AA or the equivalent from two nationally
recognized rating services reasonably acceptable to Agent; (e) commercial paper
(foreign and domestic) or master notes, other than commercial paper or master
notes issued by Borrower or any of its Affiliates, and, at the time of
acquisition, having a long-term rating of at least A or the equivalent from a
nationally recognized rating service reasonably acceptable to Agent and having a
short-term rating of at least A-1 and P-1 from S&P and Moody's, respectively
(or, if at any time neither S&P nor Moody's shall be rating such obligations,
then the highest rating from such other nationally recognized rating services
reasonably acceptable to Agent); (f) domestic and Eurodollar certificates of
deposit or domestic time deposits or Eurotime deposits or bankers' acceptances
(foreign or domestic) that are issued by a bank (I) which has, at the time of
acquisition, a long-term rating of at least A or the equivalent from a
nationally recognized rating service reasonably acceptable to Agent and (II) if
a domestic bank, which is a member of the FDIC; and (g) overnight securities
repurchase agreements, or reverse repurchase agreements secured by any of the
foregoing types of securities or debt instruments, provided that the collateral
supporting such repurchase agreements shall have a value not less than 101% of
the principal amount of the repurchase agreement plus accrued interest.
"Closing Checklist" means the Closing Checklist attached
hereto as Exhibit B, as the same may be amended by the parties.
"Closing Date" means the date on which this Agreement shall
become effective in accordance with Section 11.19, which date shall be February
__, 2002 or such later date as to which Agent and Borrower agree in writing.
"Commission" means the Securities and Exchange Commission.
"Commitment" means, with respect to any Lender, the principal
amount set out under such Lender's name under the heading "Loan Commitment" on
the counterpart signature pages attached to this Agreement or as set forth on an
Assignment and Assumption complying with Section 10.11 and executed by such
Lender, as assignee, as such amount may be adjusted pursuant to the terms of
this Agreement.
"Contaminant" means any pollutant (as that term is defined in
42 U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 C.F.R. Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), or any constituent of any such substance or waste, including, but not
limited to hydrocarbons (including
5
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, urea formaldehyde insulation, radioactive materials, biological
substances, PCBs, pesticides, herbicides, asbestos, sewage sludge, industrial
slag, acids, metals, or solvents.
"Continuation/Conversion Date" means, with respect to the
continuation of a LIBOR Loan or the conversion of a Base Rate Loan into a LIBOR
Loan, and vice versa, the date of such continuation or conversion.
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including without limitation any
restrictive covenant affecting such Person or any of its properties).
"Controlled Ownership Interests" means ownership interests in
a Person where the REIT or Borrower (independently or collectively) has control
over the management and operations of such Person.
"Convertible Securities" means evidences of indebtedness,
shares of stock, limited or general partnership interests or other ownership
interests, warrants, options, or other rights or securities which are
convertible into or exchangeable for, with or without payment of additional
consideration, shares of common stock of the REIT or partnership interests of
Borrower, as the case may be, either immediately or upon the arrival of a
specified date or the happening of a specified event.
"Court Order" means any judgment, writ, injunction, decree,
rule or regulation of any court or Governmental Authority binding upon the
Person in question.
"Debt Service" means, for any period, Interest Expense for
such period, plus scheduled principal amortization (exclusive of Balloon
Payments) for such period on all Indebtedness of the REIT, on a consolidated
basis.
"Development Activity" means construction in process, that is
being performed by or at the direction of Borrower, any Subsidiary or any
Investment Affiliate, of any manufactured home community that will be owned and
operated by Borrower, any Subsidiary or any Investment Affiliate upon completion
of construction, including construction in process of manufactured home
communities not owned by Borrower, any Subsidiary or any Investment Affiliate
but which Borrower, any Subsidiary or any Investment Affiliate has the
contractual obligation to purchase, but excluding construction in process for
the purpose of expanding manufactured home communities that have been operated
for at least one (1) year prior to the commencement of such expansion.
"Documentation Agent" means Commerzbank Aktiengesellschaft,
New York Branch and JP Morgan Chase Bank, each in its capacity as a
documentation agent for the Lenders under this Agreement.
6
"DOL" means the United States Department of Labor and any
successor department or agency.
"Dollars" and "$" means the lawful money of the United States
of America.
"EBITDA" means, for any period and without duplication, (i)
Net Income for such period, plus (ii) depreciation and amortization expense and
other non-cash items deducted in the calculation of Net Income for such period,
plus (iii) Interest Expense deducted in the calculation of Net Income for such
period, plus, (iv) Taxes deducted in the calculation of Net Income for such
period, minus (v) the gains (and plus the losses) from extraordinary or unusual
items or asset sales or write-ups or forgiveness of indebtedness included in the
calculation of Net Income for such period, minus (vi) earnings of Subsidiaries
for such period distributed to third parties, plus (or minus in the case of a
loss) (vii) Borrower's Share of the net income (or loss) of each Investment
Affiliate for such period calculated in conformity with GAAP before
depreciation, minus (or plus in the case of a loss) (viii) Borrower's Share of
the gains (or losses) from extraordinary or unusual items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of the net
income of each Investment Affiliate for such period.
"Environmental Laws" means all federal, state, district, local
and foreign laws, and all orders, consent orders, judgments, notices, permits or
demand letters issued, promulgated or entered thereunder, relating to pollution
or protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or industrial substances or Contaminants into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contamination, chemicals, industrial
substances or Contaminants. The term Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"); the Toxic Substances Control Act, as
amended; the Hazardous Materials Transportation Act, as amended; the Resource
Conservation and Recovery Act, as amended ("RCRA"); the Clean Water Act, as
amended; the Safe Drinking Water Act, as amended; the Clean Air Act, as amended;
all analogous state laws; the plans, rules, regulations or ordinances adopted,
or other criteria and guidelines promulgated pursuant to the preceding laws or
other similar laws, regulations, rules or ordinances now or hereafter in effect
regulating public health, welfare or the environment.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under federal or state Environmental Laws or
regulations, or (b) damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a Contaminant into
the environment
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
7
"ERISA Affiliate" means any (a) corporation which is, becomes,
or is deemed by any Governmental Authority to be a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Internal
Revenue Code) as a Person or is so deemed by such Person, (b) partnership, trade
or business (whether or not incorporated) which is, becomes or is deemed by any
Governmental Authority to be under common control (within the meaning of Section
414(c) of the Internal Revenue Code) with such Person or is so deemed by such
Person, (c) any Person which is, becomes or is deemed by any Governmental
Authority to be a member of the same "affiliated service group" (as defined in
Section 414(m) of the Internal Revenue Code) as such Person or is so deemed by
such Person, or (d) any other organization or arrangement described in Section
414(o) of the Internal Revenue Code which is, becomes or is deemed by such
Person or by any Governmental Authority to be required to be aggregated pursuant
to regulations issued under Section 414(o) of the Internal Revenue Code with
such Person pursuant to Section 414(o) of the Internal Revenue Code or is so
deemed by such Person.
"Event of Default" means any of the occurrences set forth in
Article IX after the expiration of any applicable grace period expressly
provided therein.
"Facility" means the loan facility of One Hundred Million
Dollars ($100,000,000) described in Section 2.01(a).
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate, rounded upwards to the nearest one hundredth of one percent
(0.01%), per annum equal for each day during such period to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any governmental authority succeeding to its
functions.
"Financial Statements" has the meaning ascribed to such term
in Section 5.01(a).
"First Extended Maturity Date" has the meaning ascribed to
such term in Section 2.09(a).
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower and the REIT,
which shall be the twelve (12) month period ending on the last day of December
in each year.
8
"Fixed Charges" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, (ii) 3% of Base Rent for such period, and
(iii) Borrower's Share of Capital Expenditures from each Investment Affiliate
for such period.
"Funds from Operations" means the definition of "Funds from
Operations" of the National Association of Real Estate Investment Trusts on the
date of determination (before allocation to minority interests).
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession, which are applicable to the circumstances as of
the date of determination and which are consistent with the past practices of
the REIT and Borrower.
"Governmental Authority" means any nation or government, any
federal, state, local, municipal or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Gross Asset Value" means, with respect to any Person as of
any date of determination, the sum of the Adjusted Asset Values for each
Property then owned by such Person plus the value of any cash or Cash Equivalent
owned by such Person and not subject to any Lien.
"Indebtedness," as applied to any Person (and without
duplication), means (a) all indebtedness, obligations or other liabilities
(whether secured, unsecured, recourse, non-recourse, direct, senior or
subordinate) of such Person for borrowed money, (b) all indebtedness,
obligations or other liabilities of such Person evidenced by Securities or other
similar instruments, (c) all reimbursement obligations and other liabilities of
such Person with respect to letters of credit or banker's acceptances issued for
such Person's account or other similar instruments for which a contingent
liability exists, (d) all obligations of such Person to pay the deferred
purchase price of Property or services, (e) all obligations in respect of
Capital Leases of such Person, (f) all Accommodation Obligations of such Person,
(g) all indebtedness, obligations or other liabilities of such Person or others
secured by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of, such
Person, (h) all indebtedness, obligations or other liabilities (other than
interest expense liability) in respect of Interest Rate Contracts and foreign
currency exchange agreements, excluding all indebtedness, obligations or other
liabilities in respect of such Interest Rate Contracts to the extent that the
aggregate notional amount thereof does not exceed the aggregate principal amount
of any outstanding fixed or floating rate Indebtedness, obligations or other
liabilities permitted under this Agreement that exist as of the date that such
Interest Rate Contracts are entered into or that are incurred no more than
thirty (30) days after such Interest Rate Contracts are entered into and (i)
ERISA obligations currently due and payable.
"Initial Maturity Date" means August 9, 2003.
9
"Interest Expense" means, for any period and without
duplication, total interest expense, whether paid, accrued or capitalized
(including loan and letter of credit fees and the interest component of Capital
Leases but excluding interest expense covered by an interest reserve established
under a loan facility) of the REIT, on a consolidated basis and determined in
accordance with GAAP.
"Interest Period" means, relative to any LIBOR Loans, the
period beginning on (and including) the date on which such LIBOR Loans are made
as, or converted into, LIBOR Loans, and shall end on (but exclude) the day which
numerically corresponds to such date one (1), two (2), three (3), six (6) or
twelve (12) months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in either case as
Borrower may select in its relevant Notice of Continuation/Conversion pursuant
to Section 2.01(b); provided, however, that:
(a) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on the
Business Day next preceding such numerically corresponding day);
(b) no Interest Period may end later than the Termination
Date; and
(c) with the reasonable approval of Agent (unless any Lender
has previously advised Agent and Borrower that it is unable to enter into LIBOR
contracts for an Interest Period of such duration), an Interest Period may have
a duration of less than one (1) month.
"Interest Rate Contracts" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate protection.
"Interim Period" has the meaning ascribed to such term in
Section 3.01(g).
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and any successor statute.
"Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by that Person of Securities, or of a
beneficial interest in Securities, of any other Person, and any direct or
indirect loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, advances to employees and
similar items made or incurred in the ordinary course of business), or capital
contribution by such Person to any other Person, including all Indebtedness and
accounts owed by that other Person which are not current assets or did not arise
from sales of goods or services to that Person in the ordinary course of
business. The amount of any Investment shall be determined in conformity with
GAAP except as otherwise specifically provided herein.
"Investment Affiliate" means any Person in whom the REIT,
Borrower or any Subsidiary holds an equity interest, directly or indirectly,
whose financial results are not
10
consolidated under GAAP with the financial results of the REIT or Borrower on
the consolidated financial statements of the REIT and Borrower.
"Investment Mortgages" means mortgages securing indebtedness
directly or indirectly owed to Borrower or any of its Subsidiaries, including
certificates of interest in real estate mortgage investment conduits.
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Land" means unimproved real estate purchased or leased or to
be purchased or leased by Borrower or any of its Subsidiaries for the purpose of
future development of improvements.
"Lender Affiliate" as applied to any Lender, means any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Lender. For purposes of this definition, "control" (including
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means (a) the possession,
directly or indirectly, of the power to vote more than fifty percent (50%) of
the Securities having voting power for the election of directors of such Person
or otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, or (b) the ownership of a general partnership interest or a
limited partnership interest representing more than fifty (50%) of the
outstanding limited partnership interests of a Person.
"Lender Reply Period" has the meaning ascribed to such term in
Section 10.10(a). "Lender Taxes" has the meaning ascribed to
such term in Section 2.03(g).
"Lenders" means Wells Fargo and any other bank, finance
company, insurance or other financial institution which is or becomes a party to
this Agreement by execution of a counterpart signature page hereto or an
Assignment and Assumption, as assignee.
"Level I Period" means a period during which the ratio of
Total Liabilities to the sum of Gross Asset Values for Borrower and each of its
Subsidiaries shall be equal to or less than 0.45:1.
"Level II Period" means a period during which the ratio of
Total Liabilities to the sum of Gross Asset Values for Borrower and each of its
Subsidiaries shall exceed 0.45:1 but shall not exceed 0.60:1.
"Liabilities and Costs" means all claims, judgments,
liabilities, obligations, responsibilities, losses, damages (including punitive
and treble damages), costs, disbursements and expenses (including without
limitation reasonable attorneys', experts' and consulting fees and costs of
investigation and feasibility studies), fines, penalties and monetary sanctions,
and interest, direct or indirect, known or unknown, absolute or contingent,
past, present or future.
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"LIBOR" means, relative to any Interest Period for any LIBOR
Loan, the rate of interest obtained by dividing (i) the rate of interest
determined by Agent (whose determination shall be conclusive absent manifest
error, which shall not include any lower determination by any other banks) equal
to the rate (rounded upwards, if necessary, to the nearest one one-hundredth of
one percent (.01%)) per annum reported by Wells Fargo at which Dollar deposits
in immediately available funds are offered by Wells Fargo to leading banks in
the Eurodollar inter bank market at or about 11:00 AM London time two (2)
Business Days prior to the beginning of such Interest Period for delivery on the
first day of such Interest Period for a period approximately equal to such
Interest Period and in an amount equal or comparable to the LIBOR Loan to which
such Interest Period relates, by (ii) a percentage expressed as a decimal equal
to one (1) minus the LIBOR Reserve Percentage.
"LIBOR Loans" means those portions of the Loan bearing
interest, at all times during an Interest Period applicable to such portion, at
a fixed rate of interest determined by reference to LIBOR.
"LIBOR Reserve Percentage" means, relative to any Interest
Period, the average daily maximum reserve requirement (including, without
limitation, all basic, emergency, supplemental, marginal and other reserves)
which is imposed under Regulation D, as Regulation D may be amended, modified or
supplemented, on "Eurocurrency liabilities" having a term equal to the
applicable Interest Period (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on LIBOR Loans
is determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any bank to United States
residents), which requirement shall be expressed as a decimal. LIBOR shall be
adjusted automatically on, and as of the effective date of, any change in the
LIBOR Reserve Percentage.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights-of-way, zoning restrictions
and the like), lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including without limitation any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement (other than a financing statement filed by a
"true" lessor pursuant to Section 9-408 of the Uniform Commercial Code) naming
the owner of the asset to which such Lien relates as debtor, under the Uniform
Commercial Code or other comparable law of any jurisdiction.
"Loan" means the One Hundred Million Dollar ($100,000,000)
loan made pursuant to this Agreement.
"Loan Documents" means, this Agreement, the Loan Notes, the
REIT Guaranty, and all other agreements, instruments and documents (together
with amendments and supplements thereto and replacements thereof) now or
hereafter executed by the REIT, Borrower or any Agreement Party, which evidence,
guaranty or secure the Obligations.
12
"Loan Notes" means the promissory notes evidencing the Loan in
the aggregate original principal amount of One Hundred Million Dollars
($100,000,000) executed by Borrower in favor of Lenders, as they may be amended,
supplemented, replaced or modified from time to time. The initial Loan Notes and
any replacements thereof shall be substantially in the form of Exhibit D.
"Manufactured Home Community Mortgages" means Investment
Mortgages issued by any Person engaged primarily in the business of developing,
owning, and managing manufactured home communities.
"Manufactured Home Community Ownership Interests" means
partnership, joint venture, membership or other equity interests issued by any
Person engaged primarily in the business of developing, owning, and managing
manufactured home communities.
"Material Adverse Effect" means a material adverse effect upon
(i) the ability of Borrower or the REIT to perform its covenants and obligations
under this Agreement and the other Loan Documents or (ii) the ability of Agent
or Lenders to enforce the Loan Documents. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has or will result in a
Material Adverse Effect," and the phrase "has no (or does not have a) Material
Adverse Effect" or "will not result in a Material Adverse Effect" or words
substantially similar thereto shall in all cases be intended to mean "does not
or will not result in a Material Adverse Effect."
"Maturity Date" means the Initial Maturity Date, as such date
may be extended pursuant to Section 2.09.
"Minimum Net Worth" means Three Hundred Fifty-Eight Million
Dollars ($358,000,000), plus ninety percent (90%) of all Net Offering Proceeds
received by the REIT or Borrower after the Closing Date, minus ninety percent
(90%) of the aggregate cost to the REIT or Borrower for the repurchase of any
common stock, preferred stock, partnership interests, limited liability company
interests, Convertible Securities or other ownership or equity interests in the
REIT or Borrower; provided, however, that in no event shall the Minimum Net
Worth be less than Three Hundred Twenty Two Million Dollars ($322,000,000).
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, and its successors and assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by Agent.
"Multiemployer Plan" means an employee benefit plan defined in
Section 4001(a)(3) or Section 3(37) of ERISA which is, or within the immediately
preceding six (6) years was, maintained, administered, contributed to by or was
required to be contributed to by a Person or any ERISA Affiliate, or under which
a Person or any ERISA Affiliate may incur any liability.
13
"Net Income" means, for any period, the net income (or loss)
after Taxes of the REIT, on a consolidated basis, for such period calculated in
conformity with GAAP; provided, however, that Net Income shall not include the
net income (or loss) of Investment Affiliates.
"Net Offering Proceeds" means all cash or other assets
received by the REIT or Borrower as a result of the sale of common stock,
preferred stock, partnership interests, limited liability company interests,
Convertible Securities or other ownership or equity interests in the REIT or
Borrower less customary costs and discounts of issuance paid by the REIT or
Borrower, as the case may be.
"Net Operating Income" means, for any period, and with respect
to any Qualifying Unencumbered Property, the net operating income of such
Qualifying Unencumbered Property (attributed to such Property in a manner
reasonably acceptable to Agent) for such period (i) determined in accordance
with GAAP, (ii) determined in a manner which is consistent with the past
practices of the REIT and Borrower, and (iii) inclusive of an allocation of
reasonable management fees and administrative costs to such Qualifying
Unencumbered Property consistent with the past practices of the REIT and
Borrower, except that, for purposes of determining Net Operating Income, income
shall not (a) include security or other deposits, lease termination or other
similar charges, delinquent rent recoveries, unless previously reflected in
reserves, or any other items reasonably deemed by Agent to be of a non-recurring
nature or (b) be reduced by depreciation or amortization or any other non-cash
item.
"Net Price" means, with respect to the purchase of any
Property by Borrower or any Subsidiary, without duplication, (i) cash and Cash
Equivalents paid as consideration for such purchase, plus (ii) the principal
amount of any note or other deferred payment obligation delivered in connection
with such purchase (except as described in clause (iv) below), plus (iii) the
value of any other consideration delivered in connection with such purchase or
sale (including, without limitation, shares in the REIT and operating
partnership units or preferred operating partnership units in Borrower) (as
reasonably determined by Agent), minus (iv) the value of any consideration
deposited into escrow or subject to disbursement or claim upon the occurrence of
any event, minus (v) reasonable costs of sale and taxes paid or payable in
connection with such purchase.
"Net Worth" means, at any time, the tangible net worth of the
REIT determined in accordance with GAAP, on a consolidated basis, not including
depreciation and amortization expense of the REIT since September 30, 2001 and
not including the REIT's share of depreciation and amortization expense of
Investment Affiliates since September 30, 2001.
"Non-Manufactured Home Community Property" means Property
which is not (i) used for lease or operation of manufactured home communities,
(ii) Land, (iii) Securities consisting of stock issued by real estate investment
trusts engaged primarily in the development, ownership and management of
manufactured home communities, (iv) Manufactured Home Community Mortgages, (v)
Manufactured Home Community Ownership Interests or (vi) Taxable REIT Subsidiary
Interests.
14
"Non-Recourse Indebtedness" means any single loan with respect
to which recourse for payment is limited to specific assets related to a
particular Property or group of Properties encumbered by a Lien securing such
Indebtedness, so long as the Adjusted Asset Value for such Property, or the
total of the Adjusted Asset Values for such group of Properties, does not exceed
One Hundred Million Dollars ($100,000,000); provided, however, that personal
recourse to the REIT, Borrower or any Subsidiary by a holder of any such loan
for fraud, misrepresentation, misapplication of cash, waste, environmental
claims and liabilities and other circumstances customarily excluded by
institutional lenders from exculpation provisions and/or included in separate
indemnification agreements in non-recourse financing of real estate shall not,
by itself, prevent such loan from being characterized as Non-Recourse
Indebtedness.
"Notice of Borrowing" means a notice of borrowing duly
executed by an authorized officer of Borrower substantially in the form of
Exhibit E-1.
"Notice of Continuation/Conversion" means a notice of
continuation or conversion of or to a LIBOR Loan duly executed by an authorized
officer of Borrower substantially in the form of Exhibit E-2.
"Obligations" means, from time to time, all Indebtedness of
Borrower owing to Agent, any Lender, or any Person entitled to indemnification
pursuant to Section 11.02, or any of their respective successors, transferees or
assigns, of every type and description, whether or not evidenced by any note,
guaranty or other instrument, arising under or in connection with this Agreement
or any other Loan Document, whether or not for the payment of money, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, reasonable attorneys' fees and disbursements and any other sum
now or hereafter chargeable to Borrower under or in connection with this
Agreement or any other Loan Document. Notwithstanding anything to the contrary
contained in this definition, Obligations shall not be deemed to include any
obligations or liabilities of Borrower to Agent or any Lender under an Interest
Rate Contract, foreign currency exchange agreement or other Contractual
Obligation unless the same is among Borrower and all Lenders. Obligations shall
also not include the "Obligations" under the Revolving Credit Agreement.
"Officer's Certificate" means a certificate signed by a
specified officer of a Person certifying as to the matters set forth therein.
"Other Indebtedness" means all Indebtedness other than the
Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Permit" means any permit, approval, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
"Permitted Holdings" means any of the holdings and activities
described in Section 8.08, but only to the extent permitted in Section 8.08.
15
"Permitted Liens" means:
(a) Liens for Taxes, assessments or other governmental charges
not yet due and payable or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted in
accordance with Sections 6.01(d) or 6.02(g);
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred in the
ordinary course of business for sums not more than sixty (60) days delinquent or
which are being contested in good faith in accordance with Sections 6.01(d) or
6.02(g);
(c) deposits made in the ordinary course of business to secure
liabilities to insurance carriers;
(d) Liens for purchase money obligations for equipment;
provided that (i) the Indebtedness secured by any such Lien does not exceed the
purchase price of such equipment, (ii) any such Lien encumbers only the asset so
purchased and the proceeds upon sale, disposition, loss or destruction thereof,
and (iii) such Lien, after giving effect to the Indebtedness secured thereby,
does not give rise to an Event of Default or Unmatured Event of Default pursuant
to Section 7.01(a);
(e) easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on Schedule B to
Borrower's or any Subsidiary's owner's title insurance policies for any of
Borrower's or any Subsidiary's, as applicable, real Properties, so long as the
foregoing do not interfere in any material respect with the use or ordinary
conduct of the business of Borrower or such Subsidiary, as applicable, and do
not diminish in any material respect the value of the Property to which it is
attached or for which it is listed; or
(f) Liens and judgments which have been or will be bonded or
released of record within thirty (30) days after the date such Lien or judgment
is entered or filed against the REIT, Borrower, any Subsidiary or any Agreement
Party.
"Person" means any natural person, employee, corporation,
limited partnership, limited liability partnership, general partnership, joint
stock company, limited liability company, joint venture, association, company,
trust, bank, trust company, land trust, business trust, real estate investment
trust or other organization, whether or not a legal entity, or any other
nongovernmental entity, or any Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3)
of ERISA (other than a Multiemployer Plan) in respect of which a Person or an
ERISA Affiliate, as applicable, is an "employer" as defined in Section 3(5) of
ERISA.
"Pre-Closing Financials" has the meaning ascribed to such term
in Section 4.01(g).
16
"Prior Credit Agreement" means that certain Amended and
Restated Credit Agreement (Term Loan) dated as of April 28, 1998, by and among
Borrower, the REIT and the financial institutions named therein, as heretofore
amended.
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the aggregate amount
of all of the Lenders' Commitments, as adjusted from time to time in accordance
with the provisions of this Agreement.
"Property" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit, or other
asset owned by such Person.
"Qualifying Unencumbered Property" means (a) the Properties
listed on Exhibit F hereto and (b) any Property designated by Borrower from time
to time pursuant to Section 5.04 which (i) is an operating manufactured home
community property wholly-owned (directly or beneficially) by Borrower or any
Subsidiary wholly-owned, directly or indirectly by Borrower and/or the REIT,
(ii) is not subject (nor are any direct or indirect equity interests in such
Property subject) to a Lien which secures Indebtedness of any Person other than
a Permitted Lien, (iii) is not subject (nor are any direct or indirect equity
interests in such Property subject) to any covenant, condition, or other
restriction which prohibits or limits the creation or assumption of any Lien
upon such Property (except as set forth in the Revolving Credit Agreement), and
(iv) has not been designated by Agent in a notice to Borrower as not acceptable
to the Requisite Lenders pursuant to Section 5.04; provided, however, that the
weighted average occupancy rate of the Properties listed on Exhibit F together
with those designated by Borrower to be Qualifying Unencumbered Properties
pursuant to Section 5.04 (excluding expansion areas of such Properties which are
purchased and/or developed on or after the Closing Date) shall be at least
eighty-five percent (85%); and provided, further, that Borrower may, upon at
least fifteen (15) Business Days prior notice to Agent, designate that any
Property listed on Exhibit F or otherwise designated as a Qualifying
Unencumbered Property is no longer a Qualifying Unencumbered Property (and upon
such designation, such Property shall no longer be a Qualifying Unencumbered
Property).
"Recourse Indebtedness" means, with respect to any Person,
Indebtedness which is not Non-Recourse Indebtedness.
"Regulation D" means Regulation D of the Federal Reserve Board
as in effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board
as in effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board
as in effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board
as in effect from time to time.
17
"REIT" has the meaning ascribed to such term in the preamble
hereto.
"REIT Guaranty" means the REIT Guaranty of even date herewith
executed by the REIT in favor of Agent and the Lenders.
"Release" may be either a noun or a verb and means the
release, spill, emission, leaking, pumping, pouring, emitting, emptying,
escaping, dumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment or into or out of any
property, including the movement of Contaminants through or in the air, soil,
surface water, groundwater or property.
"Remedial Action" means any action undertaken pursuant to
Environmental Laws to (a) clean up, remove, remedy, respond to, treat or in any
other way address Contaminants in the indoor or outdoor environment; (b) prevent
the Release or threat of Release or minimize the further Release of Contaminants
so they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; or (c) perform pre-remedial
studies and investigations and post-remedial monitoring and care.
"Reportable Event" means any of the events described in
Section 4043(b) of ERISA, other than an event for which the thirty (30) day
notice requirement is waived by regulations, or any of the events described in
Section 4062(f) or 4063(a) of ERISA.
"Requirements of Law" means, as to any Person, the charter and
by-laws, partnership agreements or other organizational or governing documents
of such Person, and any law, rule or regulation, permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations T, U and X and any certificate of
occupancy, zoning ordinance, building or land use requirement or Permit or
occupational safety or health law, rule or regulation.
"Requisite Lenders" means, collectively, Lenders whose Pro
Rata Shares, in the aggregate, are at least sixty-six and two-thirds percent (66
2/3%); provided, however, that the Requisite Lenders must be comprised of a
minimum of two (2) Lenders; and provided, further, that for purposes of any
amendment, modification or waiver of the requirements of Article VIII, the
Requisite Lenders must include Agent in its capacity as a Lender.
"Revolving Credit Agreement" means that certain Second Amended
and Restated Credit Agreement dated as of April 28, 1998 by and among Borrower,
the REIT, Wells Fargo, as Agent, and the lenders named therein, as heretofore
and hereafter amended or amended and restated.
"S&P" means Standard & Poor's Rating Group, a division of
McGraw Hill, its successors and assigns, and, if Standard & Poor's Rating Group
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other nationally
recognized securities rating agency designated by Agent.
18
"Second Extended Maturity Date" has the meaning ascribed to
such term in Section 2.09(b).
"Secretary's Certificate" has the meaning ascribed to such
term in Section 3.01(c)(i).
"Secured Debt" means Indebtedness, the payment of which is
secured by a Lien on any real Property owned or leased by the REIT, Borrower, or
any Subsidiary.
"Securities" means any stock, partnership interests, shares,
shares of beneficial interest, voting trust certificates, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities," or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended
to the date hereof and from time to time hereafter, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"Sole Lead Arranger" means Wells Fargo Bank, N.A. in its
capacity as sole lead arranger for the Lenders under this Agreement.
"Solvent" means as to any Person at the time of determination,
such Person (a) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (b) is
able to pay all of its debts as such debts mature; and (c) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"Subsidiary" means any Person whose financial results are
consolidated under GAAP with the financial results of the REIT or Borrower on
the consolidated financial statements of the REIT or Borrower.
"Supermajority Lenders" means Lenders whose Pro Rata Shares,
in the aggregate, are at least eighty-five percent (85%); provided, however,
that the Supermajority Lenders must be comprised of a minimum of two (2)
Lenders; and provided, further, that for purposes of any amendment, modification
or waiver of the requirements of Article VIII, the Supermajority Lenders must
include Agent in its capacity as a Lender.
"Syndication Agent" means Bank of America National Trust and
Savings Association in its capacity as syndication agent for the Lenders under
this Agreement.
19
"Taxable REIT Subsidiary Interest" means equity interests in
Subsidiaries not engaged in the development, ownership or operation of real
estate and permitted to be held by Borrower and the REIT pursuant to Section
856(1) of the Internal Revenue Code (as amended from time to time) without
violating the REIT's status as a real estate investment trust.
"Taxes" means all federal, state, local and foreign income and
gross receipts taxes.
"Termination Date" has the meaning ascribed to such term in
Section 2.01(d).
"Termination Event" means (a) any Reportable Event, (b) the
withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a) (2)
of ERISA, (c) the occurrence of an obligation arising under Section 4041 of
ERISA of a Person or an ERISA Affiliate to provide affected parties with a
written notice of an intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA, (d) the institution by the
PBGC of proceedings to terminate any Benefit Plan under Section 4042 of ERISA or
to appoint a trustee to administer any Benefit Plan, (e) any event or condition
which constitutes grounds under Section 4042 of ERISA for the appointment of a
trustee to administer a Benefit Plan, (f) the partial or complete withdrawal of
such Person or any ERISA Affiliate from a Multiemployer Plan which would have a
Material Adverse Effect, or (g) the adoption of an amendment by any Person or
any ERISA Affiliate to terminate any Benefit Plan which is subject to Title IV
of ERISA or Section 412 of the Internal Revenue Code or the treatment of an
amendment to a Benefit Plan as a termination under ERISA.
"Total Liabilities" means, without duplication, all
Indebtedness of the REIT on a consolidated basis, plus all other items which, in
accordance with GAAP, would be included as liabilities on the liability side of
the balance sheet of the REIT, on a consolidated basis, and in any event shall
include recourse and non-recourse mortgage debt, letters of credit, purchase
obligations, forward equity sales, repurchase obligations, unsecured debt,
accounts payable, lease obligations (including ground leases) to the extent
required, in accordance with GAAP, to be classified as capital leases on the
balance sheet of the REIT, guarantees of indebtedness, subordinated debt and
unfunded obligations; provided, however, that "Total Liabilities" shall not
include dividends declared by the REIT or Borrower which are permitted under
Section 7.01(d) but not yet paid.
"Unencumbered Asset Value" means, as of any date of
determination, (i) a fraction, the numerator of which is the product of four (4)
and the Net Operating Income for the most recently ended Fiscal Quarter which is
attributable (in a manner reasonably acceptable to Agent) to Qualifying
Unencumbered Properties wholly-owned (directly or beneficially) by Borrower or
any Subsidiary wholly-owned, directly or indirectly, by Borrower and/or the
REIT, for the entire Fiscal Quarter and the denominator of which is eight
hundred seventy-five ten-thousandths (0.0875) plus (ii) the aggregate of the Net
Prices paid by Borrower or such Subsidiary for all Qualifying Unencumbered
Properties which have been acquired in the Fiscal Quarter most recently ended.
20
"Unencumbered Net Operating Income" means for any Fiscal
Quarter, Net Operating Income for such period from each Qualifying Unencumbered
Property.
"Unfunded Pension Liabilities" means the excess of a Benefit
Plan's accrued benefits, as defined in Section 3(23) of ERISA, over the current
value of that Plan's assets, as defined in Section 3(26) of ERISA.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect on the date hereof in the State of Illinois.
"Unmatured Event of Default" means an event which, with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default.
"Unsecured Debt" means, as of any date of determination and
without duplication, all Indebtedness of the REIT, Borrower or any Subsidiary,
which is not Secured Debt plus all accounts payable of the REIT, Borrower or any
Subsidiary incurred in the ordinary course of business, the payment of which is
not secured by a Lien on any property owned or leased by the REIT, Borrower or
any Subsidiary.
"Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.
"Welfare Plan" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which a Person or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or
within the immediately preceding five years maintained, administered,
contributed to or was required to contribute to, or under which a Person or any
ERISA Affiliate may incur any liability.
"Wells Fargo" has the meaning ascribed to such term in the
preamble hereto.
"Wholly-Owned Subsidiary" means any Subsidiary which is
wholly-owned directly or indirectly by Borrower or the REIT.
1.02 Computation of Time Periods. In this Agreement, unless
otherwise specified, in the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each mean "to and including." Periods of days referred to
in this Agreement shall be counted in calendar days unless Business Days are
expressly prescribed.
1.03 Terms
(a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP, provided that for purposes of references to the financial
results of the "REIT, on a consolidated basis," the REIT shall be deemed to own
one hundred percent (100%) of the partnership interests in Borrower.
21
(b) Any time the phrase "to the best of Borrower's knowledge"
or a phrase similar thereto is used herein, it means: "to the actual knowledge
of the executive officers of Borrower and the REIT, after reasonable inquiry of
those agents, employees or contractors of the REIT, Borrower, any Agreement
Party or any Subsidiary who could reasonably be anticipated to have knowledge
with respect to the subject matter or circumstances in question and review of
those documents or instruments which could reasonably be anticipated to be
relevant to the subject matter or circumstances in question."
(c) In each case where the consent or approval of Agent,
Requisite Lenders, Supermajority Lenders or all Lenders is required or their
non-obligatory action is requested by Borrower, such consent, approval or action
shall be in the sole and absolute discretion of Agent and, as applicable, each
Lender, unless otherwise specifically indicated.
ARTICLE II
LOAN
2.01 Making of Loan and Repayment.
(a) Loan Availability.
(i) Subject to the terms and conditions set forth in
this Agreement and in reliance on the representation and warranties of
Borrower and the REIT set forth in this Agreement, each Lender hereby
agrees to make its share of the Loan to Borrower on the Closing Date in
an amount equal to such Lender's Commitment. The Loan will be evidenced
by the Loan Notes.
(ii) The Loan may be voluntarily prepaid pursuant to
Section 2.05(a), but Borrower may not reborrow any amounts so prepaid.
The principal balance of the Loan shall be payable in full on the
Termination Date.
(b) Notice of Borrowing; Continuation/Conversion. Borrower
shall give Agent, at Wells Fargo Disbursement Center, 2120 East Park Place,
Suite 100, El Segundo, California 90245, with a copy to Wells Fargo Bank, N.A.,
225 West Wacker Drive, Suite 2550, Chicago, Illinois 60606, Attn: Account
Officer, or such other address as Agent shall designate, an original or
facsimile Notice of Borrowing no later than 10:00 A.M. (California time), not
less than three (3) nor more than five (5) Business Days prior to the Closing
Date. The Notice of Borrowing shall specify whether the Loan will be a Base Rate
Loan or a LIBOR Loan and, if a LIBOR Loan, the applicable Interest Period. Any
Notice of Borrowing pursuant to this Section 2.01(b) shall be irrevocable.
Borrower may elect (A) so long as no Event of Default has occurred and is
continuing, to convert Base Rate Loans or any portion thereof into LIBOR Loans,
(B) to convert LIBOR Loans or any portion thereof into Base Rate Loans, or (C)
so long as no Event of Default has occurred and is continuing, to continue any
LIBOR Loans or any portion thereof for an additional Interest Period; provided,
however, that the amount of the Loan being continued as or converted to LIBOR
Loans shall, in the aggregate, equal One Million Dollars ($1,000,000) or an
integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof.
The
22
applicable Interest Period for the continuation of any LIBOR Loan shall commence
on the day on which the next preceding Interest Period expires. Each such
election shall be made by giving Agent, at 2120 E. Park Place, Suite 100, El
Segundo, California 90245 Attn: Jean Randall-Hall, a Notice of
Continuation/Conversion by 10:00 A.M. (California time) on the date of a
conversion to a Base Rate Loan, or by 10:00 A.M. (California time) not less than
three (3) nor more than five (5) Business Days prior to the date of a conversion
to or continuation of a LIBOR Loan, specifying, in each case (1) whether a
conversion or continuation is to occur, (2) the amount of the conversion or
continuation, (3) the Interest Period therefor, in the case of a conversion to
or continuation of a LIBOR Loan, and (4) the date of the conversion or
continuation (which date shall be a Business Day). Agent shall promptly notify
each Lender, but in any event within one (1) Business Day after receipt of such
notice, of its receipt of each such notice and the contents thereof.
Notwithstanding anything to the contrary contained herein and subject to the
default interest provisions contained in Section 2.03, if an Event of Default
occurs, all LIBOR Loans will convert to Base Rate Loans upon the expiration of
the applicable Interest Periods therefor or the date the Loan becomes due,
whichever occurs first. Except as provided above, the conversion of a LIBOR Loan
to a Base Rate Loan shall only occur on the last Business Day of the Interest
Period relating to such LIBOR Loan. In the absence of an effective election by
Borrower of a LIBOR Loan and Interest Period in accordance with the above
procedures prior to the third (3rd) Business Day prior to the expiration of the
then current Interest Period with respect to any LIBOR Loan, interest on such
LIBOR Loan shall accrue at the interest rate then applicable to a LIBOR Loan for
an Interest Period of thirty (30) days, effective immediately upon the
expiration of the then-current Interest Period, without prejudice, however, to
the right of Borrower to elect a Base Rate Loan or a different Interest Period
in accordance with the terms and provisions of this Agreement; provided,
however, that if such continuation shall cause the number of LIBOR Loan tranches
to exceed three (3), such LIBOR Loan shall be converted to a Base Rate Loan.
(c) Making of Loan. Subject to Section 10.03, Agent shall make
the proceeds of the Loan available to Borrower in El Segundo, California on the
Closing Date and shall disburse such funds in Dollars and in immediately
available funds not later than 1:00 P.M. Chicago time to Borrower's account, at
Bank of America, Account Number 73-66901095 in Chicago, Illinois, or such other
account specified in the Notice of Borrowing acceptable to Agent, with a
confirming telephone call to Quantaze Watts at (312) 279-1408 or Mark Howell at
(312) 279-1402.
(d) Term; Principal Payment. The outstanding balance of the
Loan shall be payable in full on the earlier to occur of (A) the Maturity Date,
and (B) the acceleration of the Loan pursuant to Section 9.02(a) (the
"Termination Date").
2.02 Borrowing and Interest Rate Election Authorization.
Borrower shall provide Agent with documentation reasonably satisfactory to Agent
indicating the names of those employees or agents of Borrower authorized by
Borrower to sign Notices of Borrowing and Continuation/Conversion, any extension
notice and to receive callback confirmations, and Agent and Lenders shall be
entitled to rely on such documentation until notified in writing by Borrower of
any change(s) of the persons so authorized. Agent shall be entitled to act in
good faith on the instructions of anyone identifying himself as one of the
Persons so authorized, and Borrower
23
shall be bound thereby in the same manner as if such Person were actually so
authorized. Borrower agrees to indemnify, defend and hold Lenders and Agent
harmless from and against any and all Liabilities and Costs which may arise or
be created by the acceptance of instructions for making the Loan.
2.03 Interest on the Loan.
(a) Base Rate Loans. Subject to Section 2.03(d), all Base Rate
Loans shall bear interest on the average daily unpaid principal amount thereof
from the date made until paid in full at a fluctuating rate per annum equal to
the Base Rate.
(b) LIBOR Loans. Subject to Section 2.03(d), all LIBOR Loans
shall bear interest on the unpaid principal amount thereof during the Interest
Period applicable thereto at a rate per annum equal to the sum of LIBOR for such
Interest Period plus the Applicable Margin. Upon receipt of a Notice of
Borrowing or Notice of Continuation/Conversion requesting the making of,
continuation of and/or conversion to LIBOR Loans, Agent shall determine LIBOR
applicable to the Interest Period for such LIBOR Loans, and shall give notice
thereof to Borrower and Lenders; provided, however, that failure to give such
notice shall not affect the validity of such rate. Each determination by Agent
of LIBOR shall be conclusive and binding upon the parties hereto in the absence
of demonstrable error. LIBOR Loans shall be in tranches of One Million Dollars
($1,000,000) or One Hundred Thousand Dollar ($100,000) increments in excess
thereof. No more than three (3) LIBOR Loan tranches shall be outstanding at any
one time.
(c) Interest Payments. Subject to Section 2.03(d), interest
accrued on the Loan shall be payable by Borrower in arrears on the first
Business Day of the first calendar month following the Closing Date, and the
first Business Day of each succeeding calendar month thereafter, and on the
Termination Date.
(d) Default Interest. Notwithstanding the rates of interest
specified in Sections 2.03(a) and 2.03(b) and the payment dates specified in
Section 2.03(c), effective immediately upon demand by Agent after the occurrence
of an Event of Default and during the continuance of any Event of Default, the
principal balance of the Loan then outstanding and, to the extent permitted by
applicable law, any interest payments on the Loan not paid when due shall bear
interest payable upon demand at a rate which is five percent (5%) per annum in
excess of the rate or rates of interest otherwise payable under this Agreement.
All other amounts due Agent or Lenders (whether directly or for reimbursement)
under this Agreement or any of the other Loan Documents if not paid when due, or
if no time period is expressed, if not paid within fifteen (15) days after
written demand to Borrower, shall bear interest from and after demand at the
rate which is five percent (5%) per annum in excess of the lowest rate or rates
of interest otherwise payable under this Agreement, or, if no portion of the
Loan is then outstanding, at the rate which is five percent (5%) per annum in
excess of the rate of interest applicable to Base Rate Loans.
(e) Late Fee. Borrower acknowledges that late payment to Agent
will cause Agent and Lenders to incur costs not contemplated by this Agreement.
Such costs include
24
without limitation processing and accounting charges. Therefore, if Borrower
fails timely to pay any sum due and payable hereunder through the Termination
Date (other than payments of principal), unless waived by Agent pursuant to
Section 11.05(e), a late charge of four cents ($.04) for each dollar of any
interest payment due hereon and which is not paid within ten (10) days after
such payment is due or of any other amount due hereon (other than payments of
principal) and which is not paid within thirty (30) days after such payment is
due, shall be charged by Agent (for the benefit of Lenders) and paid by Borrower
for the purpose of defraying the expense incident to handling such delinquent
payment; provided, however, that no late charges shall be assessed with respect
to any amount for which Borrower is obligated to pay interest at the rate
specified in Section 2.03(d), provided, further, that in no event shall Agent or
Lenders be required to refund any late fees paid by Borrower, notwithstanding
the preceding proviso. Borrower and Agent agree that this late charge represents
a reasonable sum considering all of the circumstances existing on the date
hereof and represents a fair and reasonable estimate of the costs that Agent and
Lenders will incur by reason of late payment. Borrower and Agent further agree
that proof of actual damages would be costly and inconvenient. Acceptance of any
late charge shall not constitute a waiver of the default with respect to the
overdue installment, and shall not prevent Agent from exercising any of the
other rights available hereunder or under any other Loan Document. Such late
charge shall be paid without prejudice to any other rights of Agent.
(f) Computation of Interest. Interest and fees shall be
computed on the basis of the actual number of days elapsed in the period during
which interest or fees accrue and a year of three hundred sixty (360) days. In
computing interest on the Loan, the date of the making of the Loan shall be
included and the date of payment shall be excluded. Notwithstanding subsections
(a), (b), (d) and (e) above, interest in respect of the Loan or any portion
thereof shall not exceed the maximum rate permitted by applicable law.
(g) Changes; Legal Restrictions. In the event that after the
Closing Date (A) the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a court or Governmental Authority or
any change in the interpretation or application thereof by a court or
Governmental Authority, or (B) compliance by Agent or any Lender with any
request or directive made or issued after the Closing Date (whether or not
having the force of law and whether or not the failure to comply therewith would
be unlawful) from any central bank or other Governmental Authority or
quasi-governmental authority:
(i) subjects Agent or any Lender to any tax, duty or
other charge of any kind with respect to the Facility, this Agreement
or any of the other Loan Documents or changes the basis of taxation of
payments to Agent or such Lender of principal, fees, interest or any
other amount payable hereunder, except for net income, gross receipts,
gross profits or franchise taxes imposed by any jurisdiction and not
specifically based upon loan transactions (all such non-excepted taxes,
duties and other charges being hereinafter referred to as "Lender
Taxes");
(ii) imposes, modifies or holds applicable, in the
determination of Agent or any Lender, any reserve, special deposit,
compulsory loan, FDIC insurance, capital
25
allocation or similar requirement against assets held by, or deposits
or other liabilities in or . for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds by,
Agent or such Lender or any applicable lending office (except to the
extent that reserve and FDIC insurance requirements are reflected in
the "Base Rate" or "LIBOR"; or
(iii) imposes on Agent or any Lender any other
condition materially more burdensome in nature, extent or consequence
than those in existence as of the Closing Date;
and the result of any of the foregoing is to (X) increase the cost to Agent or
any Lender of making, renewing, maintaining or participating in any portion of
the Loan or to reduce any amount receivable hereunder or thereunder or (Y) to
require Agent or any Lender or any applicable lending office to make any payment
calculated by reference to the amount of the portion of the Loan held or
interest received by it under such portion of the Loan; then, in any such case,
Borrower shall promptly pay to Agent or such Lender, as applicable, upon demand,
such amount or amounts (based upon a reasonable allocation thereof by Agent or
such Lender to the financing transactions contemplated by this Agreement and
affected by this Section 2.03(g)) as may be necessary to compensate Agent or
such Lender for any such additional cost incurred, reduced amounts received or
additional payments made to the extent Agent or such Lender generally imposes
such additional costs, losses and payments on other borrowers of Agent or such
Lender in similar circumstances. Agent or such Lender shall deliver to Borrower
and in the case of a delivery by a Lender, such Lender shall also deliver to
Agent, a written statement in reasonable detail of the claimed additional costs
incurred, reduced amounts received or additional payments made and the basis
therefor as soon as reasonably practicable after Agent or such Lender, as
applicable, obtains knowledge thereof.
(h) Certain Provisions Regarding LIBOR Loans.
(i) LIBOR Lending Unlawful. If any Lender shall
determine in good faith that the introduction of or any change in or in
the interpretation of any law makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for such
Lender to convert any Base Rate Loan into a LIBOR Loan or maintain any
Loan as a LIBOR Loan, (A) the obligations of the Lenders to convert any
Base Rate Loan into a LIBOR Loan or maintain any LIBOR Loans shall,
upon such determination, forthwith be suspended until such Lender shall
notify Agent that the circumstances causing such suspension no longer
exist, and (B) if required by law or such assertion, all LIBOR Loans
shall automatically convert into Base Rate Loans.
(ii) Deposits Unavailable. If Agent shall have
determined in good faith that adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBOR Loans,
then, upon notice from Agent to Borrower the obligations of all Lenders
to convert any Base Rate Loan into a LIBOR Loan or maintain any Loan as
a LIBOR Loan shall forthwith be suspended until Agent shall notify
Borrower that the circumstances causing such suspension no longer
exist. Agent will give such notice
26
when it determines, in good faith, that such circumstances no longer
exist; provided, however, that Agent shall not have any liability to
any Person with respect to any delay in giving such notice.
(iii) Funding Losses. In the event any Lender shall
incur any loss or expense (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to make or maintain any portion of the Loan as
a LIBOR Loan) as a result of:
(A) any continuance, conversion, repayment
or prepayment of the principal amount of any LIBOR Loans for
any reason whatsoever on a date other than the scheduled last
day of the Interest Period applicable thereto; or
(B) any Base Rate Loans not being converted
into LIBOR Loans or any LIBOR Loans not being continued as
LIBOR Loans in accordance with the Notice of
Continuation/Conversion therefor, other than as a result of
such Lender's breach of its obligation to continue or convert
such Loan in accordance with the terms hereof;
then, within fifteen (15) Business Days after Borrower's receipt of the
written notice of such Lender to Borrower with a copy to Agent,
Borrower shall reimburse such Lender for such loss or expense;
provided, however, that each Lender will use reasonable efforts to
minimize such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of
demonstrable error, be conclusive and binding on the parties hereto.
(i) Withholding Tax Exemption. Each Lender that is not created
or organized under the laws of the United States of America or a political
subdivision thereof shall deliver to Borrower and Agent no later than the
Closing Date (or, in the case of a Lender which becomes a Lender pursuant to
Section 10.11, the date upon which such Lender becomes a party hereto) a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender, in a form satisfactory to Borrower and Agent, to the effect that
such Lender is capable, under the provisions of an applicable treaty concluded
by the United States of America (in which case the certificate shall be
accompanied by three (3) accurate and complete duly executed originals of Form
W-8BEN of the Internal Revenue Service) or under Section 1442 of the Internal
Revenue Code (in which case the certificate shall be accompanied by three (3)
accurate and complete duly executed originals of Form W-8ECI of the Internal
Revenue Service), of receiving payments of principal, interest and fees
hereunder without deduction or withholding of United States federal income tax.
Further, if at any time a Lender changes its applicable lending office or
selects an additional applicable lending office, it shall, at the same time or
promptly thereafter, but only to the extent the certificate and forms previously
delivered by it hereunder are no longer applicable or effective, deliver to
Borrower and Agent in replacement for, or in addition to, the certificate and
forms previously delivered by it hereunder, a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender accompanied by
three (3) accurate and complete duly executed originals of either Form W-8BEN of
the Internal Revenue Service or
27
Form W-8ECI of the Internal Revenue Service, whichever is applicable, indicating
that such Lender is entitled to receive payments of principal, interest and fees
for the account of such changed or additional applicable lending office under
this Agreement without deduction or withholding of United States federal tax.
Each Lender further agrees to deliver to Borrower and Agent a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender
accompanied by three (3) accurate and complete duly executed originals of either
Form W-8BEN of the Internal Revenue Service or Form W-8ECI of the Internal
Revenue Service, whichever is appropriate, substantially in a form satisfactory
to Borrower and Agent, before or promptly upon the occurrence of any event
requiring a change in the most recent certificate or Internal Revenue Service
form previously delivered by it to Borrower and Agent pursuant to this Section
2.03(j). Further, each Lender which delivers a certificate accompanied by Form
W-8BEN of the Internal Revenue Service covenants and agrees to deliver to
Borrower and Agent within fifteen (15) days prior to January 1, 2003, and every
third (3rd) anniversary of such date thereafter, on which this Agreement is
still in effect, another such certificate and three (3) accurate and complete
original signed copies of Form W-8BEN (or any successor form or forms required
under the Internal Revenue Code or the applicable regulations promulgated
thereunder), and each Lender that delivers a certificate accompanied by Form
W-8ECI of the Internal Revenue Service covenants and agrees to deliver to
Borrower and Agent within fifteen (15) days prior to the beginning of each
subsequent taxable year of such Lender during which this Agreement is still in
effect, another such certificate and three (3) accurate and complete original
signed copies of Internal Revenue Service Form W-8ECI (or any successor form or
forms required under the Internal Revenue Code or the applicable regulations
promulgated hereunder). If (i) any Lender is required under this Section 2.03(j)
to provide a certificate or other evidence described above and fails to deliver
to Borrower and Agent such certificate or other evidence or (ii) any Lender
delivers a certificate to the effect that, as a result of the adoption of or any
change in any law, treaty, rule, regulation, guideline or determination of a
Governmental Authority after the date such Lender became a party hereto, such
Lender is not capable of receiving payments of interest hereunder without
deduction or withholding of United States federal income tax as specified
therein and that it is not capable of recovering the full amount of the same
from a source other than Borrower, then, to the extent required by law, as the
sole consequence of such Lender's failure to deliver the certificate described
in (i) above or such Lender's delivery of the certificate described in (ii)
above, Borrower shall be entitled to deduct or withhold taxes from the payments
owed to such Lender.
2.04 Fees.
(a) Loan Fee. On the Closing Date, Borrower shall pay Agent,
for the benefit of the Lenders, the loan fee which is provided for in the
separate fee agreement between Agent and Borrower.
(b) Arrangement and Administrative Agency Fees. Borrower shall
pay Agent such fees as are provided for in the separate fee agreement between
Agent and Borrower, as in existence from time to time.
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(c) Payment of Fees. The fees described in this Section 2.04
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
California in immediately available funds and shall be non-refundable when paid.
If Borrower fails to make any payment of fees or expenses specified or referred
to in this Agreement due to Agent or Lenders, including without limitation those
referred to in this Section 2.04 or otherwise under this Agreement or any
separate fee agreement between Borrower and Agent relating to this Agreement,
when due, the amount due shall bear interest until paid at the Base Rate and,
after five (5) days at the rate specified in Section 2.03(d) (but not to exceed
the maximum rate permitted by applicable law) and shall constitute part of the
Obligations. All fees described in this Section 2.04 which are expressed as a
per annum charge shall be calculated on the basis of the actual number of days
elapsed in a three hundred sixty (360) day year.
2.05 Payments.
(a) Voluntary Prepayments. Borrower may, upon not less than
three (3) Business Days prior written notice, at any time and from time to time,
prepay, without premium or penalty (other than as set forth in Section
2.03(h)(iii)), the Loan in whole or in part in amounts not less than One Hundred
Thousand Dollars ($100,000) or integral multiples of Twenty-Five Thousand
Dollars ($25,000) in excess of One Hundred Thousand Dollars ($100,000). Any
notice of prepayment given to Agent under this Section 2.05(a) shall specify the
date of prepayment and the aggregate principal amount of the prepayment. All
prepayments of principal shall be accompanied by a payment of all accrued and
unpaid interest thereon.
(b) Manner and Time of Payment. All payments of principal,
interest and fees hereunder payable to Agent or the Lenders shall be made
without condition or reservation of right and free of set-off or counterclaim,
in Dollars and by (i) wire transfer (pursuant to Agent's written wire transfer
instructions) of immediately available funds, delivered to Agent not later than
11:00 A.M. (California time) on the date due; and funds received by Agent after
that time and date shall be deemed to have been paid on the next succeeding
Business Day or (ii) by check (pursuant to Agent's written check payment
instructions) delivered to Agent, such check and the payment intended to be
covered thereby to be deemed to have been paid on the date Agent receives
immediately available funds therefor. All payments of principal, interest and
fees hereunder shall be made by (i) wire transfer of immediately available funds
to Wells Fargo Bank, N.A. (ABA number 121000248) for credit to account number
2934507203 reference MHC Operating Limited Partnership, loan number 1561ZMC with
telephonic notice to Jean Randall-Hall at (310) 335-9492, or (ii) check payable
to Wells Fargo Bank, N.A. and delivered to Agent at 2120 E. Park Place, Suite
100, El Segundo, California 90245, Attn: Jean Randall-Hall, or to such other
bank, account or address as Agent may specify in a written notice to Borrower.
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(c) Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in Section 2.04, as the case
may be.
2.06 Increased Capital. If either (i) the introduction of or
any change in or in the interpretation of any law or regulation or (ii)
compliance by Agent or any Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful) made or issued
after the Closing Date affects or would affect the amount of capital required or
expected to be maintained by Agent or such Lender or any corporation controlling
Agent or such Lender, and Agent or such Lender determines that the amount of
such capital is increased by or based upon the existence of Agent's obligations
hereunder or such Lender's obligation to maintain, continue or convert to LIBOR
Loans hereunder, then, upon demand by Agent or such Lender, Borrower shall
immediately pay to Agent or such Lender, from time to time as specified by Agent
or such Lender, additional amounts sufficient to compensate Agent or such Lender
in the light of such circumstances, to the extent that Agent or such Lender
reasonably determines such increase in capital to be allocable to the existence
of Agent's obligations hereunder or such Lender's commitment and to the extent
Agent or such Lender generally imposes such amounts on other borrowers of Agent
or Lender in similar circumstances. A certificate as to such amounts in
reasonable detail submitted to Borrower by Agent or such Lender shall, in the
absence of manifest error, be conclusive and binding for all purposes.
2.07 Notice of Increased Costs. Each Lender agrees that, as
promptly as reasonably practicable after it becomes aware of the occurrence of
an event or the existence of a condition which would cause it to be affected by
any of the events or conditions described in Section 2.03(g) or (h), or Section
2.06, it will notify Borrower and provide in such notice a reasonably detailed
calculation of the amount due from Borrower, and provide a copy of such notice
to Agent, of such event and the possible effects thereof. If Agent or the
affected Lender shall fail to notify Borrower of the occurrence of any such
event or the existence of any such condition within ninety (90) days following
the end of the month during which such event occurred or such condition arose,
then Borrower's liability for any amounts described in said Sections 2.03(g) and
(h) and 2.06 incurred by Agent or such affected Lender as a result of such event
or condition shall be limited to those attributable to the period occurring
subsequent to the ninetieth (90th) day prior to the date upon which Agent or
such affected Lender actually notified Borrower of such event or condition.
2.08 Option to Replace Lenders.
(a) Lenders. If any Lender shall make any demand for payment
or reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (a) there does not then exist any Unmatured Event of Default
or Event of Default and (b) the circumstances resulting in such demand for
payment or reimbursement are not applicable to all Lenders, Borrower may
terminate the Commitment of such Lender, in whole but not in part, by
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(i) giving such Lender and Agent not less than three (3) Business Days prior
written notice thereof, which notice shall be irrevocable and effective only
upon receipt thereof by such Lender and Agent and shall specify the effective
date of such termination, (ii) paying to such Lender (and there shall become due
and payable) on such date the outstanding principal amount of the portion of the
Loan made by such Lender, all interest thereon, and all other Obligations owed
to such Lender, including, without limitation, amounts owing under Sections
2.03(g), 2.03(h)(iii), 2.04 and 2.06, if any, and (iii) pursuant to the
provisions of Section 10.11, proposing the introduction of a replacement Lender
reasonably satisfactory to Agent, or obtaining the agreement of one or more
existing Lenders, to assume the entire amount of the Commitment of the Lender
whose Commitment is being terminated, on the effective date of such termination.
Upon the satisfaction of all of the foregoing conditions, such Lender which is
being terminated pursuant to this Section 2.08 shall cease to be a "Lender" for
purposes of this Agreement provided that Borrower shall continue to be obligated
to such Lender under Sections 11.01 and 11.02 (and any other indemnifications
contained herein or in any other Loan Document) with respect to or on account of
unpaid, unliquidated, unknown or similar claims or liabilities accruing prior to
such Lender ceasing to be a "Lender" for purposes of this Agreement.
(b) Agent. If Agent shall make any demand for payment or
reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (i) there does not then exist any Unmatured Event of Default
or Event of Default and (ii) the circumstances resulting in such demand for
payment or reimbursement are not applicable to all Lenders, Borrower may remove
Agent by (x) giving the Lenders and Agent not less than thirty (30) Business
Days prior written notice thereof, and (y) paying to Agent (and there shall
become due and payable) on such date all other Obligations owed to Agent,
including, without limitation, amounts owing under Sections 2.03(g), 2.03(h),
2.04 and 2.06, if any. Agent shall be replaced in accordance with the provisions
of Section 10.09 hereof.
2.09 Extension Options.
(a) First Extension Option. At the written request of Borrower
made to Agent at least thirty (30) days prior to the Initial Maturity Date, the
Maturity Date shall be extended to the one-year anniversary of the Initial
Maturity Date (the "First Extended Maturity Date") provided that the following
conditions are satisfied:
(i) no Event of Default or Unmatured Event of Default
shall have occurred and be continuing as of the Initial Maturity Date;
(ii) all representations and warranties made by
Borrower and the REIT contained in this Agreement and the other Loan
Documents shall be true and correct in all material respects as of the
Initial Maturity Date except to the extent they related to a specific
date;
(iii) Agent shall have received an Officer's
Certificate of the REIT dated as of the Initial Maturity Date stating
that the executive officer who is the signatory thereto, which officer
shall be the chief executive officer or the chief financial officer of
31
the REIT, has reviewed, or caused under his supervision to be reviewed,
the terms of this Agreement and the other Loan Documents, and has made,
or caused to be made under his supervision, a review in reasonable
detail of the transactions and condition of Borrower, the REIT, the
Subsidiaries, and the Agreement Parties, and that (A) such review has
not disclosed the existence as of the date of such Officer's
Certificate, and that the signer does not have knowledge of the
existence as of the date of such Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured
Event of Default and (B) all representations and warranties made by
such entities contained in this Agreement and the other Loan Documents
are true and correct in all material respects as of the date of such
Officer's Certificate except to the extent they relate to a specific
date; and
(iv) on or before the Initial Maturity Date, Agent
shall have received, for the benefit of the Lenders, an extension fee
in the amount of three tenths of one percent (0.30%) of the amount of
the Facility.
(b) Second Extension Option. At the written request of
Borrower made to Agent at least thirty (30) days prior to the First Extended
Maturity Date, the Maturity Date shall be further extended to the one-year
anniversary of the First Extended Maturity Date (the "Second Extended Maturity
Date") provided that the following conditions are satisfied:
(i) no Event of Default or Unmatured Event of Default
shall have occurred and be continuing as of the First Extended
Maturity Date;
(ii) all representations and warranties made by
Borrower and the REIT contained in this Agreement and the other Loan
Documents shall be true and correct in all material respects as of the
First Extended Maturity Date except to the extent they related to a
specific date;
(iii) Agent shall have received an Officer's
Certificate of the REIT dated as of the First Extended Maturity Date
stating that the executive officer who is the signatory thereto, which
officer shall be the chief executive officer or the chief financial
officer of the REIT, has reviewed, or caused under his supervision to
be reviewed, the terms of this Agreement and the other Loan Documents,
and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of Borrower, the
REIT, the Subsidiaries, and the Agreement Parties, and that (A) such
review has not disclosed the existence as of the date of such Officer's
Certificate, and that the signer does not have knowledge of the
existence as of the date of such Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured
Event of Default and (B) all representations and warranties made by
such entities contained in this Agreement and the other Loan Documents
are true and correct in all material respects as of the date of such
Officer's Certificate except to the extent they relate to a specific
date; and
32
(iv) on or before the First Extended Maturity Date,
Agent shall have received, for the benefit of the Lenders, an extension
fee in the amount of thirty-five hundredths of one percent (0.35%) of
the amount of the Facility.
ARTICLE III
CONDITIONS TO LOAN
3.01 Conditions to Disbursement of Loan. The obligation of
Lenders to make the Loan shall be subject to satisfaction of each of the
following conditions precedent on or before the Closing Date:
(a) Borrower Loan Documents. Borrower shall have executed and
delivered to Agent each of the following, in form and substance reasonably
acceptable to Agent and Agent's counsel:
(i) This Agreement;
(ii) The Loan Notes;
(iii) A solvency certificate;
(iv) Agent's form of Funds Transfer Agreement and
signature authorization form; and
(v) All other documents to be executed by or on
behalf of Borrower as listed on the Closing
Checklist.
(b) REIT Documents. The REIT shall have executed and delivered
to Agent each of the following, in form and substance reasonably acceptable to
Agent and Agent's counsel:
(i) The REIT Guaranty;
(ii) A solvency certificate;
(iii) A Compliance Certificate confirming the
matters described in Section 3.01(i); and
(iv) All other documents to be executed by or on
behalf of the REIT as listed on the Closing
Checklist.
(c) Corporate and Partnership Documents. Agent shall have
received the following corporate and partnership documents:
(i) With respect to Borrower: a certified copy of
Borrower's limited partnership agreement; a certified copy of
Borrower's Certificate of Limited Partnership;
33
a certificate of existence for Borrower from the State of
Illinois; and a certificate of Borrower's general partner's
secretary or an officer comparable thereto (a "Secretary's
Certificate") with respect to Borrower pertaining to
authorization, incumbency and by-laws, if any; and
(ii) With respect to the REIT: certified copies of
the REIT's certificate of incorporation and by-laws; a good standing
certificate of the REIT from the State of Maryland; and a Secretary's
Certificate with respect to the REIT pertaining to authorization,
incumbency and by-laws.
(d) Notice of Borrowing. Borrower shall have delivered to
Agent a Notice of Borrowing in compliance with Section 2.01(b).
(e) Performance. Borrower, the REIT and each Agreement Party
shall have performed in all material respects all agreements and covenants
required by Agent to be performed by them as a condition to funding the Loan.
(f) Solvency. Each of the REIT, Borrower and each Agreement
Party shall be Solvent.
(g) Material Adverse Changes. No change, as reasonably
determined by Agent, shall have occurred during the period commencing on
September 30, 2001 and ending on the Closing Date (the "Interim Period"), which
has a Material Adverse Effect.
(h) Litigation Proceedings. There shall not have been
instituted or, to the knowledge of Borrower or the REIT, threatened, during the
Interim Period, any litigation or proceeding in any court or by a Governmental
Authority affecting or threatening to affect Borrower, the REIT, any Subsidiary,
or any Agreement Party, in which there is a reasonable possibility of an adverse
decision that could, individually or in the aggregate, have a Material Adverse
Effect.
(i) No Event of Default; Satisfaction of Financial Covenants.
On the Closing Date and after giving effect to the disbursement of the Loan, no
Event of Default or Unmatured Event of Default shall exist and all of the
financial covenants contained in Articles VII and VIII shall be satisfied.
(j) Opinion of Counsel. Agent shall have received on behalf of
Agent and Lenders a favorable opinion of counsel for Borrower, each Agreement
Party and the REIT dated as of the Closing Date, in form and substance
reasonably satisfactory to Agent and its counsel.
(k) Due Diligence. Agent shall have completed its review of
all other information delivered by Borrower pursuant to this Section 3.01 and
shall have completed such additional due diligence investigations as Agent deems
reasonably necessary, and such review and investigations shall provide Agent
with results and information which, in Agent's reasonable determination, are
satisfactory to permit Agent to enter into this Agreement.
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(l) Representations and Warranties. All representations and
warranties made by Borrower and the REIT contained in this Agreement and the
other Loan Documents shall be true and correct in all material respects.
(m) Fees. Agent shall have received for the benefit of Agent
and Lenders all fees (or Borrower shall have made arrangements reasonably
acceptable to Agent therefor) then due, and Borrower shall have performed all of
its other obligations as set forth in the Loan Documents to make payments to
Agent on or before the Closing Date and all expenses of Agent incurred prior to
such Closing Date (including without limitation all reasonable attorneys' fees),
shall have been paid by Borrower.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties as to Borrower. In order
to induce Lenders to make the Loan, Borrower hereby represents and warrants to
Lenders as follows:
(a) Organization; Partnership Powers. Borrower (i) is a
limited partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, (ii) is duly qualified to do
business as a foreign limited partnership and in good standing under the laws of
each jurisdiction in which the nature of its business requires it to be so
qualified, except for those jurisdictions where failure to so qualify and be in
good standing would not have a Material Adverse Effect and (iii) has all
requisite partnership power and authority to own, operate and encumber its
property and assets and to conduct its business as presently conducted and as
proposed to be conducted in connection with and following the consummation of
the transactions contemplated by the Loan Documents.
(b) Authority. Borrower has the requisite partnership power
and authority to execute, deliver and perform each of the Loan Documents to
which it is or will be a party. The execution, delivery and performance thereof,
and the consummation of the transactions contemplated thereby, have been duly
approved by the general partner of Borrower, and no other partnership
proceedings or authorizations on the part of Borrower or its general or limited
partners are necessary to consummate such transactions. Each of the Loan
Documents to which Borrower is a party has been duly executed and delivered by
Borrower and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.
(c) Ownership of Borrower. Schedule 4.01(c) sets forth the
general partners of Borrower and their respective ownership percentages as of
the date hereof. Except as set forth in the partnership agreement of Borrower,
no partnership interests (or any securities, instruments, warrants, option or
purchase rights, conversion or exchange rights, calls, commitments or claims of
any character convertible into or exercisable for partnership interests) of
Borrower are subject to issuance under any security, instrument, warrant, option
or purchase rights, conversion or exchange rights, call, commitment or claim of
any right, title or interest therein or thereto. To
35
Borrower's knowledge, all of the partnership interests in Borrower have been
issued in compliance with all applicable Requirements of Law.
(d) No Conflict. The execution, delivery and performance by
Borrower of the Loan Documents to which it is or will be a party, and each of
the transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or Certificate of Limited
Partnership or other organizational documents, as the case may be, or the
organizational documents of any Subsidiary of Borrower or (ii) conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under any Requirement of Law, Contractual Obligation or Court
Order of or binding upon Borrower or any of its Subsidiaries, or require
termination of any such Contractual Obligation, the consequences of which
conflict or breach or default or termination would have a Material Adverse
Effect, or result in or require the creation or imposition of any Lien
whatsoever upon any Property (except as contemplated herein).
(e) Consents and Authorizations. Borrower has obtained all
consents and authorizations required pursuant to its Contractual Obligations
with any other Person, the failure of which to obtain would have a Material
Adverse Effect, and has obtained all consents and authorizations of, and
effected all notices to and filings with, any Governmental Authority necessary
to allow Borrower to lawfully execute, deliver and perform its obligations under
the Loan Documents to which Borrower is a party.
(f) Governmental Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any other federal or state statute or regulation such that its ability to incur
indebtedness is limited or its ability to consummate the transactions
contemplated by the Loan Documents is materially impaired.
(g) Prior Financials. The Consolidated and Combined Balance
Sheet as of September 30, 2001, the Consolidated and Combined Statement of
Operations for the Quarter Ended September 30, 2001, and the Consolidated and
Combined Statement of Cash Flows for the Quarter Ended September 30, 2001, of
the REIT contained in the Form 10-Q Quarterly Report of the REIT as of September
30, 2001 (the "Pre-Closing Financials") delivered to Agent prior to the date
hereof were prepared in accordance with GAAP in effect on the date such
Pre-Closing Financials were prepared and fairly present the assets, liabilities
and financial condition of the REIT, on a consolidated basis, at such date and
the results of its operations and its cash flows, on a consolidated basis, for
the period then ended.
(h) Financial Statements; Projections and Forecasts. Each of
the Financial Statements to be delivered to Agent pursuant to Sections 5.01(a)
and (b), (i) has been, or will be, as applicable, prepared in accordance with
the books and records of the REIT, on a consolidated basis, and (ii) either
fairly present, or will fairly present, as applicable, the financial condition
of the REIT, on a consolidated basis, at the dates thereof (and, if applicable,
subject to normal year-end adjustments) and the results of its operations and
cash flows, on a consolidated basis, for the period then ended. Each of the
projections delivered to Agent (A) has been, or will be, as
36
applicable, prepared by the REIT and the REIT's financial personnel in light of
the past business and performance of the REIT, on a consolidated basis and (B)
represent, or will represent, as of the date thereof, the reasonable good faith
estimates of such personnel.
(i) Litigation; Adverse Effects.
(i) There is no action, suit, proceeding,
governmental investigation or arbitration, at law or in equity, or
before or by any Governmental Authority, pending, or to the best of
Borrower's knowledge, threatened against Borrower or any of its
Subsidiaries or any of their respective Properties, in which there is a
reasonable possibility of an adverse decision that could have a
Material Adverse Effect; and
(ii) Neither Borrower nor any of its Subsidiaries is
(A) in violation of any Requirement of Law, which violation has a
Material Adverse Effect, or (B) subject to or in default with respect
to any Court Order which has a Material Adverse Effect.
(j) No Material Adverse Change. Since September 30, 2001,
there has occurred no event which has a Material Adverse Effect.
(k) Payment of Taxes. All tax returns and reports to be filed
by Borrower or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable will not have, in the aggregate, a Material Adverse Effect.
Borrower has no knowledge of any proposed tax assessment against Borrower or any
of its Subsidiaries that will have a Material Adverse Effect, which is not being
actively contested in good faith by such Person.
(l) Material Adverse Agreements. Neither Borrower nor any of
its Subsidiaries is a party to or subject to any Contractual Obligation or other
restriction contained in its partnership agreement, certificate of partnership,
by-laws, or similar governing documents which has a Material Adverse Effect.
(m) Performance. Neither Borrower nor any of its Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute a default under such Contractual
Obligation in each case, except where the consequences, direct or indirect, of
such default or defaults, if any, will not have a Material Adverse Effect.
(n) Federal Reserve Regulations. No part of the proceeds of
the Loan hereunder will be used to purchase or carry any "margin security" as
defined in Regulation U or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulation U. Borrower is not
engaged primarily in
37
the business of extending credit for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U. No part of the proceeds of the Loan
will be used for any purpose that violates, or which is inconsistent with, the
provisions of Regulation X or any other regulation of the Federal Reserve Board.
(o) Disclosure. Borrower has not intentionally or knowingly
withheld any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of
Borrower's future performance such representations and warranties are made in
good faith and to the best judgment of Borrower at the time such projections
were made.
(p) Requirements of Law. To Borrower's knowledge, Borrower and
each of its Subsidiaries are in compliance with all Requirements of Law
(including without limitation the Securities Act and the Securities Exchange
Act, and the applicable rules and regulations thereunder, state securities law
and "Blue Sky" laws) applicable to them and their respective businesses, in each
case, where the failure to so comply will have a Material Adverse Effect.
(q) Patents, Trademarks, Permits, Etc. Borrower and each of
its Subsidiaries owns, is licensed or otherwise has the lawful right to use, or
has all permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of Borrower's or such Subsidiary's business as currently conducted,
the absence of which would have a Material Adverse Effect. To Borrower's
knowledge, the use of such permits and other governmental approvals, patents,
trademarks, trade names, copyrights, technology, know-how and processes by
Borrower or such Subsidiary does not infringe on the rights of any Person,
subject to such claims and infringements as do not, in the aggregate, have a
Material Adverse Effect.
(r) Environmental Matters. To the knowledge of Borrower,
except as would not have a Material Adverse Effect and except as set forth on
Schedule 4.01(r), (i) the Property and operations of Borrower and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of Borrower or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental Laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither Borrower nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now, nor to Borrower's knowledge has
there ever been, on or in the Property of Borrower or any of its Subsidiaries
(except in compliance in all material respects with all applicable Environmental
Laws): (A) any underground storage tanks, (B) any asbestos-containing material,
(C) any polychlorinated biphenyls (PCB's) used in hydraulic oils, electrical
transformers or other equipment, (D) any petroleum hydrocarbons or (E) any
chlorinated or halogenated solvents; and (v) neither Borrower nor any of its
Subsidiaries has received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of a
Contaminant into the environment.
38
(s) ERISA. None of the REIT, Borrower or any Agreement Party
is an "employee pension benefit plan" as defined in Section 3(2) of ERISA, an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA, a
"multiemployer plan" as defined in Sections 4001(a)(3) or 3(37) of ERISA or a
"plan" as defined in Section 4975(e)(1) of the Internal Revenue Code. Except for
a prohibited transaction arising solely because of a Lender's breach of the
covenant set forth in Section 11.23, none of the Obligations, any of the Loan
Documents or the exercise of any of the Agent's or Lenders' rights in connection
therewith constitutes a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and the taxes and penalties imposed by Section 4975 of the Internal Revenue Code
and Section 502(i) of ERISA) or otherwise results in a Lender, Agent or the
Lenders being deemed in violation of Sections 404 or 406 of ERISA or Section
4975 of the Internal Revenue Code or will by itself result in a Lender, Agent or
the Lenders being a fiduciary or party in interest under ERISA or a
"disqualified person" as defined in Section 4975(e)(2) of the Internal Revenue
Code with respect to an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code. No assets of the REIT, Borrower or any Agreement Party
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code.
Each Borrower Plan is in compliance with ERISA and the
applicable provisions of the Internal Revenue Code in all respects except where
the failure to comply would not have a Material Adverse Effect. There are no
claims (other than claims for benefits in the normal course), actions or
lawsuits asserted or instituted against, and none of Borrower, the REIT, any of
the Subsidiaries or any of their ERISA Affiliates has knowledge of any
threatened litigation or claims against the assets of any Borrower Plan or
against any fiduciary of such Borrower Plan with respect to the operation of
such Borrower Plan which could have a Material Adverse Effect. No liability to
the PBGC has been, or is likely to be, incurred by Borrower, the REIT, any of
the Subsidiaries or their ERISA Affiliates other than such liabilities which, in
the aggregate, would not have a Material Adverse Effect. None of Borrower, the
REIT, any of the Subsidiaries or any of their ERISA Affiliates is now
contributing to or has ever contributed to or been obligated to contribute to
any Multiemployer Plan, no employees or former employees of Borrower, the REIT,
any of the Subsidiaries or any of their ERISA Affiliates have been covered by
any Multiemployer Plan in respect of their employment by Borrower or such
Subsidiary or such ERISA Affiliate. None of Borrower, the REIT, any of the
Subsidiaries or any of their ERISA Affiliates has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Internal Revenue
Code or in a transaction subject to the prohibitions of Section 406 of ERISA, in
connection with any Benefit Plan or Welfare Plan which would subject Borrower,
the REIT, any of the Subsidiaries or any of their ERISA Affiliates (after giving
effect to any exemption) to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Internal Revenue Code, Section 502 of ERISA or
any other liability under ERISA which tax, penalty or other liability would have
a Material Adverse Effect. None of the Benefit Plans subject to Title IV of
ERISA has any material Unfunded Pension Liability as to which Borrower, the
REIT, any of the Subsidiaries or any of their ERISA Affiliates is or may be
liable, which liability would have a Material Adverse Effect.
39
(t) Solvency. Borrower is and will be Solvent after giving
effect to the disbursements of the Loan and the payment and accrual of all fees
then payable hereunder.
(u) Use of Proceeds. Borrower's use of the proceeds of the
Loan are, and will continue to be, legal and proper uses (and to the extent
necessary, duly authorized by Borrower's partners) and such uses are consistent
with all applicable laws and statutes.
(v) Subsidiaries and Investment Affiliates. Each Subsidiary
and Investment Affiliate as of the date hereof is set forth on Schedule 4.01(v).
Schedule 4.01(v) sets forth the ownership of each such Subsidiary and Investment
Affiliate and the material Property owned by such Person as of the date hereof.
4.02 Representations and Warranties as to the REIT. In order
to induce Lenders to make the Loan, the REIT hereby represents and warrants to
Lenders as follows:
(a) Organization; Corporate Powers. The REIT (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland, (ii) is duly qualified to do business as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the nature of its business requires it to be so qualified, except for those
jurisdictions where failure to so qualify and be in good standing would not have
a Material Adverse Effect, and (iii) has all requisite corporate power and
authority to own, operate and encumber its property and assets and to conduct
its business as presently conducted and as proposed to be conducted in
connection with and following the consummation of the transactions contemplated
by the Loan Documents.
(b) Authority. The REIT has the requisite corporate power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the Board of Directors of the REIT, and no other corporate proceedings on the
part of the REIT are necessary to consummate such transactions. Each of the Loan
Documents to which the REIT is a party has been duly executed and delivered by
the REIT and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.
(c) No Conflict. The execution, delivery and performance by
the REIT of the Loan Documents to which it is a party, and each of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate its Articles or Certificate of Incorporation or by-laws, or other
organizational documents, as the case may be, or the organizational documents of
Borrower or any Subsidiary, (ii) conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under any
Requirement of Law, Contractual Obligation or Court Order of the REIT, Borrower
or any Subsidiary, or require termination of any such Contractual Obligation,
the consequences of which conflict or breach or default or termination will have
a Material Adverse Effect, or result in or require the creation or imposition of
any Lien
40
whatsoever upon any of its Property, or (iii) require any approval of the
stockholders of the REIT.
(d) Consents and Authorizations. The REIT has obtained all
consents and authorizations required pursuant to its Contractual Obligations
with any other Person, the failure of which to obtain would have a Material
Adverse Effect, and has obtained all consents and authorizations of, and
effected all notices to and filings with, any Governmental Authority necessary
to allow the REIT to lawfully execute, deliver and perform its obligations under
the Loan Documents to which the REIT is a party.
(e) Governmental Regulation. The REIT is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any other federal or state statute or regulation such that its ability to incur
indebtedness is limited or its ability to consummate the transactions
contemplated by the Loan Documents is materially impaired.
(f) Capitalization. To the REIT's knowledge, all of the
capital stock of the REIT has been issued in compliance with all applicable
Requirements of Law.
(g) Litigation; Adverse Effects.
(i) There is no action, suit, proceeding,
governmental investigation or arbitration, at law or in equity, or
before or by any Governmental Authority, pending, or to best of the
REIT's knowledge, threatened against the REIT, any of its Subsidiaries
or any of their respective Properties in which there is a reasonable
possibility of an adverse decision that could have a Material Adverse
Effect; and
(ii) Neither the REIT nor any of its Subsidiaries is
(A) in violation of any applicable Requirement of Law, which violation
has a Material Adverse Effect, or (B) subject to or in default with
respect to any Court Order which has a Material Adverse Effect.
(h) Payment of Taxes. All tax returns and reports to be filed
by the REIT or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable would not have, in the aggregate, a Material Adverse Effect. The
REIT has no knowledge of any proposed tax assessment against the REIT or any of
its Subsidiaries that would have a Material Adverse Effect, which is not being
actively contested in good faith by the REIT or such Subsidiary.
(i) Material Adverse Agreements. The REIT is not a party to or
subject to any Contractual Obligation or other restriction contained in its
charter, by-laws, or similar governing documents which has a Material Adverse
Effect.
41
(j) Performance. Neither the REIT nor any of its Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute a default under such Contractual
Obligation in each case, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(k) Securities Activities. The REIT is not engaged principally
in the business of extending credit for the purpose of purchasing or carrying
any "margin stock" (as defined in Regulation U).
(l) Disclosure. The REIT has not intentionally or knowingly
withheld any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of the
REIT's future performance such representations and warranties are made in good
faith and to the best judgment of the management of the REIT at the time such
projections were made.
(m) Requirements of Law. To the REIT's knowledge, the REIT and
each of its Subsidiaries are in compliance with all Requirements of Law
(including without limitation the Securities Act and the Securities Exchange
Act, and the applicable rules and regulations thereunder, state securities law
and "Blue Sky" laws) applicable to them and their respective businesses, in each
case, where the failure to so comply would have a Material Adverse Effect. After
giving effect to all filings made simultaneously with the Closing Date, the REIT
has made all filings with and obtained all consents of the Commission required
under the Securities Act and the Securities Exchange Act in connection with the
execution, delivery and performance by the REIT of the Loan Documents to which
it is a party.
(n) Patents, Trademarks, Permits, Etc. The REIT and each of
its Subsidiaries owns, is licensed or otherwise has the lawful right to use, or
has all permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of the REIT's or such Subsidiary's business as currently conducted,
the absence of which would have a Material Adverse Effect. To the REIT's
knowledge, the use of such permits and other governmental approvals, patents,
trademarks, trade names, copyrights, technology, know-how and processes by the
REIT or such Subsidiary does not infringe on the rights of any Person, subject
to such claims and infringements as do not, in the aggregate, have a Material
Adverse Effect.
(o) Environmental Matters. To the knowledge of the REIT,
except as would not have a Material Adverse Effect and except as set forth on
Schedule 4.01(r), (i) the Property and operations of the REIT and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of the REIT or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental Laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither the REIT nor any of its Subsidiaries has filed any notice
42
under applicable Environmental Laws reporting a Release of a Contaminant into
the environment in violation of any Environmental Laws, except as the same may
have been heretofore remedied; (iv) there is not now, nor to the REIT's
knowledge has there ever been, on or in the Property of the REIT or any of its
Subsidiaries (except in compliance in all material respects with all applicable
Environmental Laws): (A) any underground storage tanks, (B) any
asbestos-containing material, (C) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment, (D) any petroleum
hydrocarbons or (E) any chlorinated or halogenated solvents; and (v) neither the
REIT nor any of its Subsidiaries has received any notice or claim to the effect
that it is or may be liable to any Person as a result of the Release or
threatened Release of a Contaminant into the environment.
(p) Solvency. The REIT is and will be Solvent after giving
effect to the disbursement of the Loan and the payment of all fees then payable
hereunder.
(q) Status as a REIT. The REIT (i) is a real estate investment
trust as defined in Section 856 of the Internal Revenue Code (or any successor
provision thereto), (ii) has not revoked its election to be a real estate
investment trust, (iii) has not engaged in any "prohibited transactions" as
defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor
provision thereto), except for the transfer of manufactured home inventory from
Borrower to Realty Systems, Inc., a Delaware corporation (provided that such
transfer does not adversely affect the REIT's status as a real estate investment
trust under the Internal Revenue Code), and (iv) for its current "tax year" (as
defined in the Internal Revenue Code) is and for all prior tax years subsequent
to its election to be a real estate investment trust has been entitled to a
dividends paid deduction which meets the requirements of Section 857 of the
Internal Revenue Code.
(r) Ownership. The REIT does not own any Property or have any
interest in any Person other than as set forth on Schedule 4.01(v).
(s) Listing. The common stock of the REIT is and will continue
to be listed for trading and traded on either the New York Stock Exchange or
American Stock Exchange.
ARTICLE V
REPORTING COVENANTS
Borrower covenants and agrees that, on and after the date
hereof, until payment in full of all of the Obligations and termination of this
Agreement:
5.01 Financial Statements and Other Financial and Operating
Information. Borrower shall maintain or cause to be maintained a system of
accounting established and administered in accordance with sound business
practices and consistent with past practice to permit preparation of quarterly
and annual financial statements in conformity with GAAP. Borrower shall deliver
or cause to be delivered to Agent with copies for each Lender:
43
(a) Quarterly Financial Statements Certified by CFO. As soon
as practicable, and in any event within fifty (50) days after the end of each
Fiscal Quarter, except the last Fiscal Quarter of a Fiscal Year, consolidated
balance sheets, statements of income and expenses and statements of cash flow
(collectively, "Financial Statements") for the REIT, on a consolidated basis, in
the form provided to the Commission on the REIT's Form 10-Q and certified by the
REIT's chief financial officer.
(b) Annual Financial Statements. Within one hundred and twenty
(120) days after the close of each Fiscal Year, annual Financial Statements of
the REIT, on a consolidated basis (in the form provided to the Commission on the
REIT's Form 10K), audited and certified without qualification by the
Accountants.
(c) Officer's Certificate of REIT. (i) Together with each
delivery of any Financial Statement pursuant to Sections 5.01(a) and (b), an
Officer's Certificate of the REIT, stating that (A) the executive officer who is
the signatory thereto, which officer shall be the chief executive officer or the
chief financial officer of the REIT, has reviewed, or caused under his
supervision to be reviewed, the terms of this Agreement and the other Loan
Documents, and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of Borrower, the REIT, the
Subsidiaries, and the Agreement Parties, during the accounting period covered by
such Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signer does not
have knowledge of the existence as of the date of the Officer's Certificate, of
any condition or event which constitutes an Event of Default or Unmatured Event
of Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto and (B) such Financial
Statements have been prepared in accordance with the books and records of the
REIT, on a consolidated basis, and fairly present the financial condition of the
REIT, on a consolidated basis, at the date thereof (and, if applicable, subject
to normal year-end adjustments) and the results of operations and cash flows, on
a consolidated basis, for the period then ended; and (ii) together with each
delivery pursuant to clauses (a) and (b) above, a compliance certificate
demonstrating, in reasonable detail (which detail shall include actual
calculations), compliance during and at the end of such accounting periods with
the financial covenants contained in Sections 7.01(a), 7.01(d) and 7.02(a) and
Article VIII.
(d) Knowledge of Event of Default. Promptly upon Borrower
obtaining knowledge (i) of any condition or event which constitutes an Event of
Default or Unmatured Event of Default, or (ii) of any condition or event which
has a Material Adverse Effect, an Officer's Certificate of the REIT specifying
the nature and period of existence of any such condition or event and the nature
of such claimed Event of Default, Unmatured Event of Default, event or
condition, and what action Borrower, the REIT or the Agreement Party, as the
case may be, has taken, is taking and proposes to take with respect thereto.
(e) Litigation, Arbitration or Government Investigation.
Promptly upon Borrower obtaining knowledge of (i) the institution of, or threat
of, any material action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower, any
44
Agreement Party, the REIT, any Subsidiary or any of their Property not
previously disclosed in writing by Borrower to Agent pursuant to this Section
5.01(e), or (ii) any material development in any action, suit, proceeding,
governmental investigation or arbitration already disclosed, in which, in either
case, there is a reasonable possibility of an adverse decision that could have a
Material Adverse Effect, a notice thereof to Agent and such other information as
may be reasonably available to it to enable Agent and its counsel to evaluate
such matters.
(f) Failure of the REIT to Qualify as Real Estate Investment
Trust. Promptly upon, and in any event within forty-eight (48) hours after
Borrower first has knowledge of (i) the REIT failing to continue to qualify as a
real estate investment trust as defined in Section 856 of the Internal Revenue
Code (or any successor provision thereof), (ii) any act by the REIT causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the REIT to be subject to the taxes imposed by Section 857(b)(6)
of the Internal Revenue Code (or any successor provision thereto), (iv) the REIT
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Internal Revenue Code or (v) any challenge by
the IRS to the REIT's status as a real estate investment trust, a notice of any
such occurrence or circumstance.
(g) Management Reports. Upon and after the occurrence of an
Event of Default, copies of any management reports prepared by the Accountants
as soon as available.
(h) Property Changes. Notice of any material acquisition,
disposition, merger, or purchase by the REIT, Borrower, any Subsidiary or any
Agreement Party no later than ten (10) days after the consummation thereof,
specifying the nature of the transaction in reasonable detail.
(i) Other Information. Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments in the
possession of the REIT, Borrower, any Subsidiary, or any Agreement Party with
respect to the business, financial condition, operations, performance, or
properties of Borrower, the REIT, any Subsidiary, or any Agreement Party, as
Agent may, from time to time, reasonably request, including without limitation,
annual information with respect to cash flow projections, budgets, operating
statements (current year and immediately preceding year), rent rolls, lease
expiration reports, leasing status reports, note payable summaries, bullet note
summaries, equity funding requirements, contingent liability summaries, line of
credit summaries, line of credit collateral summaries, wrap note or note
receivable summaries, schedules of outstanding letters of credit, summaries of
cash and Cash Equivalents, projections of management and leasing fees and
overhead budgets, each in the form customarily prepared by the REIT or Borrower.
If Borrower fails to provide Agent with information requested from Borrower
within the time periods provided for herein, or if no time periods are provided
for, within ten (10) Business Days after Agent requests such information, and
provided that Agent gives Borrower reasonable prior notice and an opportunity to
participate, Borrower hereby authorizes Agent to communicate with the
Accountants and authorizes the Accountants to disclose to Agent any and all
financial statements and other information of any kind, including copies of any
management letter or the substance of any oral information, that such
Accountants may have with respect to financial condition, operations,
properties, performance and prospects of Borrower, the REIT, any Subsidiary, or
any Agreement
45
Party. Concurrently therewith, Agent will notify Borrower of any such
communication. At Agent's request, Borrower shall deliver a letter addressed to
the Accountants instructing them to disclose such information in compliance with
this Section 5.01(i).
5.02 Press Releases; SEC Filings and Financial Statements. The
REIT and Borrower will deliver to the Agent as soon as practicable after public
release all press releases concerning the REIT or Borrower. The REIT and
Borrower will deliver to Agent as soon as practicable after filing with the
Commission, all reports and notices, proxy statements, registration statements
and prospectuses. All materials sent or made available generally by the REIT to
the holders of its publicly-held Securities or to a trustee under any indenture
or filed with the Commission, including all periodic reports required to be
filed with the Commission, will be delivered to Agent as soon as available.
5.03 Environmental Notices. Except for events or occurrences
that will not result in a Material Adverse Effect, Borrower shall notify Agent,
in writing, as soon as practicable, and in any event within ten (10) days after
Borrower's learning thereof, of any: (a) written notice or claim to the effect
that Borrower, any Agreement Party, the REIT, or any Subsidiary is or may be
liable to any Person as a result of the Release or threatened Release of any
Contaminant into the environment; (b) written notice that Borrower, any
Agreement Party, the REIT, or any Subsidiary is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (c) written notice that any Property of Borrower, any Agreement
Party, the REIT, or any Subsidiary is subject to an Environmental Lien; (d)
written notice of violation to Borrower, any Agreement Party, the REIT, or any
Subsidiary or awareness of a condition which might reasonably result in a notice
of violation of any Environmental Laws by Borrower, the REIT, any Subsidiary or
any Agreement Party; (e) commencement or written threat of any judicial or
administrative proceeding alleging a violation by Borrower, the REIT, any
Subsidiary or any Agreement Party of any Environmental Laws; or (f) written
notice received directly from a Governmental Authority of any changes to any
existing Environmental Laws.
5.04 Qualifying Unencumbered Properties. Borrower may from
time to time but no more frequently than quarterly deliver notice to Agent
stating that Borrower intends to designate a Property to become a Qualifying
Unencumbered Property. Such notice shall (i) set forth the name of such Property
(or, if such Property has no name, such notice shall otherwise identify such
Property), and (ii) be accompanied by a statement of income, certified by the
chief financial officer of the REIT, for each such Property for the then most
recently completed Fiscal Quarter (or, if such statement of income is
unavailable, a pro forma financial statement setting forth the Net Operating
Income with respect to such Property for the then current Fiscal Quarter). If
any such Property meets the requirements set forth in the definition of
"Qualifying Unencumbered Properties" and Agent fails to deliver written notice
to Borrower stating that the Requisite Lenders have disapproved the designation
of such Property as a Qualifying Unencumbered Property (it being understood that
such notice shall provide Borrower with information regarding why such
designation was disapproved by the Requisite Lenders and that the Requisite
Lenders will not unreasonably disapprove such designation) within twenty (20)
46
days after receipt of such information by Agent, such Property shall become a
Qualifying Unencumbered Property.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower and the REIT covenant and agree that, on and after
the date hereof, until payment in full of all of the Obligations and termination
of this Agreement:
6.01 With respect to Borrower:
(a) Existence. Borrower shall, and shall cause each of its
Subsidiaries to, at all times maintain its and their respective partnership,
limited liability company, trust or corporate existence, as applicable, and
preserve and keep in full force and effect its and their respective rights and
franchises unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect. Borrower shall maintain its status as a limited
partnership.
(b) Qualification. Borrower shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses require them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect.
(c) Compliance with Laws, Etc. Borrower shall, and shall cause
each of its Subsidiaries to, (i) comply with all Requirements of Law and
Contractual Obligations, and all restrictive covenants affecting Borrower and
its Subsidiaries or their respective properties, performance, assets or
operations, and (ii) obtain as needed all Permits necessary for its and their
respective operations and maintain such in good standing, except in each of the
foregoing cases where the failure to do so will not have a Material Adverse
Effect or expose Agent or Lenders to any material liability therefor.
(d) Payment of Taxes and Claims. (a) Borrower shall, and shall
cause each of its Subsidiaries to, pay (i) all taxes, assessments and other
governmental charges imposed upon it or them or on any of its or their
respective properties or assets or in respect of any of its or their respective
franchises, business, income or property before any penalty or interest accrues
thereon, the failure to make payment of which in such time periods would have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which would have a Material Adverse Effect; provided, however, that
no such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if adequate reserves shall have been set aside therefor in
accordance with GAAP.
47
(e) Maintenance of Properties; Insurance. Borrower shall, and
shall cause each of its Subsidiaries to, maintain in good repair, working order
and condition, excepting ordinary wear and tear, all of its and their respective
Property (personal and real) and will make or cause to be made all appropriate
repairs, renewals and replacements thereof, in each case where the failure to so
maintain, repair, renew or replace would have a Material Adverse Effect.
Borrower shall, and shall cause each of its Subsidiaries to, maintain with
insurance companies that have a Best Rating of "A- VII" or higher or other
insurance companies reasonably acceptable to Agent that have similar financial
resources and stability, which companies shall be qualified to do business in
the states where such Property is located, insurance policies and programs
reasonably acceptable to Agent insuring all property and assets material to the
operations of Borrower and each of its Subsidiaries against loss or damage by
fire, theft, burglary, pilferage and loss in transit and business interruption,
together with such other hazards as is reasonably consistent with prudent
industry practice, and maintain liability insurance consistent with prudent
industry practice with financially sound insurance companies qualified to do
business in the states where such Property is located. The insurance policies
shall provide that they cannot be terminated or materially modified unless Agent
receives thirty (30) days prior written notice of said termination or
modification. At Agent's reasonable request, Borrower shall furnish evidence of
replacement costs, without cost to Agent, such as are regularly and ordinarily
made by insurance companies to determine the then replacement cost of the
improvements on any Property of Borrower or any of its Subsidiaries. In the
event Borrower fails to cause insurance to be carried as aforesaid, Agent shall
have the right (but not the obligation), with the consent of Requisite Lenders,
to place and maintain insurance required to be maintained hereunder and treat
the amounts expended therefor as additional Obligations, payable on demand;
provided however, that Agent shall give Borrower five (5) days' prior notice of
Agent's intent to place or maintain such insurance during which time Borrower
shall have the opportunity to obtain such insurance. All of the insurance
policies required hereunder shall be in form and substance reasonably
satisfactory to Agent. Agent hereby agrees that Borrower may use blanket
policies to satisfy the requirements of this Section 6.01(e), approves the
issuer, form and content of all insurance policies currently carried by Borrower
and agrees that such insurance satisfies the requirements of this Section
6.01(e). Furthermore, Agent agrees that it will not be unreasonable in
exercising any right hereunder to require Borrower to modify, alter or
supplement its insurance policies or coverage or in exercising any right it may
have hereunder to approve any changes Borrower may hereafter make with respect
to its insurance.
(f) Inspection of Property; Books and Records. Borrower shall
permit and shall cause each of the REIT, each Subsidiary, and each Agreement
Party to, upon reasonable prior notice by Agent to Borrower, permit any
authorized representative(s) designated by Agent to visit and inspect any of its
properties including inspection of financial and accounting records and leases,
and to make copies and take extracts therefrom, all at such times during normal
business hours and as often as Agent may reasonably request. In connection
therewith, Borrower shall pay all reasonable expenses of the types described in
Section 11.01. Borrower shall keep, and shall cause each of the REIT, each
Subsidiary and each Agreement Party to keep proper books of record and account
in conformity with GAAP, as modified and as otherwise required by this Agreement
and applicable Requirements of Law.
48
(g) Maintenance of Licenses, Permits, Etc. Borrower shall, and
shall cause each of its Subsidiaries to, maintain in full force and effect all
licenses, permits, governmental approvals, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of their respective businesses, except where the failure to obtain any
of the foregoing would not have a Material Adverse Effect; and notify Agent in
writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any such material
license, permit, patent, trademark, trade name, copyright, governmental
approval, franchise authorization or right, except where the suspension,
cancellation, revocation or discontinuance would not have a Material Adverse
Effect.
(h) Conduct of Business. Except for Permitted Holdings and
other Investments permitted under Section 7.01(c), Borrower shall engage only in
the business of owning, operating, managing and developing manufactured home
communities, whether directly or through its Subsidiaries.
(i) Use of Proceeds. Borrower shall use the proceeds of the
Loan only for the purpose of refinancing indebtedness outstanding under the
Prior Credit Agreement.
(j) Further Assurance. Borrower shall take and shall cause its
Subsidiaries and each Agreement Party to take all such further actions and
execute all such further documents and instruments as Agent may at any time
reasonably determine to be necessary or advisable to (i) correct any technical
defect or technical error that may be discovered in any Loan Document or in the
execution, acknowledgment or recordation thereof and (ii) cause the execution,
delivery and performance of the Loan Documents to be duly authorized.
6.02 With respect to the REIT:
(a) Corporate Existence. The REIT shall, and shall cause each
of its Subsidiaries to, at all times maintain its and their respective
partnership or corporate existence, as applicable, and preserve and keep in full
force and effect its and their respective rights and franchises unless the
failure to maintain such rights and franchises will not have a Material Adverse
Effect.
(b) Qualification, Name. The REIT shall, and shall cause each
of its Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses requires them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect. The REIT will transact business solely in its or
its Subsidiaries' own name.
(c) Securities Law Compliance. The REIT shall comply in all
material respects with all rules and regulations of the Commission and file all
reports required by the Commission relating to the REIT's publicly-held
Securities.
(d) Continued Status as a REIT; Prohibited Transactions. The
REIT (i) will continue to be a real estate investment trust as defined in
Section 856 of the Internal Revenue Code (or any successor provision thereto),
(ii) will not revoke its election to be a real estate
49
investment trust, (iii) will not engage in any "prohibited transactions" as
defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor
provision thereto), and (iv) will do all acts necessary to continue to be
entitled to a dividend paid deduction meeting the requirements of Section 857 of
the Internal Revenue Code.
(e) NYSE or ASE Listed Company. The REIT shall cause its
common stock at all times to be listed for trading and be traded on the New York
Stock Exchange or American Stock Exchange.
(f) Compliance with Laws, Etc. The REIT shall, and shall cause
each of its Subsidiaries to, (i) comply with all Requirements of Law and
Contractual Obligations, and all restrictive covenants affecting the REIT and
its Subsidiaries or their respective properties, performance, prospects, assets
or operations, and (ii) obtain as needed all Permits necessary for its and their
respective operations and maintain such in good standing, except in each of the
foregoing cases where the failure to do so will not have a Material Adverse
Effect.
(g) Payment of Taxes and Claims. Subject to Section 6.02(d),
the REIT shall, and shall cause each of its Subsidiaries to, pay (i) all taxes,
assessments and other governmental charges imposed upon it or them or on any of
its or their respective properties or assets or in respect of any of its or
their respective franchises, business, income or property before any penalty or
interest accrues thereon, the failure to make payment of which would have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which would have a Material Adverse Effect; provided, however, that
no such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if adequate reserves shall have been set aside therefor in
accordance with GAAP.
ARTICLE VII
NEGATIVE COVENANTS
Borrower and the REIT covenant and agree that, on and after
the date hereof, until payment in full of all of the Obligations and termination
of this Agreement:
7.01 With respect to Borrower:
(a) Indebtedness. Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) the Obligations;
50
(ii) trade debt incurred in the normal course of
business;
(iii) intercompany payables and receivables owing
between Subsidiaries in the nature of trade debt incurred in the normal
course of business; and
(iv) Indebtedness which, after giving effect thereto,
may be incurred or may remain outstanding without giving rise to an
Event of Default or Unmatured Event of Default under any provision of
Articles VII and VIII; provided, however, that (A) Borrower shall not,
and shall not permit any of its Subsidiaries to, guarantee or otherwise
become or remain directly or indirectly liable with respect to the
Indebtedness of any Investment Affiliate, and (B) Borrower shall not
permit any Subsidiary to create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to, any Recourse
Indebtedness in excess of Ten Million Dollars ($10,000,000) per
Subsidiary at any time or Thirty Million Dollars ($30,000,000) in the
aggregate for all Subsidiaries at any time.
(b) Liens. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:
(i) Permitted Liens; and
(ii) Liens securing Indebtedness permitted to be
incurred and remain outstanding pursuant to Section 7.01(a)(iv).
(c) Investments. Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly make or own any Investment
except:
(i) Investments in cash and Cash Equivalents;
(ii) Permitted Holdings;
(iii) Investments in Subsidiaries and Investment
Affiliates owned as of the Closing Date;
(iv) Investments permitted pursuant to Section
7.01(e)(v);
(v) Controlled Ownership Interests which do not
constitute Non-Manufactured Home Community Property; and
(vi) mortgage loans which do not constitute
Non-Manufactured Home Community Property and which are either
eliminated in the consolidation of the REIT, Borrower and the
Subsidiaries or are accounted for as investments in real estate under
GAAP.
51
(d) Distributions and Dividends. Neither Borrower nor the REIT
shall declare or make any dividend or other distribution on account of
partnership interests in excess of ninety-five percent (95%) of Funds From
Operations in any Fiscal Year; provided, however, that if an Event of Default
under Section 9.01(a) shall have occurred, neither Borrower nor the REIT shall
declare or make any dividend or other distribution on account of partnership
interests in excess of what is required for the REIT to maintain its status as a
real estate investment trust as defined in Section 856 of the Internal Revenue
Code.
(e) Restrictions on Fundamental Changes.
(i) Borrower shall not, and shall not permit any of
its Subsidiaries to, enter into any merger, consolidation,
reorganization or recapitalization or liquidate, wind-up or dissolve
(or suffer any liquidation or dissolution), or discontinue its
business.
(ii) Borrower shall remain a limited partnership with
the REIT as its sole general partner.
(iii) Borrower shall not change its Fiscal Year.
(iv) Except for Permitted Holdings and other
Investments permitted under Section 7.01(c), Borrower shall not engage
in any line of business other than ownership, operation, management and
development of manufactured home communities and the provision of
services incidental thereto and the brokerage, purchase, and sale of
manufactured home units, whether directly or through its Subsidiaries
and Investment Affiliates.
(v) Borrower shall not acquire by purchase or
otherwise all or substantially all of the business, property or assets
of, or stock or other evidence of beneficial ownership of, any Person,
unless after giving effect thereto, Borrower is in pro forma compliance
with this Agreement.
(f) ERISA. Neither Borrower nor the REIT shall, and neither
shall permit any Subsidiary or any of their ERISA Affiliates to, do any of the
following to the extent that such act or failure to act would result in the
aggregate, after taking into account any other such acts or failure to act, in a
Material Adverse Effect:
(i) Engage, or knowingly permit a Subsidiary or an
ERISA Affiliate to engage, in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code which
is not exempt under Section 407 or 408 of ERISA or Section 4975(d) of
the Internal Revenue Code for which a class exemption is not available
or a private exemption has not been previously obtained from the DOL;
(ii) Permit to exist any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the
Internal Revenue Code), whether or not waived;
52
(iii) Fail, or permit a Subsidiary or an ERISA
Affiliate of the REIT, Borrower or any Subsidiary to fail, to pay
timely required contributions or annual installments due with respect
to any waived funding deficiency to any Plan if such failure could
result in the imposition of a Lien or otherwise would have a Material
Adverse Effect;
(iv) Terminate, or permit an ERISA Affiliate of the
REIT, Borrower or any Subsidiary to terminate, any Benefit Plan which
would result in any liability of Borrower or a Subsidiary or an ERISA
Affiliate of the REIT, Borrower or any Subsidiary under Title IV of
ERISA;
(v) Fail, or permit any Subsidiary or ERISA Affiliate
to fail to pay any required installment under section (m) of Section
412 of the Internal Revenue Code or any other payment required under
Section 412 of the Internal Revenue Code on or before the due date for
such installment or other payment, if such failure could result in the
imposition of a Lien or otherwise would have a Material Adverse Effect;
(vi) Permit to exist any Termination Event;
(vii) Make, or permit a Subsidiary or an ERISA
Affiliate of the REIT, Borrower or any Subsidiary to make, a complete
or partial withdrawal (within the meaning of ERISA Section 4201) from
any Multiemployer Plan so as to result in liability to Borrower, a
Subsidiary or any ERISA Affiliate of the REIT, Borrower or any
Subsidiary which would have a Material Adverse Effect; or
(viii) Permit the total Unfunded Pension Liabilities
(using the actuarial assumptions utilized by the PBGC) for all Benefit
Plans (other than Benefit Plans which have no Unfunded Pension
Liabilities) to have a Material Adverse Effect.
None of the REIT, Borrower nor any Agreement Party shall use
any "assets" (within the meaning of ERISA or Section 4975 of the Internal
Revenue Code, including but not limited to 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code to repay or secure the Obligations if the use of such
assets may result in a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and Section 4975 of the Internal Revenue Code and the taxes and penalties
imposed by Section 4975 of the Internal Revenue Code and Section 502(i) of
ERISA) or in a Lender, Agent or the Lenders being deemed in violation of Section
404 or 406 of ERISA or Section 4975 of the Internal Revenue Code or otherwise by
itself results in or will result in a Lender, Agent or the Lenders being a
fiduciary or party in interest under ERISA or a "disqualified person" as defined
in Section 4975(e)(2) of the Internal Revenue Code with respect to an "employee
benefit plan" within the meaning of Section 3(3) of ERISA or a "plan" within the
meaning of Section 4975(e)(1) of the Internal Revenue Code. Without limitation
of any other provision of this Agreement, none of the REIT, Borrower or any
Agreement Party shall assign, sell, pledge, encumber, transfer, hypothecate or
otherwise
53
dispose of their respective interests or rights (direct or indirect) in any Loan
Document, or attempt to do any of the foregoing or suffer any of the foregoing,
or permit any party with a direct or indirect interest or right in any Loan
Document to do any of the foregoing, nor shall the REIT or Borrower assign,
sell, pledge, encumber, transfer, hypothecate or otherwise dispose of any of
their respective rights or interests (direct or indirect) in any Agreement
Party, Borrower or the REIT, as applicable, or attempt to do any of the
foregoing or suffer any of the foregoing, if such action would cause the
Obligations, or the exercise of any of the Agent's or Lenders' rights in
connection therewith, to constitute a prohibited transaction under ERISA or the
Internal Revenue Code (unless Borrower furnishes to Agent a legal opinion
reasonably satisfactory to Agent that the transaction is exempt from the
prohibited transaction provisions of ERISA and the Internal Revenue Code (for
this purpose, Agent and the Lenders agree to supply Borrower all relevant
non-confidential factual information reasonably necessary to such legal opinion
and reasonably requested by Borrower)) or otherwise results in a Lender, Agent
or the Lenders being deemed in violation of Sections 404 or 406 of ERISA or
Section 4975 of the Internal Revenue Code or otherwise by itself would result in
a Lender, Agent or the Lenders being a fiduciary or party in interest under
ERISA or a "disqualified person" as defined in Section 4975(e)(2) of the
Internal Revenue Code with respect to an "employee benefit plan" within the
meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section
4975(e)(1) of the Internal Revenue Code.
(g) Environmental Liabilities. Borrower shall not, and shall
not permit any of its Subsidiaries to, become subject to any Liabilities and
Costs which would have a Material Adverse Effect arising out of or related to
(i) the Release or threatened Release of any Contaminant into the environment,
or any Remedial Action in response thereto, or (ii) any violation of any
Environmental Laws. Notwithstanding the foregoing provision, Borrower and its
Subsidiaries shall have the right to contest in good faith any claim of
violation of an Environmental Law by appropriate legal proceedings and shall be
entitled to postpone compliance with the obligation being contested as long as
(i) no Event of Default shall have occurred and be continuing, (ii) Borrower
shall have given Agent prior written notice of the commencement of such contest,
(iii) noncompliance with such Environmental Law shall not subject Borrower or
such Subsidiary to any criminal penalty or subject Agent to pay any civil
penalty or to prosecution for a crime, and (iv) no portion of any Property
material to Borrower or its condition or prospects shall be in imminent danger
of being sold, forfeited or lost, by reason of such contest or the continued
existence of the matter being contested.
(h) Amendment of Constituent Documents. Borrower shall not
permit any amendment of its limited partnership agreement, certificate of
limited partnership or by-laws, if any, which would materially and adversely
affect Agent or Lenders or their respective rights and remedies under the Loan
Documents.
(i) Disposal of Interests. Borrower will not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise encumber or
dispose of any material portion of its partnership interests, stock or other
ownership interests in any Subsidiary or other Person in which it has an
interest unless Borrower has delivered to Agent a Compliance Certificate showing
on a pro forma basis (calculated in a manner reasonably acceptable to Agent)
that there
54
would be no breach of any of the financial covenants contained in Articles VII
and VIII after giving effect to such conveyance, sale, transfer, assignment,
pledge, or other encumbrance or disposition.
(j) Margin Regulations. No portion of the proceeds of any
credit extended under this Agreement shall be used in any manner which might
cause the extension of credit or the application of such proceeds to violate
Regulation U or Regulation X or any other regulation of the Federal Reserve
Board or to violate the Securities Exchange Act or the Securities Act, in each
case as in effect on the Closing Date and the date of such use of proceeds.
(k) Transactions with Affiliates. Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into, any transaction or
series of related transactions with any Affiliate of Borrower, other than
transactions in the ordinary course of business which are on terms and
conditions substantially as favorable to Borrower or such Subsidiary as would be
obtainable by Borrower or such Subsidiary in an arms-length transaction with a
Person other than an Affiliate.
7.02 With respect to the REIT:
(a) Indebtedness. The REIT shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) the Obligations; and
(ii) Indebtedness which, after giving effect thereto,
may be incurred or may remain outstanding without giving rise to an
Event of Default or Unmatured Event of Default under any provision of
Articles VII and VIII; provided, however, that (A) the REIT shall not,
and shall not permit any of its Subsidiaries to, guarantee or otherwise
become or remain directly or indirectly liable with respect to the
Indebtedness of any Investment Affiliate, and (B) the REIT shall not
permit any Subsidiary to create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to, any Recourse
Indebtedness in excess of Ten Million Dollars ($10,000,000) per
Subsidiary at any time or Thirty Million Dollars ($30,000,000) in the
aggregate for all Subsidiaries at any time.
(b) Liens. The REIT shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:
(i) Permitted Liens; and
(ii) Liens securing Indebtedness permitted to be
incurred and remain outstanding pursuant to Section 7.02(a)(ii).
55
(c) Restriction on Fundamental Changes.
(i) The REIT shall not enter into any merger,
consolidation, reorganization or recapitalization or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution) or discontinue
its business.
(ii) The REIT shall not change its Fiscal Year.
(iii) The REIT shall not engage in any line of
business other than owning partnership interests in Borrower and the
interests identified on Schedule 4.01(v) as being owned by the REIT and
any other ownership interests in Subsidiaries and Investment Affiliates
which are permitted under the terms of Borrower's partnership
agreement.
(iv) The REIT shall not have an Investment in any
Person other than Borrower and the interests identified on Schedule
4.01(v) as being owned by the REIT and any other ownership interests in
Subsidiaries and Investment Affiliates which are permitted under the
terms of Borrower's partnership agreement.
(v) The REIT shall not acquire an interest in any
Property other than Securities issued by Borrower and the interests
identified on Schedule 4.01(v) and any other ownership interests in
Subsidiaries and Investment Affiliates which are permitted under the
terms of Borrower's partnership agreement.
(d) Environmental Liabilities. The REIT shall not, and shall
not permit any of its Subsidiaries to, become subject to any Liabilities and
Costs which would have a Material Adverse Effect arising out of or related to
(i) the Release or threatened Release of any Contaminant into the environment,
or any Remedial Action in response thereto, or (ii) any violation of any
Environmental Laws. Notwithstanding the foregoing provision, the REIT and its
Subsidiaries shall have the right to contest in good faith any claim of
violation of an Environmental Law by appropriate legal proceedings and shall be
entitled to postpone compliance with the obligation being contested as long as
(i) no Event of Default shall have occurred and be continuing, (ii) the REIT
shall have given Agent prior written notice of the commencement of such contest,
(iii) noncompliance with such Environmental Law shall not subject the REIT or
such Subsidiary to any criminal penalty or subject Agent to pay any civil
penalty or to prosecution for a crime, and (iv) no portion of any Property
material to Borrower or its condition or prospects shall be in imminent danger
of being sold, forfeited or lost, by reason of such contest or the continued
existence of the matter being contested.
(e) Amendment of Charter or By-Laws. The REIT shall not permit
any amendment of its charter documents or by-laws, which would materially and
adversely affect Agent or Lenders or their respective rights and remedies under
the Loan Documents.
(f) Disposal of Partnership Interests. The REIT will not
directly or indirectly convey, sell, transfer, assign, pledge or otherwise
encumber or dispose of any of its partnership interests in Borrower.
56
(g) Maximum Ownership Interests. No Person or group of Persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act) (other
than Samuel Zell) shall beneficially acquire ownership (within the meaning of
Rule 13d-3 promulgated by the Commission under such Act), directly or
indirectly, of more than fifteen percent (15%) of the Securities which have the
right to elect the board of directors of the REIT under ordinary circumstances
on a combined basis, after giving effect to the conversion of any Convertible
Securities in the REIT and Borrower.
ARTICLE VIII
FINANCIAL COVENANTS
Borrower covenants and agrees that, on and after the date of
this Agreement and until payment in full of all the Obligations, the expiration
of all Commitments and the termination of this Agreement:
8.01 Total Liabilities to Gross Asset Value. Borrower shall
not permit the ratio of Total Liabilities to the sum of Gross Asset Values for
Borrower and each of its Subsidiaries to exceed 0.6:1.
8.02 Secured Debt to Gross Asset Value. Borrower shall not
permit the ratio of Secured Debt to the sum of Gross Asset Values for Borrower
and each of its Subsidiaries to exceed 0.5:1.
8.03 EBITDA to Interest Expense Ratio. Borrower shall not
permit the ratio of EBITDA for any Fiscal Quarter to Interest Expense for such
Fiscal Quarter to be less than 2.0:1.
8.04 EBITDA to Fixed Charges Ratio. Borrower shall not permit
the ratio of EBITDA for any Fiscal Quarter to Fixed Charges for such Fiscal
Quarter to be less than 1.75:1.
8.05 Unencumbered Net Operating Income to Unsecured Interest
Expense. Borrower shall not permit the ratio of Unencumbered Net Operating
Income for any Fiscal Quarter to Unsecured Interest Expense for such Fiscal
Quarter to be less than 1.80:1.
8.06 Unencumbered Pool. Borrower shall not permit the ratio of
(a) the sum of (i) the Unencumbered Asset Value and (ii) the fair market value
of cash and Cash Equivalents owned collectively by Borrower and any Wholly-Owned
Subsidiary and subject to no Lien to (b) outstanding Unsecured Debt to be less
than 1.80:1.
8.07 Minimum Net Worth. Borrower will maintain a Net Worth of
not less than the Minimum Net Worth.
8.08 Permitted Holdings. Borrower's primary business will be
the ownership, operation, management and development of manufactured home
communities and any other business activities of Borrower and its Subsidiaries
will remain incidental thereto. Notwithstanding the foregoing, Borrower and its
Subsidiaries may acquire, maintain or engage in
57
the following "Permitted Holdings" if and so long as (i) the aggregate value of
such Permitted Holdings, whether held directly or indirectly by Borrower and its
Subsidiaries, does not exceed, at any time, twenty percent (20%) of Gross Asset
Value for Borrower as a whole and (ii) the value of each such Permitted Holding,
whether held directly or indirectly by Borrower and its Subsidiaries, does not
exceed, at any time, the following percentages of Borrower's Gross Asset Value:
Maximum Percentage of
Permitted Holdings Gross Asset Value
------------------ -----------------
Non-Manufactured Home Community Property (other than cash
or Cash Equivalents) 10%
Taxable REIT Subsidiary Interests 5%
Land 5%
Securities issued by real estate
investment trusts primarily engaged in the development,
ownership, operation and management of
manufactured home communities 5%
Manufactured Home Community Mortgages
other than mortgage indebtedness which is
either eliminated in the consolidation of the REIT,
Borrower and the Subsidiaries or
accounted for as investments in real estate
under GAAP 10%
Manufacturing Home Community Ownership Interests other
than Controlled Ownership Interests 10%
Development Activity 10%
The value of the foregoing categories of Permitted Holdings shall be calculated
as follows: (i) the value of any Non-Manufactured Home Community Property (other
than cash or Cash Equivalents) or any Manufactured Home Community Ownership
Interest (other than a Controlled Ownership Interest) shall be calculated based
upon its Adjusted Asset Value; (ii) the value of any Land or any Security issued
by a real estate investment trust primarily engaged in the development,
ownership, operation and management of manufactured home communities shall be
equal to the lesser of (A) the acquisition cost thereof or (B) the current
market value thereof (such market value to be determined in a manner reasonably
acceptable to Agent); (iii) the value of any Taxable REIT Subsidiary Interest
shall be the acquisition or investment cost thereof; (iv) the value of any
Manufactured Home Community Mortgage (other than mortgage indebtedness which is
either eliminated in the consolidation of the REIT, Borrower and the
58
Subsidiaries or accounted for as an investment in real estate under GAAP) shall
be equal to the book value thereof; (v) the value of Development Activity by
Borrower or any Subsidiary shall be equal to the full budgeted cost thereof; and
(vi) the value of any Development Activity by an Investment Affiliate shall be
equal to the greater of (A) Borrower's pro rata share of the full budgeted cost
thereof based upon its percentage of equity ownership, or (B) Borrower's pro
rata share of the full budgeted cost thereof based upon Borrower's economic
interest in the project (as determined by Borrower in a manner reasonably
satisfactory to Agent).
8.09 Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter, but
shall be satisfied at all times.
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.01 Events of Default. Each of the following occurrences
shall constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. (i) The failure to pay
in full any amount due on the Termination Date; (ii) the failure to pay in full
any principal when due; (iii) the failure to pay in full any interest owing
hereunder or under any of the other Loan Documents within ten (10) days after
the due date thereof and, unless Agent has previously delivered two (2) or more
notices of payment default to Borrower during the term of this Agreement (in
which event the following notice shall not be required), Agent shall have given
Borrower written notice that Agent has not received such payment on or before
the date such payment was required to be made and Borrower shall have failed to
make such payment within five (5) days after receipt of such notice; or (iv) the
failure to pay in full any other payment required hereunder or under any of the
other Loan Documents, whether such payment is required to be made to Agent or to
some other Person, within ten (10) days after Agent gives Borrower written
notice that such payment is due and unpaid.
(b) Dividends. Borrower or the REIT shall breach the covenant
set forth in Section 7.01(d).
(c) Breach of Financial Covenants. Borrower shall fail to
satisfy any covenant set forth in Article VIII and such failure shall continue
for forty (40) days after Borrower's knowledge thereof.
(d) Other Defaults. Borrower, the REIT or any Agreement Party
shall fail duly and punctually to perform or observe any agreement, covenant or
obligation binding on Borrower, the REIT or any Agreement Party under this
Agreement or under any of the other Loan Documents (other than as described in
Section 6.01(e) or Sections 9.01(a), (b), (c), (e), (g) or (p)), and such
failure shall continue for thirty (30) days after written notice from Agent to
Borrower, the REIT or any Agreement Party (or (i) such lesser period of time as
is mandated by applicable Requirements of Law or (ii) such longer period of time
(but in no case more than ninety (90) days) as is reasonably required to cure
such failure if Borrower, the REIT, or such
59
Agreement Party commences such cure within such thirty (30) days and diligently
pursues the completion thereof).
(e) Breach of Representation or Warranty. Any representation
or warranty made or deemed made by Borrower, the REIT or any Agreement Party to
Agent or any Lender herein or in any of the other Loan Documents or in any
statement, certificate or financial statements at any time given by Borrower
pursuant to any of the Loan Documents shall be false or misleading in any
material respect on the date as of which made and, with respect to such
representations or warranties not known by Borrower at the time made or deemed
made to be false or misleading, the defect causing such representation or
warranty to be false or misleading is not removed within thirty (30) days after
the written notice thereof from Agent to Borrower.
(f) Default as to Other Indebtedness. Borrower, the REIT, any
Subsidiary or any Investment Affiliate shall have defaulted under any Other
Indebtedness of such party (other than Non-Recourse Indebtedness) and as a
result thereof the holders of such Other Indebtedness shall have accelerated
such Other Indebtedness (other than Non-Recourse Indebtedness), if the aggregate
amount of such accelerated Other Indebtedness (to the extent of any recourse to
Borrower, the REIT or any Subsidiary), together with the aggregate amount of any
Other Indebtedness (other than Non-Recourse Indebtedness) of Borrower, the REIT,
any Subsidiary or any Investment Affiliate which has theretofore been
accelerated (to the extent of any recourse to Borrower, the REIT or any
Subsidiary) is $10,000,000 or more.
(g) Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) An involuntary case or other proceeding shall be
commenced against the REIT, Borrower, any Subsidiary, or any Agreement
Party and the petition shall not be dismissed within sixty (60) days
after commencement of the case, or a court having jurisdiction shall
enter a decree or order for relief in respect of the REIT, Borrower,
any Subsidiary, or any Agreement Party, as the case may be, in an
involuntary case or other proceeding, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or any
other similar relief shall be granted under any applicable federal,
state or foreign law; or
(ii) A decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers
over Borrower, the REIT, any Subsidiary, or any Agreement Party, or
over all or a substantial part of the property of the REIT, Borrower,
any Subsidiary, or any Agreement Party shall be entered, or an interim
receiver, trustee or other custodian of the REIT, Borrower, any
Subsidiary, or any Agreement Party, or of all or a substantial part of
the property of the REIT, Borrower, any Subsidiary, or any Agreement
Party shall be appointed or a warrant of attachment, execution or
similar process against any substantial part of the property of the
REIT, Borrower, any Subsidiary, or any Agreement Party shall be issued
and any such event shall not be stayed, vacated, dismissed, bonded or
discharged within sixty (60) days of entry, appointment or issuance.
60
(h) Voluntary Bankruptcy; Appointment of Receiver, etc. The
REIT, Borrower, any Subsidiary, or any Agreement Party shall have an order for
relief entered with respect to it or commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking of possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the REIT, Borrower, any Subsidiary, or any Agreement Party shall make
any assignment for the benefit of creditors or shall be unable or fail, or admit
in writing its inability, to pay its debts as such debts become due; or the
general partner(s) or Board of Directors (or any committee thereof), as
applicable, of the REIT, Borrower, any Subsidiary, or any Agreement Party adopts
any resolution or otherwise authorizes any action to approve any of the
foregoing.
(i) Judgments and Attachments. (i) Any money judgments (other
than a money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writs or warrants of attachment,
or similar processes involving an aggregate amount in excess of $5,000,000 shall
be entered or filed against the REIT, Borrower, any Subsidiary, or any Agreement
Party or their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days, or (ii) any judgment or
order of any court or administrative agency awarding material damages shall be
entered against the REIT, Borrower, any Subsidiary, or any Agreement Party in
any action under the Federal securities laws seeking rescission of the purchase
or sale of, or for damages arising from the purchase or sale of, any Securities,
such judgment or order shall have become final after exhaustion of all available
appellate remedies and such judgment or order would have a Material Adverse
Effect.
(j) Dissolution. Any order, judgment or decree shall be
entered against the REIT, Borrower, or any Agreement Party decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or the REIT, Borrower, or
any Agreement Party shall otherwise dissolve or cease to exist.
(k) Loan Documents. Any Loan Document shall cease to be in
full force and effect for any reason or any guarantor under any guaranty of all
or any portion of the Obligations shall at any time disavow or deny liability
under such guaranty in writing.
(l) ERISA Plan Assets. Any assets of Borrower, the REIT or any
Agreement Party shall constitute "assets" (within the meaning of 29 C.F.R. ss.
2510.3-101 or any successor regulation thereto) of an "employee benefit plan"
within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of
Section 4975(e)(1) of the Internal Revenue Code or Borrower, the REIT or any
Agreement Party shall be an "employee benefit plan" as defined in Section 3(3)
of ERISA, a "multiemployer plan" as defined in Sections 4001(a)(3) or 3(37) of
ERISA, or a "plan" as defined in Section 4975(e)(1) of the Internal Revenue
Code.
(m) ERISA Prohibited Transaction. The Obligations, any of the
Loan Documents or the exercise of any of the Agent's or Lenders' rights in
connection therewith shall constitute a prohibited transaction under ERISA
and/or the Internal Revenue Code (which is not
61
exempt from the restrictions of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code and the taxes and penalties imposed by Section 4975 of the
Internal Revenue Code and Section 502(i) of ERISA).
(n) ERISA Liabilities. (i) Any Termination Event occurs which
will or is reasonably likely to subject Borrower, the REIT, any Subsidiary, any
Agreement Party, any ERISA Affiliate thereof or any of them to a liability which
Agent reasonably determines will have a Material Adverse Effect; (ii) the plan
administrator of any Benefit Plan applies for approval under Section 412(d) of
the Internal Revenue Code for a waiver of the minimum funding standards of
Section 412(a) of the Internal Revenue Code and Agent reasonably determines that
the business hardship upon which the Section 412(d) waiver request was based
will or would reasonably be anticipated to subject Borrower, the REIT, any
Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of them
to a liability which Agent reasonably determines will have a Material Adverse
Effect; (iii) any Benefit Plan shall incur an "accumulated funding deficiency"
(as defined in Section 412 of the Internal Revenue Code or Section 302 of ERISA)
for which a waiver shall not have been obtained in accordance with the
applicable provisions of the Internal Revenue Code or ERISA which "accumulated
funding deficiency" will or would reasonably be anticipated to subject Borrower,
the REIT, any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or
any of them to a liability which Agent reasonably determines will have a
Material Adverse Effect; (iv) Borrower, the REIT, any Subsidiary, any Agreement
Party, or any ERISA Affiliate thereof or any of them shall have engaged in a
transaction which is prohibited under Section 4975 of the Internal Revenue Code
or Section 406 of ERISA which will or would reasonably be anticipated to result
in the imposition of a liability on Borrower, the REIT, any Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them which Agent
reasonably determines will have a Material Adverse Effect; (v) Borrower, the
REIT, any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any
of them shall fail to pay when due an amount which it shall have become liable
to pay to the PBGC, a Plan or a trust established under Title IV of ERISA which
failure will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Subsidiary, any Agreement Party, or any
ERISA Affiliate thereof or any of them which Agent reasonably determines will
have a Material Adverse Effect; (vi) a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that a Benefit Plan
must be terminated or have a trustee appointed to administer such Plan which
condition will or would reasonably be anticipated to result in the imposition of
a liability on Borrower, the REIT, any Subsidiary, any Agreement Party, or any
ERISA Affiliate thereof or any of them which Agent reasonably determines will
have a Material Adverse Effect; (vii) a Lien shall be imposed on any assets of
Borrower, the REIT, any Subsidiary, any Agreement Party, or any ERISA Affiliate
thereof or any of them in favor of the PBGC or a Plan which Agent reasonably
determines will have a Material Adverse Effect; (viii) Borrower, the REIT, any
Subsidiary, any Agreement Party, or any ERISA Affiliate
62
thereof or any of them shall suffer a partial or complete withdrawal from a
Multiemployer Plan or shall be in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan resulting from a
complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA)
from such Multiemployer Plan which will or would reasonably be anticipated to
result in the imposition of a liability on Borrower, the REIT, any Subsidiary,
any Agreement Party, or any ERISA Affiliate thereof or any of them which Agent
reasonably determines will have a Material Adverse Effect; or (ix) a proceeding
shall be instituted by a fiduciary of any Multiemployer Plan against Borrower,
the REIT, any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or
any of them to enforce Section 515 of ERISA which will or would reasonably be
anticipated to result in the imposition of a liability on Borrower, the REIT,
any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of
them which Agent reasonably determines will have a Material Adverse Effect.
(o) Solvency. Borrower, any Agreement Party or the REIT shall
cease to be Solvent.
(p) Board of Directors. During any 12-month period,
individuals who were directors of the REIT on the first day of such period shall
not constitute a majority of the board of directors of the REIT.
(q) Revolving Credit Agreement. An "Event of Default" shall
have occurred under the Revolving Credit Agreement.
An Event of Default shall be deemed "continuing" until cured
or waived in writing in accordance with Section 11.05.
9.02 Rights and Remedies.
(a) Acceleration. Upon the occurrence of any Event of Default
with respect to Borrower described in the foregoing Section 9.01(g) or 9.01(h),
the unpaid principal amount of and any and all accrued interest on the Loan and
all of the other Obligations shall automatically become immediately due and
payable, with all additional interest from time to time accrued thereon and
without presentment, demand or protest or other requirements of any kind
(including without limitation diligence, presentment, notice of intent to demand
or accelerate or notice of acceleration), all of which are hereby expressly
waived by Borrower, and the obligations of Lenders to make, continue or convert
any Loan hereunder shall thereupon terminate; and upon the occurrence and during
the continuance of any other Event of Default, Agent shall, at the request of,
or may, with the consent of, Requisite Lenders, by written notice to Borrower,
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loan and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation diligence, presentment,
notice of intent to demand or accelerate and of acceleration), all of which are
hereby expressly waived by Borrower. Upon the occurrence of and during the
continuance of an Event of Default, no Agreement Party shall be permitted to
make any distributions or dividends without the prior written consent of Agent.
Upon the occurrence of an Event of Default or an acceleration of the
Obligations, Agent and Lenders may exercise all or any portion of the rights and
remedies set forth in the Loan Documents.
(b) Access to Information. Notwithstanding anything to the
contrary contained in the Loan Documents, upon the occurrence of and during the
continuance of an Event of Default,
63
Agent shall be entitled to request and receive, by or through Borrower or
appropriate legal process, any and all information concerning the REIT,
Borrower, any Subsidiary of Borrower, any Investment Affiliate, any Agreement
Party, or any property of any of them, which is reasonably available to or
obtainable by Borrower.
(c) Waiver of Demand. Demand, presentment, protest and notice
of nonpayment are hereby waived by Borrower.
(d) Waivers, Amendments and Remedies. No delay or omission of
Agent or Lenders to exercise any right under any Loan Document shall impair such
right or be construed to be a waiver of any Event of Default or an acquiescence
therein, and any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in a writing signed by Agent
after obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to Agent and Lenders until the Obligations have been paid in
full, the Commitments have expired or terminated and this Agreement has been
terminated.
9.03 Rescission. If at any time after acceleration of the
maturity of the Loan, Borrower shall pay all arrears of interest and all
payments on account of principal of the Loan which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Unmatured Events of Default (other than nonpayment
of principal of and accrued interest on the Loan due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to Section 11.05,
then by written notice to Borrower, Requisite Lenders may elect, in the sole
discretion of Requisite Lenders to rescind and annul the acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Unmatured Event of Default or impair any right or remedy in connection
therewith. The provisions of the preceding sentence are intended merely to bind
Lenders to a decision which may be made at the election of Requisite Lenders;
they are not intended to benefit Borrower and do not give Borrower the right to
require Lenders to rescind or annul any acceleration hereunder, even if the
conditions set forth herein are met.
ARTICLE X
AGENCY PROVISIONS
10.01 Appointment.
(a) Each Lender hereby designates and appoints Wells Fargo as
Agent of such Lender under this Agreement and the Loan Documents, and each
Lender hereby irrevocably authorizes Agent to take such action on its behalf
under the provisions of this Agreement and the Loan Documents and to exercise
such powers as are set forth herein or therein, together with
64
such other powers as are reasonably incidental thereto. Agent agrees to act as
such on the express conditions contained in this Article X.
(b) The provisions of this Article X are solely for the
benefit of Agent and Lenders, and Borrower shall not have any rights to rely on
or enforce any of the provisions hereof. In performing its functions and duties
under this Agreement, Agent shall act solely as Agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower.
10.02 Nature of Duties. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be administrative in nature. Subject
to the provisions of Sections 10.05 and 10.07, Agent shall administer the Loan
in the same manner as it administers its own loans. Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Loan Documents, expressed or implied, is
intended or shall be construed to impose upon Agent any obligation in respect of
this Agreement or any of the Loan Documents except as expressly set forth herein
or therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the REIT, Borrower, the Subsidiaries, the
Investment Affiliates, and each Agreement Party in connection with the making
and the continuance of the Loan hereunder and shall make its own assessment of
the creditworthiness of the REIT, Borrower, the Subsidiaries, the Investment
Affiliates, and each Agreement Party, and, except as specifically provided
herein, Agent shall not have any duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter.
10.03 Loan Continuation/Conversion.
(a) Promptly after receipt of a Notice of
Continuation/Conversion, but in no event later than two (2) Business Days prior
to the proposed Continuation/Conversion Date for the continuation of a LIBOR
Loan or the conversion of a Base Rate Loan into a LIBOR Loan, Agent shall
notify, by telecopy, each Lender of the proposed continuation or conversion and
the Continuation/Conversion Date set forth therein. Each Lender shall make
available to Agent (or the funding bank or entity designated by Agent), the
amount of such Lender's Pro Rata Share of the Loan in immediately available
funds not later than the time designated in Section 10.03(b). Unless Agent shall
have been notified by any Lender prior to such time for funding in respect of
the Loan that such Lender does not intend to make available to Agent such
Lender's Pro Rata Share of the Loan, Agent may assume that such Lender has made
such amount available to Agent and Agent, in its sole discretion, may, but shall
not be obligated to, make available to Borrower a corresponding amount. If such
corresponding amount is not in fact made available to Agent by such Lender on or
prior to the Closing Date, such Lender agrees to pay to Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to Borrower until the date such
amount is paid or repaid to Agent, at the Federal Funds Rate. If such Lender
shall pay to Agent such corresponding amount, such amount so paid shall
constitute such Lender's Pro Rata Share of the
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Loan. If such Lender shall not pay to Agent such corresponding amount after
reasonable attempts are made by Agent to collect such amounts from such Lender,
Borrower agrees to repay to Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to Borrower until the date such amount is repaid to Agent, at the
interest rate applicable thereto.
(b) Each Lender shall make the amount of its Pro Rata Share of
the Loan available to Agent in Dollars and in immediately available funds, to
such bank and account, in El Segundo, California as Agent may designate, not
later than 9:00 A.M. (California time) on the Closing Date. Nothing in this
Section 10.03(b) shall be deemed to relieve any Lender of its obligation
hereunder to deliver its Pro Rata Share of the Loan on the Closing Date, nor
shall any Lender be responsible for the failure of any other Lender to perform
its obligations to deliver its Pro Rata Share of the Loan hereunder, and the
Commitment of any Lender shall not be increased or decreased as a result of the
failure by any other Lender to perform its obligation to deliver its Pro Rata
Share of the Loan as required by this Section 10.03.
10.04 Distribution and Apportionment of Payments. Payments
actually received by Agent for the account of Lenders shall be paid to them
promptly after receipt thereof by Agent, but in any event prior to 3:00 P.M.
(California time) on the day of receipt (if received by 11:00 A.M. (California
time) on such day), or within one (1) Business Day thereafter (if received after
11:00 A.M. (California time) on the day of receipt), provided that Agent shall
pay to such Lenders interest thereon at the Federal Funds Rate from the Business
Day on which such funds are required to be paid to Lenders by Agent until such
funds are actually paid in immediately available funds to such Lenders. All
payments of principal and interest in respect of the outstanding Loan, all
payments of the fees described in this Agreement (other than agency and
arrangement fees described in Section 2.04(b)), and all payments in respect of
any other Obligations shall be allocated among such of Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Agent shall promptly, but in any event within two (2) Business
Days (with interest thereon, if required pursuant to this Section 11.04(a)),
distribute to each Lender at its primary address set forth on the appropriate
counterpart signature page hereof or on the Assignment and Assumption, or at
such other address as a Lender may request in writing, such funds as it may be
entitled to receive, provided that Agent shall in any event not be bound to
inquire into or determine the validity, scope or priority of any interest or
entitlement of any Lender and may suspend all payments and seek appropriate
relief (including without limitation instructions from Requisite Lenders, or all
Lenders, as applicable, or an action in the nature of interpleader) in the event
of any doubt or dispute as to any apportionment or distribution contemplated
hereby. The order of priority herein is set forth solely to determine the rights
and priorities of Lenders as among themselves and may at any time or from time
to time be changed by Lenders as they may elect, in writing in accordance with
Section 11.05, without necessity of notice to or consent of or approval by
Borrower or any other Person.
10.05 Rights, Exculpation, Etc. Neither Agent, any Affiliate
of Agent, nor any of their respective officers, directors, employees, agents,
attorneys or consultants, shall be liable to any Lender for any action taken or
omitted by them hereunder or under any of the Loan
66
Documents, or in connection herewith or therewith, except that Agent shall be
liable for its gross negligence or willful misconduct in the performance of its
express obligations hereunder. In the absence of gross negligence or willful
misconduct, Agent shall not be liable for any apportionment or distribution of
payments made by it in good faith pursuant to Section 10.04. Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement, or any of the
other Loan Documents, or any of the transactions contemplated hereby and
thereby; or for the financial condition of the REIT, Borrower, any Subsidiary,
any Investment Affiliate, or any Agreement Party. Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any of the Loan Documents
or the financial condition of the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party, or the existence or possible existence of any
Unmatured Event of Default or Event of Default. Agent may at any time request
instructions from Lenders with respect to any actions or approvals which, by the
terms of this Agreement or of any of the Loan Documents, Agent is permitted or
required to take or to grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from Requisite Lenders or Supermajority
Lenders, as the case may be. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of Requisite Lenders, Supermajority Lenders
or, where applicable, all Lenders. Agent shall promptly notify each Lender at
any time that the Requisite Lenders or Supermajority Lenders, as the case may
be, have instructed Agent to act or refrain from acting pursuant hereto.
10.06 Reliance. Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents, telecopies
or any telephone message believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person, and with respect to
all matters pertaining to this Agreement or any of the Loan Documents and its
duties hereunder or thereunder, upon advice of legal counsel (including counsel
for Borrower), independent public accountant and other experts selected by it.
10.07 Indemnification. To the extent that Agent is not
reimbursed and indemnified by Borrower, Lenders will reimburse, within ten (10)
days after notice from Agent, and indemnify Agent for and against any and all
Liabilities and Costs which may be imposed on, incurred by, or asserted against
Agent (in its capacity as Agent) in any way relating to or arising out of this
Agreement or any of the other Loan Documents or any action taken or omitted by
Agent (in its capacity as Agent) under this Agreement or any of the other Loan
Documents, in proportion to each Lender's Pro Rata Share, provided that no
Lender shall be liable for any portion of such Liabilities and Costs resulting
from Agent's gross negligence or willful misconduct, bad faith or fraud. The
obligations of Lenders under this Section 10.07 shall survive the payment in
full of all Obligations and the termination of this Agreement. In the event that
after payment and distribution of any amount by Agent to Lenders, any Lender or
third party,
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including Borrower, any creditor of Borrower or a trustee in bankruptcy,
recovers from Agent any amount found to have been wrongfully paid to Agent or
disbursed by Agent to Lenders, then Lenders, in proportion to their respective
Pro Rata Shares, shall reimburse Agent for all such amounts. Notwithstanding the
foregoing, Agent shall not be obligated to advance Liabilities and Costs and may
require the deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or made
payable.
10.08 Agent Individually. With respect to its Pro Rata Share
of the Commitments hereunder and its Pro Rata share of the Loan, Agent shall
have and may exercise the same rights and powers hereunder and is subject to the
same obligations and liabilities as and to the extent set forth herein for any
other Lender. The terms "Lenders", "Requisite Lenders", "Supermajority Lenders",
or any similar terms may include Agent in its individual capacity as a Lender,
one of the Requisite Lenders or one of the Supermajority Lenders, but Requisite
Lenders and Supermajority Lenders shall not include Agent solely in its capacity
as Agent. Agent and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with Borrower
or any of its Subsidiaries or Affiliates as if it were not acting as Agent
pursuant hereto.
10.09 Successor Agent; Resignation of Agent; Removal of
Agent.
(a) Agent may resign from the performance of all its functions
and duties hereunder at any time by giving at least thirty (30) Business Days
prior written notice to Lenders and Borrower. For good cause, by a determination
of all the Lenders (excluding for such determination Agent in its capacity as a
Lender), Agent may be removed at any time by giving at least thirty (30)
Business Days prior written notice to Agent and Borrower. Such resignation or
removal shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clauses (b) and (c) below or as otherwise provided
below.
(b) Upon any such notice of resignation by or removal of
Agent, Requisite Lenders shall appoint a successor Agent with the consent of
Borrower, which shall not be unreasonably withheld or delayed (and which
approval from Borrower shall not be required upon the occurrence and during the
continuance of an Event of Default). Any successor Agent must be a bank (i) the
senior debt obligations of which (or such Bank's parent's senior debt
obligations) are rated not less than Baa-1 by Moody's or a comparable rating by
a rating agency acceptable to Requisite Lenders, (ii) which has total assets in
excess of Ten Billion Dollars ($10,000,000,000) and (iii) which is a Lender as
of the date of such succession holding a Commitment without participants equal
to at least ten percent (10%) of the Facility. Agent hereby agrees to remit to
any successor Agent, a pro rata portion of any annual agent's fee received by
Agent, in advance, for the one-year period covered by such agent's fee based
upon the portion of such year then remaining.
(c) If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the retiring or removed Agent, with
the consent of Borrower, which may not be unreasonably withheld or delayed (and
which approval from Borrower shall not be required upon the occurrence and
during the continuance of an Event of Default), shall then
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appoint a successor Agent who shall meet the requirements described in
subsection (b) above and who shall serve as Agent until such time, if any, as
Requisite Lenders, with the consent of Borrower, which may not be unreasonably
withheld or delayed (and which approval from Borrower shall not be required upon
the occurrence and during the continuance of an Event of Default), appoint a
successor Agent as provided above.
10.10 Consents and Approvals.
(a) Each Lender authorizes and directs Agent to enter into the
Loan Documents other than this Agreement for the benefit of Lenders. Each Lender
agrees that any action taken by Agent at the direction or with the consent of
Requisite Lenders or the Supermajority Lenders and any action taken by Agent not
requiring consent by Requisite Lenders, Supermajority Lenders, or all Lenders in
accordance with the provisions of this Agreement or any Loan Document, and the
exercise by Agent at the direction or with the consent of Requisite Lenders or
the Supermajority Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all Lenders, except for actions specifically requiring the
approval of all Lenders. All communications from Agent to Lenders requesting
Lenders' determination, consent, approval or disapproval (i) shall be given in
the form of a written notice to each Lender, (ii) shall be accompanied by a
description of the matter or item as to which such determination, approval,
consent or disapproval is requested, or shall advise each Lender where such
matter or item may be inspected, or shall otherwise describe the matter or issue
to be resolved, (iii) shall include, if reasonably requested by a Lender and to
the extent not previously provided to such Lender, written materials and a
summary of all oral information provided to Agent by Borrower in respect of the
matter or issue to be resolved, and (iv) shall include Agent's recommended
course of action or determination in respect thereof. Each Lender shall reply
promptly, but in any event within fifteen (15) Business Days after receipt of
the request therefor from Agent (the "Lender Reply Period"). Unless a Lender
shall give written notice to Agent that it objects to the recommendation or
determination of Agent (together with a written explanation of the reasons
behind such objection) within the Lender Reply Period, such Lender shall be
deemed to have approved of or consented to such recommendation or determination.
With respect to decisions requiring the approval of Requisite Lenders,
Supermajority Lenders or all Lenders, Agent shall submit its recommendation or
determination for approval of or consent to such recommendation or determination
to all Lenders and upon receiving the required approval or consent shall follow
the course of action or determination recommended to Lenders by Agent or such
other course of action recommended by Requisite Lenders or Supermajority
Lenders, as the case may be, and each non-responding Lender shall be deemed to
have concurred with such recommended course of action. The following amendments,
modifications or waivers shall require the consent of the Requisite Lenders:
(i) Waiver of Sections 7.01(h) or 7.02(e);
(ii) Acceleration following an Event of Default
pursuant to Section 9.02(a) (except for any Event of Default pursuant
to Sections 9.01(g) or 9.01(h)) or rescission of such acceleration
pursuant to Section 9.03;
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(iii) Approval of the exercise of remedies requiring
the consent of the Requisite Lenders under Section 9.02(a);
(iv) Appointment of a successor Agent in accordance
with Sections 10.09(b) and (c); or
(v) Disapproval of any Property as a Qualifying
Unencumbered Property.
(b) Except for amendments, modifications and waivers requiring
the consent of all Lenders pursuant to Section 11.05(b) hereof, the consent of
the Supermajority Lenders shall be required to amend or modify Sections 8.01,
8.02, 8.03, 8.04, 8.05, 8.06, 8.07 or 9.01(a) or to waive any requirement
thereof or to amend or modify this Section 10.10(b).
(c) In addition to the required consents or approvals referred
to in Section 11.05, Agent may at any time request instructions from Requisite
Lenders with respect to any actions or approvals which, by the terms of this
Agreement or of any of the Loan Documents, Agent is permitted or required to
take or to grant without instructions from any Lenders, and if such instructions
are promptly requested, Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from taking any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement, any of
the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, Supermajority Lenders or all Lenders. Agent shall
promptly notify each Lender at any time that the Requisite Lenders or
Supermajority Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
10.11 Assignments and Participations.
(a) Subject to the provisions of Section 10.11(j), after first
obtaining the approval of Agent and Borrower, which approval will not be
unreasonably withheld (and which approval from Borrower shall not be required
upon the occurrence and during the continuance of an Event of Default), each
Lender may assign to one or more banks, finance companies, insurance or other
institutions all or a portion of its rights and obligations under this Agreement
in accordance with the provisions of this Section (including without limitation
all or a portion of its Commitment and the portion of the Loan owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of the assigning Lender's rights and obligations under
this Agreement and the assignment shall cover the same percentage of such
Lender's Commitment and the portion of the Loan owing to it, (ii) unless Agent
and Borrower otherwise consent (which consent of Borrower shall not be required
upon the occurrence and during the continuance of an Event of Default), the
aggregate amount of the Commitment of the assigning Lender being assigned to a
Person that is not already a Lender hereunder (provided such Lender was also a
Lender on the Closing Date) pursuant to each such assignment shall in no event
be less than Five Million Dollars ($5,000,000) and shall be an integral multiple
of One Million
70
Dollars ($1,000,000), (iii) the parties to each such assignment shall execute
and deliver to Agent, for its approval and acceptance, an Assignment and
Assumption and (iv) Agent shall receive from the assignor or assignors for its
sole account a processing fee of Three Thousand Dollars ($3,000). Upon such
execution, delivery, approval and acceptance, and upon the effective date
specified in the applicable Assignment and Assumption, (A) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been validly and effectively assigned to it pursuant
to such Assignment and Assumption, have the rights and obligations of a Lender
hereunder and (B) the Lender-assignor thereunder shall, to the extent that
rights and obligations hereunder have been validly and effectively assigned by
it pursuant to such Assignment and Assumption, relinquish its rights and be
released from its obligations under this Agreement.
(b) By executing and delivering an Assignment and Assumption,
the Lender-assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT, Borrower,
any Subsidiary, any Investment Affiliate, or any Agreement Party or the
performance or observance by the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party of any of their respective obligations under
any Loan Document or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Article V or
delivered pursuant to Article V to the date of such assignment and such other
Loan Documents and other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Assumption; (iv) such assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes Agent to take such action as Agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) Agent shall maintain at its address referred to on the
counterpart signature pages hereof a copy of each Assignment and Assumption
delivered to and accepted by it and shall record the names and addresses of each
Lender and the Commitment of, and principal amount of the Loan owing to, such
Lender from time to time. Borrower, Agent and Lenders may treat each Person
whose name is so recorded as a Lender hereunder for all purposes of this
Agreement.
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(d) Upon its receipt of an Assignment and Assumption executed
by an assigning Lender and an assignee, Agent shall, if such Assignment and
Assumption has been properly completed and is in substantially the form of
Exhibit A, (i) accept such Assignment and Assumption, (ii) record the
information contained therein and (iii) give prompt notice thereof to Borrower.
Upon request, Borrower will execute and deliver to Agent an appropriate
replacement promissory note or replacement promissory notes in favor of each
assignee (and assignor, if such assignor is retaining a portion of its
Commitment and the Loan) reflecting such assignee's (and assignor's) Pro Rata
Share(s) of the Facility. Upon execution and delivery of such replacement
promissory notes, the original promissory note or notes evidencing all or a
portion of the Commitment and the Loan being assigned shall be canceled and
returned to Borrower.
(e) Each Lender may sell participations to one or more banks,
finance companies, insurance or other entities in or to all or a portion of its
rights and obligations under this Agreement (including without limitation all or
a portion of its Commitment and the portion of the Loan owing to it); provided,
however, that (i) such Lender's obligations under this Agreement (including
without limitation its Commitment to Borrower hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) Borrower, Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and with regard to any
and all payments to be made under this Agreement and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
that such Participant may have the contractual right in the applicable
participation agreement to prevent (A) increases in the Facility, (B) extensions
of the Maturity Date (except pursuant to Section 2.09 hereof), (C) decreases in
the interest rates described in this Agreement, and (D) a release of the REIT
Guaranty.
(f) Borrower will use reasonable efforts to cooperate with
Agent and Lenders in connection with the assignment of interests under this
Agreement or the sale of participations herein.
(g) Anything in this Agreement to the contrary
notwithstanding, and without the need to comply with any of the formal or
procedural requirements of this Agreement, including Section 10.11, any Lender
may at any time and from time to time pledge and assign all or any portion of
its rights under all or any of the Loan Documents to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such Lender from its
obligations thereunder. To facilitate any such pledge or assignment, Agent
shall, at the request of such Lender, enter into a letter agreement with the
Federal Reserve Bank in, or substantially in, the form of the exhibit to
Appendix C to the Federal Reserve Bank of New York Operating Circular No 12.
(h) Anything in this Agreement to the contrary
notwithstanding, any Lender may assign all or any portion of its rights and
obligations under this Agreement to a Lender Affiliate of such Lender without
first obtaining the approval of Agent and Borrower, provided that (i) such
Lender gives Agent and Borrower at least fifteen (15) days prior written notice
of any such assignment, (ii) the parties to each such assignment execute and
deliver to Agent an Assignment
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and Assumption, and (iii) Agent receives from assignor for its sole account a
processing fee of Three Thousand Dollars ($3,000).
(i) No Lender shall be permitted to assign, or sell a
participation interest in, all or any portion of its rights and obligations
under this Agreement to Borrower or any Affiliate of Borrower.
(j) Anything in this Agreement to the contrary
notwithstanding, so long as no Event of Default shall have occurred and be
continuing, no Lender shall be permitted to enter into an assignment of its
rights and obligations hereunder which would result in such Lender holding a
Commitment of less than Ten Million Dollars ($10,000,000). In the event Agent
ceases to hold a Commitment of less than ten percent (10%) of the Facility,
Agent shall resign from the performance of all of its functions and duties
hereunder; provided, however, that no such resignation shall be required during
the continuance of an Event of Default.
10.12 Ratable Sharing. Subject to Sections 10.03 and 10.04,
Lenders agree among themselves that (i) with respect to all amounts received by
them which are applicable to the payment of the Obligations, equitable
adjustment will be made so that, in effect, all such amounts will be shared
among them ratably in accordance with their Pro Rata Shares, whether received by
voluntary payment, by the exercise of the right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations, (ii) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim, set-off, banker's lien or otherwise, receive
payment of a proportion of the aggregate amount of the Obligations held by it
which is greater than its Pro Rata Share of the payments on account of the
Obligations, the one receiving such excess payment shall purchase, without
recourse or warranty, an undivided interest and participation (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in such
Obligations owed to the others so that all such recoveries with respect to such
Obligations shall be applied ratably in accordance with their Pro Rata Shares;
provided, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to that party
to the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 10.12 may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
subject to Section 11.04, the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.
10.13 Delivery of Documents. Agent shall as soon as reasonably
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary set forth on the Closing Checklist
attached hereto as Exhibit B and (ii) all documents of which Agent receives
copies from Borrower for distribution to Lenders pursuant to Sections 5.01 and
11.07. In addition, within ten (10) Business Days after receipt of a request in
writing from a Lender for written
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information or documents provided by or prepared by Borrower, the REIT or any
Agreement Party, Agent shall deliver such written information or documents to
such requesting Lender if Agent has possession of such written information or
documents in its capacity as Agent or as a Lender.
10.14 Notice of Events of Default. Except as expressly
provided in this Section 10.14, Agent shall not be deemed to have knowledge or
notice of the occurrence of any Unmatured Event of Default or Event of Default
(other than nonpayment of principal of or interest on the Loan) unless Agent has
received notice in writing from a Lender or Borrower referring to this Agreement
or the other Loan Documents, describing such event or condition and expressly
stating that such notice is a notice of an Unmatured Event of Default or Event
of Default. Should Agent receive such notice of the occurrence of an Unmatured
Event of Default or Event of Default, or should Agent send Borrower a notice of
Unmatured Event of Default or Event of Default, Agent shall promptly give notice
thereof to each Lender.
ARTICLE XI
MISCELLANEOUS
11.01 Expenses.
(a) Generally. Borrower agrees, within thirty (30) days after
receipt of a written notice from the Agent, to pay or reimburse Agent for all of
Agent's reasonable costs and expenses incurred by Agent at any time (whether
prior to, on or after the date of this Agreement) in connection with: (A) the
negotiation, preparation and execution of this Agreement and the other Loan
Documents and any amendments or waivers with respect hereto requested by
Borrower, including, without limitation, the reasonable fees, expenses and
disbursements of Agent's outside counsel incurred in connection therewith; (B)
the making of the Loan and (C) the collection or enforcement by Agent of any of
the Obligations, including, without limitation, reasonable attorneys' fees and
costs incurred in connection therewith.
(b) After Event of Default. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable costs and expenses, including
without limitation reasonable attorneys' fees and disbursements incurred by
Agent or Lenders after the occurrence of an Event of Default (i) in enforcing
any Obligation or exercising or enforcing any other right or remedy available by
reason of such Event of Default; (ii) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in
commencing, defending or intervening in any litigation or in filing a petition,
complaint, answer, motion or other pleadings in any legal proceeding relating to
Borrower, the REIT or any Agreement Party and related to or arising out of the
transactions contemplated hereby; (iv) in taking any other action in or with
respect to any suit or proceeding (whether in bankruptcy or otherwise); or (v)
attempting to enforce or enforcing any rights under the Loan Documents;
provided, however, that the attorneys' fees and disbursements for which Borrower
is obligated under this subsection (b) shall be limited to the reasonable
non-duplicative fees and disbursements of counsel for Agent and
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counsel for all Lenders as a group. For purposes of this Section 11.01(b), (i)
counsel for Agent shall mean a single outside law firm representing Agent plus
any additional law firms providing special local law representation in
connection with the enforcement of the Loan Documents, and (ii) counsel for all
Lenders as a group shall mean a single outside law firm representing such
Lenders as a group.
11.02 Indemnity.
(a) Generally. Borrower shall indemnify and defend Agent and
each Lender and their respective affiliates, participants, officers, directors,
employees and agents (each an "Indemnitee") against, and shall hold each such
Indemnitee harmless from, any and all losses, damages (whether general, punitive
or otherwise), liabilities, claims, causes of action (whether legal, equitable
or administrative), judgments, court costs and legal or other expenses
(including reasonable attorneys' fees) which such Indemnitee may suffer or
incur: (i) in connection with claims made by third parties against such
Indemnitee for losses or damages suffered by such third party as a result of (A)
such Indemnitee's performance of this Agreement or any of the other Loan
Documents, including without limitation such Indemnitee's exercise or failure to
exercise any rights, remedies or powers in connection with this Agreement or any
of the other Loan Documents or (B) the failure by Borrower, the REIT or any
Agreement Party to perform any of their respective obligations under this
Agreement or any of the other Loan Documents as and when required hereby or
thereby, including without limitation any failure of any representation or
warranty of Borrower, the REIT or any Agreement Party to be true and correct;
(ii) in connection with any claim or cause of action of any kind by any Person
to the effect that such Indemnitee is in any way responsible or liable for any
act or omission by Borrower, the REIT or any Agreement Party, whether on account
of any theory of derivative liability or otherwise; (iii) in connection with the
past, present or future environmental condition of any Property owned by
Borrower, the REIT, Subsidiary or any Agreement Party, the presence of
asbestos-containing materials at any such Property, the presence of Contaminants
in groundwater at any such Property, or the Release or threatened Release of any
Contaminant into the environment from any such Property; or (iv) in connection
with any claim or cause of action of any kind by any Person which would have the
effect of denying such Indemnitee the full benefit or protection of any
provision of this Agreement or any of the other Loan Documents.
(b) ERISA. Without limitation of the provisions of subsection
(a) above, Borrower shall indemnify and hold each Indemnitee free and harmless
from and against all loss, costs (including reasonable attorneys' fees and
expenses), expenses, taxes, and damages (including consequential damages) such
Indemnitee may suffer or incur by reason of the investigation, defense and
settlement of claims and in obtaining any prohibited transaction exemption under
ERISA or the Internal Revenue Code necessary in such Indemnitee's reasonable
judgment by reason of the inaccuracy of the representations and warranties set
forth in the first paragraph of Section 4.01(s) or a breach of the provisions
set forth in the last paragraph of Section 7.01(f).
(c) Exceptions; Limitations. Notwithstanding anything to the
contrary set forth in this Section 11.02, Borrower shall have no obligation to
any Indemnitee hereunder with
75
respect to (i) any intentional tort, fraud or act of gross negligence or bad
faith which any Indemnitee is personally determined by the judgment of a court
of competent jurisdiction (sustained on appeal, if any) to have committed, (ii)
any liability of such Indemnitee to any third party based upon contractual
obligations of such Indemnitee owing to such third party which are not expressly
set forth in the Loan Documents or (iii) violations of Environmental Laws
relating to a Property which are caused by the act or omission of such
Indemnitee after such Indemnitee takes possession of such Property and which
would not have occurred if such Indemnitee had exercised reasonable care under
the circumstances. In addition, the indemnification set forth in this Section
11.02 in favor of any officer, director, partner, employee or agent of Agent or
any Lender shall be solely in their respective capacities as such officer,
director, partner, employee or agent. Such indemnification in favor of any
affiliate of Agent or any Lender shall be solely in its capacity as the provider
of services to Agent or such Lender in connection with this Agreement, and such
indemnification in favor of any participant of Agent or any Lender shall be
solely in its capacity as a participant in the Commitments and the Loan.
(d) Payment; Survival. Borrower shall pay any amount owing
under this Section 11.02 within thirty (30) days after written demand therefor
by the applicable Indemnitee together with reasonable supporting documentation
therefor. The indemnity set forth in this Section 11.02 shall survive the
payment of all amounts payable pursuant to, and secured by, this Agreement and
the other Loan Documents. Payment by any Indemnitee shall not be a condition
precedent to the obligations of Borrower under this Section 11.02. To the extent
that any indemnification obligation set forth in this Section 11.02 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of the applicable
indemnified matter.
11.03 Change in Accounting Principles. Except as otherwise
provided herein, if any changes in accounting principles from those used in the
preparation of the most recent financial statements delivered to Agent pursuant
to the terms hereof are hereafter required or permitted by the rules,
regulations, pronouncements and opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and are adopted by the REIT,
Borrower, any Subsidiary, any Investment Affiliate, or any Agreement Party with
the agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, standards or terms found herein, the parties hereto agree to enter
into negotiations in order to amend such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
financial condition of the REIT, on a consolidated basis, shall be the same
after such changes as if such changes had not been made; provided, however, that
no change in GAAP that would affect the method of calculation of any of the
financial covenants, standards or terms shall be given effect in such
calculations until such provisions are amended, in a manner satisfactory to
Agent and all Lenders, to so reflect such change in accounting principles.
11.04 Setoff. In addition to any Liens granted to Agent and
any rights now or hereafter granted under applicable law and not by way of
limitation of any such Lien or rights,
76
upon the occurrence and during the continuance of any Event of Default, Agent
and each Lender are hereby authorized by Borrower at any time or from time to
time, with concurrent notice to Borrower, or to any other Person (any such
notice being hereby expressly waived) to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other indebtedness at any time held or
owing by Agent or such Lender solely to or for the credit or the account of
Borrower against and on account of the Obligations of Borrower to Agent or such
Lender including but not limited to the Loan and all claims of any nature or
description arising out of or connected with this Agreement or any of the other
Loan Documents, irrespective of whether or not (a) Agent or such Lender shall
have made any demand hereunder or (b) Agent shall have declared the principal of
and interest on the Loan and other amounts due hereunder to be due and payable
as permitted by Article X and although said obligations and liabilities, or any
of them, may be contingent or unmatured.
11.05 Amendments and Waivers. No amendment or modification of
any provision of this Agreement shall be effective without the written agreement
of Requisite Lenders (after notice to all Lenders) as provided in Section
10.10(a) and Borrower (provided that the agreement of Requisite Lenders shall
not be required for amendments or modifications that are purely of a clerical
nature or that correct a manifest error), and no termination or waiver of any
such provision of this Agreement (including without limitation any waiver of an
Event of Default which does not specifically require the consent of all
Lenders), or consent to any departure by Borrower therefrom, shall in any event
be effective without the written concurrence of Requisite Lenders (after notice
to all Lenders) as provided in Section 10.10(a), which Requisite Lenders shall
have the right to grant or withhold at their sole discretion, except that the
amendments, modifications or waivers specified in Section 10.10(b) shall require
the consent of the Supermajority Lenders and the following amendments,
modifications or waivers shall require the consent of all Lenders (other than
Section 11.05(i) which shall require the consent of all Lenders other than
Agent):
(a) Increasing the Facility;
(b) Changing the principal amount or final maturity of the
Loan;
(c) Reducing or increasing the interest rates applicable to
the Loan;
(d) Reducing the rates on which fees payable pursuant hereto
are determined;
(e) Forgiving or delaying any amount payable under Article II
(other than late fees);
(f) Changing the definition of "Requisite Lenders,"
"Supermajority Lenders," or "Pro Rata Shares";
(g) Changing any provision contained in Section 11.05;
77
(h) Releasing any obligor under any Loan Document, unless such
release is otherwise required by the terms of this Agreement or any other Loan
Document;
(i) Removal of Agent for good cause in accordance with Section
10.09(a); and
(j) Modifying or waiving any other provision herein which
specifically requires the consent of all Lenders.
Notwithstanding anything to the contrary contained in this Agreement, Borrower
shall have no right to consent to any amendment, modification, termination or
waiver of any provision of Article X hereof; provided, however, that no
amendment, modification, termination or waiver of Section 10.09(b), 10.09(c),
10.10(a), or 10.11 (except subsection (i) thereof) which has an adverse effect
on Borrower or Borrower's rights hereunder shall be effective without the
written concurrence of Borrower. Agent and Lenders further acknowledge and agree
that the remaining provisions of Article X are intended to and shall continue to
address only the rights and obligations of Agent and Lenders amongst each other
and do not and shall not impose obligations or restrictions upon Borrower or
result in any way in the loss of any rights, claims or defenses of Borrower. No
amendment, modification, termination or waiver of any provision of Article X
hereof or any other provision referring to any Agent shall be effective without
the written concurrence of the Agent. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section shall be binding on each assignee, transferee or recipient of
Agent's powers, functions or duties or any Lender's Commitment under this
Agreement or the Loan at the time outstanding.
11.06 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Unmatured Event of Default if
such action is taken or condition exists.
11.07 Notices and Delivery. Unless otherwise specifically
provided herein, any consent, notice or other communication herein required or
permitted to be given shall be in writing and may be personally served,
telecopied or sent by courier service or United States mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or if deposited in the United States mail (registered or
certified, with postage prepaid and properly addressed) upon receipt or refusal
to accept delivery. Notices to Agent shall not be effective until received by
Agent. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 11.07) shall
be as set forth below each party's name on the signature pages hereof, or, as to
each party, at such other address as may be designated by such party in a
written notice to all of the other parties. All deliveries to be made to Agent
for distribution to the Lenders shall be made to Agent at the addresses
specified for notice on the signature page hereto and, in addition, a sufficient
78
number of copies of each such delivery shall be delivered to Agent for delivery
to each Lender at the address specified for deliveries on the signature page
hereto or such other address as may be designated by Agent or Lenders in a
written notice.
11.08 Survival of Warranties, Indemnities and Agreements. All
agreements, representations, warranties and indemnities made or given herein or
pursuant hereto shall survive the execution and delivery of this Agreement and
the other Loan Documents and the making and repayment of the Loan hereunder and
such indemnities shall survive termination hereof.
11.09 Failure or Indulgence Not Waiver; Remedies Cumulative.
Except as otherwise expressly provided in this Agreement or any other Loan
Document, no failure or delay on the part of Agent or any Lender in the exercise
of any power, right or privilege under any of the Loan Documents shall impair
such power, right or privilege or be construed to be a waiver of any default or
acquiescence therein nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing under the Loan
Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.
11.10 Marshaling; Recourse to Security; Payments Set Aside.
Neither any Lender nor Agent shall be under any obligation to marshal any assets
in favor of Borrower or any other party or against or in payment of any or all
of the Obligations. Recourse to security shall not be required at any time. To
the extent that Borrower makes a payment or payments to Agent or the Lenders or
Agent or the Lenders exercise their rights of set off, and such payment or
payments or the proceeds of such enforcement or set off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or set off had not occurred.
11.11 Severability. In case any provision in or obligation
under this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
11.12 Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.13 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
79
11.14 Limitation of Liability. To the extent permitted by
applicable law, no claim may be made by Borrower, the REIT, any Lender or any
other Person against Agent or any Lender, or the affiliates, directors,
officers, employees, attorneys or agents of any of them, for any punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith; and
Borrower, the REIT and each Lender hereby waive, release and agree not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
11.15 Successors and Assigns. This Agreement and the other
Loan Documents shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of Agent and Lenders. The terms
and provisions of this Agreement shall inure to the benefit of any permitted
assignee or transferee of the Loan and the Commitments of Lenders under this
Agreement, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Agent and Lenders shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Borrower's rights or any interest therein hereunder, and
Borrower's duties and obligations hereunder, shall not be assigned (whether
directly, indirectly, by operation of law or otherwise) without the consent of
all Lenders.
11.16 Usury Limitation. Each Loan Document is expressly
limited so that in no contingency or event whatsoever, whether by reason of
error of fact or law, payment, prepayment or advancement of the proceeds of the
Loan, acceleration of maturity of the unpaid principal balance of the Loan, or
otherwise, shall the amount paid or agreed to be paid to Lenders for the use,
forbearance, or retention of money, including any fees or charges collected or
made in connection with the Loan which may be treated as interest under
applicable law, if any, exceed the maximum legal limit (if any such limit is
applicable) under United States federal laws or state laws (to the extent not
preempted by federal law, if any), now or hereafter governing the interest
payable under such Loan Documents. If, from any circumstances whatsoever,
fulfillment of any provision hereof or any of the other Loan Documents at the
time performance of such provision shall be due, shall involve transcending the
limit of validity (if any) prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances Lenders shall ever receive as interest an amount which would
exceed the maximum legal limit (if any such limit is applicable), such amount
which would be excessive interest shall be applied to the reduction of the
unpaid principal balance due under the Loan Documents and not to the payment of
interest or, if necessary, to Borrower. Notwithstanding any other provision of
this Agreement or any of the other Loan Documents, this provision shall control
every other provision of all Loan Documents.
11.17 Confidentiality. Agent and Lenders shall use reasonable
efforts to assure that any information about Borrower, the REIT, Subsidiaries
and Investment Affiliates (and their respective Properties) not generally
disclosed to the public which is furnished to Agent or Lenders pursuant to the
provisions of this Agreement or any of the other Loan Documents is
80
used only for the purposes of this Agreement and the other Loan Documents and
shall not be divulged to any other Person other than Agent, Lenders and their
respective affiliates, officers, directors, employees and agents who are
actively and directly participating in the evaluation, administration or
enforcement of the Obligations; provided, however, that nothing herein shall
affect the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for Agent or
Lenders or to their accountants, (iii) to bank examiners and auditors, (iv) to
any transferee or participant or prospective transferee or participant hereunder
who agrees to be bound by this provision, (v) in connection with the enforcement
of the rights of Agent and Lenders under this Agreement and the other Loan
Documents, or (vi) in connection with any litigation to which Agent or any
Lender is a party so long as Agent or such Lender provides Borrower with prior
written notice of the need for such disclosure and exercises reasonable efforts
to obtain a protective order with respect to such information from the court or
other tribunal before which such litigation is pending.
11.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER
OF JURY TRIAL; WAIVER OF PERMISSIVE COUNTERCLAIMS. ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST BORROWER OR THE REIT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE AND ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER OR THE
REIT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING SITUS WITHIN THE
BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE NORTHERN DISTRICT OF ILLINOIS,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER AND THE REIT ACCEPT,
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY
ANY FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER AND THE REIT HEREBY DESIGNATE AND APPOINT ELLEN KELLEHER,
ESQ., MANUFACTURED HOME COMMUNITIES, INC., TWO NORTH RIVERSIDE PLAZA, SUITE 800,
CHICAGO, ILLINOIS 60606, TO RECEIVE ON THEIR BEHALF SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
BY SUCH PERSON TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. SUCH
APPOINTMENT SHALL BE REVOCABLE ONLY WITH AGENT'S PRIOR WRITTEN APPROVAL.
BORROWER AND THE REIT IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS
RESPECTIVE NOTICE ADDRESS SPECIFIED ON THE SIGNATURE PAGES HEREOF, SUCH SERVICE
TO BECOME EFFECTIVE UPON RECEIPT. BORROWER, THE REIT, AGENT AND LENDERS
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (B) ANY OBJECTION (INCLUDING
WITHOUT LIMITATION ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING
81
OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. BORROWER AND THE REIT AGREE THAT THEY WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIM IN ANY PROCEEDING BROUGHT BY LENDER WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
11.19 Counterparts; Effectiveness; Inconsistencies. This
Agreement and any amendments, waivers, consents or supplements may be executed
in counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective when Borrower, the
initial Lenders and Agent have duly executed and delivered counterpart execution
pages of this Agreement to each other (delivery by Borrower and the REIT to
Lenders and by any Lender to Borrower, the REIT and any other Lender being
deemed to have been made by delivery to Agent). This Agreement and each of the
other Loan Documents shall be construed to the extent reasonable to be
consistent one with the other, but to the extent that the terms and conditions
of this Agreement are actually and directly inconsistent with the terms and
conditions of any other Loan Document, this Agreement shall govern.
11.20 Construction. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement and that the normal
rule 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.
11.21 Entire Agreement. This Agreement, taken together with
all of the other Loan Documents and all certificates and other documents
delivered by Borrower to Agent in connection herewith, embodies the entire
agreement and supersede all prior agreements, written and oral, relating to the
subject matter hereof.
11.22 Agent's Action for Its Own Protection Only. The
authority herein conferred upon Agent, and any action taken by Agent, to inspect
any Property will be exercised and taken by Agent for its own protection only
and may not be relied upon by Borrower for any purposes whatsoever, and Agent
shall not be deemed to have assumed any responsibility to Borrower with respect
to any such action herein authorized or taken by Agent. Any review,
investigation or inspection conducted by Agent, any consultants retained by
Agent or any agent or representative of Agent in order to verify independently
Borrower's satisfaction of any conditions precedent to the Loan, Borrower's
performance of any of the covenants, agreements and obligations of Borrower
under this Agreement, or the validity of any representations and warranties made
by Borrower hereunder (regardless of whether or not the party conducting such
review, investigation or inspection should have discovered that any of such
conditions precedent were not satisfied or that any such covenants, agreements
or obligations were not performed or that any such representations or warranties
were not true), shall not affect (or constitute a waiver by Agent or Lenders of)
(i) any of Borrower's representations and warranties under this Agreement or
Agent's or Lenders' reliance thereon or (ii) Agent's or Lenders' reliance upon
any certifications of Borrower required under this
82
Agreement or any other facts, information or reports furnished to Agent and
Lenders by Borrower hereunder.
11.23 Lenders' ERISA Covenant. Each Lender, by its signature
hereto or on the applicable Assignment and Assumption, hereby agrees (a) that on
the date any Loan is disbursed hereunder no portion of such Lender's Pro Rata
Share of such Loan will constitute "assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an "employee benefit plan" within the meaning of Section 3(3) of
ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Internal
Revenue Code, and (b) that following such date such Lender shall not allocate
such Lender's Pro Rata Share of any Loan to an account of such Lender if such
allocation (i) by itself would cause such Pro Rata Share of such Loan to then
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code and (ii) by itself would cause such Loan to constitute
a prohibited transaction under ERISA or the Internal Revenue Code (which is not
exempt from the restrictions of Section 406 of ERISA and Section 4975 of the
Internal Revenue Code and the taxes and penalties imposed by Section 4975 of the
Internal Revenue Code and Section 502(i) of ERISA) or any Agent or Lender being
deemed in violation of Section 404 of ERISA.
11.24. Sole Lead Arranger, Documentation Agents and
Syndication Agent. Each of the parties to this Agreement acknowledges and agrees
that the obligations of Sole Lead Arranger, each Documentation Agent and
Syndication Agent hereunder shall be limited to those obligations that are
expressly set forth herein, if any, and Sole Lead Arranger, either Documentation
Agent and Syndication Agent shall not be required to take any action or assume
any liability except as may be required in their respective capacities as a
Lender hereunder. Each of the parties to this Agreement agrees that, for
purposes of the indemnifications set forth herein, the term "Agent" shall be
deemed to include Sole Lead Arranger, each Documentation Agent and Syndication
Agent.
[SIGNATURE PAGES FOLLOW]
83
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
"Borrower"
MHC OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership
By: MANUFACTURED HOME
COMMUNITIES, INC., a Maryland
corporation, as General Partner
By: /s/ JOHN M. ZOELLER
----------------------------------------------
Name: John M. Zoeller
Title: Vice President/Chief Financial Officer
Address:
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Telecopy: 312/279-1710
"REIT"
MANUFACTURED HOME COMMUNITIES,
INC., a Maryland corporation
By: /s/ JOHN M. ZOELLER
----------------------------------------------
Name: John M. Zoeller
Title: Vice President/Chief Financial Officer
Address:
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Telecopy: 312/279-1710
S-1
"Lenders"
WELLS FARGO BANK, N.A., as Agent, as Sole
Lead Arranger and as a Lender
By: /s/ Steven R. Lowery
---------------------------------------------
Name: Steven R. Lowery
-------------------------------------------
Title: Vice President
------------------------------------------
Address:
225 West Wacker Drive, Suite 2550
Chicago, Illinois 60606
Attn.: Senior Loan Officer
Telecopy: 312/782-0969
with a copy to:
Wells Fargo & Co.
Real Estate Group
420 Montgomery Street, Floor 6
San Francisco, California 94163
Attn.: Chief Credit Officer
Telecopy: 415/391-2971
with a copy to (for Financial Statements
and Reporting Information Only):
Wells Fargo Bank
2030 Main Street
Suite 800
Irvine, California 92714
Attn: Jim Furuyama
Telecopy: 949/251-4343
Loan Commitment: $40,000,000
40%
S-2
BANK OF AMERICA, N.A., as Syndication Agent
and as a Lender
By: /s/ Megan McBride
----------------------------------------
Name: Megan McBride
--------------------------------------
Title: Principal
-------------------------------------
Address:
231 S. LaSalle Street, 15th Floor
Chicago, Illinois 60697
Attn.: Megan McBride
Telecopy: 312/974-4970
Loan Commitment: $20,000,000
20%
S-3
COMMERZBANK AKTIENGESELLSCHAFT,
New York Branch, as a Documentation Agent
and as a Lender
By: /s/ Ralph Marra
--------------------------------------
Name: Ralph Marra
------------------------------------
Title: Vice President
-----------------------------------
By: /s/ David Buettner
--------------------------------------
Name: David Buettner
------------------------------------
Title: Assistant Vice President
-----------------------------------
Address:
1251 Avenue of the Americas
New York, New York 10020
Attn.: David Buettner
Telecopy: 212-400-577
Loan Commitment: $20,000,000
20%
S-4
JP MORGAN CHASE BANK (successor by merger
to Morgan Guaranty Trust Company of New York),
as a Documentation Agent and as a Lender
By: /s/ Marc E. Costantino
-------------------------------------------
Name: Marc E. Costantino
-----------------------------------------
Title: Vice President
----------------------------------------
Address:
60 Wall Street, 22nd Floor
New York, New York 10260-0060
Attn.: Avin Dwivedy
Telecopy: 212/648-8111
Loan Commitment: $20,000,000
20%
S-5
Exhibit 10.42
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
(REVOLVING FACILITY)
AMONG
MHC OPERATING LIMITED PARTNERSHIP,
AN ILLINOIS LIMITED PARTNERSHIP,
AS BORROWER,
MANUFACTURED HOME COMMUNITIES, INC.,
A MARYLAND CORPORATION,
THE REIT
WELLS FARGO BANK, N.A.,
BANK OF AMERICA, N.A.,
COMMERZBANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH,
AND
LASALLE BANK NATIONAL ASSOCIATION
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 11.13, AS LENDERS,
WELLS FARGO BANK, N.A.
AS AGENT, SOLE LEAD ARRANGER,
SWINGLINE LENDER AND ISSUING LENDER,
BANK OF AMERICA, N.A.,
AS SYNDICATION AGENT,
AND
LASALLE BANK NATIONAL ASSOCIATION,
AS DOCUMENTATION AGENT
DATED AS OF FEBRUARY 9, 2002
TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS............................................................................................2
1.01 Certain Defined Terms......................................................................................2
1.02 Computation of Time Periods...............................................................................23
1.03 Terms.....................................................................................................23
1.04 Interrelationship With the Existing Credit Agreement......................................................23
ARTICLE II. LOANS................................................................................................23
2.01 Loan Advances and Repayment...............................................................................23
2.02 Authorization to Obtain Loans and Letters of Credit.......................................................26
2.03 Interest on the Loans.....................................................................................26
2.04 Fees.31
2.05 Payments..................................................................................................31
2.06 Increased Capital.........................................................................................32
2.07 Notice of Increased Costs.................................................................................33
2.08 Option to Replace Lenders.................................................................................33
2.09 Letters of Credit.........................................................................................34
2.10 Swingline Loans...........................................................................................38
ARTICLE III. EXTENSION OPTIONS...................................................................................40
3.01 First Extension Option....................................................................................40
3.02 Second Extension Option...................................................................................41
ARTICLE IV. CONDITIONS TO LOANS..................................................................................41
4.01 Intentionally Omitted.....................................................................................41
4.02 Conditions Precedent to All Loans and Issuance of Letters of Credit.......................................42
ARTICLE V. REPRESENTATIONS AND WARRANTIES........................................................................42
5.01 Representations and Warranties as to Borrower.............................................................42
5.02 Representations and Warranties as to the REIT.............................................................47
ARTICLE VI. REPORTING COVENANTS..................................................................................51
6.01 Financial Statements and Other Financial and Operating Information........................................51
6.02 Press Releases; SEC Filings and Financial Statements......................................................53
6.03 Environmental Notices.....................................................................................53
6.04 Qualifying Unencumbered Properties........................................................................53
ARTICLE VII. AFFIRMATIVE COVENANTS...............................................................................54
7.01 With respect to Borrower:.................................................................................54
7.02 With respect to the REIT:.................................................................................56
ARTICLE VIII. NEGATIVE COVENANTS.................................................................................57
8.01 With respect to Borrower:.................................................................................57
8.02 With respect to the REIT:.................................................................................62
ARTICLE IX. FINANCIAL COVENANTS..................................................................................63
9.01 Total Liabilities to Gross Asset Value....................................................................64
9.02 Secured Debt to Gross Asset Value.........................................................................64
9.03 EBITDA to Interest Expense Ratio..........................................................................64
9.04 EBITDA to Fixed Charges Ratio.............................................................................64
9.05 Unencumbered Net Operating Income to Unsecured Interest Expense...........................................64
9.06 Unencumbered Pool.........................................................................................64
9.07 Minimum Net Worth.........................................................................................64
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9.08 Permitted Holdings........................................................................................64
9.09 Calculation...............................................................................................65
ARTICLE X. EVENTS OF DEFAULT; RIGHTS AND REMEDIES................................................................65
10.01 Events of Default.........................................................................................65
10.02 Rights and Remedies.......................................................................................69
10.03 Rescission................................................................................................71
10.04 Suspension of Lending.....................................................................................71
ARTICLE XI. AGENCY PROVISIONS....................................................................................71
11.01 Appointment...............................................................................................71
11.02 Nature of Duties..........................................................................................71
11.03 Loan Disbursements........................................................................................72
11.04 Distribution and Apportionment of Payments................................................................72
11.05 Rights, Exculpation, Etc..................................................................................74
11.06 Reliance..................................................................................................74
11.07 Indemnification...........................................................................................75
11.08 Agent Individually........................................................................................75
11.09 Successor Agent; Resignation of Agent; Removal of Agent...................................................75
11.10 Consents and Approvals....................................................................................76
11.11 [Intentionally Omitted]...................................................................................77
11.12 [Intentionally Omitted]...................................................................................77
11.13 Assignments and Participations............................................................................77
11.14 Ratable Sharing...........................................................................................80
11.15 Delivery of Documents.....................................................................................81
11.16 Notice of Events of Default...............................................................................81
ARTICLE XII. MISCELLANEOUS.......................................................................................81
12.01 Expenses..................................................................................................81
12.02 Indemnity.................................................................................................82
12.03 Change in Accounting Principles...........................................................................83
12.04 Setoff....................................................................................................83
12.05 Amendments and Waivers....................................................................................84
12.06 Independence of Covenants.................................................................................85
12.07 Notices and Delivery......................................................................................85
12.08 Survival of Warranties, Indemnities and Agreements........................................................86
12.09 Failure or Indulgence Not Waiver; Remedies Cumulative.....................................................86
12.10 Marshalling; Recourse to Security; Payments Set Aside.....................................................86
12.11 Severability..............................................................................................86
12.12 Headings..................................................................................................86
12.13 Governing Law.............................................................................................86
12.14 Limitation of Liability...................................................................................86
12.15 Successors and Assigns....................................................................................87
12.16 Usury Limitation..........................................................................................87
12.17 Confidentiality...........................................................................................87
12.18 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial; Waiver Of Permissive Counterclaims..88
12.19 Counterparts; Effectiveness; Inconsistencies..............................................................90
12.20 Construction..............................................................................................90
12.21 Entire Agreement..........................................................................................90
12.22 Agent's Action for Its Own Protection Only................................................................90
12.23 Lenders' ERISA Covenant...................................................................................91
12.24 Sole Lead Arranger, Documentation Agent and Syndication Agent.............................................91
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EXHIBITS
- --------
A - Assignment and Assumption
B - REIT Guaranty
C - [Intentionally Deleted]
D - Revolving Loan Notes
E - Swingline Note
F - Qualifying Unencumbered Properties
G - Letter of Credit Note
H - Letter of Credit Application
I - Notice of Borrowing
J - Notice of Continuation/Conversion
SCHEDULES
5.01(c) - Ownership of Borrower
5.01(r) - Environmental Matters
5.01(w) - Subsidiaries and Investment Affiliates
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT is dated as
of February __, 2002 (as amended, supplemented or modified from time to time,
the "Agreement") and is among MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), Manufactured Home Communities, Inc., a
Maryland corporation (the "REIT"), each of the Lenders, as hereinafter defined,
Wells Fargo Bank, N.A ("Wells Fargo") in its capacity as Agent, as Sole Lead
Arranger, as Swingline Lender, as Issuing Lender and as a Lender, Bank of
America, N.A., as Syndication Agent and as a Lender, LaSalle Bank National
Association, as Documentation Agent and as a Lender, and Commerzbank
Aktiengesellschaft, New York Branch, as a Lender.
RECITALS
A. Borrower, the REIT and Wells Fargo Realty Advisors Funding
Incorporated ("WFRAF"), in its capacity as Agent and as the sole Lender, have
previously entered into that certain Credit Agreement dated as of August 16,
1994 (the "Original Credit Agreement").
B. The Original Credit Agreement was amended and restated in
its entirety by that certain First Amended and Restated Credit Agreement dated
as of September 26, 1994 (the "First Amended Credit Agreement") by and among
Borrower, the REIT, WFRAF, as Agent and as a Lender, and Bank of America
Illinois, as Co-Agent and as Lender.
C. The First Amended Credit Agreement was amended and restated
in its entirety by that certain Second Amended and Restated Credit Agreement
dated as of April 28, 1998 (the "Existing Credit Agreement") by and among
Borrower, the REIT, Wells Fargo (as successor in interest to WFRAF), as Agent,
Swingline Lender, Issuing Lender, and a Lender, Bank of America National Trust
and Savings Association, as Syndication Agent and as a Lender, Morgan Guaranty
Trust Company of New York, as Documentation Agent and as a Lender, and
Commerzbank Aktiengesellschaft, New York Branch, as a Lender.
D. The Existing Credit Agreement has been amended by that
certain First Amendment to Second Amended and Restated Credit Agreement dated as
of December 18, 1998 (the "First Amendment") and that certain Second Amendment
to Second Amended and Restated Credit Agreement dated as of August 9, 2000 (the
"Second Amendment").
E. The "Lenders" under the Existing Credit Agreement (as so
amended) are Wells Fargo, Bank of America National Trust and Savings Association
(as successor in interest to Bank of America Illinois), Commerzbank
Aktiengesellschaft, New York Branch and LaSalle Bank National Association (the
"Existing Lenders").
F. Borrower, the REIT, Wells Fargo, as Agent, Sole Lead
Arranger, Swingline Lender, Issuing Lender and as a Lender, Bank of America
National Trust and Savings Association, as Syndication Agent and as a Lender,
LaSalle Bank National Association, as Documentation Agent and as a Lender and
the other Lenders desire to further amend and restate the Existing Credit
Agreement (as so amended) in its entirety to make certain modifications as
hereinafter set forth.
NOW THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
ARTICLE I.
DEFINITIONS
Certain Defined Terms. The following terms used in this
Agreement shall have the following meanings (such meanings to be applicable,
except to the extent otherwise indicated in a definition of a particular term,
both to the singular and the plural forms of the terms defined):
"Accommodation Obligations" as applied to any Person, means
any obligation, contingent or otherwise, of that Person in respect of which that
Person is liable for any Indebtedness or other obligation or liability of
another Person, including without limitation and without duplication (i) any
such Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or to make payment other than for
value received and (ii) any obligation of such Person arising through such
Person's status as a general partner of a general or limited partnership with
respect to any Indebtedness, obligation or liability of such general or limited
partnership.
"Accountants" means any nationally recognized independent
accounting firm.
"Adjusted Asset Value" means, as of any date of determination,
(i) for any Property for which an acquisition or disposition by Borrower or any
Subsidiary has not occurred in the Fiscal Quarter most recently ended as of such
date, the product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to such Property in a manner reasonably
acceptable to Agent, and the denominator of which is eight hundred seventy-five
ten-thousandths (0.0875), and (ii) for any Property which has been acquired by
Borrower or any Subsidiary in the Fiscal Quarter most recently ended as of such
date, the Net Price of the Property paid by Borrower or such Subsidiary for such
Property.
"Affiliates" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, (b) the ownership of a general
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partnership interest in such Person or (c) the ownership of twenty-five percent
(25%) or more of the limited partnership interests (or other ownership interests
with similarly limited voting rights) in such Person; provided, however, that in
no event shall the Affiliates of Borrower or any Subsidiary or any Investment
Affiliate include Persons holding direct or indirect ownership interests in the
REIT or any other real estate investment trust which holds a general partnership
interest in Borrower if such Person does not otherwise constitute an "Affiliate"
hereunder; provided, further, that the REIT and Borrower shall at all times be
deemed Affiliates of each other.
"Agent" means Wells Fargo in its capacity as administrative
agent for the Lenders under this Agreement, and shall include any successor
Agent appointed pursuant hereto and shall be deemed to refer to Wells Fargo in
its individual capacity as a Lender where the context so requires.
"Agreement" has the meaning ascribed to such term in the
preamble hereto.
"Agreement Party" means any Person, other than the REIT and
Borrower, which concurrently with the execution of this Agreement or hereafter
executes and delivers a guaranty in connection with this Agreement, which as of
the date of determination, is in force and effect.
"Applicable Margin" means, for any day, the rate per annum set
forth below opposite the applicable Level Period then in effect:
Level Period Applicable Margin
------------ -----------------
Level I Period 1.0%
Level II Period 1.125%
The Applicable Margin shall be adjusted for all purposes quarterly as soon as
reasonably practicable, but not later than five (5) days, after the date of
receipt by Agent of the quarterly financial information in accordance with the
provisions of Section 6.01(a) hereof, together with a calculation by Borrower of
the ratio of Total Liabilities to the sum of Gross Asset Values for Borrower and
each of its Subsidiaries as of the end of the applicable Fiscal Quarter. No
adjustment in the Applicable Margin shall be made retroactively.
"Assignment and Assumption" means an Assignment and Assumption
in the form of Exhibit A hereto (with blanks appropriately filled in) delivered
to Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to Section 11.13.
"Balloon Payment" means, with respect to any loan constituting
Indebtedness, any required principal payment of such loan which is either (i)
payable at the maturity of such loan or (ii) in an amount which exceeds
twenty-five percent (25%) of the original principal amount of such loan;
provided, however, that the final payment of a fully amortizing loan shall not
constitute a Balloon Payment.
"Base Rate" means, on any day, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall at all times be
equal to the higher of (a) the base rate of interest per annum established from
time to time by Wells Fargo, and designated as its prime
3
rate and in effect on such day, and (b) the Federal Funds Rate as announced by
the Federal Reserve Bank of New York, in effect on such day plus one half
percent (0.5%) per annum. Each change in the Base Rate shall become effective
automatically as of the opening of business on the date of such change in the
Base Rate, without prior written notice to Borrower or Lenders. The Base Rate
may not be the lowest rate of interest charged by any bank, Agent or Lender on
similar loans.
"Base Rate Loans" means those Loans bearing interest at the
Base Rate.
"Base Rent" means the aggregate rent received, on a
consolidated basis, by Borrower or any Subsidiary from tenants which lease
manufactured home community sites owned by Borrower or any Subsidiary minus any
amounts specifically identified as and representing payments for trash removal,
cable television, water, electricity, other utilities, taxes and other rent
which reimburses expenses related to the tenant's occupancy.
"Benefit Plan" means any employee pension benefit plan as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which a
Person or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the immediately preceding five (5) years,
maintained, administered, contributed to or was required to contribute to, or
under which a Person or any ERISA Affiliate may have any liability.
"Borrower" has the meaning ascribed to such term in the
preamble hereto.
"Borrower Plan" shall mean any Plan (A) which Borrower, any of
its Subsidiaries or any of its ERISA Affiliates maintains, administers,
contributes to or is required to contribute to, or, within the five years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which Borrower, any of its Subsidiaries or any of its
ERISA Affiliates may incur any liability and (B) which covers any employee or
former employee of Borrower, any of its Subsidiaries or any of its ERISA
Affiliates (with respect to their relationship with such entities).
"Borrower's Share" means Borrower's and/or the REIT's
collective direct or indirect share of the assets, liabilities, income, expenses
or expenditures, as applicable, of an Investment Affiliate based upon Borrower's
and/or the REIT's percentage ownership (whether direct or indirect) of such
Investment Affiliate, as the case may be.
"Borrowing" means a borrowing under the Facility.
"Business Day" means (a) with respect to any Borrowing,
payment or rate determination of LIBOR Loans, a day, other than a Saturday or
Sunday, on which Agent is open for business in Chicago and San Francisco and on
which dealings in Dollars are carried on in the London inter bank market, and
(b) for all other purposes any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of California and Illinois, or
is a day on which banking institutions located in California and Illinois are
required or authorized by law or other governmental action to close.
"Capital Expenditures" means, as applied to any Person for any
period, the aggregate of all expenditures (whether paid in cash or accrued as
liabilities during that period and including that portion of Capital Leases
which is capitalized on the balance sheet of a
4
Person) by such Person during such period that, in conformity with GAAP, are
required to be included in or reflected by the property, plant or equipment or
similar fixed asset accounts reflected in the balance sheet of such Person,
excluding any expenditures reasonably determined by such Person as having been
incurred for expansion of the number of manufactured home sites at a
manufactured home community owned by such Person.
"Capital Leases," as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by an agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one (1) year after the date of acquisition
thereof; (b) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two nationally recognized rating services
reasonably acceptable to Agent; (c) domestic corporate bonds, other than
domestic corporate bonds issued by Borrower or any of its Affiliates, maturing
no more than 2 years after the date of acquisition thereof and, at the time of
acquisition, having a rating of at least A or the equivalent from two nationally
recognized rating services reasonably acceptable to Agent; (d) variable-rate
domestic corporate notes or medium term corporate notes, other than notes issued
by Borrower or any of its Affiliates, maturing or resetting no more than 1 year
after the date of acquisition thereof and having a rating of at least AA or the
equivalent from two nationally recognized rating services reasonably acceptable
to Agent; (e) commercial paper (foreign and domestic) or master notes, other
than commercial paper or master notes issued by Borrower or any of its
Affiliates, and, at the time of acquisition, having a long-term rating of at
least A or the equivalent from a nationally recognized rating service reasonably
acceptable to Agent and having a short-term rating of at least A-1 and P-1 from
S&P and Moody's, respectively (or, if at any time neither S&P nor Moody's shall
be rating such obligations, then the highest rating from such other nationally
recognized rating services reasonably acceptable to Agent); (f) domestic and
Eurodollar certificates of deposit or domestic time deposits or Eurotime
deposits or bankers' acceptances (foreign or domestic) that are issued by a bank
(I) which has, at the time of acquisition, a long-term rating of at least A or
the equivalent from a nationally recognized rating service reasonably acceptable
to Agent and (II) if a domestic bank, which is a member of the FDIC; and (g)
overnight securities repurchase agreements, or reverse repurchase agreements
secured by any of the foregoing types of securities or debt instruments,
provided that the collateral supporting such repurchase agreements shall have a
value not less than 101% of the principal amount of the repurchase agreement
plus accrued interest.
"Closing Date" means the date on which this Agreement shall
become effective in accordance with Section 12.19, which date shall be February
__, 2002 or such later date as to which Agent and Borrower agree in writing.
"Commission" means the Securities and Exchange Commission.
"Commitment" means, with respect to any Lender, such Lender's
Pro Rata Share of the Facility which amount shall not exceed the principal
amount set out under such Lender's
5
name under the heading "Loan Commitment" on the counterpart signature pages
attached to this Agreement or as set forth on an Assignment and Assumption
executed by such Lender, as assignee, as such amount may be adjusted pursuant to
the terms of this Agreement.
"Contaminant" means any pollutant (as that term is defined in
42 U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 C.F.R. Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), or any constituent of any such substance or waste, including, but not
limited to hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, urea formaldehyde insulation, radioactive
materials, biological substances, PCBs, pesticides, herbicides, asbestos, sewage
sludge, industrial slag, acids, metals, or solvents.
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including without limitation any
restrictive covenant affecting such Person or any of its properties).
"Controlled Ownership Interests" means ownership interests in
a Person where the REIT or Borrower (independently or collectively) has control
over the management and operations of such Person.
"Convertible Securities" means evidences of indebtedness,
shares of stock, limited or general partnership interests or other ownership
interests, warrants, options, or other rights or securities which are
convertible into or exchangeable for, with or without payment of additional
consideration, shares of common stock of the REIT or partnership interests of
Borrower, as the case may be, either immediately or upon the arrival of a
specified date or the happening of a specified event.
"Court Order" means any judgment, writ, injunction, decree,
rule or regulation of any court or Governmental Authority binding upon the
Person in question.
"Debt Service" means, for any period, Interest Expense for
such period plus scheduled principal amortization (exclusive of Balloon
Payments) for such period on all Indebtedness of the REIT, on a consolidated
basis.
"Defaulting Lender" means any Lender which fails or refuses to
perform its obligations under this Agreement within the time period specified
for performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of two (2) Business Days after written
notice from Agent.
"Development Activity" means construction in process, that is
being performed by or at the direction of Borrower, any Subsidiary or any
Investment Affiliate, of any manufactured home community that will be owned and
operated by Borrower, any Subsidiary or any Investment Affiliate upon completion
of construction, including construction in process of
6
manufactured home communities not owned by Borrower, any Subsidiary or any
Investment Affiliate but which Borrower, any Subsidiary or any Investment
Affiliate has the contractual obligation to purchase, but excluding construction
in process for the purpose of expanding manufactured home communities that have
been operated for at least one (1) year prior to the commencement of such
expansion.
"Documentation Agent" means LaSalle Bank National Association
in its capacity as documentation agent for the Lenders under this Agreement.
"DOL" means the United States Department of Labor and any
successor department or agency.
"Dollars" and "$" means the lawful money of the United States
of America.
"EBITDA" means, for any period and without duplication (i) Net
Income for such period, plus (ii) depreciation and amortization expense and
other non-cash items deducted in the calculation of Net Income for such period,
plus (iii) Interest Expense deducted in the calculation of Net Income for such
period, plus, (iv) Taxes deducted in the calculation of Net Income for such
period, minus (v) the gains (and plus the losses) from extraordinary or unusual
items or asset sales or write-ups or forgiveness of indebtedness included in the
calculation of Net Income, for such period, minus (vi) earnings of Subsidiaries
for such period distributed to third parties, plus (or minus in the case of a
loss) (vii) Borrower's Share of the net income (or loss) of each Investment
Affiliate for such period calculated in conformity with GAAP before
depreciation, minus (or plus in the case of a loss) (viii) Borrower's Share of
the gains (or losses) from extraordinary or unusual items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of the net
income of each Investment Affiliate for such period.
"Environmental Laws" means all federal, state, district, local
and foreign laws, and all orders, consent orders, judgments, notices, permits or
demand letters issued, promulgated or entered thereunder, relating to pollution
or protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or industrial substances or Contaminants into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contamination, chemicals, industrial
substances or Contaminants. The term Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"); the Toxic Substances Control Act, as
amended; the Hazardous Materials Transportation Act, as amended; the Resource
Conservation and Recovery Act, as amended ("RCRA"); the Clean Water Act, as
amended; the Safe Drinking Water Act, as amended; the Clean Air Act, as amended;
all analogous state laws; the plans, rules, regulations or ordinances adopted,
or other criteria and guidelines promulgated pursuant to the preceding laws or
other similar laws, regulations, rules or ordinances now or hereafter in effect
regulating public health, welfare or the environment.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under federal or state Environmental Laws or
regulations, or (b) damages arising
7
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Contaminant into the environment
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means any (a) corporation which is, becomes,
or is deemed by any Governmental Authority to be a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Internal
Revenue Code) as a Person or is so deemed by such Person, (b) partnership, trade
or business (whether or not incorporated) which is, becomes or is deemed by any
Governmental Authority to be under common control (within the meaning of Section
414(c) of the Internal Revenue Code) with such Person or is so deemed by such
Person, (c) any Person which is, becomes or is deemed by any Governmental
Authority to be a member of the same "affiliated service group" (as defined in
Section 414(m) of the Internal Revenue Code) as such Person or is so deemed by
such Person, or (d) any other organization or arrangement described in Section
414(o) of the Internal Revenue Code which is, becomes or is deemed by such
Person or by any Governmental Authority to be required to be aggregated pursuant
to regulations issued under Section 414(o) of the Internal Revenue Code with
such Person pursuant to Section 414(o) of the Internal Revenue Code or is so
deemed by such Person.
"Event of Default" means any of the occurrences set forth in
Article X after the expiration of any applicable grace period expressly provided
therein.
"Existing Credit Agreement" has the meaning set forth in the
Recitals hereto.
"Existing Loans" means the "Loans" as defined in the Existing
Credit Agreement.
"Facility" means the loan facility of up to One Hundred Fifty
Million Dollars ($150,000,000) described in Section 2.01(a).
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate, rounded upwards to the nearest one hundredth of one percent
(0.01%), per annum equal for each day during such period to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any governmental authority succeeding to its
functions.
"Financial Statements" has the meaning ascribed to such term
in Section 6.01(a).
"First Extended Maturity Date" has the meaning ascribed to
such term in Section 3.01.
8
"FIRREA" means the Financial Institutions Recovery, Reform and
Enforcement Act of 1989, as amended from time to time.
"First Amendment" has the meaning set forth in the Recitals
hereto.
"First Amended Credit Agreement" has the meaning set forth in
the Recitals hereto.
"First Extended Maturity Date" has the meaning set forth in
Section 3.01.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower and the REIT
which shall be the twelve (12) month period ending on the last day of December
in each year.
"Fixed Charges" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, (ii) 3% of Base Rent for such period, and
(iii) Borrower's Share of Capital Expenditures from each Investment Affiliate
for such period.
"Funding Date" means, with respect to any Loan made after the
Closing Date, the date of the funding of such Loan.
"Funds from Operations" means the definition of "Funds from
Operations" of the National Association of Real Estate Investment Trusts on the
date of determination (before allocation to minority interests).
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession, which are applicable to the circumstances as of
the date of determination and which are consistent with the past practices of
the REIT and Borrower.
"Governmental Authority" means any nation or government, any
federal, state, local, municipal or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Gross Asset Value" means with respect to any Person as of any
date of determination, the sum of the Adjusted Asset Values for each Property
then owned by such Person plus the value of any cash or Cash Equivalent owned by
such Person and not subject to any Lien.
"Indebtedness," as applied to any Person (and without
duplication), means (a) all indebtedness, obligations or other liabilities
(whether secured, unsecured, recourse, non-recourse, direct, senior or
subordinate) of such Person for borrowed money, (b) all indebtedness,
obligations or other liabilities of such Person evidenced by Securities or other
similar instruments, (c) all reimbursement obligations and other liabilities of
such Person with respect to letters of credit or banker's acceptances issued for
such Person's account or other similar instruments for which a contingent
liability exists, (d) all obligations of such Person to pay the
9
deferred purchase price of Property or services, (e) all obligations in respect
of Capital Leases of such Person, (f) all Accommodation Obligations of such
Person, (g) all indebtedness, obligations or other liabilities of such Person or
others secured by a Lien on any asset of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by, or are a personal
liability of, such Person, (h) all indebtedness, obligations or other
liabilities (other than interest expense liability) in respect of Interest Rate
Contracts and foreign currency exchange agreements excluding all indebtedness,
obligations or other liabilities in respect of such Interest Rate Contracts to
the extent that the aggregate notional amount thereof does not exceed the
aggregate principal amount of any outstanding fixed or floating rate
Indebtedness, obligations or other liabilities permitted under this Agreement
that exist as of the date that such Interest Rate Contracts are entered into or
that are incurred no more than thirty (30) days after such Interest Rate
Contracts are entered into and (i) ERISA obligations currently due and payable.
"Initial Maturity Date" means August 9, 2003.
"Interest Expense" means, for any period and without
duplication, total interest expense, whether paid, accrued or capitalized
(including loan and letter of credit fees and the interest component of Capital
Leases but excluding interest expense covered by an interest reserve established
under a loan facility) of the REIT, on a consolidated basis and determined in
accordance with GAAP.
"Interest Period" means, relative to any LIBOR Loans
comprising part of the same Borrowing, the period beginning on (and including)
the date on which such LIBOR Loans are made as, or converted into, LIBOR Loans,
and shall end on (but exclude) the day which numerically corresponds to such
date one (1), two (2), three (3), six (6) or twelve (12) months thereafter (or,
if such month has no numerically corresponding day, on the last Business Day of
such month), in either case as Borrower may select in its relevant Notice of
Borrowing pursuant to Section 2.01(b); provided, however, that:
(a) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day);
(b) no Interest Period may end later than the Termination
Date; and
(c) with the reasonable approval of Agent (unless any Lender
has previously advised Agent and Borrower that it is unable to enter
into LIBOR contracts for an Interest Period of such duration), an
Interest Period may have a duration of less than one (1) month.
"Interest Rate Contracts" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate protection.
"Interim Period" has the meaning ascribed to such term in
Section 4.01(g).
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and any successor statute.
10
"Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by that Person of Securities, or of a
beneficial interest in Securities, of any other Person, and any direct or
indirect loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, advances to employees and
similar items made or incurred in the ordinary course of business), or capital
contribution by such Person to any other Person, including all Indebtedness and
accounts owed by that other Person which are not current assets or did not arise
from sales of goods or services to that Person in the ordinary course of
business. The amount of any Investment shall be determined in conformity with
GAAP except as otherwise specifically provided herein.
"Investment Affiliate" means any Person in whom the REIT,
Borrower or any Subsidiary holds an equity interest, directly or indirectly,
whose financial results are not consolidated under GAAP with the financial
results of the REIT or Borrower on the consolidated financial statements of the
REIT and Borrower.
"Investment Mortgages" means mortgages securing indebtedness
directly or indirectly owed to Borrower or any of its Subsidiaries, including
certificates of interest in real estate mortgage investment conduits.
"Issuing Lender" means Wells Fargo in its capacity as issuer
of Letters of Credit under this Agreement, and shall include any successor
Issuing Lender appointed pursuant hereto.
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Land" means unimproved real estate purchased or leased or to
be purchased or leased by Borrower or any of its Subsidiaries for the purpose of
future development of improvements.
"Lender Affiliate" as applied to any Lender, means any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Lender. For purposes of this definition, "control" (including
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means (a) the possession,
directly or indirectly, of the power to vote more than fifty percent (50%) of
the Securities having voting power for the election of directors of such Person
or otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, or (b) the ownership of a general partnership interest or a
limited partnership interest representing more than fifty (50%) of the
outstanding limited partnership interests of a Person.
"Lender Reply Period" has the meaning ascribed to such term in
Section 11.10(a).
"Lender Taxes" has the meaning ascribed to such term in
Section 2.03(g).
"Lenders" means Wells Fargo and any other bank, finance
company, insurance or other financial institution which is or becomes a party to
this Agreement by execution of a counterpart signature page hereto or an
Assignment and Assumption, as assignee, provided that with respect to matters
requiring the consent to or approval of Requisite Lenders, the Supermajority
Lenders, or all Lenders at any given time, all then existing Defaulting Lenders
11
will be disregarded and excluded, and, for voting purposes only, "all Lenders"
shall be deemed to mean "all Lenders other than Defaulting Lenders."
"Letter of Credit Application" shall have the meaning ascribed
to such term in Section 2.09(b).
"Letter of Credit Documents" has the meaning set forth in
Section 2.09(j) hereof.
"Letter of Credit Mandatory Borrowing" has the meaning set
forth in Section 2.09(f) hereof.
"Letter of Credit Note" means the promissory note evidencing
the Letter of Credit Obligations in the original principal amount of Thirty
Million Dollars ($30,000,000) executed by Borrower in favor of Issuing Lender
pursuant to the Existing Credit Agreement, as it may be amended, supplemented,
replaced or modified from time to time. A copy of the Letter of Credit Note is
attached hereto as Exhibit G.
"Letter of Credit Obligations" means, collectively and without
duplication, (a) all reimbursement and other obligations of Borrower in respect
of Letters of Credit, and (b) all amounts paid by Lenders to Issuing Lender in
respect of Letters of Credit.
"Letters of Credit" means the letters of credit issued by
Issuing Lender pursuant to Section 2.09 hereof for the account of Borrower in an
aggregate face amount not to exceed $30,000,000.00 outstanding at any one time,
as they may be drawn on, replaced or modified from time to time.
"Level I Period" means a period during which the ratio of
Total Liabilities to the sum of Gross Asset Values for the Borrower and each of
its Subsidiaries shall be equal to or less than 0.45:1.
"Level II Period" means a period during which the ratio of
Total Liabilities to the sum of Gross Asset Values for Borrower and each of its
Subsidiaries shall exceed 0.45:1 but shall not exceed 0.60:1.
"Liabilities and Costs" means all claims, judgments,
liabilities, obligations, responsibilities, losses, damages (including punitive
and treble damages), costs, disbursements and expenses (including without
limitation reasonable attorneys', experts' and consulting fees and costs of
investigation and feasibility studies), fines, penalties and monetary sanctions,
interest, direct or indirect, known or unknown, absolute or contingent, past,
present or future.
"LIBOR" means, relative to any Interest Period for any LIBOR
Loan included in any Borrowing, the rate of interest obtained by dividing (i)
the rate of interest determined by Agent (whose determination shall be
conclusive absent manifest error, which shall not include any lower
determination by any other banks) equal to the rate (rounded upwards, if
necessary, to the nearest one one-hundredth of one percent (.01%)) per annum
reported by Wells Fargo at which Dollar deposits in immediately available funds
are offered by Wells Fargo to leading banks in the Eurodollar inter bank market
at or about 11:00 A.M. London time two (2) Business Days prior to the beginning
of such Interest Period for delivery on the first day of such Interest Period
for a period approximately equal to such Interest Period and in an amount equal
or
12
comparable to the LIBOR Loan to which such Interest Period relates, by (ii) a
percentage expressed as a decimal equal to one (1) minus the LIBOR Reserve
Percentage.
"LIBOR Loan" means a Loan bearing interest, at all times
during an Interest Period applicable to such Loan, at a fixed rate of interest
determined by reference to LIBOR.
"LIBOR Reserve Percentage" means, relative to any Interest
Period, the average daily maximum reserve requirement (including, without
limitation, all basic, emergency, supplemental, marginal and other reserves)
which is imposed under Regulation D, as Regulation D may be amended, modified or
supplemented, on "Eurocurrency liabilities" having a term equal to the
applicable Interest Period (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on LIBOR Loans
is determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any bank to United States
residents), which requirement shall be expressed as a decimal. LIBOR shall be
adjusted automatically on, and as of the effective date of, any change in the
LIBOR Reserve Percentage.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights-of-way, zoning restrictions
and the like), lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including without limitation any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement (other than a financing statement filed by a
"true" lessor pursuant to Section 9-408 of the Uniform Commercial Code) naming
the owner of the asset to which such Lien relates as debtor, under the Uniform
Commercial Code or other comparable law of any jurisdiction.
"Loans" means the loans made pursuant to the Facility,
including, without limitation, loans made pursuant to Section 2.01 hereof,
Swingline Loans, and Loans made pursuant to Mandatory Borrowings.
"Loan Availability" means the amount of the Facility from time
to time.
"Loan Documents" means, this Agreement, the Loan Notes, the
REIT Guaranty, and all other agreements, instruments and documents (together
with amendments and supplements thereto and replacements thereof) now or
hereafter executed by the REIT, Borrower or any Agreement Party, which evidence,
guaranty or secure the Obligations.
"Loan Notes" means the promissory notes evidencing the Loans
(other than Swingline Loans) in the aggregate original principal amount of One
Hundred Fifty Million Dollars ($150,000,000) executed by Borrower in favor of
Lenders pursuant to the Existing Credit Agreement, as they may be amended,
supplemented, replaced or modified from time to time. Copies of the Loan Notes
are attached hereto as Exhibit D.
"Mandatory Borrowing" means any Letter of Credit Mandatory
Borrowing or Swingline Mandatory Borrowing.
13
"Manufactured Home Community Mortgages" means Investment
Mortgages issued by any Person engaged primarily in the business of developing,
owning, and managing manufactured home communities.
"Manufactured Home Community Ownership Interests" means
partnership, joint venture, membership or other equity interests issued by any
Person engaged primarily in the business of developing, owning, and managing
manufactured home communities.
"Material Adverse Effect" means a material adverse effect upon
(i) the ability of Borrower or the REIT to perform its covenants and obligations
under this Agreement and the other Loan Documents or (ii) the ability of Agent
or Lenders to enforce the Loan Documents. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has or will result in a
Material Adverse Effect," and the phrase "has no (or does not have a) Material
Adverse Effect" or "will not result in a Material Adverse Effect" or words
substantially similar thereto shall in all cases be intended to mean "does not
or will not result in a Material Adverse Effect."
"Maturity Date" means the Initial Maturity Date, as such date
may be extended pursuant to Article III.
"Minimum Net Worth" means Three Hundred Fifty-Eight Million
Dollars ($358,000,000), plus ninety percent (90%) of all Net Offering Proceeds
received by the REIT or Borrower after the Closing Date, minus ninety percent
(90%) of the aggregate cost to the REIT or Borrower for the repurchase of any
common stock, preferred stock, partnership interests, limited liability company
interests, Convertible Securities or other ownership or equity interests in the
REIT or Borrower; provided, however, that in no event shall the Minimum Net
Worth be less than Three Hundred Twenty Two Million Dollars ($322,000,000).
"Moody's" means Moody's Investors Service, a Delaware
corporation, and its successors and assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by Agent.
"Multiemployer Plan" means an employee benefit plan defined in
Section 4001(a)(3) or Section 3(37) of ERISA which is, or within the immediately
preceding six (6) years was, maintained, administered, contributed to by or was
required to be contributed to by a Person or any ERISA Affiliate, or under which
a Person or any ERISA Affiliate may incur any liability.
"Net Income" means, for any period, the net income (or loss)
after Taxes of the REIT, on a consolidated basis, for such period calculated in
conformity with GAAP; provided, however, that Net Income shall not include the
net income (or loss) of Investment Affiliates.
"Net Offering Proceeds" means all cash or other assets
received by the REIT or Borrower as a result of the sale of common stock,
preferred stock, partnership interests, limited liability company interests,
Convertible Securities or other ownership or equity interests in the REIT or
Borrower less customary costs and discounts of issuance paid by the REIT or
Borrower, as the case may be.
14
"Net Operating Income" means, for any period, and with respect
to any Qualifying Unencumbered Property, the net operating income of such
Qualifying Unencumbered Property (attributed to such Property in a manner
reasonably acceptable to Agent) for such period (i) determined in accordance
with GAAP, (ii) determined in a manner which is consistent with the past
practices of the REIT and Borrower, and (iii) inclusive of an allocation of
reasonable management fees and administrative costs to such Qualifying
Unencumbered Property consistent with the past practices of the REIT and
Borrower, except that, for purposes of determining Net Operating Income, income
shall not (a) include security or other deposits, lease termination or other
similar charges, delinquent rent recoveries, unless previously reflected in
reserves, or any other items reasonably deemed by Agent to be of a non-recurring
nature or (b) be reduced by depreciation or amortization or any other non-cash
item.
"Net Price" means, with respect to the purchase of any
Property by Borrower or any Subsidiary, without duplication, (i) cash and Cash
Equivalents paid as consideration for such purchase, plus (ii) the principal
amount of any note or other deferred payment obligation delivered in connection
with such purchase (except as described in clause (iv) below), plus (iii) the
value of any other consideration delivered in connection with such purchase or
sale (including, without limitation, shares in the REIT and operating
partnership units or preferred operating partnership units in Borrower) (as
reasonably determined by Agent), minus (iv) the value of any consideration
deposited into escrow or subject to disbursement or claim upon the occurrence of
any event, minus (v) reasonable costs of sale and taxes paid or payable in
connection with such purchase.
"Net Worth" means, at any time, the tangible net worth of the
REIT determined in accordance with GAAP, on a consolidated basis, not including
depreciation and amortization expense of the REIT since September 30, 2001 and
not including the REIT's share of depreciation and amortization expense of
Investment Affiliates since September 30, 2001.
"New Lender" shall have the meaning set forth in Section
11.13(k) hereof.
"Non-Manufactured Home Community Property" means Property
which is not (i) used for lease or operation of manufactured home communities,
(ii) Land, (iii) Securities consisting of stock issued by real estate investment
trusts engaged primarily in the development, ownership and management of
manufactured home communities, (iv) Manufactured Home Community Mortgages, (v)
Manufactured Home Community Ownership Interests or (vi) Taxable REIT Subsidiary
Interests.
"Non Pro Rata Loan" means a Loan (other than a Swingline Loan
but including a Mandatory Borrowing) or Letter of Credit draw with respect to
which less than all Lenders have funded their respective Pro Rata Shares of such
Loans or Letter of Credit draws (whether by making Loans or purchasing
participation interests in accordance with the terms hereof) and the failure of
the non-funding Lender or Lenders to fund its or their respective Pro Rata
Shares of such Loan or Letter of Credit draw constitutes a breach of this
Agreement.
"Non-Recourse Indebtedness" means any single loan with respect
to which recourse for payment is limited to specific assets related to a
particular Property or group of Properties encumbered by a Lien securing such
Indebtedness, so long as the Adjusted Asset Value for such Property, or the
total of the Adjusted Asset Values for such group of Properties,
15
does not exceed One Hundred Million Dollars ($100,000,000); provided, however,
that personal recourse to the REIT, Borrower or any Subsidiary by a holder of
any such loan for fraud, misrepresentation, misapplication of cash, waste,
environmental claims and liabilities and other circumstances customarily
excluded by institutional lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financing of real estate
shall not, by itself, prevent such loan from being characterized as Non-Recourse
Indebtedness.
"Notice of Borrowing" means, with respect to a proposed
Borrowing pursuant to Section 2.01(b) or Section 2.10, a notice of borrowing
duly executed by an authorized officer of Borrower substantially in the form of
Exhibit I.
"Notice of Continuation/Conversion" means a notice of
continuation or conversion of or to a LIBOR Loan duly executed by an authorized
officer of Borrower substantially in the form of Exhibit J.
"Obligations" means, from time to time, all Indebtedness of
Borrower owing to Agent, Swingline Lender, Issuing Lender, any Lender, or any
Person entitled to indemnification pursuant to Section 12.02, or any of their
respective successors, transferees or assigns, of every type and description,
whether or not evidenced by any note, guaranty or other instrument, arising
under or in connection with this Agreement or any other Loan Document, whether
or not for the payment of money, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, reasonable attorneys' fees
and disbursements and any other sum now or hereafter chargeable to Borrower
under or in connection with this Agreement or any other Loan Document.
Notwithstanding anything to the contrary contained in this definition,
Obligations shall not be deemed to include any obligations or liabilities of
Borrower to Agent or any Lender under an Interest Rate Contract, foreign
currency exchange agreement or other Contractual Obligation unless the same is
among Borrower and all Lenders. Obligations shall also not include the
"Obligations" under the Term Loan Credit Agreement.
"Officer's Certificate" means a certificate signed by a
specified officer of a Person certifying as to the matters set forth therein.
"Other Indebtedness" means all Indebtedness other than the
Obligations.
"Original Credit Agreement" has the meaning set forth in the
Recitals hereto.
"Original Obligations" means the "Obligations" as defined in
the Existing Credit Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Permit" means any permit, approval, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
"Permitted Holdings" means any of the holdings and activities
described in Section 9.08, but only to the extent permitted in Section 9.08.
16
"Permitted Liens" means:
(a) Liens for Taxes, assessments or other governmental charges
not yet due and payable or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted in
accordance with Sections 7.01(d) or 7.02(g);
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred
in the ordinary course of business for sums not more than sixty (60)
days delinquent or which are being contested in good faith in
accordance with Sections 7.01(d) or 7.02(g);
(c) deposits made in the ordinary course of business to secure
liabilities to insurance carriers;
(d) Liens for purchase money obligations for equipment;
provided that (i) the Indebtedness secured by any such Lien does not
exceed the purchase price of such equipment, (ii) any such Lien
encumbers only the asset so purchased and the proceeds upon sale,
disposition, loss or destruction thereof, and (iii) such Lien, after
giving effect to the Indebtedness secured thereby, does not give rise
to an Event of Default or Unmatured Event of Default pursuant to
Section 8.01(a);
(e) easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on Schedule
B to Borrower's or any Subsidiary's, as applicable, owner's title
insurance policies for any of Borrower's or any Subsidiary's real
Properties, so long as the foregoing do not interfere in any material
respect with the use or ordinary conduct of the business of Borrower or
such Subsidiary, as applicable, and do not diminish in any material
respect the value of the Property to which it is attached or for which
it is listed; or
(f) Liens and judgments which have been or will be bonded or
released of record within thirty (30) days after the date such Lien or
judgment is entered or filed against the REIT, Borrower, any Subsidiary
or any Agreement Party.
"Person" means any natural person, employee, corporation,
limited partnership, limited liability partnership, general partnership, joint
stock company, limited liability company, joint venture, association, company,
trust, bank, trust company, land trust, business trust, real estate investment
trust or other organization, whether or not a legal entity, or any other
nongovernmental entity, or any Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3)
of ERISA (other than a Multiemployer Plan) in respect of which a Person or an
ERISA Affiliate, as applicable, is an "employer" as defined in Section 3(5) of
ERISA.
"Pre-Closing Financials" has the meaning ascribed to such term
in Section 5.01(g).
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the
17
denominator of which shall be the aggregate amount of all of the Lenders'
Commitments, as adjusted from time to time in accordance with the provisions of
this Agreement.
"Property" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit, or other
asset owned by such Person.
"Qualifying Unencumbered Property" means (a) the Properties
listed on Exhibit F hereto and (b) any Property designated by Borrower from time
to time pursuant to Section 6.04 which (i) is an operating manufactured home
community property wholly-owned (directly or beneficially) by Borrower or any
Subsidiary wholly-owned, directly or indirectly by Borrower and/or the REIT,
(ii) is not subject (nor are any direct or indirect equity interests in such
Property subject) to a Lien which secures Indebtedness of any Person other than
a Permitted Lien, (iii) is not subject (nor are any direct or indirect equity
interests in such Property subject) to any covenant, condition, or other
restriction which prohibits or limits the creation or assumption of any Lien
upon such Property (except as set forth in the Term Loan Credit Agreement), and
(iv) has not been designated by Agent in a notice to Borrower as not acceptable
to the Requisite Lenders pursuant to Section 6.04; provided, however, that the
weighted average occupancy rate of the Properties listed on Exhibit F together
with those designated by Borrower to be Qualifying Unencumbered Properties
pursuant to Section 6.04 (excluding expansion areas of such Properties which are
purchased and/or developed on or after the Closing Date) shall be at least
eighty-five percent (85%); and provided, further, that Borrower may, upon at
least fifteen (15) Business Days prior notice to Agent, designate that any
Property listed on Exhibit F or otherwise designated as a Qualifying
Unencumbered Property is no longer a Qualifying Unencumbered Property (and upon
such designation, such Property shall no longer be a Qualifying Unencumbered
Property).
"Recourse Indebtedness" means, with respect to any Person,
Indebtedness which is not Non-Recourse Indebtedness.
"Regulation D" means Regulation D of the Federal Reserve Board
as in effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board
as in effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board
as in effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board
as in effect from time to time.
"REIT" has the meaning ascribed to such term in the preamble
hereto.
"REIT Guaranty" means the Amended and Restated REIT Guaranty
dated as of April 28, 1998 executed by the REIT in favor of Agent and the
Lenders. A copy of the REIT Guaranty is attached hereto as Exhibit B.
"Release" may be either a noun or a verb and means the
release, spill, emission, leaking, pumping, pouring, emitting, emptying,
escaping, dumping, injection, deposit, disposal,
18
discharge, dispersal, leaching or migration into the indoor or outdoor
environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"Remedial Action" means any action undertaken pursuant to
Environmental Laws to (a) clean up, remove, remedy, respond to, treat or in any
other way address Contaminants in the indoor or outdoor environment; (b) prevent
the Release or threat of Release or minimize the further Release of Contaminants
so they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; or (c) perform pre-remedial
studies and investigations and post-remedial monitoring and care.
"Reportable Event" means any of the events described in
Section 4043(b) of ERISA, other than an event for which the thirty (30) day
notice requirement is waived by regulations, or any of the events described in
Section 4062(f) or 4063(a) of ERISA.
"Requirements of Law" means, as to any Person, the charter and
by-laws, partnership agreements or other organizational or governing documents
of such Person, and any law, rule or regulation, permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations T, U and X, FIRREA and any
certificate of occupancy, zoning ordinance, building or land use requirement or
Permit or occupational safety or health law, rule or regulation.
"Requisite Lenders" means, collectively, Lenders whose Pro
Rata Shares, in the aggregate, are at least sixty-six and two-thirds percent (66
2/3%); provided, however, that, in determining such percentage at any given
time, all then existing Defaulting Lenders will be disregarded and excluded and
the Pro Rata Shares of Lenders shall be redetermined, for voting purposes only,
to exclude the Pro Rata Shares of such Defaulting Lenders; and provided,
further, that so long as there are at least two (2) Lenders who are not
Defaulting Lenders, the Requisite Lenders must be comprised of a minimum of two
(2) Lenders; and provided, further, that for purposes of any amendment,
modification or waiver of the requirements of Article IX, the Requisite lenders
must include Agent in its capacity as a Lender (provided Agent is not a
defaulting Lender).
"S&P" means Standard & Poor's Rating Group, a division of
McGraw Hill, its successors and assigns, and, if Standard & Poor's Rating Group
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other nationally
recognized securities rating agency designated by Agent.
"Second Amendment" has the meaning set forth in the Recitals
hereto.
"Second Extended Maturity Date" has the meaning set forth in
Section 3.02.
"Secretary's Certificate" has the meaning ascribed to such
term in Section 4.01(c)(i).
"Secured Debt" means Indebtedness, the payment of which is
secured by a Lien on any real Property owned or leased by the REIT, Borrower, or
any Subsidiary.
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"Securities" means any stock, partnership interests, shares,
shares of beneficial interest, voting trust certificates, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities," or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended
to the date hereof and from time to time hereafter, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"Senior Loans" has the meaning ascribed to such term in
Section 11.04(b).
"Sole Lead Arranger" means Wells Fargo Bank, N.A. in its
capacity as sole lead arranger for the Lenders under this Agreement.
"Solvent" means as to any Person at the time of determination,
such Person (a) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (b) is
able to pay all of its debts as such debts mature; and (c) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"Subsidiary" means any Person, whose financial results are
consolidated under GAAP with the financial results of the REIT or Borrower on
the consolidated financial statements of the REIT or Borrower.
"Supermajority Lenders" means, collectively, Lenders whose Pro
Rata Shares, in the aggregate, are at least eighty-five percent (85%), provided,
however, that, in determining such percentage at any given time, all then
existing Defaulting Lenders will be disregarded and excluded and the Pro Rata
Shares of Lenders shall be redetermined, for voting purposes only, to exclude
the Pro Rata Shares of such Defaulting Lenders; and provided, further, that, so
long as there are at least two (2) Lenders who are not Defaulting Lenders, the
Supermajority Lenders must be comprised of a minimum of two (2) Lenders; and
provided, further, that for purposes of any amendment, modification or waiver of
the requirements of Article IX, the Supermajority Lenders must include Agent in
its capacity as a Lender (provided Agent is not a Defaulting Lender).
"Swingline Mandatory Borrowing" has the meaning set forth in
Section 2.10(b)(iv) hereof.
"Swingline Lender" means Wells Fargo in its capacity as
Swingline Lender hereunder, and shall include any successor Swingline Lender
appointed pursuant hereto.
"Swingline Loan" means a Loan made by the Swingline Lender
pursuant to Section 2.10 hereof.
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"Swingline Note" means the promissory note evidencing the
Swingline Loans in the original principal amount of Thirty Million Dollars
($30,000,000) executed by Borrower in favor of Swingline Lender pursuant to the
Existing Credit Agreement, as it may be amended, supplemented, replaced or
modified from time to time. A copy of the Swingline Note is attached hereto as
Exhibit E.
"Syndication Agent" means Bank of America, N.A. in its
capacity as syndication agent for the Lenders under this Agreement.
"Taxable REIT Subsidiary Interests" means equity interests in
Subsidiaries not engaged in the development, ownership or operation or real
estate and permitted to be held by Borrower and the REIT pursuant to Section
856(l) of the Internal Revenue Code (as amended from time to time) without
violating the REIT's status as a real estate investment trust.
"Taxes" means all federal, state, local and foreign income and
gross receipts taxes.
"Term Loan Credit Agreement" means that certain Term Loan
Credit Agreement dated as of February __, 2002 by and among Borrower, the REIT,
Wells Fargo, as Agent, and the lenders named therein (as the same may be
amended, modified, supplemented or amended and restated from time to time).
"Termination Date" has the meaning ascribed to such term in
Section 2.01(d).
"Termination Event" means (a) any Reportable Event, (b) the
withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, (c) the occurrence of an obligation arising under Section 4041 of
ERISA of a Person or an ERISA Affiliate to provide affected parties with a
written notice of an intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA, (d) the institution by the
PBGC of proceedings to terminate any Benefit Plan under Section 4042 of ERISA or
to appoint a trustee to administer any Benefit Plan, (e) any event or condition
which constitutes grounds under Section 4042 of ERISA for the appointment of a
trustee to administer a Benefit Plan, (f) the partial or complete withdrawal of
such Person or any ERISA Affiliate from a Multiemployer Plan which would have a
Material Adverse Effect, or (g) the adoption of an amendment by any Person or
any ERISA Affiliate to terminate any Benefit Plan which is subject to Title IV
of ERISA or Section 412 of the Internal Revenue Code or the treatment of an
amendment to a Benefit Plan as a termination under ERISA.
"Total Liabilities" means, without duplication, all
Indebtedness of the REIT on a consolidated basis, plus all other items which, in
accordance with GAAP, would be included as liabilities on the liability side of
the balance sheet of the REIT, on a consolidated basis, and in any event shall
include recourse and non-recourse mortgage debt, letters of credit, purchase
obligations, forward equity sales, repurchase obligations, unsecured debt,
accounts payable, lease obligations (including ground leases) to the extent
required, in accordance with GAAP, to be classified as capital leases on the
balance sheet of the REIT, guarantees of indebtedness, subordinated debt and
unfunded obligations; provided, however, that "Total Liabilities" shall not
21
include dividends declared by the REIT or Borrower which are permitted under
Section 8.01(d) but not yet paid.
"Unencumbered Asset Value" means, as of any date of
determination, (i) a fraction, the numerator of which is the product of four (4)
and the Net Operating Income for the most recently ended Fiscal Quarter which is
attributable (in a manner reasonably acceptable to Agent) to Qualifying
Unencumbered Properties wholly-owned (directly or beneficially) by Borrower or
any Subsidiary wholly-owned, directly or indirectly, by Borrower and/or the
REIT, for the entire Fiscal Quarter and the denominator of which is eight
hundred seventy-five ten-thousandths (0.0875) plus (ii) the aggregate of the Net
Prices paid by Borrower or such Subsidiary for all Qualifying Unencumbered
Properties which have been acquired in the Fiscal Quarter most recently ended.
"Unencumbered Net Operating Income" means for any Fiscal
Quarter, Net Operating Income for such period from each Qualifying Unencumbered
Property.
"Unfunded Pension Liabilities" means the excess of a Benefit
Plan's accrued benefits, as defined in Section 3(23) of ERISA, over the current
value of that Plan's assets, as defined in Section 3(26) of ERISA.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect on the date hereof in the State of Illinois.
"Unmatured Event of Default" means an event which, with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default.
"Unsecured Debt" means, as of any date of determination and
without duplication, all Indebtedness of the REIT, Borrower or any Subsidiary,
which is not Secured Debt plus all accounts payable of the REIT, Borrower or any
Subsidiary incurred in the ordinary course of business, the payment of which is
not secured by a Lien on any property owned or leased by the REIT, Borrower or
any Subsidiary.
"Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.
"Unused Amount" has the meaning ascribed to such term in
Section 2.04(a).
"Unused Facility Fee" has the meaning ascribed to such term in
Section 2.04(b).
"Welfare Plan" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which a Person or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or
within the immediately preceding five years maintained, administered,
contributed to or was required to contribute to, or under which a Person or any
ERISA Affiliate may incur any liability.
"Wells Fargo" has the meaning ascribed to such term in the
preamble hereto.
"Wholly-Owned Subsidiary" means any Subsidiary which is
wholly-owned directly or indirectly by Borrower or the REIT.
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"WFRAF" has the meaning set forth in the Recitals hereto.
Computation of Time Periods. In this Agreement, unless
otherwise specified, in the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each mean "to and including." Periods of days referred to
in this Agreement shall be counted in calendar days unless Business Days are
expressly prescribed.
1.03 Terms.
(a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP, provided that for purposes of references to the financial
results of the "REIT, on a consolidated basis," the REIT shall be deemed to own
one hundred percent (100%) of the partnership interests in Borrower.
(b) Any time the phrase "to the best of Borrower's knowledge"
or a phrase similar thereto is used herein, it means: "to the actual knowledge
of the executive officers of Borrower and the REIT, after reasonable inquiry of
those agents, employees or contractors of the REIT, Borrower, any Agreement
Party or any Subsidiary who could reasonably be anticipated to have knowledge
with respect to the subject matter or circumstances in question and review of
those documents or instruments which could reasonably be anticipated to be
relevant to the subject matter or circumstances in question."
(c) In each case where the consent or approval of Agent,
Requisite Lenders, Supermajority Lenders or all Lenders is required or their
non-obligatory action is requested by Borrower, such consent, approval or action
shall be in the sole and absolute discretion of Agent and, as applicable, each
Lender, unless otherwise specifically indicated.
Interrelationship With the Existing Credit Agreement.
Effective on the Closing Date, this Agreement shall amend and restate the
provisions of the Existing Credit Agreement (as amended by the First Amendment
and the Second Amendment) in their entirety, and all Existing Loans and all
Loans made on or after the Closing Date shall be governed exclusively by the
terms of this Agreement. All Original Obligations outstanding on the Closing
Date (including without limitation all accrued and unpaid interest and fees)
shall, to the extent not paid on the Closing Date, be deemed to be Obligations
outstanding hereunder. The REIT Guaranty shall remain in full force and effect
with respect to the Obligations and is hereby reaffirmed. The Loan Notes shall
continue to evidence the Loans (other than Swingline Loans) and are hereby
reaffirmed. The Swingline Note shall continue to evidence the Swingline Loans
and is hereby reaffirmed. The parties acknowledge and agree that the execution
and delivery of this Agreement shall not constitute a novation, payment and
reborrowing or termination of the Original Obligations and that all such
Original Obligations outstanding on the Closing Date are in all respects
continued and outstanding as Obligations under this Agreement.
ARTICLE II.
LOANS
2.01 Loan Advances and Repayment.
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(a) Loan Availability.
(i) Subject to the terms and conditions set forth in
this Agreement, Lenders hereby agree to make Loans (other than
Swingline Loans) to Borrower from time to time during the
period from the Closing Date to the first Business Day
preceding the Maturity Date; provided, that the sum of the
aggregate principal amount of all outstanding Loans (including
Swingline Loans) plus the aggregate face amount of all
outstanding Letters of Credit shall not exceed Loan
Availability; and provided, further, that if a Base Rate Loan
is being made pursuant to Section 2.09(e) hereof to reimburse
Issuing Lender for a drawn Letter of Credit, to avoid a
duplicative reduction in the amount of Loan Availability, the
drawn Letter of Credit shall not be considered outstanding.
All Loans (other than Swingline Loans) under this Agreement
shall be made by Lenders simultaneously and proportionately to
their respective Pro Rata Shares, it being understood that no
Lender shall be responsible for any failure by any other
Lender to perform its obligation to make a Loan hereunder and
that the Commitment of any Lender shall not be increased or
decreased as a result of the failure by any other Lender to
perform its obligation to make a Loan. The Loans (other than
Swingline Loans) will be evidenced by the Loan Notes. The
Swingline Loans will be evidenced by the Swingline Note.
(ii) Loans (including, without limitation, Swingline
Loans) may be voluntarily prepaid pursuant to Section 2.05(a)
and, subject to the provisions of this Agreement (including,
without limitation, the provisions of Section 2.11 hereof),
any amounts so prepaid may be reborrowed, up to the amount
available under Section 2.01(a)(i) at the time of such
Borrowing, until the Business Day next preceding the
Termination Date. The principal balance of the Loans shall be
payable in full on the Termination Date. During the term of
this Agreement and prior to the termination of the
Commitments, Borrower shall pay to Agent, within one (1)
Business Day after Borrower's receipt of a demand in writing
from Agent for the benefit of Lenders, such principal amounts
as are necessary so that the sum of the aggregate principal
amounts of all outstanding Loans (including Swingline Loans)
plus the aggregate face amount of all outstanding Letters of
Credit at any time does not exceed Loan Availability at such
time.
(b) Notice of Borrowing. Whenever Borrower desires to borrow
under this Section 2.01, Borrower shall give Agent, at Wells Fargo Real Estate
Group Disbursement Center, 2120 East Park Place, Suite 100, El Segundo,
California 90245, with a copy to: Wells Fargo Bank, N.A., 225 West Wacker Drive,
Suite 2550, Chicago, Illinois 60606, Attn: Account Officer, or such other
address as Agent shall designate, an original or facsimile Notice of Borrowing
no later than 10:00 A.M. (California time), not less than three (3) nor more
than five (5) Business Days prior to the proposed Funding Date of each Loan.
Each Notice of Borrowing shall specify (i) the Funding Date (which shall be a
Business Day) in respect of the Loan, (ii) the amount of the proposed Loan,
provided that the aggregate amount of such proposed Loan shall equal (A) in the
case of Base Rate Loans, One Million Dollars ($1,000,000) or integral multiples
of One Hundred Thousand Dollars ($100,000) in excess thereof, or (B) in the case
of LIBOR Loans, One Million Dollars ($1,000,000) or integral multiples of One
Hundred Thousand Dollars ($100,000) in excess thereof, and (iii) whether the
Loan to be made thereunder will be a Base
24
Rate Loan or a LIBOR Loan and, if a LIBOR Loan, the Interest Period. Any Notice
of Borrowing pursuant to this Section 2.01(b) shall be irrevocable. Each such
Notice of Borrowing shall be accompanied by all reports or documents required to
be delivered by Borrower to Agent or any Lender under this Agreement. Borrower
may elect (A) so long as no Event of Default has occurred and is continuing, to
convert Base Rate Loans or any portion thereof into LIBOR Loans, (B) to convert
LIBOR Loans or any portion thereof into Base Rate Loans, or (C) so long as no
Event of Default has occurred and is continuing, to continue any LIBOR Loans or
any portion thereof for an additional Interest Period, provided, however, that
the aggregate amount of Loans being continued as or converted into LIBOR Loans
shall, in the aggregate, equal One Million Dollars ($1,000,000) or an integral
multiple of One Hundred Thousand Dollars ($100,000) in excess thereof. The
applicable Interest Period for the continuation of any LIBOR Loan shall commence
on the day on which the next preceding Interest Period expires. Each such
election shall be made by giving Agent, at 2120 E. Park Place, Suite 100, El
Segundo, California 90245, Attn: Jean Randall-Hall, a Notice of
Continuation/Conversion by 10:00 A.M. (California time) on the date of a
conversion to a Base Rate Loan, or by 10:00 A.M. (California time) not less than
three (3) nor more than five (5) Business Days prior to the date of a conversion
to or continuation of a LIBOR Loan, specifying, in each case (1) whether a
conversion or continuation is to occur, (2) the amount of the conversion or
continuation, (3) the Interest Period therefor, in the case of a conversion to
or continuation of a LIBOR Loan, and (4) the date of the conversion or
continuation (which date shall be a Business Day). Agent shall promptly notify
each Lender, but in any event within one (1) Business Day after receipt of such
notice, of its receipt of each such notice and the contents thereof.
Notwithstanding anything to the contrary contained herein and subject to the
default interest provisions contained in Section 2.03, if an Event of Default
occurs and as a result thereof the Commitments are terminated, all LIBOR Loans
will convert to Base Rate Loans upon the expiration of the applicable Interest
Periods therefor or the date all Loans become due, whichever occurs first.
Except as provided above, the conversion of a LIBOR Loan to a Base Rate Loan
shall only occur on the last Business Day of the Interest Period relating to
such LIBOR Loan. In the absence of an effective election by Borrower of a LIBOR
Loan and Interest Period in accordance with the above procedures prior to the
third (3rd) Business Day prior to the expiration of the then current Interest
Period with respect to any LIBOR Loan, interest on such LIBOR Loan shall accrue
at the interest rate then applicable to a LIBOR Loan for an Interest Period of
thirty (30) days, effective immediately upon the expiration of the then-current
Interest Period, without prejudice, however, to the right of Borrower to elect a
Base Rate Loan or a different Interest Period in accordance with the terms and
provisions of this Agreement; provided, however, that if such continuation shall
cause the number of LIBOR Loan tranches to exceed six (6), such LIBOR Loan shall
be converted to a Base Rate Loan.
(c) Making of Loans. Subject to Section 11.03, Agent shall
make the proceeds of Loans (other than Swingline Loans) available to Borrower in
El Segundo, California on such Funding Date and shall disburse such funds in
Dollars and in immediately available funds not later than 1:00 P.M. Chicago time
to Borrower's account, at Bank of America, Account Number 73-66901095 in
Chicago, Illinois, or such other account specified in the Notice of Borrowing
acceptable to Agent, with a confirming telephone call to Quantaze Watts at (312)
279-1408 or Mark Howell at (312) 279-1402.
(d) Term; Principal Payment. The outstanding balance of the
Loans (other than Swingline Loans, which by their terms shall mature earlier)
shall be payable in full on the
25
earlier to occur of (A) the Maturity Date, and (B) the acceleration of the Loans
pursuant to Section 10.02(a) (the "Termination Date").
Authorization to Obtain Loans and Letters of Credit. Borrower
shall provide Agent with documentation reasonably satisfactory to Agent
indicating the names of those employees or agents of Borrower authorized by
Borrower to sign Notices of Borrowing, to request Letters of Credit and to
receive callback confirmations, and Agent and Lenders shall be entitled to rely
on such documentation until notified in writing by Borrower of any change(s) of
the persons so authorized. Agent, Swingline Lender and Issuing Lender shall be
entitled to act in good faith on the instructions of anyone identifying himself
as one of the Persons authorized to request Loans or Letters of Credit, and
Borrower shall be bound thereby in the same manner as if such Person were
actually so authorized. Borrower agrees to indemnify, defend and hold Lenders,
Agent, Swingline Lender and Issuing Lender harmless from and against any and all
Liabilities and Costs which may arise or be created by the acceptance of
instructions for making Loans, and issuing Letters of Credit.
2.03 Interest on the Loans
(a) Base Rate Loans. Subject to Section 2.03(d), all Base Rate
Loans shall bear interest on the average daily unpaid principal amount thereof
from the date made until paid in full at a fluctuating rate per annum equal to
the Base Rate. Base Rate Loans shall be made in minimum amounts of One Million
Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars
($100,000) in excess thereof.
(b) LIBOR Loans. Subject to Section 2.03(d), all LIBOR Loans
shall bear interest on the unpaid principal amount thereof during the Interest
Period applicable thereto at a rate per annum equal to the sum of LIBOR for such
Interest Period plus the Applicable Margin. Upon receipt of a Notice of
Borrowing requesting LIBOR Loans, Agent shall determine LIBOR applicable to the
Interest Period for such LIBOR Loans, and shall give notice thereof to Borrower
and Lenders; provided, however, that failure to give such notice shall not
affect the validity of such rate. Each determination by Agent of LIBOR shall be
conclusive and binding upon the parties hereto in the absence of demonstrable
error. LIBOR Loans shall be in tranches of One Million Dollars ($1,000,000) or
One Hundred Thousand Dollars ($100,000) increments in excess thereof. No more
than six (6) LIBOR Loan tranches shall be outstanding at any one time.
(c) Interest Payments. Subject to Section 2.03(d), interest
accrued on all Loans shall be payable by Borrower in arrears on the first
Business Day of the first calendar month following the Closing Date, and the
first Business Day of each succeeding calendar month thereafter, and on the
Termination Date.
(d) Default Interest. Notwithstanding the rates of interest
specified in Sections 2.03(a) and 2.03(b) and the payment dates specified in
Section 2.03(c), effective immediately upon demand by Agent after the occurrence
of an Event of Default and during the continuance of any Event of Default, the
principal balance of all Loans then outstanding and, to the extent permitted by
applicable law, any interest payments on the Loans not paid when due shall bear
interest payable upon demand at a rate which is five percent (5%) per annum in
excess of the rate or rates of interest otherwise payable under this Agreement.
All other amounts due
26
Agent, Swingline Lender, Issuing Lender or Lenders (whether directly or for
reimbursement) under this Agreement or any of the other Loan Documents if not
paid when due, or if no time period is expressed, if not paid within fifteen
(15) days after written demand to Borrower, shall bear interest from and after
demand at the rate which is five percent (5%) per annum in excess of the lowest
rate or rates of interest otherwise payable under this Agreement, or, if no
Loans are then outstanding, at the rate which is five percent (5%) per annum in
excess of the rate of interest applicable to Base Rate Loans.
(e) Late Fee. Borrower acknowledges that late payment
hereunder will cause Agent, Swingline Lender, Issuing Lender and Lenders to
incur costs not contemplated by this Agreement. Such costs include without
limitation processing and accounting charges. Therefore, if Borrower fails
timely to pay any sum due and payable hereunder through the Termination Date
(other than payments of principal), unless waived by Agent pursuant to Section
12.05(e), a late charge of four cents ($.04) for each dollar of any interest
payment due hereon and which is not paid within ten (10) days after such payment
is due or of any other amount due hereon (other than payments of principal) and
which is not paid within thirty (30) days after such payment is due, shall be
charged by Agent (for the benefit of Swingline Lender, Issuing Lender and
Lenders, as applicable) and paid by Borrower for the purpose of defraying the
expense incident to handling such delinquent payment; provided, however, that no
late charges shall be assessed with respect to any amount for which Borrower is
obligated to pay interest at the rate specified in Section 2.03(d), provided,
further, that in no event shall Agent, Swingline Lender, Issuing Lender or
Lenders be required to refund any late fees paid by Borrower, notwithstanding
the preceding proviso. Borrower, Agent, Swingline Lender, Issuing Lender, and
Lenders agree that this late charge represents a reasonable sum considering all
of the circumstances existing on the date hereof and represents a fair and
reasonable estimate of the costs that Agent, Swingline Lender, Issuing Lender
and Lenders will incur by reason of late payment. Borrower, Agent, Swingline
Lender, Issuing Lender and Lenders further agree that proof of actual damages
would be costly and inconvenient. Acceptance of any late charge shall not
constitute a waiver of the default with respect to the overdue installment, and
shall not prevent Agent from exercising any of the other rights available
hereunder or any other Loan Document. Such late charge shall be paid without
prejudice to any other rights of Agent.
(f) Computation of Interest. Interest and fees shall be
computed on the basis of the actual number of days elapsed in the period during
which interest or fees accrue and a year of three hundred sixty (360) days. In
computing interest on any Loan, the date of the making of the Loan shall be
included and the date of payment shall be excluded; provided, however, that if a
Loan is repaid on the same day on which it is made, one (1) day's interest shall
be paid on that Loan. Notwithstanding subsections (a), (b), (d) and (e) above,
interest in respect of any Loan shall not exceed the maximum rate permitted by
applicable law.
(g) Changes; Legal Restrictions. In the event that after the
Closing Date (A) the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a court or Governmental Authority or
any change in the interpretation or application thereof by a court or
Governmental Authority, or (B) compliance by Agent, Swingline Lender, Issuing
Lender or any Lender with any request or directive made or issued after the
Closing Date (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) from any central bank or other
Governmental Authority or quasi-governmental authority:
27
(i) subjects Agent, Swingline Lender, Issuing Lender
or any Lender to any tax, duty or other charge of any kind
with respect to the Facility, this Agreement or any of the
other Loan Documents or the Loans or the Letters of Credit or
changes the basis of taxation of payments to Agent, Swingline
Lender, Issuing Lender or such Lender of principal, fees,
interest or any other amount payable hereunder, except for net
income, gross receipts, gross profits or franchise taxes
imposed by any jurisdiction and not specifically based upon
loan transactions (all such non-excepted taxes, duties and
other charges being hereinafter referred to as "Lender
Taxes");
(ii) imposes, modifies or holds applicable, in the
determination of Agent, Swingline Lender, Issuing Lender or
any Lender, any reserve, special deposit, compulsory loan,
FDIC insurance, capital allocation or similar requirement
against assets held by, or deposits or other liabilities in or
for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, Agent,
Swingline Lender, Issuing Lender or such Lender or any
applicable lending office (except to the extent that the
reserve and FDIC insurance requirements are reflected in the
"Base Rate" or "LIBOR Rate"); or
(iii) imposes on Agent, Swingline Lender, Issuing
Lender or any Lender any other condition materially more
burdensome in nature, extent or consequence than those in
existence as of the Closing Date;
and the result of any of the foregoing is to (X) increase the cost to Agent,
Swingline Lender, Issuing Lender or any Lender of making, renewing, maintaining
or participating in the Loans or issuing or participating in the Letters of
Credit or to reduce any amount receivable hereunder or thereunder or (Y) to
require Agent, Swingline Lender, Issuing Lender or any Lender or any applicable
lending office to make any payment calculated by reference to the amount of the
Loan held or interest received by it; then, in any such case, Borrower shall
promptly pay to Agent, Swingline Lender, Issuing Lender or such Lender, as
applicable, upon demand, such amount or amounts (based upon a reasonable
allocation thereof by Agent, Swingline Lender, Issuing Lender or such Lender to
the financing transactions contemplated by this Agreement and affected by this
Section 2.03(g)) as may be necessary to compensate Agent, Swingline Lender,
Issuing Lender or such Lender for any such additional cost incurred, reduced
amounts received or additional payments made to the extent Agent, Swingline
Lender, Issuing Lender or such Lender generally imposes such additional costs,
losses and payments on other borrowers in similar circumstances. Agent,
Swingline Lender, Issuing Lender or such Lender shall deliver to Borrower and in
the case of a delivery by a Lender, such Lender shall also deliver to Agent, a
written statement in reasonable detail of the claimed additional costs incurred,
reduced amounts received or additional payments made and the basis therefor as
soon as reasonably practicable after Agent or such Lender, as applicable,
obtains knowledge thereof.
(h) Certain Provisions Regarding LIBOR Loans
(i) LIBOR Lending Unlawful. If any Lender shall
determine in good faith that the introduction of or any change
in or in the interpretation of any law makes it unlawful, or
any central bank or other governmental authority asserts that
it is unlawful, for such Lender to make or maintain any Loan
as a LIBOR
28
Loan, (A) the obligations of the Lenders to make or maintain
any Loans as LIBOR Loans shall, upon such determination,
forthwith be suspended until such Lender shall notify Agent
that the circumstances causing such suspension no longer
exist, and (B) if required by law or such assertion, all LIBOR
Loans shall automatically convert into Base Rate Loans.
(ii) Deposits Unavailable. If Agent shall have
determined in good faith that adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBOR
Loans, then, upon notice from Agent to Borrower the
obligations of all Lenders to make or maintain Loans as LIBOR
Loans shall forthwith be suspended until Agent shall notify
Borrower that the circumstances causing such suspension no
longer exist. Agent will give such notice when it determines,
in good faith, that such circumstances no longer exist;
provided, however, that Agent shall not have any liability to
any Person with respect to any delay in giving such notice.
(iii) Funding Losses. In the event any Lender shall
incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to make or
maintain any portion of any Loan as a LIBOR Loan) as a result
of:
(A) any continuance, conversion, repayment or
prepayment of the principal amount of any LIBOR Loans for any
reason whatsoever on a date other than the scheduled last day
of the Interest Period applicable thereto; or
(B) any Loans not being made as LIBOR Loans in
accordance with the Notice of Borrowing therefor, other than
as a result of such Lender's breach of its obligation to fund
such Loans in accordance with the terms hereof;
then, within fifteen (15) Business Days after Borrower's receipt of the
written notice of such Lender to Borrower with a copy to Agent,
Borrower shall reimburse such Lender for such loss or expense;
provided, however, that each Lender will use reasonable efforts to
minimize such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of
demonstrable error, be conclusive and binding on the parties hereto.
(i) Withholding Tax Exemption. Each Lender that is not created
or organized under the laws of the United States of America or a political
subdivision thereof shall deliver to Borrower and Agent no later than the
Closing Date (or, in the case of a Lender which becomes a Lender pursuant to
Section 11.13, the date upon which such Lender becomes a party hereto) a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender, in a form satisfactory to Borrower and Agent, to the effect that
such Lender is capable, under the provisions of an applicable treaty concluded
by the United States of America (in which case the certificate shall be
accompanied by three (3) accurate and complete duly executed originals of Form
W-8BEN of the Internal Revenue Service) or under Section 1442 of the Internal
Revenue Code (in which case the certificate shall be accompanied by three (3)
accurate and complete duly executed originals of Form W-8ECI of the Internal
Revenue Service), of receiving payments of principal, interest and fees
hereunder without deduction or withholding of United States federal
29
income tax. Further, if at any time a Lender changes its applicable lending
office or selects an additional applicable lending office, it shall, at the same
time or promptly thereafter, but only to the extent the certificate and forms
previously delivered by it hereunder are no longer applicable or effective,
deliver to Borrower and Agent in replacement for, or in addition to, the
certificate and forms previously delivered by it hereunder, a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender
accompanied by three (3) accurate and complete duly executed originals of either
Form W-8BEN of the Internal Revenue Service or Form W-8ECI of the Internal
Revenue Service, whichever is applicable, indicating that such Lender is
entitled to receive payments of principal, interest and fees for the account of
such changed or additional applicable lending office under this Agreement
without deduction or withholding of United States federal tax. Each Lender
further agrees to deliver to Borrower and Agent a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender accompanied by
three (3) accurate and complete duly executed originals of either Form W-8BEN of
the Internal Revenue Service or Form W-8ECI of the Internal Revenue Service,
whichever is appropriate, substantially in a form satisfactory to Borrower and
Agent, before or promptly upon the occurrence of any event requiring a change in
the most recent certificate or Internal Revenue Service form previously
delivered by it to Borrower and Agent pursuant to this Section 2.03(j). Further,
each Lender which delivers a certificate accompanied by Form W-8BEN of the
Internal Revenue Service covenants and agrees to deliver to Borrower and Agent
within fifteen (15) days prior to January 1, 2003, and every third (3rd)
anniversary of such date thereafter, on which this Agreement is still in effect,
another such certificate and three (3) accurate and complete original signed
copies of Form W-8BEN (or any successor form or forms required under the
Internal Revenue Code or the applicable regulations promulgated thereunder), and
each Lender that delivers a certificate accompanied by Form W-8ECI of the
Internal Revenue Service covenants and agrees to deliver to Borrower and Agent
within fifteen (15) days prior to the beginning of each subsequent taxable year
of such Lender during which this Agreement is still in effect, another such
certificate and three (3) accurate and complete original signed copies of
Internal Revenue Service Form W-8ECI (or any successor form or forms required
under the Internal Revenue Code or the applicable regulations promulgated
hereunder). If (i) any Lender is required under this Section 2.03(j) to provide
a certificate or other evidence described above and fails to deliver to Borrower
and Agent such certificate or other evidence or (ii) any Lender delivers a
certificate to the effect that, as a result of the adoption of or any change in
any law, treaty, rule, regulation, guideline or determination of a Governmental
Authority after the date such Lender became a party hereto, such Lender is not
capable of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax as specified therein and that it
is not capable of recovering the full amount of the same from a source other
than Borrower, then, to the extent required by law, as the sole consequence of
such Lender's failure to deliver the certificate described in (i) above or such
Lender's delivery of the certificate described in (ii) above, Borrower shall be
entitled to deduct or withhold taxes from the payments owed to such Lender.
2.04 Fees.
(a) Intentionally Deleted.
(b) Unused Facility Fee. Until the Obligations are paid in
full and this Agreement is terminated or, if sooner, the date the Commitments
terminate, and subject to Section 11.04(b), Borrower shall pay to Agent, for the
account of each Lender, an Unused
30
Facility Fee accruing from and after the Closing Date at the rate described
below upon the amount during each calendar quarter of (i) the Facility, minus
(ii) the sum of (A) the average daily aggregate principal balance of all Loans
then outstanding other than Swingline Loans and (B) the average daily aggregate
face amount of all outstanding Letters of Credit (the "Unused Amount"). The
Unused Facility Fee will be calculated and will accrue at the rate per annum of
fifteen one-hundredths of one percent (.15%). Subject to Section 11.04(b), each
Lender shall be entitled to receive its Pro Rata Share of such Unused Facility
Fee. All such Unused Facility Fees payable under this paragraph shall be payable
in arrears on the fifth Business Day in each calendar quarter beginning with the
first calendar quarter after the Closing Date.
(c) Arrangement and Administrative Agency Fees. Borrower shall
pay Agent such fees as are provided for in the separate fee agreement between
Agent and Borrower, as in existence from time to time.
(d) Letter of Credit Fee. With respect to each Letter of
Credit, Borrower agrees to pay to Agent (i) a letter of credit fee equal to the
Applicable Margin on the face amount of such Letter of Credit for the term of
such Letter of Credit to be distributed by Agent to each Lender according to its
Pro Rata Share payable in arrears on the fifth Business Day in each calendar
quarter beginning with the first calendar quarter after the Closing Date and
ending on the date of the expiration, return or termination of such Letter of
Credit if such date is a date other than the first Business Day of a calendar
month and (ii) a non-refundable issuing fee of $500.00 solely for the account of
Issuing Lender, payable in full on the date of issuance thereof.
(e) Payment of Fees. The fees described in this Section 2.04
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
California in immediately available funds and shall be non-refundable when paid.
If Borrower fails to make any payment of fees or expenses specified or referred
to in this Agreement due to Agent or Lenders, including without limitation those
referred to in this Section 2.04 or otherwise under this Agreement or any
separate fee agreement between Borrower and Agent relating to this Agreement,
when due, the amount due shall bear interest until paid at the Base Rate and,
after five (5) days at the rate specified in Section 2.03(d) (but not to exceed
the maximum rate permitted by applicable law) and shall constitute part of the
Obligations. All fees described in this Section 2.04 which are expressed as a
per annum charge shall be calculated on the basis of the actual number of days
elapsed in a three hundred sixty (360) day year.
2.05 Payments.
(a) Voluntary Prepayments. Borrower may, upon not less than
three (3) Business Days prior written notice (or with written notice not later
than 1:00 P.M. (California time) on the same Business Day in the case of a
Swingline Loan), at any time and from time to time, prepay any Loans, without
premium or penalty (other than as set forth in Section 2.03(h)(iii)), in whole
or in part in amounts not less than One Hundred Thousand Dollars ($100,000) or
integral multiples of Twenty-Five Thousand Dollars ($25,000) in excess of One
Hundred Thousand Dollars ($100,000). Any notice of prepayment given to Agent
under this
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Section 2.05(a) shall specify the date of prepayment and the aggregate principal
amount of the prepayment. All prepayments of principal shall be accompanied by a
payment of all accrued and unpaid interest thereon.
(b) Manner and Time of Payment. All payments of principal,
interest and fees hereunder payable to Agent, Swingline Lender, Issuing Lender
or the Lenders shall be made without condition or reservation of right and free
of set-off or counterclaim, in Dollars and by (i) wire transfer (pursuant to
Agent's written wire transfer instructions) of immediately available funds,
delivered to Agent not later than 11:00 A.M. (California time) (or 2:00 P.M.
(California time) in the case of a Swingline Loan) on the date due; and funds
received by Agent after that time and date shall be deemed to have been paid on
the next succeeding Business Day or (ii) by check (pursuant to Agent's written
check payment instructions) delivered to Agent, such check and the payment
intended to be covered thereby to be deemed to have been paid on the date Agent
receives immediately available funds therefor. All payments of principal,
interest and fees hereunder shall be made by (i) wire transfer of immediately
available funds to Wells Fargo Bank, N.A. (ABA number 121000248) for credit to
account number AC2963507207, reference MHC Operating Limited Partnership, loan
number 6023AMC with telephonic notice to Jean Randall-Hall at (310) 335-9492 or
(ii) check payable to Wells Fargo Bank, N.A., and delivered to Agent at 2120 E.
Park Place, Suite 100, El Segundo, California 90245, Attn: Jean Randall-Hall, or
to such other bank, account or address as Agent may specify in a written notice
to Borrower.
(c) Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in Section 2.04, as the case
may be.
Increased Capital.(a) If either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) compliance
by Agent, Swingline Lender, Issuing Lender or any Lender with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law and whether or not the failure to comply therewith would
be unlawful) made or issued after the Closing Date affects or would affect the
amount of capital required or expected to be maintained by Agent, Swingline
Lender, Issuing Lender or such Lender or any corporation controlling Agent,
Swingline Lender, Issuing Lender or such Lender, and Agent, Swingline Lender,
Issuing Lender or such Lender determines that the amount of such capital is
increased by or based upon the existence of the obligations of Agent, Swingline
Lender, Issuing Lender or such Lender, then, upon demand by Agent, Swingline
Lender, Issuing Lender or such Lender, Borrower shall immediately pay to Agent,
Swingline Lender, Issuing Lender or such Lender, from time to time as specified
by Agent, Swingline Lender, Issuing Lender or such Lender, additional amounts
sufficient to compensate Agent, Swingline Lender, Issuing Lender or such Lender
in light of such circumstances, to the extent that Agent, Swingline Lender,
Issuing Lender or such Lender reasonably determines such increase in capital to
be allocable to the existence of the obligations of Agent, Swingline Lender,
Issuing Lender or such Lender hereunder and to the extent Agent, Swingline
Lender, Issuing Lender or such Lender generally imposes such amounts on other
borrowers in similar circumstances. A certificate as to such amounts submitted
to Borrower by Agent, Swingline Lender, Issuing Lender or such Lender shall, in
the absence of manifest error, be conclusive and binding for all purposes.
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2.07 Notice of Increased Costs. Each of Agent, Swingline Lender, Issuing Lender
and the Lenders agrees that, as promptly as reasonably practicable after it
becomes aware of the occurrence of an event or the existence of a condition
which would cause it to be affected by any of the events or conditions described
in Section 2.03(g) or (h), or Section 2.06, it will notify Borrower and provide
in such notice a reasonably detailed calculation of the amount due from
Borrower, and provide a copy of such notice to Agent, of such event and the
possible effects thereof. If Agent, Swingline Lender, Issuing Lender or the
affected Lender shall fail to notify Borrower of the occurrence of any such
event or the existence of any such condition within ninety (90) days following
the end of the month during which such event occurred or such condition arose,
then Borrower's liability for any amounts described in said Sections 2.03(g) and
(h) and 2.06 incurred by Agent, Swingline Lender, Issuing Lender or such
affected Lender as a result of such event or condition shall be limited to those
attributable to the period occurring subsequent to the ninetieth (90th) day
prior to the date upon which Agent, Swingline Lender, Issuing Lender or such
affected Lender actually notified Borrower of such event or condition.
2.08 Option to Replace Lenders.
(a) Lenders. If any Lender shall make any demand for payment
or reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (a) there does not then exist any Unmatured Event of Default
or Event of Default and (b) the circumstances resulting in such demand for
payment or reimbursement are not applicable to all Lenders, Borrower may
terminate the Commitment of such Lender, in whole but not in part, by (i) giving
such Lender and Agent not less than three (3) Business Days prior written notice
thereof, which notice shall be irrevocable and effective only upon receipt
thereof by such Lender and Agent and shall specify the effective date of such
termination, (ii) paying to such Lender (and there shall become due and payable)
on such date the outstanding principal amount of all Loans made by such Lender,
all interest thereon, and all other Obligations owed to such Lender, including,
without limitation, amounts owing under Sections 2.03(g), 2.03(h)(iii), 2.04 and
2.06, if any, and (iii) pursuant to the provisions of Section 11.13, proposing
the introduction of a replacement Lender reasonably satisfactory to Agent, or
obtaining the agreement of one or more existing Lenders, to assume the entire
amount of the Commitment of the Lender whose Commitment is being terminated, on
the effective date of such termination. Upon the satisfaction of all of the
foregoing conditions, such Lender which is being terminated pursuant to this
Section 2.08 shall cease to be a "Lender" for purposes of this Agreement
provided that Borrower shall continue to be obligated to such Lender under
Sections 12.01 and 12.02 (and any other indemnifications contained herein or in
any other Loan Document) with respect to or on account of unpaid, unliquidated,
unknown or similar claims or liabilities accruing prior to such Lender ceasing
to be a "Lender" for purposes of this Agreement.
(b) Agent, Swingline Lender and Issuing Lender. If Agent,
Swingline Lender or Issuing Lender shall make any demand for payment or
reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (a) there does not then exist any Unmatured Event of Default
or Event of Default and (b) the circumstances resulting in such demand for
payment or reimbursement are not applicable to all Lenders, Borrower may remove
Agent, Swingline Lender and Issuing Lender by (i) giving the Lenders and Agent
not less than thirty (30) Business Days prior written notice thereof, and (ii)
paying to Agent, Swingline Lender and Issuing Lender (and there shall become due
and payable) on such date all other Obligations owed to Agent, Swingline Lender
and Issuing Lender, including, without limitation, amounts
33
owing under Sections 2.03(g), 2.03(h), 2.04 and 2.06, if any. Agent, Swingline
Lender and Issuing Lender shall be replaced in accordance with the provisions of
Section 11.09 hereof.
2.09 Letters of Credit.
(a) Letter of Credit Availability. Subject to the terms and
conditions set forth in this Agreement, at any time and from time to time
through the date that is thirty (30) days prior to the Maturity Date, Issuing
Lender shall issue such Letters of Credit for the account of Borrower as
Borrower may request in accordance with this Section 2.09; provided that (i)
upon issuance of such Letters of Credit, the sum of the aggregate principal
amount of all outstanding Loans (including Swingline Loans) plus the aggregate
face amount of all outstanding Letters of Credit shall not exceed Loan
Availability, provided, that if a Base Rate Loan is being made pursuant to
Section 2.09(e) hereof to reimburse Issuing Lender for a drawn Letter of Credit,
to avoid a duplicative reduction in the amount of Loan Availability, the drawn
Letter of Credit shall not be considered outstanding; (ii) the aggregate face
amount of all outstanding Letters of Credit shall not exceed Thirty Million
Dollars ($30,000,000); and (iii) unless all Lenders otherwise consent in
writing, the term of any Letter of Credit shall not extend or be extended beyond
the date which is ten (10) days prior to the Maturity Date and no Letter of
Credit shall contain an automatic extension or renewal clause. Use of funds
drawn under Letters of Credit shall be subject to the same conditions as those
for use of Loan proceeds set forth in Section 7.01(i) hereof.
(b) Request for Letter of Credit. Borrower shall deliver to
Agent and Issuing Lender a duly executed letter of credit application
substantially in the form attached as Exhibit H hereto (a "Letter of Credit
Application") not later than 10:00 A.M., (California time), at least five (5)
Business Days prior to the date upon which a requested Letter of Credit is to be
issued. Borrower shall further deliver to Agent and Issuing Lender such
additional instruments and documents as Issuing Lender may reasonably require,
in conformity with customary and commercially reasonable practices or law, in
connection with the issuance of such Letter of Credit.
(c) Issuance of Letters of Credit. Subject to the conditions
set forth in this Agreement, Issuing Lender shall issue the Letter of Credit on
or before 5:00 P.M. (California time), on or before the day which is five (5)
Business Days following receipt of the documents last due pursuant to Section
2.09(b) hereof in respect thereof. Upon issuance of a Letter of Credit, Issuing
Lender shall promptly notify Lenders of the amount and terms thereof. Issuing
Lender shall provide copies of each Letter of Credit to Lenders promptly
following issuance thereof and shall notify Lenders promptly of all payments,
reimbursements, expirations, negotiations, transfers and other activity with
respect to outstanding Letters of Credit.
(d) Participations. Each Lender, upon issuance by Issuing
Lender of a Letter of Credit in accordance with the provisions of this
Agreement, shall be deemed to have purchased without recourse a risk
participation from Issuing Lender in such Letter of Credit and the obligations
arising thereunder, in each case in an amount equal to its Pro Rata Share of the
obligations under such Letter of Credit, and shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety, and be obligated
to pay to Issuing Lender therefor and discharge when due, its Pro Rata Share of
the obligations arising under such Letter of Credit.
34
(e) Reimbursement. In the event of any drawing or request for
drawing under any Letter of Credit, Issuing Lender will promptly notify Borrower
and Agent thereof. Unless Borrower shall notify Issuing Lender of its intent to
otherwise reimburse Issuing Lender immediately upon receipt of notice from
Issuing Lender of a drawing under a Letter of Credit, Borrower shall be deemed
to have requested Base Rate Loans in the amount of the drawing as provided in
subsection (f) hereof, the proceeds of which will be used to satisfy the
reimbursement obligations. Borrower shall reimburse Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a Loan obtained
hereunder or otherwise) in same day funds as provided herein. If Borrower shall
fail to reimburse Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to the Base
Rate plus two percent (2%). Borrower's reimbursement obligations hereunder shall
be absolute and unconditional under all circumstances irrespective of any rights
of set-off, counterclaim or defense to payment Borrower may claim or have
against Issuing Lender, Agent, the Lenders, the beneficiary of the Letter of
Credit drawn upon or any other Person, including, without limitation, any
defense based on any failure of Borrower to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of Credit;
provided, however, that (i) the Borrower shall not be obligated to reimburse
Issuing Lender and (ii) Lenders shall not be obligated to fund Loans or purchase
participations hereunder in reimbursement of Issuing Lender, for any wrongful
payment made by Issuing Lender under a Letter of Credit as a result of acts or
omissions constituting bad faith, willful misconduct or gross negligence on the
part of Issuing Lender. The Letter of Credit Obligations will be evidenced by
the Letter of Credit Note.
(f) Repayment with Loans. On any day on which Borrower shall
have requested, or been deemed to have requested, Base Rate Loans to reimburse a
drawing under a Letter of Credit, Agent shall give notice to the Lenders that
such Loans have been requested or deemed requested in connection with a drawing
under a Letter of Credit, in which case such Loans (collectively, a "Letter of
Credit Mandatory Borrowing") shall be immediately made by all Lenders (without
giving effect to any termination of the Commitments pursuant to Section 10.02
hereof) pro rata based on each Lender's Pro Rata Share and the proceeds thereof
shall be paid directly to Issuing Lender for application to the respective
Letter of Credit Obligations. Each Lender hereby irrevocably agrees to make such
Loans promptly upon any such request or deemed request in the amount and in the
manner specified in the preceding sentence and on the same such date (or the
next Business Day if such notice is received after 10:00 A.M. (California time))
notwithstanding (i) the amount of the Letter of Credit Mandatory Borrowing may
not comply with the minimum amount for Borrowings otherwise required hereunder,
(ii) whether any conditions specified in Section 4.02 are then satisfied, (iii)
whether an Event of Default or Unmatured Event of Default then exists, (iv)
failure of any such request or deemed request for a Borrowing to be made by the
time otherwise required in Section 2.01 hereof, (v) the date of such Letter of
Credit Mandatory Borrowing (provided that such date must be a Business Day), or
(vi) any termination of the Commitments immediately prior to such Letter of
Credit Mandatory Borrowing or contemporaneously therewith. In the event that any
Letter of Credit Mandatory Borrowing cannot for any reason occur in respect of a
Letter of Credit on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the Bankruptcy
Code with respect to Borrower), then each Lender hereby agrees that it shall
forthwith fund (as of the date the Letter of Credit Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments received from Borrower on
or after such date and prior to such funding) its participation interest in the
outstanding obligations arising in
35
connection with such Letter of Credit, provided that (A) all interest payable on
Borrower's reimbursement obligation with respect to such Letter of Credit shall
be for the account of Issuing Lender until but excluding the day upon which the
Letter of Credit Mandatory Borrowing would otherwise have occurred, and (B) in
the event of a delay between the day upon which the Letter of Credit Mandatory
Borrowing would otherwise have occurred and the time any funding of a
participation pursuant to this sentence is actually made, the funding Lender
shall be required to pay to the Issuing Lender interest on the principal amount
of such participation for each day from and including the day upon which the
Letter of Credit Mandatory Borrowing would otherwise have occurred to but
excluding the date of funding of such participation, at the rate equal to the
Federal Funds Rate, for the two (2) Business Days after the date the Letter of
Credit Mandatory Borrowing would otherwise have occurred, and thereafter at a
rate equal to the Base Rate.
(g) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit shall,
for purposes hereof, be treated in all respects the same as if it were the
issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. Issuing Lender may have the
Letters of Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
deemed in all respects to be a part thereof.
(i) Collateralization at Termination Date. Upon the occurrence
of the Termination Date prior to the expiration of all Letters of Credit,
Borrower shall provide to Issuing Lender a standby letter of credit issued by a
bank with a rating of its senior unsecured debt obligations of not less than A
by Moody's, in form and substance satisfactory to Issuing Lender, in favor of
Issuing Lender in a face amount equal to the outstanding Letters of Credit on
that date, or shall make other provisions satisfactory to Issuing Lender and
Agent for the full collateralization, by cash or cash equivalent, of such
outstanding Letters of Credit. In the event of failure of Borrower to comply
with the requirement of this Section 2.09(i), such portion of the face amount of
all outstanding Letters of Credit as to which Borrower has failed to comply
shall be deemed to be immediately due and payable.
(j) Limitation of Liability. Borrower assumes all risks of the
acts or omissions of any beneficiary or transferee of any Letter of Credit with
respect to its use of such Letter of Credit absent the bad faith, gross
negligence or willful misconduct of Issuing Lender. Neither Issuing Lender,
Agent, any Lender nor any of their respective officers, directors, employees or
agents shall be liable or responsible for, nor shall Borrower's obligations
hereunder in respect of such Letters of Credit be impaired as a result of any of
the following absent the bad faith, gross negligence or willful misconduct of
Issuing Lender:
(i) any lack of validity or enforceability of any
Letter of Credit or any other agreement or instrument relating
thereto (such Letter of Credit and any other agreement or
instrument relating thereto being, collectively, the "Letter
of Credit Documents");
(ii) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in
connection therewith;
36
(iii) any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) the existence of any claim, setoff, defense or
other right that Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee
may be acting), Issuing Lender or any other Person, whether in
connection with the transactions contemplated by the Letter of
Credit Documents or any unrelated transaction;
(v) failure of any documents to bear any reference or
adequate reference to the Letter of Credit; or
(vi) any other circumstances whatsoever in making or
failing to make payment under any Letter of Credit.
In furtherance and not in limitation of the foregoing, Issuing Lender may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary,
absent the bad faith, gross negligence or willful misconduct of Issuing Lender.
(k) Lenders. Any action taken or omitted to be taken by
Issuing Lender under or in connection with any Letter of Credit, if taken or
omitted in the absence of bad faith, gross negligence or willful misconduct,
shall not put Issuing Lender under any resulting liability to any Lender or
relieve that Lender of its obligations hereunder to Issuing Lender. In
determining whether to pay under any Letter of Credit, Issuing Lender shall have
no obligations to Lenders other than to confirm that any documents required to
be delivered under such Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of such Letter of
Credit.
(l) Indemnification. Borrower shall indemnify and hold
harmless Issuing Lender, Agent and Lenders from and against any and all claims,
damages, losses, liabilities, reasonable costs and expenses of any kind
whatsoever, including reasonable fees and expenses of attorneys that such
indemnified Person may incur, together with all reasonable costs and expenses
resulting from the compromise or defense of any claims or liabilities
hereinafter described, by reason of or in connection with (i) the execution and
delivery or transfer of, or payment or failure to pay under, any Letter of
Credit, (ii) any suit, action or proceeding brought by any Person to require or
present payment under any Letter of Credit, or (iii) any breach by Borrower of
any warranty, covenant, term or condition in, or the occurrence of any default
under, any Letter of Credit or any related contract; provided, however, that
Borrower shall not be required to indemnify Issuing Lender, Agent or any Lender
for any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by the willful misconduct, gross negligence, bad
faith or fraud of such indemnified Person; and provided, further, that Issuing
Lender will be liable to Borrower for any damages suffered by Borrower as a
result of Issuing Lender's grossly negligent or willful failure to pay under any
Letter of Credit after the presentment to it of documentation in strict
compliance with the terms and conditions of
37
the Letter of Credit and absent any challenge by any Person (other than Issuing
Lender or any of its affiliates) to the making of such payment.
2.10 Swingline Loans
(a) Swingline Availability. Subject to the terms and
conditions set forth in this Agreement, Swingline Lender agrees to make certain
revolving loans to Borrower (each a "Swingline Loan" and, collectively, the
"Swingline Loans") from time to time during the period from the Closing Date to
the fifth day preceding the Maturity Date; provided, however, that the aggregate
amount of Swingline Loans outstanding at any time shall not exceed the lesser of
(i) THIRTY MILLION DOLLARS ($30,000,000), and (ii) the excess of Loan
Availability over the sum of the aggregate principal amount of all outstanding
Loans (excluding Swingline Loans) plus the aggregate face amount of all
outstanding Letters of Credit, provided, that if a Base Rate Loan is being made
pursuant to Section 2.09(e) hereof to reimburse Issuing Lender for a drawn
Letter of Credit, to avoid a duplicative reduction in the amount of Loan
availability, the drawn Letter of Credit shall not be considered outstanding.
Subject to the limitations set forth herein, any amounts repaid in respect of
Swingline Loans may be reborrowed.
(b) Swingline Borrowings.
(i) Notice of Borrowing. Whenever Borrower desires to
borrow under this Section 2.10, Borrower shall give Swingline
Lender and Agent at Wells Fargo Real Estate Group Disbursement
Center, 2120 East Park Place, Suite 100, El Segundo,
California 90245, with a copy to Wells Fargo Bank, N.A., 225
West Wacker Drive, Suite 2550, Chicago, Illinois 60606, Attn:
Account Officer, or such other address as Agent shall
designate, an original or facsimile Notice of Borrowing no
later than 11:00 A.M. (California time) on the proposed date
of such borrowing (and confirmed by telephone by such time),
specifying (A) that a Swingline Loan is being requested, (B)
the amount of such Swingline Loan, (C) the proposed date of
such Swingline Loan, which shall be a Business Day, and (D)
stating that no Event of Default or Unmatured Event of Default
has occurred and is continuing both before and after giving
effect to such Swingline Loan. Such notice shall be
irrevocable.
(ii) Minimum Amounts; Frequency of Swingline Loans.
Each Swingline Loan shall be in a minimum principal amount of
$1,000,000, or an integral multiple of $100,000 in excess
thereof. Swingline Loans shall be available no more frequently
than six (6) times in any month.
(iii) Making of Swingline Loans. Swingline Lender
shall make the proceeds of each Swingline Loan available to
Borrower in El Segundo, California on the applicable Funding
Date in Dollars and in immediately available funds not later
than 1:00 P.M. (California time) on such Funding Date to
Borrower's account, at Bank of America, Account Number
75-01943 in Chicago, Illinois or such other account specified
in the Notice of Borrowing and acceptable to Agent.
(iv) Repayment of Swingline Loans. Each Swingline Loan
shall be due and payable on the earliest of (A) five (5) days
from the date of the applicable
38
Funding Date for such Swingline Loan, (B) the date of the next
Borrowing under Section 2.01 hereof (other than a Letter of
Credit Mandatory Borrowing) or (C) the Termination Date. If,
and to the extent, any Swingline Loans shall be outstanding on
the date of any Borrowing under Section 2.01 hereof (other
than a Letter of Credit Mandatory Borrowing), such Swingline
Loans shall first be repaid from the proceeds of such
Borrowing prior to the disbursement of the same to Borrower.
If, and to the extent, a Borrowing under Section 2.01 hereof
(other than a Letter of Credit Mandatory Borrowing) is not
requested prior to the Termination Date or the end of the five
(5) day period after a Swingline Loan is made, Borrower shall
be deemed to have requested Base Rate Loans in the amount of
the applicable Swingline Loan then outstanding, the proceeds
of which shall be used to repay such Swingline Loan to the
Swingline Lender. In addition, the Swingline Lender may, at
any time, in its sole discretion, by written notice to
Borrower and Agent, demand repayment of its Swingline Loans by
way of Base Rate Loans, in which case Borrower shall be deemed
to have requested Base Rate Loans in the amount of such
Swingline Loans then outstanding, the proceeds of which shall
be used to repay such Swingline Loans to the Swingline Lender.
Any Borrowing which is deemed requested by Borrower in
accordance with this Section 2.10(b)(iv) is hereinafter
referred to as a "Swingline Mandatory Borrowing". Each Lender
hereby irrevocably agrees to make Base Rate Loans in
accordance with its Pro Rata Share promptly upon receipt of
notice from the Swingline Lender of any such deemed request
for a Swingline Mandatory Borrowing in the amount and in the
manner specified in the preceding sentences and on the date
such notice is received by such Lender (or the next Business
Day if such notice is received after 10:00 A.M. (California
time)) notwithstanding (I) the amount of the Swingline
Mandatory Borrowing may not comply with the minimum amount for
Borrowings otherwise required hereunder, (II) whether any
conditions specified in Section 4.02 hereof are then
satisfied, (III) whether an Event of Default or Unmatured
Event of Default then exists, (IV) failure of any such deemed
request for a Borrowing to be made by the time otherwise
required in Section 2.01 hereof, (V) the date of such
Swingline Mandatory Borrowing (provided that such date must be
a Business Day), or (VI) any termination of the Commitments
immediately prior to such Swingline Mandatory Borrowing or
contemporaneously therewith; provided, however, that no Lender
shall be obligated to make any Loans under this Section
2.10(b)(iv) if an Event of Default or Unmatured Event of
Default then exists and the applicable Swingline Loan was made
by the Swingline Lender without receipt of a written Notice of
Borrowing in the form specified in subclause (i) above or
after Agent had delivered a notice of an Event of Default or
Unmatured Event of Default which had not been rescinded.
(v) Purchase of Participations. In the event that any
Swingline Mandatory Borrowing cannot for any reason occur on
the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to Borrower), then each
Lender hereby agrees that it shall forthwith purchase (as of
the date the Swingline Mandatory Borrowing would otherwise
have occurred, but adjusted for any payment received from
Borrower on or after such date and prior to such purchase)
39
from the Swingline Lender such participations in the
outstanding Swingline Loans as shall be necessary to cause
each such Lender to share in such Swingline Loans ratably
based upon its Pro Rata Share, provided that (A) all interest
payable on the Swingline Loans with respect to any
participation shall be for the account of the Swingline Lender
until but excluding the day upon which the Swingline Mandatory
Borrowing would otherwise have occurred, and (B) in the event
of a delay between the day upon which the Swingline Mandatory
Borrowing would otherwise have occurred and the time any
purchase of a participation pursuant to this sentence is
actually made, the purchasing Lender shall be required to pay
to the Swingline Lender interest on the principal amount of
such participation for each day from and including the day
upon which the Swingline Mandatory Borrowing would otherwise
have occurred to but excluding the date of payment for such
participation, at the rate equal to the Federal Funds Rate,
for the two (2) Business Days after the date the Swingline
Mandatory Borrowing would otherwise have occurred, and
thereafter at a rate equal to the Base Rate. Notwithstanding
the foregoing, no Bank shall be obligated to purchase a
participation in any Swingline Loan if an Event of Default or
Unmatured Event of Default then exists and such Swingline Loan
was made by the Swingline Lender without receipt of a written
Notice of Borrowing in the form specified in subclause (i)
above or after Agent had delivered a notice of an Event of
Default or Unmatured Event of Default which had not been
rescinded.
(c) Interest Rate. Each Swingline Loan shall bear interest at
a rate per annum equal to the Base Rate minus 1.5% per annum.
ARTICLE III.
EXTENSION OPTIONS
3.01 First Extension Option. At the written request of
Borrower made at least thirty (30) days prior to the Initial Maturity Date, the
Maturity Date shall be extended to the one-year anniversary of the Initial
Maturity Date (the "First Extended Maturity Date") provided that the following
conditions are satisfied:
(a) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing as of the Initial Maturity Date;
(b) all representations and warranties made by Borrower and
the REIT contained in this Agreement and the other Loan Documents shall be true
and correct in all material respects as of the Initial Maturity Date except to
the extent they related to a specific date;
(c) Agent shall have received Officer's Certificates of the
REIT dated as of the Initial Maturity Date stating that the executive officer
who is the signatory thereto, which officer shall be the chief executive officer
or the chief financial officer of the REIT, has reviewed, or caused under his
supervision to be reviewed, the terms of this Agreement and the other Loan
Documents, and has made, or caused to be made under his supervision, a review in
40
reasonable detail of the transactions and condition of Borrower, the REIT, the
Subsidiaries, and the Agreement Parties, and that (A) such review has not
disclosed the existence as of the date of such Officer's Certificate, and that
the signer does not have knowledge of the existence as of the date of such
Officer's Certificate, of any condition or event which constitutes an Event of
Default or Unmatured Event of Default and (B) all representations and warranties
made by such entities contained in this Agreement and the other Loan Documents
are true and correct in all material respects as of the date of such Officer's
Certificate except to the extent they relate to a specific date; and
(d) on or before the Initial Maturity Date, Agent shall have
received, on behalf of Agent and Lenders, an extension fee in the amount of
one-fourth of one percent (0.25%) of the amount of the Facility.
3.02 Second Extension Option. At the written request of
Borrower made at least thirty (30) days prior to the First Extended Maturity
Date, the Maturity Date shall be further extended to the one-year anniversary of
the First Extended Maturity Date (the "Second Extended Maturity Date") provided
that the following conditions are satisfied:
(a) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing as of the First Extended Maturity Date;
(b) all representations and warranties made by Borrower and
the REIT contained in this Agreement and the other Loan Documents shall be true
and correct in all material respects as of the First Extended Maturity Date
except to the extent they related to a specific date;
(c) Agent shall have received Officer's Certificates of the
REIT dated as of the First Extended Maturity Date stating that the executive
officer who is the signatory thereto, which officer shall be the chief executive
officer or the chief financial officer of the REIT, has reviewed, or caused
under his supervision to be reviewed, the terms of this Agreement and the other
Loan Documents, and has made, or caused to be made under his supervision, a
review in reasonable detail of the transactions and condition of Borrower, the
REIT, the Subsidiaries, and the Agreement Parties, and that (A) such review has
not disclosed the existence as of the date of such Officer's Certificate, and
that the signer does not have knowledge of the existence as of the date of such
Officer's Certificate, of any condition or event which constitutes an Event of
Default or Unmatured Event of Default and (B) all representations and warranties
made by such entities contained in this Agreement and the other Loan Documents
are true and correct in all material respects as of the date of such Officer's
Certificate except to the extent they relate to a specific date; and
(d) on or before the First Extended Maturity Date, Agent shall
have received, on behalf of Agent and Lenders, an extension fee in the amount of
thirty-five hundredths of one percent (0.35%) of the amount of the Facility.
ARTICLE IV.
CONDITIONS TO LOANS
4.01 Intentionally Omitted.
41
4.02 Conditions Precedent to All Loans and Issuance of Letters
of Credit. The obligation of each Swingline Lender to make any Swingline Loan
requested to be made by it, the obligation of Lender to make any Loan requested
to be made by it, and the obligation of Issuing Lender to issue any Letter of
Credit requested to be issued by it, on any date, is subject to satisfaction of
the following conditions precedent as of such date:
(a) Documents. With respect to a request for a Loan, Agent
shall have received in accordance with the provisions of Section 2.01(b) hereof
or Section 2.10 hereof (as applicable), an original and duly executed Notice of
Borrowing. With respect to a request for a Letter of Credit, Agent and Issuing
Bank shall have received in accordance with the provisions of Section 2.09(b)
hereof, an original and duly executed Letter of Credit Application together with
such other documents as shall be required under Section 2.09(b) hereof.
(b) Additional Matters. As of the Funding Date for any Loan or
the issuance date of any Letter of Credit and after giving effect to the Loans
and/or Letters of Credit being requested:
(i) Representations and Warranties. All of the
representations and warranties of Borrower and the REIT
contained in this Agreement and in any other Loan Document
(other than representations and warranties which expressly
speak only as of a different date) shall be true and correct
in all material respects on and as of such Funding Date or
issuance date, as though made on and as of such date;
(ii) No Default. No Event of Default or Unmatured
Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan or issuance
for the requested Letter of Credit and all of the financial
covenants contained in Articles VIII and IX shall be
satisfied; and
(iii) No Material Adverse Change. No change shall have
occurred which shall have a Material Adverse Effect.
Each submission by Borrower to Agent of a Notice of Borrowing with respect to a
Loan or a request for a Letter of Credit and the acceptance by Borrower of the
proceeds of each such Loan made hereunder or the issuance of such Letter of
Credit hereunder shall constitute a representation and warranty by Borrower as
of the Funding Date in respect of such Loan or the date such Letter of Credit is
issued that all the conditions contained in this Section 4.02 have been
satisfied.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
5.01 Representations and Warranties as to Borrower. Borrower
hereby represents and warrants to Agent, Swingline Lender, Issuing Lender and
Lenders as follows:
(a) Organization; Partnership Powers. Borrower (i) is a
limited partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, (ii) is duly qualified to do
business as a foreign limited partnership and in good standing under the laws of
each jurisdiction in which the nature of its business requires it to be so
42
qualified, except for those jurisdictions where failure to so qualify and be in
good standing would not have a Material Adverse Effect and (iii) has all
requisite partnership power and authority to own, operate and encumber its
property and assets and to conduct its business as presently conducted and as
proposed to be conducted in connection with and following the consummation of
the transactions contemplated by the Loan Documents.
(b) Authority. Borrower has the requisite partnership power
and authority to execute, deliver and perform each of the Loan Documents to
which it is or will be a party. The execution, delivery and performance thereof,
and the consummation of the transactions contemplated thereby, have been duly
approved by the general partner of Borrower, and no other partnership
proceedings or authorizations on the part of Borrower or its general or limited
partners are necessary to consummate such transactions. Each of the Loan
Documents to which Borrower is a party has been duly executed and delivered by
Borrower and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.
(c) Ownership of Borrower. Schedule 5.01(c) sets forth the
general partners of Borrower and their respective ownership percentages as of
the date hereof. Except as set forth in the partnership agreement of Borrower,
no partnership interests (or any securities, instruments, warrants, option or
purchase rights, conversion or exchange rights, calls, commitments or claims of
any character convertible into or exercisable for partnership interests) of
Borrower are subject to issuance under any security, instrument, warrant, option
or purchase rights, conversion or exchange rights, call, commitment or claim of
any right, title or interest therein or thereto. To Borrower's knowledge, all of
the partnership interests in Borrower have been issued in compliance with all
applicable Requirements of Law.
(d) No Conflict. The execution, delivery and performance by
Borrower of the Loan Documents to which it is or will be a party, and each of
the transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or Certificate of Limited
Partnership or other organizational documents, as the case may be, or the
organizational documents of any Subsidiary of Borrower or (ii) conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under any Requirement of Law, Contractual Obligation or Court
Order of or binding upon Borrower or any of its Subsidiaries, or require
termination of any such Contractual Obligation, the consequences of which
conflict or breach or default or termination would have a Material Adverse
Effect, or result in or require the creation or imposition of any Lien
whatsoever upon any Property (except as contemplated herein).
(e) Consents and Authorizations. Borrower has obtained all
consents and authorizations required pursuant to its Contractual Obligations
with any other Person, the failure of which to obtain would have a Material
Adverse Effect, and has obtained all consents and authorizations of, and
effected all notices to and filings with, any Governmental Authority necessary
to allow Borrower to lawfully execute, deliver and perform its obligations under
the Loan Documents to which Borrower is a party.
(f) Governmental Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce
43
Act, the Investment Company Act of 1940 or any other federal or state statute or
regulation such that its ability to incur indebtedness is limited or its ability
to consummate the transactions contemplated by the Loan Documents is materially
impaired.
(g) Prior Financials. The Consolidated and Combined Balance
Sheet as of September 30, 2001, the Consolidated and Combined Statement of
Operations for the Quarter Ended September 30, 2001, and the Consolidated and
Combined Statement of Cash Flows for the Quarter Ended September 30, 2001 of the
REIT contained in the Form 10-Q Quarterly Report of the REIT as of September 30,
2001 (the "Pre-Closing Financials") delivered to Agent prior to the date hereof
were prepared in accordance with GAAP in effect on the date such Pre-Closing
Financials were prepared and fairly present the assets, liabilities and
financial condition of the REIT, on a consolidated basis, at such date and the
results of its operations and its cash flows, on a consolidated basis, for the
period then ended.
(h) Financial Statements; Projections and Forecasts. Each of
the Financial Statements to be delivered to Agent pursuant to Sections 6.01(a)
and (b), (i) has been, or will be, as applicable, prepared in accordance with
the books and records of the REIT, on a consolidated basis, and (ii) either
fairly present, or will fairly present, as applicable, the financial condition
of the REIT, on a consolidated basis, at the dates thereof (and, if applicable,
subject to normal year-end adjustments) and the results of its operations and
cash flows, on a consolidated basis, for the period then ended. Each of the
projections delivered to Agent (A) has been, or will be, as applicable, prepared
by the REIT and the REIT's financial personnel in light of the past business and
performance of the REIT, on a consolidated basis and (B) represent, or will
represent, as of the date thereof, the reasonable good faith estimates of such
personnel.
(i) Litigation; Adverse Effects.
(i) There is no action, suit, proceeding, governmental
investigation or arbitration, at law or in equity, or before
or by any Governmental Authority, pending, or to the best of
Borrower's knowledge, threatened against Borrower or any of
its Subsidiaries or any of their respective Properties, in
which there is a reasonable possibility of an adverse decision
that could have a Material Adverse Effect; and
(ii) Neither Borrower nor any of its Subsidiaries is
(A) in violation of any Requirement of Law, which violation
has a Material Adverse Effect, or (B) subject to or in default
with respect to any Court Order which has a Material Adverse
Effect.
(j) No Material Adverse Change. Since September 30, 2001,
there has occurred no event which has a Material Adverse Effect.
(k) Payment of Taxes. All tax returns and reports to be filed
by Borrower or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable will not have, in the aggregate, a Material Adverse Effect.
Borrower has
44
no knowledge of any proposed tax assessment against Borrower or any of its
Subsidiaries that will have a Material Adverse Effect, which is not being
actively contested in good faith by such Person.
(l) Material Adverse Agreements. Neither Borrower nor any of
its Subsidiaries is a party to or subject to any Contractual Obligation or other
restriction contained in its partnership agreement, certificate of partnership,
by-laws, or similar governing documents which has a Material Adverse Effect.
(m) Performance. Neither Borrower nor any of its Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute a default under such Contractual
Obligation in each case, except where the consequences, direct or indirect, of
such default or defaults, if any, will not have a Material Adverse Effect.
(n) Federal Reserve Regulations. No part of the proceeds of
the Loan hereunder will be used to purchase or carry any "margin security" as
defined in Regulation U or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulation U. Borrower is not
engaged primarily in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U. Borrower
is not engaged primarily in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U. No part of
the proceeds of the Loans will be used for any purpose that violates, or which
is inconsistent with, the provisions of Regulation X or any other regulation of
the Federal Reserve Board.
(o) Disclosure. Borrower has not intentionally or knowingly
withheld any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of
Borrower's future performance such representations and warranties are made in
good faith and to the best judgment of Borrower at the time such projections
were made.
(p) Requirements of Law. To Borrower's knowledge, Borrower and
each of its Subsidiaries are in compliance with all Requirements of Law
(including without limitation the Securities Act and the Securities Exchange
Act, and the applicable rules and regulations thereunder, state securities law
and "Blue Sky" laws) applicable to them and their respective businesses, in each
case, where the failure to so comply will have a Material Adverse Effect.
(q) Patents, Trademarks, Permits, Etc. Borrower and each of
its Subsidiaries owns, is licensed or otherwise has the lawful right to use, or
has all permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of Borrower's or such Subsidiary's business as currently conducted,
the absence of which would have a Material Adverse Effect. To Borrower's
knowledge, the use of such permits and other governmental approvals, patents,
trademarks, trade names, copyrights, technology, know-how and processes by
Borrower or such
45
Subsidiary does not infringe on the rights of any Person, subject to such claims
and infringements as do not, in the aggregate, have a Material Adverse Effect.
(r) Environmental Matters. To the knowledge of Borrower,
except as would not have a Material Adverse Effect and except as set forth on
Schedule 5.01(r), (i) the Property and operations of Borrower and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of Borrower or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental Laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither Borrower nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now, nor to Borrower's knowledge has
there ever been, on or in the Property of Borrower or any of its Subsidiaries
(except in compliance in all material respects with all applicable Environmental
Laws): (A) any underground storage tanks, (B) any asbestos-containing material,
(C) any polychlorinated biphenyls (PCB's) used in hydraulic oils, electrical
transformers or other equipment, (D) any petroleum hydrocarbons or (E) any
chlorinated or halogenated solvents; and (v) neither Borrower nor any of its
Subsidiaries has received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of a
Contaminant into the environment.
(s) ERISA. None of the REIT, Borrower or any Agreement Party
is an "employee pension benefit plan" as defined in Section 3(2) of ERISA, an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA, a
"multiemployer plan" as defined in Sections 4001(a)(3) or 3(37) of ERISA or a
"plan" as defined in Section 4975(e)(1) of the Internal Revenue Code. Except for
a prohibited transaction arising solely because of a Lender's breach of the
covenant set forth in Section 11.23, none of the Obligations, any of the Loan
Documents or the exercise of any of the Agent's or Lenders' rights in connection
therewith constitutes a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and the taxes and penalties imposed by Section 4975 of the Internal Revenue Code
and Section 502(i) of ERISA) or otherwise results in a Lender, the Agent or the
Lenders being deemed in violation of Sections 404 or 406 of ERISA or Section
4975 of the Internal Revenue Code or will by itself result in a Lender, Agent or
the Lenders being a fiduciary or party in interest under ERISA or a
"disqualified person" as defined in Section 4975(e)(2) of the Internal Revenue
Code with respect to an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code. No assets of the REIT, Borrower or any Agreement Party
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code.
Each Borrower Plan is in compliance with ERISA and the
applicable provisions of the Internal Revenue Code in all respects except where
the failure to comply would not have a Material Adverse Effect. There are no
claims (other than claims for benefits in the normal course), actions or
lawsuits asserted or instituted against, and none of Borrower, the REIT, any of
the Subsidiaries or any of their ERISA Affiliates has knowledge of any
threatened litigation or claims against the assets of any Borrower Plan or
against any fiduciary of such Borrower Plan
46
with respect to the operation of such Borrower Plan which could have a Material
Adverse Effect. No liability to the PBGC has been, or is likely to be, incurred
by Borrower, the REIT, any of the Subsidiaries or their ERISA Affiliates other
than such liabilities which, in the aggregate, would not have a Material Adverse
Effect. None of Borrower, the REIT, any of the Subsidiaries or any of their
ERISA Affiliates is now contributing to or has ever contributed to or been
obligated to contribute to any Multiemployer Plan, no employees or former
employees of Borrower, the REIT, any of the Subsidiaries or any of their ERISA
Affiliates have been covered by any Multiemployer Plan in respect of their
employment by Borrower or such Subsidiary or such ERISA Affiliate. None of
Borrower, the REIT, any of the Subsidiaries or any of their ERISA Affiliates has
engaged in a "prohibited transaction," as such term is defined in Section 4975
of the Internal Revenue Code or in a transaction subject to the prohibitions of
Section 406 of ERISA, in connection with any Benefit Plan or Welfare Plan which
would subject Borrower, the REIT, any of the Subsidiaries or any of their ERISA
Affiliates (after giving effect to any exemption) to the tax or penalty on
prohibited transactions imposed by Section 4975 of the Internal Revenue Code,
Section 502 of ERISA or any other liability under ERISA which tax, penalty or
other liability would have a Material Adverse Effect. None of the Benefit Plans
subject to Title IV of ERISA has any material Unfunded Pension Liability as to
which Borrower, the REIT, any of the Subsidiaries or any of their ERISA
Affiliates is or may be liable, which liability would have a Material Adverse
Effect.
(t) Solvency. Borrower is and will be Solvent after giving
effect to the disbursements of the Loans and the payment and accrual of all fees
then payable hereunder.
(u) Title to Assets; No Liens. Borrower has good, indefeasible
and merchantable title to the Property owned or leased by it, and all such
Property is free and clear of all Liens, except Permitted Liens and Liens
permitted by Section 8.01(b).
(v) Use of Proceeds. Borrower's use of the proceeds of the
Loans are, and will continue to be, legal and proper uses (and to the extent
necessary, duly authorized by Borrower's partners) and such uses are consistent
with all applicable laws and statutes and Section 7.01(i).
(w) Subsidiaries and Investment Affiliates. Each Subsidiary
and Investment Affiliate as of the date hereof is set forth on Schedule 5.01(w).
Schedule 5.01(w) sets forth the ownership of each such Subsidiary and Investment
Affiliate and the material Property owned by such Person as of the date hereof.
5.02 Representations and Warranties as to the REIT. The REIT
hereby represents and warrants to Agent, Swingline Lender, Issuing Lender and
Lenders as follows:
(a) Organization; Corporate Powers. The REIT (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland, (ii) is duly qualified to do business as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the nature of its business requires it to be so qualified, except for those
jurisdictions where failure to so qualify and be in good standing would not have
a Material Adverse Effect, and (iii) has all requisite corporate power and
authority to own, operate and encumber its property and assets and to conduct
its business as presently conducted and as
47
proposed to be conducted in connection with and following the consummation of
the transactions contemplated by the Loan Documents.
(b) Authority. The REIT has the requisite corporate power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the Board of Directors of the REIT, and no other corporate proceedings on the
part of the REIT are necessary to consummate such transactions. Each of the Loan
Documents to which the REIT is a party has been duly executed and delivered by
the REIT and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.
(c) No Conflict. The execution, delivery and performance by
the REIT of the Loan Documents to which it is a party, and each of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate its Articles or Certificate of Incorporation or by-laws, or other
organizational documents, as the case may be, or the organizational documents of
Borrower or any Subsidiary, (ii) conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under any
Requirement of Law, Contractual Obligation or Court Order of the REIT, Borrower
or any Subsidiary, or require termination of any such Contractual Obligation,
the consequences of which conflict or breach or default or termination will have
a Material Adverse Effect, or result in or require the creation or imposition of
any Lien whatsoever upon any of its Property, or (iii) require any approval of
the stockholders of the REIT.
(d) Consents and Authorizations. The REIT has obtained all
consents and authorizations required pursuant to its Contractual Obligations
with any other Person, the failure of which to obtain would have a Material
Adverse Effect, and has obtained all consents and authorizations of, and
effected all notices to and filings with, any Governmental Authority necessary
to allow the REIT to lawfully execute, deliver and perform its obligations under
the Loan Documents to which the REIT is a party.
(e) Governmental Regulation. The REIT is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any other federal or state statute or regulation such that its ability to incur
indebtedness is limited or its ability to consummate the transactions
contemplated by the Loan Documents is materially impaired.
(f) Capitalization. To the REIT's knowledge, all of the
capital stock of the REIT has been issued in compliance with all applicable
Requirements of Law.
(g) Litigation; Adverse Effects.
(i) There is no action, suit, proceeding,
governmental investigation or arbitration, at law or in
equity, or before or by any Governmental Authority, pending,
or to best of the REIT's knowledge, threatened against the
REIT, any of its Subsidiaries or any of their respective
Properties in which there is a reasonable possibility of an
adverse decision that could have a Material Adverse Effect;
and
48
(ii) Neither the REIT nor any of its Subsidiaries is
(A) in violation of any applicable Requirement of Law, which
violation has a Material Adverse Effect, or (B) subject to or
in default with respect to any Court Order which has a
Material Adverse Effect.
(h) Payment of Taxes. All tax returns and reports to be filed
by the REIT or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable would not have, in the aggregate, a Material Adverse Effect. The
REIT has no knowledge of any proposed tax assessment against the REIT or any of
its Subsidiaries that would have a Material Adverse Effect, which is not being
actively contested in good faith by the REIT or such Subsidiary.
(i) Material Adverse Agreements. The REIT is not a party to or
subject to any Contractual Obligation or other restriction contained in its
charter, by-laws, or similar governing documents which has a Material Adverse
Effect.
(j) Performance. Neither the REIT nor any of its Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute a default under such Contractual
Obligation in each case, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(k) Securities Activities. The REIT is not engaged principally
in the business of extending credit for the purpose of purchasing or carrying
any "margin stock" (as defined in Regulation U).
(l) Disclosure. The REIT has not intentionally or knowingly
withheld any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of the
REIT's future performance such representations and warranties are made in good
faith and to the best judgment of the management of the REIT at the time such
projections were made.
(m) Requirements of Law. To the REIT's knowledge, the REIT and
each of its Subsidiaries are in compliance with all Requirements of Law
(including without limitation the Securities Act and the Securities Exchange
Act, and the applicable rules and regulations thereunder, state securities law
and "Blue Sky" laws) applicable to them and their respective businesses, in each
case, where the failure to so comply would have a Material Adverse Effect. After
giving effect to all filings made simultaneously with the Closing Date, the REIT
has made all filings with and obtained all consents of the Commission required
under the Securities Act and the Securities Exchange Act in connection with the
execution, delivery and performance by the REIT of the Loan Documents to which
it is a party.
(n) Patents, Trademarks, Permits, Etc. The REIT and each of
its Subsidiaries owns, is licensed or otherwise has the lawful right to use, or
has all permits and other
49
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of the
REIT's or such Subsidiary's business as currently conducted, the absence of
which would have a Material Adverse Effect. To the REIT's knowledge, the use of
such permits and other governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how and processes by the REIT or such Subsidiary
does not infringe on the rights of any Person, subject to such claims and
infringements as do not, in the aggregate, have a Material Adverse Effect.
(o) Environmental Matters. To the knowledge of the REIT,
except as would not have a Material Adverse Effect and except as set forth on
Schedule 5.01(r), (i) the Property and operations of the REIT and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of the REIT or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental Laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither the REIT nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now, nor to the REIT's knowledge has
there ever been, on or in the Property of the REIT or any of its Subsidiaries
(except in compliance in all material respects with all applicable Environmental
Laws): (A) any underground storage tanks, (B) any asbestos-containing material,
(C) any polychlorinated biphenyls (PCB's) used in hydraulic oils, electrical
transformers or other equipment, (D) any petroleum hydrocarbons or (E) any
chlorinated or halogenated solvents; and (v) neither the REIT nor any of its
Subsidiaries has received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of a
Contaminant into the environment.
(p) Solvency. The REIT is and will be Solvent after giving
effect to the disbursement of the Loans and the payment of all fees then payable
hereunder.
(q) Status as a REIT. The REIT (i) is a real estate investment
trust as defined in Section 856 of the Internal Revenue Code (or any successor
provision thereto), (ii) has not revoked its election to be a real estate
investment trust, (iii) has not engaged in any "prohibited transactions" as
defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor
provision thereto), except for the transfer of manufactured home inventory from
Borrower to Realty Systems, Inc., a Delaware corporation (provided that such
transfer does not adversely affect the REIT's status as a real estate investment
trust under the Internal Revenue Code), and (iv) for its current "tax year" (as
defined in the Internal Revenue Code) is and for all prior tax years subsequent
to its election to be a real estate investment trust has been entitled to a
dividends paid deduction which meets the requirements of Section 857 of the
Internal Revenue Code.
(r) Ownership. The REIT does not own any Property or have any
interest in any Person, other than as set forth on Schedule 5.01(w).
(s) Listing. The common stock of the REIT is and will continue
to be listed for trading and traded on either the New York Stock Exchange or
American Stock Exchange.
50
ARTICLE VI.
REPORTING COVENANTS
Borrower covenants and agrees that, on and after the date
hereof, until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
6.01 Financial Statements and Other Financial and Operating
Information. Borrower shall maintain or cause to be maintained a system of
accounting established and administered in accordance with sound business
practices and consistent with past practice to permit preparation of quarterly
and annual financial statements in conformity with GAAP. Borrower shall deliver
or cause to be delivered to Agent with copies for each Lender:
(a) Quarterly Financial Statements Certified by CFO. As soon
as practicable, and in any event within fifty (50) days after the end of each
Fiscal Quarter, except the last Fiscal Quarter of a Fiscal Year, consolidated
balance sheets, statements of income and expenses and statements of cash flow
(collectively, "Financial Statements") for the REIT, on a consolidated basis, in
the form provided to the Commission on the REIT's Form 10-Q and certified by the
REIT's chief financial officer.
(b) Annual Financial Statements. Within one hundred and twenty
(120) days after the close of each Fiscal Year, annual Financial Statements of
the REIT, on a consolidated basis (in the form provided to the Commission on the
REIT's Form 10K), audited and certified without qualification by the
Accountants.
(c) Officer's Certificate of REIT. (i) Together with each
delivery of any Financial Statement pursuant to clauses (a) and (b) above, an
Officer's Certificate of the REIT, stating that (A) the executive officer who is
the signatory thereto, which officer shall be the chief executive officer or the
chief financial officer of the REIT, has reviewed, or caused under his
supervision to be reviewed, the terms of this Agreement and the other Loan
Documents, and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of Borrower, the REIT, the
Subsidiaries, and the Agreement Parties, during the accounting period covered by
such Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signer does not
have knowledge of the existence as of the date of the Officer's Certificate, of
any condition or event which constitutes an Event of Default or Unmatured Event
of Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto and (B) such Financial
Statements have been prepared in accordance with the books and records of the
REIT, on a consolidated basis, and fairly present the financial condition of the
REIT, on a consolidated basis, at the date thereof (and, if applicable, subject
to normal year-end adjustments) and the results of operations and cash flows, on
a consolidated basis, for the period then ended; and (ii) together with each
delivery pursuant to clauses (a) and (b) above, a compliance certificate
demonstrating, in reasonable detail (which detail shall include actual
calculations), compliance during and at the end of such accounting periods with
the financial covenants contained in Sections 8.01(a), 8.01(d) and 8.02(a) and
Article IX.
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(d) Knowledge of Event of Default. Promptly upon Borrower
obtaining knowledge (i) of any condition or event which constitutes an Event of
Default or Unmatured Event of Default, or (ii) of any condition or event which
has a Material Adverse Effect, an Officer's Certificate of the REIT specifying
the nature and period of existence of any such condition or event and the nature
of such claimed Event of Default, Unmatured Event of Default, event or
condition, and what action Borrower, the REIT or the Agreement Party, as the
case may be, has taken, is taking and proposes to take with respect thereto.
(e) Litigation, Arbitration or Government Investigation.
Promptly upon Borrower obtaining knowledge of (i) the institution of, or threat
of, any material action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower, any Agreement Party, the REIT, any
Subsidiary or any of their Property not previously disclosed in writing by
Borrower to Agent pursuant to this Section 6.01(f), or (ii) any material
development in any action, suit, proceeding, governmental investigation or
arbitration already disclosed, in which, in either case, there is a reasonable
possibility of an adverse decision that could have a Material Adverse Effect, a
notice thereof to Agent and such other information as may be reasonably
available to it to enable Agent and its counsel to evaluate such matters.
(f) Failure of the REIT to Qualify as Real Estate Investment
Trust. Promptly upon, and in any event within forty- eight (48) hours after
Borrower first has knowledge of (i) the REIT failing to continue to qualify as a
real estate investment trust as defined in Section 856 of the Internal Revenue
Code (or any successor provision thereof), (ii) any act by the REIT causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the REIT to be subject to the taxes imposed by Section 857(b)(6)
of the Internal Revenue Code (or any successor provision thereto), (iv) the REIT
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Internal Revenue Code, or (v) any challenge
by the IRS to the REIT's status as a real estate investment trust, a notice of
any such occurrence or circumstance.
(g) Management Reports. Upon and after the occurrence of an
Event of Default, copies of any management reports prepared by the Accountants
as soon as available.
(h) Property Changes. Notice of any material acquisition,
disposition, merger, or purchase by the REIT, Borrower, any Subsidiary or any
Agreement Party no later than ten (10) days after the consummation thereof,
specifying the nature of the transaction in reasonable detail.
(i) Other Information. Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments in the
possession of the REIT, Borrower, any Subsidiary, or any Agreement Party with
respect to the business, financial condition, operations, performance, or
properties of Borrower, the REIT, any Subsidiary, or any Agreement Party, as
Agent may, from time to time, reasonably request, including without limitation,
annual information with respect to cash flow projections, budgets, operating
statements (current year and immediately preceding year), rent rolls, lease
expiration reports, leasing status reports, note payable summaries, bullet note
summaries, equity funding requirements, contingent liability summaries, line of
credit summaries, line of credit collateral summaries, wrap note or note
receivable summaries, schedules of outstanding letters of credit, summaries of
cash and Cash Equivalents, projections of management and leasing fees and
overhead budgets, each in the form
52
customarily prepared by the REIT or Borrower. If Borrower fails to provide Agent
with information requested from Borrower within the time periods provided for
herein, or if no time periods are provided for, within ten (10) Business Days
after Agent requests such information, and provided that Agent gives Borrower
reasonable prior notice and an opportunity to participate, Borrower hereby
authorizes Agent to communicate with the Accountants and authorizes the
Accountants to disclose to Agent any and all financial statements and other
information of any kind, including copies of any management letter or the
substance of any oral information, that such Accountants may have with respect
to the financial condition, operations, properties, performance and prospects of
Borrower, the REIT, any Subsidiary, or any Agreement Party. Concurrently
therewith, Agent will notify Borrower of any such communication. At Agent's
request, Borrower shall deliver a letter addressed to the Accountants
instructing them to disclose such information in compliance with this Section
6.01(s).
6.02 Press Releases; SEC Filings and Financial Statements. The
REIT and Borrower will deliver to the Agent as soon as practicable after public
release all press releases concerning the REIT or Borrower. The REIT and
Borrower will deliver to Agent as soon as practicable after filing with the
Commission, all reports and notices, proxy statements, registration statements
and prospectuses. All materials sent or made available generally by the REIT to
the holders of its publicly-held Securities or to a trustee under any indenture
or filed with the Commission, including all periodic reports required to be
filed with the Commission, will be delivered to Agent as soon as available.
6.03 Environmental Notices. Except for events or occurrences
that will not result in a Material Adverse Effect, Borrower shall notify Agent,
in writing, as soon as practicable, and in any event within ten (10) days after
Borrower's learning thereof, of any: (a) written notice or claim to the effect
that Borrower, any Agreement Party, the REIT, or any Subsidiary is or may be
liable to any Person as a result of the Release or threatened Release of any
Contaminant into the environment; (b) written notice that Borrower, any
Agreement Party, the REIT, or any Subsidiary is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (c) written notice that any Property of Borrower, any Agreement
Party, the REIT, or any Subsidiary is subject to an Environmental Lien; (d)
written notice of violation to Borrower, any Agreement Party, the REIT, or any
REIT Subsidiary or awareness of a condition which might reasonably result in a
notice of violation of any Environmental Laws by Borrower, the REIT, any REIT
Subsidiary or any Agreement Party; (e) commencement or written threat of any
judicial or administrative proceeding alleging a violation by Borrower, the
REIT, any Subsidiary or any Agreement Party of any Environmental Laws; or (f)
written notice received directly from a Governmental Authority of any changes to
any existing Environmental Laws.
6.04 Qualifying Unencumbered Properties. Borrower may from
time to time but no more frequently than quarterly deliver notice to the Agent
stating that Borrower intends to designate a Property to become a Qualifying
Unencumbered Property. Such notice shall (i) set forth the name of such Property
(or, if such Property has no name, such notice shall otherwise identify such
Property), and (ii) be accompanied by a statement of income, certified by the
chief financial officer of the REIT, for each such Property for the then most
recently completed Fiscal Quarter (or, if such statement of income is
unavailable, a pro forma financial statement setting forth the Net Operating
Income with respect to such Property for the then current Fiscal Quarter).
53
If any such Property meets the requirements set forth in the definition of
"Qualifying Unencumbered Properties" and the Agent fails to deliver written
notice to Borrower stating that the Requisite Lenders have disapproved the
designation of such Property as a Qualifying Unencumbered Property (it being
understood that such notice shall provide Borrower with information regarding
why such designation was disapproved by the Requisite Lenders and that the
Requisite Lenders will not unreasonably disapprove such designation) within
twenty (20) days after receipt of such information by Agent, such Property shall
become a Qualifying Unencumbered Property.
ARTICLE VII.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, on and after the date
hereof, until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
7.01 With respect to Borrower:
(a) Existence. Borrower shall, and shall cause each of its
Subsidiaries to, at all times maintain its and their respective partnership
limited liability company, trust or corporate existence, as applicable, and
preserve and keep in full force and effect its and their respective rights and
franchises unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect. Borrower shall maintain its status as a limited
partnership.
(b) Qualification. Borrower shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses require them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect.
(c) Compliance with Laws, Etc. Borrower shall, and shall cause
each of its Subsidiaries to, (i) comply with all Requirements of Law and
Contractual Obligations, and all restrictive covenants affecting Borrower and
its Subsidiaries or their respective properties, performance, assets or
operations, and (ii) obtain as needed all Permits necessary for its and their
respective operations and maintain such in good standing, except in each of the
foregoing cases where the failure to do so will not have a Material Adverse
Effect or expose Agent or Lenders to any material liability therefor.
(d) Payment of Taxes and Claims. (a) Borrower shall, and shall
cause each of its Subsidiaries to, pay (i) all taxes, assessments and other
governmental charges imposed upon it or them or on any of its or their
respective properties or assets or in respect of any of its or their respective
franchises, business, income or property before any penalty or interest accrues
thereon, the failure to make payment of which in such time periods would have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which would have a Material Adverse Effect; provided, however, that
no such taxes, assessments, and governmental charges referred to in clause (i)
above or
54
claims referred to in clause (ii) above need be paid if being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if adequate reserves shall have been set aside therefor in accordance with
GAAP.
(e) Maintenance of Properties; Insurance. Borrower shall, and
shall cause each of its Subsidiaries to, maintain in good repair, working order
and condition, excepting ordinary wear and tear, all of its and their respective
Property (personal and real) and will make or cause to be made all appropriate
repairs, renewals and replacements thereof, in each case where the failure to so
maintain, repair, renew or replace would have a Material Adverse Effect.
Borrower shall, and shall cause each of its Subsidiaries to, maintain with
insurance companies that have a Best Rating of "A- VII" or higher or other
insurance companies reasonably acceptable to Agent that have similar financial
resources and stability, which companies shall be qualified to do business in
the states where such Property is located, the insurance policies and programs
reasonably acceptable to Agent insuring all property and assets material to the
operations of Borrower and each of its Subsidiaries against loss or damage by
fire, theft, burglary, pilferage and loss in transit and business interruption,
together with such other hazards as is reasonably consistent with prudent
industry practice, and maintain liability insurance consistent with prudent
industry practice with financially sound insurance companies qualified to do
business in the states where such Property is located. The insurance policies
shall provide that they cannot be terminated or materially modified unless Agent
receives thirty (30) days prior written notice of said termination or
modification. At Agent's reasonable request, Borrower shall furnish evidence of
replacement costs, without cost to Agent, such as are regularly and ordinarily
made by insurance companies to determine the then replacement cost of the
improvements on any Property of Borrower or any of its Subsidiaries. In the
event Borrower fails to cause insurance to be carried as aforesaid, Agent shall
have the right (but not the obligation), with the consent of Requisite Lenders,
to place and maintain insurance required to be maintained hereunder and treat
the amounts expended therefor as additional Obligations, payable on demand;
provided however, that Agent shall give Borrower five (5) days' prior notice of
Agent's intent to place or maintain such insurance during which time Borrower
shall have the opportunity to obtain such insurance. All of the insurance
policies required hereunder shall be in form and substance reasonably
satisfactory to Agent. Agent hereby agrees that Borrower may use blanket
policies to satisfy the requirements of this Section 7.01(e), approves the
issuer, form and content of all insurance policies currently carried by Borrower
and agrees that such insurance satisfies the requirements of this Section
7.01(e). Furthermore, Agent agrees that it will not be unreasonable in
exercising any right hereunder to require Borrower to modify, alter or
supplement its insurance policies or coverage or in exercising any right it may
have hereunder to approve any changes Borrower may hereafter make with respect
to its insurance.
(f) Inspection of Property; Books and Records. Borrower shall
permit and shall cause each of the REIT, each Subsidiary, and each Agreement
Party to, upon reasonable prior notice by Agent to Borrower, permit any
authorized representative(s) designated by Agent to visit and inspect any of its
properties including inspection of financial and accounting records and leases,
and to make copies and take extracts therefrom, all at such times during normal
business hours and as often as Agent may reasonably request. In connection
therewith, Borrower shall pay all reasonable expenses of the types described in
Section 12.01. Borrower shall keep, and shall cause each of, the REIT, each
Subsidiary and each Agreement Party to keep proper books of record and account
in conformity with GAAP, as modified and as otherwise required by this Agreement
and applicable Requirements of Law.
55
(g) Maintenance of Licenses, Permits, Etc. Borrower shall, and
shall cause each of its Subsidiaries to, maintain in full force and effect all
licenses, permits, governmental approvals, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of their respective businesses, except where the failure to obtain any
of the foregoing would not have a Material Adverse Effect; and notify Agent in
writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any such material
license, permit, patent, trademark, trade name, copyright, governmental
approval, franchise authorization or right, except where the suspension,
cancellation, revocation or discontinuance would not have a Material Adverse
Effect.
(h) Conduct of Business. Except for Permitted Holdings and
other investments permitted under Section 8.01(c), Borrower shall engage only in
the business of owning, operating, managing and developing manufactured home
communities, whether directly or through its Subsidiaries.
(i) Use of Proceeds. Borrower shall use the proceeds of each
Loan only for general partnership purposes in accordance with the provisions of
this Agreement. Notwithstanding anything contained in this Agreement to the
contrary, no Swingline Loan shall be used more than once for the purpose of
refinancing another Swingline Loan, in whole or part.
(j) Further Assurance. Borrower shall take and shall cause its
Subsidiaries and each Agreement Party to take all such further actions and
execute all such further documents and instruments as Agent may at any time
reasonably determine to be necessary or advisable to (i) correct any technical
defect or technical error that may be discovered in any Loan Document or in the
execution, acknowledgment or recordation thereof, and (ii) cause the execution,
delivery and performance of the Loan Documents to be duly authorized.
7.02 With respect to the REIT:
(a) Corporate Existence. The REIT shall, and shall cause each
of its Subsidiaries to, at all times maintain its and their respective
partnership or corporate existence, as applicable, and preserve and keep in full
force and effect its and their respective rights and franchises unless the
failure to maintain such rights and franchises will not have a Material Adverse
Effect.
(b) Qualification, Name. The REIT shall, and shall cause each
of its Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses requires them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect. The REIT will transact business solely in its or
its Subsidiaries' own name.
(c) Securities Law Compliance. The REIT shall comply in all
material respects with all rules and regulations of the Commission and file all
reports required by the Commission relating to the REIT's publicly-held
Securities.
(d) Continued Status as a REIT; Prohibited Transactions. The
REIT (i) will continue to be a real estate investment trust as defined in
Section 856 of the Internal Revenue
56
Code (or any successor provision thereto), (ii) will not revoke its election to
be a real estate investment trust, (iii) will not engage in any "prohibited
transactions" as defined in Section 856(b)(6)(iii) of the Internal Revenue Code
(or any successor provision thereto), and (iv) will do all acts necessary to
continue to be entitled to a dividend paid deduction meeting the requirements of
Section 857 of the Internal Revenue Code.
(e) NYSE or ASE Listed Company. The REIT shall cause its
common stock at all times to be listed for trading and be traded on the New York
Stock Exchange or American Stock Exchange.
(f) Compliance with Laws, Etc. The REIT shall, and shall cause
each of its Subsidiaries to, (i) comply with all Requirements of Law and
Contractual Obligations, and all restrictive covenants affecting the REIT and
its Subsidiaries or their respective properties, performance, prospects, assets
or operations, and (ii) obtain as needed all Permits necessary for its and their
respective operations and maintain such in good standing, except in each of the
foregoing cases where the failure to do so will not have a Material Adverse
Effect.
(g) Payment of Taxes and Claims. Subject to Section 7.02(d),
the REIT shall, and shall cause each of its Subsidiaries to, pay (i) all taxes,
assessments and other governmental charges imposed upon it or them or on any of
its or their respective properties or assets or in respect of any of its or
their respective franchises, business, income or property before any penalty or
interest accrues thereon, the failure to make payment of which would have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which would have a Material Adverse Effect; provided, however, that
no such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if adequate reserves shall have been set aside therefor in
accordance with GAAP.
ARTICLE VIII.
NEGATIVE COVENANTS
Borrower and the REIT covenant and agree that, on and after
the date hereof, until payment in full of all of the Obligations, the expiration
of the Commitments and termination of this Agreement:
8.01 With respect to Borrower:
(a) Indebtedness. Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) the Obligations;
(ii) trade debt incurred in the normal course of
business;
57
(iii) intercompany payables and receivables owing
between Subsidiaries in the nature of trade debt incurred in
the normal course of business; and
(iv) Indebtedness which, after giving effect thereto,
may be incurred or may remain outstanding without giving rise
to an Event of Default or Unmatured Event of Default under any
provision of Articles VIII and IX; provided, however, that (A)
the Borrower shall not, and shall not permit any of its
Subsidiaries to, guarantee or otherwise become or remain
directly or indirectly liable with respect to the Indebtedness
of any Investment Affiliate, and (B) Borrower shall not permit
any Subsidiary to create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to, any
Recourse Indebtedness in excess of Ten Million Dollars
($10,000,000) per Subsidiary at any time or Thirty Million
Dollars ($30,000,000) in the aggregate for all Subsidiaries at
any time.
(b) Liens. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:
(i) Permitted Liens; and
(ii) Liens securing Indebtedness permitted to be
incurred and remain outstanding pursuant to Section
8.01(a)(iv).
(c) Investments. Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly make or own any Investment
except:
(i) Investments in cash and Cash Equivalents;
(ii) Permitted Holdings;
(iii) Investments in Subsidiaries and Investment
Affiliates owned as of the Closing Date;
(iv) Investments permitted pursuant to Section
8.01(e)(v).
(v) Controlled Ownership Interests which do not
constitute Non-Manufactured Home Community Property; and
(vi) mortgage loans which do not constitute
Non-Manufactured Home Community Property and which are either
eliminated in the consolidation of the REIT, Borrower and the
Subsidiaries or are accounted for as investments in real
estate under GAAP.
(d) Distributions and Dividends. Neither Borrower nor the REIT
shall declare or make any dividend or other distribution on account of
partnership interests in excess of ninety-five percent (95%) of Funds From
Operations in any Fiscal Year; provided, however, that if an Event of Default
under Section 10.01(a) shall have occurred, neither Borrower nor the REIT shall
declare or make any dividend or other distribution on account of partnership
interests
58
in excess of what is required for the REIT to maintain its status as a real
estate investment trust as defined in Section 856 of the Internal Revenue Code.
(e) Restrictions on Fundamental Changes.
(i) Borrower shall not, and shall not permit any of
its Subsidiaries to, enter into any merger, consolidation,
reorganization or recapitalization or liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution), or
discontinue its business.
(ii) Borrower shall remain a limited partnership with
the REIT as its sole general partner.
(iii) Borrower shall not change its Fiscal Year.
(iv) Except for Permitted Holdings and other
Investments permitted under Section 8.01(c), Borrower shall
not engage in any line of business other than ownership,
operation, management and development of manufactured home
communities and the provision of services incidental thereto
and the brokerage, purchase, and sale of manufactured home
units, whether directly or through its Subsidiaries and
Investment Affiliates.
(v) Borrower shall not acquire by purchase or
otherwise all or substantially all of the business, property
or assets of, or stock or other evidence of beneficial
ownership of, any Person, unless after giving effect thereto,
Borrower is in pro forma compliance with this Agreement.
(f) ERISA. Neither Borrower nor the REIT shall, and neither
shall permit any Subsidiary or any of their ERISA Affiliates to, do any of the
following to the extent that such act or failure to act would result in the
aggregate, after taking into account any other such acts or failure to act, in a
Material Adverse Effect:
(i) Engage, or knowingly permit a Subsidiary or an
ERISA Affiliate to engage, in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code which is not exempt under Section 407 or
408 of ERISA or Section 4975(d) of the Internal Revenue Code
for which a class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(ii) Permit to exist any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412
of the Internal Revenue Code), whether or not waived;
(iii) Fail, or permit a Subsidiary or an ERISA
Affiliate of the REIT, Borrower or any Subsidiary to fail, to
pay timely required contributions or annual installments due
with respect to any waived funding deficiency to any Plan if
such failure could result in the imposition of a Lien or
otherwise would have a Material Adverse Effect;
59
(iv) Terminate, or permit an ERISA Affiliate of the
REIT, Borrower or any Subsidiary to terminate, any Benefit
Plan which would result in any liability of Borrower or a
Subsidiary or an ERISA Affiliate of the REIT, Borrower or any
Subsidiary under Title IV of ERISA; or
(v) Fail, or permit any Subsidiary or ERISA Affiliate
to fail to pay any required installment under section (m) of
Section 412 of the Internal Revenue Code or any other payment
required under Section 412 of the Internal Revenue Code on or
before the due date for such installment or other payment, if
such failure could result in the imposition of a Lien or
otherwise would have a Material Adverse Effect; or
(vi) Permit to exist any Termination Event;
(vii) Make, or permit a Subsidiary or an ERISA
Affiliate of the REIT, Borrower or any Subsidiary to make, a
complete or partial withdrawal (within the meaning of ERISA
Section 4201) from any Multiemployer Plan so as to result in
liability to Borrower, a Subsidiary or any ERISA Affiliate of
the REIT, Borrower or any Subsidiary which would have a
Material Adverse Effect; or
(viii) Permit the total Unfunded Pension Liabilities
(using the actuarial assumptions utilized by the PBGC) for all
Benefit Plans (other than Benefit Plans which have no Unfunded
Pension Liabilities) to have a Material Adverse Effect.
None of the REIT, Borrower nor any Agreement Party shall use any "assets"
(within the meaning of ERISA or Section 4975 of the Internal Revenue Code,
including but not limited to 29 C.F.R. ss. 2510.3-101 or any successor
regulation thereto) of an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code to repay or secure the Obligations if the use of such
assets may result in a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and Section 4975 of the Internal Revenue Code and the taxes and penalties
imposed by Section 4975 of the Internal Revenue Code and Section 502(i) of
ERISA) or in a Lender, Agent or the Lenders being deemed in violation of Section
404 or 406 of ERISA or Section 4975 of the Internal Revenue Code or otherwise by
itself results in or will result in a Lender, Agent or the Lenders being a
fiduciary or party in interest under ERISA or a "disqualified person" as defined
in Section 4975 (e) (2) of the Internal Revenue Code with respect to an
"employee benefit plan" within the meaning of Section 3(3) of ERISA or a "plan"
within the meaning of Section 4975(e)(1) of the Internal Revenue Code. Without
limitation of any other provision of this Agreement, none of the REIT, Borrower
or any Agreement Party shall assign, sell, pledge, encumber, transfer,
hypothecate or otherwise dispose of their respective interests or rights (direct
or indirect) in any Loan Document, or attempt to do any of the foregoing or
suffer any of the foregoing, or permit any party with a direct or indirect
interest or right in any Loan Document to do any of the foregoing, nor shall the
REIT or Borrower assign, sell, pledge, encumber, transfer, hypothecate or
otherwise dispose of any of their respective rights or interests (direct or
indirect) in any Agreement Party, Borrower or the REIT, as applicable, or
attempt to do any of the foregoing or suffer any of the foregoing, if such
action would cause the Obligations, or the exercise of any of the Agent's or
Lenders' rights in connection therewith, to constitute a prohibited transaction
under ERISA or the Internal Revenue
60
Code (unless Borrower furnishes to Agent a legal opinion reasonably satisfactory
to Agent that the transaction is exempt from the prohibited transaction
provisions of ERISA and the Internal Revenue Code (for this purpose, Agent and
the Lenders agree to supply Borrower all relevant non-confidential factual
information reasonably necessary to such legal opinion and reasonably requested
by Borrower)) or otherwise results in a Lender, Agent or the Lenders being
deemed in violation of Sections 404 or 406 of ERISA or Section 4975 of the
Internal Revenue Code or otherwise by itself would result in a Lender, Agent or
the Lenders being a fiduciary or party in interest under ERISA or a
"disqualified person" as defined in Section 4975(e)(2) of the Internal Revenue
Code with respect to an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code.
(g) Environmental Liabilities. Borrower shall not, and shall
not permit any of its Subsidiaries to, become subject to any Liabilities and
Costs which would have a Material Adverse Effect arising out of or related to
(i) the Release or threatened Release of any Contaminant into the environment,
or any Remedial Action in response thereto, or (ii) any violation of any
Environmental Laws. Notwithstanding the foregoing provision, Borrower and its
Subsidiaries shall have the right to contest in good faith any claim of
violation of an Environmental Law by appropriate legal proceedings and shall be
entitled to postpone compliance with the obligation being contested as long as
(i) no Event of Default shall have occurred and be continuing, (ii) Borrower
shall have given Agent prior written notice of the commencement of such contest,
(iii) noncompliance with such Environmental Law shall not subject Borrower or
such Subsidiary to any criminal penalty or subject Agent to pay any civil
penalty or to prosecution for a crime, and (iv) no portion of any Property
material to Borrower or its condition or prospects shall be in imminent danger
of being sold, forfeited or lost, by reason of such contest or the continued
existence of the matter being contested.
(h) Amendment of Constituent Documents. Borrower shall not
permit any amendment of its limited partnership agreement, certificate of
limited partnership or by-laws, if any, which would materially and adversely
affect Agent or Lenders or their respective rights and remedies under the Loan
Documents.
(i) Disposal of Interests. Borrower will not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise encumber or
dispose of any material portion of its partnership interests, stock or other
ownership interests in any Subsidiary or other Person in which it has an
interest unless Borrower has delivered to Agent a Compliance Certificate showing
on a pro forma basis (calculated in a manner reasonably acceptable to Agent)
that there would be no breach of any of the financial covenants contained in
Articles VIII and XI after giving effect to such conveyance, sale, transfer,
assignment, pledge, or other encumbrance or disposition.
(j) Margin Regulations. No portion of the proceeds of any
credit extended under this Agreement shall be used in any manner which might
cause the extension of credit or the application of such proceeds to violate
Regulation U or Regulation X or any other regulation of the Federal Reserve
Board or to violate the Securities Exchange Act or the Securities Act, in each
case as in effect on the date or dates of Borrowings and such use of proceeds.
(k) Transactions with Affiliates. Borrower shall not and shall
not permit any of its Subsidiaries to enter into, any transaction or series of
related transactions with any Affiliate
61
of Borrower, other than transactions in the ordinary course of business which
are on terms and conditions substantially as favorable to Borrower or such
Subsidiary as would be obtainable by Borrower or such Subsidiary in an
arms-length transaction with a Person other than an Affiliate.
8.02 With respect to the REIT:
(a) Indebtedness. The REIT shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) the Obligations; and
(ii) Indebtedness which, after giving effect thereto,
may be incurred or may remain outstanding without giving rise
to an Event of Default or Unmatured Event of Default under any
provision of Articles VIII and IX; provided, however, that (A)
the REIT shall not, and shall not permit any of its
Subsidiaries to, guarantee or otherwise become or remain
directly or indirectly liable with respect to the Indebtedness
of any Investment Affiliate, and (B) the REIT shall not permit
any Subsidiary to create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to, any
Recourse Indebtedness in excess of Ten Million Dollars
($10,000,000) per Subsidiary at any time or Thirty Million
Dollars ($30,000,000) in the aggregate for all Subsidiaries at
any time.
(b) Liens. The REIT shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:
(i) Permitted Liens; and
(ii) Liens securing Indebtedness permitted to be
incurred and remain outstanding pursuant to Section
8.02(a)(ii).
(c) Restriction on Fundamental Changes.
(i) The REIT shall not enter into any merger,
consolidation, reorganization or recapitalization or
liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution) or discontinue its business.
(ii) The REIT shall not change its Fiscal Year.
(iii) The REIT shall not engage in any line of
business other than owning partnership interests in Borrower
and the interests identified on Schedule 5.01(w) as being
owned by the REIT and any other ownership interests in
Subsidiaries and Investment Affiliates which are permitted
under the terms of Borrower's partnership agreement.
(iv) The REIT shall not have an Investment in any
Person other than Borrower and the interests identified on
Schedule 5.01(w) as being owned by the
62
REIT and any other ownership interests in Subsidiaries and
Investment Affiliates which are permitted under the terms of
Borrower's partnership agreement.
(v) The REIT shall not acquire an interest in any
Property other than Securities issued by Borrower and the
interests identified on Schedule 5.01(w) and any other
ownership interests in Subsidiaries and Investment Affiliates
which are permitted under the terms of Borrower's partnership
agreement.
(d) Environmental Liabilities. The REIT shall not, and shall
not permit any of its Subsidiaries to become subject to any Liabilities and
Costs which would have a Material Adverse Effect arising out of or related to
(i) the Release or threatened Release of any Contaminant into the environment,
or any Remedial Action in response thereto, or (ii) any violation of any
Environmental Laws. Notwithstanding the foregoing provision, the REIT and its
Subsidiaries shall have the right to contest in good faith any claim of
violation of an Environmental Law by appropriate legal proceedings and shall be
entitled to postpone compliance with the obligation being contested as long as
(i) no Event of Default shall have occurred and be continuing, (ii) the REIT
shall have given Agent prior written notice of the commencement of such contest,
(iii) noncompliance with such Environmental Law shall not subject the REIT or
such Subsidiary to any criminal penalty or subject Agent to pay any civil
penalty or to prosecution for a crime, and (iv) no portion of any Property
material to Borrower or its condition or prospects shall be in imminent danger
of being sold, forfeited or lost, by reason of such contest or the continued
existence of the matter being contested.
(e) Amendment of Charter or By-Laws. The REIT shall not permit
any amendment of its charter documents or by-laws, which would materially and
adversely affect Agent or Lenders or their respective rights and remedies under
the Loan Documents.
(f) Disposal of Partnership Interests. The REIT will not
directly or indirectly convey, sell, transfer, assign, pledge or otherwise
encumber or dispose of any of its partnership interests in Borrower.
(g) Maximum Ownership Interests. No Person or group of Persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act) (other
than Samuel Zell) shall beneficially acquire ownership (within the meaning of
Rule 13d-3 promulgated by the Commission under such Act), directly or
indirectly, of more than fifteen percent (15%) of the Securities which have the
right to elect the board of directors of the REIT under ordinary circumstances
on a combined basis, after giving effect to the conversion of any Convertible
Securities in the REIT and Borrower.
ARTICLE IX.
FINANCIAL COVENANTS
Borrower covenants and agrees that, on and after the date of
this Agreement and until payment in full of all the Obligations, the expiration
of all Commitments and the termination of this Agreement:
63
9.01 Total Liabilities to Gross Asset Value. Borrower shall
not permit the ratio of Total Liabilities to the sum of Gross Asset Values for
Borrower and each of its Subsidiaries to exceed 0.6:1.
9.02 Secured Debt to Gross Asset Value. Borrower shall not
permit the ratio of Secured Debt to the sum of Gross Asset Values for Borrower
and each of its Subsidiaries to exceed 0.50:1.
9.03 EBITDA to Interest Expense Ratio. Borrower shall not
permit the ratio of EBITDA for any Fiscal Quarter to Interest Expense for such
Fiscal Quarter to be less than 2.0:1.
9.04 EBITDA to Fixed Charges Ratio. Borrower shall not permit
the ratio of EBITDA for any Fiscal Quarter to Fixed Charges for such Fiscal
Quarter to be less than 1.75:1.
9.05 Unencumbered Net Operating Income to Unsecured Interest
Expense. Borrower shall not permit the ratio of Unencumbered Net Operating
Income for any Fiscal Quarter to Unsecured Interest Expense for such Fiscal
Quarter to be less than 1.80:1.
9.06 Unencumbered Pool. Borrower shall not permit the ratio of
(a) the sum of (i) the Unencumbered Asset Value and (ii) the fair market value
of cash and Cash Equivalents owned collectively by Borrower and any Wholly-Owned
Subsidiary and subject to no Lien to (b) outstanding Unsecured Debt to be less
than 1.80:1.
9.07 Minimum Net Worth. Borrower will maintain a Net Worth of
not less than the Minimum Net Worth.
9.08 Permitted Holdings. Borrower's primary business will be
the ownership, operation, management and development of manufactured home
communities and any other business activities of Borrower and its Subsidiaries
will remain incidental thereto. Notwithstanding the foregoing, Borrower and its
Subsidiaries may acquire, or maintain or engage in the following Permitted
Holdings if and so long as (i) the aggregate value of such Permitted Holdings,
whether held directly or indirectly by Borrower and its Subsidiaries, does not
exceed, at any time, twenty percent (20%) of Gross Asset Value for Borrower as a
whole and (ii) the value of each such Permitted Holding, whether held directly
or indirectly by Borrower and its Subsidiaries, does not exceed, at any time,
the following percentages of Borrower's Gross Asset Value:
Maximum Percentage
Permitted Holdings of Gross Asset Value
------------------ --------------------
Non-Manufactured Home
Community Property (other
than cash or Cash Equivalents) 10%
Land 5%
Securities issued by real estate
investment trusts primarily
engaged in the development,
ownership, operation and
64
management of manufactured
home
communities 5%
Manufactured Home
Community Mortgages other than
mortgage indebtedness which is
either eliminated in the consolidation
of the REIT, Borrower and the
Subsidiaries or accounted for as
investments in real estate under
GAAP 10%
Manufactured Home
Community Ownership Interests
other than Controlled Ownership
Interests 10%
Development Activity 10%
Taxable REIT Subsidiary Interests 5%
The value of the foregoing categories of Permitted Holdings shall be calculated
as follows: (i) the value of any Non-Manufactured Home Community Property (other
than cash or Cash Equivalents) or any Manufactured Home Community Ownership
Interest (other than a Controlled Ownership Interest) shall be calculated based
upon its Adjusted Asset Value; (ii) the value of any Land or any Security issued
by a real estate investment trust primarily engaged in the development,
ownership, operation and management of manufactured home communities shall be
equal to the lesser of (A) the acquisition cost thereof or (B) the current
market value thereof (such market value to be determined in a manner reasonably
acceptable to Agent); (iii) the value of any Taxable REIT Subsidiary Interest
shall be the acquisition or investment cost thereof; (iv) the value of any
Manufactured Home Community Mortgage (other than mortgage indebtedness which is
either eliminated in the consolidation of the REIT, Borrower and the
Subsidiaries or accounted for as an investment in real estate under GAAP) shall
be equal to the book value thereof; (v) the value of Development Activity by
Borrower or any Subsidiary shall be equal to the full budgeted cost thereof; and
(vi) the value of any Development Activity by an Investment Affiliate shall be
equal to the greater of (A) Borrower's pro rata share of the full budgeted cost
thereof based upon its percentage of equity ownership, or (B) Borrower's pro
rata share of the full budgeted cost thereof based upon Borrower's economic
interest in the project (as determined by Borrower in a manner reasonably
satisfactory to Agent).
9.09 Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter, but
shall be satisfied at all times.
ARTICLE X.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01 Events of Default. Each of the following occurrences
shall constitute an Event of Default under this Agreement:
65
(a) Failure to Make Payments When Due. (i) The failure to pay
in full any amount due on the Termination Date; (ii) the failure to pay in full
any principal when due; (iii) the failure to pay in full any interest owing
hereunder or under any of the other Loan Documents within ten (10) days after
the due date thereof and, unless Agent has previously delivered two (2) or more
notices of payment default to Borrower during the term of this Agreement (in
which event the following notice shall not be required), Agent shall have given
Borrower written notice that Agent has not received such payment on or before
the date such payment was required to be made and Borrower shall have failed to
make such payment within five (5) days after receipt of such notice; or (iv) the
failure to pay in full any other payment required hereunder or under any of the
other Loan Documents, whether such payment is required to be made to Agent or to
some other Person, within ten (10) days after Agent gives Borrower written
notice that such payment is due and unpaid.
(b) Dividends. Borrower or the REIT shall breach the covenant
set forth in Section 8.01(d).
(c) Breach of Financial Covenants. Borrower shall fail to
satisfy any covenant set forth in Article IX and such failure shall continue for
forty (40) days after Borrower's knowledge thereof.
(d) Other Defaults. Borrower, the REIT or any Agreement Party
shall fail duly and punctually to perform or observe any agreement, covenant or
obligation binding on Borrower, the REIT or any Agreement Party under this
Agreement or under any of the other Loan Documents (other than as described in
Section 7.01(e) or Sections 10.01(a), (b), (c), (e), (g) or (p)), and such
failure shall continue for thirty (30) days after written notice from Agent to
Borrower, the REIT or any Agreement Party (or (i) such lesser period of time as
is mandated by applicable Requirements of Law or (ii) such longer period of time
(but in no case more than ninety (90) days) as is reasonably required to cure
such failure if Borrower, the REIT, or such Agreement Party commences such cure
within such ninety (90) days and diligently pursues the completion thereof).
(e) Breach of Representation or Warranty. Any representation
or warranty made or deemed made by Borrower, the REIT or any Agreement Party to
Agent or any Lender herein or in any of the other Loan Documents or in any
statement, certificate or financial statements at any time given by Borrower
pursuant to any of the Loan Documents shall be false or misleading in any
material respect on the date as of which made and, with respect to any such
representation or warranty not known by Borrower at the time made or deemed made
to be false or misleading, the defect causing such representation or warranty to
be false or misleading is not removed within thirty (30) days after written
notice thereof from Agent to Borrower.
(f) Default as to Other Indebtedness. Borrower, the REIT, any
Subsidiary or any Investment Affiliate shall have defaulted under any Other
Indebtedness of such party (other than Non-Recourse Indebtedness) and as a
result thereof the holders of such Other Indebtedness shall have accelerated
such Other Indebtedness (other than Non-Recourse Indebtedness), if the aggregate
amount of such accelerated Other Indebtedness (to the extent of any recourse to
Borrower, the REIT or any Subsidiary), together with the aggregate amount of any
Other Indebtedness (other than Non-Recourse Indebtedness) of Borrower, the REIT,
any Subsidiary or
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any Investment Affiliate which has theretofore been accelerated (to the extent
of any recourse to Borrower, the REIT or any Subsidiary) is $10,000,000 or more.
(g) Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) An involuntary case or other proceeding shall be
commenced against the REIT, Borrower, any Subsidiary, or any
Agreement Party and the petition shall not be dismissed within
sixty (60) days after commencement of the case, or a court
having jurisdiction shall enter a decree or order for relief
in respect of the REIT, Borrower, any Subsidiary, or any
Agreement Party, as the case may be, in an involuntary case or
other proceeding, under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect; or any other
similar relief shall be granted under any applicable federal,
state or foreign law; or
(ii) A decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having
similar powers over Borrower, the REIT, any Subsidiary, or any
Agreement Party, or over all or a substantial part of the
property of the REIT, Borrower, any Subsidiary, or any
Agreement Party shall be entered, or an interim receiver,
trustee or other custodian of the REIT, Borrower, any
Subsidiary, or any Agreement Party, or of all or a substantial
part of the property of the REIT, Borrower, any Subsidiary, or
any Agreement Party shall be appointed or a warrant of
attachment, execution or similar process against any
substantial part of the property of the REIT, Borrower, any
Subsidiary, or any Agreement Party shall be issued and any
such event shall not be stayed, vacated, dismissed, bonded or
discharged within sixty (60) days of entry, appointment or
issuance.
(h) Voluntary Bankruptcy; Appointment of Receiver, etc. The
REIT, Borrower, any Subsidiary, or any Agreement Party shall have an order for
relief entered with respect to it or commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking of possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the REIT, Borrower, any Subsidiary, or any Agreement Party shall make
any assignment for the benefit of creditors or shall be unable or fail, or admit
in writing its inability, to pay its debts as such debts become due; or the
general partner(s) or Board of Directors (or any committee thereof), as
applicable, of the REIT, Borrower, any Subsidiary, or any Agreement Party adopts
any resolution or otherwise authorizes any action to approve any of the
foregoing.
(i) Judgments and Attachments. (i) Any money judgments (other
than a money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writs or warrants of attachment,
or similar processes involving an aggregate amount in excess of $5,000,000 shall
be entered or filed against the REIT,
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Borrower, any Subsidiary, or any Agreement Party or their respective assets and
shall remain undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days, or (ii) any judgment or order of any court or administrative
agency awarding material damages shall be entered against the REIT, Borrower,
any Subsidiary, or any Agreement Party in any action under the Federal
securities laws seeking rescission of the purchase or sale of, or for damages
arising from the purchase or sale of, any Securities, such judgment or order
shall have become final after exhaustion of all available appellate remedies and
such judgment or order would have a Material Adverse Effect.
(j) Dissolution. Any order, judgment or decree shall be
entered against the REIT, Borrower, or any Agreement Party decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or the REIT, Borrower, or
any Agreement Party shall otherwise dissolve or cease to exist.
(k) Loan Documents; Failure of Security or Subordination. Any
Loan Document shall cease to be in full force and effect or any Obligation shall
be subordinated or shall not have the priority contemplated by this Agreement or
the Loan Documents for any reason or any guarantor under any guaranty of all or
any portion of the Obligations shall at any time disavow or deny liability under
such guaranty in writing.
(l) ERISA Plan Assets. Any assets of Borrower, the REIT or any
Agreement Party shall constitute "assets" (within the meaning of 29 C.F.R. ss.
2510.3-101 or any successor regulation thereto) of an "employee benefit plan"
within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of
Section 4975(e)(1) of the Internal Revenue Code or Borrower, the REIT or any
Agreement Party shall be an "employee benefit plan" as defined in Section 3(3)
of ERISA, a "multiemployer plan" as defined in Sections 4001(a)(3) or 3(37) of
ERISA, or a "plan" as defined in Section 4975(e)(1) of the Internal Revenue
Code.
(m) ERISA Prohibited Transaction. The Obligations, any of the
Loan Documents or the exercise of any of the Agent's or Lenders' rights in
connection therewith shall constitute a prohibited transaction under ERISA
and/or the Internal Revenue Code (which is not exempt from the restrictions of
Section 406 of ERISA or Section 4975 of the Internal Revenue Code and the taxes
and penalties imposed by Section 4975 of the Internal Revenue Code and Section
502(i) of ERISA).
(n) ERISA Liabilities. (i) Any Termination Event occurs which
will or is reasonably likely to subject Borrower, the REIT, any Subsidiary, any
Agreement Party, any ERISA Affiliate thereof or any of them to a liability which
Agent reasonably determines will have a Material Adverse Effect; (ii) the plan
administrator of any Benefit Plan applies for approval under Section 412(d) of
the Internal Revenue Code for a waiver of the minimum funding standards of
Section 412(a) of the Internal Revenue Code and Agent reasonably determines that
the business hardship upon which the Section 412(d) waiver request was based
will or would reasonably be anticipated to subject Borrower, the REIT, any
Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of them
to a liability which Agent reasonably determines will have a Material Adverse
Effect; (iii) any Benefit Plan shall incur an "accumulated funding deficiency"
(as defined in Section 412 of the Internal Revenue Code or Section 302 of ERISA)
for which a waiver shall not have been obtained in accordance with the
applicable provisions of the Internal Revenue Code or ERISA which "accumulated
funding deficiency" will or would reasonably be anticipated to subject Borrower,
the REIT, any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or
any of them to a liability which the Agent reasonably determines will have a
Material Adverse Effect; (iv) Borrower, the REIT, any Subsidiary, any Agreement
Party, or any ERISA Affiliate thereof or any of them shall
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have engaged in a transaction which is prohibited under Section 4975 of the
Internal Revenue Code or Section 406 of ERISA which will or would reasonably be
anticipated to result in the imposition of a liability on Borrower, the REIT,
any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of
them which the Agent reasonably determines will have a Material Adverse Effect;
(v) Borrower, the REIT, any Subsidiary, any Agreement Party, or any ERISA
Affiliate thereof or any of them shall fail to pay when due an amount which it
shall have become liable to pay to the PBGC, a Plan or a trust established under
Title IV of ERISA which failure will or would reasonably be anticipated to
result in the imposition of a liability on Borrower, the REIT, any Subsidiary,
any Agreement Party, or any ERISA Affiliate thereof or any of them which the
Agent reasonably determines will have a Material Adverse Effect; (vi) a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that a Benefit Plan must be terminated or have a trustee
appointed to administer such Plan which condition will or would reasonably be
anticipated to result in the imposition of a liability on Borrower, the REIT,
any Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of
them which the Agent reasonably determines will have a Material Adverse Effect;
(vii) a Lien shall be imposed on any assets of Borrower, the REIT, any
Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of them
in favor of the PBGC or a Plan which the Agent reasonably determines will have a
Material Adverse Effect; (viii) Borrower, the REIT, any Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them shall suffer a
partial or complete withdrawal from a Multiemployer Plan or shall be in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from a complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA) from such Multiemployer Plan which
will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Subsidiary, any Agreement Party, or any
ERISA Affiliate thereof or any of them which the Agent reasonably determines
will have a Material Adverse Effect; or (ix) a proceeding shall be instituted by
a fiduciary of any Multiemployer Plan against Borrower, the REIT, any
Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any of them
to enforce Section 515 of ERISA which will or would reasonably be anticipated to
result in the imposition of a liability on Borrower, the REIT, any Subsidiary,
any Agreement Party, or any ERISA Affiliate thereof or any of them which the
Agent reasonably determines will have a Material Adverse Effect.
(o) Solvency. Borrower, any Agreement Party or the REIT shall
cease to be Solvent.
(p) Board of Directors. During any 12-month period,
individuals who were directors of the REIT on the first day of such period shall
not constitute a majority of the board of directors of the REIT.
(q) Term Loan Credit Agreement. An "Event of Default" shall
have occurred under the Term Loan Credit Agreement.
An Event of Default shall be deemed "continuing" until cured
or waived in writing in accordance with Section 12.05.
10.02 Rights and Remedies.
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(a) Acceleration. Upon the occurrence of any Event of Default
with respect to Borrower described in the foregoing Section 10.01(g) or
10.01(h), the Commitments (including the obligations of Swingline Lender and
Issuing Lender) shall automatically and immediately terminate and the unpaid
principal amount of and any and all accrued interest on the Loans and all of the
other Obligations shall automatically become immediately due and payable, with
all additional interest from time to time accrued thereon and without
presentment, demand or protest or other requirements of any kind (including
without limitation valuation and appraisement, diligence, presentment, notice of
intent to demand or accelerate or notice of acceleration), all of which are
hereby expressly waived by Borrower, and the obligations of Lenders to make any
Loans hereunder shall thereupon terminate; and upon the occurrence and during
the continuance of any other Event of Default, Agent shall, at the request of,
or may, with the consent of, Requisite Lenders, by written notice to Borrower,
(i) declare that the Commitments (including the obligations of Swingline Lender
and Issuing Lender) are terminated, whereupon the Commitments and the obligation
of Lenders to make any Loans hereunder shall immediately terminate, and/or (ii)
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loans and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower. Upon
the occurrence of and during the continuance of an Event of Default, no
Agreement Party shall be permitted to make any distributions or dividends
without the prior written consent of Agent. Upon the occurrence of an Event of
Default or an acceleration of the Obligations, Agent and Lenders may exercise
all or any portion of the rights and remedies set forth in the Loan Documents.
(b) Access to Information. Notwithstanding anything to the
contrary contained in the Loan Documents, upon the occurrence of and during the
continuance of an Event of Default, Agent shall be entitled to request and
receive, by or through Borrower or appropriate legal process, any and all
information concerning the REIT, Borrower, any Subsidiary of Borrower, any
Investment Affiliate, any Agreement Party, or any property of any of them, which
is reasonably available to or obtainable by Borrower.
(c) Waiver of Demand. Demand, presentment, protest and notice
of nonpayment are hereby waived by Borrower.
(d) Waivers, Amendments and Remedies. No delay or omission of
Agent or Lenders to exercise any right under any Loan Document shall impair such
right or be construed to be a waiver of any Event of Default or an acquiescence
therein, and any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in a writing signed by Agent
after obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to Agent and Lenders until the Obligations have been paid in
full, the Commitments have expired or terminated and this Agreement has been
terminated.
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10.03 Rescission. If at any time after acceleration of the
maturity of the Loans, Borrower shall pay all arrears of interest and all
payments on account of principal of the Loans which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Unmatured Events of Default (other than nonpayment
of principal of and accrued interest on the Loans due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to Section 12.05,
then by written notice to Borrower, Requisite Lenders may elect, in the sole
discretion of Requisite Lenders to rescind and annul the acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Unmatured Event of Default or impair any right or remedy in connection
therewith. The provisions of the preceding sentence are intended merely to bind
Lenders to a decision which may be made at the election of Requisite Lenders;
they are not intended to benefit Borrower and do not give Borrower the right to
require Lenders to rescind or annul any acceleration hereunder, even if the
conditions set forth herein are met.
10.04 Suspension of Lending. At any time during which an
Unmatured Event of Default exists pursuant to Section 10.01(c) or Section
10.01(d) and is not cured (by improvement in the applicable financial measure by
compliance with the applicable financial covenant in such 40-day period or as
provided in Section 10.01(d)), Borrower shall have no right to receive any
additional Loans.
ARTICLE XI.
AGENCY PROVISIONS
11.01 Appointment
(a) Each Lender hereby designates and appoints Wells Fargo as
Agent of such Lender under this Agreement and the Loan Documents, and each
Lender hereby irrevocably authorizes Agent to take such action on its behalf
under the provisions of this Agreement and the Loan Documents and to exercise
such powers as are set forth herein or therein, together with such other powers
as are reasonably incidental thereto. Agent agrees to act as such on the express
conditions contained in this Article XI.
(b) The provisions of this Article XI are solely for the
benefit of Agent and Lenders, and Borrower shall not have any rights to rely on
or enforce any of the provisions hereof. In performing its functions and duties
under this Agreement, Agent shall act solely as Agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower.
11.02 Nature of Duties. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be administrative in nature. Subject
to the provisions of Sections 11.05 and 11.07, Agent shall administer the Loans
in the same manner as it administers its own loans. Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Loan Documents, expressed or implied, is
intended or shall be construed to impose upon Agent any obligation in respect of
this Agreement or any of the Loan Documents except as expressly set forth herein
or therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the REIT, Borrower, the
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Subsidiaries, the Investment Affiliates, and each Agreement Party in connection
with the making and the continuance of the Loans hereunder and shall make its
own assessment of the creditworthiness of the REIT, Borrower, the Subsidiaries,
the Investment Affiliates, and each Agreement Party, and, except as specifically
provided herein, Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the Closing Date or at any time or times thereafter.
11.03 Loan Disbursements
(a) Promptly after receipt of a Notice of Borrowing for a Loan
to be made pursuant to Section 2.01 hereof, but in no event later than one (1)
Business Day prior to the proposed Funding Date for a Base Rate Loan or two (2)
Business Days prior to the proposed Funding Date for a LIBOR Loan, Agent shall
notify each Lender of the proposed Borrowing and the Funding Date set forth
therein. Each Lender shall make available to Agent (or the funding bank or
entity designated by Agent), the amount of such Lender's Pro Rata Share of such
Borrowing in immediately available funds not later than the times designated in
Section 11.03(b). Unless Agent shall have been notified by any Lender prior to
such time for funding in respect of any Borrowing that such Lender does not
intend to make available to Agent such Lender's Pro Rata Share of such
Borrowing, Agent may assume that such Lender has made such amount available to
Agent and Agent, in its sole discretion, may, but shall not be obligated to,
make available to Borrower a corresponding amount. If such corresponding amount
is not in fact made available to Agent by such Lender on or prior to a Funding
Date, such Lender agrees to pay to Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to Borrower until the date such amount is paid or repaid to
Agent, at the Federal Funds Rate. If such Lender shall pay to Agent such
corresponding amount, such amount so paid shall constitute such Lender's Pro
Rata Share of such Borrowing. If such Lender shall not pay to Agent such
corresponding amount after reasonable attempts are made by Agent to collect such
amounts from such Lender, Borrower agrees to repay to Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to Borrower until the date such amount is
repaid to Agent, at the interest rate applicable thereto.
(b) Requests by Agent for funding by Lenders of Loans will be
made by telecopy. Each Lender shall make the amount of its Loan available to
Agent in Dollars and in immediately available funds, to such bank and account,
in El Segundo, California as Agent may designate, not later than 10:00 A.M.
(California time) on the Funding Date designated in the Notice of Borrowing with
respect to such Loan. Nothing in this Section 11.03(b) shall be deemed to
relieve any Lender of its obligation hereunder to make its Pro Rata Share of
Loans on any Funding Date, nor shall any Lender be responsible for the failure
of any other Lender to perform its obligations to make any Loan hereunder, and
the Commitment of any Lender shall not be increased or decreased as a result of
the failure by any other Lender to perform its obligation to make a Loan.
11.04 Distribution and Apportionment of Payments
(a) Subject to Section 11.04(b), payments actually received by
Agent for the account of Lenders shall be paid to them promptly after receipt
thereof by Agent, but in any
72
event prior to 3:00 P.M. (California time) on the day of receipt (if received by
11:00 A.M. (California time) on such day), or within one (1) Business Day
thereafter (if received after 11:00 A.M. (California time) on the day of
receipt), provided that Agent shall pay to such Lenders interest thereon at the
Federal Funds Rate from the Business Day on which such funds are required to be
paid to Lenders by Agent until such funds are actually paid in immediately
available funds to such Lenders. All payments of principal and interest in
respect of outstanding Loans (other than Swingline Loans), all payments of the
fees described in this Agreement (other than agency and arrangement fees
described in Section 2.04(c)), and all payments in respect of any other
Obligations shall be allocated among such of Lenders as are entitled thereto, in
proportion to their respective Pro Rata Shares or otherwise as provided herein.
Agent shall promptly, but in any event within two (2) Business Days (with
interest thereon, if required pursuant to this Section 11.04(a)), distribute to
each Lender at its primary address set forth on the appropriate counterpart
signature page hereof or on the Assignment and Assumption, or at such other
address as a Lender may request in writing, such funds as it may be entitled to
receive, provided that Agent shall in any event not be bound to inquire into or
determine the validity, scope or priority of any interest or entitlement of any
Lender and may suspend all payments and seek appropriate relief (including
without limitation instructions from Requisite Lenders, or all Lenders, as
applicable, or an action in the nature of interpleader) in the event of any
doubt or dispute as to any apportionment or distribution contemplated hereby.
The order of priority herein is set forth solely to determine the rights and
priorities of Lenders as among themselves and may at any time or from time to
time be changed by Lenders as they may elect, in writing in accordance with
Section 12.05, without necessity of notice to or consent of or approval by
Borrower or any other Person.
(b) Notwithstanding any provision hereof to the contrary,
until such time as a Defaulting Lender has funded its Pro Rata Share of a Loan
(other than a Swingline Loan but including a Mandatory Borrowing) or draw on a
Letter of Credit which was previously a Non Pro Rata Loan, or all other Lenders
have received payment in full (whether by repayment or prepayment) of the
principal and interest due in respect of such Non Pro Rata Loan, all of the
Obligations owing to such Defaulting Lender hereunder shall be subordinated in
right of payment, as provided in the following sentence, to the prior payment in
full of all principal, interest and fees in respect of all Non Pro Rata Loans in
which the Defaulting Lender has not funded its Pro Rata Share (such principal,
interest and fees being referred to as "Senior Loans"). All amounts paid by
Borrower and otherwise due to be applied to the Obligations owing to the
Defaulting Lender pursuant to the terms hereof shall be distributed by Agent to
the other Lenders in accordance with their respective Pro Rata Shares
(recalculated for purposes hereof to exclude the Defaulting Lender's
Commitment), until all Senior Loans have been paid in full. This provision
governs only the relationship among Agent, each Defaulting Lender, and the other
Lenders; nothing hereunder shall limit the obligation of Borrower to repay all
Loans in accordance with the terms of this Agreement. The provisions of this
section shall apply and be effective regardless of whether an Event of Default
occurs and is then continuing, and notwithstanding (i) any other provision of
this Agreement to the contrary, (ii) any instruction of Borrower as to its
desired application of payments or (iii) the suspension of such Defaulting
Lender's right to vote on matters which are subject to the consent or approval
of Requisite Lenders, Supermajority Lenders, or all Lenders. No Unused Facility
Fee shall accrue in favor of, or be payable to, such Defaulting Lender from the
date of any failure to fund Loans (other than Swingline Loans but including
Loans made pursuant to Mandatory Borrowings) or draws on Letters of Credit or
reimburse Agent for any Liabilities and Costs as herein provided until such
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failure has been cured and, without limitation of other provisions set forth in
this Agreement, Agent shall be entitled to (i) collect interest from such Lender
for the period from the date on which the payment was due until the date on
which the payment is made at the Federal Funds Rate for each day during such
period, (ii) withhold or set off, and to apply to the payment of the defaulted
amount and any related interest, any amounts to be paid to such Defaulting
Lender under this Agreement, and (iii) bring an action or suit against such
Defaulting Lender in a court of competent jurisdiction to recover the defaulted
amount and any related interest. In addition, the Defaulting Lender shall
indemnify, defend and hold Agent and each of the other Lenders harmless from and
against any and all Liabilities and Costs plus interest thereon at the default
rate set forth in the Loan Documents for funds advanced by Agent or any other
Lender on account of the Defaulting Lender which they may sustain or incur by
reason of or as a direct consequence of the Defaulting Lender's failure or
refusal to abide by its obligations under this Agreement.
11.05 Rights, Exculpation, Etc. Neither Agent, any Affiliate
of Agent, nor any of their respective officers, directors, employees, agents,
attorneys or consultants, shall be liable to any Lender for any action taken or
omitted by them hereunder or under any of the Loan Documents, or in connection
herewith or therewith, except that Agent shall be liable for its gross
negligence or willful misconduct in the performance of its express obligations
hereunder. In the absence of gross negligence or willful misconduct, Agent shall
not be liable for any apportionment or distribution of payments made by it in
good faith pursuant to Section 11.04. Agent shall not be responsible to any
Lender for any recitals, statements, representations or warranties herein or for
the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement, or any of the other Loan
Documents, or any of the transactions contemplated hereby and thereby; or for
the financial condition of the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party. Agent shall not be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any of the Loan Documents or the
financial condition of the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party, or the existence or possible existence of any
Unmatured Event of Default or Event of Default. Agent may at any time request
instructions from Lenders with respect to any actions or approvals which, by the
terms of this Agreement or of any of the Loan Documents, Agent is permitted or
required to take or to grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from Requisite Lenders or Supermajority
Lenders, as the case may be. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of Requisite Lenders, Supermajority Lenders
or, where applicable, all Lenders. Agent shall promptly notify each Lender at
any time that the Requisite Lenders or Supermajority Lenders, as the case may
be, have instructed Agent to act or refrain from acting pursuant hereto.
11.06 Reliance. Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents, telecopies
or any telephone message believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person, and with respect to
all matters pertaining to this Agreement or any of the Loan
74
Documents and its duties hereunder or thereunder, upon advice of legal counsel
(including counsel for Borrower), independent public accountant and other
experts selected by it.
11.07 Indemnification. To the extent that Agent or Issuing
Lender is not reimbursed and indemnified by Borrower, Lenders will reimburse,
within ten (10) days after notice from Agent, and indemnify Agent and Issuing
Lender for and against any and all Liabilities and Costs which may be imposed
on, incurred by, or asserted against it (in its capacity as Agent or Issuing
Lender) in any way relating to or arising out of this Agreement or any of the
other Loan Documents or any action taken or omitted by Agent or Issuing Lender
(in its capacity as Agent or Issuing Lender) under this Agreement or any of the
other Loan Documents, in proportion to each Lender's Pro Rata Share, provided
that no Lender shall be liable for any portion of such Liabilities and Costs
resulting from Agent's or Issuing Lender's gross negligence or willful
misconduct, bad faith or fraud. The obligations of Lenders under this Section
11.07 shall survive the payment in full of all Obligations and the termination
of this Agreement. In the event that after payment and distribution of any
amount by Agent to Lenders, any Lender or third party, including Borrower, any
creditor of Borrower or a trustee in bankruptcy, recovers from Agent any amount
found to have been wrongfully paid to Agent or disbursed by Agent to Lenders,
then Lenders, in proportion to their respective Pro Rata Shares, shall reimburse
Agent for all such amounts. Notwithstanding the foregoing, Agent shall not be
obligated to advance Liabilities and Costs and may require the deposit by each
Lender of its Pro Rata Share of any material Liabilities and Costs anticipated
by Agent before they are incurred or made payable.
11.08 Agent Individually. With respect to its Pro Rata Share
of the Commitments hereunder and the Loans made by it, Agent shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders", "Requisite Lenders", "Supermajority Lenders", or
any similar terms may include Agent in its individual capacity as a Lender, one
of the Requisite Lenders or one of the Supermajority Lenders, but Requisite
Lenders and Supermajority Lenders shall not include Agent solely in its capacity
as Agent. Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with Borrower
or any of its Subsidiaries or Affiliates as if it were not acting as Agent
pursuant hereto.
11.09 Successor Agent; Resignation of Agent; Removal of Agent
(a) Agent may resign from the performance of all its functions
and duties hereunder at any time by giving at least thirty (30) Business Days
prior written notice to Lenders and Borrower. For good cause, by a determination
of all the Lenders (excluding for such determination the Agent in its capacity
as a Lender), the Agent may be removed at any time by giving at least thirty
(30) Business Days prior written notice to Agent and Borrower. Such resignation
or removal shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clauses (b) and (c) below or as otherwise provided
below.
(b) Upon any such notice of resignation by or removal of
Agent, Requisite Lenders shall appoint a successor Agent with the consent of
Borrower, which shall not be unreasonably withheld or delayed (and approval from
Borrower shall not be required upon the occurrence and during the continuance of
an Event of Default). Any successor Agent must be a bank (i) the senior debt
obligations of which (or such Bank's parent's senior debt obligations) are
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rated not less than Baa-1 by Moody's Inc. or a comparable rating by a rating
agency acceptable to Requisite Lenders, (ii) which has total assets in excess of
Ten Billion Dollars ($10,000,000,000) and (iii) which is a Lender as of the date
of such succession holding a Commitment without participants equal to at least
ten percent (10%) of the Facility. Agent hereby agrees to remit to any successor
Agent, a pro rata portion of any annual agent's fee received by Agent, in
advance, for the one-year period covered by such agent's fee based upon the
portion of such year then remaining.
(c) If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the retiring or removed Agent, with
the consent of Borrower, which may not be unreasonably withheld or delayed (and
which approval from Borrower shall not be required upon the occurrence and
during the continuance of an Event of Default), shall then appoint a successor
Agent who shall meet the requirements described in subsection (b) above and who
shall serve as Agent until such time, if any, as Requisite Lenders, with the
consent of Borrower, which may not be unreasonably withheld or delayed (and
which approval from Borrower shall not be required upon the occurrence and
during the continuance of an Event of Default), appoint a successor Agent as
provided above.
(d) Any Person succeeding Wells Fargo (or any successor to
Wells Fargo) as Agent hereunder shall also serve as Issuing Lender and Swingline
Lender; provided, however, that the issuer of any Letter of Credit outstanding
at the time of such succession shall retain all of the rights and protections of
Issuing Lender hereunder with respect to such Letter of Credit.
11.10 Consents and Approvals
(a) Each Lender authorizes and directs Agent to enter into the
Loan Documents other than this Agreement for the benefit of Lenders. Each Lender
agrees that any action taken by Agent at the direction or with the consent of
Requisite Lenders or the Supermajority Lenders and any action taken by Agent not
requiring consent by Requisite Lenders, Supermajority Lenders, or all Lenders in
accordance with the provisions of this Agreement or any Loan Document, and the
exercise by Agent at the direction or with the consent of Requisite Lenders or
the Supermajority Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all Lenders, except for actions specifically requiring the
approval of all Lenders. All communications from Agent to Lenders requesting
Lenders' determination, consent, approval or disapproval (i) shall be given in
the form of a written notice to each Lender, (ii) shall be accompanied by a
description of the matter or item as to which such determination, approval,
consent or disapproval is requested, or shall advise each Lender where such
matter or item may be inspected, or shall otherwise describe the matter or issue
to be resolved, (iii) shall include, if reasonably requested by a Lender and to
the extent not previously provided to such Lender, written materials and a
summary of all oral information provided to Agent by Borrower in respect of the
matter or issue to be resolved, and (iv) shall include Agent's recommended
course of action or determination in respect thereof. Each Lender shall reply
promptly, but in any event within fifteen (15) Business Days after receipt of
the request therefor from Agent (the "Lender Reply Period"). Unless a Lender
shall give written notice to Agent that it objects to the recommendation or
determination of Agent (together with a written explanation of the reasons
behind such objection) within the Lender Reply Period, such Lender shall be
deemed to have approved of or consented to such recommendation or determination.
With respect to decisions
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requiring the approval of Requisite Lenders, Supermajority Lenders or all
Lenders, Agent shall submit its recommendation or determination for approval of
or consent to such recommendation or determination to all Lenders and upon
receiving the required approval or consent shall follow the course of action or
determination recommended to Lenders by Agent or such other course of action
recommended by Requisite Lenders or Supermajority Lenders, as the case may be,
and each non-responding Lender shall be deemed to have concurred with such
recommended course of action. The following amendments, modifications or waivers
shall require the consent of the Requisite Lenders:
(i) Waiver of Sections 8.01(h) or 8.02(f);
(ii) Acceleration following an Event of Default
pursuant to Section 10.02(a) (except for any Event of Default
pursuant to Sections 10.01(g) or 10.01(h)) or rescission of
such acceleration pursuant to Section 10.03;
(iii) Approval of the exercise of remedies requiring
the consent of the Requisite Lenders under Section 10.02(a);
(iv) Appointment of a successor Agent in accordance
with Sections 11.09(b) and (c);
(v) Disapproval of any Property as a Qualifying
Unencumbered Property.
(b) Except for amendments, modifications and waivers requiring
the consent of all Lenders pursuant to Section 12.05(b) hereof, the consent of
the Supermajority Lenders shall be required to amend or modify Sections 9.01,
9.02, 9.03, 9.04, 9.05, 9.06, 9.07 or 10.01(a) or to waive any requirement
thereof or to amend or modify this Section 11.10(b).
(c) In addition to the required consents or approvals referred
to in Section 12.05, Agent may at any time request instructions from Requisite
Lenders with respect to any actions or approvals which, by the terms of this
Agreement or of any of the Loan Documents, Agent is permitted or required to
take or to grant without instructions from any Lenders, and if such instructions
are promptly requested, Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from taking any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement, any of
the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, Supermajority Lenders or all Lenders. Agent shall
promptly notify each Lender at any time that the Requisite Lenders or
Supermajority Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
11.11 [Intentionally Omitted]
11.12 [Intentionally Omitted]
11.13 Assignments and Participations
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(a) Subject to the provisions of Section 11.13(j), after first
obtaining the approval of Agent and Borrower, which approval will not be
unreasonably withheld (and which approval from Borrower shall not be required
upon the occurrence and during the continuance of an Event of Default), each
Lender may assign to one or more banks, finance companies, insurance or other
financial institutions all or a portion of its rights and obligations under this
Agreement in accordance with the provisions of this Section (including without
limitation all or a portion of its Commitment and the Loans owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of the assigning Lender's rights and obligations under
this Agreement and the assignment shall cover the same percentage of such
Lender's Commitment and Loans, (ii) unless Agent and Borrower otherwise consent
(which consent of Borrower shall not be required upon the occurrence and during
the continuance of an Event of Default), the aggregate amount of the Commitment
of the assigning Lender being assigned to a Person that is not already a Lender
hereunder (provided such Lender was also a Lender on the Closing Date) pursuant
to each such assignment shall in no event be less than Five Million Dollars
($5,000,000) and shall be an integral multiple of One Million Dollars
($1,000,000), (iii) the parties to each such assignment shall execute and
deliver to Agent, for its approval and acceptance, an Assignment and Assumption
and (iv) Agent shall receive from the assignor or assignors for its sole account
a processing fee of Three Thousand Dollars ($3,000). Upon such execution,
delivery, approval and acceptance, and upon the effective date specified in the
applicable Assignment and Assumption, (A) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
validly and effectively assigned to it pursuant to such Assignment and
Assumption, have the rights and obligations of a Lender hereunder and (B) the
Lender-assignor thereunder shall, to the extent that rights and obligations
hereunder have been validly and effectively assigned by it pursuant to such
Assignment and Assumption, relinquish its rights and be released from its
obligations under this Agreement.
(b) By executing and delivering an Assignment and Assumption,
the Lender-assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT, Borrower,
any Subsidiary, any Investment Affiliate, or any Agreement Party or the
performance or observance by the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party of any of their respective obligations under
any Loan Document or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Article VI or
delivered pursuant to Article VI to the date of such assignment and such other
Loan Documents and other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Assumption; (iv) such assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes Agent to take such action
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as Agent on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) Agent shall maintain at its address referred to on the
counterpart signature pages hereof a copy of each Assignment and Assumption
delivered to and accepted by it and shall record the names and addresses of each
Lender and the Commitment of, and principal amount of the Loans owing to, such
Lender from time to time. Borrower, Agent and Lenders may treat each Person
whose name is so recorded as a Lender hereunder for all purposes of this
Agreement.
(d) Upon its receipt of an Assignment and Assumption executed
by an assigning Lender and an assignee, Agent shall, if such Assignment and
Assumption has been properly completed and is in substantially the form of
Exhibit A, (i) accept such Assignment and Assumption, (ii) record the
information contained therein and (iii) give prompt notice thereof to Borrower.
Upon request, Borrower will execute and deliver to Agent an appropriate
replacement promissory note or replacement promissory notes in favor of each
assignee (and assignor, if such assignor is retaining a portion of its
Commitment and Loans) reflecting such assignee's (and assignor's) Pro Rata
Share(s) of the Facility. Upon execution and delivery of such replacement
promissory notes, the original promissory note or notes evidencing all or a
portion of the Commitments and Loans being assigned shall be canceled and
returned to Borrower.
(e) Each Lender may sell participations to one or more banks,
finance companies, insurance or other entities in or to all or a portion of its
rights and obligations under this Agreement (including without limitation all or
a portion of its Commitment and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement (including without limitation
its Commitment to Borrower hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) Borrower, Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
that such Participant may have the contractual right in the applicable
participation agreement to prevent (A) increases in the Facility, (B) extensions
of the Maturity Date (except pursuant to Article III hereof), (C) decreases in
the interest rates described in this Agreement, and (D) a release of the REIT
Guaranty.
(f) Borrower will use reasonable efforts to cooperate with
Agent and Lenders in connection with the assignment of interests under this
Agreement or the sale of participations herein.
(g) Anything in this Agreement to the contrary
notwithstanding, and without the need to comply with any of the formal or
procedural requirements of this Agreement, including Section 11.13, any Lender
may at any time and from time to time pledge and assign all or any portion of
its rights under all or any of the Loan Documents to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such Lender from its
obligations
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thereunder. To facilitate any such pledge or assignment, Agent shall, at the
request of such Lender, enter into a letter agreement with the Federal Reserve
Bank in, or substantially in, the form of the exhibit to Appendix C to the
Federal Reserve Bank of New York Operating Circular No 12.
(h) Anything in this Agreement to the contrary
notwithstanding, any Lender may assign all or any portion of its rights and
obligations under this Agreement to a Lender Affiliate of such Lender without
first obtaining the approval of Agent and Borrower, provided that (i) at the
time of such assignment such Lender is not a Defaulting Lender, (ii) such Lender
gives Agent and Borrower at least fifteen (15) days prior written notice of any
such assignment; (iii) the parties to each such assignment execute and deliver
to Agent an Assignment and Assumption, and (iv) Agent receives from assignor for
its sole account a processing fee of Three Thousand Dollars ($3,000).
(i) No Lender shall be permitted to assign, or sell a
participation interest in, all or any portion of its rights and obligations
under this Agreement to Borrower or any Affiliate of Borrower.
(j) Anything in this Agreement to the contrary
notwithstanding, so long as no Event of Default shall have occurred and be
continuing, no Lender shall be permitted to enter into an assignment of its
rights and obligations hereunder which would result in such Lender holding a
Commitment of less than Ten Million Dollars ($10,000,000). In the event Agent
ceases to hold a Commitment of less than ten percent (10%) of the Facility,
Agent shall resign from the performance of all of its functions and duties
hereunder; provided, however, that no such resignation shall be required during
the continuance of an Event of Default.
11.14 Ratable Sharing. Subject to Sections 11.03 and 11.04,
Lenders agree among themselves that (i) with respect to all amounts received by
them which are applicable to the payment of the Obligations, equitable
adjustment will be made so that, in effect, all such amounts will be shared
among them ratably in accordance with their Pro Rata Shares, whether received by
voluntary payment, by the exercise of the right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations, (ii) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim, set-off, banker's lien or otherwise, receive
payment of a proportion of the aggregate amount of the Obligations held by it
which is greater than its Pro Rata Share of the payments on account of the
Obligations, the one receiving such excess payment shall purchase, without
recourse or warranty, an undivided interest and participation (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in such
Obligations owed to the others so that all such recoveries with respect to such
Obligations shall be applied ratably in accordance with their Pro Rata Shares;
provided, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to that party
to the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 11.14 may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
subject to Section 12.04, the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.
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11.15 Delivery of Documents. Agent shall as soon as reasonably
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary and (ii) all documents of which Agent
receives copies from Borrower for distribution to Lenders pursuant to Sections
6.01 and 12.07. In addition, within ten (10) Business Days after receipt of a
request in writing from a Lender for written information or documents provided
by or prepared by Borrower, the REIT or any Agreement Party, Agent shall deliver
such written information or documents to such requesting Lender if Agent has
possession of such written information or documents in its capacity as Agent or
as a Lender.
11.16 Notice of Events of Default. Except as expressly
provided in this Section 11.16, Agent shall not be deemed to have knowledge or
notice of the occurrence of any Unmatured Event of Default or Event of Default
(other than nonpayment of principal of or interest on the Loans) unless Agent
has received notice in writing from a Lender or Borrower referring to this
Agreement or the other Loan Documents, describing such event or condition and
expressly stating that such notice is a notice of an Unmatured Event of Default
or Event of Default. Should Agent receive such notice of the occurrence of an
Unmatured Event of Default or Event of Default, or should Agent send Borrower a
notice of Unmatured Event of Default or Event of Default, Agent shall promptly
give notice thereof to each Lender.
ARTICLE XII.
MISCELLANEOUS
12.01 Expenses
(a) Generally. Borrower agrees, within thirty (30) days after
receipt of a written notice from the Agent, to pay or reimburse Agent for all of
Agent's reasonable costs and expenses incurred by Agent at any time (whether
prior to, on or after the date of this Agreement) in connection with: (A) the
negotiation, preparation and execution of this Agreement and the other Loan
Documents and any amendments or waivers with respect hereto requested by
Borrower, including, without limitation, the reasonable fees, expenses and
disbursements of Agent's outside counsel incurred in connection therewith; (B)
the making of the Loans and (C) the collection or enforcement by Agent of any of
the Obligations, including, without limitation, reasonable attorneys' fees and
costs incurred in connection therewith.
(b) After Event of Default. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable costs and expenses, including
without limitation reasonable attorneys' fees and disbursements incurred by
Agent or Lenders after the occurrence of an Event of Default (i) in enforcing
any Obligation or exercising or enforcing any other right or remedy available by
reason of such Event of Default; (ii) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in
commencing, defending or intervening in any litigation or in filing a petition,
complaint, answer, motion or other pleadings in any legal proceeding relating to
Borrower, the REIT or any Agreement Party and related to or arising out of the
transactions contemplated hereby; (iv) in taking any other action in or with
respect to any suit or proceeding (whether in bankruptcy or otherwise); (v) in
protecting, preserving, collecting, leasing, selling, taking possession of, or
liquidating any such collateral; or
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(vi) attempting to enforce or enforcing any rights under the Loan Documents;
provided, however, that the attorneys' fees and disbursements for which Borrower
is obligated under this subsection (b) shall be limited to the reasonable
non-duplicative fees and disbursements of counsel for Agent and counsel for all
Lenders as a group. For purposes of this Section 12.01(b), (i) counsel for Agent
shall mean a single outside law firm representing Agent plus any additional law
firms providing special local law representation in connection with the
enforcement of the Loan Documents, and (ii) counsel for all Lenders as a group
shall mean a single outside law firm representing such Lenders as a group.
12.02 Indemnity
(a) Generally. Borrower shall indemnify and defend Agent,
Swingline Lender, Issuing Lender and each Lender and their respective
affiliates, participants, officers, directors, employees and agents (each an
"Indemnitee") against, and shall hold each such Indemnitee harmless from, any
and all losses, damages (whether general, punitive or otherwise), liabilities,
claims, causes of action (whether legal, equitable or administrative),
judgments, court costs and legal or other expenses (including reasonable
attorneys' fees) which such Indemnitee may suffer or incur: (i) in connection
with claims made by third parties against such Indemnitee for losses or damages
suffered by such third party as a result of (A) such Indemnitee's performance of
this Agreement or any of the other Loan Documents, including without limitation
such Indemnitee's exercise or failure to exercise any rights, remedies or powers
in connection with this Agreement or any of the other Loan Documents or (B) the
failure by Borrower, the REIT or any Agreement Party to perform any of their
respective obligations under this Agreement or any of the other Loan Documents
as and when required hereby or thereby, including without limitation any failure
of any representation or warranty of Borrower, the REIT or any Agreement Party
to be true and correct; (ii) in connection with any claim or cause of action of
any kind by any Person to the effect that such Indemnitee is in any way
responsible or liable for any act or omission by Borrower, the REIT or any
Agreement Party, whether on account of any theory of derivative liability or
otherwise, (iii) in connection with the past, present or future environmental
condition of any Property owned by Borrower, the REIT, Subsidiary or any
Agreement Party, the presence of asbestos-containing materials at any such
Property, the presence of Contaminants in groundwater at any such Property, or
the Release or threatened Release of any Contaminant into the environment from
any such Property; or (iv) in connection with any claim or cause of action of
any kind by any Person which would have the effect of denying such Indemnitee
the full benefit or protection of any provision of this Agreement or any of the
other Loan Documents.
(b) ERISA. Without limitation of the provisions of subsection
(a) above, Borrower shall indemnify and hold each Indemnitee free and harmless
from and against all loss, costs (including reasonable attorneys' fees and
expenses), expenses, taxes, and damages (including consequential damages) such
Indemnitee may suffer or incur by reason of the investigation, defense and
settlement of claims and in obtaining any prohibited transaction exemption under
ERISA or the Internal Revenue Code necessary in such Indemnitee's reasonable
judgment by reason of the inaccuracy of the representations and warranties set
forth in the first paragraph of Section 5.01(s) or a breach of the provisions
set forth in the last paragraph of Section 8.01(f).
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(c) Exceptions; Limitations. Notwithstanding anything to the
contrary set forth in this Section 12.02, Borrower shall have no obligation to
any Indemnitee hereunder with respect to (i) any intentional tort, fraud or act
of gross negligence or bad faith which any Indemnitee is personally determined
by the judgment of a court of competent jurisdiction (sustained on appeal, if
any) to have committed, (ii) any liability of such Indemnitee to any third party
based upon contractual obligations of such Indemnitee owing to such third party
which are not expressly set forth in the Loan Documents or (iii) violations of
Environmental Laws relating to a Property which are caused by the act or
omission of such Indemnitee after such Indemnitee takes possession of such
Property and which would not have occurred if such Indemnitee had exercised
reasonable care under the circumstances. In addition, the indemnification set
forth in this Section 12.02 in favor of any officer, director, partner, employee
or agent of Agent, Swingline Lender, Issuing or any Lender shall be solely in
their respective capacities as such officer, director, partner, employee or
agent. Such indemnification in favor of any affiliate of Agent, Swingline
Lender, Issuing Lender or any Lender shall be solely in its capacity as the
provider of services to Agent, Swingline Lender, Issuing Lender or such Lender
in connection with this Agreement, and such indemnification in favor of any
participant of Agent or any Lender shall be solely in its capacity as a
participant in the Commitments and the Loans.
(d) Payment; Survival. Borrower shall pay any amount owing
under this Section 12.02 within thirty (30) days after written demand therefor
by the applicable Indemnitee together with reasonable supporting documentation
therefor. The indemnity set forth in this Section 12.02 shall survive the
payment of all amounts payable pursuant to, and secured by, this Agreement and
the other Loan Documents. Payment by any Indemnitee shall not be a condition
precedent to the obligations of Borrower under this Section 12.02. To the extent
that any indemnification obligation set forth in this Section 12.02 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of the applicable
indemnified matter.
12.03 Change in Accounting Principles. Except as otherwise
provided herein, if any changes in accounting principles from those used in the
preparation of the most recent financial statements delivered to Agent pursuant
to the terms hereof are hereafter required or permitted by the rules,
regulations, pronouncements and opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and are adopted by the REIT,
Borrower, any Subsidiary, any Investment Affiliate, or any Agreement Party with
the agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, standards or terms found herein, the parties hereto agree to enter
into negotiations in order to amend such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
financial condition of the REIT, on a consolidated basis, shall be the same
after such changes as if such changes had not been made; provided, however, that
no change in GAAP that would affect the method of calculation of any of the
financial covenants, standards or terms shall be given effect in such
calculations until such provisions are amended, in a manner satisfactory to
Agent and all Lenders, to so reflect such change in accounting principles.
12.04 Setoff. In addition to any Liens granted to Agent and
any rights now or hereafter granted under applicable law and not by way of
limitation of any such Lien or rights,
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upon the occurrence and during the continuance of any Event of Default, Agent
and each Lender are hereby authorized by Borrower at any time or from time to
time, with concurrent notice to Borrower, or to any other Person (any such
notice being hereby expressly waived) to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other indebtedness at any time held or
owing by Agent or such Lender solely to or for the credit or the account of
Borrower against and on account of the Obligations of Borrower to Agent or such
Lender including but not limited to all Loans and all claims of any nature or
description arising out of or connected with this Agreement or any of the other
Loan Documents, irrespective of whether or not (a) Agent or such Lender shall
have made any demand hereunder or (b) Agent shall have declared the principal of
and interest on the Loans and other amounts due hereunder to be due and payable
as permitted by Article XI and although said obligations and liabilities, or any
of them, may be contingent or unmatured.
12.05 Amendments and Waivers. No amendment or modification of
any provision of this Agreement shall be effective without the written agreement
of Requisite Lenders (after notice to all Lenders) as provided in Section
11.10(a) and Borrower provided that the agreement of Requisite Lenders shall not
be required for amendments or modifications that are purely of a clerical nature
or that correct a manifest error and no termination or waiver of any such
provision of this Agreement (including without limitation any waiver of an Event
of Default which does not specifically require the consent of all Lenders), or
consent to any departure by Borrower therefrom, shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders) as provided in Section 11.10(a), which Requisite Lenders shall have the
right to grant or withhold at their sole discretion, except that the amendments,
modifications or waivers specified in Section 11.10(b) shall require the consent
of the Supermajority Lenders and the following amendments, modifications or
waivers shall require the consent of all Lenders (other than Section 12.05(j)
which shall require the consent of all Lenders other than Agent):
(a) Increasing the Commitments or any Lender's Commitments;
(b) Changing the principal amount or final maturity of the
Loans;
(c) Reducing or increasing the interest rates applicable to
the Loans (other than Swingline Loans);
(d) Reducing the rates on which fees payable pursuant hereto
are determined;
(e) Forgiving or delaying any amount payable under Article II
(other than late fees);
(f) Changing the definition of "Requisite Lenders," "Loan
Availability," "Supermajority Lenders," or "Pro Rata Shares";
(g) Changing any provision contained in Section 12.05;
(h) Releasing any obligor under any Loan Document, unless such
release is otherwise required by the terms of this Agreement or any other Loan
Document;
84
(a) Issuing a Letter of Credit for a term extending beyond the
Maturity Date;
(i) Removal of Agent for good cause in accordance with Section
11.09(a); and
(j) Modifying or waiving any other provision herein which
specifically requires the consent of all Lenders.
Notwithstanding anything to the contrary contained in this Agreement, Borrower
shall have no right to consent to any amendment, modification, termination or
waiver of any provision of Article XI hereof; provided, however, that no
amendment, modification, termination or waiver of Section 11.09(b), 11.09(c),
11.10(a), or 11.13 (except subsection (i) thereof) which has an adverse effect
on Borrower or Borrower's rights hereunder shall be effective without the
written concurrence of Borrower. Agent and Lenders further acknowledge and agree
that the remaining provisions of Article XI are intended to and shall continue
to address only the rights and obligations of Agent and Lenders amongst each
other and do not and shall not impose obligations or restrictions upon Borrower
or result in any way in the loss of any rights, claims or defenses of Borrower.
No amendment, modification, termination or waiver of any provision of Article XI
hereof or any other provision referring to any Agent, Swingline Lender or
Issuing Lender shall be effective without the written concurrence of the Agent,
Swingline Lender or Issuing Lender, as applicable. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on Borrower in any case shall entitle
Borrower to any other further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section shall be binding on each assignee,
transferee or recipient of Agent's powers, functions or duties or any Lender's
Commitment under this Agreement or the Loans at the time outstanding.
12.06 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Unmatured Event of Default if
such action is taken or condition exists.
12.07 Notices and Delivery. Unless otherwise specifically
provided herein, any consent, notice or other communication herein required or
permitted to be given shall be in writing and may be personally served,
telecopied or sent by courier service or United States mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or if deposited in the United States mail (registered or
certified, with postage prepaid and properly addressed) upon receipt or refusal
to accept delivery. Notices to Agent, Swingline Lender or Issuing Lender
pursuant to Article II shall not be effective until received by Agent, Swingline
Lender or Issuing Lender, as applicable. For the purposes hereof, the addresses
of the parties hereto (until notice of a change thereof is delivered as provided
in this Section 12.07) shall be as set forth below each party's name on the
signature pages hereof, or, as to each party, at such other address as may be
designated by such party in a written notice to all of the other parties. All
deliveries to be made to Agent for
85
distribution to the Lenders shall be made to Agent at the addresses specified
for notice on the signature page hereto and, in addition, a sufficient number of
copies of each such delivery shall be delivered to Agent for delivery to each
Lender at the address specified for deliveries on the signature page hereto or
such other address as may be designated by Agent or Lenders in a written notice.
12.08 Survival of Warranties, Indemnities and Agreements. All
agreements, representations, warranties and indemnities made or given herein or
pursuant hereto shall survive the execution and delivery of this Agreement and
the other Loan Documents and the making and repayment of the Loans hereunder and
such indemnities shall survive termination hereof.
12.09 Failure or Indulgence Not Waiver; Remedies Cumulative.
Except as otherwise expressly provided in this Agreement or any other Loan
Document, no failure or delay on the part of Agent, Swingline Lender, Issuing
Lender or any Lender in the exercise of any power, right or privilege under any
of the Loan Documents shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under the Loan Documents are cumulative to and not
exclusive of any rights or remedies otherwise available.
12.10 Marshalling; Recourse to Security; Payments Set Aside.
Neither any Lender, Swingline Lender, Issuing Lender nor Agent shall be under
any obligation to marshal any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations. Recourse to security
shall not be required at any time. To the extent that Borrower makes a payment
or payments to Agent, Swingline Lender, Issuing Lender or the Lenders or Agent,
Swingline Lender, Issuing Lender or the Lenders enforce their Liens or exercise
their rights of set off, and such payment or payments or the proceeds of such
enforcement or set off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or set off had not occurred.
12.11 Severability. In case any provision in or obligation
under this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
12.12 Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
12.13 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
12.14 Limitation of Liability. To the extent permitted by
applicable law, no claim may be made by Borrower, the REIT, any Lender or any
other Person against Agent, Swingline Lender, Issuing Lender or any Lender, or
the affiliates, directors, officers, employees,
86
attorneys or agents of any of them, for any punitive damages in respect of any
claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and Borrower, the REIT, and each
Lender hereby waive, release and agree not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
12.15 Successors and Assigns. This Agreement and the other
Loan Documents shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of Agent and Lenders. The terms
and provisions of this Agreement shall inure to the benefit of any permitted
assignee or transferee of the Loans and the Commitments of Lenders under this
Agreement, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Agent and Lenders shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Borrower's rights or any interest therein hereunder, and
Borrower's duties and obligations hereunder, shall not be assigned (whether
directly, indirectly, by operation of law or otherwise) without the consent of
all Lenders.
12.16 Usury Limitation. Each Loan Document is expressly
limited so that in no contingency or event whatsoever, whether by reason of
error of fact or law, payment, prepayment or advancement of the proceeds of the
Loans, acceleration of maturity of the unpaid principal balance of the Loans, or
otherwise, shall the amount paid or agreed to be paid to Lenders for the use,
forbearance, or retention of money, including any fees or charges collected or
made in connection with the Loans which may be treated as interest under
applicable law, if any, exceed the maximum legal limit (if any such limit is
applicable) under United States federal laws or state laws (to the extent not
preempted by federal law, if any), now or hereafter governing the interest
payable under such Loan Documents. If, from any circumstances whatsoever,
fulfillment of any provision hereof or any of the other Loan Documents at the
time performance of such provision shall be due, shall involve transcending the
limit of validity (if any) prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances Lenders shall ever receive as interest an amount which would
exceed the maximum legal limit (if any such limit is applicable), such amount
which would be excessive interest shall be applied to the reduction of the
unpaid principal balance due under the Loan Documents and not to the payment of
interest or, if necessary, to Borrower. Notwithstanding any other provision of
this Agreement or any of the other Loan Documents, this provision shall control
every other provision of all Loan Documents.
12.17 Confidentiality. Agent, Swingline Lender, Issuing Lender
and Lenders shall use reasonable efforts to assure that any information about
Borrower, the REIT, Subsidiaries and Investment Affiliates (and their respective
Properties) not generally disclosed to the public which is furnished to Agent,
Swingline Lender, Issuing Lender or Lenders pursuant to the provisions of this
Agreement or any of the other Loan Documents is used only for the purposes of
this Agreement and the other Loan Documents and shall not be divulged to any
other Person other than Agent, Swingline Lender, Issuing Lender and Lenders and
their respective affiliates, officers, directors, employees and agents who are
actively and directly participating in the evaluation, administration or
enforcement of the Obligations; provided, however, that
87
nothing herein shall affect the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for Agent, Swingline Lender, Issuing Lender or Lenders or to their
accountants, (iii) to bank examiners and auditors, (iv) to any transferee or
participant or prospective transferee or participant hereunder who agrees to be
bound by this provision, (v) in connection with the enforcement of the rights of
Agent, Swingline Lender, Issuing Lender and Lenders under this Agreement and the
other Loan Documents, or (vi) in connection with any litigation to which Agent,
Swingline Lender, Issuing Lender or any Lender is a party so long as Agent,
Swingline Lender, Issuing Lender or such Lender provides Borrower with prior
written notice of the need for such disclosure and exercises reasonable efforts
to obtain a protective order with respect to such information from the court or
other tribunal before which such litigation is pending.
12.18 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial;
Waiver Of Permissive Counterclaims. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
BORROWER OR THE REIT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE AND ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER OR THE REIT WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION HAVING SITUS WITHIN THE BOUNDARIES OF
THE FEDERAL COURT DISTRICT OF THE NORTHERN DISTRICT OF ILLINOIS, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER AND THE REIT ACCEPT, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER AND THE REIT HEREBY DESIGNATE AND APPOINT ELLEN KELLEHER,
ESQ., MANUFACTURED HOME COMMUNITIES, INC., TWO NORTH RIVERSIDE PLAZA, SUITE 800,
CHICAGO, ILLINOIS 60606, TO RECEIVE ON THEIR BEHALF SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
BY SUCH PERSON TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. SUCH
APPOINTMENT SHALL BE REVOCABLE ONLY WITH AGENT'S PRIOR WRITTEN APPROVAL.
BORROWER AND THE REIT IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS
RESPECTIVE NOTICE ADDRESS SPECIFIED ON THE SIGNATURE PAGES HEREOF, SUCH SERVICE
TO BECOME EFFECTIVE UPON RECEIPT. BORROWER, THE REIT, AGENT AND LENDERS
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (B) ANY OBJECTION (INCLUDING
WITHOUT LIMITATION ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS
OF ANY OTHER
88
JURISDICTION. BORROWER AND THE REIT AGREE THAT THEY WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIM IN ANY PROCEEDING BROUGHT BY LENDER WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
89
12.19 Counterparts; Effectiveness; Inconsistencies. This
Agreement and any amendments, waivers, consents or supplements may be executed
in counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective when Borrower, the
initial Lenders, Swingline Lender, Issuing Lender and Agent have duly executed
and delivered counterpart execution pages of this Agreement to each other
(delivery by Borrower and the REIT to Lenders and by any Lender to Borrower, the
REIT and any other Lender being deemed to have been made by delivery to Agent).
This Agreement and each of the other Loan Documents shall be construed to the
extent reasonable to be consistent one with the other, but to the extent that
the terms and conditions of this Agreement are actually and directly
inconsistent with the terms and conditions of any other Loan Document, this
Agreement shall govern.
12.20 Construction. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement and that the normal
rule 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.
12.21 Entire Agreement. This Agreement, taken together with
all of the other Loan Documents and all certificates and other documents
delivered by Borrower to Agent in connection herewith, embodies the entire
agreement and supersede all prior agreements, written and oral, relating to the
subject matter hereof.
12.22 Agent's Action for Its Own Protection Only. The
authority herein conferred upon Agent, and any action taken by Agent, to inspect
any Property will be exercised and taken by Agent for its own protection only
and may not be relied upon by Borrower for any purposes whatsoever, and Agent
shall not be deemed to have assumed any responsibility to Borrower with respect
to any such action herein authorized or taken by Agent. Any review,
investigation or inspection conducted by Agent, any consultants retained by
Agent or any agent or representative of Agent in order to verify independently
Borrower's satisfaction of any conditions precedent to the Loans, Borrower's
performance of any of the covenants, agreements and obligations of Borrower
under this Agreement, or the validity of any representations and warranties made
by Borrower hereunder (regardless of whether or not the party conducting such
review, investigation or inspection should have discovered that any of such
conditions precedent were not satisfied or that any such covenants, agreements
or obligations were not performed or that any such representations or warranties
were not true), shall not affect (or constitute a waiver by Agent or Lenders of)
(i) any of Borrower's representations and warranties under this Agreement or
Agent's or Lenders' reliance thereon or (ii) Agent's or Lenders' reliance upon
any certifications of Borrower required under this Agreement or any other facts,
information or reports furnished to Agent and Lenders by Borrower hereunder.
90
12.23 Lenders' ERISA Covenant. Each Lender, by its signature
hereto or on the applicable Assignment and Assumption, hereby agrees (a) that on
the date any Loan is disbursed hereunder no portion of such Lender's Pro Rata
Share of such Loan will constitute "assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an "employee benefit plan" within the meaning of Section 3(3) of
ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Internal
Revenue Code, and (b) that following such date such Lender shall not allocate
such Lender's Pro Rata Share of any Loan to an account of such Lender if such
allocation (i) by itself would cause such Pro Rata Share of such Loan to then
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code and (ii) by itself would cause such Loan to constitute
a prohibited transaction under ERISA or the Internal Revenue Code (which is not
exempt from the restrictions of Section 406 of ERISA and Section 4975 of the
Internal Revenue Code and the taxes and penalties imposed by Section 4975 of the
Internal Revenue Code and Section 502(i) of ERISA) or any Agent or Lender being
deemed in violation of Section 404 of ERISA.
12.24 Sole Lead Arranger, Documentation Agent and Syndication
Agent. Each of the parties to this Agreement acknowledges and agrees that the
obligations of Sole Lead Arranger, Documentation Agent and Syndication Agent
hereunder shall be limited to those obligations that are expressly set forth
herein, if any, and Sole Lead Arranger, Documentation Agent and Syndication
Agent shall not be required to take any action or assume any liability except as
may be required in their respective capacities as a Lender hereunder. Each of
the parties to this Agreement agrees that, for purposes of the indemnifications
set forth herein, the term "Agent" shall be deemed to include Sole Lead
Arranger, Documentation Agent and Syndication Agent.
[SIGNATURE PAGES FOLLOW]
91
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
"Borrower"
MHC OPERATING LIMITED
PARTNERSHIP, an Illinois limited
partnership
By: MANUFACTURED HOME
COMMUNITIES, INC., a Maryland
corporation, as General Partner
By: /s/ JOHN M. ZOELLER
------------------------------------------
Name: John M. Zoeller
Title: Vice President/Chief Financial
Officer
Address:
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Telecopy: 312/279-1710
S-1
"REIT"
MANUFACTURED HOME
COMMUNITIES, INC., a Maryland
corporation
By: /s/ JOHN M. ZOELLER
-------------------------------------
Name: John M. Zoeller
Title: Vice President/Chief Financial
Officer
Address:
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Telecopy: 312/279-1710
AGREED AND ACKNOWLEDGED
FOR PURPOSES OF SECTION 1.04:
"REIT GUARANTOR"
MANUFACTURED HOME
COMMUNITIES, INC., a Maryland corporation
By: /s/ JOHN M. ZOELLER
- ---------------------------------------------
Name: John M. Zoeller
Title: Vice President/Chief Financial Officer
Address:
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Telecopy: 312/279-1710
S-2
WELLS FARGO BANK, N.A,
as Agent, Sole Lead Arranger, Swingline
Lender, Issuing Lender and a Lender
By: /s/ Steven R. Lowery
- ----------------------------------------------
Name: Steven R. Lowery
- ----------------------------------------------
Title: Vice President
- ----------------------------------------------
Address:
225 West Wacker Drive
Suite 2550
Chicago, Illinois 60601
Attn.: Senior Loan Officer
Telecopy: 312/782-0969
WITH A COPY TO:
Wells Fargo & Co.
Real Estate Group
420 Montgomery Street, Floor 6
San Francisco, California 94163
Attn.: Chief Credit Officer
Telecopy: 415/391-2971
WITH A COPY TO (FOR
FINANCIAL STATEMENTS AND REPORTING
INFORMATION ONLY):
Wells Fargo Bank
2030 Main Street
Suite 800
Irvine, California 92714
Attn: Jim Furuyama
Telecopy 949/251-4343
Commitment: $50,000,000
33.333333%
S-3
BANK OF AMERICA, N.A.,
as Syndication Agent and as a Lender
By: /s/ Megan McBride
- ----------------------------------------------
Name: Megan McBride
- ----------------------------------------------
Title: Principal
- ----------------------------------------------
Address:
231 S. LaSalle Street, 15th Floor
Chicago, Illinois 60697
Attn: Megan McBride
Telecopy: 312/974-4970
Commitment: $33,333,333.33
22.222222%
S-4
LASALLE BANK NATIONAL
ASSOCIATION, as Documentation Agent
and as a Lender
By: /s/ Crystal DiDomenico
- ----------------------------------------
Name: Crystal DiDomenico
- ----------------------------------------
Title: Relationship Manager
- ----------------------------------------
Address:
60 Wall Street, 22nd Floor
New York, New York 10260-0060
Attention: Crystal DiDomenico
Telecopy: __________________
Commitment: $33,333,333.34
22.222222%
S-5
COMMERZBANK AKTIENGESELLSCHAFT, New York
Branch, as a Lender
By: /s/ David Buettner
- -------------------------------------------
Name: David Buettner
- -------------------------------------------
Title: Assistant Vice President
- -------------------------------------------
By: /s/ E. Marcus Perry
- -------------------------------------------
Name: E. Marcus Perry
- -------------------------------------------
Title: Assistant Vice President
- -------------------------------------------
Address:
1251 Avenue of the Americas
New York, New York 10020
Attention: David Buettner
Telecopy: 212/400-5773
Commitment: $33,333,333.33
22.222222%
S-6
EXHIBIT 10.43
[WELLS FARGO LOGO]
MODIFICATION AGREEMENT
Loan No. 31-0900553R
THIS MODIFICATION AGREEMENT ("Agreement") dated December 6, 2001 is entered into
by and between WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender"), and MHC
STAGECOACH, L.L.C., a Delaware limited liability company, ("Borrower").
R E C I T A L S
A. Pursuant to the terms of a promissory note dated July 31, 2001 executed by
Borrower in favor of Lender ("Note"), Lender made a loan to Borrower in
the principal amount of FIFTY MILLION AND NO/100THS DOLLARS
($50,000,000.00) ("Loan"). The Loan is further evidenced by the documents
described in the Note as "Loan Documents". The Note is secured by, among
other things: (i) that certain Deed of Trust and Absolute Assignment of
Rents and Leases and Security Agreement (And Fixture Filing) ("Casa del
Sol III Deed of Trust") of even date therewith, executed by Borrower
encumbering certain real property and improvements located in Peoria,
Arizona; (ii) that certain Deed of Trust and Absolute Assignment of Rents
And Leases and Security Agreement (And Fixture Filing) ("Apollo Village
Deed of Trust") of even date therewith, executed by Borrower encumbering
certain other real property and improvements located in Peoria, Arizona;
(iii) that certain Deed of Trust and Absolute Assignment of Rents and
Leases and Security Agreement (And Fixture Filing) ("Woodland Hills Deed
of Trust") of even date therewith, executed by Borrower encumbering
certain real property and improvements located in Thornton, Colorado; (iv)
that certain Deed of Trust and Absolute Assignment of Rents and Leases and
Security Agreement (And Fixture Filing) ("Cabana Deed of Trust") of even
date therewith, executed by Borrower encumbering certain real property and
improvements located in Las Vegas, Nevada; (v) that certain Mortgage and
Absolute Assignment of Rents and Leases and Security Agreement (And
Fixture Filing) ("Pickwick Village Mortgage") of even date therewith,
executed by Borrower encumbering certain real property and improvements
located in Port Orange, Florida; (vi) that certain Mortgage and Absolute
Assignment of Rents and Leases and Security Agreement (And Fixture Filing)
("Indian Oaks Mortgage") of even date therewith, executed by Borrower
encumbering certain real property and improvements located in Rockledge,
Florida; and (vii) that certain Mortgage and Absolute Assignment of Rents
and Leases and Security Agreement (And Fixture Filing) ("Windmill Manor
Mortgage") of even date therewith, executed by Borrower encumbering
certain real property and improvements located in Bradenton, Florida. The
Casa del Sol III Deed of Trust, the Apollo Village Deed of Trust, the
Woodland Hills Deed of Trust, the Cabana Deed of Trust, the Pickwick
Village Mortgage, the Indian Oaks Mortgage and the Windmill Manor Mortgage
are referred to herein collectively and individually, as applicable, and
as modified, extended or renewed, as the "Mortgage" or the "Mortgages."
B. The Note, Mortgages, this Agreement, and the other documents described in
the Note as "Loan Documents", together with all modifications and
amendments thereto and any document required hereunder, are collectively
referred to herein as the "Loan Documents".
C. By this Agreement, Borrower and Lender intend to modify and amend certain
terms and provisions of the Loan Documents.
NOW, THEREFORE, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to
Lender that no Default, breach or failure of condition has occurred, or
would exist with notice or the lapse of time or both, under any of the
Loan Documents (as modified by this Agreement) and that all
representations and warranties therein are true and correct, which
representations and warranties shall survive execution of this Agreement.
Borrower also hereby represents, warrants and re-affirms to Lender that
the representations and warranties contained in the Loan Documents are, to
Borrower's current actual knowledge after reasonable investigation and
inquiry, true and correct as of the date hereof.
2. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby amended as
follows:
2.1 Section 3.6 of Exhibit A to the Note is hereby amended and restated
in its entirety as follows:
1
"3.6 BORROWER LETTER OF CREDIT.
a. Delivery to Lender. Lender has agreed that in lieu of
the Capital Expenditure Impounds required by Subsection
3.1(c) above, Lender will accept and Borrower may
deliver by November 14, 2001 an irrevocable standby
letter of credit (such letter of credit, together with
any replacement or renewal thereof, is referred to
herein as the "Borrower Letter of Credit") in the
aggregate principal amount of $306,991 issued by an
issuer reasonably acceptable to Lender in favor of
Lender, in form and content reasonably satisfactory to
Lender. Subject to the provisions of this Section 3.6,
Lender shall retain custody of any Borrower Letter of
Credit until such time as the Loan is repaid in full
(other than through judicial or nonjudicial foreclosure
of the Mortgages or deeds in lieu thereof).
b. Right to Draw. Lender shall have the right to draw upon
the Borrower Letter of Credit in the full amount thereof
upon the occurrence of any Default. In the event that
the Borrower Letter of Credit will not be renewed for
any reason, Borrower shall either (a) deliver a
substitute or replacement letter of credit in form and
content reasonably satisfactory to Lender (a
"Replacement Letter of Credit") prior to the date (the
"Replacement Date") that is thirty (30) days prior to
the expiration of the Borrower Letter of Credit or (b)
elect to reinstate the Capital Expenditure Impounds by
delivering to Lender the sum of $61,308 (the
"Reinstatement Deposit") prior to the Replacement Date
and $10,218 on each payment date thereafter for payment
or reimbursement of Capital Expenditures. The failure of
Borrower to either deliver a Replacement Letter of
Credit or the Reinstatement Deposit prior to the
Replacement Date shall be considered a Default under the
Loan Documents, and Lender shall, in addition to any
other remedy available to Lender under the Loan
Documents, be entitled to draw upon the Borrower Letter
of Credit in the full amount thereof.
c. Application of Proceeds. The proceeds of any draw under
the Borrower Letter of Credit shall be retained by
Lender as Impounds and shall be governed by the terms
and conditions of this Note and the other Loan
Documents.
d. Release of the Borrower Letter of Credit. Lender shall
surrender the Borrower Letter of Credit to Borrower and
refund to Borrower all sums drawn that Lender is holding
(and that have not otherwise been applied or spent) at
such time as the Loan is repaid in full (other than
through judicial or nonjudicial foreclosure of the
Mortgages or deeds in lieu thereof)."
2.2 All references to the term "Note" in the Loan Documents shall mean
the Note, as amended hereby and as the same may hereafter be
amended, restated, supplemented or modified from time to time.
2.3 The Mortgages and other Loan Documents which recite they are
security instruments shall secure, in addition to any other
obligations secured thereby, the payment and performance by Borrower
of all obligations under (a) the Note, as amended hereby; and (b)
this Agreement, as amended, modified, extended or renewed in writing
by Borrower and Lender.
3. FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has previously delivered
to Lender all of the relevant formation and organizational documents of
Borrower, of the partners or joint venturers of Borrower (if any), and of
all guarantors of the Loan (if any), and all such formation documents
remain in full force and effect and have not been amended or modified
since they were delivered to Lender. Borrower hereby certifies that: (i)
the above documents previously delivered to Lender are all of the relevant
formation and organizational documents of Borrower; (ii) they remain in
full force and effect; and (iii) they have not been amended or modified
since they were previously delivered to Lender.
4. NON-IMPAIRMENT. Except as expressly provided herein, nothing in this
Agreement shall alter or affect any provision, condition, or covenant
contained in the Note or any other Loan Document or affect or impair any
rights, powers, or remedies of Lender, it being the intent of the parties
hereto that the provisions of the Note and other Loan Documents shall
continue in full force and effect except as expressly modified hereby.
5. MISCELLANEOUS. This Agreement and the other Loan Documents shall be
governed by and interpreted in accordance with the laws of the State of
California, except to the extent the same are preempted by Federal law. In
any
2
action brought or arising out of this Agreement or the Loan Documents,
Borrower, and the general partners and joint venturers of Borrower (if
any), hereby consent to the jurisdiction of any Federal or State Court
having proper venue within the State of California and also consent to the
service of process by any means authorized by California or federal law.
The headings used in this Agreement are for convenience only and shall be
disregarded in interpreting the substantive provisions of this Agreement.
Except as expressly provided otherwise herein, all terms used herein shall
have the meaning given to them in the other Loan Documents. Time is of the
essence of each term of the Loan Documents, including this Agreement. If
any provision of this Agreement or any of the other Loan Documents shall
be determined by a court of competent jurisdiction to be invalid, illegal
or unenforceable, that portion shall be deemed severed from this Agreement
and the remaining parts shall remain in full force as though the invalid,
illegal, or unenforceable portion had never been a part thereof.
6. INTEGRATION; INTERPRETATION. The Loan Documents, including this Agreement,
contain or expressly incorporate by reference the entire agreement of the
parties with respect to the matters contemplated therein and supersede all
prior negotiations. The Loan Documents shall not be modified except by
written instrument executed by all parties.
7. EXECUTION IN COUNTERPART. This Agreement, and other Loan Documents which
expressly so provide, may be executed in any number of counterparts, each
of which when executed and delivered will be deemed to be an original and
all of which, taken together, will be deemed to be one and the same
instrument.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be duly
executed as of the date first above written.
"LENDER"
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Steven R. Lowery
------------------------------
Name: Steven R. Lowery
Title: Vice President
"BORROWER"
MHC STAGECOACH, L.L.C.,
a Delaware limited liability company
By: MHC-QRS STAGECOACH, INC.,
a Delaware corporation,
its Managing Member
By: /s/ John M. Zoeller
---------------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
3
GUARANTOR'S CONSENT
The undersigned ("Guarantor") consents to the foregoing Modification Agreement
and the transactions contemplated thereby and reaffirms its obligations under
the Limited Guaranty ("Guaranty") dated July 31, 2001, and its waivers, as set
forth in the Guaranty, of each and every one of the possible defenses to such
obligations. Guarantor further reaffirms that its obligations under the Guaranty
are separate and distinct from the obligations of Borrower (as defined in the
Guaranty).
AGREED:
Dated as of: December 6, 2001 "GUARANTOR"
MANUFACTURED HOME COMMUNITIES, INC.,
a Maryland corporation
By: /s/ John M. Zoeller
-------------------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
4
[WELLS FARGO LOGO]
PROMISSORY NOTE SECURED BY MORTGAGES
Loan No. 31-0900553R
$50,000,000.00 San Francisco, California
July 31, 2001
THIS PROMISSORY NOTE SECURED BY MORTGAGES (this "Note") is made and
entered into by and between MHC STAGECOACH, L.L.C., a Delaware limited liability
company ("Borrower"), and WELLS FARGO NATIONAL BANK, NATIONAL ASSOCIATION
("Lender").
1. PROMISE TO PAY. For value received, Borrower promises to pay to the order
of Lender, at 1320 Willow Pass Road, Suite 205, Concord, California 94520,
or at such other place as may be designated in writing by Lender, the
principal sum of FIFTY MILLION AND NO/100THS DOLLARS ($50,000,000.00)
("Loan"), with interest thereon as specified herein. All sums owing
hereunder are payable in lawful money of the United States of America, in
immediately available funds, without offset, deduction or counterclaim of
any kind.
2. SECURED BY MORTGAGES. This Note is secured by, among other things: (i)
that certain Deed of Trust and Absolute Assignment of Rents and Leases and
Security Agreement (And Fixture Filing) ("Casa del Sol III Deed of Trust")
of even date herewith, executed by Borrower encumbering certain real
property and improvements located in Peoria, Arizona, as more particularly
described therein ("Casa del Sol III Property"); (ii) that certain Deed of
Trust and Absolute Assignment of Rents And Leases and Security Agreement
(And Fixture Filing) ("Apollo Village Deed of Trust") of even date
herewith, executed by Borrower encumbering certain real property and
improvements located in Peoria, Arizona, as more particularly described
therein ("Apollo Village Property"); (iii) that certain Deed of Trust and
Absolute Assignment of Rents and Leases and Security Agreement (And
Fixture Filing) ("Woodland Hills Deed of Trust") of even date herewith,
executed by Borrower encumbering certain real property and improvements
located in Thornton, Colorado, as more particularly described therein
("Woodland Hills Property"); (iv) that certain Deed of Trust and Absolute
Assignment of Rents and Leases and Security Agreement (And Fixture Filing)
("Cabana Deed of Trust") of even date herewith, executed by Borrower
encumbering certain real property and improvements located in Las Vegas,
Nevada and as more particularly described therein ("Cabana Property"); (v)
that certain Mortgage and Absolute Assignment of Rents and Leases and
Security Agreement (And Fixture Filing) ("Pickwick Village Mortgage") of
even date herewith, executed by Borrower encumbering certain real property
and improvements located in Port Orange, Florida, as more particularly
described therein ("Pickwick Village Property"); (vi) that certain
Mortgage and Absolute Assignment of Rents and Leases and Security
Agreement (And Fixture Filing) ("Indian Oaks Mortgage") of even date
herewith, executed by Borrower encumbering certain real property and
improvements located in Rockledge, Florida, as more particularly described
therein ("Indian Oaks Property"); and (vii) that certain Mortgage and
Absolute Assignment of Rents and Leases and Security Agreement (And
Fixture Filing) ("Windmill Manor Mortgage") of even date herewith,
executed by Borrower encumbering certain real property and improvements
located in Bradenton, Florida, as more particularly described therein
("Windmill Manor Property"). The Casa del Sol III Deed of Trust, the
Apollo Village Deed of Trust, the Woodland Hills Deed of Trust, the Cabana
Deed of Trust, the Pickwick Village Mortgage, the Indian Oaks Mortgage and
the Windmill Manor Mortgage are referred to herein collectively and
individually, as applicable, and as modified, extended or renewed, as the
"Mortgage" or the "Mortgages." The Casa del Sol III Property, the Apollo
Village Property, the Woodland Hills Property, the Cabana Property, the
Pickwick Village Property, the Indian Oaks Property and the Windmill Manor
Property are referred to herein collectively and individually, as
applicable, as the "Property" or the "Properties."
3. DEFINITIONS. For the purposes of this Note, the following terms shall have
the following meanings:
"Affiliate" shall mean, as to any specified Person, any other Person that,
directly or indirectly, is in Control of, is Controlled by or is under
common Control with such specified Person.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks in California are
authorized or required by law to close. All references in this Note to a
"day" or a "date" shall be to a calendar day unless specifically
referenced as a Business Day.
1
"Control" shall mean with respect to any specified Person either (i)
ownership directly or through other entities of more than 100% of all
beneficial equity interest in such Person and (ii) the power to direct the
management, operation and business of such person.
"Debt Service Coverage Ratio" shall mean, as of the last day of the
calendar month immediately preceding the applicable calculation date, the
ratio in which (a) the numerator is the sum of the Net Operating Income
for each of the applicable Properties for the immediately preceding twelve
month period and (b) the denominator is the aggregate amount of principal
and interest that would be due under this Note for such period based upon
a debt service constant of seven and 97/100ths percent (7.97%).
"Default" shall have the meaning set forth in the Mortgages.
"Disbursement Date" shall mean the date upon which the Loan proceeds are
funded into escrow in connection with the closing of the Loan.
"Effective Date" shall mean the date Lender authorizes the Loan proceeds
to be released to Borrower.
"Loan Documents" shall mean the documents listed in Exhibit B attached
hereto and incorporated herein by this reference.
"Loan-to-Value Ratio" shall mean, as of the last day of the calendar month
immediately preceding the applicable calculation date, the ratio in which
(a) the numerator is the aggregate amount of principal and interest then
due under this Note and (b) the denominator is the "as-is" value of the
applicable Properties as set forth in the appraisals for such Properties.
"Maturity Date" shall mean September 1, 2011.
"Net Operating Income" shall mean, with respect to a Property, (i) the
rental payments actually received by Borrower ("Gross Rents"); plus (ii)
the expense reimbursements actually received by Borrower ("Expense
Reimbursements"); minus the sum of (w) an adjustment for
vacancy/collection losses equal to the greater of actual, market or five
percent (5%) of the Gross Rents and Expense Reimbursements; and (x) the
actual Operating Expenses; and (y) an amount for reasonable management
expenses equal to the greater of (A) four percent (4%) of Gross Rents or
(B) actual management expenses; and (z) a capital improvement reserve
equal to $17,612 for the Casa del Sol III Property, $16,450 for the Apollo
Village Property, $28,644 for the Woodland Hills Property, $13,150 for the
Cabana Property, $21,600 for the Pickwick Village Property, $10,550 for
the Indian Oaks Property, and $14,600 for the Windmill Manor Property, and
such amount as shall be reasonably determined by Lender for any
Replacement Property (as hereinafter defined).
"Operating Expenses" shall mean, with respect to a Property, all
reasonable operating expenses of such Property, including, without
limitation, those for maintenance, repairs, annual taxes, bond
assessments, ground lease payments, insurance, utilities, and other annual
expenses (but not capital expenses) that are standard and customary for
properties of this type. Operating Expenses for this purpose shall not
include any interest or principal payments on the Loan or any allowance
for depreciation.
"Person" shall mean any individual, corporation, partnership, 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.
"Property Worth" shall mean the fair market value of the Property or
Properties owned by Borrower as of the Disbursement Date.
"Rating Agency" shall mean each of Standard & Poor's Ratings Services,
Moody's Investors Services, Inc., and Fitch IBCA, Inc., and their
successors or assigns, or any other nationally recognized statistical
rating agency which rates securities in connection with a securitization.
"Remaining Properties" shall mean all of the Properties other than those
that have been released or requested to be released from the lien of the
applicable Mortgage pursuant to a Defeasance (hereinafter defined in
Section 14) or in exchange for a Replacement Property.
2
4. INTEREST; PAYMENTS.
4.1 DEFINITIONS. The following terms shall have the meanings indicated:
"Actual/360 Basis" shall mean on the basis of a 360-day year and
charged on the basis of actual days elapsed for any whole or partial
month in which interest is being calculated.
"30/360 Basis" shall mean on the basis of a 360-day year consisting
of 12 months of 30 days each.
"Interest Rate" shall mean a fixed interest rate equal to 6.98%.
4.2 INTEREST ACCRUAL. Interest on the outstanding principal balance of
this Note shall accrue from the Disbursement Date at an annual rate
equal to the Interest Rate calculated on an Actual/360 Basis.
4.3 PAYMENTS. Monthly payments hereunder shall commence on the first day
of the calendar month following the Disbursement Date and continue
on the first day of each calendar month thereafter through the
Maturity Date. If the Disbursement Date is a date other than the
first day of a calendar month, the first monthly payment shall be
interest only. Subsequent monthly payments shall be calculated on
the basis of an equal-payment thirty (30) year amortization of
principal and interest. Notwithstanding that interest on this Note
accrues on an Actual/360 Basis, the total amount of each such
amortized monthly payment of principal and interest shall be
determined using a 30/360 Basis. On the Maturity Date, all unpaid
principal and accrued but unpaid interest shall be due and owing in
full. All interest shall be paid in arrears.
4.4 ACKNOWLEDGMENTS. Borrower acknowledges that interest calculated on
an Actual/360 Basis exceeds interest calculated on a 30/360 Basis
and, therefore: (a) a greater portion of each monthly installment of
principal and interest will be applied to interest using the
Actual/360 Basis than would be the case if interest accrued on a
30/360 Basis; and (b) the unpaid principal balance of this Note on
the Maturity Date will be greater using the Actual/360 Basis than
would be the case if interest accrued on a 30/360 Basis.
4.5 APPLICATION OF PAYMENTS. In the absence of a specific determination
by Lender to the contrary, all payments paid by Borrower to Lender
in connection with the obligations of Borrower under this Note and
under the other Loan Documents shall be applied in the following
order of priority: (a) to amounts, other than principal and
interest, due to Lender pursuant to this Note or the other Loan
Documents; (b) to accrued but unpaid interest on this Note; and (c)
to the unpaid principal balance of this Note. Upon the occurrence of
a Default: (i) Borrower irrevocably waives the right to direct the
application of any and all payments at any time thereafter received
by Lender from or on behalf of Borrower, and (ii) Borrower
irrevocably agrees that Lender shall have the continuing exclusive
right to apply any and all such payments against the then due and
owing obligations of Borrower in such order of priority as Lender
may deem advisable.
5. LATE CHARGE; DEFAULT RATE.
5.1 LATE CHARGE. If any payment required hereunder is not paid on or
before the fifth calendar day of the month in which it is due,
Borrower shall pay a late or collection charge, as liquidated
damages, equal to 4% of the amount of such unpaid payment. Borrower
acknowledges that Lender will incur additional expenses as a result
of any late payments hereunder, which expenses would be
impracticable to quantify, and that Borrower's payments under this
paragraph are a reasonable estimate of such expenses. The foregoing
to the contrary notwithstanding, no late or collection charge shall
be payable by Borrower as a result of any delay in the payment of
any sum due and payable on the Maturity Date.
5.2 DEFAULT RATE. Commencing upon a Default and continuing until such
Default shall have been cured by Borrower, all sums owing on this
Note shall bear interest until paid in full at a rate per annum
equal to 5% plus the Interest Rate ("Default Rate").
6. MAXIMUM RATE PERMITTED BY LAW. Neither this Note nor any of the other Loan
Documents shall require the payment or permit the collection of any
interest or any late payment charge in excess of the maximum rate
permitted by law. If any such excess interest or late payment charge is
provided for under this Note or any of the other Loan Documents or if this
Note or any of the other Loan Documents shall be adjudicated to provide
for such excess, neither
3
Borrower nor Borrower's successors or assigns shall be obligated to pay
such excess, and the right to demand the payment of any such excess shall
be and hereby is waived, and this provision shall control any other
provision of this Note or any of the other Loan Documents. If Lender shall
collect amounts which are deemed to constitute interest and which would
increase the effective interest rate to a rate in excess of the maximum
rate permitted by law, all such amounts deemed to constitute interest in
excess of the maximum legal rate shall, upon such determination, at the
option of Lender, be returned to Borrower or credited against the
outstanding principal balance of this Note.
7. ACCELERATION. If (a) Borrower shall fail to pay when due, subject to any
applicable grace or cure period, any sums payable under this Note; (b) any
other Default shall occur; or (c) any other event or condition shall occur
which, under the terms of any of the Mortgages or any other Loan Document,
gives rise to a right of acceleration of sums owing under this Note, then
Lender, at its sole option, shall have the right to declare all sums owing
under this Note immediately due and payable; provided, however, that if
any of the Mortgages or any other Loan Document provides for the automatic
acceleration of payment of sums owing under this Note, all sums owing
under this Note shall be automatically due and payable in accordance with
the terms of such of the Mortgages or such other Loan Document.
8. BORROWER'S LIABILITY.
8.1 LIMITATION. Except as otherwise provided in this Section 8, Lender's
recovery against Borrower under this Note and the other Loan
Documents shall be limited solely to the Properties and the
"Collateral" (as defined in the Mortgages).
8.2 EXCEPTIONS. Nothing contained in Section 8.1 or elsewhere in this
Note or the other Loan Documents, however, shall limit in any way
the personal liability of Borrower owed to Lender for any losses or
damages incurred by Lender (including, without limitation, any
impairment of Lender's security for the Loan) with respect to any of
the following matters: (a) fraud or willful misrepresentation; (b)
material physical waste of the Properties (or any portions thereof)
or the Collateral; (c) failure to pay property or other taxes,
assessments or charges (other than amounts paid to Lender for taxes,
assessments or charges pursuant to Impounds as defined in Exhibit A
and where Lender elects not to apply such funds toward payment of
the taxes, assessments or charges owed) which may create liens
senior to the lien of any of the Mortgages on all or any portion of
the Properties; (d) failure to deliver any insurance or condemnation
proceeds or awards or any security deposits received by Borrower to
Lender as required under the terms of the Loan Documents or any
other instrument now or hereafter securing this Note or to otherwise
apply such sums as required under the terms of the Loan Documents or
any other instrument now or hereafter securing this Note; (e)
failure to apply any rents, royalties, accounts, revenues, income,
issues, profits and other benefits from the Properties (or any
portion thereof) which are collected or received by Borrower during
the period of any Default or after acceleration of the indebtedness
and other sums owing under the Loan Documents to the payment of
either (i) such indebtedness or other sums or (ii) the normal and
necessary operating expenses of the Properties; or (f) any breach by
Borrower of any covenant in this Note or in any of the Mortgages
regarding Hazardous Materials (as defined in the Mortgages) or any
representation or warranty of Borrower regarding Hazardous Materials
proving to have been untrue when made.
8.3 NO RELEASE OR IMPAIRMENT. Nothing contained in Section 8.1 shall be
deemed to release, affect or impair the indebtedness evidenced by
this Note or the obligations of Borrower under, or the liens and
security interests created by the Loan Documents, or Lender's rights
to enforce its remedies under this Note and the other Loan
Documents, including, without limitation, the right to pursue any
remedy for injunctive or other equitable relief, or any suit or
action in connection with the preservation, enforcement or
foreclosure of the liens, mortgages, deeds of trust, assignments and
security interests which are now or at any time hereafter security
for the payment and performance of all obligations under this Note
or the other Loan Documents.
8.4 PREVAIL AND CONTROL. The provisions of this Section 8 shall prevail
and control over any contrary provisions elsewhere in this Note or
the other Loan Documents.
9. NON-MORTGAGOR BORROWER. If Borrower is not also a "Mortgagor" under the
Mortgages, Borrower hereby makes all representations and warranties in
favor of Lender contained in Article 5 of the Mortgages, all covenants
contained in Section 6.15 of the Mortgages, and all indemnities of Lender
contained in Section 6.19 of the Mortgages, jointly and severally with the
"Mortgagor" under each of the Mortgages.
4
10. MISCELLANEOUS.
10.1 JOINT AND SEVERAL LIABILITY. If this Note is executed by more than
one person or entity as Borrower, the obligations of each such
person or entity shall be joint and several. No person or entity
shall be a mere accommodation maker, but each shall be primarily and
directly liable hereunder.
10.2 WAIVER OF PRESENTMENT. Except as otherwise provided herein or in any
other Loan Document, Borrower hereby waives presentment, demand,
notice of dishonor, notice of default or delinquency, notice of
acceleration, notice of nonpayment, notice of costs, expenses or
losses and interest thereon, and notice of interest on interest and
late charges.
10.3 DELAY IN ENFORCEMENT. No previous waiver or failure or delay by
Lender in acting with respect to the terms of this Note or the
Mortgages shall constitute a waiver of any breach, default or
failure of condition under this Note, the Mortgages or the
obligations secured thereby. A waiver of any term of this Note, the
Mortgages or of any of the obligations secured thereby must be made
in writing signed by Lender, shall be limited to the express terms
of such waiver, and shall not constitute a waiver of any subsequent
obligation of Borrower. The acceptance at any time by Lender of any
past-due amount shall not be deemed to be a waiver of the right to
require prompt payment when due of any other amounts then or
thereafter due and payable.
10.4 TIME OF THE ESSENCE. Time is of the essence with respect to every
provision hereof.
10.5 GOVERNING LAW. This Note was accepted by Lender in the state of
California and the proceeds of this Note were disbursed from the
state of California, which state the parties agree has a substantial
relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, including, without
limiting the generality of the foregoing, matters of construction,
validity, enforceability and performance, this Note, the Mortgages
and the other Loan Documents and the obligations arising hereunder
and thereunder shall be governed by, and construed in accordance
with, the laws of the state of California applicable to contracts
made and performed in such state and any applicable law of the
United States of America, except that at all times the provisions
for the foreclosure of the liens granted under the Mortgages
securing this Note and the creation, perfection and enforcement of
the security interests created pursuant thereto and pursuant to the
other Loan Documents shall be governed by and construed according to
the law of the states where the Properties are located. Except as
provided in the immediately preceding sentence, Borrower hereby
unconditionally and irrevocably waives, to the fullest extent
permitted by law, any claim to assert that the law of any
jurisdiction other than California governs the Mortgages, this Note
and the other Loan Documents.
10.6 CONSENT TO JURISDICTION. Borrower irrevocably submits to the
jurisdiction of: (a) any state or federal court sitting in the state
of California over any suit, action, or proceeding, brought by
Borrower against Lender, arising out of or relating to this Note or
the Loan evidenced hereby; (b) any state or federal court sitting in
any of the states where the Properties are located or the state in
which Borrower's principal place of business is located over any
suit, action or proceeding, brought by Lender against Borrower,
arising out of or relating to this Note or the Loan evidenced
hereby; and (c) any state court sitting in any of the counties of
the states where the Properties are located over any suit, action,
or proceeding, brought by Lender to exercise its rights of
foreclosure under the applicable Mortgage or any action brought by
Lender to enforce its rights with respect to the Collateral.
Borrower irrevocably waives, to the fullest extent permitted by law,
any objection that Borrower may now or hereafter have to the laying
of venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding
brought in any such court has been brought in an inconvenient forum.
10.7 COUNTERPARTS. This Note may be executed in any number of
counterparts, each of which when executed and delivered shall be
deemed an original and all of which taken together shall be deemed
to be one and the same Note.
10.8 HEIRS, SUCCESSORS AND ASSIGNS. All of the terms, covenants,
conditions and indemnities contained in this Note and the other Loan
Documents shall be binding upon the heirs, successors and assigns of
Borrower and shall inure to the benefit of the successors and
assigns of Lender. The foregoing sentence shall not be construed to
permit Borrower to assign the Loan except as otherwise permitted in
this Note or the other Loan Documents.
10.9 SEVERABILITY. If any term of this Note, or the application thereof
to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Note, or the application of
such term to persons or
5
circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this
Note shall be valid and enforceable to the fullest extent permitted
by law.
10.10 CONSENTS, APPROVALS AND EXPENSES. Wherever Lender's consent,
approval, acceptance or satisfaction is required under any provision
of this Note (including, without limitation, Exhibits A and B
hereto) or any of the other Loan Documents, such consent, approval,
acceptance or satisfaction shall not be unreasonably withheld,
conditioned or delayed by Lender unless such provision expressly so
provides. Wherever costs or expenses are required to be paid under
any provision of this Note or any of the other Loan Documents, such
costs or expenses shall be reasonable.
11. NOTICES. All requests, demands, notices and other communications that are
required or permitted to be given to a party under this Note shall be in
writing and shall be sent to such party, either by personal delivery, by
overnight delivery service, by certified first class mail, return receipt
requested, or by facsimile transmission to the address or facsimile number
below. All such notices and communications shall be effective upon receipt
of such delivery or facsimile transmission, together with a printed
receipt of the successful delivery of such facsimile transmission. The
addresses and facsimile numbers of the parties shall be:
Borrower: Lender:
-------- ------
MHC Stagecoach, L.L.C. Wells Fargo Bank, N.A.
c/o Manufactured Home Communities, Inc. 1320 Willow Pass Road, Suite 205
Two North Riverside Plaza Concord, CA 94520
Suite 800 Loan No. 31-0900553R
Chicago, Illinois 60606 FAX No.: (925) 691-5947
Attention: General Counsel
FAX No.: (312) 279-1715
With a copy to:
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, IL 60606-1288
Attention: Benjamin J. Randall
FAX No.: (312) 807-3903
12. ADDITIONAL TERMS AND CONDITIONS. The additional terms and conditions set
forth in Exhibit A and Exhibit B attached hereto are incorporated herein
by this reference.
13. PREPAYMENT. Borrower acknowledges that any prepayment of this Note will
cause Lender to lose its interest rate yield on this Note and will
possibly require that Lender reinvest any such prepayment amount in loans
of a lesser interest rate yield (including, without limitation, in debt
obligations other than first mortgage loans on commercial properties). As
a consequence, Borrower agrees as follows, as an integral part of the
consideration for Lender's making the Loan:
13.1 RESTRICTIONS. Any voluntary prepayment of this Note: (a) is
prohibited except during the last 3 months of the term, (b) is
permitted in full only, and not in part, and (c) may only be made on
the first day of a month.
13.2 PREPAYMENT CHARGE. Except as provided below, if this Note is prepaid
prior to the last three (3) months of the term, whether such
prepayment is involuntary or upon acceleration of the principal
amount of this Note by Lender following a Default, Borrower shall
pay to Lender on the prepayment date (in addition to all other sums
then due and owing to Lender under the Loan Documents) a prepayment
charge equal to the greater of the following two amounts: (a) an
amount equal to 1% of the then outstanding principal balance of the
Loan; or (b) an amount equal to (i) the amount, if any, by which the
sum of the present values as of the prepayment date of all unpaid
principal and interest payments required under this Note, calculated
by discounting such payments from their respective scheduled payment
dates back to the prepayment date at a discount rate equal to the
Periodic Treasury Yield (defined below) exceeds the outstanding
principal balance of the Loan as of the prepayment date, multiplied
by (ii) a fraction whose numerator is the amount of the prepayment
and whose denominator is the outstanding principal balance of the
Loan as of the prepayment date. Notwithstanding the
6
foregoing, no prepayment charge shall apply in respect to any
insurance or condemnation proceeds received by Lender and applied by
Lender to the outstanding principal balance of the Loan. For
purposes of the foregoing, "Periodic Treasury Yield" means (c) the
annual yield to maturity of the actively traded non-callable United
States Treasury fixed interest rate security (other than any such
security which can be surrendered at the option of the holder at
face value in payment of federal estate tax or which was issued at a
substantial discount) that has a maturity closest to (whether
before, on or after) the Maturity Date (or if two or more such
securities have maturity dates equally close to the Maturity Date,
the average annual yield to maturity of all such securities), as
reported in The Wall Street Journal or other authoritative
publication or news retrieval service on the fifth Business Day
preceding the prepayment date, divided by (d) 12, if scheduled
payment dates are monthly, or 4, if scheduled payment dates are
quarterly.
13.3 WAIVER. Borrower waives any right to prepay this Note except under
the terms and conditions set forth in this Section and agrees that
if this Note is prepaid, Borrower will pay the prepayment charge set
forth above. Borrower hereby acknowledges that: (a) the inclusion of
this waiver of prepayment rights and agreement to pay the prepayment
charge for the right to prepay this Note was separately negotiated
with Lender; (b) the economic value of the various elements of this
waiver and agreement was discussed; (c) the consideration given by
Borrower for the Loan was adjusted to reflect the specific waiver
and agreement negotiated between Borrower and Lender and contained
herein; and (d) this waiver is intended to comply with California
Civil Code Section 2954.10.
Borrower's Initials: ________
13.4 INSURANCE PROCEEDS; CONDEMNATION AWARDS. Notwithstanding anything
herein to the contrary, no prepayment charge shall be due and owing
with respect to any involuntary prepayment resulting from Lender's
application of any insurance proceeds or condemnation awards to the
Loan.
14. DEFEASANCE. At any time after the Lockout Expiration Date (defined below),
Borrower may elect to cause Lender to release one or more of the
Properties from the lien of any of the Mortgages and the other Loan
Documents and to accept other collateral in substitution therefor, in
accordance with the provisions of this Section ("Defeasance"), at
Borrower's sole cost and expense. "Lockout Expiration Date" means the
earlier of (a) the second anniversary of the "startup day" (as defined in
Internal Revenue Code Section 860(G)(a)(9)) of any "real estate mortgage
investment conduit" (as defined in Internal Revenue Code Section 860D)
that holds this Note and (b) the third anniversary of the date of this
Note. For purposes of this Section 14 only, (a) the values of the Casa del
Sol III Property, the Apollo Village Property, the Woodland Hills
Property, the Cabana Property, the Pickwick Village Property, the Indian
Oaks Property and the Windmill Manor Property, expressed as a percentage
of the total principal amount of the Loan ("Allocated Loan Percentage"),
shall be deemed to be 13.3%, 10.6%, 23.6%, 16.9%, 16.8%, 6.2%, and 12.6%,
respectively; and (b) the portion of the principal amount of the Loan
allocable to each of the Properties ("Allocated Loan Amount") shall be
deemed initially to be the Allocated Loan Percentage for such Property
multiplied by the initial total principal amount of the Loan and,
thereafter, the same such amount as the same shall be reduced by ratable
application of payments of principal made under this Note from time to
time.
14.1 CONDITIONS. Borrower shall only have the right to cause a Defeasance
if no Default has occurred and is continuing and all of the
following conditions have been satisfied:
a. Notice. Borrower shall give at least 60 days but not more than
90 days' written notice to Lender specifying the date of
Borrower's intended Defeasance ("Release Date"), which date
shall be a scheduled payment date and such notice shall
indicate the principal amount of the Note to be defeased;
b. Payments. Borrower shall pay in full, on or before the Release
Date, all accrued and unpaid interest and all other sums due
under this Note and the other Loan Documents on or before the
Release Date, including, without limitation, (i) all costs and
expenses paid or incurred by Lender or its agents in
connection with the Defeasance, the purchase of the Defeasance
Collateral (defined below), the release of the applicable
Properties, the review of the proposed Defeasance Collateral
and the preparation of the Defeasance Security Agreement
(defined below) and related documentation, and (ii) any
revenue, documentary stamp, intangible or other taxes, charges
or fees due in connection with the transfer or assumption of
this Note or the Defeasance;
c. Deliveries. Borrower shall deliver the following items to
Lender on or before the Release Date:
7
(i) immediately available funds ("Defeasance Deposit") in
an amount sufficient to enable Lender to purchase,
through means and sources customarily employed and
available to Lender, for the account of Borrower,
direct, non-callable obligations of the United States
of America that provide for payments prior, but as
close as possible, to all successive scheduled payment
dates occurring after the Release Date, with each such
payment being equal to or greater than one hundred
twenty five percent (125%) of the product of the
Allocated Loan Percentage for the Properties that are
the subject of the applicable Defeasance multiplied by
the installments of principal and interest required to
be paid under this Note (including, without
limitation, all amounts due on the Maturity Date) for
the balance of the term hereof ("Defeasance
Collateral"), each of which shall be duly endorsed by
the holder as directed by Lender or accompanied by a
written instrument of transfer in form and substance
satisfactory to Lender in its sole discretion
(including, without limitation, such instruments as
may be required by the depository institution holding
such securities or the issuer of such securities, as
the case may be, to effectuate book-entry transfers
and pledges through the book-entry facilities of such
institution) in order to perfect upon the delivery of
the Defeasance Security Agreement (as defined below)
the first priority security interest in the Defeasance
Collateral in favor of Lender;
(ii) a pledge and security agreement, in form and substance
satisfactory to Lender in its reasonable discretion,
creating a first priority security interest in favor
of Lender in the Defeasance Collateral ("Defeasance
Security Agreement"), which shall provide, among other
things, that any payments generated by the applicable
Defeasance Collateral shall be paid directly to Lender
and applied by Lender to amounts then due and payable
under this Note allocable to the Allocated Loan Amount
for the Properties that are the subject of the
applicable Defeasance and that any excess received by
Lender from the applicable Defeasance Collateral over
the amounts payable by Borrower under this Note
allocable to the Allocated Loan Amount for the
Properties that are the subject of the applicable
Defeasance shall be first, paid to Lender and applied
by Lender to any other amounts then due and payable
under this Note, and second, refunded to Borrower
promptly after each scheduled payment date;
(iii) a certificate of Borrower certifying that all of the
requirements of this Section 14.1 have been satisfied;
(iv) an opinion of counsel for Borrower in form and
substance and delivered by counsel satisfactory to
Lender in its sole discretion, subject, however, to
standard enforceability opinion qualifications and
limitations, stating, among other things, that (aa)
Lender has a perfected first priority security
interest in the Defeasance Collateral, (bb) the
Defeasance Security Agreement is enforceable against
Borrower in accordance with its terms and (cc) any
REMIC Trust formed pursuant to a securitization will
not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of
Internal Revenue Code Section 860D, as amended from
time to time, or any successor statute, as a result of
the Defeasance;
(v) a certificate from a firm of independent certified
public accountants acceptable to Lender certifying
that the Defeasance Collateral satisfies the
requirements of Section 14.1c(i);
(vi) written evidence from the applicable Rating Agencies
that the Defeasance will not result in a downgrading,
withdrawal or qualification of the respective ratings
in effect immediately prior to the Defeasance for any
securities issued in connection with the
securitization which are then outstanding;
(vii) a conveyance of title to the Property to be released
to a Person other than Borrower; and
(viii) such other certificates, documents or instruments as
Lender may reasonably require, including, without
limitation, such amendments to this Note and the other
Loan Documents as Lender reasonably deems appropriate
to reflect the Defeasance.
8
14.2 RELEASE OF LIEN. Upon satisfaction of all conditions specified above
with respect to any Defeasance, the Property subject to such
Defeasance shall be released from the lien of the applicable
Mortgage and the other Loan Documents to which it is subject, and
the applicable Defeasance Collateral, any Defeasance Collateral
previously delivered to Lender under this Note, the Remaining
Properties and the proceeds thereof shall constitute the only
collateral which shall secure the obligations of Borrower under this
Note and the other Loan Documents. Simultaneously with the release
of a Property pursuant to this Section, Lender shall release that
portion of all cash or other accounts maintained pursuant to the
Loan Documents relating to such Property. Lender shall, at
Borrower's expense, execute and deliver any agreements reasonably
requested by Borrower to release the lien of the applicable Mortgage
from the applicable Property. Upon any Defeasance, this Note shall
be automatically amended such that the Allocated Loan Percentage for
each of the Remaining Properties after such Defeasance shall be
equal to (A) one hundred (100) times (B) the Allocated Loan
Percentage for such Remaining Property immediately prior to such
Defeasance divided by (C) the sum of the Allocated Loan Percentages
for all of the Remaining Properties immediately prior to such
Defeasance (such that at all times the sum of the Allocated Loan
Percentages for all Remaining Properties shall be equal to one
hundred percent (100%)).
14.3 DEFEASANCE DEPOSIT. Borrower hereby authorizes and directs Lender,
using the means and sources customarily employed and available to
Lender, to use the Defeasance Deposit to purchase the Defeasance
Collateral as agent and for the account of Borrower. Payments from
the Defeasance Collateral shall be made directly to Lender for
application to the Loan as provided hereinabove. Any part of the
Defeasance Deposit exceeding the amount necessary to purchase the
Defeasance Collateral and to pay the other costs which Borrower is
obligated to pay under this Section 14 shall be refunded to
Borrower. Borrower agrees to pay all sums referred to in Section
14.1b above on or before the Release Date.
14.4 ASSIGNMENT AND ASSUMPTION. Upon the release of any of the Properties
in accordance with this Section 14, Borrower shall, at the request
of Lender, assign all of its right, title and interest in and to the
pledged Defeasance Collateral, any Defeasance Collateral previously
delivered to Lender under this Note and all its obligations and
rights under this Note, the Defeasance Security Agreement, any
Defeasance Security Agreement previously delivered to Lender under
this Note and the other Loan Documents, to a successor entity
designated by Borrower and approved by Lender in its sole
discretion. Such successor entity shall execute an assumption
agreement in form and substance satisfactory to Lender in its sole
discretion pursuant to which it shall assume Borrower's obligations
under this Note, the Defeasance Security Agreement, any Defeasance
Security Agreement previously delivered to Lender under this Note
and the other Loan Documents. As conditions to such assignment and
assumption, Borrower shall: (a) deliver to Lender a new limited
guaranty in form and substance satisfactory to Lender in its sole
discretion executed by the principals of such successor entity; (b)
deliver to Lender an opinion of counsel in form and substance and
delivered by counsel satisfactory to Lender in its sole discretion
subject, however, to standard enforceability opinion qualifications
and limitations, stating, among other things, that such assumption
agreement is enforceable against Borrower and such successor entity
in accordance with its terms and that this Note, the Defeasance
Security Agreement, any Defeasance Security Agreement previously
delivered to Lender under this Note and the other Loan Documents, as
so assumed, are enforceable against such successor entity in
accordance with their respective terms; and (c) pay all costs and
expenses incurred by Lender or its agents in connection with such
assignment and assumption (including, without limitation, the review
of the proposed transferee and the preparation of the assumption
agreement and related documentation). Upon such assumption, Borrower
shall be relieved of its obligations under this Note, the Defeasance
Security Agreement, any Defeasance Security Agreement previously
delivered to Lender under this Note and the other Loan Documents
other than those obligations which are specifically intended to
survive the payment of the Loan or other termination, satisfaction
or assignment of this Note, the Defeasance Security Agreement, any
Defeasance Security Agreement previously delivered to Lender under
this Note or the other Loan Documents or Lender's exercise of its
rights and remedies under any of such documents and instruments.
15. WAIVER OF JURY TRIAL. LENDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF LENDER OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER TO MAKE THE
9
LOAN TO BORROWER. BY ACCEPTANCE OF THIS EXECUTED NOTE, LENDER AGREES TO
THE FOREGOING WAIVER.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
"BORROWER"
MHC STAGECOACH, L.L.C.,
a Delaware limited liability company
By: MHC-QRS STAGECOACH, INC.,
a Delaware corporation,
its Managing Member
By: /s/ John M. Zoeller
----------------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
11
Loan No. 31-0900553R
EXHIBIT A TO PROMISSORY NOTE
ADDITIONAL TERMS AND CONDITIONS
This Exhibit A is attached to and forms a part of that Promissory Note Secured
by Mortgages ("Note") executed by MHC STAGECOACH, L.L.C., a Delaware limited
liability company ("Borrower") in favor of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Lender").
1. DISBURSEMENT OF LOAN PROCEEDS; LIMITATION OF LIABILITY. Borrower hereby
authorizes Lender to disburse the proceeds of the Loan, after deducting
any and all fees owed by Borrower to Lender in connection with the Loan,
to Commonwealth Land Title Insurance Company (the "Title Company"). With
respect to such disbursement, Borrower understands and agrees that Lender
does not accept responsibility for errors, acts or omissions of others,
including, without limitation, the escrow company, other banks,
communications carriers or clearinghouses through which the transfer of
Loan proceeds may be made or through which Lender receives or transmits
information, and no such entity shall be deemed Lender's agent. As a
consequence, Lender shall not be liable to Borrower for any actual
(whether direct or indirect), consequential or punitive damages which may
arise with respect to the disbursement of Loan proceeds, whether or not
(a) any claim for such damages is based on tort or contract, or (b) either
Lender or Borrower knew or should have known of the likelihood of such
damages in any situation.
2. FINANCIAL STATEMENTS.
2.1 STATEMENTS REQUIRED. During the term of the Loan and while any
liabilities of Borrower to Lender under any of the Loan Documents
remain outstanding and unless Lender otherwise consents in writing,
Borrower shall provide to Lender the following:
a. OPERATING STATEMENT. Not later than 10 days after and as of
each calendar month during the first 6 months of the term of
the Loan, and thereafter not later than 30 days after and as
of the end of each calendar quarter, an operating statement,
signed and dated by Borrower and in a form acceptable to
Lender, showing all revenues and expenses during such month or
quarter and year-to-date, relating to each of the Properties,
including, without limitation, all information requested under
any of the Loan Documents;
b. RENT ROLL. Not later than 10 days after and as of each
calendar month during the first 6 months of the term of the
Loan, and thereafter not later than 30 days after and as of
the end of each calendar quarter, a rent roll signed and dated
by Borrower and in a form acceptable to Lender, showing the
following lease information with regard to each tenant: the
name of the tenant, monthly or other periodic rental amount,
date of commencement of the lease, and payment status;
c. BALANCE SHEET. If requested by Lender, not later than 90 days
after and as of the end of each fiscal year, a balance sheet,
signed and dated by Borrower and in a form acceptable to
Lender (or audited financial statements if Borrower obtains
them), showing all assets and liabilities of Borrower; and
d. OTHER INFORMATION. From time to time, upon Lender's delivery
to Borrower of at least 10 days' prior written notice, such
other information with regard to Borrower, principals of
Borrower, guarantors or the Properties as Lender may
reasonably request in writing.
2.2 FORM; WARRANTY. Borrower agrees that all financial statements to be
delivered to Lender pursuant to Section 2.1 shall: (a) be complete
and correct in all material respects; (b) present fairly the
financial condition of the party; (c) disclose all liabilities that
are required to be reflected or reserved against; and (d) be
prepared in accordance with the same accounting standard used by
Borrower to prepare the financial statements delivered to and
approved by Lender in connection with the making of the Loan or
other accounting standards acceptable to Lender. Borrower shall be
deemed to warrant and represent that, as of the date of delivery of
any such financial statement, there has been no material adverse
change in financial condition, nor have any assets or properties
been sold, transferred, assigned, mortgaged, pledged or encumbered
since the date of such
EXHIBIT A
1
financial statement except as disclosed by Borrower in a writing
delivered to Lender. Borrower agrees that all rent rolls and other
information to be delivered to Lender pursuant to Section 2.1 shall
not contain any misrepresentation or omission of a material fact.
2.3 LATE CHARGE. If any financial statement, leasing schedule or other
item required to be delivered to Lender pursuant to Section 2.1 is
not timely delivered, Borrower shall promptly pay to Lender, as a
late charge, the sum of $500 per item. In addition, Borrower shall
promptly pay to Lender an additional late charge of $500 per item
for each full month during which such item remains undelivered
following written notice from Lender. Borrower acknowledges that
Lender will incur additional expenses as a result of any such late
deliveries, which expenses would be impracticable to quantify, and
that Borrower's payments under this Section 2.3 are a reasonable
estimate of such expenses. Notwithstanding anything to the contrary
contained herein, once during each year of the term of the Loan
Lender will give notice to Borrower of its failure to provide any
item required to be delivered to Lender pursuant to Section 2.1 and
if any such items are not delivered within three (3) Business Days
following such notice, then at such time the late charge specified
herein shall take effect.
3. IMPOUNDS.
3.1 AMOUNTS. Borrower shall deposit with Lender the amounts ("Impounds")
stated below on the dates stated below, for the purpose of paying
the costs stated below:
a. TAXES. (i) $364,529.00 on the Disbursement Date, and (ii) on
the first payment date on which both principal and interest
under the Loan are payable and on each payment date
thereafter, an amount estimated from time to time by Lender in
its reasonable discretion to be sufficient to pay for taxes
and other liabilities payable by Borrower under Section 6.9 of
each of the Mortgages. The initial estimated monthly amount to
be deposited by Borrower on each payment date is $46,881.00.
b. INSURANCE. (i) $35,144.00 on the Disbursement Date, and (ii)
on the first payment date on which both principal and interest
under the Loan are payable and on each payment date
thereafter, an amount estimated from time to time by Lender in
its reasonable discretion to be sufficient to pay for premiums
for insurance payable by Borrower under Section 6.10 of each
of the Mortgages. The initial estimated monthly amount to be
deposited by Borrower on each payment date is $4,393.00.
c. CAPITAL EXPENDITURES. $10,218 on the first payment date on
which both principal and interest under the Loan are payable
and on each payment date thereafter for payment or
reimbursement of Capital Expenditures (defined below).
3.2 APPLICATION.
a. TAXES. If no Default exists, Lender shall apply the Impounds
in a timely fashion to the payment of the taxes and other
liabilities stated above.
b. INSURANCE. If no Default exists, Lender shall apply the
Impounds to the payment of the insurance premiums stated
above.
c. CAPITAL EXPENDITURES. If no Default exists, Lender shall
release the Impounds to Borrower once a quarter, no less than
$10,000.00 per release, to pay or reimburse Borrower for the
Capital Expenditures (defined below); provided, however, that
Lender shall have received and approved each of the following:
(i) Borrower's written request for such release, describing
the Capital Expenditures and certifying that all Capital
Expenditures have been paid or incurred by Borrower for
work completed lien-free and in a workmanlike manner;
(ii) copies of invoices supporting the request for such
release; and
EXHIBIT A
2
(iii) if deemed necessary by Lender, an inspection report
signed by an inspector selected by Lender, whose fees
and expenses shall be paid by Borrower, and such other
evidence as Lender shall reasonably require, confirming
borrower's certification.
3.3 GENERAL. Any portion of the Impounds that exceeds the amount
required for payment of the foregoing costs shall be repaid to
Borrower upon Borrower's compliance with the foregoing. Reference is
made to Section 6.12(b) of each of the Mortgages for a description
of the account into which the Impounds shall be deposited and for a
description of certain rights and remedies of Lender with respect to
amounts in such account.
3.4 MAINTENANCE AND CONSTRUCTION.
a. CAPITAL EXPENDITURES. Borrower shall complete the lien-free
performance or installation of the Capital Expenditures (as
defined below) from time to time as necessary, in a
workmanlike manner and in accordance with all applicable laws,
ordinances, rules and regulations. "Capital Expenditures"
shall mean major repairs and replacements to maintain or
improve the Properties, including, without limitation,
structural repairs, roof replacements, HVAC repairs and
replacements, mechanical and plumbing repairs and replacements
and boiler repair and replacements.
b. RIGHT OF INSPECTION. Lender shall have the right to enter upon
the Properties at all reasonable times, subject to reasonable
notice except in the event of an emergency, in which case no
notice shall be required, to inspect all work for the purpose
of verifying information disclosed or required pursuant to
this Note, in a manner which does not unreasonably interfere
with the operations on the Properties. Notwithstanding the
foregoing, Lender shall not be obligated to supervise or
inspect any work or to inform Borrower or any third party
regarding any aspect of any work.
3.5 RELEASE. Lender shall release any Impounds to Borrower through a
funds transfer of such Impounds initiated by Lender to the following
account or such other account as Borrower specifies in a notice to
Lender:
Bank Name: Bank of America
-------------------------------------
ABA Routing No.: 071-000039
-------------------------------------
Account Name: 7366-9-01095
-------------------------------------
Reference: MHC Operating Limited Partnership
-------------------------------------
Advise: Megan McBride (312) 828-6274
-------------------------------------
Lender will determine the funds transfer system and other means to
be used in making each such release. Borrower agrees that each such
funds transfer initiated by Lender will be deemed to be a funds
transfer properly authorized by Borrower, even if the transfer is
not actually properly authorized by Borrower. Borrower acknowledges
that Lender will rely on the account number and ABA routing number
set forth above or specified in a notice from Borrower to Lender,
even if such account number identifies an account with a name
different from the name so specified, or the routing number
identifies a bank different from the bank so specified. If Borrower
learns of any error in the transfer of any Impounds or of any
transfer which was not properly authorized, Borrower shall notify
Lender as soon as possible in writing but in no case more than 14
days after Lender's first confirmation to Borrower of such transfer.
3.6 LETTER OF CREDIT.
a. Delivery to Lender. Lender has agreed that in lieu of the
Capital Expenditure Impounds required by Subsection 3.1(d)
above, Lender will accept and Borrower may deliver within ten
(10) Business Days after the Disbursement Date an irrevocable
standby letter of credit (such letter of credit, together with
any replacement or renewal thereof, is referred to herein as
the "Borrower Letter of Credit") in the aggregate principal
amount of $306,991 issued by an issuer reasonably acceptable
to Lender in favor of Lender, in form and content reasonably
satisfactory to Lender. Subject to the provisions of this
Section 3.6, Lender shall retain custody of any Borrower
Letter of Credit until such time as the Loan is repaid in full
(other than through judicial or nonjudicial foreclosure of the
Mortgages or deeds in lieu thereof).
EXHIBIT A
3
b. Right to Draw. Lender shall have the right to draw upon the
Borrower Letter of Credit in the full amount thereof upon the
occurrence of (i) any Default or (ii) the receipt by Lender of
notice stating that the Borrower Letter of Credit will not be
renewed (as provided for in such Borrower Letter of Credit)
and, in the event of such nonrenewal (whether by notice by the
issuing bank or otherwise), the failure of Borrower to deliver
a substitute or replacement letter of credit in form and
content satisfactory to Lender prior to the date that is
thirty (30) days prior to the expiration of the Borrower
Letter of Credit.
c. Application of Proceeds. The proceeds of any draw under the
Borrower Letter of Credit shall be retained by Lender as
Impounds and shall be governed by the terms and conditions of
this Note and the other Loan Documents.
d. Release of the Borrower Letter of Credit. Lender shall
surrender the Borrower Letter of Credit to Borrower and refund
to Borrower all sums drawn that Lender is holding (and have
not otherwise been applied or spent) at such time as the Loan
is repaid in full (other than through judicial or nonjudicial
foreclosure of the Mortgages or deeds in lieu thereof).
4. ONE-TIME RIGHT OF TRANSFER OF PROPERTIES TO THIRD PARTY. Notwithstanding
anything to the contrary contained in Section 6.15 of the Mortgages,
Lender shall, one time only, consent to the voluntary sale or exchange of
all (but not less than all) of the Properties to a bona-fide third party
purchaser ("Transfer"), if no Default has occurred and is continuing, no
event has occurred which, with the giving of notice or the passage of
time, or both, would constitute a Default and all of the following
conditions have been satisfied:
4.1 Lender receives at least sixty-five (65) days prior written notice
of the proposed Transfer;
4.2 Lender's reasonable determination that the proposed purchaser, the
proposed guarantor, if any, and the Properties all satisfy Lender's
then applicable credit review and underwriting standards, taking
into consideration, among other things, (a) any decrease in the
Properties' cash flow which would result from any increase in real
property taxes due to any anticipated reassessment of the Properties
for tax purposes and (b) any then applicable requirement of Lender
that such proposed borrowing entity constitute a single purpose
asset and bankruptcy remote entity which, at the time of the
Transfer, shall be in full compliance with the representations and
covenants set forth in Section 5.2 of the Mortgages (as such
representations may be reasonably modified by Lender after reviewing
the ownership structure of the proposed borrowing entity);
4.3 if required by Lender, delivery to Lender of a non-consolidation
opinion from a law firm reasonably acceptable to Lender and in form
and substance reasonably satisfactory to Lender;
4.4 Lender's reasonable determination that the proposed purchaser
possesses satisfactory recent experience in the ownership and
operation of properties comparable to the Properties;
4.5 the execution and delivery to Lender of such documents and
instruments as Lender shall reasonably require, in form and content
reasonably satisfactory to Lender, including, without limitation,
(i) an assumption agreement under which the purchaser assumes all
obligations and liabilities of Borrower under this Note and the
other Loan Documents and agrees to periodically pay such new or
additional Impounds to Lender as Lender may reasonably require, and
(ii) a consent to the Transfer by any existing guarantor and a
reaffirmation of such guarantor's obligations and liabilities under
any guaranty made in connection with the Loan or a new guaranty
executed by a new guarantor reasonably satisfactory to Lender;
4.6 if required by Lender, delivery to Lender of evidence of title
insurance reasonably satisfactory to Lender insuring Lender that the
liens of the Mortgages and the priority thereof will not be impaired
or affected by reason of such Transfer of the Properties;
4.7 payment to Lender of an assumption fee equal to 0.5% of the then
outstanding principal balance of this Note;
4.8 if reasonably required by Lender, deposit with Lender of any new or
additional Impounds;
4.9 reimbursement to Lender of any and all costs and expenses paid or
incurred by Lender in connection with such Transfer, including,
without limitation, all in-house or outside counsel attorneys' fees,
title insurance fees,
EXHIBIT A
4
appraisal fees, inspection fees, environmental consultants' fees and
any fees or charges of the applicable Rating Agencies;
4.10 if required by Lender, delivery to Lender of written evidence from
the applicable Rating Agencies that such Transfer will not result in
a downgrading, withdrawal or qualification of the respective ratings
in effect immediately prior to the Transfer for any securities
issued in connection with the securitization of the Loan which are
then outstanding; and
4.11 any third party consents or approvals that are required in order to
consummate the contemplated transaction shall have been obtained and
Lender shall be provided with satisfactory evidence of same.
Lender shall fully release Borrower and any existing guarantor from any further
obligation or liability to Lender under this Note and the other Loan Documents
upon the assumption by the purchaser and any new guarantor of all such
obligations and liabilities and the satisfaction of all other conditions
precedent to a Transfer in accordance with the provisions of this Section.
5. TRANSFER OF PROPERTY TO AN AFFILIATE. Notwithstanding anything to the
contrary contained in Section 6.15 of the Mortgage, Lender shall one time
only with respect to each of the Properties consent to the voluntary sale
or exchange of such Property by deed to an Affiliate of Manufactured Home
Communities, Inc. ("MHC") (such sale or exchange being herein referred to
as an "Affiliate Transfer"), if no Default has occurred and is continuing,
no event has occurred which, with the giving of notice or the passage of
time, or both, would constitute a Default and all of the following
conditions have been satisfied:
5.1 Lender receives at least sixty-five (65) days prior written notice
of the proposed Affiliate Transfer;
5.2 Lender's reasonable determination that (a) such Property's cash flow
will not be materially and adversely impacted due to any increase in
real property taxes resulting from the Affiliate Transfer and (b)
the Affiliate of MHC satisfies any then applicable requirement of
Lender that such proposed borrowing entity constitute a single
purpose asset and bankruptcy remote entity which, at the time of the
transfer, shall be in full compliance with the representations and
covenants set forth in Section 5.2 of the Mortgage encumbering such
Property (as such representations may be reasonably modified by
Lender after reviewing the ownership structure of the proposed
borrowing entity);
5.3 if required by Lender, delivery to Lender of a non-consolidation
opinion from a law firm reasonably acceptable to Lender and in form
and substance reasonably satisfactory to Lender;
5.4 the execution and delivery to Lender of such documents and
instruments as Lender shall reasonably require, in form and content
reasonably satisfactory to Lender, including, without limitation,
(i) an assumption agreement under which the purchaser assumes all
obligations and liabilities of Borrower under this Note and the
other Loan Documents and agrees to periodically pay such new or
additional Impounds to Lender as Lender may reasonably require, and
(ii) a consent to the Affiliate Transfer by any existing guarantor
and a reaffirmation of such guarantor's obligations and liabilities
under any guaranty made in connection with the Loan or a new
guaranty executed by a new guarantor reasonably satisfactory to
Lender;
5.5 if required by Lender, delivery to Lender of evidence of title
insurance reasonably satisfactory to Lender insuring Lender that the
lien of such Mortgage and the priority thereof will not be impaired
or affected by reason of such Affiliate Transfer of any such
Property;
5.6 reimbursement to Lender of any and all costs and expenses paid or
incurred by Lender in connection with such Affiliate Transfer,
including, without limitation, all in-house or outside counsel
attorneys' fees, title insurance fees, appraisal fees, inspection
fees, environmental consultants' fees and any fees or charges of the
applicable Rating Agencies;
5.7 if required by Lender, delivery to Lender of written evidence from
the applicable Rating Agencies that such Affiliate Transfer will not
result in a downgrading, withdrawal or qualification of the
respective ratings in effect immediately prior to the Affiliate
Transfer for any securities issued in connection with the
securitization of the Loan which are then outstanding; and
EXHIBIT A
5
5.8 any third party consents or approvals that are required in order to
consummate the contemplated transaction shall have been obtained and
Lender shall be provided with satisfactory evidence of same.
Lender shall fully release Borrower from any further obligation or
liability to Lender under this Note and the other Loan Documents upon the
assumption by the Affiliate of all such obligations and liabilities and
the satisfaction of all other conditions precedent to an Affiliate
Transfer in accordance with the provisions of this Section. In addition to
the Affiliate Transfers permitted above, Lender's consent shall not be
required for the normal day to day trading of shares of MHC in the public
securities market and such transactions shall not constitute an Affiliate
Transfer hereunder.
6. REPLACEMENT PROPERTIES. Upon at least 65 days' but not more than 90 days'
written notice to Lender specifying the date of Borrower's intended
substitution ("Substitution Date"), which date shall be a scheduled
payment date, Borrower may elect to cause Lender to release one or more of
the Properties from the lien of the Mortgage encumbering such Property,
provided that simultaneously with such release, Borrower shall execute and
deliver to Lender, as security for the Loan, a mortgage, deed of trust or
deed to secure debt, as applicable ("Replacement Mortgage"), encumbering a
manufactured housing community property ("Replacement Property"), in
substantially the same form as the Mortgage to be released, such other
documents as Lender may reasonably require for the purpose of granting
Lender a first priority, perfected lien on and security interest in such
Replacement Property and all related rents, personal property, reserves
and escrows on the same terms and conditions as the liens and security
interests granted to Lender in such Property on the Effective Date, and
such other modifications and amendments to the Loan Documents as may be
necessitated due to the substitution of the Replacement Property for the
Property that will be released (all of the foregoing, together with the
Replacement Mortgage, the "Replacement Documents").
6.1 Borrower's right to obtain a release of a Property shall also be
subject to the following conditions and restrictions:
a. no Default shall have occurred and be continuing and no event
has occurred which, with the giving of notice or the passage
of time, or both, would constitute a Default;
b. Borrower shall not, over the life of the Loan, be entitled to
replace Properties having, in the aggregate, an Allocated Loan
Amount of more twenty-five percent (25%) of the Loan;
c. at least sixty-five (65) days prior to the proposed date of
such release, Lender shall have obtained an appraisal of the
Replacement Property and, if required by Lender, updated
appraisals of the Remaining Properties, prepared by Cushman &
Wakefield, or such other third-party real estate professional
that is approved by the Rating Agencies, indicating that the
Loan-to-Value Ratio as of the date of such release, obtained
by using the "as-is" value of the proposed Replacement
Property set forth in such appraisal together with the "as-is"
value of the Remaining Properties as of the date of such
proposed release if new appraisals are required by Lender for
the Remaining Properties, or as of the Disbursement Date if
new appraisals are not required by Lender, is at least equal
to the Loan-to-Value Ratio existing on the Disbursement Date
which is sixty-four percent (64%);
d. Lender shall have obtained a Phase I environmental report and,
if recommended by such Phase I report, a Phase II
environmental report prepared by SI Group, or such other
environmental consultant as is approved by the Rating
Agencies, stating that the Replacement Property complies with
all applicable environmental laws;
e. Lender shall have obtained an engineering report, prepared by
SI Group, or such other consulting engineer as is approved by
the Rating Agencies, stating that the Replacement Property
complies with all applicable building laws and does not
require performance of deferred maintenance, or if remedial
steps are required to effect such compliance or such deferred
maintenance, identifying such steps and projecting the cost
thereof, which may not exceed $10,000, and in which case
Borrower shall be required to deposit with Lender an amount
equal to one hundred fifty percent (150%) of such projected
costs, which shall be deemed Impounds to be released
substantially in accordance with the provisions contained in
Section 3 of Exhibit A to this Note;
f. Borrower shall have caused to be delivered all leases, title
commitments, title insurance policies, surveys, hazard and
liability insurance, evidence of compliance with zoning and
other laws, legal
EXHIBIT A
6
opinions and other items of due diligence with respect to the
Replacement Property as the Rating Agencies may require, all
of which shall be in form and substance acceptable to the
Rating Agencies;
g. the Debt Service Coverage Ratio, calculated by substituting
the Net Operating Income of the Replacement Property for the
Net Operating Income of the Property to be released, combined
with the Net Operating Income of the Remaining Properties, as
of the time of such release shall be at least equal to the
Debt Service Coverage Ratio existing on the Disbursement Date
which is 1.55 to 1;
h. the Person transferring the Replacement Property to Borrower
shall be solvent and shall be making such transfer on an arm's
length basis and for fair consideration, and Borrower and such
Person shall deliver certifications and evidence to such
effect and such other certifications as Lender shall
reasonably require to assure itself that the substitution does
not constitute a fraudulent conveyance on the part of any
Person (assuming such Person was not solvent at the time of
substitution);
i. Borrower shall comply with such other terms and conditions as
the Rating Agencies shall require in connection with such
substitution;
j. the organizational documents of Borrower shall, if required,
be modified to permit the ownership and operation of the
Replacement Property;
k. an opinion of counsel for Borrower in form and substance and
delivered by counsel satisfactory to Lender in its sole
discretion stating, among other things, that any REMIC Trust
formed pursuant to a securitization will not fail to maintain
its status as a "real estate mortgage investment conduit"
within the meaning of Internal Revenue Code Section 860D, as
amended from time to time, or any successor statute, as a
result of the release of such Property and the substitution of
the Replacement Property;
l. Borrower shall transfer title to the Property to be released
to a Person other than Borrower or any other borrower;
m. written evidence from the applicable Rating Agencies that the
proposed release of such Property and substitution of the
Replacement Property will not result in a downgrading,
withdrawal or qualification of the respective ratings in
effect immediately prior to such release and substitution for
any securities issued in connection with the securitization
which are then outstanding;
n. any third party consents or approvals that are required in
order to consummate the contemplated transaction shall have
been obtained and Lender shall be provided with satisfactory
evidence of same;
o. delivery to Lender of evidence of title insurance reasonably
satisfactory to Lender; and
p. reimbursement to Lender of any and all costs and expenses paid
or incurred by Lender in connection with the request to
substitute a Replacement Property, including, without
limitation, all in-house or outside counsel attorneys' fees,
title insurance fees, appraisal fees, inspection fees,
environmental consultants' fees and any fees or charges of the
applicable Rating Agencies.
EXHIBIT A
7
Loan No. 31-0900553R
EXHIBIT B TO PROMISSORY NOTE
LOAN DOCUMENTS AND OTHER RELATED DOCUMENTS
This Exhibit B is attached to and forms a part of that Promissory Note Secured
by Mortgages ("Note") executed by MHC STAGECOACH, L.L.C., a Delaware limited
liability company ("Borrower") in favor of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Lender").
1. LOAN DOCUMENTS. The documents numbered 1.1 through 1.13 below of even date
herewith (unless otherwise specified) and any amendments, modifications
and supplements thereto which have received the prior written approval of
Lender and any documents executed in the future that are approved by
Lender and that recite that they are "Loan Documents" for purposes of this
Note are collectively referred to as the "Loan Documents".
1.1 This Note;
1.2 Casa del Sol III Deed of Trust, Apollo Village Deed of Trust,
Woodland Hills Deed of Trust, Cabana Deed of Trust, Pickwick Village
Mortgage, Indian Oaks Mortgage and Windmill Manor Mortgage
1.3 State of Arizona Uniform Commercial Code - Financing Statements -
Form UCC-1;
1.4 State of Colorado Uniform Commercial Code - Financing Statements -
Form UCC-1;
1.5 State of Delaware Uniform Commercial Code - Financing Statements -
Form UCC-1;
1.6 State of Florida Uniform Commercial Code - Financing Statements -
Form UCC-1;
1.7 State of Illinois Uniform Commercial Code - Financing Statements -
Form UCC-1;
1.8 State of Nevada Uniform Commercial Code - Financing Statements -
Form UCC-1;
1.9 Limited Liability Company Borrowing Certificate;
1.10 Corporate Resolution Authorizing Limited Liability Company Activity
and Certificate of Incumbency;
1.11 Corporate Resolution Authorizing Execution of Guaranty and
Endorsement and Hypothecation of Property and Certificate of
Incumbency;
1.12 Assignment of Management Contracts and Consent and Subordination of
Manager; and
1.13 O&M Plan Letters executed for Casa del Sol III Property, Cabana
Property, Apollo Village Property, Pickwick Village Property, Indian
Oaks Property, and Woodland Hills Property, respectively.
2. OTHER RELATED DOCUMENTS WHICH ARE NOT LOAN DOCUMENTS.
2.1 Flood Hazard Notice with respect to Pickwick Property;
2.2 Limited Guaranty; and
2.3 Bankruptcy Non-Consolidation Opinion of Borrower's legal counsel.
EXHIBIT B
1
Recording requested by
and when recorded return to:
WELLS FARGO BANK, N.A.
Commercial Mortgage Origination
MAC #A0194-093
45 Fremont Street, 9th Floor
San Francisco, California 94105
Attention: CMO Loan Admin.
Loan No.: 31-0900553R
Property Name: Windmill Manor
Prepared by:
Lee M. Smolen
Sidley Austin Brown & Wood
10 South Dearborn
Chicago, Illinois 60603
MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND
LEASES AND SECURITY AGREEMENT (AND FIXTURE FILING)
July 31, 2001
THIS MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT
(AND FIXTURE FILING) (the "Mortgage") is made and entered into by and among MHC
STAGECOACH, L.L.C., a Delaware limited liability company ("Mortgagor"), having
an address at c/o Manufactured Home Communities, Inc., Two North Riverside
Plaza, Suite 800, Chicago, Illinois 60606, and WELLS FARGO NATIONAL BANK,
NATIONAL ASSOCIATION ("Lender" or "Mortgagee").
THIS MORTGAGE EVIDENCES A MULTI-STATE LOAN WHICH IS SECURED BY REAL PROPERTY
LOCATED OUTSIDE THE STATE OF FLORIDA AND REAL PROPERTY LOCATED IN BREVARD,
VOLUSIA, AND MANATEE COUNTIES, FLORIDA. FLORIDA DOCUMENTARY STAMP TAX IN THE
AMOUNT OF $61,250.00 AND FLORIDA NON-RECURRING INTANGIBLE PERSONAL PROPERTY TAX
IN THE AMOUNT OF $35,000.00 ARE BEING PAID UPON RECORDATION OF ONE OF THE
FLORIDA MORTGAGES IN THE PUBLIC RECORDS OF VOLUSIA COUNTY, FLORIDA. ATTACHED
HERETO AS EXHIBIT B IS A DESCRIPTION OF THE CALCULATION OF LIABILITY FOR
DOCUMENTARY STAMP TAX AND NON-RECURRING INTANGIBLE PERSONAL PROPERTY TAX.
Page 1
R E C I T A L S
A. MHC STAGECOACH, L.L.C., a Delaware limited liability company ("Borrower")
proposes to borrow from Mortgagee, and Mortgagee proposes to lend to
Borrower the principal sum of FIFTY MILLION AND NO/100THS DOLLARS
($50,000,000.00) ("Loan"). The Loan is evidenced by a promissory note
("Note") executed by Borrower, dated the date of this Mortgage, payable to
the order of Mortgagee in the principal amount of the Loan. The maturity
date of the Loan is September 1, 2011.
B. The loan documents include this Mortgage, the Note and the other documents
described in the Note as Loan Documents ("Loan Documents").
ARTICLE I. MORTGAGE
1.1 GRANT. For the purposes of and upon the terms and
conditions of this Mortgage, Mortgagor irrevocably mortgages, grants, bargains,
sells, conveys, transfers, pledges, sets over and assigns, and grants a security
interest to Mortgagee, its successors and assign, with right of entry and
possession, all of Mortgagor's right, title and interest, whether now owned or
hereafter acquired, in or to all of the following:
(a) That real property ("Land") located in Bradenton, county
of Manatee, state of Florida, and more particularly described on Exhibit A
attached hereto;
(b) All appurtenances, easements, rights of way, water and
water rights, pumps, pipes, flumes and ditches and ditch rights, water stock,
ditch and/or reservoir stock or interests, royalties, development rights and
credits, air rights, minerals, oil rights, all sewer capacity rights, and gas
rights, now or later used or useful in connection with, appurtenant to or
related to the Land;
(c) All buildings, structures, facilities, other improvements
and fixtures now or hereafter located on the Land;
(d) All apparatus, equipment, machinery and appliances and all
accessions thereto and renewals and replacements thereof and substitutions
therefor used in the operation or occupancy of the Land, it being intended by
the parties that all such items shall be conclusively considered to be a part of
the Land, whether or not attached or affixed to the Land;
(e) All land lying in the right-of-way of any street, road,
avenue, alley or right-of-way opened, proposed or vacated, and all sidewalks,
strips and gores of land adjacent to or used in connection with the Land;
(f) All additions and accretions to the property described
above;
(g) All licenses, authorizations, certificates, variances,
consents, approvals and other permits now or hereafter pertaining to the Land
and all estate, right, title and interest of Mortgagor in, to, under or derived
from all tradenames or business names relating to the Land or the present or
future development, construction, operation or use of the Land; and
Page 2
(h) All proceeds of any of the foregoing.
All of the property described above is hereinafter collectively defined as the
"Property". The listing of specific rights or property shall not be interpreted
as a limitation of general terms.
ARTICLE II. OBLIGATIONS SECURED
2.1 OBLIGATIONS SECURED. Mortgagor makes the foregoing grant and
assignment for the purpose of securing the following obligations ("Secured
Obligations"):
(a) Full and punctual payment to Mortgagee of all sums at any time
owing under the Note;
(b) Payment and performance of all covenants and obligations of
Mortgagor under this Mortgage, including, without limitation, indemnification
obligations and advances made to protect the Property;
(c) Payment and performance of all additional covenants and
obligations of Borrower and Mortgagor under the Loan Documents;
(d) Payment and performance of all covenants and obligations, if
any, which any rider attached as an exhibit to this Mortgage recites are secured
hereby;
(e) Payment and performance of all future advances and other
obligations that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor) for the
benefit of Mortgagee, when the obligation is evidenced by a writing which
recites that it is secured by this Mortgage;
(f) All interest and charges on all obligations secured hereby
including, without limitation, prepayment charges, late charges and loan fees;
and
(g) All modifications, extensions and renewals of any of the
obligations secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or interest payment
dates or both, as the case may be, deferring or accelerating payment dates
wholly or partly; and (ii) modifications, extensions or renewals at a different
rate of interest whether or not any such modification, extension or renewal is
evidenced by a new or additional promissory note or notes.
2.2 FUTURE ADVANCES. This Mortgage is given to secure not only the
Secured Obligations, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee or the holder hereof, or
otherwise as are made within twenty years from the date hereof, to the same
extent as if such future advances were made on the date of the execution of this
Mortgage. The total amount of Secured Obligations that may be so secured by this
Mortgage may be increased or decreased from time to time, but the total unpaid
balance so secured at any one time shall not exceed twice the face amount of the
Note, plus interest thereon, and any disbursements made under this Mortgage for
the payment of impositions, taxes, assessments, levies, insurance, or otherwise
with interest on such disbursements as provided for
Page 3
herein, plus any increases in the principal balance as the result of negative
amortization or deferred interest, if any. It is agreed that any additional sum
or sums advanced by Mortgagee pursuant to the terms hereof shall be equally
secured with and have the same priority as the original Secured Obligations and
shall be subject to all of the terms, provisions and conditions of this
Mortgage, whether or not such additional loans or advances are evidenced by
other promissory notes or other guaranties of Mortgagor and whether or not
identified by a recital that it or they are secured by this Mortgage. It is
further agreed that any additional promissory note or guaranty or promissory
notes or guaranties executed and delivered pursuant to this paragraph shall
automatically be deemed to be included in the term "Note" wherever it appears in
the context of this Mortgage. Without the prior written consent of Mortgagee,
which Mortgagee may grant or withhold in its sole discretion, Mortgagor shall
not file for record any notice limiting the maximum principal amount that may be
secured by this Mortgage to a sum less than the maximum principal amount set
forth in this paragraph.
2.3 OBLIGATIONS. The term "obligations" is used herein in its
broadest and most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and loan
fees at any time accruing or assessed on any of the Secured Obligations.
2.4 MATURITY DATE. The maturity date of the Note is September 1,
2011.
2.5 INCORPORATION. All terms and conditions of the documents which
evidence any of the Secured Obligations are incorporated herein by this
reference. All persons who may have or acquire an interest in the Property shall
be deemed to have notice of the terms of the Secured Obligations and to have
notice that the rate of interest on one or more Secured Obligations may vary
from time to time.
ARTICLE III. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT. Mortgagor irrevocably assigns to Mortgagee all of
Mortgagor's right, title and interest in, to and under: (a) all present and
future leases of the Property or any portion thereof, all licenses and
agreements relating to the management, leasing or operation of the Property or
any portion thereof, and all other agreements of any kind relating to the use or
occupancy of the Property or any portion thereof, whether such leases, licenses
and agreements are now existing or entered into after the date hereof
("Leases"); and (b) the rents, issues, deposits and profits of the Property,
including, without limitation, all amounts payable and all rights and benefits
accruing to Mortgagor under the Leases ("Payments"). The term "Leases" shall
also include all guarantees of and security for the tenants' performance
thereunder, and all amendments, extensions, renewals or modifications thereto
which are permitted hereunder. This is a present and absolute assignment, not an
assignment for security purposes only, and Mortgagee's right to the Leases and
Payments is not contingent upon, and may be exercised without possession of, the
Property.
3.2 GRANT OF LICENSE. Notwithstanding the terms contained in Section
3.1, Mortgagee confers upon Mortgagor a revocable license ("License") to collect
and retain the Payments as they become due and payable, until the occurrence of
a Default (as hereinafter defined). Upon a Default, the License shall be
automatically revoked and Mortgagee may collect
Page 4
and apply the Payments pursuant to the terms hereof without notice and without
taking possession of the Property. Upon Mortgagor's cure of the Default,
Mortgagee shall re-confer upon Mortgagor a revocable license to collect and
retain the Payments as they become due and payable, until the occurrence of a
Default. All Payments thereafter collected by Mortgagor shall be held by
Mortgagor as trustee under a constructive trust for the benefit of Mortgagee.
Mortgagor hereby irrevocably authorizes and directs the tenants under the
Leases, upon notice of a Default from Mortgagee, to rely upon and comply with
any notice or demand by Mortgagee for the payment to Mortgagee of any rental or
other sums which may at any time become due under the Leases, or for the
performance of any of the tenants' undertakings under the Leases, and the
tenants shall have no right or duty to inquire as to whether any Default has
actually occurred or is then existing. Mortgagor hereby relieves the tenants
from any liability to Mortgagor by reason of relying upon and complying with any
such notice or demand by Mortgagee. Mortgagee may apply, in its sole discretion,
any Payments so collected by Mortgagee against any Secured Obligation or any
other obligation of Borrower, Mortgagor or any other person or entity, under any
document or instrument related to or executed in connection with the Loan
Documents, whether existing on the date hereof or hereafter arising. Collection
of any Payments by Mortgagee shall not cure or waive any Default or notice of
Default or invalidate any acts done pursuant to such notice.
3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall
not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; (c)
responsible or liable for any waste committed on the Property by the tenants
under any of the Leases or by any other parties; for any dangerous or defective
condition of the Property; or for any negligence in the management, upkeep,
repair or control of the Property resulting in loss or injury or death to any
tenant, licensee, employee, invitee or other person; or (d) responsible for or
impose upon Mortgagee any duty to produce rents or profits. Mortgagee shall not
directly or indirectly be liable to Mortgagor or any other person as a
consequence of: (e) the exercise of or failure to exercise any of the rights,
remedies or powers granted to Mortgagee hereunder; or (f) the failure or refusal
of Mortgagee to perform or discharge any obligation, duty or liability of
Mortgagor arising under the Leases.
3.4 COVENANTS.
(a) ALL LEASES. Mortgagor shall, at Mortgagor's sole cost and
expense:
(i) perform all obligations of the landlord under the Leases and use
reasonable efforts to enforce performance by the tenants of all obligations of
the tenants under the Leases;
(ii) use reasonable efforts to keep the Property leased at all times
to tenants whom Mortgagor reasonably and in good faith believes are creditworthy
at rents not less than the fair market rental value (including, but not limited
to, free or discounted rents to the extent the market so requires);
(iii) promptly upon Mortgagee's request, deliver to Mortgagee a copy
of each requested Lease and all amendments thereto and waivers thereof; and
Page 5
(iv) promptly upon Mortgagee's request, execute and record any
additional assignments of landlord's interest under any Lease to Mortgagee and
specific subordinations of any Lease to this Mortgage, in form and substance
satisfactory to Mortgagee.
Unless consented to in writing by Mortgagee or otherwise permitted under any
other provision of the Loan Documents, Mortgagor shall not:
(v) grant any tenant under any Lease any option, right of first
refusal or other right to purchase all or any portion of the Property under any
circumstances;
(vi) grant any tenant under any Lease any right to prepay rent more
than 1 month in advance;
(vii) except upon Mortgagee's request, execute any assignment of
landlord's interest in any Lease; or
(viii) collect rent or other sums due under any Lease in advance,
other than to collect rent 1 month in advance of the time when it becomes due.
Any such attempted action in violation of the provisions of this Section shall
be null and void.
Mortgagor shall deposit with Mortgagee any sums received by Mortgagor in
consideration of any termination, modification or amendment of any Lease or any
release or discharge of any tenant under any Lease from any obligation
thereunder and any such sums received by Mortgagor shall be held in trust by
Mortgagor for such purpose. Notwithstanding the foregoing, so long as no Default
exists, the portion of any such sum received by Mortgagor with respect to any
Lease which is less than $50,000 shall be payable to Mortgagor. All such sums
received by Mortgagee with respect to any Lease shall be deemed "Impounds" (as
defined in Section 6.12) and shall be deposited by Mortgagee into a pledged
account in accordance with Section 6.12. If no Default exists, Mortgagee shall
release such Impounds to Mortgagor from time to time as necessary to pay or
reimburse Mortgagor for such tenant improvements, brokerage commissions and
other leasing costs as may be required to re-tenant the affected space;
provided, however, Mortgagee shall have received and approved each of the
following for each tenant for which such costs were incurred; (1) Mortgagor's
written request for such release, including the name of the tenant, the location
and net rentable area of the space and a description and cost breakdown of the
tenant improvements or other leasing costs covered by the request; (2)
Mortgagor's certification that any tenant improvements have been completed
lien-free and in a workmanlike manner; (3) a fully executed Lease, or extension
or renewal of the current Lease; (4) an estoppel certificate executed by the
tenant including its acknowledgement that all tenant improvements have been
satisfactorily completed; and (5) such other information with respect to such
costs as Mortgagee may require. Following the re-tenanting of all affected space
(including, without limitation, the completion of all tenant improvements), and
provided no Default exists, Mortgagee shall release any remaining such Impounds
relating to the affected space to Mortgagor. Mortgagor shall construct all
tenant improvements in a workmanlike manner and in accordance with all
applicable laws, ordinances, rules and regulations.
(b) MAJOR LEASES. Mortgagor shall, at Mortgagor's sole cost and
expense, give Mortgagee prompt written notice of any material default by
landlord or tenant under any
Page 6
Major Lease (as defined below). Unless consented to in writing by Mortgagee or
otherwise permitted under any other provision of the Loan Documents, Mortgagor
shall not:
(i) enter into any Major Lease which (aa) is not on fair market
terms (which terms may include free or discounted rent to the extent the market
so requires); (bb) does not contain a provision requiring the tenant to execute
and deliver to the landlord an estoppel certificate in form and substance
satisfactory to the landlord promptly upon the landlord's request; or (cc)
allows the tenant to assign or sublet the premises without the landlord's
consent;
(ii) materially reduce any rent or other sums due from the tenant
under any Major Lease;
(iii) terminate or materially modify or amend any Major Lease; or
(iv) release or discharge the tenant or any guarantor under any
Major Lease from any material obligation thereunder.
Any such attempted action in violation of the provisions of this Section shall
be null and void.
"Major Lease", as used herein, shall mean any Lease, which is, at any time: (1)
a Lease of more than 20% of the total rentable area of the Property, as
reasonably determined by Mortgagee; or (2) a Lease which generates a gross base
monthly rent exceeding 20% of the total gross base monthly rent generated by all
Leases (excluding all Leases under which the tenant is then in default), as
reasonably determined by Mortgagee. Mortgagor's obligations with respect to
Major Leases shall be governed by the provisions of Section 3.4(a) as well as by
the provisions of this Section.
(c) FAILURE TO DENY REQUEST Mortgagee's failure to deny any written
request by Mortgagor for Mortgagee's consent under the provisions of Sections
3.4(a) or 3.4(b) within 10 Business Days after Mortgagee's receipt of such
request (and all documents and information reasonably related thereto) shall be
deemed to constitute Mortgagee's consent to such request.
3.5 RIGHT OF SUBORDINATION. Mortgagee may at any time and from time
to time by specific written instrument intended for the purpose unilaterally
subordinate the lien of this Mortgage to any Lease, without joinder or consent
of, or notice to, Mortgagor, any tenant or any other person. Notice is hereby
given to each tenant under a Lease of such right to subordinate. No
subordination referred to in this Section shall constitute a subordination to
any lien or other encumbrance, whenever arising, or improve the right of any
junior lienholder. Nothing herein shall be construed as subordinating this
Mortgage to any Lease.
ARTICLE IV. SECURITY AGREEMENT AND FIXTURE FILING
4.1 SECURITY INTEREST. Mortgagor grants and assigns to Mortgagee a
security interest to secure payment and performance of all of the Secured
Obligations, in all of Mortgagor's right, title and interest in and to the
following described personal property in which Mortgagor now or at any time
hereafter has any interest ("Collateral"):
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All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and other
personal property, wherever situated, which are or are to be incorporated
into, used in connection with or appropriated for use on the Property; all
rents, issues, deposits and profits of the Property (to the extent, if
any, they are not subject to the Absolute Assignment of Rents and Leases);
all inventory, accounts, cash receipts, deposit accounts, impounds,
accounts receivable, contract rights, general intangibles, software,
chattel paper, instruments, documents, promissory notes, drafts, letters
of credit, letter of credit rights, supporting obligations, insurance
policies, insurance and condemnation awards and proceeds, any other rights
to the payment of money, trade names, trademarks and service marks arising
from or related to the Property or any business now or hereafter conducted
thereon by Mortgagor; all permits, consents, approvals, licenses,
authorizations and other rights granted by, given by or obtained from, any
governmental entity with respect to the Property; all deposits or other
security now or hereafter made with or given to utility companies by
Mortgagor with respect to the Property; all advance payments of insurance
premiums made by Mortgagor with respect to the Property; all plans,
drawings and specifications relating to the Property; all loan funds held
by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee
pursuant to any Loan Document, all reserves, deferred payments, deposits,
accounts, refunds, cost savings and payments of any kind related to the
Property or any portion thereof, including, without limitation, all
"Impounds" as defined herein; together with all replacements and proceeds
of, and additions and accessions to, any of the foregoing, and all books,
records and files relating to any of the foregoing.
As to all of the above described personal property which is or which
hereafter becomes a "fixture" under the Florida Uniform Commercial Code (the
"UCC"), this Mortgage constitutes a fixture filing under Florida Statutes
Section 679.313 and 679.402, as amended and recodified from time to time, this
Mortgage shall constitute a fixture filing recorded in the real estate records.
Notwithstanding the foregoing, nothing herein shall be deemed to create any lien
or interest in favor of Mortgagee under this Mortgage in any such Collateral
which is not a fixture, and the purpose of this Article IV is to create a
fixture filing under Florida Statutes Section 679.313 and 679.402, as amended or
recodified from time to time.
4.2 COVENANTS. Mortgagor agrees: (a) to execute and deliver such
documents as Mortgagee reasonably deems necessary to create, perfect and
continue the security interests contemplated hereby; (b) not to change its name,
and, as applicable, its chief executive offices, its principal residence or the
jurisdiction in which it is organized without giving Mortgagee at least 30 days'
prior written notice thereof; and (c) to cooperate with Mortgagee in perfecting
all security interests granted herein and in obtaining such agreements from
third parties as Mortgagee deems necessary, proper or convenient in connection
with the preservation, perfection or enforcement of any of Mortgagee's rights
hereunder.
4.3 RIGHTS OF MORTGAGEE. In addition to Mortgagee's rights as a
"Secured Party" under the UCC, Mortgagee may, but shall not be obligated to, at
any time without notice and at the expense of Mortgagor: (a) give notice to any
person of Mortgagee's rights hereunder and enforce such rights at law or in
equity; (b) insure, protect, defend and
Page 8
preserve the Collateral or any rights or interests of Mortgagee therein; and (c)
inspect the Collateral during normal business hours upon reasonable prior
written notice, provided, however, that such notice shall not be required in the
event of an emergency. Notwithstanding the above, in no event shall Mortgagee be
deemed to have accepted any property other than cash in satisfaction of any
obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express
written election of said remedy under the UCC or other applicable law.
4.4 ADDITIONAL RIGHTS OF MORTGAGEE UPON DEFAULT. Upon the occurrence
of a Default, then in addition to all of Mortgagee's rights as a "Secured Party"
under the UCC or otherwise at law:
(a) DISPOSITION OF COLLATERAL. Mortgagee may: (i) upon written
notice, require Mortgagor to assemble the Collateral and make it available to
Mortgagee at a place reasonably designated by Mortgagee; (ii) without prior
notice (to the extent permitted by law), enter upon the Property or other place
where the Collateral may be located and take possession of, collect, sell,
lease, license and otherwise dispose of the Collateral, and store the same at
locations acceptable to Mortgagee at Mortgagor's expense; or (iii) sell, assign
and deliver the Collateral at any place or in any lawful manner and bid and
become purchaser at any such sales; and
(b) OTHER RIGHTS. Mortgagee may, for the account of Mortgagor and at
Mortgagor's expense: (i) operate, use, consume, sell, lease, license or
otherwise dispose of the Collateral as Mortgagee reasonably deems appropriate
for the purpose of performing any or all of the Secured Obligations; (ii) enter
into any agreement, compromise or settlement including insurance claims, which
Mortgagee may reasonably deem desirable or proper with respect to the
Collateral; and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness and
obligations now or hereafter owing to Mortgagor in connection with or on account
of the Collateral.
Mortgagor acknowledges and agrees that a disposition of the
Collateral in accordance with Mortgagee's rights and remedies as heretofore
provided is a disposition thereof in a commercially reasonable manner and that 5
Business Days prior notice of such disposition is commercially reasonable
notice. Mortgagee shall have no obligation to process or prepare the Collateral
for sale or other disposition. In disposing of the Collateral, Mortgagee may
disclaim all warranties of title, possession, quiet enjoyment and the like. Any
proceeds of any sale or other disposition of the Collateral may be applied by
Mortgagee first to the reasonable expenses incurred by Mortgagee in connection
therewith, including, without limitation, reasonable attorneys' fees and
disbursements, and then to the payment of the Secured Obligations, in such order
of application as Mortgagee may from time to time elect.
4.5 POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints
Mortgagee as Mortgagor's attorney-in-fact (such agency being coupled with an
interest), and as such attorney-in-fact, Mortgagee may, without the obligation
to do so, in Mortgagee's name or in the name of Mortgagor, prepare, execute,
file and record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve any of
Mortgagee's security interests and rights in or to the Collateral, and upon a
Default, take
Page 9
any other action required of Mortgagor; provided, however, that Mortgagee as
such attorney-in-fact shall be accountable only for such funds as are actually
received by Mortgagee.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Mortgagor represents and
warrants to Mortgagee that, to Mortgagor's current actual knowledge after
reasonable investigation and inquiry, the following statements are true and
correct as of the Effective Date:
(a) LEGAL STATUS. Mortgagor and Borrower are duly organized and
existing and in good standing under the laws of the state(s) in which Mortgagor
and Borrower are organized. Mortgagor and Borrower are qualified or licensed to
do business in all jurisdictions in which such qualification or licensing is
required.
(b) PERMITS. Mortgagor and Borrower possess all permits, franchises
and licenses and all rights to all trademarks, trade names, patents and
fictitious names, if any, necessary to enable Mortgagor and Borrower to conduct
the business(es) in which Mortgagor and Borrower are now engaged in compliance
with applicable law.
(c) AUTHORIZATION AND VALIDITY. The execution and delivery of the
Loan Documents have been duly authorized and the Loan Documents constitute valid
and binding obligations of Mortgagor, Borrower or the party which executed the
same, enforceable in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights, or by the application of rules
of equity.
(d) VIOLATIONS. The execution, delivery and performance by Mortgagor
and Borrower of each of the Loan Documents do not violate any provision of any
law or regulation, or result in any breach or default under any contract,
obligation, indenture or other instrument to which Mortgagor or Borrower is a
party or by which Mortgagor or Borrower is bound.
(e) LITIGATION. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental authority, court or
administrative agency which may adversely affect the financial condition or
operations of Mortgagor or Borrower other than those previously disclosed in
writing by Mortgagor or Borrower to Mortgagee.
(f) FINANCIAL STATEMENTS. The financial statements of Mortgagor and
Borrower, of each general partner (if Mortgagor or Borrower is a partnership),
of each member (if Mortgagor or Borrower is a limited liability company) and of
each guarantor, if any, previously delivered by Mortgagor or Borrower to
Mortgagee: (i) are materially complete and correct; (ii) present fairly the
financial condition of such party; and (iii) have been prepared in accordance
with the same accounting standard used by Mortgagor or Borrower to prepare the
financial statements delivered to and approved by Mortgagee in connection with
the making of the Loan, or other accounting standards approved by Mortgagee.
Since the date of such financial statements, there has been no material adverse
change in such financial condition, nor have any assets or properties reflected
on such financial statements been sold, transferred, assigned, mortgaged,
Page 10
pledged or encumbered except as previously disclosed in writing by Mortgagor or
Borrower to Mortgagee and approved in writing by Mortgagee.
(g) REPORTS. All reports, documents, instruments and information
delivered to Mortgagee in connection with the Loan: (i) are correct in all
material respects and sufficiently complete to give Mortgagee accurate knowledge
of their subject matter; and (ii) do not contain any misrepresentation of a
material fact or omission of a material fact which omission makes the provided
information misleading.
(h) INCOME TAXES. There are no material pending assessments or
adjustments of Mortgagor's or Borrower's income tax payable with respect to any
year.
(i) SUBORDINATION. There is no agreement or instrument to which
Borrower is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower's obligations under the
Note to an obligation owed to another party.
(J) TITLE. Mortgagor lawfully holds and possesses fee simple title
to the Property, without limitation on the right to encumber same. This Mortgage
is a first lien on the Property prior and superior to all other liens and
encumbrances on the Property except: (i) liens for real estate taxes and
assessments not yet due and payable; (ii) senior exceptions previously approved
by Mortgagee and shown in the title insurance policy insuring the lien of this
Mortgage; and (iii) other matters, if any, previously disclosed to Mortgagee by
Mortgagor in a writing specifically referring to this representation and
warranty.
(k) MECHANICS' LIENS. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to any such liens) affecting the
Property which are or may be prior to or equal to the lien of this Mortgage,
other than those (if any) previously approved by Mortgagee and shown in the
title insurance policy insuring the lien of this Mortgage.
(l) ENCROACHMENTS. Except as shown in the survey, if any, previously
delivered to Mortgagee, none of the buildings or other improvements which were
included for the purpose of determining the appraised value of the Property lies
outside of the boundaries or building restriction lines of the Property and no
buildings or other improvements located on adjoining properties encroach upon
the Property.
(m) LEASES. All existing Leases are in full force and effect and are
enforceable in accordance with their respective terms. Except as disclosed on a
rent roll provided to Mortgagee prior to the date hereof, no material breach or
default by any party, or event which would constitute a material breach or
default by any party after notice or the passage of time, or both, exists under
any existing Lease. None of the landlord's interests under any of the Leases,
including, but not limited to, rents, additional rents, charges, issues or
profits, has been transferred or assigned. Except as disclosed on a rent roll
provided to Mortgagee prior to the date hereof, no rent or other payment under
any existing Lease has been paid by any tenant for more than 1 month in advance.
(n) COLLATERAL. Mortgagor has good title to the existing Collateral,
free and clear of all liens and encumbrances except those, if any, previously
disclosed to Mortgagee by Mortgagor in writing specifically referring to this
representation and warranty. Mortgagor's chief
Page 11
executive office (or principal residence, if applicable) is located at the
address shown on page one of this Mortgage. Mortgagor is an organization
organized solely under the laws of the State of Delaware. All organizational
documents of Mortgagor delivered to Mortgagee are complete and accurate in every
respect. Mortgagor's legal name is exactly as shown on page one of this
Mortgage.
(o) CONDITION OF PROPERTY. Except as shown in the property condition
survey or other engineering reports, if any, previously delivered to or obtained
by Mortgagee, the Property is in good condition and repair and is free from any
damage that would materially and adversely affect the value of the Property as
security for the Loan or the intended use of the Property.
(p) HAZARDOUS MATERIALS. Except as shown in the environmental
assessment report(s), if any, previously delivered to or obtained by Mortgagee,
the Property is not and has not been a site for the use, generation,
manufacture, storage, treatment, release, threatened release, discharge,
disposal, transportation or presence of Hazardous Materials (as hereinafter
defined) in violation of Hazardous Materials Laws (as hereinafter defined)
except as otherwise previously disclosed in writing by Mortgagor to Mortgagee.
(q) HAZARDOUS MATERIALS LAWS. The Property complies with all
Hazardous Materials Laws.
(r) HAZARDOUS MATERIALS CLAIMS. There are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).
(s) WETLANDS. No part of the Property consists of or is classified
as wetlands, tidelands or swamp and overflow lands.
(t) COMPLIANCE WITH LAWS. All federal, state and local laws, rules
and regulations applicable to the Property, including, without limitation, all
zoning and building requirements and all requirements of the Americans With
Disabilities Act of 1990, as amended from time to time (42 U. S. C. Section
12101 et seq.) have been satisfied or complied with. Mortgagor is in possession
of all certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of the Property.
All such certificates of occupancy and other licenses, permits and
authorizations are valid and in full force and effect.
(u) PROPERTY TAXES AND OTHER LIABILITIES. All taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, and ground
rents, if any, which previously became due and owing in respect of the Property
have been paid.
(v) CONDEMNATION. There is no proceeding pending or threatened for
the total or partial condemnation of the Property.
(w) HOMESTEAD. There is no homestead or other exemption available to
Mortgagor which would materially interfere with the right to sell the Property
or the right to foreclose this Mortgage.
(x) SOLVENCY. None of the transactions contemplated by the Loan will
be or have been made with an actual intent to hinder, delay or defraud any
present or future creditors
Page 12
of Mortgagor, and Mortgagor, on the Effective Date, will have received fair and
reasonably equivalent value in good faith for the grant of the liens or security
interests effected by the Loan Documents. On the Effective Date, Mortgagor will
be solvent and will not be rendered insolvent by the transactions contemplated
by the Loan Documents. Mortgagor is able to pay its debts as they become due.
(y) SEPARATE TAX PARCEL(S). The Property is assessed for real estate
tax purposes as one or more wholly independent tax parcels, separate from any
other real property, and no other real property is assessed and taxed together
with the Property or any portion thereof.
5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS
(LEVEL V SPE). Mortgagor hereby represents, warrants and covenants to Mortgagee
that with respect to both Mortgagor and MHC-QRS STAGECOACH, INC., a Delaware
corporation, the managing member of Mortgagor:
(a) each such entity was organized solely for the purpose of (i) owning
the Properties (as defined in the Note); (ii) acting as a general partner of a
limited partnership which owns the Properties; or (iii) acting as a managing
member of a limited liability company which owns the Properties;
(b) each such entity has not engaged and will not engage in any business
unrelated to (i) the ownership of the Properties; (ii) acting as general partner
of a limited partnership which owns the Properties; or (iii) acting as a
managing member of a limited liability company which owns the Properties;
(c) each such entity has not had and will not have any assets other than
the Properties (and personal property incidental to the ownership and operation
of the Properties) or its partnership or membership interest in the limited
partnership or limited liability company which owns the Properties, as
applicable;
(d) each such entity has not and will not engage in, seek or consent to
any dissolution, winding up, liquidation, consolidation, merger, asset sale,
transfer of partnership or membership interest, or amendment of its articles of
incorporation, articles of organization, certificate of formation, operating
agreement or limited partnership agreement, as applicable;
(e) if any such entity is a limited partnership, all of its general
partners are corporations that satisfy the requirements set forth in this
Section 5.2;
(f) if any such entity is a limited liability company, it has at least one
managing member that is a corporation that satisfies the requirements set forth
in this Section 5.2;
(g) each such entity, without the unanimous consent of all of its general
partners, directors or members, as applicable, shall not file or consent to the
filing of any bankruptcy or insolvency petition or otherwise institute
insolvency proceedings with respect to itself or any other entity in which it
has a direct or indirect legal or beneficial ownership interest;
(h) each such entity has no indebtedness (and will have no indebtedness)
other than (i) the Loan (to the extent it is liable under the terms of the Loan
Documents); and (ii) unsecured
Page 13
trade debt not to exceed $1,000,000 in the aggregate with respect to Mortgagor
or $10,000 in the aggregate with respect to its managing member, which is not
evidenced by a note and is incurred in the ordinary course of its business in
connection with owning, operating and maintaining the Property (or its interest
in Mortgagor, as applicable) and is paid within thirty (30) days from the date
incurred;
(i) each such entity has not failed and will not fail to correct any known
misunderstanding regarding the separate identity of such entity;
(j) each such entity has maintained and will maintain its accounts, books
and records separate from any other person or entity;
(k) each such entity has maintained and will maintain its books, records,
resolutions and agreements as official records;
(l) each such entity (i) has not commingled and will not commingle its
funds or assets with those of any other entity; and (ii) has held and will hold
its assets in its own name;
(m) each such entity has conducted and will conduct its business in its
own name or in a registered trade name;
(n) each such entity has maintained and will maintain its accounting
records and other entity documents separate from any other person or entity;
(o) each such entity has prepared and will prepare separate tax returns
and financial statements, or if part of a consolidated group, is shown as a
separate member of such group;
(p) each such entity has paid and will pay its own liabilities and
expenses out of its own funds and assets;
(q) each such entity has held and will hold regular meetings, as
appropriate, to conduct its business and has observed and will observe all
corporate, partnership or limited liability company formalities and record
keeping, as applicable;
(r) each such entity has not assumed or guaranteed and will not assume or
guarantee or become obligated for the debts of any other entity or hold out its
credit as being available to satisfy the obligations of any other entity;
(s) each such entity has not acquired and will not acquire obligations or
securities of its partners, members or shareholders;
(t) each such entity has allocated and will allocate fairly and reasonably
the costs associated with common employees and any overhead for shared office
space and each such entity has used and will use separate stationery, invoices
and checks under its own name or under its registered trade name;
(u) each such entity has not pledged and will not pledge its assets for
the benefit of any other person or entity;
Page 14
(v) each such entity has held out and identified itself and will hold
itself out and identify itself as a separate and distinct entity under its own
name or under its registered trade name and not as a division or part of any
other person or entity;
(w) each such entity has not made and will not make loans to any person or
entity;
(x) each such entity has not identified and will not identify its
partners, members or shareholders, or any affiliates of any of the foregoing, as
a division or part of it;
(y) each such entity has not entered into and will not enter into or be a
party to, any transaction with its partners, members, shareholders, or any
affiliates of any of the foregoing, except in the ordinary course of its
business pursuant to written agreements and on terms which are intrinsically
fair and are no less favorable to it than would be obtained in a comparable
arm's-length transaction with an unrelated third party;
(z) if any such entity is a corporation, the directors of such entity
shall consider the interests of the creditors of such entity in connection with
all corporate action;
(aa) each such entity has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number of employees
in light of its contemplated business operations;
(bb) each such entity has maintained and will maintain adequate capital in
light of its contemplated business operations;
(cc) if any such entity is a limited partnership with more than one
general partner, its limited partnership agreement requires the remaining
partners to continue the partnership as long as one solvent general partner
exists;
(dd) if any such entity is a limited liability company, its operating
agreement, if any such entity is a limited partnership, its limited partnership
agreement, and if any such entity is a corporation, to the full extent permitted
by applicable law, its articles of incorporation, contain the provisions set
forth in this Section 5.2 and any such entity shall conduct its business and
operations in strict compliance with the terms contained therein;
(ee) each such entity will, as a condition to the closing of the Loan,
deliver to Mortgagee a nonconsolidation opinion in form and substance acceptable
to Mortgagee;
(ff) if any such entity is a corporation, it has maintained and will
continue to maintain at least one Independent Director (as hereinafter defined);
and
(gg) if any such entity is a corporation, it has not caused or allowed and
will not cause or allow the board of directors of such entity to take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
directors unless an Independent Director shall have participated in such vote.
An "Independent Director" shall be an individual who, except in his or her
capacity as an Independent Director of the corporation is not, and has not been
during the five (5) years
Page 15
immediately before such individual's appointment as an Independent Director: (i)
a stockholder, director, partner, officer or employee of the corporation or its
Affiliates; (ii) affiliated with a customer or supplier of the corporation or
its Affiliates; or (iii) a spouse, parent, sibling, child or other family
relative of any person described by (i) or (ii) above.
As used herein, the term "Affiliate" shall mean any person or entity other than
the corporation (i) which owns beneficially, directly or indirectly, any
outstanding shares of the corporation's stock, or (ii) which controls, is
controlled by or is under common control with the corporation. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person, whether
through ownership of voting securities, by contract or otherwise.
5.3 COMMERCIAL LOAN. Borrower warrants that the loan evidenced by
this Note is being made solely to acquire or carry on a business or commercial
enterprise, and/or Borrower is a business or commercial organization. Borrower
further warrants that all of the proceeds of the Note shall be used for
commercial purposes and stipulates that the loan evidenced by the Note shall be
construed for all purposes as a commercial loan, and is made for other than
personal, family or household purposes.
ARTICLE VI. RIGHTS AND DUTIES OF THE PARTIES
6.1 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Mortgagor shall,
or shall cause the property manager to: (a) keep the Property in good condition
and repair; (b) complete or restore promptly and in workmanlike manner the
Property or any part thereof which may be damaged or destroyed (unless, if and
to the extent permitted under Section 6.11, Mortgagee elects to require that
insurance proceeds be used to reduce the Secured Obligations and after such
repayment the ratio of Secured Obligations to the value of the Property, as
reasonably determined by Mortgagee is the same as or lower than it was
immediately before the loss or taking occurred); (c) comply and cause the
Property to comply with (i) all laws, ordinances, regulations and standards,
(ii) all covenants, conditions, restrictions and equitable servitudes, whether
public or private, of every kind and character and (iii) all requirements of
insurance companies and any bureau or agency which establishes standards of
insurability, which laws, covenants or requirements affect the Property and
pertain to acts committed or conditions existing thereon, including, without
limitation, any work of alteration, improvement or demolition as such laws,
covenants or requirements mandate; (d) operate and manage the Property at all
times in a professional manner and do all other acts which from the character or
use of the Property may be reasonably necessary to maintain and preserve its
value; (e) promptly after execution, deliver to Mortgagee a copy of any
management agreement concerning the Property and all amendments thereto and
waivers thereof; and (f) execute and acknowledge all further documents,
instruments and other papers as Mortgagee reasonably deems necessary or
appropriate to preserve, continue, perfect and enjoy the benefits of this
Mortgage and perform Mortgagor's obligations, including, without limitation,
statements of the amount secured hereby then owing and statements of no offset.
Mortgagor shall not, without Mortgagee's prior written consent: (g) remove or
demolish all or any material part of the Property; (h) alter either (i) the
exterior of the Property in a manner which materially and adversely affects the
value of the Property or (ii) the roof or other structural elements of the
Page 16
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any change
in any zoning or other land classification which affects the Property; (j)
materially alter the type of occupancy or use of all or any part of the
Property; or (k) commit or permit physical waste of the Property.
6.2 HAZARDOUS MATERIALS. Without limiting any other provision of
this Mortgage, Mortgagor agrees as follows:
(a) PROHIBITED ACTIVITIES. Mortgagor shall not cause or permit the
Property to be used as a site for the use, generation, manufacture, storage,
treatment, release, discharge, disposal, transportation or presence of any oil
or other petroleum products, flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, hazardous wastes, toxic or contaminated
substances or similar materials, including, without limitation, any substances
which are "hazardous substances," "hazardous wastes," "hazardous materials" or
"toxic substances" under the Hazardous Materials Laws (defined below) and/or
other applicable environmental laws, ordinances or regulations ("Hazardous
Materials").
The foregoing to the contrary notwithstanding, (i) Mortgagor may
store, maintain and use on the Property janitorial and maintenance supplies,
paint and other Hazardous Materials of a type and in a quantity readily
available for purchase by the general public and normally stored, maintained and
used by owners and managers of properties of a type similar to the Property; and
(ii) tenants of the Property may store, maintain and use on the Property (and,
if any tenant is a retail business, hold in inventory and sell in the ordinary
course of such tenant's business) household and consumer cleaning supplies and
other Hazardous Materials of a type and quantity readily available for purchase
by the general public and normally stored, maintained and used (and, if tenant
is a retail business, sold) by tenants of properties similar to the Property or
in similar lines of business on properties similar to the Property.
(b) HAZARDOUS MATERIALS LAWS. Mortgagor shall comply and cause the
Property to comply with all federal, state and local laws, ordinances and
regulations relating to Hazardous Materials ("Hazardous Materials Laws"),
including, without limitation: the Clean Air Act, as amended, 42 U.S.C. Section
7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (including the
Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 U.S.C.
Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29
U.S.C. Section 651; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977,
as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of
other jurisdictions or orders and regulations.
(c) NOTICES. Mortgagor shall immediately notify Mortgagee in writing
of: (i) the discovery of any Hazardous Materials on, under or about the Property
(other than Hazardous Materials permitted under Section 6.2(a)); (ii) any
knowledge by Mortgagor that the Property does not comply with any Hazardous
Materials Laws; (iii) any claims or actions ("Hazardous Materials
Page 17
Claims") pending or threatened in writing against Mortgagor or the Property by
any governmental entity or agency or any other person or entity relating to
Hazardous Materials or pursuant to the Hazardous Materials Laws; and (iv) the
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of the Property that could cause the Property or any part thereof
to become contaminated by or with Hazardous Materials.
(d) REMEDIAL ACTION. In response to knowledge of or notification to
Mortgagor of the presence of any Hazardous Materials on, under or about the
Property, Mortgagor shall immediately take, at Mortgagor's sole expense, all
remedial action required of Mortgagor by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any Hazardous
Materials Claims.
(e) INSPECTION BY MORTGAGEE. Upon reasonable prior notice to
Mortgagor (except in the event of an emergency) and during normal business
hours, Mortgagee, its employees and agents, may from time to time (whether
before or after the commencement of a nonjudicial or judicial foreclosure
proceeding), enter and inspect the Property for the purpose of determining the
existence, location, nature and magnitude of any past or present release or
threatened release of any Hazardous Materials into, onto, beneath or from the
Property.
(f) LEGAL EFFECT OF SECTION. Mortgagor and Mortgagee agree that: (i)
this Hazardous Materials Section is intended as Mortgagee's written request for
information (and Mortgagor's response) concerning the environmental condition of
the real property security as required by California Code of Civil Procedure
Section 726.5, or any other applicable law; and (ii) each representation and
warranty and covenant in this Section (together with any indemnity applicable to
a breach of any such representation and warranty) with respect to the
environmental condition of the Property is intended by Mortgagee and Mortgagor
to be an "environmental provision" for purposes of California Code of Civil
Procedure Section 736, or any other applicable law.
6.3 COMPLIANCE WITH LAWS. Mortgagor shall comply with all federal,
state and local laws, rules and regulations applicable to the Property,
including, without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990 (42 U.S.C. Section
12101 et seq.), as amended from time to time. Mortgagor shall possess and
maintain or cause Borrower to possess and maintain in full force and effect at
all times (a) all certificates of occupancy and other licenses, permits and
authorizations required by applicable law for the existing use of the Property
and (b) all permits, franchises and licenses and all rights to all trademarks,
trade names, patents and fictitious names, if any, required by applicable law
for Mortgagor and Borrower to conduct the business(es) in which Mortgagor and
Borrower are now engaged.
6.4 LITIGATION. Mortgagor shall promptly notify Mortgagee in writing
of any litigation pending or threatened in writing against Mortgagor or Borrower
claiming damages in excess of $100,000 and of all pending or threatened (in
writing) litigation against Mortgagor or Borrower if the aggregate damage claims
against Mortgagor or Borrower exceed $500,000.
6.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Mortgagor shall not:
(a) merge or consolidate with any other entity or permit Borrower to merge or
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consolidate with any other entity; (b) make any substantial change in the nature
of Mortgagor's business or structure or permit Borrower to make any substantial
change in the nature of Borrower's business or structure; (c) acquire all or
substantially all of the assets of any other entity or permit Borrower to
acquire all or substantially all of the assets of any other entity; or (d) sell,
lease, assign, transfer or otherwise dispose of a material part of Mortgagor's
assets except in the ordinary course of Mortgagor's business or permit Borrower
to sell, lease, assign, transfer or otherwise dispose of a material part of
Borrower's assets except in the ordinary course of Borrower's business.
6.6 ACCOUNTING RECORDS. Mortgagor shall maintain and cause Borrower
to maintain adequate books and records in accordance with the same accounting
standard used by Mortgagor or Borrower to prepare the financial statements
delivered to and approved by Mortgagee in connection with the making of the Loan
or other accounting standards approved by Mortgagee. Mortgagor shall permit and
shall cause Borrower to permit any representative of Mortgagee, at any
reasonable time and from time to time, upon reasonable prior notice to
Mortgagor, to inspect, audit and examine such books and records and make copies
of same.
6.7 COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor shall pay to
Mortgagee the full amount of all costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses of Mortgagee's in-house or
outside counsel, incurred by Mortgagee in connection with: (a) appraisals and
inspections of the Property or Collateral required by Mortgagee as a result of
(i) a Transfer or proposed Transfer (as defined below), or (ii) a Default; (b)
appraisals and inspections of the Property or Collateral required by applicable
law, including, without limitation, federal or state regulatory reporting
requirements; and (c) any acts performed by Mortgagee at Mortgagor's request or
wholly or partially for the benefit of Mortgagor (including, without limitation,
the preparation or review of amendments, assumptions, waivers, releases,
reconveyances, estoppel certificates or statements of amounts owing under any
Secured Obligation). In connection with appraisals and inspections, Mortgagor
specifically (but not by way of limitation) acknowledges that: (aa) a formal
written appraisal of the Property by a state certified or licensed appraiser may
be required by federal regulatory reporting requirements on an annual or more
frequent basis; and (bb) Mortgagee may require inspection of the Property by an
independent supervising architect, a cost engineering specialist, or both.
Mortgagor shall pay all indebtedness arising under this Section immediately upon
demand by Mortgagee together with interest thereon following notice of such
indebtedness at the rate of interest then applicable to the principal balance of
the Note as specified therein.
6.8 LIENS, ENCUMBRANCES AND CHARGES. Subject to the terms of Section
8.4, Mortgagor shall immediately discharge by bonding or otherwise any lien,
charge or other encumbrance which attaches to the Property in violation of
Section 6.15. Subject to Mortgagor's right to contest such matters under this
Mortgage or as expressly permitted in the Loan Documents, Mortgagor shall pay
when due all obligations secured by or reducible to liens and encumbrances which
shall now or hereafter encumber or appear to encumber all or any part of the
Property or any interest therein, whether senior or subordinate hereto,
including, without limitation, all claims for work or labor performed, or
materials or supplies furnished, in connection with any work of demolition,
alteration, repair, improvement or construction of or upon the Property, except
such as Mortgagor may in good faith contest or as to which a bona fide dispute
may arise (provided provision is made to the satisfaction of Mortgagee for
eventual payment thereof in the
Page 19
event that Mortgagor is obligated to make such payment and that any recorded
claim of lien, charge or other encumbrance against the Property is immediately
discharged by bonding or otherwise).
6.9 TAXES AND OTHER LIABILITIES. Mortgagor shall pay and discharge
when due any and all indebtedness, obligations, assessments and taxes, both real
and personal and including federal and state income taxes and state and local
property taxes and assessments. Mortgagor shall promptly provide to Mortgagee
copies of all tax and assessment notices pertaining to the Property. Mortgagor
hereby authorizes Mortgagee to obtain, at Mortgagor's expense, a tax service
contract which shall provide tax information on the Property to Mortgagee for
the term of the Loan and any extensions or renewals of the Loan.
6.10 INSURANCE COVERAGE. Mortgagor shall insure the Property against
loss or damage by fire and such other hazards as Mortgagee shall from time to
time require; provided, however, (a) Mortgagee, at Mortgagee's election, may
only require flood insurance if all or any portion of the improvements located
on the Property is or becomes located in a special flood hazard area, and (b)
Mortgagee, at Mortgagee's election, may only require earthquake insurance if all
or any portion of the Property is or becomes located in an earthquake fault
zone. Mortgagor shall also carry public liability insurance and such other
insurance as Mortgagee may reasonably require, including, without limitation,
business interruption insurance or loss of rents insurance. Such policies shall
contain a standard mortgage clause naming Mortgagee and its successors in
interest as a loss payee and requiring at least 30 days prior notice to the
holder at termination or cancellation. Mortgagor shall maintain all required
insurance throughout the term of the Loan and while any liabilities of Borrower
or Mortgagor to Mortgagee under any of the Loan Documents remain outstanding at
Mortgagor's expense, with companies, and in substance and form satisfactory to
Mortgagee. Mortgagee, by reason of accepting, rejecting, approving or obtaining
insurance shall not incur any liability for: (c) the existence, nonexistence,
form or legal sufficiency of any insurance; (d) the solvency of any insurer; or
(e) the payment of claims.
6.11 INSURANCE AND CONDEMNATION PROCEEDS.
(a) ASSIGNMENT OF CLAIMS. Mortgagor absolutely and irrevocably
assigns to Mortgagee all of the following rights, claims and amounts
(collectively, "Claims"), all of which shall be paid to Mortgagee: (i) all
awards of damages and all other compensation payable directly or indirectly by
reason of a condemnation or proposed condemnation for public or private use
affecting all or any part of, or any interest in, the Property; (ii) all other
claims and awards for damages to or decrease in value of all or any part of, or
any interest in, the Property; (iii) all proceeds of any insurance policies
payable by reason of loss sustained to all or any part of the Property; and (iv)
all interest which may accrue on any of the foregoing. Mortgagor shall give
Mortgagee prompt written notice of the occurrence of any casualty affecting, or
the institution of any proceedings for eminent domain or for the condemnation
of, the Property or any portion thereof. So long as no Default has occurred and
is continuing at the time, Mortgagor shall have the right to adjust, compromise
and settle any Claim of $100,000 or less without the consent of Mortgagee,
provided, however, all awards, proceeds and other sums described herein shall
continue to be payable to Mortgagee. Mortgagee may commence, appear in, defend
or prosecute any Claim exceeding $100,000, and may adjust, compromise and settle
all Claims (except for Claims which Mortgagor may settle as provided herein),
but shall not be responsible
Page 20
for any failure to commence, appear in, defend, prosecute or collect any such
Claim regardless of the cause of the failure. All awards, proceeds and other
sums described herein shall be payable to Mortgagee.
(b) APPLICATION OF PROCEEDS; NO DEFAULT. So long as no Default has
occurred and is continuing at the time of Mortgagee's receipt of the proceeds of
the Claims ("Proceeds") and no Default occurs thereafter, Mortgagee shall apply
the Proceeds in the following order of priority: First, to Mortgagee's expenses
in settling, prosecuting or defending the Claims; Second, to the repair or
restoration of the Property; and Third, to Mortgagor if the repair or
restoration of the Property has been completed, but to the Secured Obligations
in any order without suspending, extending or reducing any obligation of
Mortgagor to make installment payments if the repair or restoration of the
Property has not been completed. Notwithstanding the foregoing, Mortgagee shall
have no obligation to make any Proceeds available for the repair or restoration
of the Property unless and until all the following conditions have been
satisfied: (i) delivery to Mortgagee of the Proceeds plus any additional amount
which is needed to pay all costs of the repair or restoration (including,
without limitation, taxes, financing charges, insurance and rent during the
repair period); (ii) establishment of an arrangement for lien releases and
disbursement of funds acceptable to Mortgagee; (iii) delivery to Mortgagee in
form and content acceptable to Mortgagee of all of the following: (aa) plans and
specifications for the work; (bb) a contract for the work, signed by a
contractor acceptable to Mortgagee; (cc) a cost breakdown for the work; (dd) if
reasonably required by Mortgagee, a payment and performance bond for the work;
(ee) evidence of the continuation of substantially all Leases unless consented
to in writing by Mortgagee; (ff) evidence that, upon completion of the work, the
size, capacity, value, and income coverage ratios for the Property will be at
least as great as those which existed immediately before the damage or
condemnation occurred; and (gg) evidence of the satisfaction of any additional
conditions that Mortgagee may reasonably establish to protect Mortgagee's
security. Mortgagor acknowledges that the specific conditions described above
are reasonable.
(c) APPLICATION OF PROCEEDS; DEFAULT. If a Default has occurred and
is continuing at the time of Mortgagee's receipt of the Proceeds or if a Default
occurs at any time thereafter, Mortgagee may, at Mortgagee's absolute discretion
and regardless of any impairment of security or lack of impairment of security,
but subject to applicable law governing use of the Proceeds, if any, apply all
or any of the Proceeds to Mortgagee's expenses in settling, prosecuting or
defending the Claims and then apply the balance to the Secured Obligations in
any order without suspending, extending or reducing any obligation of Mortgagor
to make installment payments, and may release all or any part of the Proceeds to
Mortgagor upon any conditions Mortgagee chooses.
6.12 IMPOUNDS.
(a) POST-DEFAULT IMPOUNDS. If required by Mortgagee at any time
after a Default occurs (and regardless of whether such Default is thereafter
cured), Mortgagor shall deposit with Mortgagee such amounts ("Post-Default
Impounds") on such dates (determined by Mortgagee as provided below) as will be
sufficient to pay any or all "Costs" (as defined below) specified by Mortgagee.
Mortgagee in its reasonable discretion shall estimate the amount of such Costs
that will be payable or required during any period selected by Mortgagee not
exceeding 1 year and shall determine the fractional portion thereof that
Mortgagor shall deposit with Mortgagee
Page 21
on each date specified by Mortgagee during such period. If the Post-Default
Impounds paid by Mortgagor are not sufficient to pay the related Costs,
Mortgagor shall deposit with Mortgagee upon demand an amount equal to the
deficiency. All Post-Default Impounds shall be payable by Mortgagor in addition
to (but without duplication of) any other Impounds (as defined below).
(b) ALL IMPOUNDS. Post-Default Impounds and any other impounds that
may be payable by Borrower under the Note are collectively called "Impounds".
All Impounds shall be deposited into one or more segregated or commingled
accounts maintained by Mortgagee or its servicing agent. Except as otherwise
provided in the Note, such account(s) shall not bear interest. Mortgagee shall
not be a trustee, special depository or other fiduciary for Mortgagor with
respect to such account, and the existence of such account shall not limit
Mortgagee's rights under this Mortgage, any other agreement or any provision of
law. If no Default exists, Mortgagee shall apply all Impounds to the payment of
the related Costs, or in Mortgagee's sole discretion may release any or all
Impounds to Mortgagor for application to and payment of such Costs. If a Default
exists, Mortgagee may apply any or all Impounds to any Secured Obligation and/or
to cure such Default, whereupon Mortgagor shall restore all Impounds so applied
and cure all Defaults not cured by such application. The obligations of
Mortgagor hereunder shall not be diminished by deposits of Impounds made by
Mortgagor, except to the extent that such obligations have actually been met by
application of such Impounds. Upon any assignment of this Mortgage, Mortgagee
may assign all Impounds in its possession to Mortgagee's assignee, whereupon
Mortgagee shall be released from all liability with respect to such Impounds.
Within 60 days following full repayment of the Secured Obligations (other than
as a consequence of foreclosure or conveyance in lieu of foreclosure) or at such
earlier time as Mortgagee may elect, Mortgagee shall pay to Mortgagor all
Impounds in its possession, and no other party shall have any right or claim
thereto. "Costs" means (i) all taxes and other liabilities payable by Mortgagor
under Section 6.9, (ii) all insurance premiums payable by Mortgagor under
Section 6.10, (iii) all other costs and expenses for which Impounds are required
under the Note, and/or (iv) all other amounts that will be required to preserve
the value of the Property. Mortgagor shall deliver to Mortgagee, promptly upon
receipt, all bills for Costs for which Mortgagee has required Post-Default
Impounds.
6.13 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Mortgagor
shall protect, preserve and defend the Property and title to and right of
possession of the Property, the security of this Mortgage and the rights and
powers of Mortgagee hereunder at Mortgagor's sole expense against all adverse
claims, whether the claim: (a) is against a possessory or non-possessory
interest; (b) arose prior or subsequent to the Effective Date; or (c) is senior
or junior to Mortgagor's or Mortgagee's rights. Mortgagor shall give Mortgagee
prompt notice in writing of the assertion of any claim, of the filing of any
action or proceeding, of the occurrence of any damage to the Property and of any
condemnation offer or action.
6.14 RIGHT OF INSPECTION. Mortgagee and its independent contractors,
agents and employees may enter the Property from time to time at any reasonable
time upon reasonable prior notice to Mortgagor (except that such notice shall
not be required in the event of an emergency) for the purpose of inspecting the
Property and ascertaining Mortgagor's compliance with the terms of this
Mortgage. Mortgagee shall use reasonable efforts to assure that Mortgagee's
entry upon and inspection of the Property shall not materially and unreasonably
interfere with the business or operations of Mortgagor or Mortgagor's tenants on
the Property.
Page 22
6.15 PROHIBITION OF TRANSFER OF PROPERTY OR INTERESTS IN MORTGAGOR.
Mortgagor acknowledges that Mortgagee has relied upon the principals of
Mortgagor and Borrower and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan. Accordingly,
except with the prior written consent of Mortgagee or as otherwise expressly
permitted in the Note, Mortgagor shall not cause or permit any sale, exchange,
mortgage, pledge, hypothecation, assignment, encumbrance or other transfer,
conveyance or disposition, whether voluntarily, involuntarily or by operation of
law ("Transfer") of all or any part of, or all or any direct or indirect
interest in, the Property or the Collateral (except for equipment and inventory
in the ordinary course of its business), or cause or permit a Transfer of any
direct or indirect interest (whether general partnership interest, stock,
non-managing member limited liability company interest, trust, or otherwise) in
Mortgagor or Borrower. In the event of any Transfer that is not expressly
permitted in the Note and is without the prior written consent of Mortgagee,
Mortgagee shall have the absolute right at its option, without prior demand or
notice, to declare all of the Secured Obligations immediately due and payable,
except to the extent prohibited by law, and pursue its rights and remedies under
Section 7.3 herein. Mortgagor agrees to pay any prepayment fee as set forth in
the Note in the event the Secured Obligations are accelerated pursuant to the
terms of this Section. Consent to one such Transfer shall not be deemed to be a
waiver of the right to require the consent to future or successive Transfers.
Except for Transfers expressly permitted under the Note, Mortgagee's consent to
any Transfer may be withheld, conditioned or delayed in Mortgagee's sole and
absolute discretion.
6.16 INTENTIONALLY OMITTED.
6.17 INTENTIONALLY OMITTED.
6.18 EXCULPATION. Mortgagee shall not directly or indirectly be
liable to Mortgagor or any other person as a consequence of: (a) the exercise of
the rights, remedies or powers granted to Mortgagee in this Mortgage; (b) the
failure or refusal of Mortgagee to perform or discharge any obligation or
liability of Mortgagor under any agreement related to the Property or under this
Mortgage; or (c) any loss sustained by Mortgagor or any third party resulting
from Mortgagee's failure to lease the Property after a Default or from any other
act or omission of Mortgagee in managing the Property after a Default unless the
loss is caused by the willful misconduct and bad faith of Mortgagee and no such
liability shall be asserted or enforced against Mortgagee, all such liability
being expressly waived and released by Mortgagor.
6.19 INDEMNITY. Without in any way limiting any other indemnity
contained in this Mortgage, Mortgagor agrees to defend, indemnify and hold
harmless the Mortgagee Group (as hereinafter defined) from and against any
claim, loss, damage, cost, expense or liability directly or indirectly arising
out of: (a) the making of the Loan, except for violations of banking laws or
regulations by the Mortgagee Group; (b) this Mortgage; (c) the execution of this
Mortgage or the performance of any act required or permitted hereunder or by
law; (d) any failure of Mortgagor to perform Mortgagor's obligations under this
Mortgage or the other Loan Documents; (e) any alleged obligation or undertaking
on the Mortgagee Group's part to perform or discharge any of the
representations, warranties, conditions, covenants or other obligations
contained in any other document related to the Property; (f) any act or omission
by Mortgagor or any contractor, agent, employee or representative of Mortgagor
with respect to the Property; or (g) any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of: (i) the use, generation,
manufacture, storage, treatment, release, threatened release, discharge,
disposal, transportation or presence of any Hazardous Materials which are found
in, on, under or about the Property (including, without limitation, underground
contamination); or (ii) the breach of any covenant, representation or warranty
of Mortgagor under Section 6.2 above. The foregoing to the contrary
notwithstanding, this indemnity shall not include any claim, loss, damage, cost,
expense or liability directly or indirectly arising out of the gross negligence
or willful misconduct of any member of the Mortgagee Group, or any claim, loss,
damage, cost, expense or liability incurred by the Mortgagee Group arising from
any act or incident on the Property occurring after the full reconveyance and
release of the lien of this Mortgage on the Property, or with respect to the
matters set forth in clause (g) above, any claim, loss,
Page 23
damage, cost, expense or liability incurred by the Mortgagee Group resulting
from the introduction and initial release of Hazardous Materials on the Property
occurring after the transfer of title to the Property at a foreclosure sale
under this Mortgage, either pursuant to judicial decree or the power of sale, or
by deed in lieu of such foreclosure. This indemnity shall include, without
limitation: (aa) all consequential damages (including, without limitation, any
third party tort claims or governmental claims, fines or penalties against the
Mortgagee Group); (bb) all court costs and reasonable attorneys' fees
(including, without limitation, expert witness fees) paid or incurred by the
Mortgagee Group; and (cc) the costs, whether foreseeable or unforeseeable, of
any investigation, repair, cleanup or detoxification of the Property which is
required by any governmental entity or is otherwise necessary to render the
Property in compliance with all laws and regulations pertaining to Hazardous
Materials. "Mortgagee Group", as used herein, shall mean (1) Mortgagee
(including, without limitation, any participant in the Loan), (2) any entity
controlling, controlled by or under common control with Mortgagee, (3) the
directors, officers, employees and agents of Mortgagee and such other entities,
and (4) the successors, heirs and assigns of the entities and persons described
in foregoing clauses (1) through (3). Mortgagor shall pay immediately upon
Mortgagee's demand any amounts owing under this indemnity together with interest
from the date the indebtedness arises until paid at the rate of interest
applicable to the principal balance of the Note as specified therein. Mortgagor
agrees to use legal counsel reasonably acceptable to the Mortgagee Group in any
action or proceeding arising under this indemnity. THE PROVISIONS OF THIS
SECTION SHALL SURVIVE THE SATISFACTION AND RELEASE OF THIS MORTGAGE, BUT
MORTGAGOR'S LIABILITY UNDER THIS INDEMNITY SHALL BE SUBJECT TO THE PROVISIONS OF
THE SECTION IN THE NOTE ENTITLED "BORROWER'S LIABILITY."
6.20 INTENTIONALLY OMITTED.
6.21 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.
Without notice to or the consent, approval or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Secured Obligations ("Interested Parties"), Mortgagee may,
from time to time: (a) fully or partially release any person or entity from
liability for the payment or performance of any Secured Obligation; (b) extend
the maturity of any Secured Obligation; (c) make any agreement with Borrower
increasing the amount or otherwise altering the terms of any Secured Obligation;
(d) accept additional security for any Secured Obligation; or (e) release all or
any portion of the Property, Collateral and other security for any Secured
Obligation. None of the foregoing actions shall release or reduce the personal
liability of any of said Interested Parties, or release or impair the priority
of the lien of this Mortgage upon the Property.
Page 24
6.22 SALE OR PARTICIPATION OF LOAN. Mortgagor agrees that Mortgagee
may at any time sell, assign, participate or securitize all or any portion of
Mortgagee's rights and obligations under the Loan Documents, and that any such
sale, assignment, participation or securitization may be to one or more
financial institutions or other entities, to private investors, and/or into the
public securities market, in Mortgagee's sole discretion. Mortgagor further
agrees that Mortgagee may disseminate to any such actual or potential
purchaser(s), assignee(s) or participant(s) all documents and financial and
other information heretofore or hereafter provided to or known to Mortgagee with
respect to: (a) the Property and its operation; and/or (b) any party connected
with the Loan (including, without limitation, Mortgagor, any partner or member
of Mortgagor, any constituent partner or member of Mortgagor, any guarantor and
any nonborrower mortgagor). In the event of any such sale, assignment,
participation or securitization, Mortgagee and the other parties to the same
shall share in the rights and obligations of Mortgagee set forth in the Loan
Documents as and to the extent they shall agree among themselves. In connection
with any such sale, assignment, participation or securitization, Mortgagor
further agrees that the Loan Documents shall be sufficient evidence of the
obligations of Mortgagor to each purchaser, assignee or participant, and
Mortgagor shall, within 15 days after request by Mortgagee, (x) deliver an
estoppel certificate verifying for the benefit of Mortgagee and any other party
designated by Mortgagee the status and the terms and provisions of the Loan in
form and substance acceptable to Mortgagee, (y) provide any information, legal
opinions or documents regarding Mortgagor, Guarantor (as defined in the Loan
Documents), the Property and any tenants of the Property as Mortgagee or
Mortgagee's rating agencies may reasonably request, and (z) enter into such
amendments or modifications to the Loan Documents or the organizational
documents of Mortgagor as may be reasonably required in order to facilitate any
such sale, assignment, participation or securitization without impairing
Mortgagor's rights or increasing Mortgagor's obligations. The indemnity
obligations of Mortgagor under the Loan Documents shall also apply with respect
to any purchaser, assignee or participant.
6.23 RELEASE. Upon payment in full of the Secured Obligations, and
satisfaction of all of the covenants, warranties, undertakings and agreements
made in this Mortgage and in the other Loan Documents (including, without
limitation, repayment in full of all principal, interest and other amounts owing
under the Note) are kept and performed, and all obligations, if any, of
Mortgagee for further advances have been terminated, then, and in that event
only, Mortgagee shall release, without warranty, the Property or that portion
thereof then held hereunder. The recitals of any matters or facts in any release
executed hereunder shall be conclusive proof of the truthfulness thereof. To the
extent permitted by law, the release may describe the grantee as "the person or
persons legally entitled thereto". Mortgagee shall have no duty to determine the
rights of persons claiming to be rightful grantees of any release. When the
Property has been fully released, the last such release shall operate as a
reassignment of all future rents, issues and profits of the Property to the
person or persons legally entitled thereto.
6.24 SUBROGATION. Mortgagee shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part by
Mortgagee pursuant to this Mortgage or by the proceeds of any loan secured by
this Mortgage.
6.25 MANAGEMENT AGREEMENTS. Without the prior written consent of
Mortgagee, Mortgagor shall not terminate, modify, amend or enter into any
agreement providing for the management, leasing or operation of the Property.
Mortgagor represents,
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warrants and covenants that any existing management agreement includes, and any
future management agreement entered into by Mortgagor shall include, a provision
which provides that the management agreement is automatically terminated upon
the transfer of the Property by Mortgagor, either by sale, foreclosure, deed in
lieu of foreclosure, or otherwise, to Mortgagee or any other purchaser of the
Property. Upon a Default under the Loan Documents or a default under any
management agreement then in effect, which default is not cured within any
applicable grace or cure period, Mortgagee shall have the right to terminate, or
to direct Mortgagor to terminate, such management agreement upon thirty (30)
days' written notice and to retain, or to direct Mortgagor to retain, a new
management agent approved by Mortgagee.
ARTICLE VII. DEFAULT
7.1 DEFAULT. For all purposes hereof, "Default" shall mean either an
"Optional Default" (as defined below) or an "Automatic Default" (as defined
below).
(a) OPTIONAL DEFAULT. An "Optional Default" shall occur, at
Mortgagee's option, upon the occurrence of any of the following events:
(i) MONETARY. Borrower or Mortgagor shall fail to (aa) pay when due
any sums payable under the Loan Documents which by their express terms require
immediate payment without any grace period or sums which are payable on the
Maturity Date, or (bb) pay within 5 days when due any other sums payable under
the Note, this Mortgage or any of the other Loan Documents, including, without
limitation, any monthly payment due under the Note.
(ii) FAILURE TO PERFORM. Borrower or Mortgagor shall fail to
observe, perform or discharge any of Borrower's or Mortgagor's obligations,
covenants, conditions or agreements, other than Borrower's or Mortgagor's
payment obligations, under the Note, this Mortgage or any of the other Loan
Documents, and (aa) such failure shall remain uncured for 30 days after written
notice thereof shall have been given to Borrower or Mortgagor, as the case may
be, by Mortgagee or (bb) if such failure is of such a nature that it cannot be
cured within such 30 day period, Borrower or Mortgagor shall fail to commence to
cure such failure within such 30 day period or shall fail to diligently
prosecute such curative action thereafter.
(iii) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate or other statement (financial or otherwise) made or furnished by or
on behalf of Borrower, Mortgagor, or a guarantor, if any, to Mortgagee or in
connection with any of the Loan Documents, or as an inducement to Mortgagee to
make the Loan, shall be false, incorrect, incomplete or misleading in any
material respect when made or furnished.
(iv) CONDEMNATION; ATTACHMENT. The condemnation, seizure or
appropriation of any material portion (as reasonably determined by Mortgagee) of
the Property; or the sequestration or attachment of, or levy or execution upon
any of the Property, the Collateral or any other collateral provided by Borrower
or Mortgagor under any of the Loan Documents, or any material portion of the
other assets of Borrower or Mortgagor, which sequestration, attachment, levy or
execution is not released or dismissed within 45 days after its occurrence; or
the sale of any assets affected by any of the foregoing.
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(v) UNINSURED CASUALTY. The occurrence of an uninsured casualty with
respect to any material portion (as reasonably determined by Mortgagee) of the
Property unless: (aa) no other Default has occurred and is continuing at the
time of such casualty or occurs thereafter; (bb) Mortgagor promptly notifies
Mortgagee of the occurrence of such casualty; and (cc) not more than 45 days
after the occurrence of such casualty, Mortgagor delivers to Mortgagee
immediately available funds in an amount sufficient, in Mortgagee's reasonable
opinion, to pay all costs of the repair or restoration (including, without
limitation, taxes, financing charges, insurance and rent during the repair
period). So long as no Default has occurred and is continuing at the time of
Mortgagee's receipt of such funds and no Default occurs thereafter, Mortgagee
shall make such funds available for the repair or restoration of the Property.
Notwithstanding the foregoing, Mortgagee shall have no obligation to make any
funds available for repair or restoration of the Property unless and until all
the conditions set forth in clauses (ii) and (iii) of the second sentence of
Section 6.11(b) of this Mortgage have been satisfied. Mortgagor acknowledges
that the specific conditions described above are reasonable.
(vi) ADVERSE FINANCIAL CHANGE. Any material adverse change in the
financial condition of Borrower or any general partner or managing member of
Borrower, any guarantor, or any other person or entity from the condition shown
on the financial statement(s) submitted to Mortgagee and relied upon by
Mortgagee in making the Loan, and which change Mortgagee reasonably determines
will have a material adverse effect on (aa) the business, operations or
condition of the Property; or (bb) the ability of Borrower or Mortgagor to pay
or perform Borrower's or Mortgagor's obligations in accordance with the terms of
the Note, this Mortgage, and the other Loan Documents.
(b) AUTOMATIC DEFAULT. An "Automatic Default" shall occur
automatically upon the occurrence of any of the following events:
(i) VOLUNTARY BANKRUPTCY, INSOLVENCY, DISSOLUTION. (aa) Borrower's
filing a petition for relief under the Bankruptcy Reform Act of 1978, as amended
or recodified ("Bankruptcy Code"), or under any other present or future state or
federal law regarding bankruptcy, reorganization or other relief to debtors
(collectively, "Debtor Relief Law"); or (bb) Borrower's filing any pleading in
any involuntary proceeding under the Bankruptcy Code or other Debtor Relief Law
which admits the jurisdiction of a court to regulate Borrower or the Property or
the petition's material allegations regarding Borrower's insolvency; or (cc)
Borrower's making a general assignment for the benefit of creditors; or (dd)
Borrower's applying for, or the appointment of, a receiver, trustee, custodian
or liquidator of Borrower or any of its property; or (ee) the filing by Borrower
of a petition seeking the liquidation or dissolution of Borrower or the
commencement of any other procedure to liquidate or dissolve Borrower.
(ii) INVOLUNTARY BANKRUPTCY. Borrower's failure to effect a full
dismissal of any involuntary petition under the Bankruptcy Code or other Debtor
Relief Law that is filed against Borrower or in any way restrains or limits
Borrower or Mortgagee regarding the Loan or the Property, prior to the earlier
of the entry of any order granting relief sought in the involuntary petition or
45 days after the date of filing of the petition.
(iii) PARTNERS, GUARANTORS. The occurrence of an event specified in
clauses (i) or (ii) as to Mortgagor, any general partner or managing member of
Borrower or Mortgagor,
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or any guarantor or other person or entity in any manner obligated to Mortgagee
under the Loan Documents.
7.2 ACCELERATION. Upon the occurrence of an Optional Default,
Mortgagee may, at its option, declare all sums owing to Mortgagee under the Note
and the other Loan Documents immediately due and payable. Upon the occurrence of
an Automatic Default, all sums owing to Mortgagee under the Note and the other
Loan Documents shall automatically become immediately due and payable.
7.3 RIGHTS AND REMEDIES. In addition to the rights and remedies in
Section 7.2 above, at any time after a Default, Mortgagee shall have all of the
following rights and remedies:
(a) ENTRY ON PROPERTY. With or without notice, and without releasing
Mortgagor from any Secured Obligation, and without becoming a mortgagee in
possession, to enter upon the Property from time to time and to do such acts and
things as Mortgagee deems necessary or desirable in order to inspect,
investigate, assess and protect the security hereof or to cure any Default,
including, without limitation: (i) to take and possess all documents, books,
records, papers and accounts of Mortgagor, Borrower or the then owner of the
Property which relate to the Property; (ii) to make, terminate, enforce or
modify leases of the Property upon such terms and conditions as Mortgagee deems
proper; (iii) to make repairs, alterations and improvements to the Property
necessary, in Mortgagee's reasonable judgment, to protect or enhance the
security hereof; (iv) to appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Mortgagee
hereunder; (v) to pay, purchase, contest or compromise any encumbrance, charge,
lien or claim of lien which, in the sole judgment of Mortgagee, is or may be
senior in priority hereto, the judgment of Mortgagee being conclusive as between
the parties hereto; (vi) to obtain insurance; (vii) to pay any premiums or
charges with respect to insurance required to be carried hereunder; (viii) to
obtain a court order to enforce Mortgagee's right to enter and inspect the
Property for Hazardous Materials, in which regard the decision of Mortgagee as
to whether there exists a release or threatened release of Hazardous Materials
onto the Property shall be deemed reasonable and conclusive as between the
parties hereto; (ix) to have a receiver appointed pursuant to applicable law to
enforce Mortgagee's rights to enter and inspect the Property for Hazardous
Materials; and/or (x) to employ legal counsel, accountants, engineers,
consultants, contractors and other appropriate persons to assist them;
(b) APPOINTMENT OF RECEIVER. With or without notice or hearing, to
apply to a court of competent jurisdiction for and obtain appointment of a
receiver, trustee, liquidator or conservator of the Property, for any purpose,
including, without limitation, to enforce Mortgagee's rights to collect Payments
and to enter on and inspect the Property for Hazardous Materials, as a matter of
strict right and without regard to: (i) the adequacy of the security for the
repayment of the Secured Obligations; (ii) the existence of a declaration that
the Secured Obligations are immediately due and payable; (iii) the filing of a
notice of default; or (iv) the solvency of Mortgagor, Borrower or any guarantor
or other person or entity in any manner obligated to Mortgagee under the Loan
Documents;
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(c) INJUNCTION. To commence and maintain an action or actions in any
court of competent jurisdiction to obtain specific enforcement of the covenants
of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be
specifically enforceable by injunction or any other appropriate equitable remedy
and that for the purposes of any suit brought under this subparagraph, Mortgagor
waives the defense of laches and any applicable statute of limitations;
(d) FORECLOSURE. Immediately commence an action to foreclose this
Mortgage or to specifically enforce its provisions or any of the indebtedness
secured hereby pursuant to the statutes in such case made and provided and sell
the Property or cause the Property to be sold in accordance with the
requirements and procedures provided by said statutes in a single parcel or in
several parcels at the option of Mortgagee.
(i) In the event foreclosure proceedings are filed by Mortgagee, all
expenses incident to such proceeding, including, but not limited to, reasonable
attorneys' fees and costs, shall be paid by Mortgagor and secured by this
Mortgage and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. The secured indebtedness and all other
obligations secured by this Mortgage, including, without limitation, interest at
the Default Rate (as defined in the Note), any prepayment charge, fee or premium
required to be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), reasonable attorneys' fees and any other amounts
due and unpaid to Mortgagee under the Loan Documents, may be bid by Mortgagee in
the event of a foreclosure sale hereunder. In the event of a judicial sale
pursuant to a foreclosure decree, it is understood and agreed that Mortgagee or
its assigns may become the purchaser of the Property or any part thereof.
(ii) Mortgagee may, by following the procedures and satisfying the
requirements prescribed by applicable law, foreclose on only a portion of the
Property and, in such event, said foreclosure shall not affect the lien of this
Mortgage on the remaining portion of the Property foreclosed.
Upon sale of the Property at any foreclosure, Mortgagee may credit
bid (as determined by Mortgagee in its sole and absolute discretion) all or any
portion of the Secured Obligations. In determining such credit bid, Mortgagee
may, but is not obligated to, take into account all or any of the following: (i)
appraisals of the Property as such appraisals may be discounted or adjusted by
Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and
costs incurred by Mortgagee with respect to the Property prior to foreclosure;
(iii) expenses and costs which Mortgagee anticipates will be incurred with
respect to the Property after foreclosure, but prior to resale, including,
without limitation, costs of structural reports and other due diligence, costs
to carry the Property prior to resale, costs of resale (e.g. commissions,
attorneys' fees, and taxes), costs of any Hazardous Materials clean-up and
monitoring, costs of deferred maintenance, repair, refurbishment and retrofit,
costs of defending or settling litigation affecting the Property, and lost
opportunity costs (if any), including the time value of money during any
anticipated holding period by Mortgagee; (iv) declining trends in real property
values generally and with respect to properties similar to the Property; (v)
anticipated discounts upon resale of the Property as a distressed or foreclosed
property; (vi) the fact of additional collateral (if any), for the Secured
Obligations; and (vii) such other factors or matters that Mortgagee (in its sole
and absolute discretion) deems appropriate. In regard to the above, Mortgagor
acknowledges and
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agrees that: (viii) Mortgagee is not required to use any or all of the foregoing
factors to determine the amount of its credit bid; (ix) this paragraph does not
impose upon Mortgagee any additional obligations that are not imposed by law at
the time the credit bid is made; (x) the amount of Mortgagee's credit bid need
not have any relation to any loan-to-value ratios specified in the Loan
Documents or previously discussed between Mortgagor and Mortgagee; and (xi)
Mortgagee's credit bid may be (at Mortgagee's sole and absolute discretion)
higher or lower than any appraised value of the Property;
(e) MULTIPLE FORECLOSURES. To resort to and realize upon the
security hereunder and any other security now or later held by Mortgagee
concurrently or successively and in one or several consolidated or independent
judicial actions and to apply the proceeds received upon the Secured Obligations
all in such order and manner as Mortgagee determines in its sole discretion;
(f) RIGHTS TO COLLATERAL. To exercise all rights Mortgagee may have
with respect to the Collateral under this Mortgage, the UCC or otherwise at law;
and
(g) OTHER RIGHTS. To exercise such other rights as Mortgagee may
have at law or in equity or pursuant to the terms and conditions of this
Mortgage or any of the other Loan Documents.
In connection with any sale or sales hereunder, Mortgagee may elect
to treat any of the Property which consists of a right in action or which is
property that can be severed from the Property (including, without limitation,
any improvements forming a part thereof) without causing structural damage
thereto as if the same were personal property or a fixture, as the case may be,
and dispose of the same in accordance with applicable law, separate and apart
from the sale of the Property. Any sale of Collateral hereunder shall be
conducted in any manner permitted by the UCC.
7.4 APPLICATION OF FORECLOSURE SALE PROCEEDS. To the fullest extent
permitted by law, proceeds of any sale under this Mortgage shall be applied to
the extent funds are so available to the following items in such order as
Mortgagee in its discretion may determine:
(a) To payment of the costs, expenses and fees of taking possession
of the Property, and of holding, operating, maintaining, using, leasing,
repairing, improving, marketing and selling the same and of otherwise enforcing
Mortgagee's right and remedies hereunder and under the other Loan Documents,
including, but not limited to, receivers' fees, court costs, reasonable
attorneys', accountants', appraisers', managers', and other professional fees,
title charges and transfer taxes.
(b) To payment of all sums expended by Mortgagee under the terms of
any of the Loan Documents and not yet repaid, together with interest on such
sums at the Default Rate.
(c) To payment of the secured indebtedness and all other obligations
secured by this Mortgage, including, without limitation, interest at the Default
Rate and, to the extent permitted by applicable law, any prepayment fee, charge
or premium required to be paid under the Note in order to prepay principal, in
any order that Mortgagee chooses in its sole discretion.
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7.5 WAIVER OF MARSHALING RIGHTS. Mortgagor, for itself and for all
parties claiming through or under Mortgagor, and for all parties who may acquire
a lien on or interest in the Property, hereby waives all rights to have the
Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured Obligation,
marshaled upon any foreclosure of this Mortgage or on a foreclosure of any other
security for any of the Secured Obligations.
7.6 NO CURE OR WAIVER. Neither Mortgagee's nor any receiver's entry
upon and taking possession of all or any part of the Property, nor any
collection of rents, issues, profits, insurance proceeds, condemnation proceeds
or damages, other security or proceeds of other security, or other sums, nor the
application of any collected sum to any Secured Obligation, nor the exercise of
any other right or remedy by Mortgagee or any receiver shall cure or waive any
Default or notice of default under this Mortgage, or nullify the effect of any
notice of default or sale (unless all Secured Obligations then due have been
paid or performed and Mortgagor has cured all other Defaults hereunder), or
impair the status of the security, or prejudice Mortgagee in the exercise of any
right or remedy, or be construed as an affirmation by Mortgagee of any tenancy,
lease or option or a subordination of the lien of this Mortgage.
7.7 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor agrees
to pay to Mortgagee immediately and upon demand all costs and expenses incurred
by Mortgagee in the enforcement of the terms and conditions of this Mortgage
(including, without limitation, court costs and attorneys' fees, whether
incurred in litigation or not) with interest from the date of expenditure until
said sums have been paid at the rate of interest applicable to the principal
balance of the Note as specified therein.
7.8 POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby
irrevocably appoints Mortgagee and its successors and assigns, as its
attorney-in-fact, which agency is coupled with an interest, to perform any
obligation of Mortgagor hereunder upon the occurrence of an event, act or
omission which, with notice or passage of time or both, would constitute a
Default, provided, however, that: (a) Mortgagee as such attorney-in-fact shall
only be accountable for such funds as are actually received by Mortgagee; and
(b) Mortgagee shall not be liable to Mortgagor or any other person or entity for
any failure to act under this Section.
7.9 REMEDIES CUMULATIVE. All rights and remedies of Mortgagee
provided hereunder are cumulative and are in addition to all rights and remedies
provided by applicable law (including specifically that of foreclosure of this
instrument as though it were a mortgage) or in any other agreements between
Mortgagor and Mortgagee. Mortgagee may enforce any one or more remedies or
rights hereunder successively or concurrently.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate
by reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan Documents
grant further rights to Mortgagee and contain further agreements and affirmative
and negative covenants by Mortgagor which apply to this Mortgage and to the
Property and such further rights and agreements are incorporated herein by this
reference. THE OBLIGATIONS AND LIABILITIES OF MORTGAGOR UNDER THIS
Page 31
MORTGAGE AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE
SECTION IN THE NOTE ENTITLED "BORROWER'S LIABILITY."
8.2 NON-WAIVER. By accepting payment of any amount secured hereby
after its due date or late performance of any other Secured Obligation,
Mortgagee shall not waive its right against any person obligated directly or
indirectly hereunder or on any Secured Obligation, either to require prompt
payment or performance when due of all other sums and obligations so secured or
to declare default for failure to make such prompt payment or performance. No
exercise of any right or remedy by Mortgagee hereunder shall constitute a waiver
of any other right or remedy herein contained or provided by law. No failure by
Mortgagee to exercise any right or remedy hereunder arising upon any Default
shall be construed to prejudice Mortgagee's rights or remedies upon the
occurrence of any other or subsequent Default. No delay by Mortgagee in
exercising any such right or remedy shall be construed to preclude Mortgagee
from the exercise thereof at any time while that Default is continuing. No
notice to nor demand on Mortgagor shall of itself entitle Mortgagor to any other
or further notice or demand in similar or other circumstances.
8.3 CONSENTS, APPROVALS AND EXPENSES. Wherever Mortgagee's consent,
approval, acceptance or satisfaction is required under any provision of this
Mortgage or any of the other Loan Documents, such consent, approval, acceptance
or satisfaction shall not be unreasonably withheld, conditioned or delayed by
Mortgagee unless such provision expressly so provides. Wherever costs or
expenses are required to be paid under any provision of this Mortgage or any of
the other Loan Documents, such costs or expenses shall be reasonable.
8.4 PERMITTED CONTESTS. After prior written notice to Mortgagee,
Mortgagor may contest, by appropriate legal or other proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any lien, levy, tax or assessment, or any lien of any laborer,
mechanic, materialman, supplier or vendor, or the application to Mortgagor or
the Property of any law or the validity thereof, the assertion or imposition of
which, or the failure to pay when due, would constitute a Default; provided that
(a) Mortgagor pursues the contest diligently, in a manner which Mortgagee
determines is not prejudicial to Mortgagee, and does not impair the lien of this
Mortgage; (b) the Property, or any part hereof or estate or interest therein,
shall not be in any danger of being sold, forfeited or lost by reason of such
proceedings; (c) in the case of the contest of any law or other legal
requirement, Mortgagee shall not be in any danger of any civil or criminal
liability; and (d) if required by Mortgagee, Mortgagor deposits with Mortgagee
any funds or other forms of assurance (including a bond or letter of credit)
satisfactory to Mortgagee to protect Mortgagee from the consequences of the
contest being unsuccessful. Mortgagor's right to contest pursuant to the terms
of this provision shall in no way relieve Mortgagor or Borrower of its
obligations under the Loan or to make payments to Mortgagee as and when due.
8.5 FURTHER ASSURANCES. Mortgagor shall, upon demand by Mortgagee,
execute, acknowledge (if appropriate) and deliver any and all documents and
instruments and do or cause to be done all further acts reasonably necessary or
appropriate to effectuate the provisions hereof.
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8.6 ATTORNEYS' FEES. If any legal action, suit or proceeding is
commenced between Mortgagor and Mortgagee regarding their respective rights and
obligations under this Mortgage or any of the other Loan Documents, the
prevailing party shall be entitled to recover, in addition to damages or other
relief, costs and expenses, reasonable attorneys' fees and court costs
(including, without limitation, expert witness fees). As used herein the term
"prevailing party" shall mean the party which obtains the principal relief it
has sought, whether by compromise settlement or judgment. If the party which
commenced or instituted the action, suit or proceeding shall dismiss or
discontinue it without the concurrence of the other party, such other party
shall be deemed the prevailing party.
8.7 MORTGAGOR AND MORTGAGEE DEFINED. The term "Mortgagor" includes
both the original Mortgagor and any subsequent owner or owners of any of the
Property, and the term "Mortgagee" includes the original Mortgagee and any
future owner or holder, including assignees, pledgees and participants, of the
Note or any interest therein.
8.8 DISCLAIMERS.
(a) RELATIONSHIP. The relationship of Mortgagor and Mortgagee under
this Mortgage and the other Loan Documents is, and shall at all times remain,
solely that of borrower and lender; and Mortgagee neither undertakes nor assumes
any responsibility or duty to Mortgagor or to any third party with respect to
the Property. Notwithstanding any other provisions of this Mortgage and the
other Loan Documents: (i) Mortgagee is not, and shall not be construed to be, a
partner, joint venturer, member, alter ego, manager, controlling person or other
business associate or participant of any kind of Mortgagor, and Mortgagee does
not intend to ever assume such status; (ii) Mortgagee's activities in connection
with this Mortgage and the other Loan Documents shall not be "outside the scope
of activities of a lender of money" within the meaning of California Civil Code
Section 3434, as amended or recodified from time to time, and Mortgagee does not
intend to ever assume any responsibility to any person for the quality,
suitability, safety or condition of the Property; and (iii) Mortgagee shall not
be deemed responsible for or a participant in any acts, omissions or decisions
of Mortgagor.
(b) NO LIABILITY. Mortgagee shall not be directly or indirectly
liable or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any person or
property arising from any construction on, or occupancy or use of, the Property,
whether caused by or arising from: (i) any defect in any building, structure,
grading, fill, landscaping or other improvements thereon or in any on-site or
off-site improvement or other facility therein or thereon; (ii) any act or
omission of Mortgagor or any of Mortgagor's agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on the Property or
any fire, flood or other casualty or hazard thereon; (iv) the failure of
Mortgagor or any of Mortgagor's licensees, employees, invitees, agents,
independent contractors or other representatives to maintain the Property in a
safe condition; or (v) any nuisance made or suffered on any part of the
Property.
8.9 SEVERABILITY. If any term of this Mortgage, or the application
thereof to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Mortgage, or the application of such term
to persons or circumstances other than those as to
Page 33
which it is invalid or unenforceable, shall not be affected thereby, and each
term of this Mortgage shall be valid and enforceable to the fullest extent
permitted by law.
8.10 RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Mortgagee under the Mortgage established by Article 1 and the security agreement
established by Article 4 are independent and cumulative, and there shall be no
merger of any lien created by the Mortgage with any security interest created by
the security agreement. Mortgagee may elect to exercise or enforce any of its
rights, remedies or interests under either or both the Mortgage or the security
agreement as Mortgagee may from time to time deem appropriate. The absolute
assignment of rents and leases established by Article 3 is similarly independent
of and separate from the Mortgage and the security agreement.
8.11 MERGER. No merger shall occur as a result of Mortgagee's
acquiring any other estate in, or any other lien on, the Property unless
Mortgagee consents to a merger in writing.
8.12 OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one
person has executed this Mortgage as "Mortgagor", the obligations of all such
persons hereunder shall be joint and several.
8.13 SEPARATE AND COMMUNITY PROPERTY. Any married person who
executes this Mortgage as a Mortgagor agrees that any money judgment which
Mortgagee obtains pursuant to the terms of this Mortgage or any other obligation
of that married person secured by this Mortgage may be collected by execution
upon any separate property or community property of that person.
8.14 INTEGRATION; INTERPRETATION. The Loan Documents contain or
expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified except
by written instrument executed by all parties. Any reference in any of the Loan
Documents to the Property or Collateral shall include all or any part of the
Property or Collateral. Any reference to the Loan Documents includes any
amendments, renewals or extensions now or hereafter approved by Mortgagee in
writing. When the identity of the parties or other circumstances make it
appropriate, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural.
8.15 CAPITALIZED TERMS. Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Note.
8.16 SUCCESSORS IN INTEREST. The terms, covenants, and conditions
herein contained shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto. The foregoing sentence shall not
be construed to permit Mortgagor to assign the Loan except as otherwise
permitted under the Note or the other Loan Documents.
8.17 GOVERNING LAW. This Mortgage was accepted by Mortgagee in the
state of California and the proceeds of the Note secured hereby were disbursed
from the state of California, which state the parties agree has a substantial
relationship to the parties and to the underlying transaction embodied hereby.
Accordingly, in all respects, including, without limiting the generality of the
foregoing, matters of construction, validity, enforceability and
Page 34
performance, this Mortgage, the Note and the other Loan Documents and the
obligations arising hereunder and thereunder shall be governed by, and construed
in accordance with, the laws of the state of California applicable to contracts
made and performed in such state and any applicable law of the United States of
America, except that at all times the provisions for the creation, perfection
and enforcement of the liens and security interests created pursuant thereto and
pursuant to the other Loan Documents shall be governed by and construed
according to the law of the state where the Property is located. Except as
provided in the immediately preceding sentence, Mortgagor hereby unconditionally
and irrevocably waives, to the fullest extent permitted by law, any claim to
assert that the law of any jurisdiction other than California governs this
Mortgage, the Note and other Loan Documents.
8.18 CONSENT TO JURISDICTION. Mortgagor irrevocably submits to the
jurisdiction of: (a) any state or federal court sitting in the state of
California over any suit, action, or proceeding, brought by Mortgagor against
Mortgagee, arising out of or relating to this Mortgage, the Note or the Loan;
(b) any state or federal court sitting in the state where the Property is
located or the state in which Mortgagor's principal place of business is located
over any suit, action or proceeding, brought by Mortgagee against Mortgagor,
arising out of or relating to this Mortgage, the Note or the Loan; and (c) any
state court sitting in the county of the state where the Property is located
over any suit, action, or proceeding, brought by Mortgagee to foreclose this
Mortgage or any action brought by Mortgagee to enforce its rights with respect
to the Collateral. Mortgagor irrevocably waives, to the fullest extent permitted
by law, any objection that Mortgagor may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such court and any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum.
8.19 EXHIBITS. Exhibit A is incorporated into this Mortgage by this
reference.
8.20 ADDRESSES; REQUEST FOR NOTICE. All requests, demands, notices
and other communications that are required or permitted to be given to a party
under this Mortgage shall be in writing, refer to the Loan number, and shall be
sent to such party, either by personal delivery, by overnight delivery service,
by certified first class mail, return receipt requested, or by facsimile
transmission to the addressee or facsimile number below. All such notices and
communications shall be effective upon receipt of such delivery or facsimile
transmission, together with a printed receipt of the successful delivery of such
facsimile transmission. The addresses of the parties are set forth on page 1 of
this Mortgage and the facsimile numbers for the parties are as follows:
Mortgagee: WELLS FARGO BANK, N.A.
FAX NO.: (925) 691-5947
Mortgagor: MHC STAGECOACH, L.L.C.
FAX NO.: (312) 279-1715
Mortgagor's principal place of business is at the address set forth on
page 1 of this Mortgage. A copy of any notice to Mortgagor shall be sent as
follows:
Page 35
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, Illinois 60606
Attention: Benjamin Randall
Facsimile: (312) 807-3903
Any Mortgagor whose address is set forth on page 1 of this Mortgage hereby
requests that a copy of notice of default and notice of sale be delivered to it
at that address. Failure to insert an address shall constitute a designation of
Mortgagor's last known address as the address for such notice. Any party shall
have the right to change its address for notice hereunder to any other location
within the continental United States by giving 30 days notice to the other
parties in the manner set forth above.
8.21 COUNTERPARTS. This Mortgage may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed an
original and all of which taken together, will be deemed to be one and the same
instrument.
8.22 WAIVER OF JURY TRIAL. MORTGAGEE (BY ITS ACCEPTANCE HEREOF) AND
MORTGAGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS MORTGAGE OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF MORTGAGEE OR MORTGAGOR. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR MORTGAGEE TO ENTER INTO THIS MORTGAGE.
Page 36
IN WITNESS WHEREOF, Mortgagor has executed and delivered this Mortgage as of the
day and year first above written.
WITNESS/ATTEST: MORTGAGOR:
MHC STAGECOACH, L.L.C., a Delaware limited
liability company
/s/ Lawrence M. Gritton By: MHC-QRS STAGECOACH, INC.,
- ------------------------------- a Delaware corporation,
Print Name: Lawrence M. Gritton its Managing Member
/s/ Benjamin Randall By: /s/ John M. Zoeller
- ------------------------------- -----------------------------------
Print Name: Benjamin Randall Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
STATE OF IL )
) SS:
COUNTY OF COOK )
On 8/1, 2001 before me, M. Dobronski, Notary Public,
personally appeared John M. Zoeller, as Vice President, Chief Financial Officer
and Treasurer of MHC-QRS STAGECOACH, INC., a Delaware corporation, the managing
member of MHC STAGECOACH, L.L.C., a Delaware limited liability company,
personally known to me to be the person whose name is subscribed in the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument, the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Mary Dobronski
--------------------------
Print Name: Mary Dobronski
My Commission Expires:
11/3/03
[NOTARIAL SEAL]
NOTARY PUBLIC, State of IL
Serial No., if any:
EXHIBIT A
Loan No. 31-0900553R
EXHIBIT A
DESCRIPTION OF LAND
Exhibit A to MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) ("Mortgage") between MHC STAGECOACH, L.L.C., a
Delaware limited liability company, as "Mortgagor," and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Mortgagee."
Description of Land. The Land referred to in this Mortgage is situated in the
county of Manatee, state of Florida and is described as follows:
PARCEL A:
Begin at the Northwest corner of the Southeast 1/4 of the Northeast 1/4 of
Section 16, Township 35 South, Range 18 East, Manatee County, Florida; thence
South 00(Degree)14'17" East, 1327.25 feet to the Southwest corner of the
Southeast 1/4 of the Northeast 1/4 of the aforementioned Section 16; thence
North 89(Degree)58'09" East, 1322.53 feet to the Southeast corner of the
Southeast 1/4 of the Northeast 1/4 of Section 16; thence South 00(Degree)24'10"
East, 137.28 Feet; thence North 89(Degree)40'44" East, 1269.21 feet; thence
North 00(Degree)15'02" West, 137.28 feet; thence North 89(Degree)40'56" East,
42.00 feet along the South line of the Southwest 1/4 of the Northwest 1/4 of
Section 15, Township 35 South, Range 18 East, Manatee County, Florida to a
point, said point being the Southwest corner of the Easterly 8.00 feet of the
Southwest 1/4 of the Northwest 1/4 of Section 15; thence North 00(Degree) 15'02"
West along the West line of said Easterly 8.00 feet, 529.06 feet; thence North
89(Degree)54'48" West, 352.77 feet; thence North 83(Degree)03'14" West, 41.33
feet; thence North 89(Degree)58'10" West, 384.29 feet; thence North
64(Degree)05'35" West, 45.06 feet; thence North 89(Degree)49'37" West, 69.63
feet; thence North 00(Degree)27'02" West, 39.77 feet; thence South
89(Degree)57'27" West, 229.20 feet; thence South 00(Degree)34'37" West, 52.86
feet; thence South 89(Degree)50'04" West, 69.88 feet; thence North
68(Degree)46'00' West, 42.84 feet; thence North 89(Degree)02'58" West, 70.09
feet; thence North 00(Degree)46'23" West, 36.15 feet; thence South
89(Degree)58'50" West, 204.28 feet; thence South 01(Degree)06'03" West, 34.82
feet; thence North 89(Degree)55'45" West, 69.61 feet; thence North
61(Degree)14'43" West, 46.29 feet; thence North 89(Degree)47'56" West, 49.68
feet; thence North 01(Degree)06'00" West, 14.20 feet; thence South
89(Degree)37'41" West, 244.94 feet; thence North 14(Degree)02'42 West, 20.66
feet; thence North 00(Degree)04'49" East, 50.12 feet; thence North
07(Degree)13'20" West, 40.26 feet; thence North 00(Degree)29'42" West, 229.78
feet; thence North 89(Degree)19'18" East, 21.87 feet; thence North
00(Degree)01'05" East, 69.28 feet; thence North 16(Degree)42'43" West, 41.53
feet; thence North 00(Degree)18'37" East, 70.77 feet; thence North
90(Degree)00'00" West, 443.35 feet; thence North 02(Degree)07'48" West, 80.67
feet; thence North 25(Degree)58'34" East, 33.85 feet; thence North
00(Degree)07'24" East, 93.96 feet; thence South 89(Degree)59'49" West, 295.60
feet to the Point of Beginning.
PARCEL B:
Non-exclusive rights-of-way and easements as contained in Agreements recorded
January 13, 1939, in Deed Book 159, page 331, and re-recorded February 16, 1939,
in Deed Book 160, page
EXHIBIT A
23; recorded October 30, 1939, in Deed Book 164, page 340, and recorded May 31,
1974, in Official Records Book 673, page 646, all of the Public Records of
Manatee County, Florida.
EXHIBIT A
Loan No. 31-0900553R
EXHIBIT B
CALCULATION OF DOCUMENTARY STAMP AND INTANGIBLE PERSONAL PROPERTY TAX
Exhibit B to MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) ("Mortgage") between MHC STAGECOACH, L.L.C., a
Delaware limited liability company, as "Mortgagor," and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Mortgagee."
This Mortgage is part of an out-of-state loan transaction which only
partially secures the loan. This Mortgage encumbers the property described on
Exhibit A, and separate mortgages are being executed and delivered by Mortgagor
encumbering certain other property located in Florida and in other states (such
other property being further described on Exhibit C and being referred to as the
"Other Property"). The Florida collateral is located in Brevard, Volusia and
Manatee Counties, and three (3) separate mortgages (the Florida Mortgages")
encumbering three (3) properties are being executed and delivered by Mortgagor
for simultaneous recording in the various Florida counties described above. The
total indebtedness secured by this Mortgage equals $50,000,000.00, as evidenced
by one (1) promissory note in the aggregate original principal amount of
$50,000,000.00 (the "Note"). The Note was made, executed and delivered outside
the State of Florida. The value of the Florida property encumbered by the
Florida Mortgages equals $27,200,000.00. The aggregate value of all other
property securing the loan and located outside the State of Florida equals
$50,400,000.00. Thus, the total aggregate value of all property securing the
loan equals $77,600,000.00. The property encumbered by the Florida Mortgages and
located in Florida represents thirty-five (35%) percent [$27,200,000.00 /
$77,600,000.00] of the total value of all property securing the loan. In
accordance with Florida Statutes, Section 201.08, and Florida Administrative
Code, Rule 12B-4.053(32)(b), documentary stamp tax is computed based upon the
percentage of indebtedness which the value of the mortgaged property located in
Florida bears to the total value of all mortgaged property (which, in this case,
equals $17,500,000.00). Accordingly, documentary stamp tax in the amount of
$61,250.00 is due upon the recording of the Florida Mortgages in the Florida
counties listed above. Pursuant to Chapter 199, Florida Statutes, non-recurring
intangible personal property tax is computed and payable based upon that portion
of the indebtedness which bears the same relation as the value of the mortgaged
property located in Florida bears to the total value of all mortgaged property,
which, in this case, equals [$50,000,000.00 x ($27,200,000.00 /
$77,600,000.00)]. Thus, non-recurring intangible personal property tax in the
amount of $35,000.00 is due and payable upon recording of the Florida Mortgages
in the Florida counties listed above.
EXHIBIT B
EXHIBIT C
DESCRIPTION OF OTHER PROPERTY
Exhibit C to MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) ("Mortgage") between MHC STAGECOACH, L.L.C., a
Delaware limited liability company, as "Mortgagor," and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Mortgagee."
Description of Land. The Other Property referred to in this Mortgage is
described as follows:
CABANA PROPERTY
The Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 16,
Township 21 South, Range 62 East, M.D.B. & M., Clark County, Nevada.
EXCEPTING THEREFROM the described premises:
The North Forty feet (40.00') and the East Forty feet (40.00') of the Northeast
Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 16, Township 21
South, Range 62 East, M.D.B. & M., Clark County, Nevada; together with the
certain spandrel area in the Northeast Quarter corner thereof, also being the
Southwest corner of the intersection of East Twain Avenue and Cabana Drive,
bounded as follows: on the North by the South line of the North Forty feet
(40.00'); on the East by the West line of the East Forty feet (40.00'), and on
the Southwest by the arc of a curve concave Southwesterly, having a radius of
Twenty five feet (25.00') that is tangent to the South line of said North Forty
feet (40.00') is tangent to the South line of said North Forty feet (40.00') and
tangent to the West line of said Forty feet (40.00').
ALSO BEING described as that portion of the Northeast Quarter (NE 1/4) of the
Southwest Quarter (SW 1/4) of Section 16, Township 21 South, Range 62 East,
M.D.B. & M., Clark County, Nevada, more particularly described as follows:
COMMENCING at the Northwest corner of the Northeast Quarter (NE 1/4) of the
Southwest Quarter of said Section 16; thence South 01(Degree) 55' 58" East a
distance of 40.01 feet to a point on the Southerly right of way line of Twain
Avenue (80.00 feet wide) said point being the TRUE POINT OF BEGINNING; thence
North 89o 09' 31" East, along said Southerly right of way of Twain Avenue a
distance of 1259.02 feet to a point of tangent curve concave to the Southwest
having a radius of 25.00 feet; thence Southeasterly along the arc of said curve
through a central angle of 89(Degree) 28' 02" an arc length of 39.04 feet to a
point on the Westerly right of way line of Cabana Drive (80.00 feet wide);
thence South 01o 22' 27" East along said Westerly right of way line of Cabana
Drive a distance of 1238.26 feet; thence South 88(Degree) 17' 57" West a
distance of 1271.25 feet; thence North 01(Degree) 55' 58" West a distance of
1282.27 feet to the TRUE POINT OF BEGINNING.
EXHIBIT C
WOODLAND HILLS PROPERTY
Northwest 1/4 of the Southeast 1/4 and the North 1/2 of the Southwest 1/4 of the
Southeast 1/4 of Section 21, Township 2 South, Range 68 West of the 6th P.M.,
County of Adams, State of Colorado,
EXCEPT portions dedicated for County roads;
AND EXCEPT that part described as follows:
Beginning at the center of Section 21, Township 2 South, Range 68 West of the
6th P.M., thence South 89 degrees 53 minutes East along the North line of the
Southeast 1/4, Section 21, a distance of 40.00 feet; thence South parallel to
the West line of the Southeast 1/4 of said Section, 30.00 feet to the True Point
of Beginning; thence South 89 degrees 53 minutes East parallel to the North line
of the Southeast 1/4 a distance of 180.00 feet; thence South parallel to the
West line of the Southeast 1/4, 150.00 feet; thence North 89 degrees 53 minutes
West parallel to the North line of the Southeast 1/4, 180.00 feet; thence North
parallel to the West line of the Southeast 1/4, 150.00 feet to the True Point of
Beginning, being in the City of Thornton, County of Adams, State of Colorado;
AND EXCEPT that part described as follows:
A part of the Southeast 1/4 of Section 21, Township 2 South, Range 68 West, of
the 6th P.M., County of Adams, State of Colorado, described as follows:
Beginning at a point 220.00 feet East and 180.00 feet South of the Northwest
corner of said Southeast 1/4; thence Southerly and parallel to the West line of
said Southeast 1/4 a distance of 393.93 feet; thence on an angle to the right of
90 degrees a distance of 180.00 feet to a point 40 feet East of the West line of
said Southeast 1/4; thence on an angle to the right of 90 degrees and parallel
to said West line a distance of 394.76 feet to a point 180.00 feet South of the
North line of said Southeast 1/4; thence on an angle to the right 90 degrees 16
minutes 40 seconds and parallel to said North line a distance of 180.00 feet to
the Point of Beginning, County of Adams, State of Colorado.
EXHIBIT C
INDIAN OAKS PROPERTY
PARCEL A:
A parcel of land lying in the Northwest 1/4 of Section 21, Township 25 South,
Range 36 East, Brevard County, Florida, being more particularly described as
follows:
Commence at the Northwest corner of said Section 21, and run North 89(Degree)
50' 50" East, along the North line of said Section 21, a distance of 330.04 feet
to the Point of Beginning; thence continue North 89(Degree) 50' 50" East, along
said North line, a distance of 816.83 feet; thence South 05(Degree) 47' 10"
West, a distance of 2488.78 feet; thence North 89(Degree) 53' 00" West, a
distance of 419.86 feet; thence South 01(Degree) 04' 00" East, a distance of
150.00 feet, to a point on the North Right of Way line of Barnes Boulevard (a
100 foot Right of Way); thence North 89(Degree) 53' 00" West, along said North
Right of Way line, a distance of 100.02 feet; thence North 01(Degree) 04' 00"
West, parallel to the West line of said Northwest 1/4, a distance of 2623.29
feet, to the Point of Beginning.
PARCEL B:
A perpetual non-exclusive easement for the benefit of Parcel A for surface water
runoff from "Pod #2" through a weir on said land eastward to an existing
drainage ditch as set forth in Grant of Easement from George M. Green, Jr. and
Sandie J. Green in favor of The Indian Oaks Corporation, dated July 27, 1987,
recorded August 4, 1987, in the Public Records of Brevard County, Florida, at
Official Records Book 2826, page 2681; and modified by Stipulated Settlement in
Civil Action No. 87-9785-CA-C, The Indian Oaks Corporation, a Florida
corporation, Plaintiffs, vs. George M. Green, Jr. and Sandie J. Green, his wife,
Defendants, dated July 27, 1987, recorded August 20, 1987, in the Public Records
of Brevard County, Florida, at Official Records Book 2831, page 2211, more
particularly described as follows:
Beginning at the approximate Southwest corner of land to the East as described
in Deed recorded in Official Records Book 2471, page 2094, Public Records of
Brevard County, Florida, said point being on the public drainage ditch on the
north side of Barnes Boulevard; thence north along an existing approximately
twenty (20) foot wide drainage ditch on the westerly boundary of the land
described in said Deed for an approximate distance of 844.00 feet to an outlet
pipe which extends easterly into said drainage ditch from a Type "C" inlet weir
located on "Pod #2" of Parcel A.
EXHIBIT C
PICKWICK VILLAGE PROPERTY
PARCEL A:
A portion of the Southwest one-quarter of the Southeast one-quarter of Section
6, Township 16 South, Range 33 East, also a portion of the West one-half of the
Northeast one-quarter of Section 7, Township 16 South, Range 33 East, Volusia
County, Florida being more particularly described as follows:
As a point of reference begin at the Southwest corner of Section 6, Township 16
South, Range 33 East, thence along the South line of Section 6 South 89 degrees
35 minutes 25 seconds East a distance of 3300.00 feet to the Point of Beginning;
thence North 00 degrees 24 minutes 35 seconds East a distance of 330.00 feet;
thence North 89 degrees 35 minutes 25 seconds West a distance of 660.00 feet;
thence North 00 degrees 24 minutes 35 seconds East a distance of 200.00 feet;
thence South 89 degrees 35 minutes 25 seconds East a distance of 612.36 feet to
a point on the Southerly right-of-way line of Clyde Morris Blvd. (a 100.00 foot
right-of-way as now laid out and used); thence South 41 degrees 06 minutes 50
seconds East along the Southerly right-of-way line of said Clyde Morris Blvd. a
distance of 1067.45 feet to a point on the East line of the West one-half of the
Northeast one-quarter of Section 7, Township 16 South, Range 33 East; thence
South 00 degrees 24 minutes 35 seconds West along the said East line of the West
one-half of the Northeast one-quarter of said Section 7 a distance of 2370.82
feet; thence North 89 degrees 35 minutes 25 seconds West a distance of 1320.00
feet to a point in the West line of the West one-half of the Northeast
one-quarter of Section 7; thence North 00 degrees 24 minutes 35 seconds East
along the West line of the West one-half of the Northeast one-quarter of Section
7 a distance of 1650.00 feet; thence South 89 degrees 35 minutes 25 seconds East
a distance of 660.00 feet; thence North 00 degrees 24 minutes 35 seconds East a
distance of 990.00 feet to the Point of Beginning of this description.
PARCEL B:
A portion of the Northwest one-quarter of Section 7, Township 16 South, Range 33
East, Volusia County, Florida, being more particularly described as follows: As
a point of reference, commence at a concrete monument marking the Northwest
corner of Willow Run Subdivision, Unit 2, as per map recorded September 17,
1979, in Map Book 36, Pages 16 and 17 of the Public Records of Volusia County,
Florida; thence run North 00 degrees 41 minutes 47 seconds West along a
Northerly extension of the Westerly line of said Willow Run Subdivision, Unit 2,
a distance of 230.08 feet to a point in the North line of 230.00 foot Florida
Power and Light Company right-of-way as described in instrument recorded October
5, 1973, in Official Records Book 1664, Pages 448-450, of the Public Records of
Volusia County, Florida, said point also being in the Southerly line of Pickwick
Village Mobile Home Park, an unrecorded subdivision; thence run South 89 degrees
35 minutes 24 seconds West along the North line of said Florida Power and Light
Company right-of-way, being also the Southerly line of Pickwick Village, a
distance of 1.13 feet to a concrete monument marking the Southwest corner of
said Pickwick Village; thence North 00 degrees 24 minutes 10 seconds West, a
distance of 400.00 feet to the Point of Beginning; thence North 89 degrees 45
minutes 45 seconds West, a distance of 440.02 feet to the center line of an
80.00 foot drainage ditch easement as described in instrument
EXHIBIT C
recorded June 28, 1966, in Official Records Book 847, Pages 429 through 444, of
the Public Records of Volusia County, Florida; thence North 00 degrees 24
minutes 10 seconds West along the center line of said drainage ditch easement, a
distance of 1250.34 feet; thence South 89 degrees 45 minutes 45 seconds East, a
distance of 440.02 feet to a point on the Westerly line of said Pickwick Village
Subdivision; thence South 00 degrees 24 minutes 10 seconds East along said
Westerly line, a distance of 1250.34 feet to the Point of Beginning.
SAID PROPERTY ALSO BEING DESCRIBED AS FOLLOWS:
A portion of the Southwest one-quarter of the Southeast one-quarter of Section
6, Township 16 South, Range 33 East; also a portion of the West one-half of the
Northeast one-quarter and a portion of the Northwest one-quarter, all lying in
Section 7, Township 16 South, Range 33 East in Volusia County, Florida, being
more particularly described as follows: Commence at the Southwest corner of said
Section 6, Township 16 South, Range 33 East and run South 89(Degree) 35' 25"
East along the South line of the Southwest one-quarter a distance of 2635.46
feet to the Southwest corner of the Southeast one-quarter of said Section 6;
thence North 01(Degree) 17' 05" East along the West line of the Southeast
one-quarter of said Section 6 a distance of 328.72 feet to an iron pipe labeled
LS 2048 and the Point of Beginning of this description; from said Point of
Beginning, continue North 01(Degree) 17' 05" East along the West line of the
Southeast one-quarter a distance of 201.23 feet to an iron pipe labeled LS 2048;
thence South 89(Degree) 35' 25" East, 619.16 feet to an iron pipe labeled LS
2048, said point being on the Southwesterly right-of-way line of Clyde Morris
Boulevard; thence South 40(Degree) 56' 13" East along the Southwesterly
right-of-way line of said Clyde Morris Boulevard a distance of 1061.80 feet to
an iron pipe labeled LS 2048, said point being on the East line of the West
one-half of the Northeast one-quarter of the aforementioned Section 7, Township
16 South, Range 33 East; thence South 00(Degree) 34' 32" West along the East
line of the West one-half of the Northeast one-quarter of said Section 7, a
distance of 2362.20 feet to an iron pin labeled LB 707, said point being on the
North line of the 230 foot wide Florida Power and Light Company right-of-way, as
described in Official Records Book 1664, Pages 448, 449, and 450 of the Public
Records of Volusia County, Florida; thence North 89o 13' 53" West along the
North line of the 230 foot wide Florida Power and Light Company right-of-way a
distance of 1321.12 feet to an iron pipe labeled LS 2048, said point being on
the West line of the West one-half of the Northeast one-quarter of the
aforementioned Section 7; thence North 00(Degree) 23' 35" East along the West
line of the West one-half of the Northeast one-quarter a distance of 400.00 feet
to an iron pipe labeled LS 2048; thence North 89(Degree) 13' 53" West, 440.02
feet to an iron pipe labled LS 2048, said point being the centerline of a
drainage ditch; thence North 00(Degree) 23' 35" East along said drainage ditch
centerline a distance of 1250.34 feet to an iron pipe labeled LS 2048; thence
South 89(Degree) 13' 53" East, 440.02 feet to an iron pipe labeled LS 2048, said
point being on the West line of the West one-half of the Northeast one-quarter
of the aforementioned Section 7; thence South 00(Degree) 23' 35" West along the
West line of the West one-half of the Northeast one-quarter a distance of 12.16
feet to an iron pipe labeled LS 2048; thence South 89(Degree) 27' 21" East,
661.65 feet to an iron pipe labeled LS 2048; thence North 00(Degree) 25' 26"
East, 984.46 feet to an iron pipe labeled LS 2048; thence North 01(Degree) 14'
43" East, 328.45 feet to a nail in disk in pavement labeled LB 707; thence North
89(Degree) 33' 59" West, 661.95 feet to the Point of Beginning.
EXHIBIT C
APOLLO VILLAGE PROPERTY
That portion of the Southwest quarter of Section 21, Township 3 North, Range 1
East, of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows:
COMMENCING at the Southwest corner of said Section 21;
THENCE North 00(Degree) 34' 15" East (assumed bearing) along the West line of
said Section 21, a distance of 786.55 feet;
THENCE South 89(Degree) 25' 45" East 65.00 feet to the POINT OF BEGINNING;
THENCE continuing South 89(Degree) 25' 45" East 126.95 feet;
THENCE North 87(Degree) 23' 37" East 116.40 feet;
THENCE South 00(Degree) 30' 51" West 124.13 feet to the Northeast corner of the
property described in Docket 10568, page 613, records of Maricopa County,
Arizona;
THENCE South 00(Degree) 34' 44" West along the East line of said property 156.09
feet to a point on a line 500.00 feet North and parallel to the South line of
said Section 21;
THENCE North 88(Degree) 16' 15" East along said line 530.61 feet to the
Northeast corner of the property described in Docket 6785, page 268, records of
Maricopa County, Arizona;
THENCE South 00(Degree) 27' 31" West 435.31 feet to a point on a line 65.00 feet
North of and parallel to the South line of said Section 21;
THENCE North 88(Degree) 16' 15" East along said line 51.93 feet;
THENCE North 00(Degree) 20' 35" East 127.50 feet;
THENCE North 02(Degree) 21' 45" West 308.14 feet;
THENCE North 88(Degree) 15' 20" East 445.27 feet;
THENCE North 21(Degree) 52' 10" East 195.00 feet;
THENCE South 89(Degree) 39' 20" East 285.57 feet to a point on the West line of
the East 60 acres of the Southwest quarter of said Section 21;
THENCE North 00(Degree) 20' 40" East along said West line 807.45 feet to a point
on the Southerly line of the property described in Docket 15563, page 420,
records of Maricopa County, Arizona;
THENCE South 86(Degree) 58' 05" West along said South line and the South line of
the property described in Docket 15133, page 167, records of Maricopa County,
Arizona, 1,366.81 feet to a point 309.53 feet East of the West line of said
Section 21;
THENCE South 00(Degree) 37' 00" West 616.40 feet (620.95 feet, record) to the
North line of the property described in Docket 6099, page 277, records of
Maricopa County, Arizona;
THENCE North 89(Degree) 25' 45" West along said North line 243.43 feet to a
point on a line 65.00 feet East of and parallel to the West line of said Section
21;
THENCE South 00(Degree) 34' 15" West along said line 55.48 feet to the POINT OF
BEGINNING;
EXCEPT COMMENCING at the Southwest corner of said Section 21;
THENCE North 88(Degree) 16' 15" East (an assumed bearing) along the South line
of said Section 21, a distance of 840.11 feet;
THENCE North 00(Degree) 27' 31" East 65.05 feet to the POINT OF BEGINNING;
THENCE continuing North 00(Degree) 27' 31" East along the East line of the
property described in Docket 6785, page 259, records of Maricopa County,
Arizona, 435.31 feet;
THENCE North 87(Degree) 25' 34" East 36.52 feet;
THENCE South 02(Degree) 21' 45" East 308.14 feet;
EXHIBIT C
THENCE South 00(Degree) 20' 35" West 127.50 feet to a point on a line 65.00 feet
North of and parallel to the South line of said Section 21;
THENCE South 88(Degree) 16' 15" West along said line 51.93 feet to the POINT OF
BEGINNING; and
EXCEPT COMMENCING at the Southwest corner of said Section 21;
THENCE North 88(Degree) 08' 29" East (North 88(Degree) 16' 15" East, record)
along the South line of said Section 21, a distance of 1,684.02 feet to the West
line of the East 60 acres of the Southwest quarter of said Section 21;
THENCE North 00(Degree) 06' 45" East 669.32 feet ( North 00(Degree) 20' 40" East
669.45, record) along said West line to the POINT OF BEGINNING;
THENCE North 89(Degree) 47' 06" West (North 89(Degree) 39' 20" West, record)
115.00 feet;
THENCE North 16(Degree) 08' 00" East 325.00 feet;
THENCE North 52(Degree) 29' 10" East 31.95 feet to the West line of the East 60
acres of the Southwest quarter of said Section 21;
THENCE South 00(Degree) 06' 45" West (South 00(Degree) 20' 40" West, record)
along said West line 332.09 feet to the POINT OF BEGINNING; and
EXCEPT COMMENCING at the Southwest corner of said Section 21;
THENCE North 88(Degree) 16' 15" East along the South line of said Section 21, a
distance of 892.17 feet;
THENCE North 00(Degree) 20' 35" East 65.04 feet to a point on a line parallel to
and 65.00 feet North of the South line of said Section 21;
THENCE continuing North 00(Degree) 20' 35" East 127.50 feet;
THENCE North 02(Degree) 21' 45" West 308.14 feet;
THENCE North 88(Degree) 15' 20" East 445.27 feet;
THENCE North 21(Degree) 52' 10" East 195.00 feet;
THENCE South 89(Degree) 39' 20" East 21.00 feet to the POINT OF BEGINNING;
THENCE continuing South 89(Degree) 39' 20" East 55.00 feet;
THENCE North 00(Degree) 20' 40" East 40.00 feet;
THENCE North 89(Degree) 39' 20" West 55.00 feet;
THENCE South 00(Degree) 20' 40" West 40.00 feet to the POINT OF BEGINNING.
EXHIBIT C
CASA DEL SOL III PROPERTY
PARCEL NO. 1:
That part of Lot 3, A Subdivision of the East half of Section 24, Township 3
North, Range 1 East, of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona, according to Book 11 of Maps, page 30, records of Maricopa
County, Arizona, described as follows:
BEGINNING at the Southeast corner of said Section 24;
THENCE West along the South line of said Section 24, a distance of 1,320.54
feet;
THENCE North 01(Degree) 38' 30" East 55.02 feet to a point on a line that is
55.00 feet North of and parallel to said South line said line being the North
line of Peoria Avenue and the TRUE POINT OF BEGINNING;
THENCE West along said North line 627.98 feet;
THENCE North 45(Degree) 44' 20" East 28.64 feet;
THENCE North 01(Degree) 28' 40" East 307.70 feet;
THENCE North 45(Degree) 00' 00" East 149.61 feet;
THENCE North 32(Degree) 31' 59" West 76.22 feet;
THENCE North 01(Degree) 38' 30" East 420.00 feet;
THENCE North 89(Degree) 57' 50" East 11.71 feet;
THENCE North 01(Degree) 38' 30" East 133.00 feet to a point on a non-tangent
curve concave to the East the center of which bears North 80(Degree) 00' 01"
East having a radius of 1,430.40 feet and an interior angle of 23(Degree) 03'
59";
THENCE Northeasterly along said curve 575.86 feet;
THENCE North 01(Degree) 38' 30" East 84.00 feet;
THENCE North 89(Degree) 57' 50" East 738.38 feet;
THENCE South 01(Degree) 38' 30" West 1,407.21 feet;
THENCE West 200.00 feet;
THENCE South 01(Degree) 38' 30" West 300.11 feet to the TRUE POINT OF BEGINNING.
PARCEL NO. 2:
A perpetual easement for the installation and maintenance of private utility
lines and drainage, as created in instrument recorded in Docket 12335, page
1213, records of Maricopa County, Arizona, being 12.00 feet in width, being 6.00
feet on each side of the centerlines described as follows:
BEGINNING at the Southeast corner of Section 24, Township 3 North, Range 1 East,
of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
THENCE West 1,326.54 feet along the South line of said Section 24;
THENCE North 01(Degree) 38' 30" East 55.00 feet to the TRUE POINT OF BEGINNING;
THENCE North 01(Degree) 38' 30" East 306.11 feet;
THENCE East 206.00 feet to the point of termination; and
EXHIBIT C
BEGINNING at a point which bears North 01(Degree) 38' 30" East 1,757.00 feet and
South 89(Degree) 57' 50" West 1,120.55 feet from the Southeast corner of said
Section 24;
THENCE South 89(Degree) 57' 50" West 1,498.24 feet to a point on the East line
of the West 40.00 feet of the Southeast quarter of said Section 24 and the point
of termination;
EXCEPT any portion lying within Parcel No. 1.
PARCEL NO. 3:
A perpetual easement for irrigation purposes and for the use, construction and
maintenance of an irrigation lateral, as created in instrument recorded in
Docket 12335, page 1215, records of Maricopa County, Arizona, being 5.00 feet in
width, being 2.50 feet on each side of the centerline described as follows:
BEGINNING at a point which bears North 01(Degree) 38' 30" East 1,760.50 feet and
South 89(Degree) 57' 50" West 55.00 feet from the Southeast corner of Section
24, Township 3 North, Range 1 East, of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona;
THENCE South 89(Degree) 57' 50" West 1,833.37 feet to the point of termination;
EXCEPT any portion lying within Parcel No. 1.
PARCEL NO. 4:
A portion of the Southeast quarter of Section 24, Township 3 North, Range 1
East, of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows:
A strip of land 6.00 feet in width located West of and parallel to the Easterly
boundary line of that certain Special Warranty Deed recorded in Document No.
99-439307, records of Maricopa County, Arizona, described as follows:
COMMENCING at the South quarter corner of Section 24;
THENCE North 01(Degree) 28' 40" East along the West line of the Southeast
quarter of said Section 24, 1,760.87 feet to a point on the South line of Lot 2
as shown in Book 11 of Maps, page 30, records of Maricopa County, Arizona;
THENCE North 89(Degree) 55' 44" East along said South line 794.70 feet to a
point 6.00 feet West of and parallel to said Easterly boundary line of said
Special Warranty Deed recorded in Document No. 99-439307, records of Maricopa
County, Arizona and the POINT OF BEGINNING;
THENCE continuing North 89(Degree) 55' 44" East, along said South line, 6.00
feet to the Northeast corner of said Special Warranty Deed recorded in Document
No. 99-439307, records of Maricopa County, Arizona and the Northwest corner of
Quit Claim Deed Recorded in Document No. 95-388831, records of Maricopa County,
Arizona;
THENCE South 01(Degree) 38' 36" West, along the Easterly boundary line of said
Special Warranty Deed and the Westerly boundary line of said Quit Claim Deed,
84.00 feet to the beginning of a non-tangent curve concave Easterly and having a
radial bearing of North 76(Degree) 55' 57" West;
THENCE Southerly along said curve and along said Easterly and Westerly boundary
lines and through a central angle of 19(Degree) 06' 47" an arc length of 477.16
feet;
EXHIBIT C
THENCE South 89(Degree) 55' 44" West to a point 6.00 feet West of and parallel
to said Easterly and Westerly boundary lines to the beginning of a curve concave
Easterly and having a radius of 1,436.40 feet;
THENCE Northerly along said curve 6.00 feet West of and parallel to said
Easterly and Westerly boundary lines through a central angle of 19(Degree) 03'
50" an arc length of 477.93 feet;
THENCE North 01(Degree) 38' 36" East 6.00 feet West of and parallel to said
Easterly and Westerly boundary lines 83.22 feet to the POINT OF BEGINNING.
EXHIBIT C
Recording Requested by
and when recorded return to:
WELLS FARGO BANK, N.A.
Commercial Mortgage Origination
MAC # A0194-093
45 Fremont Street, 9th Floor
San Francisco, California 94105
Attention: CMO Loan Admin.
Loan No. : 31-0900553R
Property Name: Woodland Hills
DEED OF TRUST
AND
ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
AND
SECURITY AGREEMENT
(AND FIXTURE FILING)
The parties to this DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
AND SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust"), dated as of July
31, 2001 are MHC STAGECOACH, L.L.C., a Delaware limited liability company
("Trustor"), with a mailing address at c/o Manufactured Home Communities, Inc.,
Two North Riverside Plaza, Suite 800, Chicago, Illinois 60606, the PUBLIC
TRUSTEE OF ADAMS COUNTY, STATE OF COLORADO ("Trustee"), for the benefit of WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Beneficiary"), with a mailing address at 1320
Willow Pass Road, Suite 205, Concord, California 94520.
R E C I T A L S
A. MHC STAGECOACH, L.L.C., a Delaware limited liability company ("Borrower")
proposes to borrow from Beneficiary, and Beneficiary proposes to lend to
Borrower the principal sum of FIFTY MILLION AND NO/100THS DOLLARS
($50,000,000.00) ("Loan"). The Loan is evidenced by a promissory note
("Note") executed by Borrower, dated the date of this Deed of Trust,
payable to the order of Beneficiary in the principal amount of the Loan
and having a maturity date of September 1, 2011.
B. The loan documents include this Deed of Trust, the Note and the other
documents described in the Note as Loan Documents ("Loan Documents").
ARTICLE 1. DEED OF TRUST
1.1 GRANT. For the purposes of and upon the terms and conditions of this Deed
of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in
trust for the benefit of Beneficiary, with POWER OF SALE AND RIGHT OF
ENTRY AND POSSESSION, all estate, right, title, power, privileges and
interest which Trustor now has or may hereafter acquire in, to, under or
derived from any or all of the following:
1
a. That real property ("Land") located in Thornton, county of Adams,
state of Colorado, and more particularly described on Exhibit A
attached hereto;
b. All appurtenances, easements, rights of way, water and water rights,
wells and well rights, well permits, spring and spring rights,
pumps, pipes, flumes and ditches and ditch rights, water stock,
ditch and/or reservoir stock rights or interests, royalties,
development rights and credits, air rights, minerals, oil rights,
and gas rights, all crops, timber, trees, and landscaping,
historically used, or now or later used or useful in connection
with, appurtenant to or related to the Land and all of Trustor's
rights and interest to obtain sewer and other services from service
districts;
c. All buildings, structures, facilities, other improvements and
fixtures whether real, personal, or mixed, and whether or not
affixed, now or hereafter located on the Land;
d. All machines, articles, apparatus, equipment, machinery and
appliances and all accessions thereto and renewals and replacements
thereof and substitutions therefor used in the operation or
occupancy of the Land, it being intended by the parties that all
such items shall be conclusively considered to be a part of the
Land, whether or not attached or affixed to the Land;
e. All land lying in the right-of-way of any street, road, avenue,
alley or right-of-way opened, proposed or vacated, and all
sidewalks, strips and gores of land adjacent to or used in
connection with the Land;
f. All additions and accretions to the property described above;
g. All licenses, authorizations, certificates, variances, consents,
approvals and other permits now or hereafter pertaining to the Land
and all estate, right, title and interest of Trustor in, to, under
or derived from all tradenames or business names relating to the
Land or the present or future development, construction, operation
or use of the Land; and
h. All proceeds of any of the foregoing.
All of the property described above is hereinafter collectively defined as
the "Property". The listing of specific rights or property shall not be
interpreted as a limitation of general terms.
ARTICLE 2. OBLIGATIONS SECURED
2.1 OBLIGATIONS SECURED. Trustor makes the foregoing grant and assignment for
the purpose of securing the following obligations ("Secured Obligations"):
a. Full and punctual payment to Beneficiary of all sums at any time
owing under the Note;
b. Payment and performance of all covenants and obligations of Trustor
under this Deed of Trust including, without limitation,
indemnification obligations and advances made to protect the
Property;
c. Payment and performance of all additional covenants and obligations
of Borrower and Trustor under the Loan Documents;
d. Payment and performance of all covenants and obligations, if any,
which any rider attached as an exhibit to this Deed of Trust recites
are secured hereby;
e. Payment and performance of all future advances and other obligations
that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor)
for
2
the benefit of Beneficiary, when the obligation is evidenced by a
writing which recites that it is secured by this Deed of Trust;
f. All interest and charges on all obligations secured hereby
including, without limitation, prepayment charges, late charges and
loan fees; and
g. All modifications, extensions and renewals of any of the obligations
secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or
interest payment dates or both, as the case may be, deferring or
accelerating payment dates wholly or partly; and (ii) modifications,
extensions or renewals at a different rate of interest whether or
not any such modification, extension or renewal is evidenced by a
new or additional promissory note or notes.
2.2 OBLIGATIONS. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and
loan fees at any time accruing or assessed on any of the Secured
Obligations.
2.3 INCORPORATION. All terms and conditions of the documents which evidence
any of the Secured Obligations are incorporated herein by this reference.
All persons who may have or acquire an interest in the Property shall be
deemed to have notice of the terms of the Secured Obligations and to have
notice that the rate of interest on one or more Secured Obligations may
vary from time to time.
ARTICLE 3. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary all of Trustor's
right, title and interest in, to and under: (a) all present and future
leases of the Property or any portion thereof, all licenses and agreements
relating to the management, leasing or operation of the Property or any
portion thereof, and all other agreements of any kind relating to the use
or occupancy of the Property or any portion thereof, whether such leases,
licenses and agreements are now existing or entered into after the date
hereof ("Leases"); and (b) the rents, issues, deposits and profits of the
Property, including, without limitation, all amounts payable and all
rights and benefits accruing to Trustor under the Leases ("Payments"). The
term "Leases" shall also include all guarantees of and security for the
tenants' performance thereunder, and all amendments, extensions, renewals
or modifications thereto which are permitted hereunder. This is a present
and absolute assignment, not an assignment for security purposes only, and
Beneficiary's right to the Leases and Payments is not contingent upon, and
may be exercised without possession of, the Property.
3.2 GRANT OF LICENSE. Notwithstanding the terms contained in Section 3.1,
Beneficiary confers upon Trustor a revocable license ("License") to
collect and retain the Payments as they become due and payable, until the
occurrence of a Default (as hereinafter defined). Upon a Default, the
License shall be automatically revoked and Beneficiary may collect and
apply the Payments pursuant to the terms hereof without notice and without
taking possession of the Property. All Payments thereafter collected by
Trustor shall be held by Trustor as trustee under a constructive trust for
the benefit of Beneficiary. Trustor hereby irrevocably authorizes and
directs the tenants under the Leases, upon notice of a Default from
Beneficiary, to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums
which may at any time become due under the Leases, or for the performance
of any of the tenants' undertakings under the Leases, and the tenants
shall have no right or duty to inquire as to whether any Default has
actually occurred or is then existing. Trustor hereby relieves the tenants
from any liability to Trustor by reason of relying upon and complying with
any such notice or demand by Beneficiary. Beneficiary may apply, in its
sole discretion, any Payments so collected by Beneficiary against any
Secured Obligation or any other obligation of Borrower, Trustor or any
other person or entity, under any document or instrument related to or
executed in connection with the Loan Documents, whether existing on the
date hereof or hereafter arising. Collection of any Payments by
Beneficiary shall not cure or waive any Default or notice of Default or
invalidate any acts done pursuant to
3
such notice. If and when no Default exists, Beneficiary shall re-confer
the License upon Trustor until the occurrence of another Default.
3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause
Beneficiary to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; (c)
responsible or liable for any waste committed on the Property by the
tenants under any of the Leases or by any other parties; for any dangerous
or defective condition of the Property; or for any negligence in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee, invitee or other
person; or (d) responsible for or impose upon Beneficiary any duty to
produce rents or profits. Beneficiary shall not directly or indirectly be
liable to Trustor or any other person as a consequence of: (e) the
exercise or failure to exercise any of the rights, remedies or powers
granted to Beneficiary hereunder; or (f) the failure or refusal of
Beneficiary to perform or discharge any obligation, duty or liability of
Trustor arising under the Leases.
3.4 COVENANTS.
a. ALL LEASES. Trustor shall, at Trustor's sole cost and expense:
(i) perform all obligations of the landlord under the Leases and
use reasonable efforts to enforce performance by the tenants
of all obligations of the tenants under the Leases;
(ii) use reasonable efforts to keep the Property leased at all
times to tenants which Trustor reasonably and in good faith
believes are creditworthy at rents not less than the fair
market rental value (including, but not limited to, free or
discounted rents to the extent the market so requires);
(iii) promptly upon Beneficiary's request, deliver to Beneficiary a
copy of each requested Lease and all amendments thereto and
waivers thereof; and
(iv) promptly upon Beneficiary's request, execute and record any
additional assignments of landlord's interest under any Lease
to Beneficiary and specific subordinations of any Lease to
this Deed of Trust, in form and substance satisfactory to
Beneficiary.
Unless consented to in writing by Beneficiary or otherwise permitted
under any other provision of the Loan Documents, Trustor shall not:
(v) grant any tenant under any Lease any option, right of first
refusal or other right to purchase all or any portion of the
Property under any circumstances;
(vi) grant any tenant under any Lease any right to prepay rent more
than 1 month in advance;
(vii) except upon Beneficiary's request, execute any assignment of
landlord's interest in any Lease; or
(viii) collect rent or other sums due under any Lease in advance,
other than to collect rent 1 month in advance of the time when
it becomes due.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
Trustor shall deposit with Beneficiary any sums received by Trustor
in consideration of any termination, modification or amendment of
any Lease or any release or discharge of any tenant under any Lease
from any obligation thereunder and any such sums received by Trustor
shall be held in trust by Trustor for such purpose. Notwithstanding
the foregoing, so long as no Default exists, the portion of any such
sum received by Trustor with respect to any Lease which is less than
$50,000 shall be payable to Trustor. All
4
such sums received by Beneficiary with respect to any Lease shall be
deemed "Impounds" (as defined in Section 6.12b) and shall be
deposited by Beneficiary into a pledged account in accordance with
Section 6.12b. If no Default exists, Beneficiary shall release such
Impounds to Trustor from time to time as necessary to pay or
reimburse Trustor for such tenant improvements, brokerage
commissions and other leasing costs as may be required to re-tenant
the affected space; provided, however, Beneficiary shall have
received and approved each of the following for each tenant for
which such costs were incurred; (1) Trustor's written request for
such release, including the name of the tenant, the location and net
rentable area of the space and a description and cost breakdown of
the tenant improvements or other leasing costs covered by the
request; (2) Trustor's certification that any tenant improvements
have been completed lien-free and in a workmanlike manner; (3) a
fully executed Lease, or extension or renewal of the current Lease;
(4) an estoppel certificate executed by the tenant including its
acknowledgement that all tenant improvements have been
satisfactorily completed; and (5) such other information with
respect to such costs as Beneficiary may require. Following the
re-tenanting of all affected space (including, without limitation,
the completion of all tenant improvements), and provided no Default
exists, Beneficiary shall release any remaining such Impounds
relating to the affected space to Trustor. Trustor shall construct
all tenant improvements in a workmanlike manner and in accordance
with all applicable laws, ordinances, rules and regulations.
b. MAJOR LEASES. Trustor shall, at Trustor's sole cost and expense,
give Beneficiary prompt written notice of any material default by
landlord or tenant under any Major Lease (as defined below). Unless
consented to in writing by Beneficiary or otherwise permitted under
any other provision of the Loan Documents, Trustor shall not:
(i) enter into any Major Lease which (aa) is not on fair market
terms (which terms may include free or discounted rent to the
extent the market so requires); (bb) does not contain a
provision requiring the tenant to execute and deliver to the
landlord an estoppel certificate in form and substance
satisfactory to the landlord promptly upon the landlord's
request; or (cc) allows the tenant to assign or sublet the
premises without the landlord's consent;
(ii) reduce any rent or other sums due from the tenant under any
Major Lease;
(iii) terminate or materially modify or amend any Major Lease; or
(iv) release or discharge the tenant or any guarantor under any
Major Lease from any material obligation thereunder.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
"Major Lease", as used herein, shall mean any Lease, which is, at
any time: (1) a Lease of more than 20% of the total rentable area of
the Property, as reasonably determined by Beneficiary; or (2) a
Lease which generates a gross base monthly rent exceeding 20% of the
total gross base monthly rent generated by all Leases (excluding all
Leases under which the tenant is then in default), as reasonably
determined by Beneficiary. Trustor's obligations with respect to
Major Leases shall be governed by the provisions of Section 3.4a as
well as by the provisions of this Section.
c. FAILURE TO DENY REQUEST. Beneficiary's failure to deny any written
request by Trustor for Beneficiary's consent under the provisions of
Sections 3.4a or 3.4b within 10 Business Days after Beneficiary's
receipt of such request (and all documents and information
reasonably related thereto) shall be deemed to constitute
Beneficiary's consent to such request.
3.5 RIGHT OF SUBORDINATION. Beneficiary may at any time and from time to time
by specific written instrument intended for the purpose unilaterally
subordinate the lien of this Deed of Trust to any Lease, without joinder
or consent of, or notice to, Trustor, any tenant or any other person.
Notice is hereby given to each tenant
5
under a Lease of such right to subordinate. No subordination referred to
in this Section shall constitute a subordination to any lien or other
encumbrance, whenever arising, or improve the right of any junior
lienholder. Nothing herein shall be construed as subordinating this Deed
of Trust to any Lease.
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 SECURITY INTEREST. Trustor grants and assigns to Beneficiary a security
interest to secure payment and performance of all of the Secured
Obligations, in all of Trustor's right, title and interest in and to the
following described personal property in which Trustor now or at any time
hereafter has any interest ("Collateral"):
All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and
other personal property, wherever situated, which are or are to be
incorporated into, used in connection with or appropriated for use
on the Property; all rents, issues, deposits and profits of the
Property (to the extent, if any, they are not subject to the
Absolute Assignment of Rents and Leases); all inventory, accounts,
cash receipts, deposit accounts, impounds, accounts receivable,
contract rights, general intangibles, software, chattel paper,
instruments, documents, promissory notes, drafts, letters of credit,
letter of credit rights, supporting obligations, insurance policies,
insurance and condemnation awards and proceeds, any other rights to
the payment of money, trade names, trademarks and service marks
arising from or related to the Property or any business now or
hereafter conducted thereon by Trustor; all permits, consents,
approvals, licenses, authorizations and other rights granted by,
given by or obtained from, any governmental entity with respect to
the Property; all deposits or other security now or hereafter made
with or given to utility companies by Trustor with respect to the
Property; all advance payments of insurance premiums made by Trustor
with respect to the Property; all plans, drawings and specifications
relating to the Property; all loan funds held by Beneficiary,
whether or not disbursed; all funds deposited with Beneficiary
pursuant to any Loan Document, all reserves, deferred payments,
deposits, accounts, refunds, cost savings and payments of any kind
related to the Property or any portion thereof, including, without
limitation, all "Impounds" as defined herein; together with all
replacements and proceeds of, and additions and accessions to, any
of the foregoing, and all books, records and files relating to any
of the foregoing.
As to all of the above described personal property which is or which
hereafter becomes a "fixture" under applicable law, this Deed of Trust
constitutes a fixture filing under the Colorado Uniform Commercial Code,
as amended or recodified from time to time ("UCC").
4.2 COVENANTS. Trustor agrees: (a) to execute and deliver such documents as
Beneficiary reasonably deems necessary to create, perfect and continue the
security interests contemplated hereby; (b) not to change its name, and,
as applicable, its chief executive offices, its principal residence or the
jurisdiction in which it is organized without giving Beneficiary at least
30 days' prior written notice thereof; and (c) to cooperate with
Beneficiary in perfecting all security interests granted herein and in
obtaining such agreements from third parties as Beneficiary deems
necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of Beneficiary's rights hereunder.
4.3 RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a "Secured
Party" under the UCC, Beneficiary may, but shall not be obligated to, at
any time without notice and at the expense of Trustor: (a) give notice to
any person of Beneficiary's rights hereunder and enforce such rights at
law or in equity; (b) insure, protect, defend and preserve the Collateral
or any rights or interests of Beneficiary therein; and (c) inspect the
Collateral during normal business hours upon reasonable prior written
notice, provided, however, that such notice shall not be required in the
event of an emergency. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any
6
obligation of Trustor to Beneficiary unless Beneficiary shall make an
express written election of said remedy under the UCC or other applicable
law.
4.4 ADDITIONAL RIGHTS OF BENEFICIARY UPON DEFAULT. Upon the occurrence of a
Default, then in addition to all of Beneficiary's rights as a "Secured
Party" under the UCC or otherwise at law:
a. DISPOSITION OF COLLATERAL. Beneficiary may: (i) upon written notice,
require Trustor to assemble any or all of the Collateral and make it
available to Beneficiary at a place reasonably designated by
Beneficiary; (ii) without prior notice (to the extent permitted by
law), enter upon the Property or other place where any of the
Collateral may be located and take possession of, collect, sell,
lease, license and otherwise dispose of the Collateral, and store
the same at locations acceptable to Beneficiary at Trustor's
expense; (iii) sell, assign and deliver the Collateral at any place
or in any lawful manner and bid and become purchaser at any such
sales. In the event of a foreclosure sale, whether made by the
Trustee under the terms hereof or under judgment of a court; (iv)
the Collateral may, at the option of the Beneficiary, be sold as a
whole; (v) it shall not be necessary that Beneficiary take
possession of the Collateral prior to the time any sale is conducted
nor shall it be necessary that said Collateral be present at the
location of such sale; and (vi) Beneficiary may designate any one or
more persons as agent to perform any act necessary to any sale held
by Beneficiary, including the sending of notices and the conduct of
the sale, but in the name and on behalf of Beneficiary; and
b. OTHER RIGHTS. Beneficiary may, for the account of Trustor and at
Trustor's expense: (i) operate, use, consume, sell, lease, license
or otherwise dispose of the Collateral as Beneficiary reasonably
deems appropriate for the purpose of performing any or all of the
Secured Obligations; (ii) enter into any agreement, compromise or
settlement including insurance claims, which Beneficiary may
reasonably deem desirable or proper with respect to the Collateral;
and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness
and obligations now or hereafter owing to Trustor in connection with
or on account of the Collateral.
It is hereby agreed that to the extent permitted by law, all of the
Collateral is to be deemed and held to be a part of and affixed to the
Property. The foregoing security interest shall also cover Trustor's
leasehold interest in any of the foregoing Collateral which is leased by
Trustor. Notwithstanding the foregoing, all of the foregoing Collateral
shall be owned by Trustor and no leasing or installment sales or other
financing in connection therewith shall be permitted without the prior
written approval of Beneficiary. All of the Collateral shall be kept at
the location of the Land.
Beneficiary shall give Trustor at least 10 Business Days' prior written
notice of the time and place of any public sale of such Collateral or of
the time of or after which any private sale or any other intended
disposition thereof is to be made, and if such notice is sent to Trustor,
as the same is provided for the mailing of notices herein, it is hereby
deemed that such notice shall be and is reasonable notice to Trustor. No
such notice is necessary for any such Collateral which is perishable,
threatens to decline speedily in value or is of a type customarily sold on
a recognized market.
Trustor acknowledges and agrees that a disposition of the Collateral in
accordance with Beneficiary's rights and remedies as heretofore provided
shall be deemed to have been a public sale thereof in a commercially
reasonable manner if held contemporaneously with the sale under power of
sale (nonjudicial foreclosure) as provided in Section 7.3(c)(ii) hereof
upon giving the same notice with respect to the sale of the Collateral
hereunder as is required under said Section 7.3(c)(ii). Beneficiary shall
have no obligation to process or prepare the Collateral for sale or other
disposition. In disposing of the Collateral, Beneficiary may disclaim all
warranties of title, possession, quiet enjoyment and the like. Any
proceeds of any sale or other disposition of the Collateral may be applied
by Beneficiary first to the reasonable expenses incurred by Beneficiary in
connection therewith, including, without limitation, reasonable attorneys'
fees and disbursements, and then to the payment of the Secured
Obligations, in such order of application as Beneficiary may from time to
time elect.
7
4.5 POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as
Trustor's attorney-in-fact (such agency being coupled with an interest),
and as such attorney-in-fact, Beneficiary may, without the obligation to
do so, in Beneficiary's name or in the name of Trustor, prepare, execute,
file and record financing statements, continuation statements,
applications for registration and like papers necessary to create, perfect
or preserve any of Beneficiary's security interests and rights in or to
the Collateral, and upon a Default, take any other action required of
Trustor; provided, however, that Beneficiary as such attorney-in-fact
shall be accountable only for such funds as are actually received by
Beneficiary.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
Beneficiary that, to Trustor's current actual knowledge after reasonable
investigation and inquiry, the following statements are true and correct
as of the Effective Date:
a. LEGAL STATUS. Trustor and Borrower are duly organized and existing
and in good standing under the laws of the state(s) in which Trustor
and Borrower are organized. Trustor and Borrower are qualified or
licensed to do business in all jurisdictions in which such
qualification or licensing is required.
b. PERMITS. Trustor and Borrower possess all permits, franchises and
licenses and all rights to all trademarks, trade names, patents and
fictitious names, if any, necessary to enable Trustor and Borrower
to conduct the business(es) in which Trustor and Borrower are now
engaged in compliance with applicable law.
c. AUTHORIZATION AND VALIDITY. The execution and delivery of the Loan
Documents have been duly authorized and the Loan Documents
constitute valid and binding obligations of Trustor, Borrower or the
party which executed the same, enforceable in accordance with their
respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights, or by the application of rules of
equity.
d. VIOLATIONS. The execution, delivery and performance by Trustor and
Borrower of each of the Loan Documents do not violate any provision
of any law or regulation, or result in any breach or default under
any contract, obligation, indenture or other instrument to which
Trustor or Borrower is a party or by which Trustor or Borrower is
bound.
e. LITIGATION. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental
authority, court or administrative agency which may adversely affect
the financial condition or operations of Trustor or Borrower other
than those previously disclosed in writing by Trustor or Borrower to
Beneficiary.
f. FINANCIAL STATEMENTS. The financial statements of Trustor and
Borrower, of each general partner (if Trustor or Borrower is a
partnership), of each member (if Trustor or Borrower is a limited
liability company) and of each guarantor, if any, previously
delivered by Trustor or Borrower to Beneficiary: (i) are materially
complete and correct; (ii) present fairly the financial condition of
such party; and (iii) have been prepared in accordance with the same
accounting standard used by Trustor or Borrower to prepare the
financial statements delivered to and approved by Beneficiary in
connection with the making of the Loan, or other accounting
standards approved by Beneficiary. Since the date of such financial
statements, there has been no material adverse change in such
financial condition, nor have any assets or properties reflected on
such financial statements been sold, transferred, assigned,
mortgaged, pledged or encumbered except as previously disclosed in
writing by Trustor or Borrower to Beneficiary and approved in
writing by Beneficiary.
8
g. REPORTS. All reports, documents, instruments and information
delivered to Beneficiary in connection with the Loan: (i) are
correct in all material respects and sufficiently complete to give
Beneficiary accurate knowledge of their subject matter; and (ii) do
not contain any misrepresentation of a material fact or omission of
a material fact which omission makes the provided information
misleading.
h. INCOME TAXES. There are no material pending assessments or
adjustments of Trustor's or Borrower's income tax payable with
respect to any year.
i. SUBORDINATION. There is no agreement or instrument to which Borrower
is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower's obligations
under the Note to an obligation owed to another party.
j. TITLE. Trustor lawfully holds and possesses fee simple title to the
Property, without limitation on the right to encumber same. This
Deed of Trust is a first lien on the Property prior and superior to
all other liens and encumbrances on the Property except: (i) liens
for real estate taxes and assessments not yet due and payable; (ii)
senior exceptions previously approved by Beneficiary and shown in
the title insurance policy insuring the lien of this Deed of Trust;
and (iii) other matters, if any, previously disclosed to Beneficiary
by Trustor in a writing specifically referring to this
representation and warranty.
k. MECHANICS' LIENS. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to any such liens)
affecting the Property which are or may be prior to or equal to the
lien of this Deed of Trust, other than those (if any) previously
approved by Beneficiary and shown on the title insurance policy
insuring the lien of this Deed of Trust.
l. ENCROACHMENTS. Except as shown in the survey, if any, previously
delivered to Beneficiary, none of the buildings or other
improvements which were included for the purpose of determining the
appraised value of the Property lies outside of the boundaries or
building restriction lines of the Property and no buildings or other
improvements located on adjoining properties encroach upon the
Property.
m. LEASES. All existing Leases are in full force and effect and are
enforceable in accordance with their respective terms. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no material breach or default by any party, or event which
would constitute a material breach or default by any party after
notice or the passage of time, or both, exists under any existing
Lease. None of the landlord's interests under any of the Leases,
including, but not limited to, rents, additional rents, charges,
issues or profits, has been transferred or assigned. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no rent or other payment under any existing Lease has been
paid by any tenant for more than 1 month in advance.
n. COLLATERAL. Trustor has good title to the existing Collateral, free
and clear of all liens and encumbrances except those, if any,
previously disclosed to Beneficiary by Trustor in writing
specifically referring to this representation and warranty.
Trustor's chief executive office (or residence, if applicable) is
located at the address shown on page one of this Deed of Trust.
Trustor is an organization organized solely under the laws of the
State of Delaware. All organizational documents of Trustor delivered
to Beneficiary are complete and accurate in every respect. Trustor's
legal name is exactly as shown on page one of this Deed of Trust.
o. CONDITION OF PROPERTY. Except as shown in the property condition
survey or other engineering reports, if any, previously delivered to
or obtained by Beneficiary, the Property is in good condition and
repair and is free from any damage that would materially and
adversely affect the value of the Property as security for the Loan
or the intended use of the Property.
9
p. HAZARDOUS MATERIALS. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by
Beneficiary, the Property is not and has not been a site for the
use, generation, manufacture, storage, treatment, release,
threatened release, discharge, disposal, transportation or presence
of Hazardous Materials (as hereinafter defined) in violation of
Hazardous Materials Laws (as hereinafter defined) except as
otherwise previously disclosed in writing by Trustor to Beneficiary.
q. HAZARDOUS MATERIALS LAWS. The Property complies with all Hazardous
Materials Laws.
r. HAZARDOUS MATERIALS CLAIMS. There are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).
s. WETLANDS. No part of the Property consists of or is classified as
wetlands, tidelands or swamp and overflow lands.
t. COMPLIANCE WITH LAWS. All federal, state and local laws, rules and
regulations applicable to the Property, including, without
limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990, as
amended from time to time (42 U. S. C. Section 12101 et seq.) have
been satisfied or complied with. Trustor is in possession of all
certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of
the Property. All such certificates of occupancy and other licenses,
permits and authorizations are valid and in full force and effect.
u. PROPERTY TAXES AND OTHER LIABILITIES. All taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
and ground rents, if any, which previously became due and owing in
respect of the Property have been paid.
v. CONDEMNATION. There is no proceeding pending or threatened for the
total or partial condemnation of the Property.
w. HOMESTEAD. There is no homestead or other exemption available to
Trustor which would materially interfere with the right to sell the
Property at a trustee's sale or the right to foreclose this Deed of
Trust.
x. SOLVENCY. None of the transactions contemplated by the Loan will be
or have been made with an actual intent to hinder, delay or defraud
any present or future creditors of Trustor, and Trustor, on the
Effective Date, will have received fair and reasonably equivalent
value in good faith for the grant of the liens or security interests
effected by the Loan Documents. On the Effective Date, Trustor will
be solvent and will not be rendered insolvent by the transactions
contemplated by the Loan Documents. Trustor is able to pay its debts
as they become due.
y. SEPARATE TAX PARCEL(S). The Property is assessed for real estate tax
purposes as one or more wholly independent tax parcels, separate
from any other real property, and no other real property is assessed
and taxed together with the Property or any portion thereof.
5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS (LEVEL V SPE).
Trustor hereby represents, warrants and covenants to Beneficiary that with
respect to both Trustor and MHC-QRS STAGECOACH, INC., a Delaware
corporation, the managing member of Trustor:
a. each such entity was organized solely for the purpose of (i) owning
the Properties (as defined in the Note); (ii) acting as a general
partner of a limited partnership which owns the Properties; or (iii)
acting as a managing member of a limited liability company which
owns the Properties;
10
b. each such entity has not engaged and will not engage in any business
unrelated to (i) the ownership of the Properties; (ii) acting as
general partner of a limited partnership which owns the Properties;
or (iii) acting as a managing member of a limited liability company
which owns the Properties;
c. each such entity has not had and will not have any assets other than
the Properties (and personal property incidental to the ownership
and operation of the Properties) or its partnership or membership
interest in the limited partnership or limited liability company
which owns the Properties, as applicable;
d. each such entity has not engaged and will not engage in, seek or
consent to any dissolution, winding up, liquidation, consolidation,
merger, asset sale, transfer of partnership or membership interest,
or amendment of its articles of incorporation, articles of
organization, certificate of formation, operating agreement or
limited partnership agreement, as applicable;
e. if any such entity is a limited partnership, all of its general
partners are corporations that satisfy the requirements set forth in
this Section 5.2;
f. if any such entity is a limited liability company, it has at least
one managing member that is a corporation that satisfies the
requirements set forth in this Section 5.2;
g. each such entity, without the unanimous consent of all of its
general partners, directors or members, as applicable, shall not
file or consent to the filing of any bankruptcy or insolvency
petition or otherwise institute insolvency proceedings with respect
to itself or any other entity in which it has a direct or indirect
legal or beneficial ownership interest;
h. each such entity has no indebtedness (and will have no indebtedness)
other than (i) the Loan (to the extent it is liable under the terms
of the Loan Documents); and (ii) unsecured trade debt not to exceed
$1,000,000 in the aggregate with respect to Trustor or $10,000 in
the aggregate with respect to its managing member, which is not
evidenced by a note and is incurred in the ordinary course of its
business in connection with owning, operating and maintaining the
Property (or its interest in Trustor, as applicable) and is paid
within thirty (30) days from the date incurred;
i. each such entity has not failed and will not fail to correct any
known misunderstanding regarding the separate identity of such
entity;
j. each such entity has maintained and will maintain its accounts,
books and records separate from any other person or entity;
k. each such entity has maintained and will maintain its books,
records, resolutions and agreements as official records;
l. each such entity (i) has not commingled and will not commingle its
funds or assets with those of any other entity; and (ii) has held
and will hold its assets in its own name;
m. each such entity has conducted and will conduct its business in its
own name or in a registered trade name;
n. each such entity has maintained and will maintain its accounting
records and other entity documents separate from any other person or
entity;
o. each such entity has prepared and will prepare separate tax returns
and financial statements, or if part of a consolidated group, is
shown as a separate member of such group;
11
p. each such entity has paid and will pay its own liabilities and
expenses out of its own funds and assets;
q. each such entity has held and will hold regular meetings, as
appropriate, to conducts its business and has observed and will
observe all corporate, partnership or limited liability company
formalities and record keeping, as applicable;
r. each such entity has not assumed or guaranteed and will not assume
or guarantee or become obligated for the debts of any other entity
or hold out its credit as being available to satisfy the obligations
of any other entity;
s. each such entity has not acquired and will not acquire obligations
or securities of its partners, members or shareholders;
t. each such entity has allocated and will allocate fairly and
reasonably the costs associated with common employees and any
overhead for shared office space and each such entity has used and
will use separate stationery, invoices and checks under its own name
or under its registered trade name;
u. each such entity has not pledged and will not pledge its assets for
the benefit of any other person or entity;
v. each such entity has held out and identified itself and will hold
itself out and identify itself as a separate and distinct entity
under its own name or under its registered trade name and not as a
division or part of any other person or entity;
w. each such entity has not made and will not make loans to any person
or entity;
x. each such entity has not and will not identify its partners, members
or shareholders, or any affiliates of any of the foregoing, as a
division or part of it;
y. each such entity has not entered into and will not enter into or be
a party to, any transaction with its partners, members,
shareholders, or any affiliates of any of the foregoing, except in
the ordinary course of its business pursuant to written agreements
and on terms which are intrinsically fair and are no less favorable
to it than would be obtained in a comparable arm's-length
transaction with an unrelated third party;
z. if any such entity is a corporation, the directors of such entity
shall consider the interests of the creditors of such entity in
connection with all corporate action;
aa. each such entity has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number
of employees in light of its contemplated business operations;
bb. each such entity has maintained and will maintain adequate capital
in light of its contemplated business operations;
cc. if any such entity is a limited partnership with more than one
general partner, its limited partnership agreement requires the
remaining partners to continue the partnership as long as one
solvent general partner exists;
dd. if any such entity is a limited liability company, its operating
agreement, if any such entity is a limited partnership, its limited
partnership agreement, and if any such entity is a corporation, to
the full extent permitted by applicable law, its articles of
incorporation, contain the provisions set forth in this
12
Section 5.2 and any such entity shall conduct its business and
operations in strict compliance with the terms contained therein;
ee. each such entity will, as a condition to the closing of the Loan,
deliver to Beneficiary a nonconsolidation opinion in form and
substance acceptable to Beneficiary;
ff. if any such entity is a corporation, it has maintained and will
continue to maintain at least one Independent Director (as
hereinafter defined); and
gg. if any such entity is a corporation, it has not caused or allowed
and will not cause or allow the board of directors of such entity to
take any action requiring the unanimous affirmative vote of 100% of
the members of the board of directors unless an Independent Director
shall have participated in such vote.
An "Independent Director" shall be an individual who, except in his or her
capacity as an Independent Director of the corporation is not, and has not
been during the five (5) years immediately before such individual's
appointment as an Independent Director: (i) a stockholder, director,
partner, officer or employee of the corporation or its Affiliates; (ii)
affiliated with a customer or supplier of the corporation or its
Affiliates; or (iii) a spouse, parent, sibling, child or other family
relative of any person described by (i) or (ii) above.
As used herein, the term "Affiliate" shall mean any person or entity other
than the corporation (i) which owns beneficially, directly or indirectly,
any outstanding shares of the corporation's stock, or (ii) which controls,
is controlled by or is under common control with the corporation. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities, by contract or otherwise.
ARTICLE 6. RIGHTS AND DUTIES OF THE PARTIES
6.1 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Trustor shall, or shall
cause the property manager to: (a) keep the Property in good condition and
repair; (b) complete or restore promptly and in workmanlike manner the
Property or any part thereof which may be damaged or destroyed (unless, if
and to the extent permitted under Section 6.11, Beneficiary elects to
require that insurance proceeds be used to reduce the Secured Obligations
and after such repayment the ratio of Secured Obligations to the value of
the Property, as reasonably determined by Beneficiary is the same as or
lower than it was immediately before the loss or taking occurred); (c)
comply and cause the Property to comply with (i) all laws, ordinances,
regulations and standards, (ii) all covenants, conditions, restrictions
and equitable servitudes, whether public or private, of every kind and
character and (iii) all requirements of insurance companies and any bureau
or agency which establishes standards of insurability, which laws,
covenants or requirements affect the Property and pertain to acts
committed or conditions existing thereon, including, without limitation,
any work of alteration, improvement or demolition as such laws, covenants
or requirements mandate; (d) operate and manage the Property at all times
in a professional manner and do all other acts which from the character or
use of the Property may be reasonably necessary to maintain and preserve
its value; (e) promptly after execution, deliver to Beneficiary a copy of
any management agreement concerning the Property and all amendments
thereto and waivers thereof; and (f) execute and acknowledge all further
documents, instruments and other papers as Beneficiary or Trustee
reasonably deems necessary or appropriate to preserve, continue, perfect
and enjoy the benefits of this Deed of Trust and perform Trustor's
obligations, including, without limitation, statements of the amount
secured hereby then owing and statements of no offset. Trustor shall not,
without Beneficiary's prior written consent: (g) remove or demolish all or
any material part of the Property; (h) alter either (i) the exterior of
the Property in a manner which materially and adversely affects the value
of the Property or (ii) the roof or other structural elements of the
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any
change in any zoning or other land classification which affects the
Property;
13
(j) materially alter the type of occupancy or use of all or any part of
the Property; or (k) commit or permit waste of the Property.
6.2 HAZARDOUS MATERIALS. Without limiting any other provision of this Deed of
Trust, Trustor agrees as follows:
a. PROHIBITED ACTIVITIES. Trustor shall not cause or permit the
Property to be used as a site for the use, generation, manufacture,
storage, treatment, release, discharge, disposal, transportation or
presence of any oil or other petroleum products, flammable
explosives, asbestos, urea formaldehyde insulation, radioactive
materials, hazardous wastes, toxic or contaminated substances or
similar materials, including, without limitation, any substances
which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under the Hazardous Materials Laws
(defined below) and/or other applicable environmental laws,
ordinances or regulations ("Hazardous Materials").
The foregoing to the contrary notwithstanding, (i) Trustor may
store, maintain and use on the Property janitorial and maintenance
supplies, paint and other Hazardous Materials of a type and in a
quantity readily available for purchase by the general public and
normally stored, maintained and used by owners and managers of
properties of a type similar to the Property; and (ii) tenants of
the Property may store, maintain and use on the Property (and, if
any tenant is a retail business, hold in inventory and sell in the
ordinary course of such tenant's business) household and consumer
cleaning supplies and other Hazardous Materials of a type and
quantity readily available for purchase by the general public and
normally stored, maintained and used (and, if tenant is a retail
business, sold) by tenants of properties similar to the Property or
in similar lines of business on properties similar to the Property.
b. HAZARDOUS MATERIALS LAWS. Trustor shall comply and cause the
Property to comply with all federal, state and local laws,
ordinances and regulations relating to Hazardous Materials
("Hazardous Materials Laws"), including, without limitation: the
Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251 et seq.; the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended (including the Superfund Amendments and Reauthorization Act
of 1986, "CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.;
the Occupational Safety and Health Act, as amended, 29 U.S.C.
Section 651; the Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health
Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all
comparable state and local laws, laws of other jurisdictions or
orders and regulations.
c. NOTICES. Trustor shall immediately notify Beneficiary in writing of:
(i) the discovery of any Hazardous Materials on, under or about the
Property (other than Hazardous Materials permitted under Section
6.2(a)); (ii) any knowledge by Trustor that the Property does not
comply with any Hazardous Materials Laws; (iii) any claims or
actions ("Hazardous Materials Claims") pending or threatened in
writing against Trustor or the Property by any governmental entity
or agency or any other person or entity relating to Hazardous
Materials or pursuant to the Hazardous Materials Laws; and (iv) the
discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to become contaminated with Hazardous
Materials.
d. REMEDIAL ACTION. In response to knowledge or notification to Trustor
of the presence of any Hazardous Materials on, under or about the
Property, Trustor shall immediately take, at Trustor's sole expense,
all remedial action required by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any
Hazardous Materials Claims.
14
e. INSPECTION BY BENEFICIARY. Upon reasonable prior notice to Trustor
(except in the case of an emergency) and during normal business
hours, Beneficiary, its employees and agents, may from time to time
(whether before or after the commencement of a nonjudicial or
judicial foreclosure proceeding), enter and inspect the Property for
the purpose of determining the existence, location, nature and
magnitude of any past or present release or threatened release of
any Hazardous Materials into, onto, beneath or from the Property.
f. LEGAL EFFECT OF SECTION. Trustor and Beneficiary agree that: (i)
this Hazardous Materials Section is intended as Beneficiary's
written request for information (and Trustor's response) concerning
the environmental condition of the real property security as
required by California Code of Civil Procedure Section 726.5; and
(ii) each representation and warranty and covenant in this Section
(together with any indemnity applicable to a breach of any such
representation and warranty) with respect to the environmental
condition of the Property is intended by Beneficiary and Trustor to
be an "environmental provision" for purposes of California Code of
Civil Procedure Section 736.
6.3 COMPLIANCE WITH LAWS. Trustor shall comply with all federal, state and
local laws, rules and regulations applicable to the Property, including,
without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), as amended from time to time. Trustor shall
possess and maintain or cause Borrower to possess and maintain in full
force and effect at all times (a) all certificates of occupancy and other
licenses, permits and authorizations required by applicable law for the
existing use of the Property and (b) all permits, franchises and licenses
and all rights to all trademarks, trade names, patents and fictitious
names, if any, required by applicable law for Trustor and Borrower to
conduct the business(es) in which Trustor and Borrower are now engaged.
6.4 LITIGATION. Trustor shall promptly notify Beneficiary in writing of any
litigation pending or threatened in writing against Trustor or Borrower
claiming damages in excess of $100,000 and of all pending or threatened
(in writing) litigation against Trustor or Borrower if the aggregate
damage claims against Trustor or Borrower exceed $500,000.
6.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Trustor shall not: (a) merge or
consolidate with any other entity or permit Borrower to merge or
consolidate with any other entity; (b) make any substantial change in the
nature of Trustor's business or structure or permit Borrower to make any
substantial change in the nature of Borrower's business or structure; (c)
acquire all or substantially all of the assets of any other entity or
permit Borrower to acquire all or substantially all of the assets of any
other entity; or (d) sell, lease, assign, transfer or otherwise dispose of
a material part of Trustor's assets except in the ordinary course of
Trustor's business or permit Borrower to sell, lease, assign, transfer or
otherwise dispose of a material part of Borrower's assets except in the
ordinary course of Borrower's business.
6.6 ACCOUNTING RECORDS. Trustor shall maintain and cause Borrower to maintain
adequate books and records in accordance with the same accounting standard
used by Trustor or Borrower to prepare the financial statements delivered
to and approved by Beneficiary in connection with the making of the Loan
or other accounting standards approved by Beneficiary. Trustor shall
permit and shall cause Borrower to permit any representative of
Beneficiary, at any reasonable time and from time to time, upon reasonable
prior notice to Trustor, to inspect, audit and examine such books and
records and make copies of same.
6.7 COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor shall pay to Beneficiary the
full amount of all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses of Beneficiary's in-house or
outside counsel, incurred by Beneficiary in connection with: (a)
appraisals and inspections of the Property or Collateral required by
Beneficiary as a result of (i) a Transfer or proposed Transfer (as defined
below), or (ii) a Default; (b) appraisals and inspections of the Property
or Collateral required by applicable law, including, without limitation,
federal or state regulatory reporting requirements; and (c) any acts
performed by Beneficiary at Trustor's request or wholly or partially for
the benefit of Trustor (including, without limitation,
15
the preparation or review of amendments, assumptions, waivers, releases,
reconveyances, estoppel certificates or statements of amounts owing under
any Secured Obligation). In connection with appraisals and inspections,
Trustor specifically (but not by way of limitation) acknowledges that:
(aa) a formal written appraisal of the Property by a state certified or
licensed appraiser may be required by federal regulatory reporting
requirements on an annual or more frequent basis; and (bb) Beneficiary may
require inspection of the Property by an independent supervising
architect, a cost engineering specialist, or both. Trustor shall pay all
indebtedness arising under this Section immediately upon demand by
Beneficiary together with interest thereon following notice of such
indebtedness at the rate of interest then applicable to the principal
balance of the Note as specified therein.
6.8 LIENS, ENCUMBRANCES AND CHARGES. Subject to the terms of Section 8.4,
Trustor shall immediately discharge by bonding or otherwise any lien,
charge or other encumbrance which attaches to the Property in violation of
Section 6.15. Subject to Trustor's right to contest such matters under
this Deed of Trust or as expressly permitted in the Loan Documents,
Trustor shall pay when due all obligations secured by or reducible to
liens and encumbrances which shall now or hereafter encumber or appear to
encumber all or any part of the Property or any interest therein, whether
senior or subordinate hereto, including, without limitation, all claims
for work or labor performed, or materials or supplies furnished, in
connection with any work of demolition, alteration, repair, improvement or
construction of or upon the Property, except such as Trustor may in good
faith contest or as to which a bona fide dispute may arise (provided
provision is made to the satisfaction of Beneficiary for eventual payment
thereof in the event that Trustor is obligated to make such payment and
that any recorded claim of lien, charge or other encumbrance against the
Property is immediately discharged by bonding or otherwise).
6.9 TAXES AND OTHER LIABILITIES. Trustor shall pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real and
personal and including federal and state income taxes and state and local
property taxes and assessments. Trustor shall promptly provide to
Beneficiary copies of all tax and assessment notices pertaining to the
Property. Trustor hereby authorizes Beneficiary to obtain, at Trustor's
expense, a tax service contract which shall provide tax information on the
Property to Beneficiary for the term of the Loan and any extensions or
renewals of the Loan.
6.10 INSURANCE COVERAGE. Trustor shall insure the Property against loss or
damage by fire and such other hazards as Beneficiary shall from time to
time require; provided, however, (a) Beneficiary, at Beneficiary's
election, may only require flood insurance if all or any portion of the
improvements located on the Property is or becomes located in a special
flood hazard area, and (b) Beneficiary, at Beneficiary's election, may
only require earthquake insurance if all or any portion of the Property is
or becomes located in an earthquake fault zone. Trustor shall also carry
public liability insurance and such other insurance as Beneficiary may
reasonably require, including, without limitation, business interruption
insurance or loss of rents insurance. Such policies shall contain a
standard mortgage clause naming Beneficiary and its successors in interest
as a loss payee and requiring at least 30 days prior notice to the holder
at termination or cancellation. Trustor shall maintain all required
insurance throughout the term of the Loan and while any liabilities of
Borrower or Trustor to Beneficiary under any of the Loan Documents remain
outstanding at Trustor's expense, with companies, and in substance and
form satisfactory to Beneficiary. Neither Beneficiary nor Trustee, by
reason of accepting, rejecting, approving or obtaining insurance shall
incur any liability for: (c) the existence, nonexistence, form or legal
sufficiency of any insurance; (d) the solvency of any insurer; or (e) the
payment of claims.
6.11 CONDEMNATION AND INSURANCE PROCEEDS.
a. ASSIGNMENT OF CLAIMS. Trustor absolutely and irrevocably assigns to
Beneficiary all of the following rights, claims and amounts
(collectively, "Claims"), all of which shall be paid to Beneficiary:
(i) all awards of damages and all other compensation payable
directly or indirectly by reason of a condemnation or proposed
condemnation for public or private use affecting all or any part of,
or any interest in, the Property; (ii) all other claims and awards
for damages to or decrease in value of all or any part of, or any
interest in, the Property; (iii) all proceeds of any insurance
policies payable by
16
reason of loss sustained to all or any part of the Property; and
(iv) all interest which may accrue on any of the foregoing. Trustor
shall give Beneficiary prompt written notice of the occurrence of
any casualty affecting, or the institution of any proceedings for
eminent domain or for the condemnation of, the Property or any
portion thereof. So long as no Default has occurred and is
continuing at the time, Trustor shall have the right to adjust,
compromise and settle any Claim of $100,000 or less without the
consent of Beneficiary, provided, however, all awards, proceeds and
other sums described herein shall continue to be payable to
Beneficiary. Beneficiary may commence, appear in, defend or
prosecute any Claim exceeding $100,000, and may adjust, compromise
and settle all Claims (except for Claims which Trustor may settle as
provided herein), but shall not be responsible for any failure to
commence, appear in, defend, prosecute or collect any such Claim
regardless of the cause of the failure. All awards, proceeds and
other sums described herein shall be payable to Beneficiary.
b. APPLICATION OF PROCEEDS; NO DEFAULT. So long as no Default has
occurred and is continuing at the time of Beneficiary's receipt of
the proceeds of the Claims ("Proceeds") and no Default occurs
thereafter, Beneficiary shall apply the Proceeds in the following
order of priority: First, to Beneficiary's expenses in settling,
prosecuting or defending the Claims; Second, to the repair or
restoration of the Property; and Third, to Trustor if the repair or
restoration of the Property has been completed, but to the Secured
Obligations in any order without suspending, extending or reducing
any obligation of Trustor to make installment payments if the repair
or restoration of the Property has not been completed.
Notwithstanding the foregoing, Beneficiary shall have no obligation
to make any Proceeds available for the repair or restoration of the
Property unless and until all the following conditions have been
satisfied: (i) delivery to Beneficiary of the Proceeds plus any
additional amount which is needed to pay all costs of the repair or
restoration (including, without limitation, taxes, financing
charges, insurance and rent during the repair period); (ii)
establishment of an arrangement for lien releases and disbursement
of funds acceptable to Beneficiary; (iii) delivery to Beneficiary in
form and content acceptable to Beneficiary of all of the following:
(aa) plans and specifications for the work; (bb) a contract for the
work, signed by a contractor acceptable to Beneficiary; (cc) a cost
breakdown for the work; (dd) if reasonably required by Beneficiary,
a payment and performance bond for the work; (ee) evidence of the
continuation of substantially all Leases unless consented to in
writing by Beneficiary; (ff) evidence that, upon completion of the
work, the size, capacity, value, and income coverage ratios for the
Property will be at least as great as those which existed
immediately before the damage or condemnation occurred; and (gg)
evidence of the satisfaction of any additional conditions that
Beneficiary may reasonably establish to protect Beneficiary's
security. Trustor acknowledges that the specific conditions
described above are reasonable.
c. APPLICATION OF PROCEEDS; DEFAULT. If a Default has occurred and is
continuing at the time of Beneficiary's receipt of the Proceeds or
if a Default occurs at any time thereafter, Beneficiary may, at
Beneficiary's absolute discretion and regardless of any impairment
of security or lack of impairment of security, but subject to
applicable law governing use of the Proceeds, if any, apply all or
any of the Proceeds to Beneficiary's expenses in settling,
prosecuting or defending the Claims and then apply the balance to
the Secured Obligations in any order without suspending, extending
or reducing any obligation of Trustor to make installment payments,
and may release all or any part of the Proceeds to Trustor upon any
conditions Beneficiary chooses.
6.12 IMPOUNDS.
a. POST-DEFAULT IMPOUNDS. If required by Beneficiary at any time after
a Default occurs (and regardless of whether such Default is
thereafter cured), Trustor shall deposit with Beneficiary such
amounts ("Post-Default Impounds") on such dates (determined by
Beneficiary as provided below) as will be sufficient to pay any or
all "Costs" (as defined below) specified by Beneficiary. Beneficiary
in its reasonable discretion shall estimate the amount of such Costs
that will be payable or required during any period selected by
Beneficiary not exceeding 1 year and shall determine the fractional
portion thereof that Trustor shall deposit with Beneficiary on each
date specified by Beneficiary during such period. If the
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Post-Default Impounds paid by Trustor are not sufficient to pay the
related Costs, Trustor shall deposit with Beneficiary upon demand an
amount equal to the deficiency. All Post-Default Impounds shall be
payable by Trustor in addition to (but without duplication of) any
other Impounds (as defined below).
b. ALL IMPOUNDS. Post-Default Impounds and any other impounds that may
be payable by Borrower under the Note are collectively called
"Impounds". All Impounds shall be deposited into one or more
segregated or commingled accounts maintained by Beneficiary or its
servicing agent. Except as otherwise provided in the Note, such
account(s) shall not bear interest. Beneficiary shall not be a
trustee, special depository or other fiduciary for Trustor with
respect to such account, and the existence of such account shall not
limit Beneficiary's rights under this Deed of Trust, any other
agreement or any provision of law. If no Default exists, Beneficiary
shall apply all Impounds to the payment of the related Costs, or in
Beneficiary's sole discretion may release any or all Impounds to
Trustor for application to and payment of such Costs. If a Default
exists, Beneficiary may apply any or all Impounds to any Secured
Obligation and/or to cure such Default, whereupon Trustor shall
restore all Impounds so applied and cure all Defaults not cured by
such application. The obligations of Trustor hereunder shall not be
diminished by deposits of Impounds made by Trustor, except to the
extent that such obligations have actually been met by application
of such Impounds. Upon any assignment of this Deed of Trust,
Beneficiary may assign all Impounds in its possession to
Beneficiary's assignee, whereupon Beneficiary and Trustee shall be
released from all liability with respect to such Impounds. Within 60
days following full repayment of the Secured Obligations (other than
as a consequence of foreclosure or conveyance in lieu of
foreclosure) or at such earlier time as Beneficiary may elect,
Beneficiary shall pay to Trustor all Impounds in its possession, and
no other party shall have any right or claim thereto. "Costs" means
(i) all taxes and other liabilities payable by Trustor under Section
6.9, (ii) all insurance premiums payable by Trustor under Section
6.10, (iii) all other costs and expenses for which Impounds are
required under the Note, and/or (iv) all other amounts that will be
required to preserve the value of the Property. Trustor shall
deliver to Beneficiary, promptly upon receipt, all bills for Costs
for which Beneficiary has required Post-Default Impounds.
6.13 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Trustor shall protect,
preserve and defend the Property and title to and right of possession of
the Property, the security of this Deed of Trust and the rights and powers
of Beneficiary and Trustee hereunder at Trustor's sole expense against all
adverse claims, whether the claim: (a) is against a possessory or
non-possessory interest; (b) arose prior or subsequent to the Effective
Date; or (c) is senior or junior to Trustor's or Beneficiary's rights.
Trustor shall give Beneficiary and Trustee prompt notice in writing of the
assertion of any claim, of the filing of any action or proceeding, of the
occurrence of any damage to the Property and of any condemnation offer or
action.
6.14 RIGHT OF INSPECTION. Beneficiary and its independent contractors, agents
and employees may enter the Property from time to time at any reasonable
time upon reasonable prior notice to Trustor (except that such notice
shall not be required in the event of an emergency) for the purpose of
inspecting the Property and ascertaining Trustor's compliance with the
terms of this Deed of Trust. Beneficiary shall use reasonable efforts to
assure that Beneficiary's entry upon and inspection of the Property shall
not materially and unreasonably interfere with the business or operations
of Trustor or Trustor's tenants on the Property.
6.15 PROHIBITION OF TRANSFER OF PROPERTY OR INTERESTS IN TRUSTOR. Trustor
acknowledges that Beneficiary has relied upon the principals of Trustor
and Borrower and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan.
Accordingly, except with the prior written consent of Beneficiary or as
otherwise expressly permitted in the Note, Trustor shall not: (a) cause or
permit any sale, exchange, mortgage, pledge, hypothecation, assignment,
encumbrance or other transfer, conveyance or disposition, whether
voluntarily, involuntarily or by operation of law ("Transfer") of all or
any part of, or all or any direct or indirect interest in, the Property or
the Collateral (except for equipment and inventory in the ordinary course
of its business); or (b) cause or permit a Transfer of any direct or
indirect interest in any partnership, limited liability company,
corporation, trust, or other entity comprising all or any portion of or
holding any direct or indirect interest in Trustor or Borrower
18
(other than the sale or exchange of a limited partnership interest or a
non-managing membership interest). If any Transfer not expressly permitted
in the Note or this Deed of Trust is made without the prior written
consent of Beneficiary, Beneficiary shall have the absolute right at its
option, without prior demand or notice, to declare all of the Secured
Obligations immediately due and payable, except to the extent prohibited
by law, and pursue its rights and remedies under Section 7.3 herein.
Trustor agrees to pay any prepayment fee as set forth in the Note in the
event the Secured Obligations are accelerated pursuant to the terms of
this Section. Consent to one such Transfer shall not be deemed to be a
waiver of the right to require the consent to future or successive
Transfers. Except for Transfers expressly permitted under the Note,
Beneficiary's consent to any Transfer may be withheld, conditioned or
delayed in Beneficiary's sole and absolute discretion.
6.16 INTENTIONALLY OMITTED.
6.17 COMPENSATION OF TRUSTEE. Trustor shall pay to Trustee compensation and
reimbursement for services and expenses in the administration of this
trust pursuant to C.R.S. Sections 38-37-102 et seq., including, without
limitation, reasonable attorneys' fees. Trustor shall pay all indebtedness
arising under this Section immediately upon demand by Trustee or
Beneficiary together with interest thereon from the date the indebtedness
arises at the rate of interest then applicable to the principal balance of
the Note as specified therein.
6.18 EXCULPATION. Beneficiary shall not directly or indirectly be liable to
Trustor or any other person as a consequence of: (a) the exercise of the
rights, remedies or powers granted to Beneficiary in this Deed of Trust;
(b) the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the
Property or under this Deed of Trust; or (c) any loss sustained by Trustor
or any third party resulting from Beneficiary's failure to lease the
Property after a Default or from any other act or omission of Beneficiary
in managing the Property after a Default unless the loss is caused by the
willful misconduct and bad faith of Beneficiary and no such liability
shall be asserted or enforced against Beneficiary, all such liability
being expressly waived and released by Trustor.
6.19 INDEMNITY. Without in any way limiting any other indemnity contained in
this Deed of Trust, Trustor agrees to defend, indemnify and hold harmless
the Beneficiary Group (as defined below) from and against any claim, loss,
damage, cost, expense or liability directly or indirectly arising out of:
(a) the making of the Loan, except for violations of banking laws or
regulations by the Beneficiary Group; (b) this Deed of Trust; (c) the
execution of this Deed of Trust or the performance of any act required or
permitted hereunder or by law; (d) any failure of Trustor to perform
Trustor's obligations under this Deed of Trust or the other Loan
Documents; (e) any alleged obligation or undertaking on the Beneficiary
Group's part to perform or discharge any of the representations,
warranties, conditions, covenants or other obligations contained in any
other document related to the Property; (f) any act or omission by Trustor
or any contractor, agent, employee or representative of Trustor with
respect to the Property; or (g) any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of: (i) the use, generation,
manufacture, storage, treatment, release, threatened release, discharge,
disposal, transportation or presence of any Hazardous Materials which are
found in, on, under or about the Property (including, without limitation,
underground contamination); or (ii) the breach of any covenant,
representation or warranty of Trustor under Sections 5.1.p, 5.1.q, 5.1.r,
or 6.2 above. The foregoing to the contrary notwithstanding, this
indemnity shall not include any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of the gross negligence or
willful misconduct of any member of the Beneficiary Group, or any claim,
loss, damage, cost, expense or liability incurred by the Beneficiary Group
arising from any act or incident on the Property occurring after the full
reconveyance and release of the lien of this Deed of Trust on the
Property, or with respect to the matters set forth in clause (g) above,
any claim, loss, damage, cost, expense or liability incurred by the
Beneficiary Group resulting from the introduction and initial release of
Hazardous Materials on the Property occurring after the transfer of title
to the Property at a foreclosure sale under this Deed of Trust, either
pursuant to judicial decree or the power of sale, or by deed in lieu of
such foreclosure. This indemnity shall include, without limitation: (aa)
all consequential damages (including, without limitation, any third party
tort claims or governmental claims, fines or penalties against the
Beneficiary Group); (bb) all court costs and reasonable attorneys' fees
(including, without limitation, expert witness fees) paid or incurred by
the Beneficiary Group; and (cc) the costs, whether foreseeable or
19
unforeseeable, of any investigation, repair, cleanup or detoxification of
the Property which is required by any governmental entity or is otherwise
necessary to render the Property in compliance with all laws and
regulations pertaining to Hazardous Materials. "Beneficiary Group", as
used herein, shall mean (1) Beneficiary (including, without limitation,
any participant in the Loan), (2) any entity controlling, controlled by or
under common control with Beneficiary, (3) the directors, officers,
employees and agents of Beneficiary and such other entities, and (4) the
successors, heirs and assigns of the entities and persons described in
foregoing clauses (1) through (3). Trustor shall pay immediately upon
Beneficiary's demand any amounts owing under this indemnity together with
interest from the date the indebtedness arises until paid at the rate of
interest applicable to the principal balance of the Note as specified
therein. Trustor agrees to use legal counsel reasonably acceptable to the
Beneficiary Group in any action or proceeding arising under this
indemnity. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE TERMINATION OF
THIS DEED OF TRUST, BUT TRUSTOR'S LIABILITY UNDER THIS INDEMNITY SHALL BE
SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE ENTITLED "BORROWER'S
LIABILITY."
6.20 INTENTIONALLY OMITTED.
6.21 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Property or in any manner obligated
under the Secured Obligations ("Interested Parties"), Beneficiary may,
from time to time: (a) fully or partially release any person or entity
from liability for the payment or performance of any Secured Obligation;
(b) extend the maturity of any Secured Obligation; (c) make any agreement
with Borrower increasing the amount or otherwise altering the terms of any
Secured Obligation; (d) accept additional security for any Secured
Obligation; or (e) release all or any portion of the Property, Collateral
and other security for any Secured Obligation. None of the foregoing
actions shall release or reduce the personal liability of any of said
Interested Parties, or release or impair the priority of the lien of this
Deed of Trust upon the Property.
6.22 SALE OR PARTICIPATION OF LOAN. Trustor agrees that Beneficiary may at any
time sell, assign, participate or securitize all or any portion of
Beneficiary's rights and obligations under the Loan Documents, and that
any such sale, assignment, participation or securitization may be to one
or more financial institutions or other entities, to private investors,
and/or into the public securities market, in Beneficiary's sole
discretion. Trustor further agrees that Beneficiary may disseminate to any
such actual or potential purchaser(s), assignee(s) or participant(s) all
documents and financial and other information heretofore or hereafter
provided to or known to Beneficiary with respect to: (a) the Property and
its operation; and/or (b) any party connected with the Loan (including,
without limitation, Trustor, any partner or member of Trustor, any
constituent partner or member of Trustor, any guarantor and any
nonborrower trustor). In the event of any such sale, assignment,
participation or securitization, Beneficiary and the other parties to the
same shall share in the rights and obligations of Beneficiary set forth in
the Loan Documents as and to the extent they shall agree among themselves.
In connection with any such sale, assignment, participation or
securitization, Trustor further agrees that the Loan Documents shall be
sufficient evidence of the obligations of Trustor to each purchaser,
assignee or participant, and Trustor shall, within 15 days after request
by Beneficiary, (x) deliver an estoppel certificate verifying for the
benefit of Beneficiary and any other party designated by Beneficiary the
status and the terms and provisions of the Loan in form and substance
acceptable to Beneficiary, (y) provide any information, legal opinions or
documents regarding Trustor, Guarantor (as defined in the Loan Documents),
the Property and any tenants of the Property as Beneficiary or
Beneficiary's rating agencies may reasonably request, and (z) enter into
such amendments or modifications to the Loan Documents or the
organizational documents of Trustor as may be reasonably required in order
to facilitate any such sale, assignment, participation or securitization
without impairing Trustor's rights or increasing Trustor's obligations.
The indemnity obligations of Trustor under the Loan Documents shall also
apply with respect to any purchaser, assignee or participant.
6.23 RELEASE OF DEED OF TRUST. If the principal and interest and all other sums
due or to become due under the Note shall have been paid, then and in that
event only, the estate, right, title and interest of Trustee and
Beneficiary in the Property shall cease, and upon (a) written notice from
Beneficiary that all of the Secured Obligations have been paid, (b)
presentment of the original Note marked "cancelled," (c) surrender
20
of this Deed of Trust and said cancelled Note to Trustee, (d) execution of
the statutory form of request for release by Beneficiary and Trustee, in
due form at Trustor's cost, and (e) payment of Trustee's fees and costs
and all recording costs, Trustee shall release this Deed of Trust and the
Property shall become wholly free of the liens, security interests,
conveyances and assignments created and evidenced hereby. No release of
this Deed of Trust or the lien hereof shall be valid unless executed by
Beneficiary and Trustee.
6.24 SUBROGATION. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part
by Beneficiary pursuant to this Deed of Trust or by the proceeds of any
loan secured by this Deed of Trust.
6.25 MANAGEMENT AGREEMENTS. Without the prior written consent of Beneficiary,
Trustor shall not terminate, modify, amend or enter into any agreement
providing for the management, leasing or operation of the Property.
Trustor represents, warrants and covenants that any existing management
agreement includes, and any future management agreement entered into by
Trustor shall include, a provision which provides that the management
agreement is automatically terminated upon the transfer of the Property by
Trustor, either by sale, foreclosure, deed in lieu of foreclosure, or
otherwise, to Beneficiary or any other purchaser of the Property. Upon a
Default under the Loan Documents or a default under any management
agreement then in effect, which default is not cured within any applicable
grace or cure period, Beneficiary shall have the right to terminate, or to
direct Trustor to terminate, such management agreement upon thirty (30)
days' written notice and to retain, or to direct Trustor to retain, a new
management agent approved by Beneficiary.
ARTICLE 7. DEFAULT
7.1 DEFAULT. For all purposes hereof, "Default" shall mean either an "Optional
Default" (as defined below) or an "Automatic Default" (as defined below).
a. OPTIONAL DEFAULT. An "Optional Default" shall occur, at
Beneficiary's option, upon the occurrence of any of the following
events:
(i) MONETARY. Borrower or Trustor shall fail to (aa) pay when due
any sums payable under the Loan Documents which by their
express terms require immediate payment without any grace
period or sums which are payable on the Maturity Date, or (bb)
pay within 5 days when due any other sums payable under the
Note, this Deed of Trust or any of the other Loan Documents,
including without limitation, any monthly payment due under
the Note.
(ii) FAILURE TO PERFORM. Borrower or Trustor shall fail to observe,
perform or discharge any of Borrower's or Trustor's
obligations, covenants, conditions or agreements, other than
Borrower's or Trustor's payment obligations, under the Note,
this Deed of Trust or any of the other Loan Documents, and
(aa) such failure shall remain uncured for 30 days after
written notice thereof shall have been given to Borrower or
Trustor, as the case may be, by Beneficiary or (bb) if such
failure is of such a nature that it cannot be cured within
such 30 day period, Borrower or Trustor shall fail to commence
to cure such failure within such 30 day period or shall fail
to diligently prosecute such curative action thereafter.
(iii) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate or other statement (financial or otherwise) made
or furnished by or on behalf of Borrower, Trustor, or a
guarantor, if any, to Beneficiary or in connection with any of
the Loan Documents, or as an inducement to Beneficiary to make
the Loan, shall be false, incorrect, incomplete or misleading
in any material respect when made or furnished.
(iv) CONDEMNATION; ATTACHMENT. The condemnation, seizure or
appropriation of any material portion (as reasonably
determined by Beneficiary) of the Property; or the
sequestration or
21
attachment of, or levy or execution upon any of the Property,
the Collateral or any other collateral provided by Borrower or
Trustor under any of the Loan Documents, or any material
portion of the other assets of Borrower or Trustor, which
sequestration, attachment, levy or execution is not released
or dismissed within 45 days after its occurrence; or the sale
of any assets affected by any of the foregoing.
(v) UNINSURED CASUALTY. The occurrence of an uninsured casualty
with respect to any material portion (as reasonably determined
by Beneficiary) of the Property unless: (aa) no other Default
has occurred and is continuing at the time of such casualty or
occurs thereafter; (bb) Trustor promptly notifies Beneficiary
of the occurrence of such casualty; and (cc) not more than 45
days after the occurrence of such casualty, Trustor delivers
to Beneficiary immediately available funds in an amount
sufficient, in Beneficiary's reasonable opinion, to pay all
costs of the repair or restoration (including, without
limitation, taxes, financing charges, insurance and rent
during the repair period). So long as no Default has occurred
and is continuing at the time of Beneficiary's receipt of such
funds and no Default occurs thereafter, Beneficiary shall make
such funds available for the repair or restoration of the
Property. Notwithstanding the foregoing, Beneficiary shall
have no obligation to make any funds available for repair or
restoration of the Property unless and until all the
conditions set forth in clauses (ii) and (iii) of the second
sentence of Section 6.11(b) of this Deed of Trust have been
satisfied. Trustor acknowledges that the specific conditions
described above are reasonable.
(vi) ADVERSE FINANCIAL CHANGE. Any material adverse change in the
financial condition of Borrower or any general partner or
managing member of Borrower, any guarantor, or any other
person or entity from the condition shown on the financial
statement(s) submitted to Beneficiary and relied upon by
Beneficiary in making the Loan, and which change Beneficiary
reasonably determines will have a material adverse effect on
(aa) the business, operations or condition of the Property; or
(bb) the ability of Borrower or Trustor to pay or perform
Borrower's or Trustor's obligations in accordance with the
terms of the Note, this Deed of Trust, and the other Loan
Documents.
b. AUTOMATIC DEFAULT. An "Automatic Default" shall occur automatically
upon the occurrence of any of the following events:
(i) VOLUNTARY BANKRUPTCY, INSOLVENCY, DISSOLUTION. (aa) Borrower's
filing a petition for relief under the Bankruptcy Reform Act
of 1978, as amended or recodified ("Bankruptcy Code"), or
under any other present or future state or federal law
regarding bankruptcy, reorganization or other relief to
debtors (collectively, "Debtor Relief Law"); or (bb)
Borrower's filing any pleading in any involuntary proceeding
under the Bankruptcy Code or other Debtor Relief Law which
admits the jurisdiction of a court to regulate Borrower or the
Property or the petition's material allegations regarding
Borrower's insolvency; or (cc) Borrower's making a general
assignment for the benefit of creditors; or (dd) Borrower's
applying for, or the appointment of, a receiver, trustee,
custodian or liquidator of Borrower or any of its property; or
(ee) the filing by Borrower of a petition seeking the
liquidation or dissolution of Borrower or the commencement of
any other procedure to liquidate or dissolve Borrower.
(ii) INVOLUNTARY BANKRUPTCY. Borrower's failure to effect a full
dismissal of any involuntary petition under the Bankruptcy
Code or other Debtor Relief Law that is filed against Borrower
or in any way restrains or limits Borrower or Beneficiary
regarding the Loan or the Property, prior to the earlier of
the entry of any order granting relief sought in the
involuntary petition or 45 days after the date of filing of
the petition.
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(iii) PARTNERS, GUARANTORS. The occurrence of an event specified in
clauses (i) or (ii) as to Trustor, any general partner or
managing member of Borrower or Trustor, or any guarantor or
other person or entity in any manner obligated to Beneficiary
under the Loan Documents.
7.2 ACCELERATION. Upon the occurrence of an Optional Default, Beneficiary may,
at its option, declare all sums owing to Beneficiary under the Note and
the other Loan Documents immediately due and payable. Upon the occurrence
of an Automatic Default, all sums owing to Beneficiary under the Note and
the other Loan Documents shall automatically become immediately due and
payable.
7.3 RIGHTS AND REMEDIES. In addition to the rights and remedies in Section 7.2
above, at any time after a Default, Beneficiary shall have all of the
following rights and remedies:
a. ENTRY ON PROPERTY. With or without notice, and without releasing
Trustor from any Secured Obligation, either in person or by agent,
with or without bringing any action or proceeding, or by a receiver
appointed by a court and without regard to the adequacy of its
security, and without becoming a mortgagee in possession, to enter
upon the Property from time to time and to do such acts and things
as Beneficiary or Trustee deem necessary or desirable in order to
inspect, investigate, assess and protect the security hereof or to
cure any Default, including, without limitation: (i) to take and
possess all documents, books, records, papers and accounts of
Trustor, Borrower or the then owner of the Property which relate to
the Property; (ii) to make, terminate, enforce or modify leases of
the Property upon such terms and conditions as Beneficiary deems
proper; (iii) to make repairs, alterations and improvements to the
Property necessary, in Trustee's or Beneficiary's reasonable
judgment, to protect or enhance the security hereof; (iv) to appear
in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of Beneficiary or Trustee
hereunder; (v) to pay, purchase, contest or compromise any
encumbrance, charge, lien or claim of lien which, in the sole
judgment of either Beneficiary or Trustee, is or may be senior in
priority hereto, the judgment of Beneficiary or Trustee being
conclusive as between the parties hereto; (vi) to obtain insurance;
(vii) to pay any premiums or charges with respect to insurance
required to be carried hereunder; (viii) to obtain a court order to
enforce Beneficiary's right to enter and inspect the Property for
Hazardous Materials in which regard the decision of Beneficiary as
to whether there exists a release or threatened release of Hazardous
Materials onto the Property shall be deemed reasonable and
conclusive as between the parties hereto; (ix) to have a receiver
appointed pursuant to applicable law to enforce Beneficiary's rights
to enter and inspect the Property for Hazardous Materials; and/or
(x) to employ legal counsel, accountants, engineers, consultants,
contractors and other appropriate persons to assist them. All sums
expended by Beneficiary in connection with such entry and
possession, together with interest thereon at the Default Interest
Rate, shall be immediately due and payable to Beneficiary by Trustor
on demand and shall be secured hereby and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by
the Note;
b. APPOINTMENT OF RECEIVER. With or without notice to Trustor or
Borrower and without a hearing, which are hereby waived by Trustor
and Borrower, to ex parte to apply to a court of competent
jurisdiction for and obtain appointment of a receiver of the
Property as a matter of strict right and Beneficiary's right to
collect Payments, and without regard to: (i) the adequacy of the
security for the repayment of the Secured Obligations; or (ii) the
existence of a declaration that the Secured Obligations are
immediately due and payable; and Trustor hereby irrevocably consents
to such appointment and waives any and all notices of and defenses
to such appointment and agrees not to oppose any application
therefor by Beneficiary, but nothing herein is to be construed to
deprive Beneficiary of any other right, remedy or privilege
Beneficiary may now have under the law to have a receiver appointed,
provided, however, that, the appointment of such receiver, trustee
or other appointee by virtue of any court order, statute or
regulation shall not impair or in any manner prejudice the rights of
Beneficiary to receive Payments under the Leases pursuant to other
terms and provisions hereof. Any such receiver shall have all of the
usual powers and duties of receivers in similar cases, including,
without limitation, the full power to hold, develop, rent, lease,
manage,
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maintain, operate and otherwise use or permit the use of the
Property upon such terms and conditions as said receiver may deem to
be prudent and reasonable. Such receivership shall, at the option of
Beneficiary, continue until full payment of the Secured Obligations
or until title to the Property shall be passed by foreclosure sale
under this Deed of Trust or deed in lieu of foreclosure;
c. FORECLOSURE.
(i) JUDICIAL FORECLOSURE; INJUNCTION. To commence and maintain or
cause Trustee to commence and maintain an action or actions in
any court of competent jurisdiction to foreclose this
instrument as a mortgage or to obtain specific enforcement of
the covenants of Trustor hereunder, and Trustor agrees that
such covenants shall be specifically enforceable by injunction
or any other appropriate equitable remedy and that for the
purposes of any suit brought under this subparagraph, Trustor
waives the defense of laches and any applicable statute of
limitations;
(ii) NONJUDICIAL FORECLOSURE. To commence foreclosure proceedings
against the Property by exercise of the power of sale herein
contained and cause the Property to be sold in accordance with
the requirements and procedures provided by applicable law in
a single parcel or in several parcels at the option of
Beneficiary. Should Beneficiary elect to foreclose by exercise
of the power of sale herein contained, Beneficiary shall file
with Trustee a written notice of election and demand for sale
and all other documents, certificates and affidavits as are
required by applicable law. Thereupon, Trustee shall cause a
copy of the notice of election and demand for sale to be
recorded in the Clerk and Recorder's Office of the county in
which the Property is located. Trustee shall then give such
notices as are required by law and shall conduct the
foreclosure sale of the Property in accordance with applicable
law. Trustee shall sell and dispose of the Property (en masse
or in separate parcels, as Trustee may think best) and all the
right, title and interest of Trustor and its successors and
assigns therein, at public auction at any place permitted by
applicable law for the highest and best price the same will
bring in cash. Subject to compliance with applicable law,
Trustee may postpone the sale of all or any portion of the
Property by public announcement at the time and place of sale,
and from time to time thereafter may postpone such sale by
public announcement at the time fixed by the preceding
postponement. When the sale is held, Trustee shall execute and
deliver to the purchaser of the Property or portions thereof
at such sale a certificate of purchase as required by
applicable law. Thereafter, following the expiration of all
applicable redemption periods and satisfaction of any other
requirements prescribed by law, Trustee shall execute and
deliver a deed for the Property to the person entitled
thereto, which deed shall be in such form as is required by
law. Such sale and said deed shall be a perpetual bar, both in
law and equity, against Trustor and its successors and
assigns, and all other persons claiming the Property or any
part thereof by, through, from or under Trustor. Beneficiary
may purchase the Property, or any part thereof, and may bid in
any part or all of the Secured Obligations and it shall not be
obligatory upon the purchaser at any such sale to see to the
application of the purchase money;
(iii) GENERAL. (aa) Beneficiary may, by following the procedures and
satisfying the requirements prescribed by applicable law,
judicially or nonjudicially foreclose on only a portion of the
Property and, in such event, said foreclosure shall not affect
the lien of this Deed of Trust on the remaining portion of the
Property not foreclosed. (bb) If a nonjudicial foreclosure
hereunder shall be commenced by Trustee, Beneficiary may at
any time before the sale of the Property direct Trustee to
abandon the sale, and may then institute suit for the
collection of the Note and the other Secured Obligations and
for the judicial foreclosure of this Deed of Trust. If
Beneficiary should institute a suit for the collection of the
Note or any other Secured Obligation and for the judicial
foreclosure of this Deed of Trust, Beneficiary may at any time
before the entry of a final judgment in said suit dismiss the
same, and require Trustee to sell
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the Property in accordance with the provisions of this Deed of
Trust. (cc) Upon sale of the Property at any judicial or
nonjudicial foreclosure, Beneficiary may credit bid (as
determined by Beneficiary in its sole and absolute discretion)
all or any portion of the Secured Obligations. In determining
such credit bid, Beneficiary may, but is not obligated to,
take into account all or any of the following: (i) appraisals
of the Property as such appraisals may be discounted or
adjusted by Beneficiary in its sole and absolute underwriting
discretion; (ii) expenses and costs incurred by Beneficiary
with respect to the Property prior to foreclosure, provided
such amounts comprise a part of the Secured Obligations; (iii)
estimated reasonable expenses and costs, net of income of
holding, marketing and selling the Property, which Beneficiary
anticipates will be incurred with respect to the Property
after foreclosure, but prior to resale, including, without
limitation, costs of structural reports and other due
diligence, costs to carry the Property prior to resale, costs
of resale (e.g. commissions, attorneys' fees, and taxes),
costs of any Hazardous Materials clean-up and monitoring,
costs of deferred maintenance, repair, refurbishment and
retrofit, costs of defending or settling litigation affecting
the Property, (iv) the fact of additional collateral (if any),
for the Secured Obligations; and (v) such other factors or
matters that Beneficiary (in its sole and absolute discretion)
deems appropriate. In regard to the above, Trustor
acknowledges and agrees that: (vi) Beneficiary is not required
to use any or all of the foregoing factors to determine the
amount of its credit bid; (vii) this paragraph does not impose
upon Beneficiary any additional obligations that are not
imposed by law at the time the credit bid is made; (viii) the
amount of Beneficiary's credit bid need not have any relation
to any loan-to-value ratios specified in the Loan Documents or
previously discussed between Trustor and Beneficiary; and (ix)
Beneficiary's credit bid may be (at Beneficiary's sole and
absolute discretion) higher or lower than any appraised value
of the Property;
d. MULTIPLE FORECLOSURES. To resort to and realize upon the security
hereunder and any other security now or later held by Beneficiary
concurrently or successively and in one or several consolidated or
independent judicial actions or lawfully taken nonjudicial
proceedings, or both, and to apply the proceeds received upon the
Secured Obligations all in such order and manner as Trustee and
Beneficiary or either of them determine in their sole discretion;
e. COLLECTION OF PAYMENTS. With or without taking possession of the
Property, sue for or otherwise collect Payments under the Leases,
including those past due and unpaid, and apply the same, less costs
and expenses of operation and collection, including, without
limitation, attorneys' fees, against the Secured Obligations in such
order as Beneficiary may determine in its discretion, without in any
way curing or waiving any default.
f. RIGHTS TO COLLATERAL. To exercise all rights Trustee or Beneficiary
may have with respect to the Collateral under this Deed of Trust,
the UCC or otherwise at law; and
g. OTHER RIGHTS. To exercise such other rights as Trustee or
Beneficiary may have at law or in equity or pursuant to the terms
and conditions of this Deed of Trust or any of the other Loan
Documents.
In connection with any sale or sales hereunder, Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the Property (including, without
limitation, any improvements forming a part thereof) without causing
structural damage thereto as if the same were personal property or a
fixture, as the case may be, and dispose of the same in accordance with
applicable law, separate and apart from the sale of the Property. Any sale
of Collateral hereunder shall be conducted in any manner permitted by the
UCC.
7.4 APPLICATION OF FORECLOSURE SALE PROCEEDS. If any foreclosure sale is
effected, Trustee shall apply the proceeds of such sale in the following
order of priority: First, to the costs, fees and expenses of exercising
the power of sale and of sale, including, without limitation, the payment
of the Trustee's fees
25
and attorneys' fees; Second, to the payment of the Secured Obligations
which are secured by this Deed of Trust, in such order as Beneficiary
shall determine in its sole discretion; Third, to satisfy the outstanding
balance of obligations secured by any junior liens or encumbrances in the
order of their priority; and Fourth, to the Trustor or the Trustor's
successor in interest, or in the event the Property has been sold or
transferred to another, to the vested owner of record at the time of the
Trustee's sale.
7.5 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a
lien on or interest in the Property, hereby waives all rights to have the
Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured
Obligation, marshaled upon any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Secured Obligations.
7.6 NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any receiver's
entry upon and taking possession of all or any part of the Property, nor
any collection of rents, issues, profits, insurance proceeds, condemnation
proceeds or damages, other security or proceeds of other security, or
other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise of any other right or remedy by Beneficiary
or Trustee or any receiver shall cure or waive any Default or notice of
default under this Deed of Trust, or nullify the effect of any notice of
sale (unless all Secured Obligations then due have been paid or performed
and Trustor has cured all other Defaults hereunder), or impair the status
of the security, or prejudice Beneficiary in the exercise of any right or
remedy, or be construed as an affirmation by Beneficiary of any tenancy,
lease or option or a subordination of the lien of this Deed of Trust.
7.7 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor agrees to pay to
Beneficiary immediately and upon demand all costs and expenses incurred by
Trustee and Beneficiary in the enforcement of the terms and conditions of
this Deed of Trust (including, without limitation, statutory trustee's
fees, court costs and attorneys' fees, whether incurred in litigation or
not) with interest from the date of expenditure until said sums have been
paid at the rate of interest applicable to the principal balance of the
Note as specified therein.
7.8 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably
appoints Beneficiary and its successors and assigns, as its
attorney-in-fact, which agency is coupled with an interest, to perform any
obligation of Trustor hereunder upon the occurrence of an event, act or
omission which, with notice or passage of time or both, would constitute a
Default, provided, however, that: (a) Beneficiary as such attorney-in-fact
shall only be accountable for such funds as are actually received by
Beneficiary; and (b) Beneficiary shall not be liable to Trustor or any
other person or entity for any failure to act under this Section.
7.9 REMEDIES CUMULATIVE. All rights and remedies of Beneficiary and Trustee
under this Deed of Trust and the other Loan Documents are cumulative and
are in addition to all rights and remedies provided by applicable law
(including specifically that of foreclosure of this Deed of Trust as
though it were a mortgage). Beneficiary may enforce any one or more
remedies or rights under the Loan Documents either successively or
concurrently.
7.10 DISCONTINUANCE OF PROCEEDINGS. If Beneficiary shall 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, Beneficiary shall have the unqualified right to do so and, in such
an event, Trustor and Beneficiary shall be restored to their former
positions with respect to the Secured Obligations, the Loan Documents, the
Property and otherwise, and the rights, remedies, recourses and powers of
Beneficiary shall continue as if the same had never been invoked.
ARTICLE 8. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The
26
Loan Documents grant further rights to Beneficiary and contain further
agreements and affirmative and negative covenants by Trustor which apply
to this Deed of Trust and to the Property and such further rights and
agreements are incorporated herein by this reference. THE OBLIGATIONS AND
LIABILITIES OF TRUSTOR UNDER THIS DEED OF TRUST AND THE OTHER LOAN
DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE
ENTITLED "BORROWER'S LIABILITY."
8.2 NON-WAIVER. By accepting payment of any amount secured hereby after its
due date or late performance of any other Secured Obligation, Beneficiary
shall not waive its right against any person obligated directly or
indirectly hereunder or on any Secured Obligation, either to require
prompt payment or performance when due of all other sums and obligations
so secured or to declare default for failure to make such prompt payment
or performance. No exercise of any right or remedy by Beneficiary or
Trustee hereunder shall constitute a waiver of any other right or remedy
herein contained or provided by law. No failure by Beneficiary or Trustee
to exercise any right or remedy hereunder arising upon any Default shall
be construed to prejudice Beneficiary's or Trustee's rights or remedies
upon the occurrence of any other or subsequent Default. No delay by
Beneficiary or Trustee in exercising any such right or remedy shall be
construed to preclude Beneficiary or Trustee from the exercise thereof at
any time while that Default is continuing. No notice to nor demand on
Trustor shall of itself entitle Trustor to any other or further notice or
demand in similar or other circumstances.
8.3 CONSENTS, APPROVALS AND EXPENSES. Wherever Beneficiary's consent,
approval, acceptance or satisfaction is required under any provision of
this Deed of Trust or any of the other Loan Documents, such consent,
approval, acceptance or satisfaction shall not be unreasonably withheld,
conditioned or delayed by Beneficiary unless such provision expressly so
provides. Wherever costs or expenses are required to be paid under any
provision of this Deed of Trust or any of the other Loan Documents, such
costs or expenses shall be reasonable.
8.4 PERMITTED CONTESTS. After prior written notice to Beneficiary, Trustor may
contest, by appropriate legal or other proceedings conducted in good faith
and with due diligence, the amount, validity or application, in whole or
in part, of any lien, levy, tax or assessment, or any lien of any laborer,
mechanic, materialman, supplier or vendor, or the application to Trustor
or the Property of any law or the validity thereof, the assertion or
imposition of which, or the failure to pay when due, would constitute a
Default; provided that (a) Trustor pursues the contest diligently, in a
manner which Beneficiary determines is not prejudicial to Beneficiary, and
does not impair the lien of this Deed of Trust; (b) the Property, or any
part hereof or estate or interest therein, shall not be in any danger of
being sold, forfeited or lost by reason of such proceedings; (c) in the
case of the contest of any law or other legal requirement, Beneficiary
shall not be in any danger of any civil or criminal liability; and (d) if
required by Beneficiary, Trustor deposits with Beneficiary any funds or
other forms of assurance (including a bond or letter of credit)
satisfactory to Beneficiary to protect Beneficiary from the consequences
of the contest being unsuccessful. Trustor's right to contest pursuant to
the terms of this provision shall in no way relieve Trustor or Borrower of
its obligations under the Loan or to make payments to Beneficiary as and
when due.
8.5 FURTHER ASSURANCES. Trustor shall, upon demand by Beneficiary or Trustee,
execute, acknowledge (if appropriate) and deliver any and all documents
and instruments and do or cause to be done all further acts reasonably
necessary or appropriate to effectuate the purposes of the Loan Documents
and to perfect any assignments contained therein.
8.6 ATTORNEYS' FEES. If any legal action, suit or proceeding is commenced
between Trustor and Beneficiary regarding their respective rights and
obligations under this Deed of Trust or any of the other Loan Documents,
the prevailing party shall be entitled to recover, in addition to damages
or other relief, costs and expenses, reasonable attorneys' fees and court
costs (including, without limitation, expert witness fees). As used herein
the term "prevailing party" shall mean the party which obtains the
principal relief it has sought, whether by compromise settlement or
judgment. If the party which commenced or instituted the action, suit or
proceeding shall dismiss or discontinue it without the concurrence of the
other party, such other party shall be deemed the prevailing party.
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8.7 TRUSTOR AND BENEFICIARY DEFINED. The term "Trustor" includes both the
original Trustor and any subsequent owner or owners of any of the
Property, and the term "Beneficiary" includes the original Beneficiary and
any future owner or holder, including assignees, pledges and participants,
of the Note or any interest therein.
8.8 DISCLAIMERS.
a. RELATIONSHIP. The relationship of Trustor and Beneficiary under this
Deed of Trust and the other Loan Documents is, and shall at all
times remain, solely that of borrower and lender; and Beneficiary
neither undertakes nor assumes any responsibility or duty to Trustor
or to any third party with respect to the Property. Notwithstanding
any other provisions of this Deed of Trust and the other Loan
Documents: (i) Beneficiary is not, and shall not be construed to be,
a partner, joint venturer, member, alter ego, manager, controlling
person or other business associate or participant of any kind of
Trustor, and Beneficiary does not intend to ever assume such status;
(ii) Beneficiary's activities in connection with this Deed of Trust
and the other Loan Documents shall not be "outside the scope of
activities of a lender of money" within the meaning of California
Civil Code Section 3434, as amended or recodified from time to time,
and Beneficiary does not intend to ever assume any responsibility to
any person for the quality, suitability, safety or condition of the
Property; and (iii) Beneficiary shall not be deemed responsible for
or a participant in any acts, omissions or decisions of Trustor.
b. NO LIABILITY. Beneficiary shall not be directly or indirectly liable
or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any
person or property arising from any construction on, or occupancy or
use of, the Property, whether caused by or arising from: (i) any
defect in any building, structure, grading, fill, landscaping or
other improvements thereon or in any on-site or off-site improvement
or other facility therein or thereon; (ii) any act or omission of
Trustor or any of Trustor's agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on the
Property or any fire, flood or other casualty or hazard thereon;
(iv) the failure of Trustor or any of Trustor's licensees,
employees, invitees, agents, independent contractors or other
representatives to maintain the Property in a safe condition; or (v)
any nuisance made or suffered on any part of the Property.
8.9 SEVERABILITY. If any term of this Deed of Trust or any other Loan
Document, or the application thereof to any person or circumstances,
shall, to any extent, be invalid or unenforceable, the remainder of this
Deed of Trust or such other Loan Document, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Deed
of Trust or such other Loan Document shall be valid and enforceable to the
fullest extent permitted by law.
8.10 RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Beneficiary under the deed of trust established by Article 1 and the
security agreement established by Article 4 are independent and
cumulative, and there shall be no merger of any lien created by the deed
of trust with any security interest created by the security agreement.
Beneficiary may elect to exercise or enforce any of its rights, remedies
or interests under either or both the deed of trust or the security
agreement as Beneficiary may from time to time deem appropriate. The
absolute assignment of rents and leases established by Article 3 is
similarly independent of and separate from the deed of trust and the
security agreement.
8.11 MERGER. No merger shall occur as a result of Beneficiary's acquiring any
other estate in, or any other lien on, the Property unless Beneficiary
consents to a merger in writing.
8.12 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has
executed this Deed of Trust as "Trustor", the obligations of all such
persons hereunder shall be joint and several.
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8.13 SEPARATE AND COMMUNITY PROPERTY. Any married person who executes this Deed
of Trust as a "Trustor" agrees that any money judgment which Beneficiary
or Trustee obtains pursuant to the terms of this Deed of Trust or any
other obligation of that married person secured by this Deed of Trust may
be collected by execution upon any separate property or community property
of that person.
8.14 INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect
to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified
except by written instrument executed by all parties. Any reference in any
of the Loan Documents to the Property or Collateral shall include all or
any part of the Property or Collateral. Any reference to the Loan
Documents includes any amendments, renewals or extensions now or hereafter
approved by Beneficiary in writing. When the identity of the parties or
other circumstances make it appropriate, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
8.15 CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Note.
8.16 SUCCESSORS IN INTEREST. The terms, covenants, and conditions contained
herein and in the other Loan Documents shall be binding upon and inure to
the benefit of the heirs, successors and assigns of the parties. The
foregoing sentence shall not be construed to permit Trustor to assign the
Loan except as otherwise permitted under the Note or the other Loan
Documents.
8.17 GOVERNING LAW. This Deed of Trust was accepted by Beneficiary in the state
of California and the proceeds of the Note secured hereby were disbursed
from the state of California, which state the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, including, without limiting
the generality of the foregoing, matters of construction, validity,
enforceability and performance, this Deed of Trust, the Note and the other
Loan Documents and the obligations arising hereunder and thereunder shall
be governed by, and construed in accordance with, the laws of the state of
California applicable to contracts made and performed in such state and
any applicable law of the United States of America, except that at all
times the provisions for enforcement of Beneficiary's STATUTORY POWER OF
SALE and all other remedies granted hereunder and the creation, perfection
and enforcement of the security interests created pursuant hereto and
pursuant to the other Loan Documents in any Collateral which is located in
the state where the Property is located shall be governed by and construed
according to the law of the state where the Property is located. Except as
provided in the immediately preceding sentence, Trustor hereby
unconditionally and irrevocably waives, to the fullest extent permitted by
law, any claim to assert that the law of any jurisdiction other than
California governs this Deed of Trust, the Note and other Loan Documents.
8.18 CONSENT TO JURISDICTION. Trustor irrevocably submits to the jurisdiction
of: (a) any state or federal court sitting in the state of California over
any suit, action, or proceeding, brought by Trustor against Beneficiary,
arising out of or relating to this Deed of Trust, the Note or the Loan;
(b) any state or federal court sitting in the state where the Property is
located or the state in which Trustor's principal place of business is
located over any suit, action or proceeding, brought by Beneficiary
against Trustor, arising out of or relating to this Deed of Trust, the
Note or the Loan; and (c) any state court sitting in the county of the
state where the Property is located over any suit, action, or proceeding,
brought by Beneficiary to exercise its STATUTORY POWER OF SALE under this
Deed of Trust or any action brought by Beneficiary to enforce its rights
with respect to the Collateral. Trustor irrevocably waives, to the fullest
extent permitted by law, any objection that Trustor may now or hereafter
have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.19 EXHIBITS. Exhibit A is incorporated into this Deed of Trust by this
reference.
29
8.20 ADDRESSES; REQUEST FOR NOTICE. All notices and other communications that
are required or permitted to be given to a party under this Deed of Trust
or the other Loan Documents shall be in writing, refer to the Loan number,
and shall be sent to such party, either by personal delivery, by overnight
delivery service, by certified first class mail, return receipt requested,
or by facsimile transmission to the addressee or facsimile number below.
All such notices and communications shall be effective upon receipt of
such delivery or facsimile transmission, together with a printed receipt
of the successful delivery of such facsimile transmission. The addresses
of the parties are set forth on page 1 of this Deed of Trust and the
facsimile numbers for the parties are as follows:
Beneficiary: Trustor:
------------ --------
WELLS FARGO BANK, N.A. MHC STAGECOACH, L.L.C.
FAX No.: (925) 691-5947 FAX No.: (312) 279-1715
Trustor's principal place of business is at the address set forth on page
1 of this Deed of Trust. A copy of any notice to Trustor shall be sent as
follows:
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, Illinois 60606
Attention: Benjamin Randall
Facsimile: (312) 807-3903
Any Trustor whose address is set forth on page 1 of this Deed of Trust
hereby requests that a copy of notice of default and notice of sale be
delivered to it at that address. Failure to insert an address shall
constitute a designation of Trustor's last known address as the address
for such notice. Any party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by giving 30 days notice to the other parties in the manner set
forth above.
8.21 COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed
an original and all of which taken together, will be deemed to be one and
the same instrument.
8.22 WAIVER OF JURY TRIAL. BENEFICIARY (BY ITS ACCEPTANCE HEREOF) AND TRUSTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEED OF TRUST OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF BENEFICIARY OR TRUSTOR.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR BENEFICIARY TO ENTER INTO THIS
DEED OF TRUST.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
30
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year set forth above.
"TRUSTOR"
MHC STAGECOACH, L.L.C.,
a Delaware limited liability company
By: MHC-QRS STAGECOACH, INC.,
a Delaware corporation,
its Managing Member
By: /s/ John M. Zoeller
-------------------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
STATE OF IL )
) SS:
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 8/1,
2001 by John M. Zoeller, as Vice President, Chief Financial Officer and
Treasurer of MHC-QRS STAGECOACH, INC., a Delaware corporation, the managing
member of MHC STAGECOACH, L.L.C., a Delaware limited liability company.
WITNESS my hand and official seal.
/s/ Mary Dobronski
-----------------------------------
Print Name: Mary Dobronski
My Commission Expires:
11/3/03
[NOTARIAL SEAL]
NOTARY PUBLIC, State of IL
Serial No., if any:______________
Loan No. 31-0900553R
EXHIBIT A
DESCRIPTION OF LAND
Exhibit A to DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust") between MHC
STAGECOACH, L.L.C., a Delaware limited liability company, as "Trustor", PUBLIC
TRUSTEE OF ADAMS COUNTY, STATE OF COLORADO, as "Trustee", and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Beneficiary".
Description of Land. The Land referred to in this Deed of Trust is situated in
the county of Adams, state of Colorado and more particularly known as Thornton,
Colorado and is described as follows:
Northwest 1/4 of the Southeast 1/4 and the North 1/2 of the Southwest 1/4 of the
Southeast 1/4 of Section 21, Township 2 South, Range 68 West of the 6th P.M.,
County of Adams, State of Colorado,
EXCEPT portions dedicated for County roads;
AND EXCEPT that part described as follows:
Beginning at the center of Section 21, Township 2 South, Range 68 West of the
6th P.M., thence South 89 degrees 53 minutes East along the North line of the
Southeast 1/4, Section 21, a distance of 40.00 feet; thence South parallel to
the West line of the Southeast 1/4 of said Section, 30.00 feet to the True Point
of Beginning; thence South 89 degrees 53 minutes East parallel to the North line
of the Southeast 1/4 a distance of 180.00 feet; thence South parallel to the
West line of the Southeast 1/4, 150.00 feet; thence North 89 degrees 53 minutes
West parallel to the North line of the Southeast 1/4, 180.00 feet; thence North
parallel to the West line of the Southeast 1/4, 150.00 feet to the True Point of
Beginning, being in the City of Thornton, County of Adams, State of Colorado;
AND EXCEPT that part described as follows:
A part of the Southeast 1/4 of Section 21, Township 2 South, Range 68 West, of
the 6th P.M., County of Adams, State of Colorado, described as follows:
Beginning at a point 220.00 feet East and 180.00 feet South of the Northwest
corner of said Southeast 1/4; thence Southerly and parallel to the West line of
said Southeast 1/4 a distance of 393.93 feet; thence on an angle to the right of
90 degrees a distance of 180.00 feet to a point 40 feet East of the West line of
said Southeast 1/4; thence on an angle to the right of 90 degrees and parallel
to said West line a distance of 394.76 feet to a point 180.00 feet South of the
North line of said Southeast 1/4; thence on an angle to the right 90 degrees 16
minutes 40 seconds and parallel to said North line a distance of 180.00 feet to
the Point of Beginning, County of Adams, State of Colorado.
EXHIBIT A
Recording Requested by
and when recorded return to:
WELLS FARGO BANK, N.A.
Commercial Mortgage Origination
MAC # A0194-093
45 Fremont Street, 9th Floor
San Francisco, California 94105
Attention: CMO Loan Admin.
Loan No. : 31-0900553R
Property Name: Apollo Village
DEED OF TRUST
AND
ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
AND
SECURITY AGREEMENT
(AND FIXTURE FILING)
The parties to this DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
AND SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust"), dated as of July
31, 2001 are MHC STAGECOACH, L.L.C., a Delaware limited liability company
("Trustor"), with a mailing address at c/o Manufactured Home Communities, Inc.,
Two North Riverside Plaza, Suite 800, Chicago, Illinois 60606, TRANSNATION TITLE
INSURANCE COMPANY ("Trustee"), with a mailing address at 234 N. Central Avenue,
Phoenix, Arizona, 85004 and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Beneficiary"), with a mailing address at 1320 Willow Pass Road, Suite 205,
Concord, California 94520.
RECITALS
A. MHC STAGECOACH, L.L.C., a Delaware limited liability company ("Borrower")
proposes to borrow from Beneficiary, and Beneficiary proposes to lend to
Borrower the principal sum of FIFTY MILLION AND NO/100THS DOLLARS
($50,000,000.00) ("Loan"). The Loan is evidenced by a promissory note
("Note") executed by Borrower, dated the date of this Deed of Trust,
payable to the order of Beneficiary in the principal amount of the Loan.
The maturity date of the Loan is September 1, 2011.
B. The loan documents include this Deed of Trust, the Note and the other
documents described in the Note as Loan Documents ("Loan Documents").
ARTICLE 1. DEED OF TRUST
1.1 GRANT. For the purposes of and upon the terms and conditions of this Deed
of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in
trust for the benefit of Beneficiary, with power of sale and right of
entry and possession, all estate, right, title and interest which Trustor
now has or may hereafter acquire in, to, under or derived from any or all
of the following:
1
a. That real property ("Land") located in Peoria, county of Maricopa,
state of Arizona, and more particularly described on Exhibit A
attached hereto;
b. All appurtenances, easements, rights of way, water and water rights,
pumps, pipes, flumes and ditches and ditch rights, water stock,
ditch and/or reservoir stock or interests, royalties, development
rights and credits, air rights, minerals, oil rights, and gas
rights, now or later used or useful in connection with, appurtenant
to or related to the Land;
c. All buildings, structures, facilities, other improvements and
fixtures now or hereafter located on the Land;
d. All apparatus, equipment, machinery and appliances and all
accessions thereto and renewals and replacements thereof and
substitutions therefor used in the operation or occupancy of the
Land, it being intended by the parties that all such items shall be
conclusively considered to be a part of the Land, whether or not
attached or affixed to the Land;
e. All land lying in the right-of-way of any street, road, avenue,
alley or right-of-way opened, proposed or vacated, and all
sidewalks, strips and gores of land adjacent to or used in
connection with the Land;
f. All additions and accretions to the property described above;
g. All licenses, authorizations, certificates, variances, consents,
approvals and other permits now or hereafter pertaining to the Land
and all estate, right, title and interest of Trustor in, to, under
or derived from all tradenames or business names relating to the
Land or the present or future development, construction, operation
or use of the Land; and
h. All proceeds of any of the foregoing.
All of the property described above is hereinafter collectively defined as the
"Property". The listing of specific rights or property shall not be interpreted
as a limitation of general terms.
ARTICLE 2. OBLIGATIONS SECURED
2.1 OBLIGATIONS SECURED. Trustor makes the foregoing grant and assignment for
the purpose of securing the following obligations ("Secured Obligations"):
a. Full and punctual payment to Beneficiary of all sums at any time
owing under the Note;
b. Payment and performance of all covenants and obligations of Trustor
under this Deed of Trust, including, without limitation,
indemnification obligations and advances made to protect the
Property;
c. Payment and performance of all additional covenants and obligations
of Borrower and Trustor under the Loan Documents;
d. Payment and performance of all covenants and obligations, if any,
which any rider attached as an exhibit to this Deed of Trust recites
are secured hereby;
e. Payment and performance of all future advances and other obligations
that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor)
for the benefit of Beneficiary, when the obligation is evidenced by
a writing which recites that it is secured by this Deed of Trust;
2
f. All interest and charges on all obligations secured hereby
including, without limitation, prepayment charges, late charges and
loan fees; and
g. All modifications, extensions and renewals of any of the obligations
secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or
interest payment dates or both, as the case may be, deferring or
accelerating payment dates wholly or partly; and (ii) modifications,
extensions or renewals at a different rate of interest whether or
not any such modification, extension or renewal is evidenced by a
new or additional promissory note or notes.
2.2 OBLIGATIONS. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and
loan fees at any time accruing or assessed on any of the Secured
Obligations.
2.3 INCORPORATION. All terms and conditions of the documents which evidence
any of the Secured Obligations are incorporated herein by this reference.
All persons who may have or acquire an interest in the Property shall be
deemed to have notice of the terms of the Secured Obligations and to have
notice that the rate of interest on one or more Secured Obligations may
vary from time to time.
ARTICLE 3. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary all of Trustor's
right, title and interest in, to and under: (a) all present and future
leases of the Property or any portion thereof, all licenses and agreements
relating to the management, leasing or operation of the Property or any
portion thereof, and all other agreements of any kind relating to the use
or occupancy of the Property or any portion thereof, whether such leases,
licenses and agreements are now existing or entered into after the date
hereof ("Leases"); and (b) the rents, issues, deposits and profits of the
Property, including, without limitation, all amounts payable and all
rights and benefits accruing to Trustor under the Leases ("Payments"). The
term "Leases" shall also include all guarantees of and security for the
tenants' performance thereunder, and all amendments, extensions, renewals
or modifications thereto which are permitted hereunder. This is a present
and absolute assignment, not an assignment for security purposes only, and
Beneficiary's right to the Leases and Payments is not contingent upon, and
may be exercised without possession of, the Property.
3.2 GRANT OF LICENSE. Notwithstanding the terms contained in Section 3.1,
Beneficiary confers upon Trustor a revocable license ("License") to
collect and retain the Payments as they become due and payable, until the
occurrence of a Default (as hereinafter defined). Upon a Default, the
License shall be automatically revoked and Beneficiary may collect and
apply the Payments pursuant to the terms hereof without notice and without
taking possession of the Property. All Payments thereafter collected by
Trustor shall be held by Trustor as trustee under a constructive trust for
the benefit of Beneficiary. Trustor hereby irrevocably authorizes and
directs the tenants under the Leases, upon notice of a Default from
Beneficiary, to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums
which may at any time become due under the Leases, or for the performance
of any of the tenants' undertakings under the Leases, and the tenants
shall have no right or duty to inquire as to whether any Default has
actually occurred or is then existing. Trustor hereby relieves the tenants
from any liability to Trustor by reason of relying upon and complying with
any such notice or demand by Beneficiary. Beneficiary may apply, in its
sole discretion, any Payments so collected by Beneficiary against any
Secured Obligation or any other obligation of Borrower, Trustor or any
other person or entity, under any document or instrument related to or
executed in connection with the Loan Documents, whether existing on the
date hereof or hereafter arising. Collection of any Payments by
Beneficiary shall not cure or waive any Default or notice of Default or
invalidate any acts done pursuant to such notice. If and when no Default
exists, Beneficiary shall re-confer the License upon Trustor until the
occurrence of another Default.
3
3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause
Beneficiary to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; (c)
responsible or liable for any waste committed on the Property by the
tenants under any of the Leases or by any other parties; for any dangerous
or defective condition of the Property; or for any negligence in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee, invitee or other
person; or (d) responsible for or impose upon Beneficiary any duty to
produce rents or profits. Beneficiary shall not directly or indirectly be
liable to Trustor or any other person as a consequence of: (e) the
exercise of or failure to exercise any of the rights, remedies or powers
granted to Beneficiary hereunder; or (f) the failure or refusal of
Beneficiary to perform or discharge any obligation, duty or liability of
Trustor arising under the Leases.
3.4 COVENANTS.
A. ALL LEASES. Trustor shall, at Trustor's sole cost and expense:
(i) perform all obligations of the landlord under the Leases and
use reasonable efforts to enforce performance by the tenants
of all obligations of the tenants under the Leases;
(ii) use reasonable efforts to keep the Property leased at all
times to tenants whom Trustor reasonably and in good faith
believes are creditworthy at rents not less than the fair
market rental value (including, but not limited to, free or
discounted rents to the extent the market so requires);
(iii) promptly upon Beneficiary's request, deliver to Beneficiary a
copy of each requested Lease and all amendments thereto and
waivers thereof; and
(iv) promptly upon Beneficiary's request, execute and record any
additional assignments of landlord's interest under any Lease
to Beneficiary and specific subordinations of any Lease to
this Deed of Trust, in form and substance satisfactory to
Beneficiary.
Unless consented to in writing by Beneficiary or otherwise permitted
under any other provision of the Loan Documents, Trustor shall not:
(v) grant any tenant under any Lease any option, right of first
refusal or other right to purchase all or any portion of the
Property under any circumstances;
(vi) grant any tenant under any Lease any right to prepay rent more
than 1 month in advance;
(vii) except upon Beneficiary's request, execute any assignment of
landlord's interest in any Lease; or
(viii) collect rent or other sums due under any Lease in advance,
other than to collect rent 1 month in advance of the time when
it becomes due.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
Trustor shall deposit with Beneficiary any sums received by Trustor
in consideration of any termination, modification or amendment of
any Lease or any release or discharge of any tenant under any Lease
from any obligation thereunder and any such sums received by Trustor
shall be held in trust by Trustor for such purpose. Notwithstanding
the foregoing, so long as no Default exists, the portion of any such
sum received by Trustor with respect to any Lease which is less than
$50,000 shall be payable to Trustor. All such sums received by
Beneficiary with respect to any Lease shall be deemed "Impounds" (as
defined in Section 6.12b) and shall be deposited by Beneficiary into
a pledged account in accordance with Section 6.12b. If no Default
exists, Beneficiary shall release such Impounds to Trustor from time
to time
4
as necessary to pay or reimburse Trustor for such tenant
improvements, brokerage commissions and other leasing costs as may
be required to re-tenant the affected space; provided, however,
Beneficiary shall have received and approved each of the following
for each tenant for which such costs were incurred; (1) Trustor's
written request for such release, including the name of the tenant,
the location and net rentable area of the space and a description
and cost breakdown of the tenant improvements or other leasing costs
covered by the request; (2) Trustor's certification that any tenant
improvements have been completed lien-free and in a workmanlike
manner; (3) a fully executed Lease, or extension or renewal of the
current Lease; (4) an estoppel certificate executed by the tenant
including its acknowledgement that all tenant improvements have been
satisfactorily completed; and (5) such other information with
respect to such costs as Beneficiary may require. Following the
re-tenanting of all affected space (including, without limitation,
the completion of all tenant improvements), and provided no Default
exists, Beneficiary shall release any remaining such Impounds
relating to the affected space to Trustor. Trustor shall construct
all tenant improvements in a workmanlike manner and in accordance
with all applicable laws, ordinances, rules and regulations.
b. MAJOR LEASES. Trustor shall, at Trustor's sole cost and expense,
give Beneficiary prompt written notice of any material default by
landlord or tenant under any Major Lease (as defined below). Unless
consented to in writing by Beneficiary or otherwise permitted under
any other provision of the Loan Documents, Trustor shall not:
(i) enter into any Major Lease which (aa) is not on fair market
terms (which terms may include free or discounted rent to the
extent the market so requires); (bb) does not contain a
provision requiring the tenant to execute and deliver to the
landlord an estoppel certificate in form and substance
satisfactory to the landlord promptly upon the landlord's
request; or (cc) allows the tenant to assign or sublet the
premises without the landlord's consent;
(ii) reduce any rent or other sums due from the tenant under any
Major Lease;
(iii) terminate or materially modify or amend any Major Lease; or
(iv) release or discharge the tenant or any guarantor under any
Major Lease from any material obligation thereunder.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
"Major Lease", as used herein, shall mean any Lease, which is, at
any time: (1) a Lease of more than 20% of the total rentable area of
the Property, as reasonably determined by Beneficiary; or (2) a
Lease which generates a gross base monthly rent exceeding 20% of the
total gross base monthly rent generated by all Leases (excluding all
Leases under which the tenant is then in default), as reasonably
determined by Beneficiary. Trustor's obligations with respect to
Major Leases shall be governed by the provisions of Section 3.4a as
well as by the provisions of this Section.
c. FAILURE TO DENY REQUEST. Beneficiary's failure to deny any written
request by Trustor for Beneficiary's consent under the provisions of
Sections 3.4(a) or 3.4(b) within 10 Business Days after
Beneficiary's receipt of such request (and all documents and
information reasonably related thereto) shall be deemed to
constitute Beneficiary's consent to such request.
3.5 RIGHT OF SUBORDINATION. Beneficiary may at any time and from time to time
by specific written instrument intended for the purpose unilaterally
subordinate the lien of this Deed of Trust to any Lease, without joinder
or consent of, or notice to, Trustor, any tenant or any other person.
Notice is hereby given to each tenant under a Lease of such right to
subordinate. No subordination referred to in this Section shall constitute
a subordination to any lien or other encumbrance, whenever arising, or
improve the right of any junior lienholder. Nothing herein shall be
construed as subordinating this Deed of Trust to any Lease.
5
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 SECURITY INTEREST. Trustor grants and assigns to Beneficiary a security
interest to secure payment and performance of all of the Secured
Obligations, in all of Trustor's right, title and interest in and to the
following described personal property in which Trustor now or at any time
hereafter has any interest ("Collateral"):
All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and
other personal property, wherever situated, which are or are to be
incorporated into, used in connection with or appropriated for use
on the Property; all rents, issues, deposits and profits of the
Property (to the extent, if any, they are not subject to the
Absolute Assignment of Rents and Leases); all inventory, accounts,
cash receipts, deposit accounts, impounds, accounts receivable,
contract rights, general intangibles, software, chattel paper,
instruments, documents, promissory notes, drafts, letters of credit,
letter of credit rights, supporting obligations, insurance policies,
insurance and condemnation awards and proceeds, any other rights to
the payment of money, trade names, trademarks and service marks
arising from or related to the Property or any business now or
hereafter conducted thereon by Trustor; all permits, consents,
approvals, licenses, authorizations and other rights granted by,
given by or obtained from, any governmental entity with respect to
the Property; all deposits or other security now or hereafter made
with or given to utility companies by Trustor with respect to the
Property; all advance payments of insurance premiums made by Trustor
with respect to the Property; all plans, drawings and specifications
relating to the Property; all loan funds held by Beneficiary,
whether or not disbursed; all funds deposited with Beneficiary
pursuant to any Loan Document, all reserves, deferred payments,
deposits, accounts, refunds, cost savings and payments of any kind
related to the Property or any portion thereof, including, without
limitation, all "Impounds" as defined herein; together with all
replacements and proceeds of, and additions and accessions to, any
of the foregoing, and all books, records and files relating to any
of the foregoing.
As to all of the above described personal property which is or which
hereafter becomes a "fixture" under applicable law, this Deed of Trust
constitutes a fixture filing under the Arizona Uniform Commercial Code, as
amended or recodified from time to time ("UCC").
4.2 COVENANTS. Trustor agrees: (a) to execute and deliver such documents as
Beneficiary reasonably deems necessary to create, perfect and continue the
security interests contemplated hereby; (b) not to change its name, and,
as applicable, its chief executive offices, its principal residence or the
jurisdiction in which it is organized without giving Beneficiary at least
30 days' prior written notice thereof; and (c) to cooperate with
Beneficiary in perfecting all security interests granted herein and in
obtaining such agreements from third parties as Beneficiary deems
necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of Beneficiary's rights hereunder.
4.3 RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a "Secured
Party" under the UCC, Beneficiary may, but shall not be obligated to, at
any time without notice and at the expense of Trustor: (a) give notice to
any person of Beneficiary's rights hereunder and enforce such rights at
law or in equity; (b) insure, protect, defend and preserve the Collateral
or any rights or interests of Beneficiary therein; and (c) inspect the
Collateral during normal business hours upon reasonable prior written
notice, provided, however, that such notice shall not be required in the
event of an emergency. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any obligation of Trustor to Beneficiary unless
Beneficiary shall make an express written election of said remedy under
the UCC or other applicable law.
6
4.4 ADDITIONAL RIGHTS OF BENEFICIARY UPON DEFAULT. Upon the occurrence of a
Default, then in addition to all of Beneficiary's rights as a "Secured
Party" under the UCC or otherwise at law:
a. DISPOSITION OF COLLATERAL. Beneficiary may: (i) upon written notice,
require Trustor to assemble the Collateral and make it available to
Beneficiary at a place reasonably designated by Beneficiary; (ii)
without prior notice (to the extent permitted by law), enter upon
the Property or other place where the Collateral may be located and
take possession of, collect, sell, lease, license and otherwise
dispose of the Collateral, and store the same at locations
acceptable to Beneficiary at Trustor's expense; or (iii) sell,
assign and deliver the Collateral at any place or in any lawful
manner and bid and become purchaser at any such sales; and
b. OTHER RIGHTS. Beneficiary may, for the account of Trustor and at
Trustor's expense: (i) operate, use, consume, sell, lease, license
or otherwise dispose of the Collateral as Beneficiary reasonably
deems appropriate for the purpose of performing any or all of the
Secured Obligations; (ii) enter into any agreement, compromise or
settlement including insurance claims, which Beneficiary may
reasonably deem desirable or proper with respect to the Collateral;
and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness
and obligations now or hereafter owing to Trustor in connection with
or on account of the Collateral.
Trustor acknowledges and agrees that a disposition of the Collateral in
accordance with Beneficiary's rights and remedies as heretofore provided
is a disposition thereof in a commercially reasonable manner and that 5
Business Days prior notice of such disposition is commercially
reasonable notice. Beneficiary shall have no obligation to process or
prepare the Collateral for sale or other disposition. In disposing of
the Collateral, Beneficiary may disclaim all warranties of title,
possession, quiet enjoyment and the like. Any proceeds of any sale or
other disposition of the Collateral may be applied by Beneficiary first
to the reasonable expenses incurred by Beneficiary in connection
therewith, including, without limitation, reasonable attorneys' fees and
disbursements, and then to the payment of the Secured Obligations, in
such order of application as Beneficiary may from time to time elect.
4.5 POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as
Trustor's attorney-in-fact (such agency being coupled with an interest),
and as such attorney-in-fact, Beneficiary may, without the obligation to
do so, in Beneficiary's name or in the name of Trustor, prepare,
execute, file and record financing statements, continuation statements,
applications for registration and like papers necessary to create,
perfect or preserve any of Beneficiary's security interests and rights
in or to the Collateral, and upon a Default, take any other action
required of Trustor; provided, however, that Beneficiary as such
attorney-in-fact shall be accountable only for such funds as are
actually received by Beneficiary.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
Beneficiary that, to Trustor's current actual knowledge after reasonable
investigation and inquiry, the following statements are true and correct
as of the Effective Date:
a. LEGAL STATUS. Trustor and Borrower are duly organized and existing
and in good standing under the laws of the state(s) in which Trustor
and Borrower are organized. Trustor and Borrower are qualified or
licensed to do business in all jurisdictions in which such
qualification or licensing is required.
b. PERMITS. Trustor and Borrower possess all permits, franchises and
licenses and all rights to all trademarks, trade names, patents and
fictitious names, if any, necessary to enable Trustor and Borrower
to conduct the business(es) in which Trustor and Borrower are now
engaged in compliance with applicable law.
7
c. AUTHORIZATION AND VALIDITY. The execution and delivery of the Loan
Documents have been duly authorized and the Loan Documents
constitute valid and binding obligations of Trustor, Borrower or the
party which executed the same, enforceable in accordance with their
respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights, or by the application of rules of
equity .
d. VIOLATIONS. The execution, delivery and performance by Trustor and
Borrower of each of the Loan Documents do not violate any provision
of any law or regulation, or result in any breach or default under
any contract, obligation, indenture or other instrument to which
Trustor or Borrower is a party or by which Trustor or Borrower is
bound.
e. LITIGATION. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental
authority, court or administrative agency which may adversely affect
the financial condition or operations of Trustor or Borrower other
than those previously disclosed in writing by Trustor or Borrower to
Beneficiary.
f. FINANCIAL STATEMENTS. The financial statements of Trustor and
Borrower, of each general partner (if Trustor or Borrower is a
partnership), of each member (if Trustor or Borrower is a limited
liability company) and of each guarantor, if any, previously
delivered by Trustor or Borrower to Beneficiary: (i) are materially
complete and correct; (ii) present fairly the financial condition of
such party; and (iii) have been prepared in accordance with the same
accounting standard used by Trustor or Borrower to prepare the
financial statements delivered to and approved by Beneficiary in
connection with the making of the Loan, or other accounting
standards approved by Beneficiary. Since the date of such financial
statements, there has been no material adverse change in such
financial condition, nor have any assets or properties reflected on
such financial statements been sold, transferred, assigned,
mortgaged, pledged or encumbered except as previously disclosed in
writing by Trustor or Borrower to Beneficiary and approved in
writing by Beneficiary.
g. REPORTS. All reports, documents, instruments and information
delivered to Beneficiary in connection with the Loan: (i) are
correct in all material respects and sufficiently complete to give
Beneficiary accurate knowledge of their subject matter; and (ii) do
not contain any misrepresentation of a material fact or omission of
a material fact which omission makes the provided information
misleading.
h. INCOME TAXES. There are no material pending assessments or
adjustments of Trustor's or Borrower's income tax payable with
respect to any year.
i. SUBORDINATION. There is no agreement or instrument to which Borrower
is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower's obligations
under the Note to an obligation owed to another party.
j. TITLE. Trustor lawfully holds and possesses fee simple title to the
Property, without limitation on the right to encumber same. This
Deed of Trust is a first lien on the Property prior and superior to
all other liens and encumbrances on the Property except: (i) liens
for real estate taxes and assessments not yet due and payable; (ii)
senior exceptions previously approved by Beneficiary and shown in
the title insurance policy insuring the lien of this Deed of Trust;
and (iii) other matters, if any, previously disclosed to Beneficiary
by Trustor in a writing specifically referring to this
representation and warranty.
k. MECHANICS' LIENS. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to any such liens)
affecting the Property which are or may be prior to or equal to the
lien of this Deed of Trust, other than those (if any) previously
approved by Beneficiary and shown on the title insurance policy
insuring the lien of this Deed of Trust.
8
l. ENCROACHMENTS. Except as shown in the survey, if any, previously
delivered to Beneficiary, none of the buildings or other
improvements which were included for the purpose of determining the
appraised value of the Property lies outside of the boundaries or
building restriction lines of the Property and no buildings or other
improvements located on adjoining properties encroach upon the
Property.
m. LEASES. All existing Leases are in full force and effect and are
enforceable in accordance with their respective terms. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no material breach or default by any party, or event which
would constitute a material breach or default by any party after
notice or the passage of time, or both, exists under any existing
Lease. None of the landlord's interests under any of the Leases,
including, but not limited to, rents, additional rents, charges,
issues or profits, has been transferred or assigned. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no rent or other payment under any existing Lease has been
paid by any tenant for more than 1 month in advance.
n. COLLATERAL. Trustor has good title to the existing Collateral, free
and clear of all liens and encumbrances except those, if any,
previously disclosed to Beneficiary by Trustor in writing
specifically referring to this representation and warranty.
Trustor's chief executive office (or residence, if applicable) is
located at the address shown on page one of this Deed of Trust.
Trustor is an organization organized solely under the laws of the
State of Delaware. All organizational documents of Trustor delivered
to Beneficiary are complete and accurate in every respect. Trustor's
legal name is exactly as shown on page one of this Deed of Trust.
o. CONDITION OF PROPERTY. Except as shown in the property condition
survey or other engineering reports, if any, previously delivered to
or obtained by Beneficiary, the Property is in good condition and
repair and is free from any damage that would materially and
adversely affect the value of the Property as security for the Loan
or the intended use of the Property.
p. HAZARDOUS MATERIALS. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by
Beneficiary, the Property is not and has not been a site for the
use, generation, manufacture, storage, treatment, release,
threatened release, discharge, disposal, transportation or presence
of Hazardous Materials (as hereinafter defined) in violation of
Hazardous Materials Laws (as hereinafter defined) except as
otherwise previously disclosed in writing by Trustor to Beneficiary.
q. HAZARDOUS MATERIALS LAWS. The Property complies with all Hazardous
Materials Laws.
r. HAZARDOUS MATERIALS CLAIMS. There are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).
s. WETLANDS. No part of the Property consists of or is classified as
wetlands, tidelands or swamp and overflow lands.
t. COMPLIANCE WITH LAWS. All federal, state and local laws, rules and
regulations applicable to the Property, including, without
limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990, as
amended from time to time (42 U. S. C. Section 12101 et seq.) have
been satisfied or complied with. Trustor is in possession of all
certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of
the Property. All such certificates of occupancy and other licenses,
permits and authorizations are valid and in full force and effect.
u. PROPERTY TAXES AND OTHER LIABILITIES. All taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
and ground rents, if any, which previously became due and owing in
respect of the Property have been paid.
9
v. CONDEMNATION. There is no proceeding pending or threatened for the
total or partial condemnation of the Property.
w. HOMESTEAD. There is no homestead or other exemption available to
Trustor which would materially interfere with the right to sell the
Property at a trustee's sale or the right to foreclose this Deed of
Trust.
x. SOLVENCY. None of the transactions contemplated by the Loan will be
or have been made with an actual intent to hinder, delay or defraud
any present or future creditors of Trustor, and Trustor, on the
Effective Date, will have received fair and reasonably equivalent
value in good faith for the grant of the liens or security interests
effected by the Loan Documents. On the Effective Date, Trustor will
be solvent and will not be rendered insolvent by the transactions
contemplated by the Loan Documents. Trustor is able to pay its debts
as they become due.
y. SEPARATE TAX PARCEL(S). The Property is assessed for real estate tax
purposes as one or more wholly independent tax parcels, separate
from any other real property, and no other real property is assessed
and taxed together with the Property or any portion thereof.
5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS (LEVEL V SPE).
Trustor hereby represents, warrants and covenants to Beneficiary that with
respect to both Trustor and MHC-QRS STAGECOACH, INC., a Delaware
corporation, the managing member of Trustor:
a. each such entity was organized solely for the purpose of (i) owning
the Properties (as defined in the Note); (ii) acting as a general
partner of a limited partnership which owns the Properties; or (iii)
acting as a managing member of a limited liability company which
owns the Properties;
b. each such entity has not engaged and will not engage in any business
unrelated to (i) the ownership of the Properties; (ii) acting as
general partner of a limited partnership which owns the Properties;
or (iii) acting as a managing member of a limited liability company
which owns the Properties;
c. each such entity has not had and will not have any assets other than
the Properties (and personal property incidental to the ownership
and operation of the Properties) or its partnership or membership
interest in the limited partnership or limited liability company
which owns the Properties, as applicable;
d. each such entity has not and will not engage in, seek or consent to
any dissolution, winding up, liquidation, consolidation, merger,
asset sale, transfer of partnership or membership interest, or
amendment of its articles of incorporation, articles of
organization, certificate of formation, operating agreement or
limited partnership agreement, as applicable;
e. if any such entity is a limited partnership, all of its general
partners are corporations that satisfy the requirements set forth in
this Section 5.2;
f. if any such entity is a limited liability company, it has at least
one managing member that is a corporation that satisfies the
requirements set forth in this Section 5.2;
g. each such entity, without the unanimous consent of all of its
general partners, directors or members, as applicable, shall not
file or consent to the filing of any bankruptcy or insolvency
petition or otherwise institute insolvency proceedings with respect
to itself or any other entity in which it has a direct or indirect
legal or beneficial ownership interest;
10
h. each such entity has no indebtedness (and will have no indebtedness)
other than (i) the Loan (to the extent it is liable under the terms
of the Loan Documents); and (ii) unsecured trade debt not to exceed
____________ in the aggregate with respect to Trustor or $10,000 in
the aggregate with respect to its managing member, which is not
evidenced by a note and is incurred in the ordinary course of its
business in connection with owning, operating and maintaining the
Property (or its interest in Trustor, as applicable) and is paid
within thirty (30) days from the date incurred;
i. each such entity has not failed and will not fail to correct any
known misunderstanding regarding the separate identity of such
entity;
j. each such entity has maintained and will maintain its accounts,
books and records separate from any other person or entity;
k. each such entity has maintained and will maintain its books,
records, resolutions and agreements as official records;
l. each such entity (i) has not commingled and will not commingle its
funds or assets with those of any other entity; and (ii) has held
and will hold its assets in its own name;
m. each such entity has conducted and will conduct its business in its
own name or in a registered trade name;
n. each such entity has maintained and will maintain its accounting
records and other entity documents separate from any other person or
entity;
o. each such entity has prepared and will prepare separate tax returns
and financial statements, or if part of a consolidated group, is
shown as a separate member of such group;
p. each such entity has paid and will pay its own liabilities and
expenses out of its own funds and assets;
q. each such entity has held and will hold regular meetings, as
appropriate, to conducts its business and has observed and will
observe all corporate, partnership or limited liability company
formalities and record keeping, as applicable;
r. each such entity has not assumed or guaranteed and will not assume
or guarantee or become obligated for the debts of any other entity
or hold out its credit as being available to satisfy the obligations
of any other entity;
s. each such entity has not acquired and will not acquire obligations
or securities of its partners, members or shareholders;
t. each such entity has allocated and will allocate fairly and
reasonably the costs associated with common employees and any
overhead for shared office space and each such entity has used and
will use separate stationery, invoices and checks under its own name
or under its registered trade name;
u. each such entity has not pledged and will not pledge its assets for
the benefit of any other person or entity;
v. each such entity has held out and identified itself and will hold
itself out and identify itself as a separate and distinct entity
under its own name or under its registered trade name and not as a
division or part of any other person or entity;
11
w. each such entity has not made and will not make loans to any person
or entity;
x. each such entity has not identified and will not identify its
partners, members or shareholders, or any affiliates of any of the
foregoing, as a division or part of it;
y. each such entity has not entered into and will not enter into or be
a party to, any transaction with its partners, members,
shareholders, or any affiliates of any of the foregoing, except in
the ordinary course of its business pursuant to written agreements
and on terms which are intrinsically fair and are no less favorable
to it than would be obtained in a comparable arm's-length
transaction with an unrelated third party;
z. if any such entity is a corporation, the directors of such entity
shall consider the interests of the creditors of such entity in
connection with all corporate action;
aa. each such entity has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number
of employees in light of its contemplated business operations;
bb. each such entity has maintained and will maintain adequate capital
in light of its contemplated business operations;
cc. if any such entity is a limited partnership with more than one
general partner, its limited partnership agreement requires the
remaining partners to continue the partnership as long as one
solvent general partner exists;
dd. if any such entity is a limited liability company, its operating
agreement, if any such entity is a limited partnership, its limited
partnership agreement, and if any such entity is a corporation, to
the full extent permitted by applicable law, its articles of
incorporation, contain the provisions set forth in this Section 5.2
and any such entity shall conduct its business and operations in
strict compliance with the terms contained therein;
ee. each such entity will, as a condition to the closing of the Loan,
deliver to Beneficiary a nonconsolidation opinion in form and
substance acceptable to Beneficiary;
ff. if any such entity is a corporation, it has maintained and will
continue to maintain at least one Independent Director (as
hereinafter defined); and
gg. if any such entity is a corporation, it has not caused or allowed
and will not cause or allow the board of directors of such entity to
take any action requiring the unanimous affirmative vote of 100% of
the members of the board of directors unless an Independent Director
shall have participated in such vote.
An "Independent Director" shall be an individual who, except in his or her
capacity as an Independent Director of the corporation is not, and has not
been during the five (5) years immediately before such individual's
appointment as an Independent Director: (i) a stockholder, director,
partner, officer or employee of the corporation or its Affiliates; (ii)
affiliated with a customer or supplier of the corporation or its
Affiliates; or (iii) a spouse, parent, sibling, child or other family
relative of any person described by (i) or (ii) above.
As used herein, the term "Affiliate" shall mean any person or entity other
than the corporation (i) which owns beneficially, directly or indirectly,
any outstanding shares of the corporation's stock, or (ii) which controls,
is controlled by or is under common control with the corporation. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities, by contract or otherwise.
12
ARTICLE 6. RIGHTS AND DUTIES OF THE PARTIES
6.1 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Trustor shall, or shall
cause the property manager to: (a) keep the Property in good condition and
repair; (b) complete or restore promptly and in workmanlike manner the
Property or any part thereof which may be damaged or destroyed (unless, if
and to the extent permitted under Section 6.11, Beneficiary elects to
require that insurance proceeds be used to reduce the Secured Obligations
and after such repayment the ratio of Secured Obligations to the value of
the Property, as reasonably determined by Beneficiary is the same as or
lower than it was immediately before the loss or taking occurred); (c)
comply and cause the Property to comply with (i) all laws, ordinances,
regulations and standards, (ii) all covenants, conditions, restrictions
and equitable servitudes, whether public or private, of every kind and
character and (iii) all requirements of insurance companies and any bureau
or agency which establishes standards of insurability, which laws,
covenants or requirements affect the Property and pertain to acts
committed or conditions existing thereon, including, without limitation,
any work of alteration, improvement or demolition as such laws, covenants
or requirements mandate; (d) operate and manage the Property at all times
in a professional manner and do all other acts which from the character or
use of the Property may be reasonably necessary to maintain and preserve
its value; (e) promptly after execution, deliver to Beneficiary a copy of
any management agreement concerning the Property and all amendments
thereto and waivers thereof; and (f) execute and acknowledge all further
documents, instruments and other papers as Beneficiary or Trustee
reasonably deems necessary or appropriate to preserve, continue, perfect
and enjoy the benefits of this Deed of Trust and perform Trustor's
obligations, including, without limitation, statements of the amount
secured hereby then owing and statements of no offset. Trustor shall not,
without Beneficiary's prior written consent: (g) remove or demolish all or
any material part of the Property; (h) alter either (i) the exterior of
the Property in a manner which materially and adversely affects the value
of the Property or (ii) the roof or other structural elements of the
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any
change in any zoning or other land classification which affects the
Property; (j) materially alter the type of occupancy or use of all or any
part of the Property; or (k) commit or permit waste of the Property.
6.2 HAZARDOUS MATERIALS. Without limiting any other provision of this Deed of
Trust, Trustor agrees as follows:
a. PROHIBITED ACTIVITIES. Trustor shall not cause or permit the
Property to be used as a site for the use, generation, manufacture,
storage, treatment, release, discharge, disposal, transportation or
presence of any oil or other petroleum products, flammable
explosives, asbestos, urea formaldehyde insulation, radioactive
materials, hazardous wastes, toxic or contaminated substances or
similar materials, including, without limitation, any substances
which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under the Hazardous Materials Laws
(defined below) and/or other applicable environmental laws,
ordinances or regulations ("Hazardous Materials").
The foregoing to the contrary notwithstanding, (i) Trustor may
store, maintain and use on the Property janitorial and maintenance
supplies, paint and other Hazardous Materials of a type and in a
quantity readily available for purchase by the general public and
normally stored, maintained and used by owners and managers of
properties of a type similar to the Property; and (ii) tenants of
the Property may store, maintain and use on the Property (and, if
any tenant is a retail business, hold in inventory and sell in the
ordinary course of such tenant's business) household and consumer
cleaning supplies and other Hazardous Materials of a type and
quantity readily available for purchase by the general public and
normally stored, maintained and used (and, if tenant is a retail
business, sold) by tenants of properties similar to the Property or
in similar lines of business on properties similar to the Property.
b. HAZARDOUS MATERIALS LAWS. Trustor shall comply and cause the
Property to comply with all federal, state and local laws,
ordinances and regulations relating to Hazardous Materials
("Hazardous
13
Materials Laws"), including, without limitation: the Clean Air Act,
as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.;
the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. Section 6901 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(including the Superfund Amendments and Reauthorization Act of 1986,
"CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances
Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section
651; the Emergency Planning and Community Right-to-Know Act of 1986,
42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of
1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state
and local laws, laws of other jurisdictions or orders and
regulations.
c. NOTICES. Trustor shall immediately notify Beneficiary in writing of:
(i) the discovery of any Hazardous Materials on, under or about the
Property (other than Hazardous Materials permitted under Section
6.2(a)); (ii) any knowledge by Trustor that the Property does not
comply with any Hazardous Materials Laws; (iii) any claims or
actions ("Hazardous Materials Claims") pending or threatened in
writing against Trustor or the Property by any governmental entity
or agency or any other person or entity relating to Hazardous
Materials or pursuant to the Hazardous Materials Laws; and (iv) the
discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to become contaminated with Hazardous
Materials.
d. REMEDIAL ACTION. In response to knowledge or notification to Trustor
of the presence of any Hazardous Materials on, under or about the
Property, Trustor shall immediately take, at Trustor's sole expense,
all remedial action required by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any
Hazardous Materials Claims.
e. INSPECTION BY BENEFICIARY. Upon reasonable prior notice to Trustor
(except in the case of an emergency) and during normal business
hours, Beneficiary, its employees and agents, may from time to time
(whether before or after the commencement of a nonjudicial or
judicial foreclosure proceeding), enter and inspect the Property for
the purpose of determining the existence, location, nature and
magnitude of any past or present release or threatened release of
any Hazardous Materials into, onto, beneath or from the Property.
f. LEGAL EFFECT OF SECTION. Trustor and Beneficiary agree that: (i)
this Hazardous Materials Section is intended as Beneficiary's
written request for information (and Trustor's response) concerning
the environmental condition of the real property security as
required by California Code of Civil Procedure Section 726.5; and
(ii) each representation and warranty and covenant in this Section
(together with any indemnity applicable to a breach of any such
representation and warranty) with respect to the environmental
condition of the Property is intended by Beneficiary and Trustor to
be an "environmental provision" for purposes of California Code of
Civil Procedure Section 736.
6.3 COMPLIANCE WITH LAWS. Trustor shall comply with all federal, state and
local laws, rules and regulations applicable to the Property, including,
without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), as amended from time to time. Trustor shall
possess and maintain or cause Borrower to possess and maintain in full
force and effect at all times (a) all certificates of occupancy and other
licenses, permits and authorizations required by applicable law for the
existing use of the Property and (b) all permits, franchises and licenses
and all rights to all trademarks, trade names, patents and fictitious
names, if any, required by applicable law for Trustor and Borrower to
conduct the business(es) in which Trustor and Borrower are now engaged.
6.4 LITIGATION. Trustor shall promptly notify Beneficiary in writing of any
litigation pending or threatened in writing against Trustor or Borrower
claiming damages in excess of $100,000 and of all pending or threatened
14
(in writing) litigation against Trustor or Borrower if the aggregate
damage claims against Trustor or Borrower exceed $500,000.
6.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Trustor shall not: (a) merge or
consolidate with any other entity or permit Borrower to merge or
consolidate with any other entity; (b) make any substantial change in the
nature of Trustor's business or structure or permit Borrower to make any
substantial change in the nature of Borrower's business or structure; (c)
acquire all or substantially all of the assets of any other entity or
permit Borrower to acquire all or substantially all of the assets of any
other entity; or (d) sell, lease, assign, transfer or otherwise dispose of
a material part of Trustor's assets except in the ordinary course of
Trustor's business or permit Borrower to sell, lease, assign, transfer or
otherwise dispose of a material part of Borrower's assets except in the
ordinary course of Borrower's business.
6.6 ACCOUNTING RECORDS. Trustor shall maintain and cause Borrower to maintain
adequate books and records in accordance with the same accounting standard
used by Trustor or Borrower to prepare the financial statements delivered
to and approved by Beneficiary in connection with the making of the Loan
or other accounting standards approved by Beneficiary. Trustor shall
permit and shall cause Borrower to permit any representative of
Beneficiary, at any reasonable time and from time to time, upon reasonable
prior notice to Trustor, to inspect, audit and examine such books and
records and make copies of same.
6.7 COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor shall pay to Beneficiary the
full amount of all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses of Beneficiary's in-house or
outside counsel, incurred by Beneficiary in connection with: (a)
appraisals and inspections of the Property or Collateral required by
Beneficiary as a result of (i) a Transfer or proposed Transfer (as defined
below), or (ii) a Default; (b) appraisals and inspections of the Property
or Collateral required by applicable law, including, without limitation,
federal or state regulatory reporting requirements; and (c) any acts
performed by Beneficiary at Trustor's request or wholly or partially for
the benefit of Trustor (including, without limitation, the preparation or
review of amendments, assumptions, waivers, releases, reconveyances,
estoppel certificates or statements of amounts owing under any Secured
Obligation). In connection with appraisals and inspections, Trustor
specifically (but not by way of limitation) acknowledges that: (aa) a
formal written appraisal of the Property by a state certified or licensed
appraiser may be required by federal regulatory reporting requirements on
an annual or more frequent basis; and (bb) Beneficiary may require
inspection of the Property by an independent supervising architect, a cost
engineering specialist, or both. Trustor shall pay all indebtedness
arising under this Section immediately upon demand by Beneficiary together
with interest thereon following notice of such indebtedness at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.8 LIENS, ENCUMBRANCES AND CHARGES. Subject to the terms of Section 8.4,
Trustor shall immediately discharge by bonding or otherwise any lien,
charge or other encumbrance which attaches to the Property in violation of
Section 6.15. Subject to Trustor's right to contest such matters under
this Deed of Trust or as expressly permitted in the Loan Documents,
Trustor shall pay when due all obligations secured by or reducible to
liens and encumbrances which shall now or hereafter encumber or appear to
encumber all or any part of the Property or any interest therein, whether
senior or subordinate hereto, including, without limitation, all claims
for work or labor performed, or materials or supplies furnished, in
connection with any work of demolition, alteration, repair, improvement or
construction of or upon the Property, except such as Trustor may in good
faith contest or as to which a bona fide dispute may arise (provided
provision is made to the satisfaction of Beneficiary for eventual payment
thereof in the event that Trustor is obligated to make such payment and
that any recorded claim of lien, charge or other encumbrance against the
Property is immediately discharged by bonding or otherwise).
6.9 TAXES AND OTHER LIABILITIES. Trustor shall pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real and
personal and including federal and state income taxes and state and local
property taxes and assessments. Trustor shall promptly provide to
Beneficiary copies of all tax and assessment notices pertaining to the
Property. Trustor hereby authorizes Beneficiary to obtain, at Trustor's
15
expense, a tax service contract which shall provide tax information on the
Property to Beneficiary for the term of the Loan and any extensions or
renewals of the Loan.
6.10 INSURANCE COVERAGE. Trustor shall insure the Property against loss or
damage by fire and such other hazards as Beneficiary shall from time to
time require; provided, however, Beneficiary, at Beneficiary's election,
may only require flood insurance if all or any portion of the improvements
located on the Property is or becomes located in a special flood hazard
area, and Beneficiary, at Beneficiary's election, may only require
earthquake insurance if all or any portion of the Property is or becomes
located in an earthquake fault zone. Trustor shall also carry public
liability insurance and such other insurance as Beneficiary may reasonably
require, including, without limitation, business interruption insurance or
loss of rents insurance. Such policies shall contain a standard mortgage
clause naming Beneficiary and its successors in interest as a loss payee
and requiring at least 30 days prior notice to the holder at termination
or cancellation. Trustor shall maintain all required insurance throughout
the term of the Loan and while any liabilities of Borrower or Trustor to
Beneficiary under any of the Loan Documents remain outstanding at
Trustor's expense, with companies, and in substance and form satisfactory
to Beneficiary. Neither Beneficiary nor Trustee, by reason of accepting,
rejecting, approving or obtaining insurance shall incur any liability for:
(a) the existence, nonexistence, form or legal sufficiency of any
insurance; (b) the solvency of any insurer; or (c) the payment of claims.
6.11 CONDEMNATION AND INSURANCE PROCEEDS.
a. ASSIGNMENT OF CLAIMS. Trustor absolutely and irrevocably assigns to
Beneficiary all of the following rights, claims and amounts
(collectively, "Claims"), all of which shall be paid to Beneficiary:
(i) all awards of damages and all other compensation payable
directly or indirectly by reason of a condemnation or proposed
condemnation for public or private use affecting all or any part of,
or any interest in, the Property; (ii) all other claims and awards
for damages to or decrease in value of all or any part of, or any
interest in, the Property; (iii) all proceeds of any insurance
policies payable by reason of loss sustained to all or any part of
the Property; and (iv) all interest which may accrue on any of the
foregoing. Trustor shall give Beneficiary prompt written notice of
the occurrence of any casualty affecting, or the institution of any
proceedings for eminent domain or for the condemnation of, the
Property or any portion thereof. So long as no Default has occurred
and is continuing at the time, Trustor shall have the right to
adjust, compromise and settle any Claim of $100,000 or less without
the consent of Beneficiary, provided, however, all awards, proceeds
and other sums described herein shall continue to be payable to
Beneficiary. Beneficiary may commence, appear in, defend or
prosecute any Claim exceeding $100,000, and may adjust, compromise
and settle all Claims (except for Claims which Trustor may settle as
provided herein), but shall not be responsible for any failure to
commence, appear in, defend, prosecute or collect any such Claim
regardless of the cause of the failure. All awards, proceeds and
other sums described herein shall be payable to Beneficiary.
b. APPLICATION OF PROCEEDS; NO DEFAULT. So long as no Default has
occurred and is continuing at the time of Beneficiary's receipt of
the proceeds of the Claims ("Proceeds") and no Default occurs
thereafter, Beneficiary shall apply the Proceeds in the following
order of priority: First, to Beneficiary's expenses in settling,
prosecuting or defending the Claims; Second, to the repair or
restoration of the Property; and Third, to Trustor if the repair or
restoration of the Property has been completed, but to the Secured
Obligations in any order without suspending, extending or reducing
any obligation of Trustor to make installment payments if the repair
or restoration of the Property has not been completed.
Notwithstanding the foregoing, Beneficiary shall have no obligation
to make any Proceeds available for the repair or restoration of the
Property unless and until all the following conditions have been
satisfied: (i) delivery to Beneficiary of the Proceeds plus any
additional amount which is needed to pay all costs of the repair or
restoration (including, without limitation, taxes, financing
charges, insurance and rent during the repair period); (ii)
establishment of an arrangement for lien releases and disbursement
of funds acceptable to Beneficiary; (iii) delivery to Beneficiary in
form and content acceptable to Beneficiary of all of the following:
(aa) plans and specifications for the work; (bb) a contract for the
work, signed by a contractor acceptable to Beneficiary; (cc) a cost
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breakdown for the work; (dd) if reasonably required by Beneficiary,
a payment and performance bond for the work; (ee) evidence of the
continuation of substantially all Leases unless consented to in
writing by Beneficiary; (ff) evidence that, upon completion of the
work, the size, capacity, value, and income coverage ratios for the
Property will be at least as great as those which existed
immediately before the damage or condemnation occurred; and (gg)
evidence of the satisfaction of any additional conditions that
Beneficiary may reasonably establish to protect Beneficiary's
security. Trustor acknowledges that the specific conditions
described above are reasonable.
c. APPLICATION OF PROCEEDS; DEFAULT. If a Default has occurred and is
continuing at the time of Beneficiary's receipt of the Proceeds or
if a Default occurs at any time thereafter, Beneficiary may, at
Beneficiary's absolute discretion and regardless of any impairment
of security or lack of impairment of security, but subject to
applicable law governing use of the Proceeds, if any, apply all or
any of the Proceeds to Beneficiary's expenses in settling,
prosecuting or defending the Claims and then apply the balance to
the Secured Obligations in any order without suspending, extending
or reducing any obligation of Trustor to make installment payments,
and may release all or any part of the Proceeds to Trustor upon any
conditions Beneficiary chooses.
6.12 IMPOUNDS.
a. POST-DEFAULT IMPOUNDS. If required by Beneficiary at any time after
a Default occurs (and regardless of whether such Default is
thereafter cured), Trustor shall deposit with Beneficiary such
amounts ("Post-Default Impounds") on such dates (determined by
Beneficiary as provided below) as will be sufficient to pay any or
all "Costs" (as defined below) specified by Beneficiary. Beneficiary
in its reasonable discretion shall estimate the amount of such Costs
that will be payable or required during any period selected by
Beneficiary not exceeding 1 year and shall determine the fractional
portion thereof that Trustor shall deposit with Beneficiary on each
date specified by Beneficiary during such period. If the
Post-Default Impounds paid by Trustor are not sufficient to pay the
related Costs, Trustor shall deposit with Beneficiary upon demand an
amount equal to the deficiency. All Post-Default Impounds shall be
payable by Trustor in addition to (but without duplication of) any
other Impounds (as defined below).
b. ALL IMPOUNDS. Post-Default Impounds and any other impounds that may
be payable by Borrower under the Note are collectively called
"Impounds". All Impounds shall be deposited into one or more
segregated or commingled accounts maintained by Beneficiary or its
servicing agent. Except as otherwise provided in the Note, such
account(s) shall not bear interest. Beneficiary shall not be a
trustee, special depository or other fiduciary for Trustor with
respect to such account, and the existence of such account shall not
limit Beneficiary's rights under this Deed of Trust, any other
agreement or any provision of law. If no Default exists, Beneficiary
shall apply all Impounds to the payment of the related Costs, or in
Beneficiary's sole discretion may release any or all Impounds to
Trustor for application to and payment of such Costs. If a Default
exists, Beneficiary may apply any or all Impounds to any Secured
Obligation and/or to cure such Default, whereupon Trustor shall
restore all Impounds so applied and cure all Defaults not cured by
such application. The obligations of Trustor hereunder shall not be
diminished by deposits of Impounds made by Trustor, except to the
extent that such obligations have actually been met by application
of such Impounds. Upon any assignment of this Deed of Trust,
Beneficiary may assign all Impounds in its possession to
Beneficiary's assignee, whereupon Beneficiary and Trustee shall be
released from all liability with respect to such Impounds. Within 60
days following full repayment of the Secured Obligations (other than
as a consequence of foreclosure or conveyance in lieu of
foreclosure) or at such earlier time as Beneficiary may elect,
Beneficiary shall pay to Trustor all Impounds in its possession, and
no other party shall have any right or claim thereto. "Costs" means
(i) all taxes and other liabilities payable by Trustor under Section
6.9, (ii) all insurance premiums payable by Trustor under Section
6.10, (iii) all other costs and expenses for which Impounds are
required under the Note, and/or (iv) all other amounts that will be
required to preserve the value of the Property. Trustor shall
deliver to Beneficiary, promptly upon receipt, all bills for Costs
for which Beneficiary has required Post-Default Impounds.
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6.13 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Trustor shall protect,
preserve and defend the Property and title to and right of possession of
the Property, the security of this Deed of Trust and the rights and powers
of Beneficiary and Trustee hereunder at Trustor's sole expense against all
adverse claims, whether the claim: (a) is against a possessory or
non-possessory interest; (b) arose prior or subsequent to the Effective
Date; or (c) is senior or junior to Trustor's or Beneficiary's rights.
Trustor shall give Beneficiary and Trustee prompt notice in writing of the
assertion of any claim, of the filing of any action or proceeding, of the
occurrence of any damage to the Property and of any condemnation offer or
action.
6.14 RIGHT OF INSPECTION. Beneficiary and its independent contractors, agents
and employees may enter the Property from time to time at any reasonable
time upon reasonable prior notice to Trustor (except that such notice
shall not be required in the event of an emergency) for the purpose of
inspecting the Property and ascertaining Trustor's compliance with the
terms of this Deed of Trust. Beneficiary shall use reasonable efforts to
assure that Beneficiary's entry upon and inspection of the Property shall
not materially and unreasonably interfere with the business or operations
of Trustor or Trustor's tenants on the Property.
6.15 PROHIBITION OF TRANSFER OF PROPERTY OR INTERESTS IN TRUSTOR. Trustor
acknowledges that Beneficiary has relied upon the principals of Trustor
and Borrower and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan.
Accordingly, except with the prior written consent of Beneficiary or as
otherwise expressly permitted in the Note, Trustor shall not: (a) cause or
permit any sale, exchange, mortgage, pledge, hypothecation, assignment,
encumbrance or other transfer, conveyance or disposition, whether
voluntarily, involuntarily or by operation of law ("Transfer") of all or
any part of, or all or any direct or indirect interest in, the Property or
the Collateral (except for equipment and inventory in the ordinary course
of its business); or (b) cause or permit a Transfer of any direct or
indirect interest in any partnership, limited liability company,
corporation, trust, or other entity comprising all or any portion of or
holding any direct or indirect interest in Trustor or Borrower (other than
the sale or exchange of a limited partnership interest or a non-managing
membership interest). If any Transfer not expressly permitted in the Note
or this Deed of Trust is made without the prior written consent of
Beneficiary, Beneficiary shall have the absolute right at its option,
without prior demand or notice, to declare all of the Secured Obligations
immediately due and payable, except to the extent prohibited by law, and
pursue its rights and remedies under Section 7.3 herein. Trustor agrees to
pay any prepayment fee as set forth in the Note in the event the Secured
Obligations are accelerated pursuant to the terms of this Section. Consent
to one such Transfer shall not be deemed to be a waiver of the right to
require the consent to future or successive Transfers. Except for
Transfers expressly permitted under the Note, Beneficiary's consent to any
Transfer may be withheld, conditioned or delayed in Beneficiary's sole and
absolute discretion.
6.16 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts this
trust when this Deed of Trust is recorded. From time to time and without
affecting the personal liability of any person for payment of any
indebtedness or performance of any Secured Obligation, Beneficiary, or
Trustee at the direction of Beneficiary, may, without liability therefor
and without notice: (a) reconvey all or any part of the Property; (b)
consent to the making of any map or plat of the Property; (c) join with
Trustor in granting any easement on the Property; (d) join with Trustor in
any declaration of covenants and restrictions; or (e) join in any
extension agreement or any agreement subordinating the lien or charge of
this Deed of Trust. Nothing contained in the immediately preceding
sentence shall be construed to limit, impair or otherwise affect the
rights of Trustor in any respect. Except as may otherwise be required by
applicable law, Trustee or Beneficiary may from time to time apply to any
court of competent jurisdiction for aid and direction in the execution of
the trusts hereunder and the enforcement of the rights and remedies
available hereunder, and Trustee or Beneficiary may obtain orders or
decrees directing or confirming or approving acts in the execution of said
trusts and the enforcement of said remedies. Trustee has no obligation to
notify any party of any pending sale or any action or proceeding
(including, without limitation, actions in which Trustor, Beneficiary or
Trustee shall be a party) unless held or commenced and maintained by
Trustee under this Deed of Trust. Trustee shall not be obligated to
perform any act required of it hereunder unless the performance of the act
is requested in writing and Trustee is reasonably indemnified and held
harmless against loss, cost, liability and expense.
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6.17 COMPENSATION OF TRUSTEE. Trustor shall pay to Trustee reasonable
compensation and reimbursement for services and expenses in the
administration of this trust, including, without limitation, reasonable
attorneys' fees. Trustor shall pay all indebtedness arising under this
Section immediately upon demand by Trustee or Beneficiary together with
interest thereon from the date the indebtedness arises at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.18 EXCULPATION. Beneficiary shall not directly or indirectly be liable to
Trustor or any other person as a consequence of: (a) the exercise of the
rights, remedies or powers granted to Beneficiary in this Deed of Trust;
(b) the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the
Property or under this Deed of Trust; or (c) any loss sustained by Trustor
or any third party resulting from Beneficiary's failure to lease the
Property after a Default or from any other act or omission of Beneficiary
in managing the Property after a Default unless the loss is caused by the
willful misconduct and bad faith of Beneficiary and no such liability
shall be asserted or enforced against Beneficiary, all such liability
being expressly waived and released by Trustor.
6.19 INDEMNITY. Without in any way limiting any other indemnity contained in
this Deed of Trust, Trustor agrees to defend, indemnify and hold harmless
Trustee and the Beneficiary Group (as defined below) from and against any
claim, loss, damage, cost, expense or liability directly or indirectly
arising out of: (a) the making of the Loan, except for violations of
banking laws or regulations by the Beneficiary Group; (b) this Deed of
Trust; (c) the execution of this Deed of Trust or the performance of any
act required or permitted hereunder or by law; (d) any failure of Trustor
to perform Trustor's obligations under this Deed of Trust or the other
Loan Documents; (e) any alleged obligation or undertaking on the
Beneficiary Group's part to perform or discharge any of the
representations, warranties, conditions, covenants or other obligations
contained in any other document related to the Property; (f) any act or
omission by Trustor or any contractor, agent, employee or representative
of Trustor with respect to the Property; or (g) any claim, loss, damage,
cost, expense or liability directly or indirectly arising out of: (i) the
use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous
Materials which are found in, on, under or about the Property (including,
without limitation, underground contamination); or (ii) the breach of any
covenant, representation or warranty of Trustor under Sections 5.1.p,
5.1.q, 5.1.r, or 6.2 above. The foregoing to the contrary notwithstanding,
this indemnity shall not include any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of the gross negligence or
willful misconduct of any member of the Beneficiary Group or Trustee, or
any claim, loss, damage, cost, expense or liability incurred by the
Beneficiary Group or Trustee arising from any act or incident on the
Property occurring after the full reconveyance and release of the lien of
this Deed of Trust on the Property, or with respect to the matters set
forth in clause (g) above, any claim, loss, damage, cost, expense or
liability incurred by the Beneficiary Group resulting from the
introduction and initial release of Hazardous Materials on the Property
occurring after the transfer of title to the Property at a foreclosure
sale under this Deed of Trust, either pursuant to judicial decree or the
power of sale, or by deed in lieu of such foreclosure. This indemnity
shall include, without limitation: (aa) all consequential damages
(including, without limitation, any third party tort claims or
governmental claims, fines or penalties against Trustee or the Beneficiary
Group); (bb) all court costs and reasonable attorneys' fees (including,
without limitation, expert witness fees) paid or incurred by Trustee or
the Beneficiary Group; and (cc) the costs, whether foreseeable or
unforeseeable, of any investigation, repair, cleanup or detoxification of
the Property which is required by any governmental entity or is otherwise
necessary to render the Property in compliance with all laws and
regulations pertaining to Hazardous Materials. "Beneficiary Group", as
used herein, shall mean (1) Beneficiary (including, without limitation,
any participant in the Loan), (2) any entity controlling, controlled by or
under common control with Beneficiary, (3) the directors, officers,
employees and agents of Beneficiary and such other entities, and (4) the
successors, heirs and assigns of the entities and persons described in
foregoing clauses (1) through (3). Trustor shall pay immediately upon
Trustee's or Beneficiary's demand any amounts owing under this indemnity
together with interest from the date the indebtedness arises until paid at
the rate of interest applicable to the principal balance of the Note as
specified therein. Trustor agrees to use legal counsel reasonably
acceptable to Trustee and the Beneficiary Group in any action or
proceeding arising under this indemnity. THE PROVISIONS OF THIS SECTION
SHALL SURVIVE THE TERMINATION AND
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RECONVEYANCE OF THIS DEED OF TRUST, BUT TRUSTOR'S LIABILITY UNDER THIS
INDEMNITY SHALL BE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE
ENTITLED "BORROWER'S LIABILITY."
6.20 SUBSTITUTION OF TRUSTEE. From time to time, by a writing signed and
acknowledged by Beneficiary, Beneficiary may appoint another trustee to
act in the place and stead of Trustee or any successor. Such writing shall
set forth any information required by law and shall be recorded in the
Office of the Recorder of the County in which the Property is situated.
Beneficiary shall give such additional notice as may be required by law.
Such instrument of substitution and the compliance with any other
requirements of applicable law shall discharge Trustee herein named and
shall appoint the new trustee as the trustee hereunder with the same
effect as if originally named trustee herein. A writing recorded pursuant
to the provisions of this Section shall be conclusive proof of the proper
substitution of such new trustee.
6.21 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Property or in any manner obligated
under the Secured Obligations ("Interested Parties"), Beneficiary may,
from time to time: (a) fully or partially release any person or entity
from liability for the payment or performance of any Secured Obligation;
(b) extend the maturity of any Secured Obligation; (c) make any agreement
with Borrower increasing the amount or otherwise altering the terms of any
Secured Obligation; (d) accept additional security for any Secured
Obligation; or (e) release all or any portion of the Property, Collateral
and other security for any Secured Obligation. None of the foregoing
actions shall release or reduce the personal liability of any of said
Interested Parties, or release or impair the priority of the lien of this
Deed of Trust upon the Property.
6.22 SALE OR PARTICIPATION OF LOAN. Trustor agrees that Beneficiary may at any
time sell, assign, participate or securitize all or any portion of
Beneficiary's rights and obligations under the Loan Documents, and that
any such sale, assignment, participation or securitization may be to one
or more financial institutions or other entities, to private investors,
and/or into the public securities market, in Beneficiary's sole
discretion. Trustor further agrees that Beneficiary may disseminate to any
such actual or potential purchaser(s), assignee(s) or participant(s) all
documents and financial and other information heretofore or hereafter
provided to or known to Beneficiary with respect to: (a) the Property and
its operation; and/or (b) any party connected with the Loan (including,
without limitation, Trustor, any partner or member of Trustor, any
constituent partner or member of Trustor, any guarantor and any
nonborrower trustor). In the event of any such sale, assignment,
participation or securitization, Beneficiary and the other parties to the
same shall share in the rights and obligations of Beneficiary set forth in
the Loan Documents as and to the extent they shall agree among themselves.
In connection with any such sale, assignment, participation or
securitization, Trustor further agrees that the Loan Documents shall be
sufficient evidence of the obligations of Trustor to each purchaser,
assignee or participant, and Trustor shall, within 15 days after request
by Beneficiary, (x) deliver an estoppel certificate verifying for the
benefit of Beneficiary and any other party designated by Beneficiary the
status and the terms and provisions of the Loan in form and substance
acceptable to Beneficiary, (y) provide any information, legal opinions or
documents regarding Trustor, Guarantor (as defined in the Loan Documents),
the Property and any tenants of the Property as Beneficiary or
Beneficiary's rating agencies may reasonably request, and (z) enter into
such amendments or modifications to the Loan Documents or the
organizational documents of Trustor as may be reasonably required in order
to facilitate any such sale, assignment, participation or securitization
without impairing Trustor's rights or increasing Trustor's obligations.
The indemnity obligations of Trustor under the Loan Documents shall also
apply with respect to any purchaser, assignee or participant.
6.23 RECONVEYANCE. Upon Beneficiary's written request, and upon surrender of
this Deed of Trust or certified copy thereof and any note, instrument or
instruments setting forth all obligations secured hereby to Trustee for
cancellation, Trustee shall reconvey, without warranty, the Property or
that portion thereof then held hereunder. The recitals of any matters or
facts in any reconveyance executed hereunder shall be conclusive proof of
the truthfulness thereof. To the extent permitted by law, the reconveyance
may describe the grantee as "the person or persons legally entitled
thereto". Neither Beneficiary nor Trustee shall have any duty to determine
the rights of persons claiming to be rightful grantees of any
reconveyance. When the Property has been fully reconveyed,
20
the last such reconveyance shall operate as a reassignment of all future
rents, issues and profits of the Property to the person or persons legally
entitled thereto.
6.24 SUBROGATION. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part
by Beneficiary pursuant to this Deed of Trust or by the proceeds of any
loan secured by this Deed of Trust.
6.25 COMMUNITY FACILITIES DISTRICT. Without obtaining the prior written consent
of Beneficiary, Trustor shall not consent to, or vote in favor of, the
inclusion of all or any part of the Property in any Community Facilities
District formed pursuant to the Community Facilities District Act, A.R.S.
Section 48-701, et seq., as amended from time to time. Trustor shall
immediately give notice to Beneficiary of any notification or advice that
Trustor may receive from any municipality or other third party of any
intent or proposal to include all or any part of the Property in a
Community Facilities District. Beneficiary shall have the right to file a
written objection to the inclusion of all or any part of the Property in a
Community Facilities District, either in its own name or in the name of
Trustor, and to appear at, and participate in, any hearing with respect to
the formation of any such district.
6.26 MANAGEMENT AGREEMENTS. Without the prior written consent of Beneficiary,
Trustor shall not terminate, modify, amend or enter into any agreement
providing for the management, leasing or operation of the Property.
Trustor represents, warrants and covenants that any existing management
agreement includes, and any future management agreement entered into by
Trustor shall include, a provision which provides that the management
agreement is automatically terminated upon the transfer of the Property by
Trustor, either by sale, foreclosure, deed in lieu of foreclosure, or
otherwise, to Beneficiary or any other purchaser of the Property. Upon a
Default under the Loan Documents or a default under any management
agreement then in effect, which default is not cured within any applicable
grace or cure period, Beneficiary shall have the right to terminate, or to
direct Trustor to terminate, such management agreement upon thirty (30)
days' written notice and to retain, or to direct Trustor to retain, a new
management agent approved by Beneficiary.
ARTICLE 7. DEFAULT
7.1 DEFAULT. For all purposes hereof, "Default" shall mean either an "Optional
Default" (as defined below) or an "Automatic Default" (as defined below).
a. OPTIONAL DEFAULT. An "Optional Default" shall occur, at
Beneficiary's option, upon the occurrence of any of the following
events:
(i) MONETARY. Borrower or Trustor shall fail to (aa) pay when due
any sums payable under the Loan Documents which by their
express terms require immediate payment without any grace
period or sums which are payable on the Maturity Date, or (bb)
pay within 5 days when due any other sums payable under the
Note, this Deed of Trust or any of the other Loan Documents,
including, without limitation, any monthly payment due under
the Note.
(ii) FAILURE TO PERFORM. Borrower or Trustor shall fail to observe,
perform or discharge any of Borrower's or Trustor's
obligations, covenants, conditions or agreements, other than
Borrower's or Trustor's payment obligations, under the Note,
this Deed of Trust or any of the other Loan Documents, and
(aa) such failure shall remain uncured for 30 days after
written notice thereof shall have been given to Borrower or
Trustor, as the case may be, by Beneficiary or (bb) if such
failure is of such a nature that it cannot be cured within
such 30 day period, Borrower or Trustor shall fail to commence
to cure such failure within such 30 day period or shall fail
to diligently prosecute such curative action thereafter.
(iii) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate or other statement (financial or otherwise) made
or furnished by or on behalf of Borrower, Trustor, or a
guarantor, if
21
any, to Beneficiary or in connection with any of the Loan
Documents, or as an inducement to Beneficiary to make the
Loan, shall be false, incorrect, incomplete or misleading in
any material respect when made or furnished.
(iv) CONDEMNATION; ATTACHMENT. The condemnation, seizure or
appropriation of any material portion (as reasonably
determined by Beneficiary) of the Property; or the
sequestration or attachment of, or levy or execution upon any
of the Property, the Collateral or any other collateral
provided by Borrower or Trustor under any of the Loan
Documents, or any material portion of the other assets of
Borrower or Trustor, which sequestration, attachment, levy or
execution is not released or dismissed within 45 days after
its occurrence; or the sale of any assets affected by any of
the foregoing.
(v) UNINSURED CASUALTY. The occurrence of an uninsured casualty
with respect to any material portion (as reasonably determined
by Beneficiary) of the Property unless: (aa) no other Default
has occurred and is continuing at the time of such casualty or
occurs thereafter; (bb) Trustor promptly notifies Beneficiary
of the occurrence of such casualty; and (cc) not more than 45
days after the occurrence of such casualty, Trustor delivers
to Beneficiary immediately available funds in an amount
sufficient, in Beneficiary's reasonable opinion, to pay all
costs of the repair or restoration (including, without
limitation, taxes, financing charges, insurance and rent
during the repair period). So long as no Default has occurred
and is continuing at the time of Beneficiary's receipt of such
funds and no Default occurs thereafter, Beneficiary shall make
such funds available for the repair or restoration of the
Property. Notwithstanding the foregoing, Beneficiary shall
have no obligation to make any funds available for repair or
restoration of the Property unless and until all the
conditions set forth in clauses (ii) and (iii) of the second
sentence of Section 6.11(b) of this Deed of Trust have been
satisfied. Trustor acknowledges that the specific conditions
described above are reasonable.
(vi) ADVERSE FINANCIAL CHANGE. Any material adverse change in the
financial condition of Borrower or any general partner or
managing member of Borrower, any guarantor, or any other
person or entity from the condition shown on the financial
statement(s) submitted to Beneficiary and relied upon by
Beneficiary in making the Loan, and which change Beneficiary
reasonably determines will have a material adverse effect on
(aa) the business, operations or condition of the Property; or
(bb) the ability of Borrower or Trustor to pay or perform
Borrower's or Trustor's obligations in accordance with the
terms of the Note, this Deed of Trust, and the other Loan
Documents.
b. AUTOMATIC DEFAULT. An "Automatic Default" shall occur automatically
upon the occurrence of any of the following events:
(i) VOLUNTARY BANKRUPTCY, INSOLVENCY, DISSOLUTION. (aa) Borrower's
filing a petition for relief under the Bankruptcy Reform Act
of 1978, as amended or recodified ("Bankruptcy Code"), or
under any other present or future state or federal law
regarding bankruptcy, reorganization or other relief to
debtors (collectively, "Debtor Relief Law"); or (bb)
Borrower's filing any pleading in any involuntary proceeding
under the Bankruptcy Code or other Debtor Relief Law which
admits the jurisdiction of a court to regulate Borrower or the
Property or the petition's material allegations regarding
Borrower's insolvency; or (cc) Borrower's making a general
assignment for the benefit of creditors; or (dd) Borrower's
applying for, or the appointment of, a receiver, trustee,
custodian or liquidator of Borrower or any of its property; or
(ee) the filing by Borrower of a petition seeking the
liquidation or dissolution of Borrower or the commencement of
any other procedure to liquidate or dissolve Borrower.
(ii) INVOLUNTARY BANKRUPTCY. Borrower's failure to effect a full
dismissal of any involuntary petition under the Bankruptcy
Code or other Debtor Relief Law that is filed against Borrower
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or in any way restrains or limits Borrower or Beneficiary
regarding the Loan or the Property, prior to the earlier of
the entry of any order granting relief sought in the
involuntary petition or 45 days after the date of filing of
the petition.
(iii) PARTNERS, GUARANTORS. The occurrence of an event specified in
clauses (i) or (ii) as to Trustor, any general partner or
managing member of Borrower or Trustor, or any guarantor or
other person or entity in any manner obligated to Beneficiary
under the Loan Documents.
7.2 ACCELERATION. Upon the occurrence of an Optional Default, Beneficiary may,
at its option, declare all sums owing to Beneficiary under the Note and
the other Loan Documents immediately due and payable. Upon the occurrence
of an Automatic Default, all sums owing to Beneficiary under the Note and
the other Loan Documents shall automatically become immediately due and
payable.
7.3 RIGHTS AND REMEDIES. In addition to the rights and remedies in Section 7.2
above, at any time after a Default, Beneficiary shall have all of the
following rights and remedies:
a. ENTRY ON PROPERTY. With or without notice, and without releasing
Trustor from any Secured Obligation, and without becoming a
mortgagee in possession, to enter upon the Property from time to
time and to do such acts and things as Beneficiary or Trustee deem
necessary or desirable in order to inspect, investigate, assess and
protect the security hereof or to cure any Default, including,
without limitation: (i) to take and possess all documents, books,
records, papers and accounts of Trustor, Borrower or the then owner
of the Property which relate to the Property; (ii) to make,
terminate, enforce or modify leases of the Property upon such terms
and conditions as Beneficiary deems proper; (iii) to make repairs,
alterations and improvements to the Property necessary, in Trustee's
or Beneficiary's reasonable judgment, to protect or enhance the
security hereof; (iv) to appear in and defend any action or
proceeding purporting to affect the security hereof or the rights or
powers of Beneficiary or Trustee hereunder; (v) to pay, purchase,
contest or compromise any encumbrance, charge, lien or claim of lien
which, in the sole judgment of either Beneficiary or Trustee, is or
may be senior in priority hereto, the judgment of Beneficiary or
Trustee being conclusive as between the parties hereto; (vi) to
obtain insurance; (vii) to pay any premiums or charges with respect
to insurance required to be carried hereunder; (viii) to obtain a
court order to enforce Beneficiary's right to enter and inspect the
Property for Hazardous Materials, in which regard the decision of
Beneficiary as to whether there exists a release or threatened
release of Hazardous Materials onto the Property shall be deemed
reasonable and conclusive as between the parties hereto; (ix) to
have a receiver appointed pursuant to applicable law to enforce
Beneficiary's rights to enter and inspect the Property for Hazardous
Materials; and/or (x) to employ legal counsel, accountants,
engineers, consultants, contractors and other appropriate persons to
assist them;
b. APPOINTMENT OF RECEIVER. With or without notice or hearing, to apply
to a court of competent jurisdiction for and obtain appointment of a
receiver, trustee, liquidator or conservator of the Property, for
any purpose, including, without limitation, to enforce Beneficiary's
right to collect Payments and to enter on and inspect the Property
for Hazardous Materials, as a matter of strict right and without
regard to: (i) the adequacy of the security for the repayment of the
Secured Obligations; (ii) the existence of a declaration that the
Secured Obligations are immediately due and payable; (iii) the
filing of a notice of default; or (iv) the solvency of Trustor,
Borrower or any guarantor or other person or entity in any manner
obligated to Beneficiary under the Loan Documents;
c. JUDICIAL FORECLOSURE; INJUNCTION. To commence and maintain an action
or actions in any court of competent jurisdiction to foreclose this
instrument as a mortgage or to obtain specific enforcement of the
covenants of Trustor hereunder, and Trustor agrees that such
covenants shall be specifically enforceable by injunction or any
other appropriate equitable remedy and that for the purposes of any
suit brought under this subparagraph, Trustor waives the defense of
laches and any applicable statute of limitations;
23
d. NONJUDICIAL FORECLOSURE. To give such notice of Default and of
election to cause the Property to be sold as may be required by law
or as may be necessary to cause the Trustee to exercise the power of
sale granted herein. Trustee shall give and record such notice as
the law then requires as a condition precedent to a trustee's sale.
When the minimum period of time required by law after such notice
has elapsed, Trustee, without notice to or demand upon Trustor
except as required by law, shall sell the Property at the time and
place of sale fixed by it in the notice of sale, at one or several
sales, either as a whole or in separate parcels and in such manner
and order, as directed by Beneficiary, or by Trustor to the extent
required by law, at public auction to the highest bidder for cash,
in lawful money of the United States, payable at time of sale.
Except as required by law, neither Trustor nor any other person or
entity other than Beneficiary shall have the right to direct the
order in which the Property is sold. Subject to requirements and
limits imposed by law, Trustee may, from time to time postpone sale
of all or any portion of the Property by public announcement at such
time and place of sale, and from time to time may postpone the sale
by public announcement at the time and place fixed by the preceding
postponement. A sale of less than the whole of the Property or any
defective or irregular sale made hereunder shall not exhaust the
power of sale provided for herein. Trustee shall deliver to the
purchaser at such sale a deed conveying the Property or portion
thereof so sold, but without any covenant or warranty, express or
implied. The recitals in the deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including
Trustee, Trustor or Beneficiary, may purchase at the sale.
Upon sale of the Property at any judicial or nonjudicial
foreclosure, Beneficiary may credit bid (as determined by
Beneficiary in its sole and absolute discretion) all or any portion
of the Secured Obligations. In determining such credit bid,
Beneficiary may, but is not obligated to, take into account all or
any of the following: (i) appraisals of the Property as such
appraisals may be discounted or adjusted by Beneficiary in its sole
and absolute underwriting discretion; (ii) expenses and costs
incurred by Beneficiary with respect to the Property prior to
foreclosure; (iii) expenses and costs which Beneficiary anticipates
will be incurred with respect to the Property after foreclosure, but
prior to resale, including, without limitation, costs of structural
reports and other due diligence, costs to carry the Property prior
to resale, costs of resale (e.g. commissions, attorneys' fees, and
taxes), costs of any Hazardous Materials clean-up and monitoring,
costs of deferred maintenance, repair, refurbishment and retrofit,
costs of defending or settling litigation affecting the Property,
and lost opportunity costs (if any), including the time value of
money during any anticipated holding period by Beneficiary; (iv)
declining trends in real property values generally and with respect
to properties similar to the Property; (v) anticipated discounts
upon resale of the Property as a distressed or foreclosed property;
(vi) the fact of additional collateral (if any), for the Secured
Obligations; and (vii) such other factors or matters that
Beneficiary (in its sole and absolute discretion) deems appropriate.
In regard to the above, Trustor acknowledges and agrees that: (viii)
Beneficiary is not required to use any or all of the foregoing
factors to determine the amount of its credit bid; (ix) this
paragraph does not impose upon Beneficiary any additional
obligations that are not imposed by law at the time the credit bid
is made; (x) the amount of Beneficiary's credit bid need not have
any relation to any loan-to-value ratios specified in the Loan
Documents or previously discussed between Trustor and Beneficiary;
and (xi) Beneficiary's credit bid may be (at Beneficiary's sole and
absolute discretion) higher or lower than any appraised value of the
Property;
e. MULTIPLE FORECLOSURES. To resort to and realize upon the security
hereunder and any other security now or later held by Beneficiary
concurrently or successively and in one or several consolidated or
independent judicial actions or lawfully taken nonjudicial
proceedings, or both, and to apply the proceeds received upon the
Secured Obligations all in such order and manner as Beneficiary
determines in its sole discretion;
f. RIGHTS TO COLLATERAL. To exercise all rights Trustee or Beneficiary
may have with respect to the Collateral under this Deed of Trust,
the UCC or otherwise at law; and
24
g. OTHER RIGHTS. To exercise such other rights as Trustee or
Beneficiary may have at law or in equity or pursuant to the terms
and conditions of this Deed of Trust or any of the other Loan
Documents.
In connection with any sale or sales hereunder, Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the Property (including, without
limitation, any improvements forming a part thereof) without causing
structural damage thereto as if the same were personal property or a
fixture, as the case may be, and dispose of the same in accordance with
applicable law, separate and apart from the sale of the Property. Any sale
of Collateral hereunder shall be conducted in any manner permitted by the
UCC.
7.4 APPLICATION OF FORECLOSURE SALE PROCEEDS. If any foreclosure sale is
effected, except as otherwise may be required by applicable law, Trustee
shall apply the proceeds of such sale in the following order of priority:
First, to the costs and expenses of exercising the power of sale and of
sale, including the payment of the trustee's fees and reasonable
attorneys' fees actually incurred; Second, to the payment of the contract
or contracts secured; Third, to the payment of all other Secured
Obligations; Fourth, to junior lienholders or encumbrancers in order of
their priority; and Fifth, the remainder, if any, to the person or persons
legally entitled thereto.
7.5 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a
lien on or interest in the Property, hereby waives all rights to have the
Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured
Obligation, marshaled upon any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Secured Obligations.
7.6 NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any receiver's
entry upon and taking possession of all or any part of the Property, nor
any collection of rents, issues, profits, insurance proceeds, condemnation
proceeds or damages, other security or proceeds of other security, or
other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise of any other right or remedy by Beneficiary
or Trustee or any receiver shall cure or waive any Default or notice of
default under this Deed of Trust, or nullify the effect of any notice of
default or sale (unless all Secured Obligations then due have been paid or
performed and Trustor has cured all other Defaults hereunder), or impair
the status of the security, or prejudice Beneficiary or Trustee in the
exercise of any right or remedy, or be construed as an affirmation by
Beneficiary of any tenancy, lease or option or a subordination of the lien
of this Deed of Trust.
7.7 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor agrees to pay to
Beneficiary immediately and upon demand all costs and expenses incurred by
Trustee and Beneficiary in the enforcement of the terms and conditions of
this Deed of Trust (including, without limitation, statutory trustee's
fees, court costs and attorneys' fees, whether incurred in litigation or
not) with interest from the date of expenditure until said sums have been
paid at the rate of interest applicable to the principal balance of the
Note as specified therein.
7.8 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably
appoints Beneficiary and its successors and assigns, as its
attorney-in-fact, which agency is coupled with an interest, to perform any
obligation of Trustor hereunder upon the occurrence of an event, act or
omission which, with notice or passage of time or both, would constitute a
Default, provided, however, that: (a) Beneficiary as such attorney-in-fact
shall only be accountable for such funds as are actually received by
Beneficiary; and (b) Beneficiary shall not be liable to Trustor or any
other person or entity for any failure to act under this Section.
7.9 REMEDIES CUMULATIVE. All rights and remedies of Beneficiary and Trustee
under this Deed of Trust and the other Loan Documents are cumulative and
are in addition to all rights and remedies provided by applicable law
(including specifically that of foreclosure of this Deed of Trust as
though it were a mortgage). Beneficiary may enforce any one or more
remedies or rights under the Loan Documents either successively or
concurrently.
25
ARTICLE 8. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan
Documents grant further rights to Beneficiary and contain further
agreements and affirmative and negative covenants by Trustor which apply
to this Deed of Trust and to the Property and such further rights and
agreements are incorporated herein by this reference. THE OBLIGATIONS AND
LIABILITIES OF TRUSTOR UNDER THIS DEED OF TRUST AND THE OTHER LOAN
DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE
ENTITLED "BORROWER'S LIABILITY."
8.2 NON-WAIVER. By accepting payment of any amount secured hereby after its
due date or late performance of any other Secured Obligation, Beneficiary
shall not waive its right against any person obligated directly or
indirectly hereunder or on any Secured Obligation, either to require
prompt payment or performance when due of all other sums and obligations
so secured or to declare default for failure to make such prompt payment
or performance. No exercise of any right or remedy by Beneficiary or
Trustee hereunder shall constitute a waiver of any other right or remedy
herein contained or provided by law. No failure by Beneficiary or Trustee
to exercise any right or remedy hereunder arising upon any Default shall
be construed to prejudice Beneficiary's or Trustee's rights or remedies
upon the occurrence of any other or subsequent Default. No delay by
Beneficiary or Trustee in exercising any such right or remedy shall be
construed to preclude Beneficiary or Trustee from the exercise thereof at
any time while that Default is continuing. No notice to nor demand on
Trustor shall of itself entitle Trustor to any other or further notice or
demand in similar or other circumstances.
8.3 CONSENTS, APPROVALS AND EXPENSES. Wherever Beneficiary's consent,
approval, acceptance or satisfaction is required under any provision of
this Deed of Trust or any of the other Loan Documents, such consent,
approval, acceptance or satisfaction shall not be unreasonably withheld,
conditioned or delayed by Beneficiary unless such provision expressly so
provides. Wherever costs or expenses are required to be paid under any
provision of this Deed of Trust or any of the other Loan Documents, such
costs or expenses shall be reasonable.
8.4 PERMITTED CONTESTS. After prior written notice to Beneficiary, Trustor may
contest, by appropriate legal or other proceedings conducted in good faith
and with due diligence, the amount, validity or application, in whole or
in part, of any lien, levy, tax or assessment, or any lien of any laborer,
mechanic, materialman, supplier or vendor, or the application to Trustor
or the Property of any law or the validity thereof, the assertion or
imposition of which, or the failure to pay when due, would constitute a
Default; provided that (a) Trustor pursues the contest diligently, in a
manner which Beneficiary determines is not prejudicial to Beneficiary, and
does not impair the lien of this Deed of Trust; (b) the Property, or any
part hereof or estate or interest therein, shall not be in any danger of
being sold, forfeited or lost by reason of such proceedings; (c) in the
case of the contest of any law or other legal requirement, Beneficiary
shall not be in any danger of any civil or criminal liability; and (d) if
required by Beneficiary, Trustor deposits with Beneficiary any funds or
other forms of assurance (including a bond or letter of credit)
satisfactory to Beneficiary to protect Beneficiary from the consequences
of the contest being unsuccessful. Trustor's right to contest pursuant to
the terms of this provision shall in no way relieve Trustor or Borrower of
its obligations under the Loan or to make payments to Beneficiary as and
when due.
8.5 FURTHER ASSURANCES. Trustor shall, upon demand by Beneficiary or Trustee,
execute, acknowledge (if appropriate) and deliver any and all documents
and instruments and do or cause to be done all further acts reasonably
necessary or appropriate to effectuate the purposes of the Loan Documents
and to perfect any assignments contained therein.
8.6 ATTORNEYS' FEES. If any legal action, suit or proceeding is commenced
between Trustor and Beneficiary regarding their respective rights and
obligations under this Deed of Trust or any of the other Loan Documents,
the prevailing party shall be entitled to recover, in addition to damages
or other relief, costs and expenses,
26
reasonable attorneys' fees and court costs (including, without limitation,
expert witness fees). Court costs and attorneys' fees shall be set by the
court and not by a jury. As used herein the term "prevailing party" shall
mean the party which obtains the principal relief it has sought, whether
by compromise settlement or judgment. If the party which commenced or
instituted the action, suit or proceeding shall dismiss or discontinue it
without the concurrence of the other party, such other party shall be
deemed the prevailing party.
8.7 TRUSTOR AND BENEFICIARY DEFINED. The term "Trustor" includes both the
original Trustor and any subsequent owner or owners of any of the
Property, and the term "Beneficiary" includes the original Beneficiary and
any future owner or holder, including assignees, pledgees and
participants, of the Note or any interest therein.
8.8 DISCLAIMERS.
a. RELATIONSHIP. The relationship of Trustor and Beneficiary under this
Deed of Trust and the other Loan Documents is, and shall at all
times remain, solely that of borrower and lender; and Beneficiary
neither undertakes nor assumes any responsibility or duty to Trustor
or to any third party with respect to the Property. Notwithstanding
any other provisions of this Deed of Trust and the other Loan
Documents: (i) Beneficiary is not, and shall not be construed to be,
a partner, joint venturer, member, alter ego, manager, controlling
person or other business associate or participant of any kind of
Trustor, and Beneficiary does not intend to ever assume such status;
(ii) Beneficiary's activities in connection with this Deed of Trust
and the other Loan Documents shall not be "outside the scope of
activities of a lender of money" within the meaning of California
Civil Code Section 3434, as amended or recodified from time to time,
and Beneficiary does not intend to ever assume any responsibility to
any person for the quality, suitability, safety or condition of the
Property; and (iii) Beneficiary shall not be deemed responsible for
or a participant in any acts, omissions or decisions of Trustor.
b. NO LIABILITY. Beneficiary shall not be directly or indirectly liable
or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any
person or property arising from any construction on, or occupancy or
use of, the Property, whether caused by or arising from: (i) any
defect in any building, structure, grading, fill, landscaping or
other improvements thereon or in any on-site or off-site improvement
or other facility therein or thereon; (ii) any act or omission of
Trustor or any of Trustor's agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on the
Property or any fire, flood or other casualty or hazard thereon;
(iv) the failure of Trustor or any of Trustor's licensees,
employees, invitees, agents, independent contractors or other
representatives to maintain the Property in a safe condition; or (v)
any nuisance made or suffered on any part of the Property.
8.9 SEVERABILITY. If any term of this Deed of Trust or any other Loan
Document, or the application thereof to any person or circumstances,
shall, to any extent, be invalid or unenforceable, the remainder of this
Deed of Trust or such other Loan Document, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Deed
of Trust or such other Loan Document shall be valid and enforceable to the
fullest extent permitted by law. In addition, should this instrument be or
become ineffective as a deed of trust, then these presents shall be
construed and enforced as a realty mortgage with the Trustor being the
mortgagor and Beneficiary being the mortgagee.
8.10 RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Beneficiary under the deed of trust established by Article 1 and the
security agreement established by Article 4 are independent and
cumulative, and there shall be no merger of any lien created by the deed
of trust with any security interest created by the security agreement.
Beneficiary may elect to exercise or enforce any of its rights, remedies
or interests under either or both the deed of trust or the security
agreement as Beneficiary may from time to time deem
27
appropriate. The absolute assignment of rents and leases established by
Article 3 is similarly independent of and separate from the deed of trust
and the security agreement.
8.11 MERGER. No merger shall occur as a result of Beneficiary's acquiring any
other estate in, or any other lien on, the Property unless Beneficiary
consents to a merger in writing.
8.12 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has
executed this Deed of Trust as "Trustor", the obligations of all such
persons hereunder shall be joint and several.
8.13 SEPARATE AND COMMUNITY PROPERTY. Any married person who executes this Deed
of Trust as a "Trustor" agrees that any money judgment which Beneficiary
or Trustee obtains pursuant to the terms of this Deed of Trust or any
other obligation of that married person secured by this Deed of Trust may
be collected by execution upon any separate property or community property
of that person.
8.14 INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect
to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified
except by written instrument executed by all parties. Any reference in any
of the Loan Documents to the Property or Collateral shall include all or
any part of the Property or Collateral. Any reference to the Loan
Documents includes any amendments, renewals or extensions now or hereafter
approved by Beneficiary in writing. When the identity of the parties or
other circumstances make it appropriate, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
8.15 CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Note.
8.16 SUCCESSORS IN INTEREST. The terms, covenants, and conditions contained
herein and in the other Loan Documents herein and in the other Loan
Documents shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. The foregoing sentence shall not be
construed to permit Trustor to assign the Loan except as otherwise
permitted under the Note or the other Loan Documents.
8.17 GOVERNING LAW. This Deed of Trust was accepted by Beneficiary in the state
of California and the proceeds of the Note secured hereby were disbursed
from the state of California, which state the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, including, without limiting
the generality of the foregoing, matters of construction, validity,
enforceability and performance, this Deed of Trust, the Note and the other
Loan Documents and the obligations arising hereunder and thereunder shall
be governed by, and construed in accordance with, the laws of the state of
California applicable to contracts made and performed in such state and
any applicable law of the United States of America, except that at all
times the provisions for enforcement of Beneficiary's STATUTORY POWER OF
SALE and all other remedies granted hereunder and the creation, perfection
and enforcement of the security interests created pursuant hereto and
pursuant to the other Loan Documents in any Collateral which is located in
the state where the Property is located shall be governed by and construed
according to the law of the state where the Property is located. Except as
provided in the immediately preceding sentence, Trustor hereby
unconditionally and irrevocably waives, to the fullest extent permitted by
law, any claim to assert that the law of any jurisdiction other than
California governs this Deed of Trust, the Note and other Loan Documents.
8.18 CONSENT TO JURISDICTION. Trustor irrevocably submits to the jurisdiction
of: (a) any state or federal court sitting in the state of California over
any suit, action, or proceeding, brought by Trustor against Beneficiary,
arising out of or relating to this Deed of Trust, the Note or the Loan;
(b) any state or federal court sitting in the state where the Property is
located or the state in which Trustor's principal place of business is
located over any suit, action or proceeding, brought by Beneficiary
against Trustor, arising out of or relating to this Deed of Trust, the
Note or the Loan; and (c) any state court sitting in the county of the
state where the
28
Property is located over any suit, action, or proceeding, brought by
Beneficiary to exercise its STATUTORY POWER OF SALE under this Deed of
Trust or any action brought by Beneficiary to enforce its rights with
respect to the Collateral. Trustor irrevocably waives, to the fullest
extent permitted by law, any objection that Trustor may now or hereafter
have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.19 EXHIBITS. Exhibit A is incorporated into this Deed of Trust by this
reference.
8.20 ADDRESSES; REQUEST FOR NOTICE. All notices and other communications that
are required or permitted to be given to a party under this Deed of Trust
or the other Loan Documents shall be in writing, refer to the Loan number,
and shall be sent to such party, either by personal delivery, by overnight
delivery service, by certified first class mail, return receipt requested,
or by facsimile transmission to the addressee or facsimile number below.
All such notices and communications shall be effective upon receipt of
such delivery or facsimile transmission, together with a printed receipt
of the successful delivery of such facsimile transmission. The addresses
of the parties are set forth on page 1 of this Deed of Trust and the
facsimile numbers for the parties are as follows:
Beneficiary: Trustee:
WELLS FARGO BANK, N.A. TRANSNATION TITLE INSURANCE COMPANY
FAX No.: (925) 691-5947 FAX No.: (602) 247-2694
Trustor:
MHC STAGECOACH, L.L.C.
FAX No.: (312) 279-1715
Trustor's principal place of business is at the address set forth on page
1 of this Deed of Trust. A copy of any notice to Trustor shall be sent as
follows:
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, Illinois 60606
Attention: Benjamin Randall
Facsimile: (312) 807-3903
Any Trustor whose address is set forth on page 1 of this Deed of Trust
hereby requests that a copy of notice of default and notice of sale be
delivered to it at that address. Failure to insert an address shall
constitute a designation of Trustor's last known address as the address
for such notice. Any party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by giving 30 days notice to the other parties in the manner set
forth above.
8.21 COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed
an original and all of which taken together, will be deemed to be one and
the same instrument.
8.22 WAIVER OF JURY TRIAL. BENEFICIARY (BY ITS ACCEPTANCE HEREOF) AND TRUSTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEED OF TRUST OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER
29
ORAL OR WRITTEN) OR ACTIONS OF BENEFICIARY OR TRUSTOR. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BENEFICIARY TO ENTER INTO THIS DEED OF TRUST.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
30
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year set forth above.
"TRUSTOR"
MHC STAGECOACH, L.L.C.,
a Delaware limited liability company
By: MHC-QRS STAGECOACH, INC.,
a Delaware corporation,
its Managing Member
By: /s/ John M. Zoeller
----------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
STATE OF IL )
) SS:
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 8/1,
2001 by John M. Zoeller, as Vice President, Chief Financial Officer and
Treasurer of MHC-QRS STAGECOACH, INC., a Delaware corporation, the managing
member of MHC STAGECOACH, L.L.C., a Delaware limited liability company, on
behalf of the corporation.
WITNESS my hand and official seal.
/s/ Mary Dobronski
-------------------------------------
Print Name: Mary Dobronski
My Commission Expires:
11/3/03
[NOTARIAL SEAL]
NOTARY PUBLIC, State of IL
Serial No., if any:_______________
Loan No. 31-0900553R
EXHIBIT A
Description Of Land
Exhibit A to DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust") between MHC
STAGECOACH, L.L.C., a Delaware limited liability company, as "Trustor",
TRANSNATION TITLE INSURANCE COMPANY, as "Trustee", and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Beneficiary".
Description of Land. The Land referred to in this Deed of Trust is situated in
the county of Maricopa, state of Arizona and is described as follows:
That portion of the Southwest quarter of Section 21, Township 3 North, Range 1
East, of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows:
COMMENCING at the Southwest corner of said Section 21;
THENCE North 00(Degree) 34' 15" East (assumed bearing) along the West line of
said Section 21, a distance of 786.55 feet;
THENCE South 89(Degree) 25' 45" East 65.00 feet to the POINT OF BEGINNING;
THENCE continuing South 89(Degree) 25' 45" East 126.95 feet;
THENCE North 87(Degree) 23' 37" East 116.40 feet;
THENCE South 00(Degree) 30' 51" West 124.13 feet to the Northeast corner of the
property described in Docket 10568, page 613, records of Maricopa County,
Arizona;
THENCE South 00(Degree) 34' 44" West along the East line of said property 156.09
feet to a point on a line 500.00 feet North and parallel to the South line of
said Section 21;
THENCE North 88(Degree) 16' 15" East along said line 530.61 feet to the
Northeast corner of the property described in Docket 6785, page 268, records of
Maricopa County, Arizona;
THENCE South 00(Degree) 27' 31" West 435.31 feet to a point on a line 65.00 feet
North of and parallel to the South line of said Section 21;
THENCE North 88(Degree) 16' 15" East along said line 51.93 feet;
THENCE North 00(Degree) 20' 35" East 127.50 feet;
THENCE North 02(Degree) 21' 45" West 308.14 feet;
THENCE North 88(Degree) 15' 20" East 445.27 feet;
THENCE North 21(Degree) 52' 10" East 195.00 feet;
THENCE South 89(Degree) 39' 20" East 285.57 feet to a point on the West line of
the East 60 acres of the Southwest quarter of said Section 21;
THENCE North 00(Degree) 20' 40" East along said West line 807.45 feet to a point
on the Southerly line of the property described in Docket 15563, page 420,
records of Maricopa County, Arizona;
THENCE South 86(Degree) 58' 05" West along said South line and the South line of
the property described in Docket 15133, page 167, records of Maricopa County,
Arizona, 1,366.81 feet to a point 309.53 feet East of the West line of said
Section 21;
THENCE South 00(Degree) 37' 00" West 616.40 feet (620.95 feet, record) to the
North line of the property described in Docket 6099, page 277, records of
Maricopa County, Arizona;
THENCE North 89(Degree) 25' 45" West along said North line 243.43 feet to a
point on a line 65.00 feet East of and parallel to the West line of said Section
21;
THENCE South 00(Degree) 34' 15" West along said line 55.48 feet to the POINT OF
BEGINNING;
EXCEPT COMMENCING at the Southwest corner of said Section 21;
THENCE North 88(Degree) 16' 15" East (an assumed bearing) along the South line
of said Section 21, a distance of 840.11 feet;
EXHIBIT A
THENCE North 00(Degree) 27' 31" East 65.05 feet to the POINT OF BEGINNING;
THENCE continuing North 00(Degree) 27' 31" East along the East line of the
property described in Docket 6785, page 259, records of Maricopa County,
Arizona, 435.31 feet;
THENCE North 87(Degree) 25' 34" East 36.52 feet;
THENCE South 02(Degree) 21' 45" East 308.14 feet;
THENCE South 00(Degree) 20' 35" West 127.50 feet to a point on a line 65.00 feet
North of and parallel to the South line of said Section 21;
THENCE South 88(Degree) 16' 15" West along said line 51.93 feet to the POINT OF
BEGINNING; and
EXCEPT COMMENCING at the Southwest corner of said Section 21;
THENCE North 88(Degree) 08' 29" East (North 88(Degree) 16' 15" East, record)
along the South line of said Section 21, a distance of 1,684.02 feet to the West
line of the East 60 acres of the Southwest quarter of said Section 21;
THENCE North 00(Degree) 06' 45" East 669.32 feet ( North 00(Degree) 20' 40" East
669.45, record) along said West line to the POINT OF BEGINNING;
THENCE North 89(Degree) 47' 06" West (North 89(Degree) 39' 20" West, record)
115.00 feet;
THENCE North 16(Degree) 08' 00" East 325.00 feet;
THENCE North 52(Degree) 29' 10" East 31.95 feet to the West line of the East 60
acres of the Southwest quarter of said Section 21;
THENCE South 00(Degree) 06' 45" West (South 00(Degree) 20' 40" West, record)
along said West line 332.09 feet to the POINT OF BEGINNING; and
EXCEPT COMMENCING at the Southwest corner of said Section 21;
THENCE North 88(Degree) 16' 15" East along the South line of said Section 21, a
distance of 892.17 feet;
THENCE North 00(Degree) 20' 35" East 65.04 feet to a point on a line parallel to
and 65.00 feet North of the South line of said Section 21;
THENCE continuing North 00(Degree) 20' 35" East 127.50 feet;
THENCE North 02(Degree) 21' 45" West 308.14 feet;
THENCE North 88(Degree) 15' 20" East 445.27 feet;
THENCE North 21(Degree) 52' 10" East 195.00 feet;
THENCE South 89(Degree) 39' 20" East 21.00 feet to the POINT OF BEGINNING;
THENCE continuing South 89(Degree) 39' 20" East 55.00 feet;
THENCE North 00(Degree) 20' 40" East 40.00 feet;
THENCE North 89(Degree) 39' 20" West 55.00 feet;
THENCE South 00(Degree) 20' 40" West 40.00 feet to the POINT OF BEGINNING.
EXHIBIT A
Recording Requested by
and when recorded return to:
WELLS FARGO BANK, N.A.
Commercial Mortgage Origination
MAC # A0194-093
45 Fremont Street, 9th Floor
San Francisco, California 94105
Attention: CMO Loan Admin.
Loan No. : 31-0900553R
Property Name: Casa del Sol III
DEED OF TRUST
and
ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
and
SECURITY AGREEMENT
(AND FIXTURE FILING)
The parties to this DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
AND SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust"), dated as of July
31, 2001 are MHC STAGECOACH, L.L.C., a Delaware limited liability company
("Trustor"), with a mailing address at c/o Manufactured Home Communities, Inc.,
Two North Riverside Plaza, Suite 800, Chicago, Illinois 60606, TRANSNATION TITLE
INSURANCE COMPANY, an Arizona corporation ("Trustee"), with a mailing address at
234 N. Central Avenue, Phoenix, Arizona, 85004 and WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Beneficiary"), with a mailing address at 1320 Willow Pass Road,
Suite 205, Concord, California 94520.
RECITALS
A. MHC STAGECOACH, L.L.C., a Delaware limited liability company ("Borrower")
proposes to borrow from Beneficiary, and Beneficiary proposes to lend to
Borrower the principal sum of FIFTY MILLION AND NO/100THS DOLLARS
($50,000,000.00) ("Loan"). The Loan is evidenced by a promissory note
("Note") executed by Borrower, dated the date of this Deed of Trust,
payable to the order of Beneficiary in the principal amount of the Loan.
The maturity date of the Loan is September 1, 2011.
B. The loan documents include this Deed of Trust, the Note and the other
documents described in the Note as Loan Documents ("Loan Documents").
ARTICLE 1. DEED OF TRUST
1.1 GRANT. For the purposes of and upon the terms and conditions of this Deed
of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in
trust for the benefit of Beneficiary, with power of sale and right of
entry and possession, all estate, right, title and interest which Trustor
now has or may hereafter acquire in, to, under or derived from any or all
of the following:
1
a. That real property ("Land") located in Peoria, county of Maricopa,
state of Arizona, and more particularly described on Exhibit A
attached hereto;
b. All appurtenances, easements, rights of way, water and water rights,
pumps, pipes, flumes and ditches and ditch rights, water stock,
ditch and/or reservoir stock or interests, royalties, development
rights and credits, air rights, minerals, oil rights, and gas
rights, now or later used or useful in connection with, appurtenant
to or related to the Land;
c. All buildings, structures, facilities, other improvements and
fixtures now or hereafter located on the Land;
d. All apparatus, equipment, machinery and appliances and all
accessions thereto and renewals and replacements thereof and
substitutions therefor used in the operation or occupancy of the
Land, it being intended by the parties that all such items shall be
conclusively considered to be a part of the Land, whether or not
attached or affixed to the Land;
e. All land lying in the right-of-way of any street, road, avenue,
alley or right-of-way opened, proposed or vacated, and all
sidewalks, strips and gores of land adjacent to or used in
connection with the Land;
f. All additions and accretions to the property described above;
g. All licenses, authorizations, certificates, variances, consents,
approvals and other permits now or hereafter pertaining to the Land
and all estate, right, title and interest of Trustor in, to, under
or derived from all tradenames or business names relating to the
Land or the present or future development, construction, operation
or use of the Land; and
h. All proceeds of any of the foregoing.
All of the property described above is hereinafter collectively defined as
the "Property". The listing of specific rights or property shall not be
interpreted as a limitation of general terms.
ARTICLE 2. OBLIGATIONS SECURED
2.1 OBLIGATIONS SECURED. Trustor makes the foregoing grant and assignment for
the purpose of securing the following obligations ("Secured Obligations"):
a. Full and punctual payment to Beneficiary of all sums at any time
owing under the Note;
b. Payment and performance of all covenants and obligations of Trustor
under this Deed of Trust, including, without limitation,
indemnification obligations and advances made to protect the
Property;
c. Payment and performance of all additional covenants and obligations
of Borrower and Trustor under the Loan Documents;
d. Payment and performance of all covenants and obligations, if any,
which any rider attached as an exhibit to this Deed of Trust recites
are secured hereby;
e. Payment and performance of all future advances and other obligations
that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor)
for the benefit of Beneficiary, when the obligation is evidenced by
a writing which recites that it is secured by this Deed of Trust;
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f. All interest and charges on all obligations secured hereby
including, without limitation, prepayment charges, late charges and
loan fees; and
g. All modifications, extensions and renewals of any of the obligations
secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or
interest payment dates or both, as the case may be, deferring or
accelerating payment dates wholly or partly; and (ii) modifications,
extensions or renewals at a different rate of interest whether or
not any such modification, extension or renewal is evidenced by a
new or additional promissory note or notes.
2.2 OBLIGATIONS. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and
loan fees at any time accruing or assessed on any of the Secured
Obligations.
2.3 INCORPORATION. All terms and conditions of the documents which evidence
any of the Secured Obligations are incorporated herein by this reference.
All persons who may have or acquire an interest in the Property shall be
deemed to have notice of the terms of the Secured Obligations and to have
notice that the rate of interest on one or more Secured Obligations may
vary from time to time.
ARTICLE 3. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary all of Trustor's
right, title and interest in, to and under: (a) all present and future
leases of the Property or any portion thereof, all licenses and agreements
relating to the management, leasing or operation of the Property or any
portion thereof, and all other agreements of any kind relating to the use
or occupancy of the Property or any portion thereof, whether such leases,
licenses and agreements are now existing or entered into after the date
hereof ("Leases"); and (b) the rents, issues, deposits and profits of the
Property, including, without limitation, all amounts payable and all
rights and benefits accruing to Trustor under the Leases ("Payments"). The
term "Leases" shall also include all guarantees of and security for the
tenants' performance thereunder, and all amendments, extensions, renewals
or modifications thereto which are permitted hereunder. This is a present
and absolute assignment, not an assignment for security purposes only, and
Beneficiary's right to the Leases and Payments is not contingent upon, and
may be exercised without possession of, the Property.
3.2 GRANT OF LICENSE. Notwithstanding the terms contained in Section 3.1,
Beneficiary confers upon Trustor a revocable license ("License") to
collect and retain the Payments as they become due and payable, until the
occurrence of a Default (as hereinafter defined). Upon a Default, the
License shall be automatically revoked and Beneficiary may collect and
apply the Payments pursuant to the terms hereof without notice and without
taking possession of the Property. All Payments thereafter collected by
Trustor shall be held by Trustor as trustee under a constructive trust for
the benefit of Beneficiary. Trustor hereby irrevocably authorizes and
directs the tenants under the Leases, upon notice of a Default from
Beneficiary, to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums
which may at any time become due under the Leases, or for the performance
of any of the tenants' undertakings under the Leases, and the tenants
shall have no right or duty to inquire as to whether any Default has
actually occurred or is then existing. Trustor hereby relieves the tenants
from any liability to Trustor by reason of relying upon and complying with
any such notice or demand by Beneficiary. Beneficiary may apply, in its
sole discretion, any Payments so collected by Beneficiary against any
Secured Obligation or any other obligation of Borrower, Trustor or any
other person or entity, under any document or instrument related to or
executed in connection with the Loan Documents, whether existing on the
date hereof or hereafter arising. Collection of any Payments by
Beneficiary shall not cure or waive any Default or notice of Default or
invalidate any acts done pursuant to such notice. If and when no Default
exists, Beneficiary shall re-confer the License upon Trustor until the
occurrence of another Default.
3
3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause
Beneficiary to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; (c)
responsible or liable for any waste committed on the Property by the
tenants under any of the Leases or by any other parties; for any dangerous
or defective condition of the Property; or for any negligence in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee, invitee or other
person; or (d) responsible for or impose upon Beneficiary any duty to
produce rents or profits. Beneficiary shall not directly or indirectly be
liable to Trustor or any other person as a consequence of: (e) the
exercise of or failure to exercise any of the rights, remedies or powers
granted to Beneficiary hereunder; or (f) the failure or refusal of
Beneficiary to perform or discharge any obligation, duty or liability of
Trustor arising under the Leases.
3.4 COVENANTS.
a. ALL LEASES. Trustor shall, at Trustor's sole cost and expense:
(i) perform all obligations of the landlord under the Leases and
use reasonable efforts to enforce performance by the tenants
of all obligations of the tenants under the Leases;
(ii) use reasonable efforts to keep the Property leased at all
times to tenants whom Trustor reasonably and in good faith
believes are creditworthy at rents not less than the fair
market rental value (including, but not limited to, free or
discounted rents to the extent the market so requires);
(iii) promptly upon Beneficiary's request, deliver to Beneficiary a
copy of each requested Lease and all amendments thereto and
waivers thereof; and
(iv) promptly upon Beneficiary's request, execute and record any
additional assignments of landlord's interest under any Lease
to Beneficiary and specific subordinations of any Lease to
this Deed of Trust, in form and substance satisfactory to
Beneficiary.
Unless consented to in writing by Beneficiary or otherwise permitted
under any other provision of the Loan Documents, Trustor shall not:
(v) grant any tenant under any Lease any option, right of first
refusal or other right to purchase all or any portion of the
Property under any circumstances;
(vi) grant any tenant under any Lease any right to prepay rent more
than 1 month in advance;
(vii) except upon Beneficiary's request, execute any assignment of
landlord's interest in any Lease; or
(viii) collect rent or other sums due under any Lease in advance,
other than to collect rent 1 month in advance of the time when
it becomes due.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
Trustor shall deposit with Beneficiary any sums received by Trustor
in consideration of any termination, modification or amendment of
any Lease or any release or discharge of any tenant under any Lease
from any obligation thereunder and any such sums received by Trustor
shall be held in trust by Trustor for such purpose. Notwithstanding
the foregoing, so long as no Default exists, the portion of any such
sum received by Trustor with respect to any Lease which is less than
$50,000 shall be payable to Trustor. All such sums received by
Beneficiary with respect to any Lease shall be deemed "Impounds" (as
defined in Section 6.12b) and shall be deposited by Beneficiary into
a pledged account in accordance with Section 6.12b. If no Default
exists, Beneficiary shall release such Impounds to Trustor from time
to time
4
as necessary to pay or reimburse Trustor for such tenant
improvements, brokerage commissions and other leasing costs as may
be required to re-tenant the affected space; provided, however,
Beneficiary shall have received and approved each of the following
for each tenant for which such costs were incurred; (1) Trustor's
written request for such release, including the name of the tenant,
the location and net rentable area of the space and a description
and cost breakdown of the tenant improvements or other leasing costs
covered by the request; (2) Trustor's certification that any tenant
improvements have been completed lien-free and in a workmanlike
manner; (3) a fully executed Lease, or extension or renewal of the
current Lease; (4) an estoppel certificate executed by the tenant
including its acknowledgement that all tenant improvements have been
satisfactorily completed; and (5) such other information with
respect to such costs as Beneficiary may require. Following the
re-tenanting of all affected space (including, without limitation,
the completion of all tenant improvements), and provided no Default
exists, Beneficiary shall release any remaining such Impounds
relating to the affected space to Trustor. Trustor shall construct
all tenant improvements in a workmanlike manner and in accordance
with all applicable laws, ordinances, rules and regulations.
b. MAJOR LEASES. Trustor shall, at Trustor's sole cost and expense,
give Beneficiary prompt written notice of any material default by
landlord or tenant under any Major Lease (as defined below). Unless
consented to in writing by Beneficiary or otherwise permitted under
any other provision of the Loan Documents, Trustor shall not:
(i) enter into any Major Lease which (aa) is not on fair market
terms (which terms may include free or discounted rent to the
extent the market so requires); (bb) does not contain a
provision requiring the tenant to execute and deliver to the
landlord an estoppel certificate in form and substance
satisfactory to the landlord promptly upon the landlord's
request; or (cc) allows the tenant to assign or sublet the
premises without the landlord's consent;
(ii) reduce any rent or other sums due from the tenant under any
Major Lease;
(iii) terminate or materially modify or amend any Major Lease; or
(iv) release or discharge the tenant or any guarantor under any
Major Lease from any material obligation thereunder.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
"Major Lease", as used herein, shall mean any Lease, which is, at
any time: (1) a Lease of more than 20% of the total rentable area of
the Property, as reasonably determined by Beneficiary; or (2) a
Lease which generates a gross base monthly rent exceeding 20% of the
total gross base monthly rent generated by all Leases (excluding all
Leases under which the tenant is then in default), as reasonably
determined by Beneficiary. Trustor's obligations with respect to
Major Leases shall be governed by the provisions of Section 3.4a as
well as by the provisions of this Section.
c. FAILURE TO DENY REQUEST. Beneficiary's failure to deny any written
request by Trustor for Beneficiary's consent under the provisions of
Sections 3.4(a) or 3.4(b) within 10 Business Days after
Beneficiary's receipt of such request (and all documents and
information reasonably related thereto) shall be deemed to
constitute Beneficiary's consent to such request.
3.5 RIGHT OF SUBORDINATION. Beneficiary may at any time and from time to time
by specific written instrument intended for the purpose unilaterally
subordinate the lien of this Deed of Trust to any Lease, without joinder
or consent of, or notice to, Trustor, any tenant or any other person.
Notice is hereby given to each tenant under a Lease of such right to
subordinate. No subordination referred to in this Section shall constitute
a subordination to any lien or other encumbrance, whenever arising, or
improve the right of any junior lienholder. Nothing herein shall be
construed as subordinating this Deed of Trust to any Lease.
5
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 SECURITY INTEREST. Trustor grants and assigns to Beneficiary a security
interest to secure payment and performance of all of the Secured
Obligations, in all of Trustor's right, title and interest in and to the
following described personal property in which Trustor now or at any time
hereafter has any interest ("Collateral"):
All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and
other personal property, wherever situated, which are or are to be
incorporated into, used in connection with or appropriated for use
on the Property; all rents, issues, deposits and profits of the
Property (to the extent, if any, they are not subject to the
Absolute Assignment of Rents and Leases); all inventory, accounts,
cash receipts, deposit accounts, impounds, accounts receivable,
contract rights, general intangibles, software, chattel paper,
instruments, documents, promissory notes, drafts, letters of credit,
letter of credit rights, supporting obligations, insurance policies,
insurance and condemnation awards and proceeds, any other rights to
the payment of money, trade names, trademarks and service marks
arising from or related to the Property or any business now or
hereafter conducted thereon by Trustor; all permits, consents,
approvals, licenses, authorizations and other rights granted by,
given by or obtained from, any governmental entity with respect to
the Property; all deposits or other security now or hereafter made
with or given to utility companies by Trustor with respect to the
Property; all advance payments of insurance premiums made by Trustor
with respect to the Property; all plans, drawings and specifications
relating to the Property; all loan funds held by Beneficiary,
whether or not disbursed; all funds deposited with Beneficiary
pursuant to any Loan Document, all reserves, deferred payments,
deposits, accounts, refunds, cost savings and payments of any kind
related to the Property or any portion thereof, including, without
limitation, all "Impounds" as defined herein; together with all
replacements and proceeds of, and additions and accessions to, any
of the foregoing, and all books, records and files relating to any
of the foregoing.
As to all of the above described personal property which is or which
hereafter becomes a "fixture" under applicable law, this Deed of Trust
constitutes a fixture filing under the Arizona Uniform Commercial Code, as
amended or recodified from time to time ("UCC").
4.2 COVENANTS. Trustor agrees: (a) to execute and deliver such documents as
Beneficiary reasonably deems necessary to create, perfect and continue the
security interests contemplated hereby; (b) not to change its name, and,
as applicable, its chief executive offices, its principal residence or the
jurisdiction in which it is organized without giving Beneficiary at least
30 days' prior written notice thereof; and (c) to cooperate with
Beneficiary in perfecting all security interests granted herein and in
obtaining such agreements from third parties as Beneficiary deems
necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of Beneficiary's rights hereunder.
4.3 RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a "Secured
Party" under the UCC, Beneficiary may, but shall not be obligated to, at
any time without notice and at the expense of Trustor: (a) give notice to
any person of Beneficiary's rights hereunder and enforce such rights at
law or in equity; (b) insure, protect, defend and preserve the Collateral
or any rights or interests of Beneficiary therein; and (c) inspect the
Collateral during normal business hours upon reasonable prior written
notice, provided, however, that such notice shall not be required in the
event of an emergency. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any obligation of Trustor to Beneficiary unless
Beneficiary shall make an express written election of said remedy under
the UCC or other applicable law.
6
4.4 ADDITIONAL RIGHTS OF BENEFICIARY UPON DEFAULT. Upon the occurrence of a
Default, then in addition to all of Beneficiary's rights as a "Secured
Party" under the UCC or otherwise at law:
a. DISPOSITION OF COLLATERAL. Beneficiary may: (i) upon written notice,
require Trustor to assemble the Collateral and make it available to
Beneficiary at a place reasonably designated by Beneficiary; (ii)
without prior notice (to the extent permitted by law), enter upon
the Property or other place where the Collateral may be located and
take possession of, collect, sell, lease, license and otherwise
dispose of the Collateral, and store the same at locations
acceptable to Beneficiary at Trustor's expense; or (iii) sell,
assign and deliver the Collateral at any place or in any lawful
manner and bid and become purchaser at any such sales; and
b. OTHER RIGHTS. Beneficiary may, for the account of Trustor and at
Trustor's expense: (i) operate, use, consume, sell, lease, license
or otherwise dispose of the Collateral as Beneficiary reasonably
deems appropriate for the purpose of performing any or all of the
Secured Obligations; (ii) enter into any agreement, compromise or
settlement including insurance claims, which Beneficiary may
reasonably deem desirable or proper with respect to the Collateral;
and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness
and obligations now or hereafter owing to Trustor in connection with
or on account of the Collateral.
Trustor acknowledges and agrees that a disposition of the Collateral in
accordance with Beneficiary's rights and remedies as heretofore provided
is a disposition thereof in a commercially reasonable manner and that 5
Business Days prior notice of such disposition is commercially reasonable
notice. Beneficiary shall have no obligation to process or prepare the
Collateral for sale or other disposition. In disposing of the Collateral,
Beneficiary may disclaim all warranties of title, possession, quiet
enjoyment and the like. Any proceeds of any sale or other disposition of
the Collateral may be applied by Beneficiary first to the reasonable
expenses incurred by Beneficiary in connection therewith, including,
without limitation, reasonable attorneys' fees and disbursements, and then
to the payment of the Secured Obligations, in such order of application as
Beneficiary may from time to time elect.
4.5 POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as
Trustor's attorney-in-fact (such agency being coupled with an interest),
and as such attorney-in-fact, Beneficiary may, without the obligation to
do so, in Beneficiary's name or in the name of Trustor, prepare, execute,
file and record financing statements, continuation statements,
applications for registration and like papers necessary to create, perfect
or preserve any of Beneficiary's security interests and rights in or to
the Collateral, and upon a Default, take any other action required of
Trustor; provided, however, that Beneficiary as such attorney-in-fact
shall be accountable only for such funds as are actually received by
Beneficiary.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
Beneficiary that, to Trustor's current actual knowledge after reasonable
investigation and inquiry, the following statements are true and correct
as of the Effective Date:
a. LEGAL STATUS. Trustor and Borrower are duly organized and existing
and in good standing under the laws of the state(s) in which Trustor
and Borrower are organized. Trustor and Borrower are qualified or
licensed to do business in all jurisdictions in which such
qualification or licensing is required.
b. PERMITS. Trustor and Borrower possess all permits, franchises and
licenses and all rights to all trademarks, trade names, patents and
fictitious names, if any, necessary to enable Trustor and Borrower
to conduct the business(es) in which Trustor and Borrower are now
engaged in compliance with applicable law.
7
c. AUTHORIZATION AND VALIDITY. The execution and delivery of the Loan
Documents have been duly authorized and the Loan Documents
constitute valid and binding obligations of Trustor, Borrower or the
party which executed the same, enforceable in accordance with their
respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights, or by the application of rules of
equity .
d. VIOLATIONS. The execution, delivery and performance by Trustor and
Borrower of each of the Loan Documents do not violate any provision
of any law or regulation, or result in any breach or default under
any contract, obligation, indenture or other instrument to which
Trustor or Borrower is a party or by which Trustor or Borrower is
bound.
e. LITIGATION. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental
authority, court or administrative agency which may adversely affect
the financial condition or operations of Trustor or Borrower other
than those previously disclosed in writing by Trustor or Borrower to
Beneficiary.
f. FINANCIAL STATEMENTS. The financial statements of Trustor and
Borrower, of each general partner (if Trustor or Borrower is a
partnership), of each member (if Trustor or Borrower is a limited
liability company) and of each guarantor, if any, previously
delivered by Trustor or Borrower to Beneficiary: (i) are materially
complete and correct; (ii) present fairly the financial condition of
such party; and (iii) have been prepared in accordance with the same
accounting standard used by Trustor or Borrower to prepare the
financial statements delivered to and approved by Beneficiary in
connection with the making of the Loan, or other accounting
standards approved by Beneficiary. Since the date of such financial
statements, there has been no material adverse change in such
financial condition, nor have any assets or properties reflected on
such financial statements been sold, transferred, assigned,
mortgaged, pledged or encumbered except as previously disclosed in
writing by Trustor or Borrower to Beneficiary and approved in
writing by Beneficiary.
g. REPORTS. All reports, documents, instruments and information
delivered to Beneficiary in connection with the Loan: (i) are
correct in all material respects and sufficiently complete to give
Beneficiary accurate knowledge of their subject matter; and (ii) do
not contain any misrepresentation of a material fact or omission of
a material fact which omission makes the provided information
misleading.
h. INCOME TAXES. There are no material pending assessments or
adjustments of Trustor's or Borrower's income tax payable with
respect to any year.
i. SUBORDINATION. There is no agreement or instrument to which Borrower
is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower's obligations
under the Note to an obligation owed to another party.
j. TITLE. Trustor lawfully holds and possesses fee simple title to the
Property, without limitation on the right to encumber same. This
Deed of Trust is a first lien on the Property prior and superior to
all other liens and encumbrances on the Property except: (i) liens
for real estate taxes and assessments not yet due and payable; (ii)
senior exceptions previously approved by Beneficiary and shown in
the title insurance policy insuring the lien of this Deed of Trust;
and (iii) other matters, if any, previously disclosed to Beneficiary
by Trustor in a writing specifically referring to this
representation and warranty.
k. MECHANICS' LIENS. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to any such liens)
affecting the Property which are or may be prior to or equal to the
lien of this Deed of Trust, other than those (if any) previously
approved by Beneficiary and shown on the title insurance policy
insuring the lien of this Deed of Trust.
8
l. ENCROACHMENTS. Except as shown in the survey, if any, previously
delivered to Beneficiary, none of the buildings or other
improvements which were included for the purpose of determining the
appraised value of the Property lies outside of the boundaries or
building restriction lines of the Property and no buildings or other
improvements located on adjoining properties encroach upon the
Property.
m. LEASES. All existing Leases are in full force and effect and are
enforceable in accordance with their respective terms. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no material breach or default by any party, or event which
would constitute a material breach or default by any party after
notice or the passage of time, or both, exists under any existing
Lease. None of the landlord's interests under any of the Leases,
including, but not limited to, rents, additional rents, charges,
issues or profits, has been transferred or assigned. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no rent or other payment under any existing Lease has been
paid by any tenant for more than 1 month in advance.
n. COLLATERAL. Trustor has good title to the existing Collateral, free
and clear of all liens and encumbrances except those, if any,
previously disclosed to Beneficiary by Trustor in writing
specifically referring to this representation and warranty.
Trustor's chief executive office (or residence, if applicable) is
located at the address shown on page one of this Deed of Trust.
Trustor is an organization organized solely under the laws of the
State of Delaware. All organizational documents of Trustor delivered
to Beneficiary are complete and accurate in every respect. Trustor's
legal name is exactly as shown on page one of this Deed of Trust.
o. CONDITION OF PROPERTY. Except as shown in the property condition
survey or other engineering reports, if any, previously delivered to
or obtained by Beneficiary, the Property is in good condition and
repair and is free from any damage that would materially and
adversely affect the value of the Property as security for the Loan
or the intended use of the Property.
p. HAZARDOUS MATERIALS. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by
Beneficiary, the Property is not and has not been a site for the
use, generation, manufacture, storage, treatment, release,
threatened release, discharge, disposal, transportation or presence
of Hazardous Materials (as hereinafter defined) in violation of
Hazardous Materials Laws (as hereinafter defined) except as
otherwise previously disclosed in writing by Trustor to Beneficiary.
q. HAZARDOUS MATERIALS LAWS. The Property complies with all Hazardous
Materials Laws.
r. HAZARDOUS MATERIALS CLAIMS. There are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).
s. WETLANDS. No part of the Property consists of or is classified as
wetlands, tidelands or swamp and overflow lands.
t. COMPLIANCE WITH LAWS. All federal, state and local laws, rules and
regulations applicable to the Property, including, without
limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990, as
amended from time to time (42 U. S. C. Section 12101 et seq.) have
been satisfied or complied with. Trustor is in possession of all
certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of
the Property. All such certificates of occupancy and other licenses,
permits and authorizations are valid and in full force and effect.
u. PROPERTY TAXES AND OTHER LIABILITIES. All taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
and ground rents, if any, which previously became due and owing in
respect of the Property have been paid.
9
v. CONDEMNATION. There is no proceeding pending or threatened for the
total or partial condemnation of the Property.
w. HOMESTEAD. There is no homestead or other exemption available to
Trustor which would materially interfere with the right to sell the
Property at a trustee's sale or the right to foreclose this Deed of
Trust.
x. SOLVENCY. None of the transactions contemplated by the Loan will be
or have been made with an actual intent to hinder, delay or defraud
any present or future creditors of Trustor, and Trustor, on the
Effective Date, will have received fair and reasonably equivalent
value in good faith for the grant of the liens or security interests
effected by the Loan Documents. On the Effective Date, Trustor will
be solvent and will not be rendered insolvent by the transactions
contemplated by the Loan Documents. Trustor is able to pay its debts
as they become due.
y. SEPARATE TAX PARCEL(S). The Property is assessed for real estate tax
purposes as one or more wholly independent tax parcels, separate
from any other real property, and no other real property is assessed
and taxed together with the Property or any portion thereof.
5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS (LEVEL V SPE).
Trustor hereby represents, warrants and covenants to Beneficiary that with
respect to both Trustor and MHC-QRS STAGECOACH, INC., a Delaware
corporation, the managing member of Trustor:
a. each such entity was organized solely for the purpose of (i) owning
the Properties (as defined in the Note); (ii) acting as a general
partner of a limited partnership which owns the Properties; or (iii)
acting as a managing member of a limited liability company which
owns the Properties;
b. each such entity has not engaged and will not engage in any business
unrelated to (i) the ownership of the Properties; (ii) acting as
general partner of a limited partnership which owns the Properties;
or (iii) acting as a managing member of a limited liability company
which owns the Properties;
c. each such entity has not had and will not have any assets other than
the Properties (and personal property incidental to the ownership
and operation of the Properties) or its partnership or membership
interest in the limited partnership or limited liability company
which owns the Properties, as applicable;
d. each such entity has not and will not engage in, seek or consent to
any dissolution, winding up, liquidation, consolidation, merger,
asset sale, transfer of partnership or membership interest, or
amendment of its articles of incorporation, articles of
organization, certificate of formation, operating agreement or
limited partnership agreement, as applicable;
e. if any such entity is a limited partnership, all of its general
partners are corporations that satisfy the requirements set forth in
this Section 5.2;
f. if any such entity is a limited liability company, it has at least
one managing member that is a corporation that satisfies the
requirements set forth in this Section 5.2;
g. each such entity, without the unanimous consent of all of its
general partners, directors or members, as applicable, shall not
file or consent to the filing of any bankruptcy or insolvency
petition or otherwise institute insolvency proceedings with respect
to itself or any other entity in which it has a direct or indirect
legal or beneficial ownership interest;
10
h. each such entity has no indebtedness (and will have no indebtedness)
other than (i) the Loan (to the extent it is liable under the terms
of the Loan Documents); and (ii) unsecured trade debt not to exceed
$1,000,000 in the aggregate with respect to Trustor or $10,000 in
the aggregate with respect to its managing member, which is not
evidenced by a note and is incurred in the ordinary course of its
business in connection with owning, operating and maintaining the
Property (or its interest in Trustor, as applicable) and is paid
within thirty (30) days from the date incurred;
i. each such entity has not failed and will not fail to correct any
known misunderstanding regarding the separate identity of such
entity;
j. each such entity has maintained and will maintain its accounts,
books and records separate from any other person or entity;
k. each such entity has maintained and will maintain its books,
records, resolutions and agreements as official records;
l. each such entity (i) has not commingled and will not commingle its
funds or assets with those of any other entity; and (ii) has held
and will hold its assets in its own name;
m. each such entity has conducted and will conduct its business in its
own name or in a registered trade name;
n. each such entity has maintained and will maintain its accounting
records and other entity documents separate from any other person or
entity;
o. each such entity has prepared and will prepare separate tax returns
and financial statements, or if part of a consolidated group, is
shown as a separate member of such group;
p. each such entity has paid and will pay its own liabilities and
expenses out of its own funds and assets;
q. each such entity has held and will hold regular meetings, as
appropriate, to conducts its business and has observed and will
observe all corporate, partnership or limited liability company
formalities and record keeping, as applicable;
r. each such entity has not assumed or guaranteed and will not assume
or guarantee or become obligated for the debts of any other entity
or hold out its credit as being available to satisfy the obligations
of any other entity;
s. each such entity has not acquired and will not acquire obligations
or securities of its partners, members or shareholders;
t. each such entity has allocated and will allocate fairly and
reasonably the costs associated with common employees and any
overhead for shared office space and each such entity has used and
will use separate stationery, invoices and checks under its own name
or under its registered trade name;
u. each such entity has not pledged and will not pledge its assets for
the benefit of any other person or entity;
v. each such entity has held out and identified itself and will hold
itself out and identify itself as a separate and distinct entity
under its own name or under its registered trade name and not as a
division or part of any other person or entity;
11
w. each such entity has not made and will not make loans to any person
or entity;
x. each such entity has not identified and will not identify its
partners, members or shareholders, or any affiliates of any of the
foregoing, as a division or part of it;
y. each such entity has not entered into and will not enter into or be
a party to, any transaction with its partners, members,
shareholders, or any affiliates of any of the foregoing, except in
the ordinary course of its business pursuant to written agreements
and on terms which are intrinsically fair and are no less favorable
to it than would be obtained in a comparable arm's-length
transaction with an unrelated third party;
z. if any such entity is a corporation, the directors of such entity
shall consider the interests of the creditors of such entity in
connection with all corporate action;
aa. each such entity has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number
of employees in light of its contemplated business operations;
bb. each such entity has maintained and will maintain adequate capital
in light of its contemplated business operations;
cc. if any such entity is a limited partnership with more than one
general partner, its limited partnership agreement requires the
remaining partners to continue the partnership as long as one
solvent general partner exists;
dd. if any such entity is a limited liability company, its operating
agreement, if any such entity is a limited partnership, its limited
partnership agreement, and if any such entity is a corporation, to
the full extent permitted by applicable law, its articles of
incorporation, contain the provisions set forth in this Section 5.2
and any such entity shall conduct its business and operations in
strict compliance with the terms contained therein;
ee. each such entity will, as a condition to the closing of the Loan,
deliver to Beneficiary a nonconsolidation opinion in form and
substance acceptable to Beneficiary;
ff. if any such entity is a corporation, it has maintained and will
continue to maintain at least one Independent Director (as
hereinafter defined); and
gg. if any such entity is a corporation, it has not caused or allowed
and will not cause or allow the board of directors of such entity to
take any action requiring the unanimous affirmative vote of 100% of
the members of the board of directors unless an Independent Director
shall have participated in such vote.
An "Independent Director" shall be an individual who, except in his or her
capacity as an Independent Director of the corporation is not, and has not
been during the five (5) years immediately before such individual's
appointment as an Independent Director: (i) a stockholder, director,
partner, officer or employee of the corporation or its Affiliates; (ii)
affiliated with a customer or supplier of the corporation or its
Affiliates; or (iii) a spouse, parent, sibling, child or other family
relative of any person described by (i) or (ii) above.
As used herein, the term "Affiliate" shall mean any person or entity other
than the corporation (i) which owns beneficially, directly or indirectly,
any outstanding shares of the corporation's stock, or (ii) which controls,
is controlled by or is under common control with the corporation. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities, by contract or otherwise.
12
ARTICLE 6. RIGHTS AND DUTIES OF THE PARTIES
6.1 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Trustor shall, or shall
cause the property manager to: (a) keep the Property in good condition and
repair; (b) complete or restore promptly and in workmanlike manner the
Property or any part thereof which may be damaged or destroyed (unless, if
and to the extent permitted under Section 6.11, Beneficiary elects to
require that insurance proceeds be used to reduce the Secured Obligations
and after such repayment the ratio of Secured Obligations to the value of
the Property, as reasonably determined by Beneficiary is the same as or
lower than it was immediately before the loss or taking occurred); (c)
comply and cause the Property to comply with (i) all laws, ordinances,
regulations and standards, (ii) all covenants, conditions, restrictions
and equitable servitudes, whether public or private, of every kind and
character and (iii) all requirements of insurance companies and any bureau
or agency which establishes standards of insurability, which laws,
covenants or requirements affect the Property and pertain to acts
committed or conditions existing thereon, including, without limitation,
any work of alteration, improvement or demolition as such laws, covenants
or requirements mandate; (d) operate and manage the Property at all times
in a professional manner and do all other acts which from the character or
use of the Property may be reasonably necessary to maintain and preserve
its value; (e) promptly after execution, deliver to Beneficiary a copy of
any management agreement concerning the Property and all amendments
thereto and waivers thereof; and (f) execute and acknowledge all further
documents, instruments and other papers as Beneficiary or Trustee
reasonably deems necessary or appropriate to preserve, continue, perfect
and enjoy the benefits of this Deed of Trust and perform Trustor's
obligations, including, without limitation, statements of the amount
secured hereby then owing and statements of no offset. Trustor shall not,
without Beneficiary's prior written consent: (g) remove or demolish all or
any material part of the Property; (h) alter either (i) the exterior of
the Property in a manner which materially and adversely affects the value
of the Property or (ii) the roof or other structural elements of the
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any
change in any zoning or other land classification which affects the
Property; (j) materially alter the type of occupancy or use of all or any
part of the Property; or (k) commit or permit waste of the Property.
6.2 HAZARDOUS MATERIALS. Without limiting any other provision of this Deed of
Trust, Trustor agrees as follows:
a. PROHIBITED ACTIVITIES. Trustor shall not cause or permit the
Property to be used as a site for the use, generation, manufacture,
storage, treatment, release, discharge, disposal, transportation or
presence of any oil or other petroleum products, flammable
explosives, asbestos, urea formaldehyde insulation, radioactive
materials, hazardous wastes, toxic or contaminated substances or
similar materials, including, without limitation, any substances
which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under the Hazardous Materials Laws
(defined below) and/or other applicable environmental laws,
ordinances or regulations ("Hazardous Materials").
The foregoing to the contrary notwithstanding, (i) Trustor may
store, maintain and use on the Property janitorial and maintenance
supplies, paint and other Hazardous Materials of a type and in a
quantity readily available for purchase by the general public and
normally stored, maintained and used by owners and managers of
properties of a type similar to the Property; and (ii) tenants of
the Property may store, maintain and use on the Property (and, if
any tenant is a retail business, hold in inventory and sell in the
ordinary course of such tenant's business) household and consumer
cleaning supplies and other Hazardous Materials of a type and
quantity readily available for purchase by the general public and
normally stored, maintained and used (and, if tenant is a retail
business, sold) by tenants of properties similar to the Property or
in similar lines of business on properties similar to the Property.
b. HAZARDOUS MATERIALS LAWS. Trustor shall comply and cause the
Property to comply with all federal, state and local laws,
ordinances and regulations relating to Hazardous Materials
("Hazardous
13
Materials Laws"), including, without limitation: the Clean Air Act,
as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.;
the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. Section 6901 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(including the Superfund Amendments and Reauthorization Act of 1986,
"CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances
Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section
651; the Emergency Planning and Community Right-to-Know Act of 1986,
42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of
1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state
and local laws, laws of other jurisdictions or orders and
regulations.
c. NOTICES. Trustor shall immediately notify Beneficiary in writing of:
(i) the discovery of any Hazardous Materials on, under or about the
Property (other than Hazardous Materials permitted under Section
6.2(a)); (ii) any knowledge by Trustor that the Property does not
comply with any Hazardous Materials Laws; (iii) any claims or
actions ("Hazardous Materials Claims") pending or threatened in
writing against Trustor or the Property by any governmental entity
or agency or any other person or entity relating to Hazardous
Materials or pursuant to the Hazardous Materials Laws; and (iv) the
discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to become contaminated with Hazardous
Materials.
d. REMEDIAL ACTION. In response to knowledge or notification to Trustor
of the presence of any Hazardous Materials on, under or about the
Property, Trustor shall immediately take, at Trustor's sole expense,
all remedial action required by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any
Hazardous Materials Claims.
e. INSPECTION BY BENEFICIARY. Upon reasonable prior notice to Trustor
(except in the case of an emergency) and during normal business
hours, Beneficiary, its employees and agents, may from time to time
(whether before or after the commencement of a nonjudicial or
judicial foreclosure proceeding), enter and inspect the Property for
the purpose of determining the existence, location, nature and
magnitude of any past or present release or threatened release of
any Hazardous Materials into, onto, beneath or from the Property.
f. LEGAL EFFECT OF SECTION. Trustor and Beneficiary agree that: (i)
this Hazardous Materials Section is intended as Beneficiary's
written request for information (and Trustor's response) concerning
the environmental condition of the real property security as
required by California Code of Civil Procedure Section 726.5; and
(ii) each representation and warranty and covenant in this Section
(together with any indemnity applicable to a breach of any such
representation and warranty) with respect to the environmental
condition of the Property is intended by Beneficiary and Trustor to
be an "environmental provision" for purposes of California Code of
Civil Procedure Section 736.
6.3 COMPLIANCE WITH LAWS. Trustor shall comply with all federal, state and
local laws, rules and regulations applicable to the Property, including,
without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), as amended from time to time. Trustor shall
possess and maintain or cause Borrower to possess and maintain in full
force and effect at all times (a) all certificates of occupancy and other
licenses, permits and authorizations required by applicable law for the
existing use of the Property and (b) all permits, franchises and licenses
and all rights to all trademarks, trade names, patents and fictitious
names, if any, required by applicable law for Trustor and Borrower to
conduct the business(es) in which Trustor and Borrower are now engaged.
6.4 LITIGATION. Trustor shall promptly notify Beneficiary in writing of any
litigation pending or threatened in writing against Trustor or Borrower
claiming damages in excess of $100,000 and of all pending or threatened
(in writing)
14
litigation against Trustor or Borrower if the aggregate damage claims
against Trustor or Borrower exceed $500,000.
6.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Trustor shall not: (a) merge or
consolidate with any other entity or permit Borrower to merge or
consolidate with any other entity; (b) make any substantial change in the
nature of Trustor's business or structure or permit Borrower to make any
substantial change in the nature of Borrower's business or structure; (c)
acquire all or substantially all of the assets of any other entity or
permit Borrower to acquire all or substantially all of the assets of any
other entity; or (d) sell, lease, assign, transfer or otherwise dispose of
a material part of Trustor's assets except in the ordinary course of
Trustor's business or permit Borrower to sell, lease, assign, transfer or
otherwise dispose of a material part of Borrower's assets except in the
ordinary course of Borrower's business.
6.6 ACCOUNTING RECORDS. Trustor shall maintain and cause Borrower to maintain
adequate books and records in accordance with the same accounting standard
used by Trustor or Borrower to prepare the financial statements delivered
to and approved by Beneficiary in connection with the making of the Loan
or other accounting standards approved by Beneficiary. Trustor shall
permit and shall cause Borrower to permit any representative of
Beneficiary, at any reasonable time and from time to time, upon reasonable
prior notice to Trustor, to inspect, audit and examine such books and
records and make copies of same.
6.7 COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor shall pay to Beneficiary the
full amount of all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses of Beneficiary's in-house or
outside counsel, incurred by Beneficiary in connection with: (a)
appraisals and inspections of the Property or Collateral required by
Beneficiary as a result of (i) a Transfer or proposed Transfer (as defined
below), or (ii) a Default; (b) appraisals and inspections of the Property
or Collateral required by applicable law, including, without limitation,
federal or state regulatory reporting requirements; and (c) any acts
performed by Beneficiary at Trustor's request or wholly or partially for
the benefit of Trustor (including, without limitation, the preparation or
review of amendments, assumptions, waivers, releases, reconveyances,
estoppel certificates or statements of amounts owing under any Secured
Obligation). In connection with appraisals and inspections, Trustor
specifically (but not by way of limitation) acknowledges that: (aa) a
formal written appraisal of the Property by a state certified or licensed
appraiser may be required by federal regulatory reporting requirements on
an annual or more frequent basis; and (bb) Beneficiary may require
inspection of the Property by an independent supervising architect, a cost
engineering specialist, or both. Trustor shall pay all indebtedness
arising under this Section immediately upon demand by Beneficiary together
with interest thereon following notice of such indebtedness at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.8 LIENS, ENCUMBRANCES AND CHARGES. Subject to the terms of Section 8.4,
Trustor shall immediately discharge by bonding or otherwise any lien,
charge or other encumbrance which attaches to the Property in violation of
Section 6.15. Subject to Trustor's right to contest such matters under
this Deed of Trust or as expressly permitted in the Loan Documents,
Trustor shall pay when due all obligations secured by or reducible to
liens and encumbrances which shall now or hereafter encumber or appear to
encumber all or any part of the Property or any interest therein, whether
senior or subordinate hereto, including, without limitation, all claims
for work or labor performed, or materials or supplies furnished, in
connection with any work of demolition, alteration, repair, improvement or
construction of or upon the Property, except such as Trustor may in good
faith contest or as to which a bona fide dispute may arise (provided
provision is made to the satisfaction of Beneficiary for eventual payment
thereof in the event that Trustor is obligated to make such payment and
that any recorded claim of lien, charge or other encumbrance against the
Property is immediately discharged by bonding or otherwise).
6.9 TAXES AND OTHER LIABILITIES. Trustor shall pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real and
personal and including federal and state income taxes and state and local
property taxes and assessments. Trustor shall promptly provide to
Beneficiary copies of all tax and assessment notices pertaining to the
Property. Trustor hereby authorizes Beneficiary to obtain, at Trustor's
15
expense, a tax service contract which shall provide tax information on the
Property to Beneficiary for the term of the Loan and any extensions or
renewals of the Loan.
6.10 INSURANCE COVERAGE. Trustor shall insure the Property against loss or
damage by fire and such other hazards as Beneficiary shall from time to
time require; provided, however, Beneficiary, at Beneficiary's election,
may only require flood insurance if all or any portion of the improvements
located on the Property is or becomes located in a special flood hazard
area, and Beneficiary, at Beneficiary's election, may only require
earthquake insurance if all or any portion of the Property is or becomes
located in an earthquake fault zone. Trustor shall also carry public
liability insurance and such other insurance as Beneficiary may reasonably
require, including, without limitation, business interruption insurance or
loss of rents insurance. Such policies shall contain a standard mortgage
clause naming Beneficiary and its successors in interest as a loss payee
and requiring at least 30 days prior notice to the holder at termination
or cancellation. Trustor shall maintain all required insurance throughout
the term of the Loan and while any liabilities of Borrower or Trustor to
Beneficiary under any of the Loan Documents remain outstanding at
Trustor's expense, with companies, and in substance and form satisfactory
to Beneficiary. Neither Beneficiary nor Trustee, by reason of accepting,
rejecting, approving or obtaining insurance shall incur any liability for:
(a) the existence, nonexistence, form or legal sufficiency of any
insurance; (b) the solvency of any insurer; or (c) the payment of claims.
6.11 CONDEMNATION AND INSURANCE PROCEEDS.
a. ASSIGNMENT OF CLAIMS. Trustor absolutely and irrevocably assigns to
Beneficiary all of the following rights, claims and amounts
(collectively, "Claims"), all of which shall be paid to Beneficiary:
(i) all awards of damages and all other compensation payable
directly or indirectly by reason of a condemnation or proposed
condemnation for public or private use affecting all or any part of,
or any interest in, the Property; (ii) all other claims and awards
for damages to or decrease in value of all or any part of, or any
interest in, the Property; (iii) all proceeds of any insurance
policies payable by reason of loss sustained to all or any part of
the Property; and (iv) all interest which may accrue on any of the
foregoing. Trustor shall give Beneficiary prompt written notice of
the occurrence of any casualty affecting, or the institution of any
proceedings for eminent domain or for the condemnation of, the
Property or any portion thereof. So long as no Default has occurred
and is continuing at the time, Trustor shall have the right to
adjust, compromise and settle any Claim of $100,000 or less without
the consent of Beneficiary, provided, however, all awards, proceeds
and other sums described herein shall continue to be payable to
Beneficiary. Beneficiary may commence, appear in, defend or
prosecute any Claim exceeding $100,000, and may adjust, compromise
and settle all Claims (except for Claims which Trustor may settle as
provided herein), but shall not be responsible for any failure to
commence, appear in, defend, prosecute or collect any such Claim
regardless of the cause of the failure. All awards, proceeds and
other sums described herein shall be payable to Beneficiary.
b. APPLICATION OF PROCEEDS; NO DEFAULT. So long as no Default has
occurred and is continuing at the time of Beneficiary's receipt of
the proceeds of the Claims ("Proceeds") and no Default occurs
thereafter, Beneficiary shall apply the Proceeds in the following
order of priority: First, to Beneficiary's expenses in settling,
prosecuting or defending the Claims; Second, to the repair or
restoration of the Property; and Third, to Trustor if the repair or
restoration of the Property has been completed, but to the Secured
Obligations in any order without suspending, extending or reducing
any obligation of Trustor to make installment payments if the repair
or restoration of the Property has not been completed.
Notwithstanding the foregoing, Beneficiary shall have no obligation
to make any Proceeds available for the repair or restoration of the
Property unless and until all the following conditions have been
satisfied: (i) delivery to Beneficiary of the Proceeds plus any
additional amount which is needed to pay all costs of the repair or
restoration (including, without limitation, taxes, financing
charges, insurance and rent during the repair period); (ii)
establishment of an arrangement for lien releases and disbursement
of funds acceptable to Beneficiary; (iii) delivery to Beneficiary in
form and content acceptable to Beneficiary of all of the following:
(aa) plans and specifications for the work; (bb) a contract for the
work, signed by a contractor acceptable to Beneficiary; (cc) a cost
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breakdown for the work; (dd) if reasonably required by Beneficiary,
a payment and performance bond for the work; (ee) evidence of the
continuation of substantially all Leases unless consented to in
writing by Beneficiary; (ff) evidence that, upon completion of the
work, the size, capacity, value, and income coverage ratios for the
Property will be at least as great as those which existed
immediately before the damage or condemnation occurred; and (gg)
evidence of the satisfaction of any additional conditions that
Beneficiary may reasonably establish to protect Beneficiary's
security. Trustor acknowledges that the specific conditions
described above are reasonable.
c. APPLICATION OF PROCEEDS; DEFAULT. If a Default has occurred and is
continuing at the time of Beneficiary's receipt of the Proceeds or
if a Default occurs at any time thereafter, Beneficiary may, at
Beneficiary's absolute discretion and regardless of any impairment
of security or lack of impairment of security, but subject to
applicable law governing use of the Proceeds, if any, apply all or
any of the Proceeds to Beneficiary's expenses in settling,
prosecuting or defending the Claims and then apply the balance to
the Secured Obligations in any order without suspending, extending
or reducing any obligation of Trustor to make installment payments,
and may release all or any part of the Proceeds to Trustor upon any
conditions Beneficiary chooses.
6.12 IMPOUNDS.
a. POST-DEFAULT IMPOUNDS. If required by Beneficiary at any time after
a Default occurs (and regardless of whether such Default is
thereafter cured), Trustor shall deposit with Beneficiary such
amounts ("Post-Default Impounds") on such dates (determined by
Beneficiary as provided below) as will be sufficient to pay any or
all "Costs" (as defined below) specified by Beneficiary. Beneficiary
in its reasonable discretion shall estimate the amount of such Costs
that will be payable or required during any period selected by
Beneficiary not exceeding 1 year and shall determine the fractional
portion thereof that Trustor shall deposit with Beneficiary on each
date specified by Beneficiary during such period. If the
Post-Default Impounds paid by Trustor are not sufficient to pay the
related Costs, Trustor shall deposit with Beneficiary upon demand an
amount equal to the deficiency. All Post-Default Impounds shall be
payable by Trustor in addition to (but without duplication of) any
other Impounds (as defined below).
b. ALL IMPOUNDS. Post-Default Impounds and any other impounds that may
be payable by Borrower under the Note are collectively called
"Impounds". All Impounds shall be deposited into one or more
segregated or commingled accounts maintained by Beneficiary or its
servicing agent. Except as otherwise provided in the Note, such
account(s) shall not bear interest. Beneficiary shall not be a
trustee, special depository or other fiduciary for Trustor with
respect to such account, and the existence of such account shall not
limit Beneficiary's rights under this Deed of Trust, any other
agreement or any provision of law. If no Default exists, Beneficiary
shall apply all Impounds to the payment of the related Costs, or in
Beneficiary's sole discretion may release any or all Impounds to
Trustor for application to and payment of such Costs. If a Default
exists, Beneficiary may apply any or all Impounds to any Secured
Obligation and/or to cure such Default, whereupon Trustor shall
restore all Impounds so applied and cure all Defaults not cured by
such application. The obligations of Trustor hereunder shall not be
diminished by deposits of Impounds made by Trustor, except to the
extent that such obligations have actually been met by application
of such Impounds. Upon any assignment of this Deed of Trust,
Beneficiary may assign all Impounds in its possession to
Beneficiary's assignee, whereupon Beneficiary and Trustee shall be
released from all liability with respect to such Impounds. Within 60
days following full repayment of the Secured Obligations (other than
as a consequence of foreclosure or conveyance in lieu of
foreclosure) or at such earlier time as Beneficiary may elect,
Beneficiary shall pay to Trustor all Impounds in its possession, and
no other party shall have any right or claim thereto. "Costs" means
(i) all taxes and other liabilities payable by Trustor under Section
6.9, (ii) all insurance premiums payable by Trustor under Section
6.10, (iii) all other costs and expenses for which Impounds are
required under the Note, and/or (iv) all other amounts that will be
required to preserve the value of the Property. Trustor shall
deliver to Beneficiary, promptly upon receipt, all bills for Costs
for which Beneficiary has required Post-Default Impounds.
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6.13 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Trustor shall protect,
preserve and defend the Property and title to and right of possession of
the Property, the security of this Deed of Trust and the rights and powers
of Beneficiary and Trustee hereunder at Trustor's sole expense against all
adverse claims, whether the claim: (a) is against a possessory or
non-possessory interest; (b) arose prior or subsequent to the Effective
Date; or (c) is senior or junior to Trustor's or Beneficiary's rights.
Trustor shall give Beneficiary and Trustee prompt notice in writing of the
assertion of any claim, of the filing of any action or proceeding, of the
occurrence of any damage to the Property and of any condemnation offer or
action.
6.14 RIGHT OF INSPECTION. Beneficiary and its independent contractors, agents
and employees may enter the Property from time to time at any reasonable
time upon reasonable prior notice to Trustor (except that such notice
shall not be required in the event of an emergency) for the purpose of
inspecting the Property and ascertaining Trustor's compliance with the
terms of this Deed of Trust. Beneficiary shall use reasonable efforts to
assure that Beneficiary's entry upon and inspection of the Property shall
not materially and unreasonably interfere with the business or operations
of Trustor or Trustor's tenants on the Property.
6.15 PROHIBITION OF TRANSFER OF PROPERTY OR INTERESTS IN TRUSTOR. Trustor
acknowledges that Beneficiary has relied upon the principals of Trustor
and Borrower and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan.
Accordingly, except with the prior written consent of Beneficiary or as
otherwise expressly permitted in the Note, Trustor shall not: (a) cause or
permit any sale, exchange, mortgage, pledge, hypothecation, assignment,
encumbrance or other transfer, conveyance or disposition, whether
voluntarily, involuntarily or by operation of law ("Transfer") of all or
any part of, or all or any direct or indirect interest in, the Property or
the Collateral (except for equipment and inventory in the ordinary course
of its business); or (b) cause or permit a Transfer of any direct or
indirect interest in any partnership, limited liability company,
corporation, trust, or other entity comprising all or any portion of or
holding any direct or indirect interest in Trustor or Borrower (other than
the sale or exchange of a limited partnership interest or a non-managing
membership interest). If any Transfer not expressly permitted in the Note
or this Deed of Trust is made without the prior written consent of
Beneficiary, Beneficiary shall have the absolute right at its option,
without prior demand or notice, to declare all of the Secured Obligations
immediately due and payable, except to the extent prohibited by law, and
pursue its rights and remedies under Section 7.3 herein. Trustor agrees to
pay any prepayment fee as set forth in the Note in the event the Secured
Obligations are accelerated pursuant to the terms of this Section. Consent
to one such Transfer shall not be deemed to be a waiver of the right to
require the consent to future or successive Transfers. Except for
Transfers expressly permitted under the Note, Beneficiary's consent to any
Transfer may be withheld, conditioned or delayed in Beneficiary's sole and
absolute discretion.
6.16 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts this
trust when this Deed of Trust is recorded. From time to time and without
affecting the personal liability of any person for payment of any
indebtedness or performance of any Secured Obligation, Beneficiary, or
Trustee at the direction of Beneficiary, may, without liability therefor
and without notice: (a) reconvey all or any part of the Property; (b)
consent to the making of any map or plat of the Property; (c) join with
Trustor in granting any easement on the Property; (d) join with Trustor in
any declaration of covenants and restrictions; or (e) join in any
extension agreement or any agreement subordinating the lien or charge of
this Deed of Trust. Nothing contained in the immediately preceding
sentence shall be construed to limit, impair or otherwise affect the
rights of Trustor in any respect. Except as may otherwise be required by
applicable law, Trustee or Beneficiary may from time to time apply to any
court of competent jurisdiction for aid and direction in the execution of
the trusts hereunder and the enforcement of the rights and remedies
available hereunder, and Trustee or Beneficiary may obtain orders or
decrees directing or confirming or approving acts in the execution of said
trusts and the enforcement of said remedies. Trustee has no obligation to
notify any party of any pending sale or any action or proceeding
(including, without limitation, actions in which Trustor, Beneficiary or
Trustee shall be a party) unless held or commenced and maintained by
Trustee under this Deed of Trust. Trustee shall not be obligated to
perform any act required of it hereunder unless the performance of the act
is requested in writing and Trustee is reasonably indemnified and held
harmless against loss, cost, liability and expense.
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6.17 COMPENSATION OF TRUSTEE. Trustor shall pay to Trustee reasonable
compensation and reimbursement for services and expenses in the
administration of this trust, including, without limitation, reasonable
attorneys' fees. Trustor shall pay all indebtedness arising under this
Section immediately upon demand by Trustee or Beneficiary together with
interest thereon from the date the indebtedness arises at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.18 EXCULPATION. Beneficiary shall not directly or indirectly be liable to
Trustor or any other person as a consequence of: (a) the exercise of the
rights, remedies or powers granted to Beneficiary in this Deed of Trust;
(b) the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the
Property or under this Deed of Trust; or (c) any loss sustained by Trustor
or any third party resulting from Beneficiary's failure to lease the
Property after a Default or from any other act or omission of Beneficiary
in managing the Property after a Default unless the loss is caused by the
willful misconduct and bad faith of Beneficiary and no such liability
shall be asserted or enforced against Beneficiary, all such liability
being expressly waived and released by Trustor.
6.19 INDEMNITY. Without in any way limiting any other indemnity contained in
this Deed of Trust, Trustor agrees to defend, indemnify and hold harmless
Trustee and the Beneficiary Group (as defined below) from and against any
claim, loss, damage, cost, expense or liability directly or indirectly
arising out of: (a) the making of the Loan, except for violations of
banking laws or regulations by the Beneficiary Group; (b) this Deed of
Trust; (c) the execution of this Deed of Trust or the performance of any
act required or permitted hereunder or by law; (d) any failure of Trustor
to perform Trustor's obligations under this Deed of Trust or the other
Loan Documents; (e) any alleged obligation or undertaking on the
Beneficiary Group's part to perform or discharge any of the
representations, warranties, conditions, covenants or other obligations
contained in any other document related to the Property; (f) any act or
omission by Trustor or any contractor, agent, employee or representative
of Trustor with respect to the Property; or (g) any claim, loss, damage,
cost, expense or liability directly or indirectly arising out of: (i) the
use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous
Materials which are found in, on, under or about the Property (including,
without limitation, underground contamination); or (ii) the breach of any
covenant, representation or warranty of Trustor under Sections 5.1.p,
5.1.q, 5.1.r, or 6.2 above. The foregoing to the contrary notwithstanding,
this indemnity shall not include any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of the gross negligence or
willful misconduct of any member of the Beneficiary Group or Trustee, or
any claim, loss, damage, cost, expense or liability incurred by the
Beneficiary Group or Trustee arising from any act or incident on the
Property occurring after the full reconveyance and release of the lien of
this Deed of Trust on the Property, or with respect to the matters set
forth in clause (g) above, any claim, loss, damage, cost, expense or
liability incurred by the Beneficiary Group resulting from the
introduction and initial release of Hazardous Materials on the Property
occurring after the transfer of title to the Property at a foreclosure
sale under this Deed of Trust, either pursuant to judicial decree or the
power of sale, or by deed in lieu of such foreclosure. This indemnity
shall include, without limitation: (aa) all consequential damages
(including, without limitation, any third party tort claims or
governmental claims, fines or penalties against Trustee or the Beneficiary
Group); (bb) all court costs and reasonable attorneys' fees (including,
without limitation, expert witness fees) paid or incurred by Trustee or
the Beneficiary Group; and (cc) the costs, whether foreseeable or
unforeseeable, of any investigation, repair, cleanup or detoxification of
the Property which is required by any governmental entity or is otherwise
necessary to render the Property in compliance with all laws and
regulations pertaining to Hazardous Materials. "Beneficiary Group", as
used herein, shall mean (1) Beneficiary (including, without limitation,
any participant in the Loan), (2) any entity controlling, controlled by or
under common control with Beneficiary, (3) the directors, officers,
employees and agents of Beneficiary and such other entities, and (4) the
successors, heirs and assigns of the entities and persons described in
foregoing clauses (1) through (3). Trustor shall pay immediately upon
Trustee's or Beneficiary's demand any amounts owing under this indemnity
together with interest from the date the indebtedness arises until paid at
the rate of interest applicable to the principal balance of the Note as
specified therein. Trustor agrees to use legal counsel reasonably
acceptable to Trustee and the Beneficiary Group in any action or
proceeding arising under this indemnity. THE PROVISIONS OF THIS SECTION
SHALL SURVIVE THE TERMINATION AND
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RECONVEYANCE OF THIS DEED OF TRUST, BUT TRUSTOR'S LIABILITY UNDER THIS
INDEMNITY SHALL BE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE
ENTITLED "BORROWER'S LIABILITY."
6.20 SUBSTITUTION OF TRUSTEE. From time to time, by a writing signed and
acknowledged by Beneficiary, Beneficiary may appoint another trustee to
act in the place and stead of Trustee or any successor. Such writing shall
set forth any information required by law and shall be recorded in the
Office of the Recorder of the County in which the Property is situated.
Beneficiary shall give such additional notice as may be required by law.
Such instrument of substitution and the compliance with any other
requirements of applicable law shall discharge Trustee herein named and
shall appoint the new trustee as the trustee hereunder with the same
effect as if originally named trustee herein. A writing recorded pursuant
to the provisions of this Section shall be conclusive proof of the proper
substitution of such new trustee.
6.21 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Property or in any manner obligated
under the Secured Obligations ("Interested Parties"), Beneficiary may,
from time to time: (a) fully or partially release any person or entity
from liability for the payment or performance of any Secured Obligation;
(b) extend the maturity of any Secured Obligation; (c) make any agreement
with Borrower increasing the amount or otherwise altering the terms of any
Secured Obligation; (d) accept additional security for any Secured
Obligation; or (e) release all or any portion of the Property, Collateral
and other security for any Secured Obligation. None of the foregoing
actions shall release or reduce the personal liability of any of said
Interested Parties, or release or impair the priority of the lien of this
Deed of Trust upon the Property.
6.22 SALE OR PARTICIPATION OF LOAN. Trustor agrees that Beneficiary may at any
time sell, assign, participate or securitize all or any portion of
Beneficiary's rights and obligations under the Loan Documents, and that
any such sale, assignment, participation or securitization may be to one
or more financial institutions or other entities, to private investors,
and/or into the public securities market, in Beneficiary's sole
discretion. Trustor further agrees that Beneficiary may disseminate to any
such actual or potential purchaser(s), assignee(s) or participant(s) all
documents and financial and other information heretofore or hereafter
provided to or known to Beneficiary with respect to: (a) the Property and
its operation; and/or (b) any party connected with the Loan (including,
without limitation, Trustor, any partner or member of Trustor, any
constituent partner or member of Trustor, any guarantor and any
nonborrower trustor). In the event of any such sale, assignment,
participation or securitization, Beneficiary and the other parties to the
same shall share in the rights and obligations of Beneficiary set forth in
the Loan Documents as and to the extent they shall agree among themselves.
In connection with any such sale, assignment, participation or
securitization, Trustor further agrees that the Loan Documents shall be
sufficient evidence of the obligations of Trustor to each purchaser,
assignee or participant, and Trustor shall, within 15 days after request
by Beneficiary, (x) deliver an estoppel certificate verifying for the
benefit of Beneficiary and any other party designated by Beneficiary the
status and the terms and provisions of the Loan in form and substance
acceptable to Beneficiary, (y) provide any information, legal opinions or
documents regarding Trustor, Guarantor (as defined in the Loan Documents),
the Property and any tenants of the Property as Beneficiary or
Beneficiary's rating agencies may reasonably request, and (z) enter into
such amendments or modifications to the Loan Documents or the
organizational documents of Trustor as may be reasonably required in order
to facilitate any such sale, assignment, participation or securitization
without impairing Trustor's rights or increasing Trustor's obligations.
The indemnity obligations of Trustor under the Loan Documents shall also
apply with respect to any purchaser, assignee or participant.
6.23 RECONVEYANCE. Upon Beneficiary's written request, and upon surrender of
this Deed of Trust or certified copy thereof and any note, instrument or
instruments setting forth all obligations secured hereby to Trustee for
cancellation, Trustee shall reconvey, without warranty, the Property or
that portion thereof then held hereunder. The recitals of any matters or
facts in any reconveyance executed hereunder shall be conclusive proof of
the truthfulness thereof. To the extent permitted by law, the reconveyance
may describe the grantee as "the person or persons legally entitled
thereto". Neither Beneficiary nor Trustee shall have any duty to determine
the rights of persons claiming to be rightful grantees of any
reconveyance. When the Property has been fully reconveyed,
20
the last such reconveyance shall operate as a reassignment of all future
rents, issues and profits of the Property to the person or persons legally
entitled thereto.
6.24 SUBROGATION. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part
by Beneficiary pursuant to this Deed of Trust or by the proceeds of any
loan secured by this Deed of Trust.
6.25 COMMUNITY FACILITIES DISTRICT. Without obtaining the prior written consent
of Beneficiary, Trustor shall not consent to, or vote in favor of, the
inclusion of all or any part of the Property in any Community Facilities
District formed pursuant to the Community Facilities District Act, A.R.S.
Section 48-701, et seq., as amended from time to time. Trustor shall
immediately give notice to Beneficiary of any notification or advice that
Trustor may receive from any municipality or other third party of any
intent or proposal to include all or any part of the Property in a
Community Facilities District. Beneficiary shall have the right to file a
written objection to the inclusion of all or any part of the Property in a
Community Facilities District, either in its own name or in the name of
Trustor, and to appear at, and participate in, any hearing with respect to
the formation of any such district.
6.26 MANAGEMENT AGREEMENTS. Without the prior written consent of Beneficiary,
Trustor shall not terminate, modify, amend or enter into any agreement
providing for the management, leasing or operation of the Property.
Trustor represents, warrants and covenants that any existing management
agreement includes, and any future management agreement entered into by
Trustor shall include, a provision which provides that the management
agreement is automatically terminated upon the transfer of the Property by
Trustor, either by sale, foreclosure, deed in lieu of foreclosure, or
otherwise, to Beneficiary or any other purchaser of the Property. Upon a
Default under the Loan Documents or a default under any management
agreement then in effect, which default is not cured within any applicable
grace or cure period, Beneficiary shall have the right to terminate, or to
direct Trustor to terminate, such management agreement upon thirty (30)
days' written notice and to retain, or to direct Trustor to retain, a new
management agent approved by Beneficiary.
ARTICLE 7. DEFAULT
7.1 DEFAULT. For all purposes hereof, "Default" shall mean either an "Optional
Default" (as defined below) or an "Automatic Default" (as defined below).
a. OPTIONAL DEFAULT. An "Optional Default" shall occur, at
Beneficiary's option, upon the occurrence of any of the following
events:
(i) MONETARY. Borrower or Trustor shall fail to (aa) pay when due
any sums payable under the Loan Documents which by their
express terms require immediate payment without any grace
period or sums which are payable on the Maturity Date, or (bb)
pay within 5 days when due any other sums payable under the
Note, this Deed of Trust or any of the other Loan Documents,
including, without limitation, any monthly payment due under
the Note.
(ii) FAILURE TO PERFORM. Borrower or Trustor shall fail to observe,
perform or discharge any of Borrower's or Trustor's
obligations, covenants, conditions or agreements, other than
Borrower's or Trustor's payment obligations, under the Note,
this Deed of Trust or any of the other Loan Documents, and
(aa) such failure shall remain uncured for 30 days after
written notice thereof shall have been given to Borrower or
Trustor, as the case may be, by Beneficiary or (bb) if such
failure is of such a nature that it cannot be cured within
such 30 day period, Borrower or Trustor shall fail to commence
to cure such failure within such 30 day period or shall fail
to diligently prosecute such curative action thereafter.
(iii) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate or other statement (financial or otherwise) made
or furnished by or on behalf of Borrower, Trustor, or a
guarantor, if
21
any, to Beneficiary or in connection with any of the Loan
Documents, or as an inducement to Beneficiary to make the
Loan, shall be false, incorrect, incomplete or misleading in
any material respect when made or furnished.
(iv) CONDEMNATION; ATTACHMENT. The condemnation, seizure or
appropriation of any material portion (as reasonably
determined by Beneficiary) of the Property; or the
sequestration or attachment of, or levy or execution upon any
of the Property, the Collateral or any other collateral
provided by Borrower or Trustor under any of the Loan
Documents, or any material portion of the other assets of
Borrower or Trustor, which sequestration, attachment, levy or
execution is not released or dismissed within 45 days after
its occurrence; or the sale of any assets affected by any of
the foregoing.
(v) UNINSURED CASUALTY. The occurrence of an uninsured casualty
with respect to any material portion (as reasonably determined
by Beneficiary) of the Property unless: (aa) no other Default
has occurred and is continuing at the time of such casualty or
occurs thereafter; (bb) Trustor promptly notifies Beneficiary
of the occurrence of such casualty; and (cc) not more than 45
days after the occurrence of such casualty, Trustor delivers
to Beneficiary immediately available funds in an amount
sufficient, in Beneficiary's reasonable opinion, to pay all
costs of the repair or restoration (including, without
limitation, taxes, financing charges, insurance and rent
during the repair period). So long as no Default has occurred
and is continuing at the time of Beneficiary's receipt of such
funds and no Default occurs thereafter, Beneficiary shall make
such funds available for the repair or restoration of the
Property. Notwithstanding the foregoing, Beneficiary shall
have no obligation to make any funds available for repair or
restoration of the Property unless and until all the
conditions set forth in clauses (ii) and (iii) of the second
sentence of Section 6.11(b) of this Deed of Trust have been
satisfied. Trustor acknowledges that the specific conditions
described above are reasonable.
(vi) ADVERSE FINANCIAL CHANGE. Any material adverse change in the
financial condition of Borrower or any general partner or
managing member of Borrower, any guarantor, or any other
person or entity from the condition shown on the financial
statement(s) submitted to Beneficiary and relied upon by
Beneficiary in making the Loan, and which change Beneficiary
reasonably determines will have a material adverse effect on
(aa) the business, operations or condition of the Property; or
(bb) the ability of Borrower or Trustor to pay or perform
Borrower's or Trustor's obligations in accordance with the
terms of the Note, this Deed of Trust, and the other Loan
Documents.
b. AUTOMATIC DEFAULT. An "Automatic Default" shall occur automatically
upon the occurrence of any of the following events:
(i) VOLUNTARY BANKRUPTCY, INSOLVENCY, DISSOLUTION. (aa) Borrower's
filing a petition for relief under the Bankruptcy Reform Act
of 1978, as amended or recodified ("Bankruptcy Code"), or
under any other present or future state or federal law
regarding bankruptcy, reorganization or other relief to
debtors (collectively, "Debtor Relief Law"); or (bb)
Borrower's filing any pleading in any involuntary proceeding
under the Bankruptcy Code or other Debtor Relief Law which
admits the jurisdiction of a court to regulate Borrower or the
Property or the petition's material allegations regarding
Borrower's insolvency; or (cc) Borrower's making a general
assignment for the benefit of creditors; or (dd) Borrower's
applying for, or the appointment of, a receiver, trustee,
custodian or liquidator of Borrower or any of its property; or
(ee) the filing by Borrower of a petition seeking the
liquidation or dissolution of Borrower or the commencement of
any other procedure to liquidate or dissolve Borrower.
(ii) INVOLUNTARY BANKRUPTCY. Borrower's failure to effect a full
dismissal of any involuntary petition under the Bankruptcy
Code or other Debtor Relief Law that is filed against Borrower
22
or in any way restrains or limits Borrower or Beneficiary
regarding the Loan or the Property, prior to the earlier of
the entry of any order granting relief sought in the
involuntary petition or 45 days after the date of filing of
the petition.
(iii) PARTNERS, GUARANTORS. The occurrence of an event specified in
clauses (i) or (ii) as to Trustor, any general partner or
managing member of Borrower or Trustor, or any guarantor or
other person or entity in any manner obligated to Beneficiary
under the Loan Documents.
7.2 ACCELERATION. Upon the occurrence of an Optional Default, Beneficiary may,
at its option, declare all sums owing to Beneficiary under the Note and
the other Loan Documents immediately due and payable. Upon the occurrence
of an Automatic Default, all sums owing to Beneficiary under the Note and
the other Loan Documents shall automatically become immediately due and
payable.
7.3 RIGHTS AND REMEDIES. In addition to the rights and remedies in Section 7.2
above, at any time after a Default, Beneficiary shall have all of the
following rights and remedies:
a. ENTRY ON PROPERTY. With or without notice, and without releasing
Trustor from any Secured Obligation, and without becoming a
mortgagee in possession, to enter upon the Property from time to
time and to do such acts and things as Beneficiary or Trustee deem
necessary or desirable in order to inspect, investigate, assess and
protect the security hereof or to cure any Default, including,
without limitation: (i) to take and possess all documents, books,
records, papers and accounts of Trustor, Borrower or the then owner
of the Property which relate to the Property; (ii) to make,
terminate, enforce or modify leases of the Property upon such terms
and conditions as Beneficiary deems proper; (iii) to make repairs,
alterations and improvements to the Property necessary, in Trustee's
or Beneficiary's reasonable judgment, to protect or enhance the
security hereof; (iv) to appear in and defend any action or
proceeding purporting to affect the security hereof or the rights or
powers of Beneficiary or Trustee hereunder; (v) to pay, purchase,
contest or compromise any encumbrance, charge, lien or claim of lien
which, in the sole judgment of either Beneficiary or Trustee, is or
may be senior in priority hereto, the judgment of Beneficiary or
Trustee being conclusive as between the parties hereto; (vi) to
obtain insurance; (vii) to pay any premiums or charges with respect
to insurance required to be carried hereunder; (viii) to obtain a
court order to enforce Beneficiary's right to enter and inspect the
Property for Hazardous Materials, in which regard the decision of
Beneficiary as to whether there exists a release or threatened
release of Hazardous Materials onto the Property shall be deemed
reasonable and conclusive as between the parties hereto; (ix) to
have a receiver appointed pursuant to applicable law to enforce
Beneficiary's rights to enter and inspect the Property for Hazardous
Materials; and/or (x) to employ legal counsel, accountants,
engineers, consultants, contractors and other appropriate persons to
assist them;
b. APPOINTMENT OF RECEIVER. With or without notice or hearing, to apply
to a court of competent jurisdiction for and obtain appointment of a
receiver, trustee, liquidator or conservator of the Property, for
any purpose, including, without limitation, to enforce Beneficiary's
right to collect Payments and to enter on and inspect the Property
for Hazardous Materials, as a matter of strict right and without
regard to: (i) the adequacy of the security for the repayment of the
Secured Obligations; (ii) the existence of a declaration that the
Secured Obligations are immediately due and payable; (iii) the
filing of a notice of default; or (iv) the solvency of Trustor,
Borrower or any guarantor or other person or entity in any manner
obligated to Beneficiary under the Loan Documents;
c. JUDICIAL FORECLOSURE; INJUNCTION. To commence and maintain an action
or actions in any court of competent jurisdiction to foreclose this
instrument as a mortgage or to obtain specific enforcement of the
covenants of Trustor hereunder, and Trustor agrees that such
covenants shall be specifically enforceable by injunction or any
other appropriate equitable remedy and that for the purposes of any
suit brought under this subparagraph, Trustor waives the defense of
laches and any applicable statute of limitations;
23
d. NONJUDICIAL FORECLOSURE. To give such notice of Default and of
election to cause the Property to be sold as may be required by law
or as may be necessary to cause the Trustee to exercise the power of
sale granted herein. Trustee shall give and record such notice as
the law then requires as a condition precedent to a trustee's sale.
When the minimum period of time required by law after such notice
has elapsed, Trustee, without notice to or demand upon Trustor
except as required by law, shall sell the Property at the time and
place of sale fixed by it in the notice of sale, at one or several
sales, either as a whole or in separate parcels and in such manner
and order, as directed by Beneficiary, or by Trustor to the extent
required by law, at public auction to the highest bidder for cash,
in lawful money of the United States, payable at time of sale.
Except as required by law, neither Trustor nor any other person or
entity other than Beneficiary shall have the right to direct the
order in which the Property is sold. Subject to requirements and
limits imposed by law, Trustee may, from time to time postpone sale
of all or any portion of the Property by public announcement at such
time and place of sale, and from time to time may postpone the sale
by public announcement at the time and place fixed by the preceding
postponement. A sale of less than the whole of the Property or any
defective or irregular sale made hereunder shall not exhaust the
power of sale provided for herein. Trustee shall deliver to the
purchaser at such sale a deed conveying the Property or portion
thereof so sold, but without any covenant or warranty, express or
implied. The recitals in the deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including
Trustee, Trustor or Beneficiary, may purchase at the sale.
Upon sale of the Property at any judicial or nonjudicial
foreclosure, Beneficiary may credit bid (as determined by
Beneficiary in its sole and absolute discretion) all or any portion
of the Secured Obligations. In determining such credit bid,
Beneficiary may, but is not obligated to, take into account all or
any of the following: (i) appraisals of the Property as such
appraisals may be discounted or adjusted by Beneficiary in its sole
and absolute underwriting discretion; (ii) expenses and costs
incurred by Beneficiary with respect to the Property prior to
foreclosure; (iii) expenses and costs which Beneficiary anticipates
will be incurred with respect to the Property after foreclosure, but
prior to resale, including, without limitation, costs of structural
reports and other due diligence, costs to carry the Property prior
to resale, costs of resale (e.g. commissions, attorneys' fees, and
taxes), costs of any Hazardous Materials clean-up and monitoring,
costs of deferred maintenance, repair, refurbishment and retrofit,
costs of defending or settling litigation affecting the Property,
and lost opportunity costs (if any), including the time value of
money during any anticipated holding period by Beneficiary; (iv)
declining trends in real property values generally and with respect
to properties similar to the Property; (v) anticipated discounts
upon resale of the Property as a distressed or foreclosed property;
(vi) the fact of additional collateral (if any), for the Secured
Obligations; and (vii) such other factors or matters that
Beneficiary (in its sole and absolute discretion) deems appropriate.
In regard to the above, Trustor acknowledges and agrees that: (viii)
Beneficiary is not required to use any or all of the foregoing
factors to determine the amount of its credit bid; (ix) this
paragraph does not impose upon Beneficiary any additional
obligations that are not imposed by law at the time the credit bid
is made; (x) the amount of Beneficiary's credit bid need not have
any relation to any loan-to-value ratios specified in the Loan
Documents or previously discussed between Trustor and Beneficiary;
and (xi) Beneficiary's credit bid may be (at Beneficiary's sole and
absolute discretion) higher or lower than any appraised value of the
Property;
e. MULTIPLE FORECLOSURES. To resort to and realize upon the security
hereunder and any other security now or later held by Beneficiary
concurrently or successively and in one or several consolidated or
independent judicial actions or lawfully taken nonjudicial
proceedings, or both, and to apply the proceeds received upon the
Secured Obligations all in such order and manner as Beneficiary
determines in its sole discretion;
f. RIGHTS TO COLLATERAL. To exercise all rights Trustee or Beneficiary
may have with respect to the Collateral under this Deed of Trust,
the UCC or otherwise at law; and
24
g. OTHER RIGHTS. To exercise such other rights as Trustee or
Beneficiary may have at law or in equity or pursuant to the terms
and conditions of this Deed of Trust or any of the other Loan
Documents.
In connection with any sale or sales hereunder, Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the Property (including, without
limitation, any improvements forming a part thereof) without causing
structural damage thereto as if the same were personal property or a
fixture, as the case may be, and dispose of the same in accordance with
applicable law, separate and apart from the sale of the Property. Any sale
of Collateral hereunder shall be conducted in any manner permitted by the
UCC.
7.4 APPLICATION OF FORECLOSURE SALE PROCEEDS. If any foreclosure sale is
effected, except as otherwise may be required by applicable law, Trustee
shall apply the proceeds of such sale in the following order of priority:
First, to the costs and expenses of exercising the power of sale and of
sale, including the payment of the trustee's fees and reasonable
attorneys' fees actually incurred; Second, to the payment of the contract
or contracts secured; Third, to the payment of all other Secured
Obligations; Fourth, to junior lienholders or encumbrancers in order of
their priority; and Fifth, the remainder, if any, to the person or persons
legally entitled thereto.
7.5 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a
lien on or interest in the Property, hereby waives all rights to have the
Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured
Obligation, marshaled upon any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Secured Obligations.
7.6 NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any receiver's
entry upon and taking possession of all or any part of the Property, nor
any collection of rents, issues, profits, insurance proceeds, condemnation
proceeds or damages, other security or proceeds of other security, or
other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise of any other right or remedy by Beneficiary
or Trustee or any receiver shall cure or waive any Default or notice of
default under this Deed of Trust, or nullify the effect of any notice of
default or sale (unless all Secured Obligations then due have been paid or
performed and Trustor has cured all other Defaults hereunder), or impair
the status of the security, or prejudice Beneficiary or Trustee in the
exercise of any right or remedy, or be construed as an affirmation by
Beneficiary of any tenancy, lease or option or a subordination of the lien
of this Deed of Trust.
7.7 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor agrees to pay to
Beneficiary immediately and upon demand all costs and expenses incurred by
Trustee and Beneficiary in the enforcement of the terms and conditions of
this Deed of Trust (including, without limitation, statutory trustee's
fees, court costs and attorneys' fees, whether incurred in litigation or
not) with interest from the date of expenditure until said sums have been
paid at the rate of interest applicable to the principal balance of the
Note as specified therein.
7.8 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably
appoints Beneficiary and its successors and assigns, as its
attorney-in-fact, which agency is coupled with an interest, to perform any
obligation of Trustor hereunder upon the occurrence of an event, act or
omission which, with notice or passage of time or both, would constitute a
Default, provided, however, that: (a) Beneficiary as such attorney-in-fact
shall only be accountable for such funds as are actually received by
Beneficiary; and (b) Beneficiary shall not be liable to Trustor or any
other person or entity for any failure to act under this Section.
7.9 REMEDIES CUMULATIVE. All rights and remedies of Beneficiary and Trustee
under this Deed of Trust and the other Loan Documents are cumulative and
are in addition to all rights and remedies provided by applicable law
(including specifically that of foreclosure of this Deed of Trust as
though it were a mortgage). Beneficiary may enforce any one or more
remedies or rights under the Loan Documents either successively or
concurrently.
25
ARTICLE 8. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan
Documents grant further rights to Beneficiary and contain further
agreements and affirmative and negative covenants by Trustor which apply
to this Deed of Trust and to the Property and such further rights and
agreements are incorporated herein by this reference. THE OBLIGATIONS AND
LIABILITIES OF TRUSTOR UNDER THIS DEED OF TRUST AND THE OTHER LOAN
DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE
ENTITLED "BORROWER'S LIABILITY."
8.2 NON-WAIVER. By accepting payment of any amount secured hereby after its
due date or late performance of any other Secured Obligation, Beneficiary
shall not waive its right against any person obligated directly or
indirectly hereunder or on any Secured Obligation, either to require
prompt payment or performance when due of all other sums and obligations
so secured or to declare default for failure to make such prompt payment
or performance. No exercise of any right or remedy by Beneficiary or
Trustee hereunder shall constitute a waiver of any other right or remedy
herein contained or provided by law. No failure by Beneficiary or Trustee
to exercise any right or remedy hereunder arising upon any Default shall
be construed to prejudice Beneficiary's or Trustee's rights or remedies
upon the occurrence of any other or subsequent Default. No delay by
Beneficiary or Trustee in exercising any such right or remedy shall be
construed to preclude Beneficiary or Trustee from the exercise thereof at
any time while that Default is continuing. No notice to nor demand on
Trustor shall of itself entitle Trustor to any other or further notice or
demand in similar or other circumstances.
8.3 CONSENTS, APPROVALS AND EXPENSES. Wherever Beneficiary's consent,
approval, acceptance or satisfaction is required under any provision of
this Deed of Trust or any of the other Loan Documents, such consent,
approval, acceptance or satisfaction shall not be unreasonably withheld,
conditioned or delayed by Beneficiary unless such provision expressly so
provides. Wherever costs or expenses are required to be paid under any
provision of this Deed of Trust or any of the other Loan Documents, such
costs or expenses shall be reasonable.
8.4 PERMITTED CONTESTS. After prior written notice to Beneficiary, Trustor may
contest, by appropriate legal or other proceedings conducted in good faith
and with due diligence, the amount, validity or application, in whole or
in part, of any lien, levy, tax or assessment, or any lien of any laborer,
mechanic, materialman, supplier or vendor, or the application to Trustor
or the Property of any law or the validity thereof, the assertion or
imposition of which, or the failure to pay when due, would constitute a
Default; provided that (a) Trustor pursues the contest diligently, in a
manner which Beneficiary determines is not prejudicial to Beneficiary, and
does not impair the lien of this Deed of Trust; (b) the Property, or any
part hereof or estate or interest therein, shall not be in any danger of
being sold, forfeited or lost by reason of such proceedings; (c) in the
case of the contest of any law or other legal requirement, Beneficiary
shall not be in any danger of any civil or criminal liability; and (d) if
required by Beneficiary, Trustor deposits with Beneficiary any funds or
other forms of assurance (including a bond or letter of credit)
satisfactory to Beneficiary to protect Beneficiary from the consequences
of the contest being unsuccessful. Trustor's right to contest pursuant to
the terms of this provision shall in no way relieve Trustor or Borrower of
its obligations under the Loan or to make payments to Beneficiary as and
when due.
8.5 FURTHER ASSURANCES. Trustor shall, upon demand by Beneficiary or Trustee,
execute, acknowledge (if appropriate) and deliver any and all documents
and instruments and do or cause to be done all further acts reasonably
necessary or appropriate to effectuate the purposes of the Loan Documents
and to perfect any assignments contained therein.
8.6 ATTORNEYS' FEES. If any legal action, suit or proceeding is commenced
between Trustor and Beneficiary regarding their respective rights and
obligations under this Deed of Trust or any of the other Loan Documents,
the prevailing party shall be entitled to recover, in addition to damages
or other relief, costs and expenses,
26
reasonable attorneys' fees and court costs (including, without limitation,
expert witness fees). Court costs and attorneys' fees shall be set by the
court and not by a jury. As used herein the term "prevailing party" shall
mean the party which obtains the principal relief it has sought, whether
by compromise settlement or judgment. If the party which commenced or
instituted the action, suit or proceeding shall dismiss or discontinue it
without the concurrence of the other party, such other party shall be
deemed the prevailing party.
8.7 TRUSTOR AND BENEFICIARY DEFINED. The term "Trustor" includes both the
original Trustor and any subsequent owner or owners of any of the
Property, and the term "Beneficiary" includes the original Beneficiary and
any future owner or holder, including assignees, pledgees and
participants, of the Note or any interest therein.
8.8 DISCLAIMERS.
a. RELATIONSHIP. The relationship of Trustor and Beneficiary under this
Deed of Trust and the other Loan Documents is, and shall at all
times remain, solely that of borrower and lender; and Beneficiary
neither undertakes nor assumes any responsibility or duty to Trustor
or to any third party with respect to the Property. Notwithstanding
any other provisions of this Deed of Trust and the other Loan
Documents: (i) Beneficiary is not, and shall not be construed to be,
a partner, joint venturer, member, alter ego, manager, controlling
person or other business associate or participant of any kind of
Trustor, and Beneficiary does not intend to ever assume such status;
(ii) Beneficiary's activities in connection with this Deed of Trust
and the other Loan Documents shall not be "outside the scope of
activities of a lender of money" within the meaning of California
Civil Code Section 3434, as amended or recodified from time to time,
and Beneficiary does not intend to ever assume any responsibility to
any person for the quality, suitability, safety or condition of the
Property; and (iii) Beneficiary shall not be deemed responsible for
or a participant in any acts, omissions or decisions of Trustor.
b. NO LIABILITY. Beneficiary shall not be directly or indirectly liable
or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any
person or property arising from any construction on, or occupancy or
use of, the Property, whether caused by or arising from: (i) any
defect in any building, structure, grading, fill, landscaping or
other improvements thereon or in any on-site or off-site improvement
or other facility therein or thereon; (ii) any act or omission of
Trustor or any of Trustor's agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on the
Property or any fire, flood or other casualty or hazard thereon;
(iv) the failure of Trustor or any of Trustor's licensees,
employees, invitees, agents, independent contractors or other
representatives to maintain the Property in a safe condition; or (v)
any nuisance made or suffered on any part of the Property.
8.9 SEVERABILITY. If any term of this Deed of Trust or any other Loan
Document, or the application thereof to any person or circumstances,
shall, to any extent, be invalid or unenforceable, the remainder of this
Deed of Trust or such other Loan Document, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Deed
of Trust or such other Loan Document shall be valid and enforceable to the
fullest extent permitted by law. In addition, should this instrument be or
become ineffective as a deed of trust, then these presents shall be
construed and enforced as a realty mortgage with the Trustor being the
mortgagor and Beneficiary being the mortgagee.
8.10 RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Beneficiary under the deed of trust established by Article 1 and the
security agreement established by Article 4 are independent and
cumulative, and there shall be no merger of any lien created by the deed
of trust with any security interest created by the security agreement.
Beneficiary may elect to exercise or enforce any of its rights, remedies
or interests under either or both the deed of trust or the security
agreement as Beneficiary may from time to time deem
27
appropriate. The absolute assignment of rents and leases established by
Article 3 is similarly independent of and separate from the deed of trust
and the security agreement.
8.11 MERGER. No merger shall occur as a result of Beneficiary's acquiring any
other estate in, or any other lien on, the Property unless Beneficiary
consents to a merger in writing.
8.12 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has
executed this Deed of Trust as "Trustor", the obligations of all such
persons hereunder shall be joint and several.
8.13 SEPARATE AND COMMUNITY PROPERTY. Any married person who executes this Deed
of Trust as a "Trustor" agrees that any money judgment which Beneficiary
or Trustee obtains pursuant to the terms of this Deed of Trust or any
other obligation of that married person secured by this Deed of Trust may
be collected by execution upon any separate property or community property
of that person.
8.14 INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect
to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified
except by written instrument executed by all parties. Any reference in any
of the Loan Documents to the Property or Collateral shall include all or
any part of the Property or Collateral. Any reference to the Loan
Documents includes any amendments, renewals or extensions now or hereafter
approved by Beneficiary in writing. When the identity of the parties or
other circumstances make it appropriate, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
8.15 CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Note.
8.16 SUCCESSORS IN INTEREST. The terms, covenants, and conditions contained
herein and in the other Loan Documents herein and in the other Loan
Documents shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. The foregoing sentence shall not be
construed to permit Trustor to assign the Loan except as otherwise
permitted under the Note or the other Loan Documents.
8.17 GOVERNING LAW. This Deed of Trust was accepted by Beneficiary in the state
of California and the proceeds of the Note secured hereby were disbursed
from the state of California, which state the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, including, without limiting
the generality of the foregoing, matters of construction, validity,
enforceability and performance, this Deed of Trust, the Note and the other
Loan Documents and the obligations arising hereunder and thereunder shall
be governed by, and construed in accordance with, the laws of the state of
California applicable to contracts made and performed in such state and
any applicable law of the United States of America, except that at all
times the provisions for enforcement of Beneficiary's STATUTORY POWER OF
SALE and all other remedies granted hereunder and the creation, perfection
and enforcement of the security interests created pursuant hereto and
pursuant to the other Loan Documents in any Collateral which is located in
the state where the Property is located shall be governed by and construed
according to the law of the state where the Property is located. Except as
provided in the immediately preceding sentence, Trustor hereby
unconditionally and irrevocably waives, to the fullest extent permitted by
law, any claim to assert that the law of any jurisdiction other than
California governs this Deed of Trust, the Note and other Loan Documents.
8.18 CONSENT TO JURISDICTION. Trustor irrevocably submits to the jurisdiction
of: (a) any state or federal court sitting in the state of California over
any suit, action, or proceeding, brought by Trustor against Beneficiary,
arising out of or relating to this Deed of Trust, the Note or the Loan;
(b) any state or federal court sitting in the state where the Property is
located or the state in which Trustor's principal place of business is
located over any suit, action or proceeding, brought by Beneficiary
against Trustor, arising out of or relating to this Deed of Trust, the
Note or the Loan; and (c) any state court sitting in the county of the
state where the
28
Property is located over any suit, action, or proceeding, brought by
Beneficiary to exercise its STATUTORY POWER OF SALE under this Deed of
Trust or any action brought by Beneficiary to enforce its rights with
respect to the Collateral. Trustor irrevocably waives, to the fullest
extent permitted by law, any objection that Trustor may now or hereafter
have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.19 EXHIBITS. Exhibit A is incorporated into this Deed of Trust by this
reference.
8.20 ADDRESSES; REQUEST FOR NOTICE. All notices and other communications that
are required or permitted to be given to a party under this Deed of Trust
or the other Loan Documents shall be in writing, refer to the Loan number,
and shall be sent to such party, either by personal delivery, by overnight
delivery service, by certified first class mail, return receipt requested,
or by facsimile transmission to the addressee or facsimile number below.
All such notices and communications shall be effective upon receipt of
such delivery or facsimile transmission, together with a printed receipt
of the successful delivery of such facsimile transmission. The addresses
of the parties are set forth on page 1 of this Deed of Trust and the
facsimile numbers for the parties are as follows:
Beneficiary: Trustee:
WELLS FARGO BANK, N.A. TRANSNATION TITLE INSURANCE COMPANY
FAX No.: (925) 691-5947 FAX No.: (602) 247-2694
Trustor:
MHC STAGECOACH, L.L.C.
FAX No.: (312) 279-1715
Trustor's principal place of business is at the address set forth on page
1 of this Deed of Trust. A copy of any notice to Trustor shall be sent as
follows:
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, Illinois 60606
Attention: Benjamin Randall
Facsimile: (312) 807-3903
Any Trustor whose address is set forth on page 1 of this Deed of Trust
hereby requests that a copy of notice of default and notice of sale be
delivered to it at that address. Failure to insert an address shall
constitute a designation of Trustor's last known address as the address
for such notice. Any party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by giving 30 days notice to the other parties in the manner set
forth above.
8.21 COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed
an original and all of which taken together, will be deemed to be one and
the same instrument.
8.22 WAIVER OF JURY TRIAL. BENEFICIARY (BY ITS ACCEPTANCE HEREOF) AND TRUSTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEED OF TRUST OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER
29
ORAL OR WRITTEN) OR ACTIONS OF BENEFICIARY OR TRUSTOR. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BENEFICIARY TO ENTER INTO THIS DEED OF TRUST.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
30
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year set forth above.
"TRUSTOR"
MHC STAGECOACH, L.L.C.,
a Delaware limited liability company
By: MHC-QRS STAGECOACH, INC.,
a Delaware corporation,
its Managing Member
By: /s/ John M. Zoeller
-----------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
STATE OF IL )
) SS:
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 8/1, 2001 by
John M. Zoeller, as Vice President, Chief Financial Officer and Treasurer of
MHC-QRS STAGECOACH, INC., a Delaware corporation, the managing member of MHC
STAGECOACH, L.L.C., a Delaware limited liability company, on behalf of the
corporation.
WITNESS my hand and official seal.
/s/ Mary Dobronski
-----------------------------------
Print Name: Mary Dobronski
My Commission Expires:
11/3/03
[NOTARIAL SEAL]
NOTARY PUBLIC, State of IL
Serial No., if any:________________
Loan No. 31-0900553R
EXHIBIT A
DESCRIPTION OF LAND
Exhibit A to DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust") between MHC
STAGECOACH, L.L.C., a Delaware limited liability company, as "Trustor",
TRANSNATION TITLE INSURANCE COMPANY, as "Trustee", and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Beneficiary".
Description of Land. The Land referred to in this Deed of Trust is situated in
the county of Maricopa, state of Arizona and is described as follows:
PARCEL NO. 1:
That part of Lot 3, A Subdivision of the East half of Section 24, Township 3
North, Range 1 East, of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona, according to Book 11 of Maps, page 30, records of Maricopa
County, Arizona, described as follows:
BEGINNING at the Southeast corner of said Section 24;
THENCE West along the South line of said Section 24, a distance of 1,320.54
feet;
THENCE North 01(Degree) 38' 30" East 55.02 feet to a point on a line that is
55.00 feet North of and parallel to said South line said line being the North
line of Peoria Avenue and the TRUE POINT OF BEGINNING;
THENCE West along said North line 627.98 feet;
THENCE North 45(Degree) 44' 20" East 28.64 feet;
THENCE North 01(Degree) 28' 40" East 307.70 feet;
THENCE North 45(Degree) 00' 00" East 149.61 feet;
THENCE North 32(Degree) 31' 59" West 76.22 feet;
THENCE North 01(Degree) 38' 30" East 420.00 feet;
THENCE North 89(Degree) 57' 50" East 11.71 feet;
THENCE North 01(Degree) 38' 30" East 133.00 feet to a point on a non-tangent
curve concave to the East the center of which bears North 80(Degree) 00' 01"
East having a radius of 1,430.40 feet and an interior angle of 23(Degree) 03'
59";
THENCE Northeasterly along said curve 575.86 feet;
THENCE North 01(Degree) 38' 30" East 84.00 feet;
THENCE North 89(Degree) 57' 50" East 738.38 feet;
THENCE South 01(Degree) 38' 30" West 1,407.21 feet;
THENCE West 200.00 feet;
THENCE South 01(Degree) 38' 30" West 300.11 feet to the TRUE POINT OF BEGINNING.
PARCEL NO. 2:
A perpetual easement for the installation and maintenance of private utility
lines and drainage, as created in instrument recorded in Docket 12335, page
1213, records of Maricopa County, Arizona, being 12.00 feet in width, being 6.00
feet on each side of the centerlines described as follows:
BEGINNING at the Southeast corner of Section 24, Township 3 North, Range 1 East,
of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
THENCE West 1,326.54 feet along the South line of said Section 24;
THENCE North 01(Degree) 38' 30" East 55.00 feet to the TRUE POINT OF BEGINNING;
THENCE North 01(Degree) 38' 30" East 306.11 feet;
EXHIBIT A
THENCE East 206.00 feet to the point of termination; and
BEGINNING at a point which bears North 01(Degree) 38' 30" East 1,757.00 feet and
South 89(Degree) 57' 50" West 1,120.55 feet from the Southeast corner of said
Section 24;
THENCE South 89(Degree) 57' 50" West 1,498.24 feet to a point on the East line
of the West 40.00 feet of the Southeast quarter of said Section 24 and the point
of termination;
EXCEPT any portion lying within Parcel No. 1.
PARCEL NO. 3:
A perpetual easement for irrigation purposes and for the use, construction and
maintenance of an irrigation lateral, as created in instrument recorded in
Docket 12335, page 1215, records of Maricopa County, Arizona, being 5.00 feet in
width, being 2.50 feet on each side of the centerline described as follows:
BEGINNING at a point which bears North 01(Degree) 38' 30" East 1,760.50 feet and
South 89(Degree) 57' 50" West 55.00 feet from the Southeast corner of Section
24, Township 3 North, Range 1 East, of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona;
THENCE South 89(Degree) 57' 50" West 1,833.37 feet to the point of termination;
EXCEPT any portion lying within Parcel No. 1.
PARCEL NO. 4:
A portion of the Southeast quarter of Section 24, Township 3 North, Range 1
East, of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows:
A strip of land 6.00 feet in width located West of and parallel to the Easterly
boundary line of that certain Special Warranty Deed recorded in Document No.
99-439307, records of Maricopa County, Arizona, described as follows:
COMMENCING at the South quarter corner of Section 24;
THENCE North 01(Degree) 28' 40" East along the West line of the Southeast
quarter of said Section 24, 1,760.87 feet to a point on the South line of Lot 2
as shown in Book 11 of Maps, page 30, records of Maricopa County, Arizona;
THENCE North 89(Degree) 55' 44" East along said South line 794.70 feet to a
point 6.00 feet West of and parallel to said Easterly boundary line of said
Special Warranty Deed recorded in Document No. 99-439307, records of Maricopa
County, Arizona and the POINT OF BEGINNING;
THENCE continuing North 89(Degree) 55' 44" East, along said South line, 6.00
feet to the Northeast corner of said Special Warranty Deed recorded in Document
No. 99-439307, records of Maricopa County, Arizona and the Northwest corner of
Quit Claim Deed Recorded in Document No. 95-388831, records of Maricopa County,
Arizona;
THENCE South 01(Degree) 38' 36" West, along the Easterly boundary line of said
Special Warranty Deed and the Westerly boundary line of said Quit Claim Deed,
84.00 feet to the beginning of a non-tangent curve concave Easterly and having a
radial bearing of North 76(Degree) 55' 57" West;
THENCE Southerly along said curve and along said Easterly and Westerly boundary
lines and through a central angle of 19(Degree) 06' 47" an arc length of 477.16
feet;
THENCE South 89(Degree) 55' 44" West to a point 6.00 feet West of and
parallel to said Easterly and Westerly boundary lines to the beginning of a
curve concave Easterly and having a radius of 1,436.40 feet;
THENCE Northerly along said curve 6.00 feet West of and parallel to said
Easterly and Westerly boundary lines through a central angle of 19(Degree) 03'
50" an arc length of 477.93 feet;
THENCE North 01(Degree) 38' 36" East 6.00 feet West of and parallel to said
Easterly and Westerly boundary lines 83.22 feet to the POINT OF BEGINNING.
EXHIBIT A
RECORDING Requested by APN: 161-16-301-006
and when recorded return to:
WELLS FARGO BANK, N.A.
Commercial Mortgage Origination
MAC # A0194-093
45 Fremont Street, 9th Floor
San Francisco, California 94105
Attention: CMO Loan Admin.
Loan No. : 31-0900553R
Property Name: Cabana
DEED OF TRUST
AND
ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT
(AND FIXTURE FILING)
The parties to this DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
AND SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust"), dated as of July
31, 2001, are MHC STAGECOACH, L.L.C., a Delaware limited liability company
("Trustor"), with a mailing address at c/o Manufactured Home Communities, Inc.,
Two North Riverside Plaza, Suite 800, Chicago, Illinois 60606, AMERICAN
SECURITIES COMPANY OF NEVADA, a Nevada corporation ("Trustee"), with a mailing
address at 1320 Willow Pass Road, Suite 205, Concord, California 94520, and
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Beneficiary"), with a mailing address
at 1320 Willow Pass Road, Suite 205, Concord, California 94520.
R E C I T A L S
A. MHC STAGECOACH, L.L.C., a Delaware limited liability company ("Borrower")
proposes to borrow from Beneficiary, and Beneficiary proposes to lend to
Borrower the principal sum of FIFTY MILLION AND NO/100THS DOLLARS
($50,000,000.00) ("Loan"). The Loan is evidenced by a promissory note
("Note") executed by Borrower, dated the date of this Deed of Trust,
payable to the order of Beneficiary in the principal amount of the Loan.
The maturity date of the Loan is September 1, 2011.
B. The loan documents include this Deed of Trust, the Note and the other
documents described in the Note as Loan Documents ("Loan Documents").
ARTICLE 1. DEED OF TRUST
1.1 GRANT. For the purposes of and upon the terms and conditions of this Deed
of Trust, Trustor irrevocably grants, bargains, sells, conveys and assigns
to Trustee, in trust for the benefit of Beneficiary, with power of sale
and right of entry and possession, all estate, right, title and interest
which Trustor now has or may hereafter acquire in, to, under or derived
from any or all of the following:
1
a. That real property ("Land") located in Las Vegas, county of Clark,
state of Nevada, and more particularly described on Exhibit A
attached hereto;
b. All appurtenances, easements, rights of way, water and water rights,
pumps, pipes, flumes and ditches and ditch rights, water stock,
ditch and/or reservoir stock or interests, royalties, development
rights and credits, air rights, minerals, oil rights, and gas
rights, now or later used or useful in connection with, appurtenant
to or related to the Land;
c. All buildings, structures, facilities, other improvements and
fixtures now or hereafter located on the Land;
d. All apparatus, equipment, machinery and appliances and all
accessions thereto and renewals and replacements thereof and
substitutions therefor used in the operation or occupancy of the
Land, it being intended by the parties that all such items shall be
conclusively considered to be a part of the Land, whether or not
attached or affixed to the Land;
e. All land lying in the right-of-way of any street, road, avenue,
alley or right-of-way opened, proposed or vacated, and all
sidewalks, strips and gores of land adjacent to or used in
connection with the Land;
f. All additions and accretions to the property described above;
g. All licenses, authorizations, certificates, variances, consents,
approvals and other permits now or hereafter pertaining to the Land
and all estate, right, title and interest of Trustor in, to, under
or derived from all tradenames or business names relating to the
Land or the present or future development, construction, operation
or use of the Land; and
h. All proceeds of any of the foregoing.
All of the property described above is hereinafter collectively defined as
the "Property". The listing of specific rights or property shall not be
interpreted as a limitation of general terms.
ARTICLE 2. OBLIGATIONS SECURED
2.1 OBLIGATIONS SECURED. Trustor makes the foregoing grant and assignment for
the purpose of securing the following obligations ("Secured Obligations"):
a. Full and punctual payment to Beneficiary of all sums at any time
owing under the Note;
b. Payment and performance of all covenants and obligations of Trustor
under this Deed of Trust including, without limitation,
indemnification obligations and advances made to protect the
Property;
c. Payment and performance of all additional covenants and obligations
of Borrower and Trustor under the Loan Documents;
d. Payment and performance of all covenants and obligations, if any,
which any rider attached as an exhibit to this Deed of Trust recites
are secured hereby;
e. Payment and performance of all future advances and other obligations
that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor)
for the benefit of Beneficiary, when the obligation is evidenced by
a writing which recites that it is secured by this Deed of Trust;
2
f. All interest and charges on all obligations secured hereby
including, without limitation, prepayment charges, late charges and
loan fees; and
g. All modifications, extensions and renewals of any of the obligations
secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or
interest payment dates or both, as the case may be, deferring or
accelerating payment dates wholly or partly; and (ii) modifications,
extensions or renewals at a different rate of interest whether or
not any such modification, extension or renewal is evidenced by a
new or additional promissory note or notes.
2.2 OBLIGATIONS. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and
loan fees at any time accruing or assessed on any of the Secured
Obligations.
2.3 INCORPORATION. All terms and conditions of the documents which evidence
any of the Secured Obligations are incorporated herein by this reference.
All persons who may have or acquire an interest in the Property shall be
deemed to have notice of the terms of the Secured Obligations and to have
notice that the rate of interest on one or more Secured Obligations may
vary from time to time.
ARTICLE 3. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary all of Trustor's
right, title and interest in, to and under: (a) all present and future
leases of the Property or any portion thereof, all licenses and agreements
relating to the management, leasing or operation of the Property or any
portion thereof, and all other agreements of any kind relating to the use
or occupancy of the Property or any portion thereof, whether such leases,
licenses and agreements are now existing or entered into after the date
hereof ("Leases"); and (b) the rents, issues, deposits and profits of the
Property, including, without limitation, all amounts payable and all
rights and benefits accruing to Trustor under the Leases ("Payments"). The
term "Leases" shall also include all guarantees of and security for the
tenants' performance thereunder, and all amendments, extensions, renewals
or modifications thereto which are permitted hereunder. This is a present
and absolute assignment, not an assignment for security purposes only, and
Beneficiary's right to the Leases and Payments is not contingent upon, and
may be exercised without possession of, the Property.
3.2 GRANT OF LICENSE. Notwithstanding the terms of contained in Section 3.1,
Beneficiary confers upon Trustor a revocable license ("License") to
collect and retain the Payments as they become due and payable, until the
occurrence of a Default (as hereinafter defined). Upon a Default, the
License shall be automatically revoked and Beneficiary may collect and
apply the Payments pursuant to the terms hereof without notice and without
taking possession of the Property. All Payments thereafter collected by
Trustor shall be held by Trustor as trustee under a constructive trust for
the benefit of Beneficiary. Trustor hereby irrevocably authorizes and
directs the tenants under the Leases, upon notice of a Default from
Beneficiary, to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums
which may at any time become due under the Leases, or for the performance
of any of the tenants' undertakings under the Leases, and the tenants
shall have no right or duty to inquire as to whether any Default has
actually occurred or is then existing. Trustor hereby relieves the tenants
from any liability to Trustor by reason of relying upon and complying with
any such notice or demand by Beneficiary. Beneficiary may apply, in its
sole discretion, any Payments so collected by Beneficiary against any
Secured Obligation or any other obligation of Borrower, Trustor or any
other person or entity, under any document or instrument related to or
executed in connection with the Loan Documents, whether existing on the
date hereof or hereafter arising. Collection of any Payments by
Beneficiary shall not cure or waive any Default or notice of Default or
invalidate any acts done pursuant to such notice. If and when no Default
exists, Beneficiary shall re-confer the License upon Trustor until the
occurrence of another Default.
3
3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause
Beneficiary to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; (c)
responsible or liable for any waste committed on the Property by the
tenants under any of the Leases or by any other parties; for any dangerous
or defective condition of the Property; or for any negligence in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee, invitee or other
person; or (d) responsible for or impose upon Beneficiary any duty to
produce rents or profits. Beneficiary shall not directly or indirectly be
liable to Trustor or any other person as a consequence of: (e) the
exercise or failure to exercise any of the rights, remedies or powers
granted to Beneficiary hereunder; or (f) the failure or refusal of
Beneficiary to perform or discharge any obligation, duty or liability of
Trustor arising under the Leases.
3.4 COVENANTS.
a. ALL LEASES. Trustor shall, at Trustor's sole cost and expense:
(i) perform all obligations of the landlord under the Leases and
use reasonable efforts to enforce performance by the tenants
of all obligations of the tenants under the Leases;
(ii) use reasonable efforts to keep the Property leased at all
times to tenants which Trustor reasonably and in good faith
believes are creditworthy at rents not less than the fair
market rental value (including, but not limited to, free or
discounted rents to the extent the market so requires);
(iii) promptly upon Beneficiary's request, deliver to Beneficiary a
copy of each requested Lease and all amendments thereto and
waivers thereof; and
(iv) promptly upon Beneficiary's request, execute and record any
additional assignments of landlord's interest under any Lease
to Beneficiary and specific subordinations of any Lease to
this Deed of Trust, in form and substance satisfactory to
Beneficiary.
Unless consented to in writing by Beneficiary or otherwise permitted
under any other provision of the Loan Documents, Trustor shall not:
(v) grant any tenant under any Lease any option, right of first
refusal or other right to purchase all or any portion of the
Property under any circumstances;
(vi) grant any tenant under any Lease any right to prepay rent more
than 1 month in advance;
(vii) except upon Beneficiary's request, execute any assignment of
landlord's interest in any Lease; or
(viii) collect rent or other sums due under any Lease in advance,
other than to collect rent 1 month in advance of the time when
it becomes due.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
Trustor shall deposit with Beneficiary any sums received by Trustor
in consideration of any termination, modification or amendment of
any Lease or any release or discharge of any tenant under any Lease
from any obligation thereunder and any such sums received by Trustor
shall be held in trust by Trustor for such purpose. Notwithstanding
the foregoing, so long as no Default exists, the portion of any such
sum received by Trustor with respect to any Lease which is less than
$50,000 shall be payable to Trustor. All such sums received by
Beneficiary with respect to any Lease shall be deemed "Impounds" (as
defined in Section 6.12b) and shall be deposited by Beneficiary into
a pledged account in accordance with Section 6.12b. If no Default
exists, Beneficiary shall release such Impounds to Trustor from time
to time
4
as necessary to pay or reimburse Trustor for such tenant
improvements, brokerage commissions and other leasing costs as may
be required to re-tenant the affected space; provided, however,
Beneficiary shall have received and approved each of the following
for each tenant for which such costs were incurred; (1) Trustor's
written request for such release, including the name of the tenant,
the location and net rentable area of the space and a description
and cost breakdown of the tenant improvements or other leasing costs
covered by the request; (2) Trustor's certification that any tenant
improvements have been completed lien-free and in a workmanlike
manner; (3) a fully executed Lease, or extension or renewal of the
current Lease; (4) an estoppel certificate executed by the tenant
including its acknowledgement that all tenant improvements have been
satisfactorily completed; and (5) such other information with
respect to such costs as Beneficiary may require. Following the
re-tenanting of all affected space (including, without limitation,
the completion of all tenant improvements), and provided no Default
exists, Beneficiary shall release any remaining such Impounds
relating to the affected space to Trustor. Trustor shall construct
all tenant improvements in a workmanlike manner and in accordance
with all applicable laws, ordinances, rules and regulations.
b. MAJOR LEASES. Trustor shall, at Trustor's sole cost and expense,
give Beneficiary prompt written notice of any material default by
landlord or tenant under any Major Lease (as defined below). Unless
consented to in writing by Beneficiary or otherwise permitted under
any other provision of the Loan Documents, Trustor shall not:
(i) enter into any Major Lease which (aa) is not on fair market
terms (which terms may include free or discounted rent to the
extent the market so requires); (bb) does not contain a
provision requiring the tenant to execute and deliver to the
landlord an estoppel certificate in form and substance
satisfactory to the landlord promptly upon the landlord's
request; or (cc) allows the tenant to assign or sublet the
premises without the landlord's consent;
(ii) reduce any rent or other sums due from the tenant under any
Major Lease;
(iii) terminate or materially modify or amend any Major Lease; or
(iv) release or discharge the tenant or any guarantor under any
Major Lease from any material obligation thereunder.
Any such attempted action in violation of the provisions of this
Section shall be null and void.
"Major Lease", as used herein, shall mean any Lease, which is, at
any time: (1) a Lease of more than 20% of the total rentable area of
the Property, as reasonably determined by Beneficiary; or (2) a
Lease which generates a gross base monthly rent exceeding 20% of the
total gross base monthly rent generated by all Leases (excluding all
Leases under which the tenant is then in default), as reasonably
determined by Beneficiary. Trustor's obligations with respect to
Major Leases shall be governed by the provisions of Section 3.4a as
well as by the provisions of this Section.
c. FAILURE TO DENY REQUEST. Beneficiary's failure to deny any written
request by Trustor for Beneficiary's consent under the provisions of
Sections 3.4(a) or 3.4(b) within 10 Business Days after
Beneficiary's receipt of such request (and all documents and
information reasonably related thereto) shall be deemed to
constitute Beneficiary's consent to such request.
3.5 RIGHT OF SUBORDINATION. Beneficiary may at any time and from time to time
by specific written instrument intended for the purpose unilaterally
subordinate the lien of this Deed of Trust to any Lease, without joinder
or consent of, or notice to, Trustor, any tenant or any other person.
Notice is hereby given to each tenant under a Lease of such right to
subordinate. No subordination referred to in this Section shall constitute
a subordination to any lien or other encumbrance, whenever arising, or
improve the right of any junior lienholder. Nothing herein shall be
construed as subordinating this Deed of Trust to any Lease.
5
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 SECURITY INTEREST. Trustor pledges to Beneficiary and grants and assigns
to Beneficiary a security interest to secure payment and performance of
all of the Secured Obligations, in all of Trustor's right, title and
interest in and to the following described personal property in which
Trustor now or at any time hereafter has any interest ("Collateral"):
All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and
other personal property, wherever situated, which are or are to be
incorporated into, used in connection with or appropriated for use
on the Property; all rents, issues, deposits and profits of the
Property (to the extent, if any, they are not subject to the
Absolute Assignment of Rents and Leases); all inventory, accounts,
cash receipts, deposit accounts, impounds, accounts receivable,
contract rights, general intangibles, software, chattel paper,
instruments, documents, promissory notes, drafts, letters of credit,
letter of credit rights, supporting obligations, insurance policies,
insurance and condemnation awards and proceeds, any other rights to
the payment of money, trade names, trademarks and service marks
arising from or related to the Property or any business now or
hereafter conducted thereon by Trustor; all permits, consents,
approvals, licenses, authorizations and other rights granted by,
given by or obtained from, any governmental entity with respect to
the Property; all deposits or other security now or hereafter made
with or given to utility companies by Trustor with respect to the
Property; all advance payments of insurance premiums made by Trustor
with respect to the Property; all plans, drawings and specifications
relating to the Property; all loan funds held by Beneficiary,
whether or not disbursed; all funds deposited with Beneficiary
pursuant to any Loan Document, all reserves, deferred payments,
deposits, accounts, refunds, cost savings and payments of any kind
related to the Property or any portion thereof, including, without
limitation, all "Impounds" as defined herein; together with all
replacements and proceeds of, and additions and accessions to, any
of the foregoing, and all books, records and files relating to any
of the foregoing.
As to all of the above described personal property which is or which
hereafter becomes a "fixture" under applicable law, this Deed of Trust
constitutes a fixture filing under the Uniform Commercial Code, as enacted
in the State of Nevada, Chapters 104 and 104A of the Nevada Revised
Statutes, as amended or recodified from time to time ("UCC").
4.2 COVENANTS. Trustor agrees: (a) to execute and deliver such documents as
Beneficiary reasonably deems necessary to create, perfect and continue the
security interests contemplated hereby; (b) not to change its name, and,
as applicable, its chief executive offices, its principal residence or the
jurisdiction in which it is organized without giving Beneficiary at least
30 days' prior written notice thereof; and (c) to cooperate with
Beneficiary in perfecting all security interests granted herein and in
obtaining such agreements from third parties as Beneficiary deems
necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of Beneficiary's rights hereunder.
4.3 RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a "Secured
Party" under the UCC, Beneficiary may, but shall not be obligated to, at
any time without notice and at the expense of Trustor: (a) give notice to
any person of Beneficiary's rights hereunder and enforce such rights at
law or in equity; (b) insure, protect, defend and preserve the Collateral
or any rights or interests of Beneficiary therein; and (c) inspect the
Collateral during normal business hours upon reasonable prior written
notice, provided, however, that such notice shall not be required in the
event of an emergency. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any obligation of Trustor to Beneficiary unless
Beneficiary shall make an express written election of said remedy under
the UCC or other applicable law.
6
4.4 ADDITIONAL RIGHTS OF BENEFICIARY UPON DEFAULT. Upon the occurrence of a
Default, then in addition to all of Beneficiary's rights as a "Secured
Party" under the UCC or otherwise at law:
a. DISPOSITION OF COLLATERAL. Beneficiary may: (i) upon written notice,
require Trustor to assemble the Collateral and make it available to
Beneficiary at a place reasonably designated by Beneficiary; (ii)
without prior notice (to the extent permitted by law), enter upon
the Property or other place where the Collateral may be located and
take possession of, collect, sell, lease, license and otherwise
dispose of the Collateral, and store the same at locations
acceptable to Beneficiary at Trustor's expense; or (iii) sell,
assign and deliver the Collateral at any place or in any lawful
manner and bid and become purchaser at any such sales; and
b. OTHER RIGHTS. Beneficiary may, for the account of Trustor and at
Trustor's expense: (i) operate, use, consume, sell, lease, license
or otherwise dispose of the Collateral as Beneficiary reasonably
deems appropriate for the purpose of performing any or all of the
Secured Obligations; (ii) enter into any agreement, compromise or
settlement including insurance claims, which Beneficiary may
reasonably deem desirable or proper with respect to the Collateral;
and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness
and obligations now or hereafter owing to Trustor in connection with
or on account of the Collateral.
Trustor acknowledges and agrees that a disposition of the Collateral in
accordance with Beneficiary's rights and remedies as heretofore provided
is a disposition thereof in a commercially reasonable manner and that 5
Business Days prior notice of such disposition is commercially reasonable
notice. Beneficiary shall have no obligation to process or prepare the
Collateral for sale or other disposition. In disposing of the Collateral,
Beneficiary may disclaim all warranties of title, possession, quiet
enjoyment and the like. Any proceeds of any sale or other disposition of
the Collateral may be applied by Beneficiary first to the reasonable
expenses incurred by Beneficiary in connection therewith, including,
without limitation, reasonable attorneys' fees and disbursements, and then
to the payment of the Secured Obligations, in such order of application as
Beneficiary may from time to time elect.
4.5 POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as
Trustor's attorney-in-fact (such agency being coupled with an interest),
and as such attorney-in-fact, Beneficiary may, without the obligation to
do so, in Beneficiary's name or in the name of Trustor, prepare, execute,
file and record financing statements, continuation statements,
applications for registration and like papers necessary to create, perfect
or preserve any of Beneficiary's security interests and rights in or to
the Collateral, and upon a Default, take any other action required of
Trustor; provided, however, that Beneficiary as such attorney-in-fact
shall be accountable only for such funds as are actually received by
Beneficiary.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
Beneficiary that, to Trustor's current actual knowledge after reasonable
investigation and inquiry, the following statements are true and correct
as of the Effective Date:
a. LEGAL STATUS. Trustor and Borrower are duly organized and existing
and in good standing under the laws of the state(s) in which Trustor
and Borrower are organized. Trustor and Borrower are qualified or
licensed to do business in all jurisdictions in which such
qualification or licensing is required.
b. PERMITS. Trustor and Borrower possess all permits, franchises and
licenses and all rights to all trademarks, trade names, patents and
fictitious names, if any, necessary to enable Trustor and Borrower
to conduct the business(es) in which Trustor and Borrower are now
engaged in compliance with applicable law.
7
c. AUTHORIZATION AND VALIDITY. The execution and delivery of the Loan
Documents have been duly authorized and the Loan Documents
constitute valid and binding obligations of Trustor, Borrower or the
party which executed the same, enforceable in accordance with their
respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights, or by the application of rules of
equity .
d. VIOLATIONS. The execution, delivery and performance by Trustor and
Borrower of each of the Loan Documents do not violate any provision
of any law or regulation, or result in any breach or default under
any contract, obligation, indenture or other instrument to which
Trustor or Borrower is a party or by which Trustor or Borrower is
bound.
e. LITIGATION. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental
authority, court or administrative agency which may adversely affect
the financial condition or operations of Trustor or Borrower other
than those previously disclosed in writing by Trustor or Borrower to
Beneficiary.
f. FINANCIAL STATEMENTS. The financial statements of Trustor and
Borrower, of each general partner (if Trustor or Borrower is a
partnership), of each member (if Trustor or Borrower is a limited
liability company) and of each guarantor, if any, previously
delivered by Trustor or Borrower to Beneficiary: (i) are materially
complete and correct; (ii) present fairly the financial condition of
such party; and (iii) have been prepared in accordance with the same
accounting standard used by Trustor or Borrower to prepare the
financial statements delivered to and approved by Beneficiary in
connection with the making of the Loan, or other accounting
standards approved by Beneficiary. Since the date of such financial
statements, there has been no material adverse change in such
financial condition, nor have any assets or properties reflected on
such financial statements been sold, transferred, assigned,
mortgaged, pledged or encumbered except as previously disclosed in
writing by Trustor or Borrower to Beneficiary and approved in
writing by Beneficiary.
g. REPORTS. All reports, documents, instruments and information
delivered to Beneficiary in connection with the Loan: (i) are
correct in all material respects and sufficiently complete to give
Beneficiary accurate knowledge of their subject matter; and (ii) do
not contain any misrepresentation of a material fact or omission of
a material fact which omission makes the provided information
misleading.
h. INCOME TAXES. There are no material pending assessments or
adjustments of Trustor's or Borrower's income tax payable with
respect to any year.
i. SUBORDINATION. There is no agreement or instrument to which Borrower
is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower's obligations
under the Note to an obligation owed to another party.
j. TITLE. Trustor lawfully holds and possesses fee simple title to the
Property, without limitation on the right to encumber same. This
Deed of Trust is a first lien on the Property prior and superior to
all other liens and encumbrances on the Property except: (i) liens
for real estate taxes and assessments not yet due and payable; (ii)
senior exceptions previously approved by Beneficiary and shown in
the title insurance policy insuring the lien of this Deed of Trust;
and (iii) other matters, if any, previously disclosed to Beneficiary
by Trustor in a writing specifically referring to this
representation and warranty.
k. MECHANICS' LIENS. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to any such liens)
affecting the Property which are or may be prior to or equal to the
lien of this Deed of Trust, other than those (if any) previously
approved by Beneficiary and shown on the title insurance policy
insuring the lien of this Deed of Trust.
8
l. ENCROACHMENTS. Except as shown in the survey, if any, previously
delivered to Beneficiary, none of the buildings or other
improvements which were included for the purpose of determining the
appraised value of the Property lies outside of the boundaries or
building restriction lines of the Property and no buildings or other
improvements located on adjoining properties encroach upon the
Property.
m. LEASES. All existing Leases are in full force and effect and are
enforceable in accordance with their respective terms. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no material breach or default by any party, or event which
would constitute a material breach or default by any party after
notice or the passage of time, or both, exists under any existing
Lease. None of the landlord's interests under any of the Leases,
including, but not limited to, rents, additional rents, charges,
issues or profits, has been transferred or assigned. Except as
disclosed on a rent roll provided to Beneficiary prior to the date
hereof, no rent or other payment under any existing Lease has been
paid by any tenant for more than 1 month in advance.
n. COLLATERAL. Trustor has good title to the existing Collateral, free
and clear of all liens and encumbrances except those, if any,
previously disclosed to Beneficiary by Trustor in writing
specifically referring to this representation and warranty.
Trustor's chief executive office (or residence, if applicable) is
located at the address shown on page one of this Deed of Trust.
Trustor is an organization organized solely under the laws of the
State of Delaware. All organizational documents of Trustor delivered
to Beneficiary are complete and accurate in every respect. Trustor's
legal name is exactly as shown on page one of this Deed of Trust.
o. CONDITION OF PROPERTY. Except as shown in the property condition
survey or other engineering reports, if any, previously delivered to
or obtained by Beneficiary, the Property is in good condition and
repair and is free from any damage that would materially and
adversely affect the value of the Property as security for the Loan
or the intended use of the Property.
p. HAZARDOUS MATERIALS. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by
Beneficiary, the Property is not and has not been a site for the
use, generation, manufacture, storage, treatment, release,
threatened release, discharge, disposal, transportation or presence
of Hazardous Materials (as hereinafter defined) in violation of
Hazardous Materials Laws (as hereinafter defined) except as
otherwise previously disclosed in writing by Trustor to Beneficiary.
q. HAZARDOUS MATERIALS LAWS. The Property complies with all Hazardous
Materials Laws.
r. HAZARDOUS MATERIALS CLAIMS. There are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).
s. WETLANDS. No part of the Property consists of or is classified as
wetlands, tidelands or swamp and overflow lands.
t. COMPLIANCE WITH LAWS. All federal, state and local laws, rules and
regulations applicable to the Property, including, without
limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990, as
amended from time to time (42 U. S. C. Section 12101 et seq.) have
been satisfied or complied with. Trustor is in possession of all
certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of
the Property. All such certificates of occupancy and other licenses,
permits and authorizations are valid and in full force and effect.
u. PROPERTY TAXES AND OTHER LIABILITIES. All taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
and ground rents, if any, which previously became due and owing in
respect of the Property have been paid.
9
v. CONDEMNATION. There is no proceeding pending or threatened for the
total or partial condemnation of the Property.
w. HOMESTEAD. There is no homestead or other exemption available to
Trustor which would materially interfere with the right to sell the
Property at a trustee's sale or the right to foreclose this Deed of
Trust.
x. SOLVENCY. None of the transactions contemplated by the Loan will be
or have been made with an actual intent to hinder, delay or defraud
any present or future creditors of Trustor, and Trustor, on the
Effective Date, will have received fair and reasonably equivalent
value in good faith for the grant of the liens or security interests
effected by the Loan Documents. On the Effective Date, Trustor will
be solvent and will not be rendered insolvent by the transactions
contemplated by the Loan Documents. Trustor is able to pay its debts
as they become due.
y. SEPARATE TAX PARCEL(S). The Property is assessed for real estate tax
purposes as one or more wholly independent tax parcels, separate
from any other real property, and no other real property is assessed
and taxed together with the Property or any portion thereof.
5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS (LEVEL V SPE).
Trustor hereby represents, warrants and covenants to Beneficiary that with
respect to both Trustor and MHC-QRS STAGECOACH, INC., a Delaware
corporation, the managing member of Trustor:
a. each such entity was organized solely for the purpose of (i) owning
the Properties (as defined in the Note); (ii) acting as a general
partner of a limited partnership which owns the Properties; or (iii)
acting as a managing member of a limited liability company which
owns the Properties;
b. each such entity has not engaged and will not engage in any business
unrelated to (i) the ownership of the Properties; (ii) acting as
general partner of a limited partnership which owns the Properties;
or (iii) acting as a managing member of a limited liability company
which owns the Properties;
c. each such entity has not had and will not have any assets other than
the Properties (and personal property incidental to the ownership
and operation of the Properties) or its partnership or membership
interest in the limited partnership or limited liability company
which owns the Properties, as applicable;
d. each such entity has not and will not engage in, seek or consent to
any dissolution, winding up, liquidation, consolidation, merger,
asset sale, transfer of partnership or membership interest, or
amendment of its articles of incorporation, articles of
organization, certificate of formation, operating agreement or
limited partnership agreement, as applicable;
e. if any such entity is a limited partnership, all of its general
partners are corporations that satisfy the requirements set forth in
this Section 5.2;
f. if any such entity is a limited liability company, it has at least
one managing member that is a corporation that satisfies the
requirements set forth in this Section 5.2;
g. each such entity, without the unanimous consent of all of its
general partners, directors or members, as applicable, shall not
file or consent to the filing of any bankruptcy or insolvency
petition or otherwise institute insolvency proceedings with respect
to itself or any other entity in which it has a direct or indirect
legal or beneficial ownership interest;
10
h. each such entity has no indebtedness (and will have no indebtedness)
other than (i) the Loan (to the extent it is liable under the terms
of the Loan Documents); and (ii) unsecured trade debt not to exceed
$1,000,000 in the aggregate with respect to Trustor or $10,000 in
the aggregate with respect to its managing member, which is not
evidenced by a note and is incurred in the ordinary course of its
business in connection with owning, operating and maintaining the
Property (or its interest in Trustor, as applicable) and is paid
within thirty (30) days from the date incurred;
i. each such entity has not failed and will not fail to correct any
known misunderstanding regarding the separate identity of such
entity;
j. each such entity has maintained and will maintain its accounts,
books and records separate from any other person or entity;
k. each such entity has maintained and will maintain its books,
records, resolutions and agreements as official records;
l. each such entity (i) has not commingled and will not commingle its
funds or assets with those of any other entity; and (ii) has held
and will hold its assets in its own name;
m. each such entity has conducted and will conduct its business in its
own name or in a registered trade name;
n. each such entity has maintained and will maintain its accounting
records and other entity documents separate from any other person or
entity;
o. each such entity has prepared and will prepare separate tax returns
and financial statements, or if part of a consolidated group, is
shown as a separate member of such group;
p. each such entity has paid and will pay its own liabilities and
expenses out of its own funds and assets;
q. each such entity has held and will hold regular meetings, as
appropriate, to conducts its business and has observed and will
observe all corporate, partnership or limited liability company
formalities and record keeping, as applicable;
r. each such entity has not assumed or guaranteed and will not assume
or guarantee or become obligated for the debts of any other entity
or hold out its credit as being available to satisfy the obligations
of any other entity;
s. each such entity has not acquired and will not acquire obligations
or securities of its partners, members or shareholders;
t. each such entity has allocated and will allocate fairly and
reasonably the costs associated with common employees and any
overhead for shared office space and each such entity has used and
will use separate stationery, invoices and checks under its own name
or under its registered trade name;
u. each such entity has not pledged and will not pledge its assets for
the benefit of any other person or entity;
v. each such entity has held out and identified itself and will hold
itself out and identify itself as a separate and distinct entity
under its own name or under its registered trade name and not as a
division or part of any other person or entity;
11
w. each such entity has not made and will not make loans to any person
or entity;
x. each such entity has not identified and will not identify its
partners, members or shareholders, or any affiliates of any of the
foregoing, as a division or part of it;
y. each such entity has not entered into and will not enter into or be
a party to, any transaction with its partners, members,
shareholders, or any affiliates of any of the foregoing, except in
the ordinary course of its business pursuant to written agreements
and on terms which are intrinsically fair and are no less favorable
to it than would be obtained in a comparable arm's-length
transaction with an unrelated third party;
z. if any such entity is a corporation, the directors of such entity
shall consider the interests of the creditors of such entity in
connection with all corporate action;
aa. each such entity has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number
of employees in light of its contemplated business operations;
bb. each such entity has maintained and will maintain adequate capital
in light of its contemplated business operations;
cc. if any such entity is a limited partnership with more than one
general partner, its limited partnership agreement requires the
remaining partners to continue the partnership as long as one
solvent general partner exists;
dd. if any such entity is a limited liability company, its operating
agreement, if any such entity is a limited partnership, its limited
partnership agreement, and if any such entity is a corporation, to
the full extent permitted by applicable law, its articles of
incorporation, contain the provisions set forth in this Section 5.2
and any such entity shall conduct its business and operations in
strict compliance with the terms contained therein;
ee. each such entity will, as a condition to the closing of the Loan,
deliver to Beneficiary a nonconsolidation opinion in form and
substance acceptable to Beneficiary;
ff. if any such entity is a corporation, it has maintained and will
continue to maintain at least one Independent Director (as
hereinafter defined); and
gg. if any such entity is a corporation, it has not caused or allowed
and will not cause or allow the board of directors of such entity to
take any action requiring the unanimous affirmative vote of 100% of
the members of the board of directors unless an Independent Director
shall have participated in such vote.
An "Independent Director" shall be an individual who, except in his or her
capacity as an Independent Director of the corporation is not, and has not
been during the five (5) years immediately before such individual's
appointment as an Independent Director: (i) a stockholder, director,
partner, officer or employee of the corporation or its Affiliates; (ii)
affiliated with a customer or supplier of the corporation or its
Affiliates; or (iii) a spouse, parent, sibling, child or other family
relative of any person described by (i) or (ii) above.
As used herein, the term "Affiliate" shall mean any person or entity other
than the corporation (i) which owns beneficially, directly or indirectly,
any outstanding shares of the corporation's stock, or (ii) which controls,
is controlled by or is under common control with the corporation. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities, by contract or otherwise.
12
ARTICLE 6. RIGHTS AND DUTIES OF THE PARTIES
6.1 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Trustor shall, or shall
cause the property manager to: (a) keep the Property in good condition and
repair; (b) complete or restore promptly and in workmanlike manner the
Property or any part thereof which may be damaged or destroyed (unless, if
and to the extent permitted under Section 6.11, Beneficiary elects to
require that insurance proceeds be used to reduce the Secured Obligations
and after such repayment the ratio of Secured Obligations to the value of
the Property, as reasonably determined by Beneficiary is the same as or
lower than it was immediately before the loss or taking occurred); (c)
comply and cause the Property to comply with (i) all laws, ordinances,
regulations and standards, (ii) all covenants, conditions, restrictions
and equitable servitudes, whether public or private, of every kind and
character and (iii) all requirements of insurance companies and any bureau
or agency which establishes standards of insurability, which laws,
covenants or requirements affect the Property and pertain to acts
committed or conditions existing thereon, including, without limitation,
any work of alteration, improvement or demolition as such laws, covenants
or requirements mandate; (d) operate and manage the Property at all times
in a professional manner and do all other acts which from the character or
use of the Property may be reasonably necessary to maintain and preserve
its value; (e) promptly after execution, deliver to Beneficiary a copy of
any management agreement concerning the Property and all amendments
thereto and waivers thereof; and (f) execute and acknowledge all further
documents, instruments and other papers as Beneficiary or Trustee
reasonably deems necessary or appropriate to preserve, continue, perfect
and enjoy the benefits of this Deed of Trust and perform Trustor's
obligations, including, without limitation, statements of the amount
secured hereby then owing and statements of no offset. Trustor shall not,
without Beneficiary's prior written consent: (g) remove or demolish all or
any material part of the Property; (h) alter either (i) the exterior of
the Property in a manner which materially and adversely affects the value
of the Property or (ii) the roof or other structural elements of the
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any
change in any zoning or other land classification which affects the
Property; (j) materially alter the type of occupancy or use of all or any
part of the Property; or (k) commit or permit waste of the Property.
6.2 HAZARDOUS MATERIALS. Without limiting any other provision of this Deed of
Trust, Trustor agrees as follows:
a. PROHIBITED ACTIVITIES. Trustor shall not cause or permit the
Property to be used as a site for the use, generation, manufacture,
storage, treatment, release, discharge, disposal, transportation or
presence of any oil or other petroleum products, flammable
explosives, asbestos, urea formaldehyde insulation, radioactive
materials, hazardous wastes, toxic or contaminated substances or
similar materials, including, without limitation, any substances
which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under the Hazardous Materials Laws
(defined below) and/or other applicable environmental laws,
ordinances or regulations ("Hazardous Materials").
The foregoing to the contrary notwithstanding, (i) Trustor may
store, maintain and use on the Property janitorial and maintenance
supplies, paint and other Hazardous Materials of a type and in a
quantity readily available for purchase by the general public and
normally stored, maintained and used by owners and managers of
properties of a type similar to the Property; and (ii) tenants of
the Property may store, maintain and use on the Property (and, if
any tenant is a retail business, hold in inventory and sell in the
ordinary course of such tenant's business) household and consumer
cleaning supplies and other Hazardous Materials of a type and
quantity readily available for purchase by the general public and
normally stored, maintained and used (and, if tenant is a retail
business, sold) by tenants of properties similar to the Property or
in similar lines of business on properties similar to the Property.
13
b. HAZARDOUS MATERIALS LAWS. Trustor shall comply and cause the
Property to comply with all federal, state and local laws,
ordinances and regulations relating to Hazardous Materials
("Hazardous Materials Laws"), including, without limitation: the
Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251 et seq.; the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended (including the Superfund Amendments and Reauthorization Act
of 1986, "CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.;
the Occupational Safety and Health Act, as amended, 29 U.S.C.
Section 651; the Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health
Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all
comparable state and local laws, laws of other jurisdictions or
orders and regulations.
c. NOTICES. Trustor shall immediately notify Beneficiary in writing of:
(i) the discovery of any Hazardous Materials on, under or about the
Property (other than Hazardous Materials permitted under Section
6.2(a)); (ii) any knowledge by Trustor that the Property does not
comply with any Hazardous Materials Laws; (iii) any claims or
actions ("Hazardous Materials Claims") pending or threatened in
writing against Trustor or the Property by any governmental entity
or agency or any other person or entity relating to Hazardous
Materials or pursuant to the Hazardous Materials Laws; and (iv) the
discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to become contaminated with Hazardous
Materials.
d. REMEDIAL ACTION. In response to knowledge or notification to Trustor
of the presence of any Hazardous Materials on, under or about the
Property, Trustor shall immediately take, at Trustor's sole expense,
all remedial action required by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any
Hazardous Materials Claims.
e. INSPECTION BY BENEFICIARY. Upon reasonable prior notice to Trustor
(except in the case of an emergency) and during normal business
hours, Beneficiary, its employees and agents, may from time to time
(whether before or after the commencement of a nonjudicial or
judicial foreclosure proceeding), enter and inspect the Property for
the purpose of determining the existence, location, nature and
magnitude of any past or present release or threatened release of
any Hazardous Materials into, onto, beneath or from the Property.
f. LEGAL EFFECT OF SECTION. Trustor and Beneficiary agree that each
representation and warranty and covenant in this Section (together
with any indemnity applicable to a breach of any such representation
and warranty) with respect to the environmental condition of the
Property is intended by Beneficiary and Trustor to be an
"environmental provision" for purposes of Nevada Revised Statutes
Section 40.502.
6.3 COMPLIANCE WITH LAWS. Trustor shall comply with all federal, state and
local laws, rules and regulations applicable to the Property, including,
without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), as amended from time to time. Trustor shall
possess and maintain or cause Borrower to possess and maintain in full
force and effect at all times (a) all certificates of occupancy and other
licenses, permits and authorizations required by applicable law for the
existing use of the Property and (b) all permits, franchises and licenses
and all rights to all trademarks, trade names, patents and fictitious
names, if any, required by applicable law for Trustor and Borrower to
conduct the business(es) in which Trustor and Borrower are now engaged.
6.4 LITIGATION. Trustor shall promptly notify Beneficiary in writing of any
litigation pending or threatened in writing against Trustor or Borrower
claiming damages in excess of $100,000 and of all pending or threatened
14
(in writing) litigation against Trustor or Borrower if the aggregate
damage claims against Trustor or Borrower exceed $500,000.
6.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Trustor shall not: (a) merge or
consolidate with any other entity or permit Borrower to merge or
consolidate with any other entity; (b) make any substantial change in the
nature of Trustor's business or structure or permit Borrower to make any
substantial change in the nature of Borrower's business or structure; (c)
acquire all or substantially all of the assets of any other entity or
permit Borrower to acquire all or substantially all of the assets of any
other entity; or (d) sell, lease, assign, transfer or otherwise dispose of
a material part of Trustor's assets except in the ordinary course of
Trustor's business or permit Borrower to sell, lease, assign, transfer or
otherwise dispose of a material part of Borrower's assets except in the
ordinary course of Borrower's business.
6.6 ACCOUNTING RECORDS. Trustor shall maintain and cause Borrower to maintain
adequate books and records in accordance with the same accounting standard
used by Trustor or Borrower to prepare the financial statements delivered
to and approved by Beneficiary in connection with the making of the Loan
or other accounting standards approved by Beneficiary. Trustor shall
permit and shall cause Borrower to permit any representative of
Beneficiary, at any reasonable time and from time to time, upon reasonable
prior notice to Trustor, to inspect, audit and examine such books and
records and make copies of same.
6.7 COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor shall pay to Beneficiary the
full amount of all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses of Beneficiary's in-house or
outside counsel, incurred by Beneficiary in connection with: (a)
appraisals and inspections of the Property or Collateral required by
Beneficiary as a result of (i) a Transfer or proposed Transfer (as defined
below), or (ii) a Default; (b) appraisals and inspections of the Property
or Collateral required by applicable law, including, without limitation,
federal or state regulatory reporting requirements; and (c) any acts
performed by Beneficiary at Trustor's request or wholly or partially for
the benefit of Trustor (including, without limitation, the preparation or
review of amendments, assumptions, waivers, releases, reconveyances,
estoppel certificates or statements of amounts owing under any Secured
Obligation). In connection with appraisals and inspections, Trustor
specifically (but not by way of limitation) acknowledges that: (aa) a
formal written appraisal of the Property by a state certified or licensed
appraiser may be required by federal regulatory reporting requirements on
an annual or more frequent basis; and (bb) Beneficiary may require
inspection of the Property by an independent supervising architect, a cost
engineering specialist, or both. Trustor shall pay all indebtedness
arising under this Section immediately upon demand by Beneficiary together
with interest thereon following notice of such indebtedness at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.8 LIENS, ENCUMBRANCES AND CHARGES. Subject to the terms of Section 8.4,
Trustor shall immediately discharge by bonding or otherwise any lien,
charge or other encumbrance which attaches to the Property in violation of
Section 6.15. Subject to Trustor's right to contest such matters under
this Deed of Trust or as expressly permitted in the Loan Documents,
Trustor shall pay when due all obligations secured by or reducible to
liens and encumbrances which shall now or hereafter encumber or appear to
encumber all or any part of the Property or any interest therein, whether
senior or subordinate hereto, including, without limitation, all claims
for work or labor performed, or materials or supplies furnished, in
connection with any work of demolition, alteration, repair, improvement or
construction of or upon the Property, except such as Trustor may in good
faith contest or as to which a bona fide dispute may arise (provided
provision is made to the satisfaction of Beneficiary for eventual payment
thereof in the event that Trustor is obligated to make such payment and
that any recorded claim of lien, charge or other encumbrance against the
Property is immediately discharged by bonding or otherwise).
6.9 TAXES AND OTHER LIABILITIES. Trustor shall pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real and
personal and including federal and state income taxes and state and local
property taxes and assessments. Trustor shall promptly provide to
Beneficiary copies of all tax and assessment notices pertaining to the
Property. Trustor hereby authorizes Beneficiary to obtain, at Trustor's
15
expense, a tax service contract which shall provide tax information on the
Property to Beneficiary for the term of the Loan and any extensions or
renewals of the Loan.
6.10 INSURANCE COVERAGE. Trustor shall insure the Property against loss or
damage by fire and such other hazards as Beneficiary shall from time to
time require; provided, however, (a) Beneficiary, at Beneficiary's
election, may only require flood insurance if all or any portion of the
improvements located on the Property is or becomes located in a special
flood hazard area, and (b) Beneficiary, at Beneficiary's election, may
only require earthquake insurance if all or any portion of the Property is
or becomes located in an earthquake fault zone. Trustor shall also carry
public liability insurance and such other insurance as Beneficiary may
reasonably require, including, without limitation, business interruption
insurance or loss of rents insurance. Such policies shall contain a
standard mortgage clause naming Beneficiary and its successors in interest
as a loss payee and requiring at least 30 days prior notice to the holder
at termination or cancellation. Trustor shall maintain all required
insurance throughout the term of the Loan and while any liabilities of
Borrower or Trustor to Beneficiary under any of the Loan Documents remain
outstanding at Trustor's expense, with companies, and in substance and
form satisfactory to Beneficiary. Neither Beneficiary nor Trustee, by
reason of accepting, rejecting, approving or obtaining insurance shall
incur any liability for: (c) the existence, nonexistence, form or legal
sufficiency of any insurance; (d) the solvency of any insurer; or (e) the
payment of claims.
6.11 CONDEMNATION AND INSURANCE PROCEEDS.
a. ASSIGNMENT OF CLAIMS. Trustor absolutely and irrevocably assigns to
Beneficiary all of the following rights, claims and amounts
(collectively, "Claims"), all of which shall be paid to Beneficiary:
(i) all awards of damages and all other compensation payable
directly or indirectly by reason of a condemnation or proposed
condemnation for public or private use affecting all or any part of,
or any interest in, the Property; (ii) all other claims and awards
for damages to or decrease in value of all or any part of, or any
interest in, the Property; (iii) all proceeds of any insurance
policies payable by reason of loss sustained to all or any part of
the Property; and (iv) all interest which may accrue on any of the
foregoing. Trustor shall give Beneficiary prompt written notice of
the occurrence of any casualty affecting, or the institution of any
proceedings for eminent domain or for the condemnation of, the
Property or any portion thereof. So long as no Default has occurred
and is continuing at the time, Trustor shall have the right to
adjust, compromise and settle any Claim of $100,000 or less without
the consent of Beneficiary, provided, however, all awards, proceeds
and other sums described herein shall continue to be payable to
Beneficiary. Beneficiary may commence, appear in, defend or
prosecute any Claim exceeding $100,000, and may adjust, compromise
and settle all Claims (except for Claims which Trustor may settle as
provided herein), but shall not be responsible for any failure to
commence, appear in, defend, prosecute or collect any such Claim
regardless of the cause of the failure. All awards, proceeds and
other sums described herein shall be payable to Beneficiary.
b. APPLICATION OF PROCEEDS; NO DEFAULT. So long as no Default has
occurred and is continuing at the time of Beneficiary's receipt of
the proceeds of the Claims ("Proceeds") and no Default occurs
thereafter, Beneficiary shall apply the Proceeds in the following
order of priority: First, to Beneficiary's expenses in settling,
prosecuting or defending the Claims; Second, to the repair or
restoration of the Property; and Third, to Trustor if the repair or
restoration of the Property has been completed, but to the Secured
Obligations in any order without suspending, extending or reducing
any obligation of Trustor to make installment payments if the repair
or restoration of the Property has not been completed.
Notwithstanding the foregoing, Beneficiary shall have no obligation
to make any Proceeds available for the repair or restoration of the
Property unless and until all the following conditions have been
satisfied: (i) delivery to Beneficiary of the Proceeds plus any
additional amount which is needed to pay all costs of the repair or
restoration (including, without limitation, taxes, financing
charges, insurance and rent during the repair period); (ii)
establishment of an arrangement for lien releases and disbursement
of funds acceptable to Beneficiary; (iii) delivery to Beneficiary in
form and content acceptable to Beneficiary of all of the following:
(aa) plans and specifications for the work; (bb) a contract for the
work, signed by a contractor acceptable to Beneficiary; (cc) a cost
breakdown for the work; (dd) if
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reasonably required by Beneficiary, a payment and performance bond
for the work; (ee) evidence of the continuation of substantially all
Leases unless consented to in writing by Beneficiary; (ff) evidence
that, upon completion of the work, the size, capacity, value, and
income coverage ratios for the Property will be at least as great as
those which existed immediately before the damage or condemnation
occurred; and (gg) evidence of the satisfaction of any additional
conditions that Beneficiary may reasonably establish to protect
Beneficiary's security. Trustor acknowledges that the specific
conditions described above are reasonable.
c. APPLICATION OF PROCEEDS; DEFAULT. If a Default has occurred and is
continuing at the time of Beneficiary's receipt of the Proceeds or
if a Default occurs at any time thereafter, Beneficiary may, at
Beneficiary's absolute discretion and regardless of any impairment
of security or lack of impairment of security, but subject to
applicable law governing use of the Proceeds, if any, apply all or
any of the Proceeds to Beneficiary's expenses in settling,
prosecuting or defending the Claims and then apply the balance to
the Secured Obligations in any order without suspending, extending
or reducing any obligation of Trustor to make installment payments,
and may release all or any part of the Proceeds to Trustor upon any
conditions Beneficiary chooses.
6.12 IMPOUNDS.
a. POST-DEFAULT IMPOUNDS. If required by Beneficiary at any time after
a Default occurs (and regardless of whether such Default is
thereafter cured), Trustor shall deposit with Beneficiary such
amounts ("Post-Default Impounds") on such dates (determined by
Beneficiary as provided below) as will be sufficient to pay any or
all "Costs" (as defined below) specified by Beneficiary. Beneficiary
in its reasonable discretion shall estimate the amount of such Costs
that will be payable or required during any period selected by
Beneficiary not exceeding 1 year and shall determine the fractional
portion thereof that Trustor shall deposit with Beneficiary on each
date specified by Beneficiary during such period. If the
Post-Default Impounds paid by Trustor are not sufficient to pay the
related Costs, Trustor shall deposit with Beneficiary upon demand an
amount equal to the deficiency. All Post-Default Impounds shall be
payable by Trustor in addition to (but without duplication of) any
other Impounds (as defined below).
b. ALL IMPOUNDS. Post-Default Impounds and any other impounds that may
be payable by Borrower under the Note are collectively called
"Impounds". All Impounds shall be deposited into one or more
segregated or commingled accounts maintained by Beneficiary or its
servicing agent. Except as otherwise provided in the Note, such
account(s) shall not bear interest. Beneficiary shall not be a
trustee, special depository or other fiduciary for Trustor with
respect to such account, and the existence of such account shall not
limit Beneficiary's rights under this Deed of Trust, any other
agreement or any provision of law. If no Default exists, Beneficiary
shall apply all Impounds to the payment of the related Costs, or in
Beneficiary's sole discretion may release any or all Impounds to
Trustor for application to and payment of such Costs. If a Default
exists, Beneficiary may apply any or all Impounds to any Secured
Obligation and/or to cure such Default, whereupon Trustor shall
restore all Impounds so applied and cure all Defaults not cured by
such application. The obligations of Trustor hereunder shall not be
diminished by deposits of Impounds made by Trustor, except to the
extent that such obligations have actually been met by application
of such Impounds. Upon any assignment of this Deed of Trust,
Beneficiary may assign all Impounds in its possession to
Beneficiary's assignee, whereupon Beneficiary and Trustee shall be
released from all liability with respect to such Impounds. Within 60
days following full repayment of the Secured Obligations (other than
as a consequence of foreclosure or conveyance in lieu of
foreclosure) or at such earlier time as Beneficiary may elect,
Beneficiary shall pay to Trustor all Impounds in its possession, and
no other party shall have any right or claim thereto. "Costs" means
(i) all taxes and other liabilities payable by Trustor under Section
6.9, (ii) all insurance premiums payable by Trustor under Section
6.10, (iii) all other costs and expenses for which Impounds are
required under the Note, and/or (iv) all other amounts that will be
required to preserve the value of the Property. Trustor shall
deliver to Beneficiary, promptly upon receipt, all bills for Costs
for which Beneficiary has required Post-Default Impounds.
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6.13 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Trustor shall protect,
preserve and defend the Property and title to and right of possession of
the Property, the security of this Deed of Trust and the rights and powers
of Beneficiary and Trustee hereunder at Trustor's sole expense against all
adverse claims, whether the claim: (a) is against a possessory or
non-possessory interest; (b) arose prior or subsequent to the Effective
Date; or (c) is senior or junior to Trustor's or Beneficiary's rights.
Trustor shall give Beneficiary and Trustee prompt notice in writing of the
assertion of any claim, of the filing of any action or proceeding, of the
occurrence of any damage to the Property and of any condemnation offer or
action.
6.14 RIGHT OF INSPECTION. Beneficiary and its independent contractors, agents
and employees may enter the Property from time to time at any reasonable
time upon reasonable prior notice to Trustor (except that such notice
shall not be required in the event of an emergency) for the purpose of
inspecting the Property and ascertaining Trustor's compliance with the
terms of this Deed of Trust. Beneficiary shall use reasonable efforts to
assure that Beneficiary's entry upon and inspection of the Property shall
not materially and unreasonably interfere with the business or operations
of Trustor or Trustor's tenants on the Property.
6.15 PROHIBITION OF TRANSFER OF PROPERTY OR INTERESTS IN TRUSTOR. Trustor
acknowledges that Beneficiary has relied upon the principals of Trustor
and Borrower and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan.
Accordingly, except with the prior written consent of Beneficiary or as
otherwise expressly permitted in the Note, Trustor shall not: (a) cause or
permit any sale, exchange, mortgage, pledge, hypothecation, assignment,
encumbrance or other transfer, conveyance or disposition, whether
voluntarily, involuntarily or by operation of law ("Transfer") of all or
any part of, or all or any direct or indirect interest in, the Property or
the Collateral (except for equipment and inventory in the ordinary course
of its business); or (b) cause or permit a Transfer of any direct or
indirect interest in any partnership, limited liability company,
corporation, trust, or other entity comprising all or any portion of or
holding any direct or indirect interest in Trustor or Borrower (other than
the sale or exchange of a limited partnership interest or a non-managing
membership interest). If any Transfer not expressly permitted in the Note
or this Deed of Trust is made without the prior written consent of
Beneficiary, Beneficiary shall have the absolute right at its option,
without prior demand or notice, to declare all of the Secured Obligations
immediately due and payable, except to the extent prohibited by law, and
pursue its rights and remedies under Section 7.3 herein. Trustor agrees to
pay any prepayment fee as set forth in the Note in the event the Secured
Obligations are accelerated pursuant to the terms of this Section. Consent
to one such Transfer shall not be deemed to be a waiver of the right to
require the consent to future or successive Transfers. Except for
Transfers expressly permitted under the Note, Beneficiary's consent to any
Transfer may be withheld, conditioned or delayed in Beneficiary's sole and
absolute discretion.
6.16 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts this
trust when this Deed of Trust is recorded. From time to time upon written
request of Beneficiary and presentation of this Deed of Trust, or a
certified copy thereof, for endorsement, and without affecting the
personal liability of any person for payment of any indebtedness or
performance of any Secured Obligation, Trustee may, without liability
therefor and without notice: (a) reconvey all or any part of the Property;
(b) consent to the making of any map or plat of the Property; (c) join
with Trustor in granting any easement on the Property; (d) join with
Trustor in any declaration of covenants and restrictions; or (e) join in
any extension agreement or any agreement subordinating the lien or charge
of this Deed of Trust. Nothing contained in the immediately preceding
sentence shall be construed to limit, impair or otherwise affect the
rights of Trustor in any respect. Except as may otherwise be required by
applicable law, Trustee or Beneficiary may from time to time apply to any
court of competent jurisdiction for aid and direction in the execution of
the trusts hereunder and the enforcement of the rights and remedies
available hereunder, and Trustee or Beneficiary may obtain orders or
decrees directing or confirming or approving acts in the execution of said
trusts and the enforcement of said remedies. Trustee has no obligation to
notify any party of any pending sale or any action or proceeding
(including, without limitation, actions in which Trustor, Beneficiary or
Trustee shall be a party) unless held or commenced and maintained by
Trustee under this Deed of Trust. Trustee shall not be obligated to
perform any act required of it hereunder
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unless the performance of the act is requested in writing and Trustee is
reasonably indemnified and held harmless against loss, cost, liability and
expense.
6.17 COMPENSATION OF TRUSTEE. Trustor shall pay to Trustee reasonable
compensation and reimbursement for services and expenses in the
administration of this trust, including, without limitation, reasonable
attorneys' fees. Trustor shall pay all indebtedness arising under this
Section immediately upon demand by Trustee or Beneficiary together with
interest thereon from the date the indebtedness arises at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.18 EXCULPATION. Beneficiary shall not directly or indirectly be liable to
Trustor or any other person as a consequence of: (a) the exercise of the
rights, remedies or powers granted to Beneficiary in this Deed of Trust;
(b) the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the
Property or under this Deed of Trust; or (c) any loss sustained by Trustor
or any third party resulting from Beneficiary's failure to lease the
Property after a Default or from any other act or omission of Beneficiary
in managing the Property after a Default unless the loss is caused by the
willful misconduct and bad faith of Beneficiary and no such liability
shall be asserted or enforced against Beneficiary, all such liability
being expressly waived and released by Trustor.
6.19 INDEMNITY. Without in any way limiting any other indemnity contained in
this Deed of Trust, Trustor agrees to defend, indemnify and hold harmless
Trustee and the Beneficiary Group (as defined below) from and against any
claim, loss, damage, cost, expense or liability directly or indirectly
arising out of: (a) the making of the Loan, except for violations of
banking laws or regulations by the Beneficiary Group; (b) this Deed of
Trust; (c) the execution of this Deed of Trust or the performance of any
act required or permitted hereunder or by law; (d) any failure of Trustor
to perform Trustor's obligations under this Deed of Trust or the other
Loan Documents; (e) any alleged obligation or undertaking on the
Beneficiary Group's part to perform or discharge any of the
representations, warranties, conditions, covenants or other obligations
contained in any other document related to the Property; (f) any act or
omission by Trustor or any contractor, agent, employee or representative
of Trustor with respect to the Property; or (g) any claim, loss, damage,
cost, expense or liability directly or indirectly arising out of: (i) the
use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous
Materials which are found in, on, under or about the Property (including,
without limitation, underground contamination); or (ii) the breach of any
covenant, representation or warranty of Trustor under Sections 5.1.p,
5.1.q, 5.1.r, or 6.2 above. The foregoing to the contrary notwithstanding,
this indemnity shall not include any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of the gross negligence or
willful misconduct of any member of the Beneficiary Group or Trustee, or
any claim, loss, damage, cost, expense or liability incurred by the
Beneficiary Group or Trustee arising from any act or incident on the
Property occurring after the full reconveyance and release of the lien of
this Deed of Trust on the Property, or with respect to the matters set
forth in clause (g) above, any claim, loss, damage, cost, expense or
liability incurred by the Beneficiary Group resulting from the
introduction and initial release of Hazardous Materials on the Property
occurring after the transfer of title to the Property at a foreclosure
sale under this Deed of Trust, either pursuant to judicial decree or the
power of sale, or by deed in lieu of such foreclosure. This indemnity
shall include, without limitation: (aa) all consequential damages
(including, without limitation, any third party tort claims or
governmental claims, fines or penalties against Trustee or the Beneficiary
Group); (bb) all court costs and reasonable attorneys' fees (including,
without limitation, expert witness fees) paid or incurred by Trustee or
the Beneficiary Group; and (cc) the costs, whether foreseeable or
unforeseeable, of any investigation, repair, cleanup or detoxification of
the Property which is required by any governmental entity or is otherwise
necessary to render the Property in compliance with all laws and
regulations pertaining to Hazardous Materials. "Beneficiary Group", as
used herein, shall mean (1) Beneficiary (including, without limitation,
any participant in the Loan), (2) any entity controlling, controlled by or
under common control with Beneficiary, (3) the directors, officers,
employees and agents of Beneficiary and such other entities, and (4) the
successors, heirs and assigns of the entities and persons described in
foregoing clauses (1) through (3). Trustor shall pay immediately upon
Trustee's or Beneficiary's demand any amounts owing under this indemnity
together with interest from the date the indebtedness arises until paid at
the rate of interest applicable to the principal balance of the Note as
specified therein. Trustor agrees to use legal
19
counsel reasonably acceptable to Trustee and the Beneficiary Group in any
action or proceeding arising under this indemnity. THE PROVISIONS OF THIS
SECTION SHALL SURVIVE THE TERMINATION AND RECONVEYANCE OF THIS DEED OF
TRUST, BUT TRUSTOR'S LIABILITY UNDER THIS INDEMNITY SHALL BE SUBJECT TO
THE PROVISIONS OF THE SECTION IN THE NOTE ENTITLED "BORROWER'S LIABILITY."
6.20 SUBSTITUTION OF TRUSTEE. From time to time, by a writing signed and
acknowledged by Beneficiary and recorded in the Office of the Recorder of
the County in which the Property is situated, Beneficiary may appoint
another trustee to act in the place and stead of Trustee or any successor.
Such writing shall set forth any information required by law. The
recordation of such instrument of substitution shall discharge Trustee
herein named and shall appoint the new trustee as the trustee hereunder
with the same effect as if originally named trustee herein. A writing
recorded pursuant to the provisions of this Section shall be conclusive
proof of the proper substitution of such new trustee.
6.21 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Property or in any manner obligated
under the Secured Obligations ("Interested Parties"), Beneficiary may,
from time to time: (a) fully or partially release any person or entity
from liability for the payment or performance of any Secured Obligation;
(b) extend the maturity of any Secured Obligation; (c) make any agreement
with Borrower increasing the amount or otherwise altering the terms of any
Secured Obligation; (d) accept additional security for any Secured
Obligation; or (e) release all or any portion of the Property, Collateral
and other security for any Secured Obligation. None of the foregoing
actions shall release or reduce the personal liability of any of said
Interested Parties, or release or impair the priority of the lien of this
Deed of Trust upon the Property.
6.22 SALE OR PARTICIPATION OF LOAN. Trustor agrees that Beneficiary may at any
time sell, assign, participate or securitize all or any portion of
Beneficiary's rights and obligations under the Loan Documents, and that
any such sale, assignment, participation or securitization may be to one
or more financial institutions or other entities, to private investors,
and/or into the public securities market, in Beneficiary's sole
discretion. Trustor further agrees that Beneficiary may disseminate to any
such actual or potential purchaser(s), assignee(s) or participant(s) all
documents and financial and other information heretofore or hereafter
provided to or known to Beneficiary with respect to: (a) the Property and
its operation; and/or (b) any party connected with the Loan (including,
without limitation, Trustor, any partner or member of Trustor, any
constituent partner or member of Trustor, any guarantor and any
nonborrower trustor). In the event of any such sale, assignment,
participation or securitization, Beneficiary and the other parties to the
same shall share in the rights and obligations of Beneficiary set forth in
the Loan Documents as and to the extent they shall agree among themselves.
In connection with any such sale, assignment, participation or
securitization, Trustor further agrees that the Loan Documents shall be
sufficient evidence of the obligations of Trustor to each purchaser,
assignee or participant, and Trustor shall, within 15 days after request
by Beneficiary, (x) deliver an estoppel certificate verifying for the
benefit of Beneficiary and any other party designated by Beneficiary the
status and the terms and provisions of the Loan in form and substance
acceptable to Beneficiary, (y) provide any information, legal opinions or
documents regarding Trustor, Guarantor (as defined in the Loan Documents),
the Property and any tenants of the Property as Beneficiary or
Beneficiary's rating agencies may reasonably request, and (z) enter into
such amendments or modifications to the Loan Documents or the
organizational documents of Trustor as may be reasonably required in order
to facilitate any such sale, assignment, participation or securitization
without impairing Trustor's rights or increasing Trustor's obligations.
The indemnity obligations of Trustor under the Loan Documents shall also
apply with respect to any purchaser, assignee or participant.
6.23 RECONVEYANCE. Upon Beneficiary's written request, and upon surrender of
this Deed of Trust or certified copy thereof and any note, instrument or
instruments setting forth all obligations secured hereby to Trustee for
cancellation, Trustee shall reconvey, without warranty, the Property or
that portion thereof then held hereunder. The recitals of any matters or
facts in any reconveyance executed hereunder shall be conclusive proof of
the truthfulness thereof. To the extent permitted by law, the reconveyance
may describe the grantee as "the person or persons legally entitled
thereto". Neither Beneficiary nor Trustee shall have any duty to determine
the rights
20
of persons claiming to be rightful grantees of any reconveyance. When the
Property has been fully reconveyed, the last such reconveyance shall
operate as a reassignment of all future rents, issues and profits of the
Property to the person or persons legally entitled thereto.
6.24 SUBROGATION. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part
by Beneficiary pursuant to this Deed of Trust or by the proceeds of any
loan secured by this Deed of Trust.
6.25 MANAGEMENT AGREEMENTS. Without the prior written consent of Beneficiary,
Trustor shall not terminate, modify, amend or enter into any agreement
providing for the management, leasing or operation of the Property.
Trustor represents, warrants and covenants that any existing management
agreement includes, and any future management agreement entered into by
Trustor shall include, a provision which provides that the management
agreement is automatically terminated upon the transfer of the Property by
Trustor, either by sale, foreclosure, deed in lieu of foreclosure, or
otherwise, to Beneficiary or any other purchaser of the Property. Upon a
Default under the Loan Documents or a default under any management
agreement then in effect, which default is not cured within any applicable
grace or cure period, Beneficiary shall have the right to terminate, or to
direct Trustor to terminate, such management agreement upon thirty (30)
days' written notice and to retain, or to direct Trustor to retain, a new
management agent approved by Beneficiary.
ARTICLE 7. DEFAULT
7.1 DEFAULT. For all purposes hereof, "Default" shall mean either an "Optional
Default" (as defined below) or an "Automatic Default" (as defined below).
a. OPTIONAL DEFAULT. An "Optional Default" shall occur, at
Beneficiary's option, upon the occurrence of any of the following
events:
(i) MONETARY. Borrower or Trustor shall fail to (aa) pay when due
any sums payable under the Loan Documents which by their
express terms require immediate payment without any grace
period or sums which are payable on the Maturity Date, or (bb)
pay within 5 days when due any other sums payable under the
Note, this Deed of Trust or any of the other Loan Documents,
including without limitation, any monthly payment due under
the Note.
(ii) FAILURE TO PERFORM. Borrower or Trustor shall fail to observe,
perform or discharge any of Borrower's or Trustor's
obligations, covenants, conditions or agreements, other than
Borrower's or Trustor's payment obligations, under the Note,
this Deed of Trust or any of the other Loan Documents, and
(aa) such failure shall remain uncured for 30 days after
written notice thereof shall have been given to Borrower or
Trustor, as the case may be, by Beneficiary or (bb) if such
failure is of such a nature that it cannot be cured within
such 30 day period, Borrower or Trustor shall fail to commence
to cure such failure within such 30 day period or shall fail
to diligently prosecute such curative action thereafter.
(iii) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate or other statement (financial or otherwise) made
or furnished by or on behalf of Borrower, Trustor, or a
guarantor, if any, to Beneficiary or in connection with any of
the Loan Documents, or as an inducement to Beneficiary to make
the Loan, shall be false, incorrect, incomplete or misleading
in any material respect when made or furnished.
(iv) CONDEMNATION; ATTACHMENT. The condemnation, seizure or
appropriation of any material portion (as reasonably
determined by Beneficiary) of the Property; or the
sequestration or attachment of, or levy or execution upon any
of the Property, the Collateral or any other collateral
provided by Borrower or Trustor under any of the Loan
Documents, or any material portion of
21
the other assets of Borrower or Trustor, which sequestration,
attachment, levy or execution is not released or dismissed
within 45 days after its occurrence; or the sale of any assets
affected by any of the foregoing.
(v) UNINSURED CASUALTY. The occurrence of an uninsured casualty
with respect to any material portion (as reasonably determined
by Beneficiary) of the Property unless: (aa) no other Default
has occurred and is continuing at the time of such casualty or
occurs thereafter; (bb) Trustor promptly notifies Beneficiary
of the occurrence of such casualty; and (cc) not more than 45
days after the occurrence of such casualty, Trustor delivers
to Beneficiary immediately available funds in an amount
sufficient, in Beneficiary's reasonable opinion, to pay all
costs of the repair or restoration (including, without
limitation, taxes, financing charges, insurance and rent
during the repair period). So long as no Default has occurred
and is continuing at the time of Beneficiary's receipt of such
funds and no Default occurs thereafter, Beneficiary shall make
such funds available for the repair or restoration of the
Property. Notwithstanding the foregoing, Beneficiary shall
have no obligation to make any funds available for repair or
restoration of the Property unless and until all the
conditions set forth in clauses (ii) and (iii) of the second
sentence of Section 6.11(b) of this Deed of Trust have been
satisfied. Trustor acknowledges that the specific conditions
described above are reasonable.
(vi) ADVERSE FINANCIAL CHANGE. Any material adverse change in the
financial condition of Borrower or any general partner or
managing member of Borrower, any guarantor, or any other
person or entity from the condition shown on the financial
statement(s) submitted to Beneficiary and relied upon by
Beneficiary in making the Loan, and which change Beneficiary
reasonably determines will have a material adverse effect on
(aa) the business, operations or condition of the Property; or
(bb) the ability of Borrower or Trustor to pay or perform
Borrower's or Trustor's obligations in accordance with the
terms of the Note, this Deed of Trust, and the other Loan
Documents.
b. AUTOMATIC DEFAULT. An "Automatic Default" shall occur automatically
upon the occurrence of any of the following events:
(i) VOLUNTARY BANKRUPTCY, INSOLVENCY, DISSOLUTION. (aa) Borrower's
filing a petition for relief under the Bankruptcy Reform Act
of 1978, as amended or recodified ("Bankruptcy Code"), or
under any other present or future state or federal law
regarding bankruptcy, reorganization or other relief to
debtors (collectively, "Debtor Relief Law"); or (bb)
Borrower's filing any pleading in any involuntary proceeding
under the Bankruptcy Code or other Debtor Relief Law which
admits the jurisdiction of a court to regulate Borrower or the
Property or the petition's material allegations regarding
Borrower's insolvency; or (cc) Borrower's making a general
assignment for the benefit of creditors; or (dd) Borrower's
applying for, or the appointment of, a receiver, trustee,
custodian or liquidator of Borrower or any of its property; or
(ee) the filing by Borrower of a petition seeking the
liquidation or dissolution of Borrower or the commencement of
any other procedure to liquidate or dissolve Borrower.
(ii) INVOLUNTARY BANKRUPTCY. Borrower's failure to effect a full
dismissal of any involuntary petition under the Bankruptcy
Code or other Debtor Relief Law that is filed against Borrower
or in any way restrains or limits Borrower or Beneficiary
regarding the Loan or the Property, prior to the earlier of
the entry of any order granting relief sought in the
involuntary petition or 45 days after the date of filing of
the petition.
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(iii) PARTNERS, GUARANTORS. The occurrence of an event specified in
clauses (i) or (ii) as to Trustor, any general partner or
managing member of Borrower or Trustor, or any guarantor or
other person or entity in any manner obligated to Beneficiary
under the Loan Documents.
7.2 ACCELERATION. Upon the occurrence of an Optional Default, Beneficiary may,
at its option, declare all sums owing to Beneficiary under the Note and
the other Loan Documents immediately due and payable. Upon the occurrence
of an Automatic Default, all sums owing to Beneficiary under the Note and
the other Loan Documents shall automatically become immediately due and
payable.
7.3 RIGHTS AND REMEDIES. In addition to the rights and remedies in Section 7.2
above, at any time after a Default, Beneficiary shall have all of the
following rights and remedies:
a. ENTRY ON PROPERTY. With or without notice, and without releasing
Trustor from any Secured Obligation, and without becoming a
mortgagee in possession, to enter upon the Property from time to
time and to do such acts and things as Beneficiary or Trustee deem
necessary or desirable in order to inspect, investigate, assess and
protect the security hereof or to cure any Default, including,
without limitation: (i) to take and possess all documents, books,
records, papers and accounts of Trustor, Borrower or the then owner
of the Property which relate to the Property; (ii) to make,
terminate, enforce or modify leases of the Property upon such terms
and conditions as Beneficiary deems proper; (iii) to make repairs,
alterations and improvements to the Property necessary, in Trustee's
or Beneficiary's reasonable judgment, to protect or enhance the
security hereof; (iv) to appear in and defend any action or
proceeding purporting to affect the security hereof or the rights or
powers of Beneficiary or Trustee hereunder; (v) to pay, purchase,
contest or compromise any encumbrance, charge, lien or claim of lien
which, in the sole judgment of either Beneficiary or Trustee, is or
may be senior in priority hereto, the judgment of Beneficiary or
Trustee being conclusive as between the parties hereto; (vi) to
obtain insurance; (vii) to pay any premiums or charges with respect
to insurance required to be carried hereunder; (viii) to obtain a
court order to enforce Beneficiary's right to enter and inspect the
Property for Hazardous Materials, in which regard the decision of
Beneficiary as to whether there exists a release or threatened
release of Hazardous Materials onto the Property shall be deemed
reasonable and conclusive as between the parties hereto; (ix) to
have a receiver appointed pursuant to applicable law to enforce
Beneficiary's rights to enter and inspect the Property for Hazardous
Materials; and/or (x) to employ legal counsel, accountants,
engineers, consultants, contractors and other appropriate persons to
assist them;
b. APPOINTMENT OF RECEIVER. With or without notice or hearing, to apply
to a court of competent jurisdiction for and obtain appointment of a
receiver, trustee, liquidator or conservator of the Property, for
any purpose, including, without limitation, to enforce Beneficiary's
right to collect Payments and to enter on and inspect the Property
for Hazardous Materials, as a matter of strict right and without
regard to: (i) the adequacy of the security for the repayment of the
Secured Obligations; (ii) the existence of a declaration that the
Secured Obligations are immediately due and payable; (iii) the
filing of a notice of default; or (iv) the solvency of Trustor,
Borrower or any guarantor or other person or entity in any manner
obligated to Beneficiary under the Loan Documents;
c. JUDICIAL FORECLOSURE; INJUNCTION. To commence and maintain an action
or actions in any court of competent jurisdiction to foreclose this
instrument as a mortgage or to obtain specific enforcement of the
covenants of Trustor hereunder, and Trustor agrees that such
covenants shall be specifically enforceable by injunction or any
other appropriate equitable remedy and that for the purposes of any
suit brought under this subparagraph, Trustor waives the defense of
laches and any applicable statute of limitations;
d. NONJUDICIAL FORECLOSURE. To execute a written notice of such Default
and of the election to cause the Property to be sold to satisfy the
Secured Obligations. Trustee shall give and record such notice as
the law then requires as a condition precedent to a trustee's sale.
When the minimum period of time required by law after such notice
has elapsed, Trustee, without notice to or demand upon Trustor
except as
23
required by law, shall sell the Property at the time and place of
sale fixed by it in the notice of sale, at one or several sales,
either as a whole or in separate parcels and in such manner and
order, all as Beneficiary in its sole discretion may determine, at
public auction to the highest bidder for cash, in lawful money of
the United States, payable at time of sale. Neither Trustor nor any
other person or entity other than Beneficiary shall have the right
to direct the order in which the Property is sold. Subject to
requirements and limits imposed by law, Trustee may, from time to
time postpone sale of all or any portion of the Property by public
announcement at such time and place of sale, and from time to time
may postpone the sale by public announcement at the time and place
fixed by the preceding postponement. A sale of less than the whole
of the Property or any defective or irregular sale made hereunder
shall not exhaust the power of sale provided for herein. Trustee
shall deliver to the purchaser at such sale a deed conveying the
Property or portion thereof so sold, but without any covenant or
warranty, express or implied. The recitals in the deed of any
matters or facts shall be conclusive proof of the truthfulness
thereof. Any person, including Trustee, Trustor or Beneficiary may
purchase at the sale;
Upon sale of the Property at any judicial or nonjudicial
foreclosure, Beneficiary may credit bid (as determined by
Beneficiary in its sole and absolute discretion) all or any portion
of the Secured Obligations. In determining such credit bid,
Beneficiary may, but is not obligated to, take into account all or
any of the following: (i) appraisals of the Property as such
appraisals may be discounted or adjusted by Beneficiary in its sole
and absolute underwriting discretion; (ii) expenses and costs
incurred by Beneficiary with respect to the Property prior to
foreclosure; (iii) expenses and costs which Beneficiary anticipates
will be incurred with respect to the Property after foreclosure, but
prior to resale, including, without limitation, costs of structural
reports and other due diligence, costs to carry the Property prior
to resale, costs of resale (e.g. commissions, attorneys' fees, and
taxes), costs of any Hazardous Materials clean-up and monitoring,
costs of deferred maintenance, repair, refurbishment and retrofit,
costs of defending or settling litigation affecting the Property,
and lost opportunity costs (if any), including the time value of
money during any anticipated holding period by Beneficiary; (iv)
declining trends in real property values generally and with respect
to properties similar to the Property; (v) anticipated discounts
upon resale of the Property as a distressed or foreclosed property;
(vi) the fact of additional collateral (if any), for the Secured
Obligations; and (vii) such other factors or matters that
Beneficiary (in its sole and absolute discretion) deems appropriate.
In regard to the above, Trustor acknowledges and agrees that: (viii)
Beneficiary is not required to use any or all of the foregoing
factors to determine the amount of its credit bid; (ix) this
paragraph does not impose upon Beneficiary any additional
obligations that are not imposed by law at the time the credit bid
is made; (x) the amount of Beneficiary's credit bid need not have
any relation to any loan-to-value ratios specified in the Loan
Documents or previously discussed between Trustor and Beneficiary;
and (xi) Beneficiary's credit bid may be (at Beneficiary's sole and
absolute discretion) higher or lower than any appraised value of the
Property;
e. MULTIPLE FORECLOSURES. To resort to and realize upon the security
hereunder and any other security now or later held by Beneficiary
concurrently or successively and in one or several consolidated or
independent judicial actions or lawfully taken nonjudicial
proceedings, or both, and to apply the proceeds received upon the
Secured Obligations all in such order and manner as Trustee and
Beneficiary or either of them determine in their sole discretion;
f. RIGHTS TO COLLATERAL. To exercise all rights Trustee or Beneficiary
may have with respect to the Collateral under this Deed of Trust,
the UCC or otherwise at law; and
g. OTHER RIGHTS. To exercise such other rights as Trustee or
Beneficiary may have at law or in equity or pursuant to the terms
and conditions of this Deed of Trust or any of the other Loan
Documents.
In connection with any sale or sales hereunder, Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the Property (including, without
limitation, any improvements forming a part thereof) without causing
structural damage thereto as if the same were personal
24
property or a fixture, as the case may be, and dispose of the same in
accordance with applicable law, separate and apart from the sale of the
Property. Any sale of Collateral hereunder shall be conducted in any
manner permitted by the UCC.
7.4 APPLICATION OF FORECLOSURE SALE PROCEEDS. If any foreclosure sale is
effected, Trustee shall apply the proceeds of such sale in the following
order of priority: First, to the costs, fees and expenses of exercising
the power of sale and of sale, including, without limitation, the payment
of reasonable Trustee's fees and attorneys' fees; Second, to the payment
of the Secured Obligations which are secured by this Deed of Trust, in
such order as Beneficiary shall determine in its sole discretion; Third,
to satisfy the outstanding balance of obligations secured by any junior
liens or encumbrances in the order of their priority; and Fourth, to the
Trustor or the Trustor's successor in interest, or in the event the
Property has been sold or transferred to another, to the vested owner of
record at the time of the Trustee's sale.
7.5 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a
lien on or interest in the Property, hereby waives all rights to have the
Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured
Obligation, marshaled upon any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Secured Obligations.
7.6 NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any receiver's
entry upon and taking possession of all or any part of the Property, nor
any collection of rents, issues, profits, insurance proceeds, condemnation
proceeds or damages, other security or proceeds of other security, or
other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise of any other right or remedy by Beneficiary
or Trustee or any receiver shall cure or waive any Default or notice of
default under this Deed of Trust, or nullify the effect of any notice of
default or sale (unless all Secured Obligations then due have been paid or
performed and Trustor has cured all other Defaults hereunder), or impair
the status of the security, or prejudice Beneficiary or Trustee in the
exercise of any right or remedy, or be construed as an affirmation by
Beneficiary of any tenancy, lease or option or a subordination of the lien
of this Deed of Trust.
7.7 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor agrees to pay to
Beneficiary immediately and upon demand all costs and expenses incurred by
Trustee and Beneficiary in the enforcement of the terms and conditions of
this Deed of Trust (including, without limitation, statutory trustee's
fees, court costs and attorneys' fees, whether incurred in litigation or
not) with interest from the date of expenditure until said sums have been
paid at the rate of interest applicable to the principal balance of the
Note as specified therein.
7.8 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably
appoints Beneficiary and its successors and assigns, as its
attorney-in-fact, which agency is coupled with an interest, to perform any
obligation of Trustor hereunder upon the occurrence of an event, act or
omission which, with notice or passage of time or both, would constitute a
Default, provided, however, that: (a) Beneficiary as such attorney-in-fact
shall only be accountable for such funds as are actually received by
Beneficiary; and (b) Beneficiary shall not be liable to Trustor or any
other person or entity for any failure to act under this Section.
7.9 REMEDIES CUMULATIVE. All rights and remedies of Beneficiary and Trustee
under this Deed of Trust and the other Loan Documents are cumulative and
are in addition to all rights and remedies provided by applicable law
(including specifically that of foreclosure of this Deed of Trust as
though it were a mortgage). Beneficiary may enforce any one or more
remedies or rights under the Loan Documents either successively or
concurrently.
ARTICLE 8. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The
25
Loan Documents grant further rights to Beneficiary and contain further
agreements and affirmative and negative covenants by Trustor which apply
to this Deed of Trust and to the Property and such further rights and
agreements are incorporated herein by this reference. THE OBLIGATIONS AND
LIABILITIES OF TRUSTOR UNDER THIS DEED OF TRUST AND THE OTHER LOAN
DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE
ENTITLED "BORROWER'S LIABILITY."
8.2 NON-WAIVER. By accepting payment of any amount secured hereby after its
due date or late performance of any other Secured Obligation, Beneficiary
shall not waive its right against any person obligated directly or
indirectly hereunder or on any Secured Obligation, either to require
prompt payment or performance when due of all other sums and obligations
so secured or to declare default for failure to make such prompt payment
or performance. No exercise of any right or remedy by Beneficiary or
Trustee hereunder shall constitute a waiver of any other right or remedy
herein contained or provided by law. No failure by Beneficiary or Trustee
to exercise any right or remedy hereunder arising upon any Default shall
be construed to prejudice Beneficiary's or Trustee's rights or remedies
upon the occurrence of any other or subsequent Default. No delay by
Beneficiary or Trustee in exercising any such right or remedy shall be
construed to preclude Beneficiary or Trustee from the exercise thereof at
any time while that Default is continuing. No notice to nor demand on
Trustor shall of itself entitle Trustor to any other or further notice or
demand in similar or other circumstances.
8.3 CONSENTS, APPROVALS AND EXPENSES. Wherever Beneficiary's consent,
approval, acceptance or satisfaction is required under any provision of
this Deed of Trust or any of the other Loan Documents, such consent,
approval, acceptance or satisfaction shall not be unreasonably withheld,
conditioned or delayed by Beneficiary unless such provision expressly so
provides. Wherever costs or expenses are required to be paid under any
provision of this Deed of Trust or any of the other Loan Documents, such
costs or expenses shall be reasonable.
8.4 PERMITTED CONTESTS. After prior written notice to Beneficiary, Trustor may
contest, by appropriate legal or other proceedings conducted in good faith
and with due diligence, the amount, validity or application, in whole or
in part, of any lien, levy, tax or assessment, or any lien of any laborer,
mechanic, materialman, supplier or vendor, or the application to Trustor
or the Property of any law or the validity thereof, the assertion or
imposition of which, or the failure to pay when due, would constitute a
Default; provided that (a) Trustor pursues the contest diligently, in a
manner which Beneficiary determines is not prejudicial to Beneficiary, and
does not impair the lien of this Deed of Trust; (b) the Property, or any
part hereof or estate or interest therein, shall not be in any danger of
being sold, forfeited or lost by reason of such proceedings; (c) in the
case of the contest of any law or other legal requirement, Beneficiary
shall not be in any danger of any civil or criminal liability; and (d) if
required by Beneficiary, Trustor deposits with Beneficiary any funds or
other forms of assurance (including a bond or letter of credit)
satisfactory to Beneficiary to protect Beneficiary from the consequences
of the contest being unsuccessful. Trustor's right to contest pursuant to
the terms of this provision shall in no way relieve Trustor or Borrower of
its obligations under the Loan or to make payments to Beneficiary as and
when due.
8.5 FURTHER ASSURANCES. Trustor shall, upon demand by Beneficiary or Trustee,
execute, acknowledge (if appropriate) and deliver any and all documents
and instruments and do or cause to be done all further acts reasonably
necessary or appropriate to effectuate the purposes of the Loan Documents
and to perfect any assignments contained therein.
8.6 ATTORNEYS' FEES. If any legal action, suit or proceeding is commenced
between Trustor and Beneficiary regarding their respective rights and
obligations under this Deed of Trust or any of the other Loan Documents,
the prevailing party shall be entitled to recover, in addition to damages
or other relief, costs and expenses, reasonable attorneys' fees and court
costs (including, without limitation, expert witness fees). As used herein
the term "prevailing party" shall mean the party which obtains the
principal relief it has sought, whether by compromise settlement or
judgment. If the party which commenced or instituted the action, suit or
proceeding shall dismiss or discontinue it without the concurrence of the
other party, such other party shall be deemed the prevailing party.
26
8.7 TRUSTOR AND BENEFICIARY DEFINED. The term "Trustor" includes both the
original Trustor and any subsequent owner or owners of any of the
Property, and the term "Beneficiary" includes the original Beneficiary and
any future owner or holder, including assignees, pledges and participants,
of the Note or any interest therein.
8.8 DISCLAIMERS.
a. RELATIONSHIP. The relationship of Trustor and Beneficiary under this
Deed of Trust and the other Loan Documents is, and shall at all
times remain, solely that of borrower and lender; and Beneficiary
neither undertakes nor assumes any responsibility or duty to Trustor
or to any third party with respect to the Property. Notwithstanding
any other provisions of this Deed of Trust and the other Loan
Documents: (i) Beneficiary is not, and shall not be construed to be,
a partner, joint venturer, member, alter ego, manager, controlling
person or other business associate or participant of any kind of
Trustor, and Beneficiary does not intend to ever assume such status;
(ii) Beneficiary's activities in connection with this Deed of Trust
and the other Loan Documents shall not be "outside the scope of
activities of a lender of money" within the meaning of California
Civil Code Section 3434, as amended or recodified from time to time,
and Beneficiary does not intend to ever assume any responsibility to
any person for the quality, suitability, safety or condition of the
Property; and (iii) Beneficiary shall not be deemed responsible for
or a participant in any acts, omissions or decisions of Trustor.
b. NO LIABILITY. Beneficiary shall not be directly or indirectly liable
or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any
person or property arising from any construction on, or occupancy or
use of, the Property, whether caused by or arising from: (i) any
defect in any building, structure, grading, fill, landscaping or
other improvements thereon or in any on-site or off-site improvement
or other facility therein or thereon; (ii) any act or omission of
Trustor or any of Trustor's agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on the
Property or any fire, flood or other casualty or hazard thereon;
(iv) the failure of Trustor or any of Trustor's licensees,
employees, invitees, agents, independent contractors or other
representatives to maintain the Property in a safe condition; or (v)
any nuisance made or suffered on any part of the Property.
8.9 SEVERABILITY. If any term of this Deed of Trust or any other Loan
Document, or the application thereof to any person or circumstances,
shall, to any extent, be invalid or unenforceable, the remainder of this
Deed of Trust or such other Loan Document, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Deed
of Trust or such other Loan Document shall be valid and enforceable to the
fullest extent permitted by law.
8.10 RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Beneficiary under the deed of trust established by Article 1 and the
security agreement established by Article 4 are independent and
cumulative, and there shall be no merger of any lien created by the deed
of trust with any security interest created by the security agreement.
Beneficiary may elect to exercise or enforce any of its rights, remedies
or interests under either or both the deed of trust or the security
agreement as Beneficiary may from time to time deem appropriate. The
absolute assignment of rents and leases established by Article 3 is
similarly independent of and separate from the deed of trust and the
security agreement.
8.11 MERGER. No merger shall occur as a result of Beneficiary's acquiring any
other estate in, or any other lien on, the Property unless Beneficiary
consents to a merger in writing.
8.12 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has
executed this Deed of Trust as "Trustor", the obligations of all such
persons hereunder shall be joint and several.
27
8.13 SEPARATE AND COMMUNITY PROPERTY. Any married person who executes this Deed
of Trust as a "Trustor" agrees that any money judgment which Beneficiary
or Trustee obtains pursuant to the terms of this Deed of Trust or any
other obligation of that married person secured by this Deed of Trust may
be collected by execution upon any separate property or community property
of that person.
8.14 INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect
to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified
except by written instrument executed by all parties. Any reference in any
of the Loan Documents to the Property or Collateral shall include all or
any part of the Property or Collateral. Any reference to the Loan
Documents includes any amendments, renewals or extensions now or hereafter
approved by Beneficiary in writing. When the identity of the parties or
other circumstances make it appropriate, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
8.15 CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Note.
8.16 SUCCESSORS IN INTEREST. The terms, covenants, and conditions contained
herein and in the other Loan Documents shall be binding upon and inure to
the benefit of the heirs, successors and assigns of the parties. The
foregoing sentence shall not be construed to permit Trustor to assign the
Loan except as otherwise permitted under the Note or the other Loan
Documents.
8.17 GOVERNING LAW. This Deed of Trust was accepted by Beneficiary in the state
of California and the proceeds of the Note secured hereby were disbursed
from the state of California, which state the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, including, without limiting
the generality of the foregoing, matters of construction, validity,
enforceability and performance, this Deed of Trust, the Note and the other
Loan Documents and the obligations arising hereunder and thereunder shall
be governed by, and construed in accordance with, the laws of the state of
California applicable to contracts made and performed in such state and
any applicable law of the United States of America, except that at all
times the provisions for enforcement of Beneficiary's STATUTORY POWER OF
SALE and all other remedies granted hereunder, Beneficiary's rights under
Section 6.2 above, and the creation, perfection and enforcement of the
security interests created pursuant hereto and pursuant to the other Loan
Documents in any Collateral which is located in the state where the
Property is located shall be governed by and construed according to the
law of the state where the Property is located. Except as provided in the
immediately preceding sentence, Trustor hereby unconditionally and
irrevocably waives, to the fullest extent permitted by law, any claim to
assert that the law of any jurisdiction other than California governs this
Deed of Trust, the Note and other Loan Documents.
8.18 CONSENT TO JURISDICTION. Trustor irrevocably submits to the jurisdiction
of: (a) any state or federal court sitting in the state of California over
any suit, action, or proceeding, brought by Trustor against Beneficiary,
arising out of or relating to this Deed of Trust, the Note or the Loan;
(b) any state or federal court sitting in the state where the Property is
located or the state in which Trustor's principal place of business is
located over any suit, action or proceeding, brought by Beneficiary
against Trustor, arising out of or relating to this Deed of Trust, the
Note or the Loan; and (c) any state court sitting in the county of the
state where the Property is located over any suit, action, or proceeding,
brought by Beneficiary to exercise its STATUTORY POWER OF SALE under this
Deed of Trust or any action brought by Beneficiary to enforce its rights
with respect to the Collateral. Trustor irrevocably waives, to the fullest
extent permitted by law, any objection that Trustor may now or hereafter
have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.19 EXHIBITS. Exhibit A is incorporated into this Deed of Trust by this
reference.
28
8.20 ADDRESSES; REQUEST FOR NOTICE. All notices and other communications that
are required or permitted to be given to a party under this Deed of Trust
or the other Loan Documents shall be in writing, refer to the Loan number,
and shall be sent to such party, either by personal delivery, by overnight
delivery service, by certified first class mail, return receipt requested,
or by facsimile transmission to the addressee or facsimile number below.
All such notices and communications shall be effective upon receipt of
such delivery or facsimile transmission, together with a printed receipt
of the successful delivery of such facsimile transmission. The addresses
of the parties are set forth on page 1 of this Deed of Trust and the
facsimile numbers for the parties are as follows:
Beneficiary: Trustee:
WELLS FARGO BANK, N.A. AMERICAN SECURITIES COMPANY
FAX No.: (925) 691-5947 OF NEVADA
FAX No.: (925) 691-5947
Trustor:
MHC STAGECOACH, L.L.C.
FAX No.: (312) 279-1715
Trustor's principal place of business is at the address set forth on page
1 of this Deed of Trust. A copy of any notice to Trustor shall be sent as
follows:
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, Illinois 60606
Attention: Benjamin Randall
Facsimile: (312) 807-3903
Any Trustor whose address is set forth on page 1 of this Deed of Trust
hereby requests that a copy of notice of default and notice of sale be
delivered to it at that address. Failure to insert an address shall
constitute a designation of Trustor's last known address as the address
for such notice. Any party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by giving 30 days notice to the other parties in the manner set
forth above.
8.21 COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed
an original and all of which taken together, will be deemed to be one and
the same instrument.
8.22 WAIVER OF JURY TRIAL. BENEFICIARY (BY ITS ACCEPTANCE HEREOF) AND TRUSTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEED OF TRUST OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF BENEFICIARY OR TRUSTOR.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR BENEFICIARY TO ENTER INTO THIS
DEED OF TRUST.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
29
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year set forth above.
"TRUSTOR"
MHC STAGECOACH, L.L.C.,
a Delaware limited liability company
By: MHC-QRS STAGECOACH, INC.,
a Delaware corporation,
its Managing Member
By: /s/ John M. Zoeller
-------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
STATE OF IL )
) SS:
COUNTY OF COOK )
This instrument was acknowledged before me on 8/1, 2001 by
John M. Zoeller, as Vice President, Chief Financial Officer and Treasurer of
MHC-QRS STAGECOACH, INC., a Delaware corporation, the managing member of MHC
STAGECOACH, L.L.C., a Delaware limited liability company.
WITNESS my hand and official seal.
/s/ Mary Dobronski
------------------------------
Print Name: Mary Dobronski
My Commission Expires:
11/3/03
[NOTARIAL SEAL]
NOTARY PUBLIC, State of IL
Serial No., if any:_______________
Loan No. 31-0900553R
EXHIBIT A
DESCRIPTION OF LAND
Exhibit A to DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT (AND FIXTURE FILING) ("Deed of Trust") between MHC
STAGECOACH, L.L.C., a Delaware limited liability company, as "Trustor", AMERICAN
SECURITIES COMPANY OF NEVADA, as "Trustee", and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as "Beneficiary".
Description of Land. The Land referred to in this Deed of Trust is situated in
the county of Clark, state of Nevada and is described as follows:
The Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 16,
Township 21 South, Range 62 East, M.D.B. & M., Clark County, Nevada.
EXCEPTING THEREFROM the described premises:
The North Forty feet (40.00') and the East Forty feet (40.00') of the Northeast
Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 16, Township 21
South, Range 62 East, M.D.B. & M., Clark County, Nevada; together with the
certain spandrel area in the Northeast Quarter corner thereof, also being the
Southwest corner of the intersection of East Twain Avenue and Cabana Drive,
bounded as follows: on the North by the South line of the North Forty feet
(40.00'); on the East by the West line of the East Forty feet (40.00'), and on
the Southwest by the arc of a curve concave Southwesterly, having a radius of
Twenty five feet (25.00') that is tangent to the South line of said North Forty
feet (40.00') is tangent to the South line of said North Forty feet (40.00') and
tangent to the West line of said Forty feet (40.00').
ALSO BEING described as that portion of the Northeast Quarter (NE 1/4) of the
Southwest Quarter (SW 1/4) of Section 16, Township 21 South, Range 62 East,
M.D.B. & M., Clark County, Nevada, more particularly described as follows:
COMMENCING at the Northwest corner of the Northeast Quarter (NE 1/4) of the
Southwest Quarter of said Section 16; thence South 01(Degree) 55' 58" East a
distance of 40.01 feet to a point on the Southerly right of way line of Twain
Avenue (80.00 feet wide) said point being the TRUE POINT OF BEGINNING; thence
North 89(Degree) 09' 31" East, along said Southerly right of way of Twain Avenue
a distance of 1259.02 feet to a point of tangent curve concave to the Southwest
having a radius of 25.00 feet; thence Southeasterly along the arc of said curve
through a central angle of 89(Degree) 28' 02" an arc length of 39.04 feet to a
point on the Westerly right of way line of Cabana Drive (80.00 feet wide);
thence South 01(Degree) 22' 27" East along said Westerly right of way line of
Cabana Drive a distance of 1238.26 feet; thence South 88(Degree) 17' 57" West a
distance of 1271.25 feet; thence North 01(Degree) 55' 58" West a distance of
1282.27 feet to the TRUE POINT OF BEGINNING.
EXHIBIT A
Recording requested by
and when recorded return to:
WELLS FARGO BANK, N.A.
Commercial Mortgage Origination
MAC #A0194-093
45 Fremont Street, 9th Floor
San Francisco, California 94105
Attention: CMO Loan Admin.
Loan No.: 31-0900553R
Property Name: Indian Oaks
Prepared by:
Lee M. Smolen
Sidley Austin Brown & Wood
10 South Dearborn
Chicago, Illinois 60603
MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND
LEASES AND SECURITY AGREEMENT (AND FIXTURE FILING)
July 31, 2001
THIS MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT
(AND FIXTURE FILING) (the "Mortgage") is made and entered into by and among MHC
STAGECOACH, L.L.C., a Delaware limited liability company ("Mortgagor"), having
an address at c/o Manufactured Home Communities, Inc., Two North Riverside
Plaza, Suite 800, Chicago, Illinois 60606, and WELLS FARGO NATIONAL BANK,
NATIONAL ASSOCIATION ("Lender" or "Mortgagee").
THIS MORTGAGE EVIDENCES A MULTI-STATE LOAN WHICH IS SECURED BY REAL PROPERTY
LOCATED OUTSIDE THE STATE OF FLORIDA AND REAL PROPERTY LOCATED IN BREVARD,
VOLUSIA, AND MANATEE COUNTIES, FLORIDA. FLORIDA DOCUMENTARY STAMP TAX IN THE
AMOUNT OF $61,250.00 AND FLORIDA NON-RECURRING INTANGIBLE PERSONAL PROPERTY TAX
IN THE AMOUNT OF $35,000.00 ARE BEING PAID UPON RECORDATION OF ONE OF THE
FLORIDA MORTGAGES IN THE PUBLIC RECORDS OF VOLUSIA COUNTY, FLORIDA. ATTACHED
HERETO AS EXHIBIT B IS A DESCRIPTION OF THE CALCULATION OF LIABILITY FOR
DOCUMENTARY STAMP TAX AND NON-RECURRING INTANGIBLE PERSONAL PROPERTY TAX.
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R E C I T A L S
A. MHC STAGECOACH, L.L.C., a Delaware limited liability company ("Borrower")
proposes to borrow from Mortgagee, and Mortgagee proposes to lend to Borrower
the principal sum of FIFTY MILLION AND NO/100THS DOLLARS ($50,000,000.00)
("Loan"). The Loan is evidenced by a promissory note ("Note") executed by
Borrower, dated the date of this Mortgage, payable to the order of Mortgagee
in the principal amount of the Loan. The maturity date of the Loan is
September 1, 2011.
B. The loan documents include this Mortgage, the Note and the other documents
described in the Note as Loan Documents ("Loan Documents").
ARTICLE I. MORTGAGE
1.1 GRANT. For the purposes of and upon the terms and conditions of
this Mortgage, Mortgagor irrevocably mortgages, grants, bargains, sells,
conveys, transfers, pledges, sets over and assigns, and grants a security
interest to Mortgagee, its successors and assign, with right of entry and
possession, all of Mortgagor's right, title and interest, whether now owned or
hereafter acquired, in or to all of the following:
(a) That real property ("Land") located in Rockledge, county of
Brevard, state of Florida, and more particularly described on Exhibit A attached
hereto;
(b) All appurtenances, easements, rights of way, water and water
rights, pumps, pipes, flumes and ditches and ditch rights, water stock, ditch
and/or reservoir stock or interests, royalties, development rights and credits,
air rights, minerals, oil rights, all sewer capacity rights, and gas rights, now
or later used or useful in connection with, appurtenant to or related to the
Land;
(c) All buildings, structures, facilities, other improvements and
fixtures now or hereafter located on the Land;
(d) All apparatus, equipment, machinery and appliances and all
accessions thereto and renewals and replacements thereof and substitutions
therefor used in the operation or occupancy of the Land, it being intended by
the parties that all such items shall be conclusively considered to be a part of
the Land, whether or not attached or affixed to the Land;
(e) All land lying in the right-of-way of any street, road, avenue,
alley or right-of-way opened, proposed or vacated, and all sidewalks, strips and
gores of land adjacent to or used in connection with the Land;
(f) All additions and accretions to the property described above;
(g) All licenses, authorizations, certificates, variances, consents,
approvals and other permits now or hereafter pertaining to the Land and all
estate, right, title and interest of Mortgagor in, to, under or derived from all
tradenames or business names relating to the Land or the present or future
development, construction, operation or use of the Land; and
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(h) All proceeds of any of the foregoing.
All of the property described above is hereinafter collectively defined as the
"Property". The listing of specific rights or property shall not be interpreted
as a limitation of general terms.
ARTICLE II. OBLIGATIONS SECURED
2.1 OBLIGATIONS SECURED. Mortgagor makes the foregoing grant and
assignment for the purpose of securing the following obligations ("Secured
Obligations"):
(a) Full and punctual payment to Mortgagee of all sums at any time
owing under the Note;
(b) Payment and performance of all covenants and obligations of
Mortgagor under this Mortgage, including, without limitation, indemnification
obligations and advances made to protect the Property;
(c) Payment and performance of all additional covenants and
obligations of Borrower and Mortgagor under the Loan Documents;
(d) Payment and performance of all covenants and obligations, if
any, which any rider attached as an exhibit to this Mortgage recites are secured
hereby;
(e) Payment and performance of all future advances and other
obligations that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor) for the
benefit of Mortgagee, when the obligation is evidenced by a writing which
recites that it is secured by this Mortgage;
(f) All interest and charges on all obligations secured hereby
including, without limitation, prepayment charges, late charges and loan fees;
and
(g) All modifications, extensions and renewals of any of the
obligations secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or interest payment
dates or both, as the case may be, deferring or accelerating payment dates
wholly or partly; and (ii) modifications, extensions or renewals at a different
rate of interest whether or not any such modification, extension or renewal is
evidenced by a new or additional promissory note or notes.
2.2 FUTURE ADVANCES. This Mortgage is given to secure not only the
Secured Obligations, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee or the holder hereof, or
otherwise as are made within twenty years from the date hereof, to the same
extent as if such future advances were made on the date of the execution of this
Mortgage. The total amount of Secured Obligations that may be so secured by this
Mortgage may be increased or decreased from time to time, but the total unpaid
balance so secured at any one time shall not exceed twice the face amount of the
Note, plus interest thereon, and any disbursements made under this Mortgage for
the payment of impositions, taxes, assessments, levies, insurance, or otherwise
with interest on such disbursements as provided for
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herein, plus any increases in the principal balance as the result of negative
amortization or deferred interest, if any. It is agreed that any additional sum
or sums advanced by Mortgagee pursuant to the terms hereof shall be equally
secured with and have the same priority as the original Secured Obligations and
shall be subject to all of the terms, provisions and conditions of this
Mortgage, whether or not such additional loans or advances are evidenced by
other promissory notes or other guaranties of Mortgagor and whether or not
identified by a recital that it or they are secured by this Mortgage. It is
further agreed that any additional promissory note or guaranty or promissory
notes or guaranties executed and delivered pursuant to this paragraph shall
automatically be deemed to be included in the term "Note" wherever it appears in
the context of this Mortgage. Without the prior written consent of Mortgagee,
which Mortgagee may grant or withhold in its sole discretion, Mortgagor shall
not file for record any notice limiting the maximum principal amount that may be
secured by this Mortgage to a sum less than the maximum principal amount set
forth in this paragraph.
2.3 OBLIGATIONS. The term "obligations" is used herein in its
broadest and most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and loan
fees at any time accruing or assessed on any of the Secured Obligations.
2.4 MATURITY DATE. The maturity date of the Note is September 1,
2011.
2.5 INCORPORATION. All terms and conditions of the documents which
evidence any of the Secured Obligations are incorporated herein by this
reference. All persons who may have or acquire an interest in the Property shall
be deemed to have notice of the terms of the Secured Obligations and to have
notice that the rate of interest on one or more Secured Obligations may vary
from time to time.
ARTICLE III. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT. Mortgagor irrevocably assigns to Mortgagee all of
Mortgagor's right, title and interest in, to and under: (a) all present and
future leases of the Property or any portion thereof, all licenses and
agreements relating to the management, leasing or operation of the Property or
any portion thereof, and all other agreements of any kind relating to the use or
occupancy of the Property or any portion thereof, whether such leases, licenses
and agreements are now existing or entered into after the date hereof
("Leases"); and (b) the rents, issues, deposits and profits of the Property,
including, without limitation, all amounts payable and all rights and benefits
accruing to Mortgagor under the Leases ("Payments"). The term "Leases" shall
also include all guarantees of and security for the tenants' performance
thereunder, and all amendments, extensions, renewals or modifications thereto
which are permitted hereunder. This is a present and absolute assignment, not an
assignment for security purposes only, and Mortgagee's right to the Leases and
Payments is not contingent upon, and may be exercised without possession of, the
Property.
3.2 GRANT OF LICENSE. Notwithstanding the terms contained in Section
3.1, Mortgagee confers upon Mortgagor a revocable license ("License") to collect
and retain the Payments as they become due and payable, until the occurrence of
a Default (as hereinafter defined). Upon a Default, the License shall be
automatically revoked and Mortgagee may collect
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and apply the Payments pursuant to the terms hereof without notice and without
taking possession of the Property. Upon Mortgagor's cure of the Default,
Mortgagee shall re-confer upon Mortgagor a revocable license to collect and
retain the Payments as they become due and payable, until the occurrence of a
Default. All Payments thereafter collected by Mortgagor shall be held by
Mortgagor as trustee under a constructive trust for the benefit of Mortgagee.
Mortgagor hereby irrevocably authorizes and directs the tenants under the
Leases, upon notice of a Default from Mortgagee, to rely upon and comply with
any notice or demand by Mortgagee for the payment to Mortgagee of any rental or
other sums which may at any time become due under the Leases, or for the
performance of any of the tenants' undertakings under the Leases, and the
tenants shall have no right or duty to inquire as to whether any Default has
actually occurred or is then existing. Mortgagor hereby relieves the tenants
from any liability to Mortgagor by reason of relying upon and complying with any
such notice or demand by Mortgagee. Mortgagee may apply, in its sole discretion,
any Payments so collected by Mortgagee against any Secured Obligation or any
other obligation of Borrower, Mortgagor or any other person or entity, under any
document or instrument related to or executed in connection with the Loan
Documents, whether existing on the date hereof or hereafter arising. Collection
of any Payments by Mortgagee shall not cure or waive any Default or notice of
Default or invalidate any acts done pursuant to such notice.
3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall
not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; (c)
responsible or liable for any waste committed on the Property by the tenants
under any of the Leases or by any other parties; for any dangerous or defective
condition of the Property; or for any negligence in the management, upkeep,
repair or control of the Property resulting in loss or injury or death to any
tenant, licensee, employee, invitee or other person; or (d) responsible for or
impose upon Mortgagee any duty to produce rents or profits. Mortgagee shall not
directly or indirectly be liable to Mortgagor or any other person as a
consequence of: (e) the exercise of or failure to exercise any of the rights,
remedies or powers granted to Mortgagee hereunder; or (f) the failure or refusal
of Mortgagee to perform or discharge any obligation, duty or liability of
Mortgagor arising under the Leases.
3.4 COVENANTS.
(a) ALL LEASES. Mortgagor shall, at Mortgagor's sole cost and
expense:
(i) perform all obligations of the landlord under the Leases and use
reasonable efforts to enforce performance by the tenants of all obligations of
the tenants under the Leases;
(ii) use reasonable efforts to keep the Property leased at all times
to tenants whom Mortgagor reasonably and in good faith believes are creditworthy
at rents not less than the fair market rental value (including, but not limited
to, free or discounted rents to the extent the market so requires);
(iii) promptly upon Mortgagee's request, deliver to Mortgagee a copy
of each requested Lease and all amendments thereto and waivers thereof; and
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(iv) promptly upon Mortgagee's request, execute and record any
additional assignments of landlord's interest under any Lease to Mortgagee and
specific subordinations of any Lease to this Mortgage, in form and substance
satisfactory to Mortgagee.
Unless consented to in writing by Mortgagee or otherwise permitted under any
other provision of the Loan Documents, Mortgagor shall not:
(v) grant any tenant under any Lease any option, right of first
refusal or other right to purchase all or any portion of the Property under any
circumstances;
(vi) grant any tenant under any Lease any right to prepay rent more
than 1 month in advance;
(vii) except upon Mortgagee's request, execute any assignment of
landlord's interest in any Lease; or
(viii) collect rent or other sums due under any Lease in advance,
other than to collect rent 1 month in advance of the time when it becomes due.
Any such attempted action in violation of the provisions of this Section shall
be null and void.
Mortgagor shall deposit with Mortgagee any sums received by Mortgagor in
consideration of any termination, modification or amendment of any Lease or any
release or discharge of any tenant under any Lease from any obligation
thereunder and any such sums received by Mortgagor shall be held in trust by
Mortgagor for such purpose. Notwithstanding the foregoing, so long as no Default
exists, the portion of any such sum received by Mortgagor with respect to any
Lease which is less than $50,000 shall be payable to Mortgagor. All such sums
received by Mortgagee with respect to any Lease shall be deemed "Impounds" (as
defined in Section 6.12) and shall be deposited by Mortgagee into a pledged
account in accordance with Section 6.12. If no Default exists, Mortgagee shall
release such Impounds to Mortgagor from time to time as necessary to pay or
reimburse Mortgagor for such tenant improvements, brokerage commissions and
other leasing costs as may be required to re-tenant the affected space;
provided, however, Mortgagee shall have received and approved each of the
following for each tenant for which such costs were incurred; (1) Mortgagor's
written request for such release, including the name of the tenant, the location
and net rentable area of the space and a description and cost breakdown of the
tenant improvements or other leasing costs covered by the request; (2)
Mortgagor's certification that any tenant improvements have been completed
lien-free and in a workmanlike manner; (3) a fully executed Lease, or extension
or renewal of the current Lease; (4) an estoppel certificate executed by the
tenant including its acknowledgement that all tenant improvements have been
satisfactorily completed; and (5) such other information with respect to such
costs as Mortgagee may require. Following the re-tenanting of all affected space
(including, without limitation, the completion of all tenant improvements), and
provided no Default exists, Mortgagee shall release any remaining such Impounds
relating to the affected space to Mortgagor. Mortgagor shall construct all
tenant improvements in a workmanlike manner and in accordance with all
applicable laws, ordinances, rules and regulations.
(b) MAJOR LEASES. Mortgagor shall, at Mortgagor's sole cost and
expense, give Mortgagee prompt written notice of any material default by
landlord or tenant under any
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Major Lease (as defined below). Unless consented to in writing by Mortgagee or
otherwise permitted under any other provision of the Loan Documents, Mortgagor
shall not:
(i) enter into any Major Lease which (aa) is not on fair market
terms (which terms may include free or discounted rent to the extent the market
so requires); (bb) does not contain a provision requiring the tenant to execute
and deliver to the landlord an estoppel certificate in form and substance
satisfactory to the landlord promptly upon the landlord's request; or (cc)
allows the tenant to assign or sublet the premises without the landlord's
consent;
(ii) materially reduce any rent or other sums due from the tenant
under any Major Lease;
(iii) terminate or materially modify or amend any Major Lease; or
(iv) release or discharge the tenant or any guarantor under any
Major Lease from any material obligation thereunder.
Any such attempted action in violation of the provisions of this Section shall
be null and void.
"Major Lease", as used herein, shall mean any Lease, which is, at any time: (1)
a Lease of more than 20% of the total rentable area of the Property, as
reasonably determined by Mortgagee; or (2) a Lease which generates a gross base
monthly rent exceeding 20% of the total gross base monthly rent generated by all
Leases (excluding all Leases under which the tenant is then in default), as
reasonably determined by Mortgagee. Mortgagor's obligations with respect to
Major Leases shall be governed by the provisions of Section 3.4(a) as well as by
the provisions of this Section.
(c) FAILURE TO DENY REQUEST Mortgagee's failure to deny any written
request by Mortgagor for Mortgagee's consent under the provisions of Sections
3.4(a) or 3.4(b) within 10 Business Days after Mortgagee's receipt of such
request (and all documents and information reasonably related thereto) shall be
deemed to constitute Mortgagee's consent to such request.
3.5 RIGHT OF SUBORDINATION. Mortgagee may at any time and from time
to time by specific written instrument intended for the purpose unilaterally
subordinate the lien of this Mortgage to any Lease, without joinder or consent
of, or notice to, Mortgagor, any tenant or any other person. Notice is hereby
given to each tenant under a Lease of such right to subordinate. No
subordination referred to in this Section shall constitute a subordination to
any lien or other encumbrance, whenever arising, or improve the right of any
junior lienholder. Nothing herein shall be construed as subordinating this
Mortgage to any Lease.
ARTICLE IV. SECURITY AGREEMENT AND FIXTURE FILING
4.1 SECURITY INTEREST. Mortgagor grants and assigns to Mortgagee a
security interest to secure payment and performance of all of the Secured
Obligations, in all of Mortgagor's right, title and interest in and to the
following described personal property in which Mortgagor now or at any time
hereafter has any interest ("Collateral"):
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All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and other
personal property, wherever situated, which are or are to be incorporated
into, used in connection with or appropriated for use on the Property; all
rents, issues, deposits and profits of the Property (to the extent, if
any, they are not subject to the Absolute Assignment of Rents and Leases);
all inventory, accounts, cash receipts, deposit accounts, impounds,
accounts receivable, contract rights, general intangibles, software,
chattel paper, instruments, documents, promissory notes, drafts, letters
of credit, letter of credit rights, supporting obligations, insurance
policies, insurance and condemnation awards and proceeds, any other rights
to the payment of money, trade names, trademarks and service marks arising
from or related to the Property or any business now or hereafter conducted
thereon by Mortgagor; all permits, consents, approvals, licenses,
authorizations and other rights granted by, given by or obtained from, any
governmental entity with respect to the Property; all deposits or other
security now or hereafter made with or given to utility companies by
Mortgagor with respect to the Property; all advance payments of insurance
premiums made by Mortgagor with respect to the Property; all plans,
drawings and specifications relating to the Property; all loan funds held
by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee
pursuant to any Loan Document, all reserves, deferred payments, deposits,
accounts, refunds, cost savings and payments of any kind related to the
Property or any portion thereof, including, without limitation, all
"Impounds" as defined herein; together with all replacements and proceeds
of, and additions and accessions to, any of the foregoing, and all books,
records and files relating to any of the foregoing.
As to all of the above described personal property which is or which
hereafter becomes a "fixture" under the Florida Uniform Commercial Code (the
"UCC"), this Mortgage constitutes a fixture filing under Florida Statutes
Section 679.313 and 679.402, as amended and recodified from time to time, this
Mortgage shall constitute a fixture filing recorded in the real estate records.
Notwithstanding the foregoing, nothing herein shall be deemed to create any lien
or interest in favor of Mortgagee under this Mortgage in any such Collateral
which is not a fixture, and the purpose of this Article IV is to create a
fixture filing under Florida Statutes Section 679.313 and 679.402, as amended or
recodified from time to time.
4.2 COVENANTS. Mortgagor agrees: (a) to execute and deliver such
documents as Mortgagee reasonably deems necessary to create, perfect and
continue the security interests contemplated hereby; (b) not to change its name,
and, as applicable, its chief executive offices, its principal residence or the
jurisdiction in which it is organized without giving Mortgagee at least 30 days'
prior written notice thereof; and (c) to cooperate with Mortgagee in perfecting
all security interests granted herein and in obtaining such agreements from
third parties as Mortgagee deems necessary, proper or convenient in connection
with the preservation, perfection or enforcement of any of Mortgagee's rights
hereunder.
4.3 RIGHTS OF MORTGAGEE. In addition to Mortgagee's rights as a
"Secured Party" under the UCC, Mortgagee may, but shall not be obligated to, at
any time without notice and at the expense of Mortgagor: (a) give notice to any
person of Mortgagee's rights hereunder and enforce such rights at law or in
equity; (b) insure, protect, defend and
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preserve the Collateral or any rights or interests of Mortgagee therein; and (c)
inspect the Collateral during normal business hours upon reasonable prior
written notice, provided, however, that such notice shall not be required in the
event of an emergency. Notwithstanding the above, in no event shall Mortgagee be
deemed to have accepted any property other than cash in satisfaction of any
obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express
written election of said remedy under the UCC or other applicable law.
4.4 ADDITIONAL RIGHTS OF MORTGAGEE UPON DEFAULT. Upon the occurrence
of a Default, then in addition to all of Mortgagee's rights as a "Secured Party"
under the UCC or otherwise at law:
(a) DISPOSITION OF COLLATERAL. Mortgagee may: (i) upon written
notice, require Mortgagor to assemble the Collateral and make it available to
Mortgagee at a place reasonably designated by Mortgagee; (ii) without prior
notice (to the extent permitted by law), enter upon the Property or other place
where the Collateral may be located and take possession of, collect, sell,
lease, license and otherwise dispose of the Collateral, and store the same at
locations acceptable to Mortgagee at Mortgagor's expense; or (iii) sell, assign
and deliver the Collateral at any place or in any lawful manner and bid and
become purchaser at any such sales; and
(b) OTHER RIGHTS. Mortgagee may, for the account of Mortgagor and at
Mortgagor's expense: (i) operate, use, consume, sell, lease, license or
otherwise dispose of the Collateral as Mortgagee reasonably deems appropriate
for the purpose of performing any or all of the Secured Obligations; (ii) enter
into any agreement, compromise or settlement including insurance claims, which
Mortgagee may reasonably deem desirable or proper with respect to the
Collateral; and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness and
obligations now or hereafter owing to Mortgagor in connection with or on account
of the Collateral.
Mortgagor acknowledges and agrees that a disposition of the
Collateral in accordance with Mortgagee's rights and remedies as heretofore
provided is a disposition thereof in a commercially reasonable manner and that 5
Business Days prior notice of such disposition is commercially reasonable
notice. Mortgagee shall have no obligation to process or prepare the Collateral
for sale or other disposition. In disposing of the Collateral, Mortgagee may
disclaim all warranties of title, possession, quiet enjoyment and the like. Any
proceeds of any sale or other disposition of the Collateral may be applied by
Mortgagee first to the reasonable expenses incurred by Mortgagee in connection
therewith, including, without limitation, reasonable attorneys' fees and
disbursements, and then to the payment of the Secured Obligations, in such order
of application as Mortgagee may from time to time elect.
4.5 POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints
Mortgagee as Mortgagor's attorney-in-fact (such agency being coupled with an
interest), and as such attorney-in-fact, Mortgagee may, without the obligation
to do so, in Mortgagee's name or in the name of Mortgagor, prepare, execute,
file and record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve any of
Mortgagee's security interests and rights in or to the Collateral, and upon a
Default, take
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any other action required of Mortgagor; provided, however, that Mortgagee as
such attorney-in-fact shall be accountable only for such funds as are actually
received by Mortgagee.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Mortgagor represents and
warrants to Mortgagee that, to Mortgagor's current actual knowledge after
reasonable investigation and inquiry, the following statements are true and
correct as of the Effective Date:
(a) LEGAL STATUS. Mortgagor and Borrower are duly organized and
existing and in good standing under the laws of the state(s) in which Mortgagor
and Borrower are organized. Mortgagor and Borrower are qualified or licensed to
do business in all jurisdictions in which such qualification or licensing is
required.
(b) PERMITS. Mortgagor and Borrower possess all permits, franchises
and licenses and all rights to all trademarks, trade names, patents and
fictitious names, if any, necessary to enable Mortgagor and Borrower to conduct
the business(es) in which Mortgagor and Borrower are now engaged in compliance
with applicable law.
(c) AUTHORIZATION AND VALIDITY. The execution and delivery of the
Loan Documents have been duly authorized and the Loan Documents constitute valid
and binding obligations of Mortgagor, Borrower or the party which executed the
same, enforceable in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights, or by the application of rules
of equity.
(d) VIOLATIONS. The execution, delivery and performance by Mortgagor
and Borrower of each of the Loan Documents do not violate any provision of any
law or regulation, or result in any breach or default under any contract,
obligation, indenture or other instrument to which Mortgagor or Borrower is a
party or by which Mortgagor or Borrower is bound.
(e) LITIGATION. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental authority, court or
administrative agency which may adversely affect the financial condition or
operations of Mortgagor or Borrower other than those previously disclosed in
writing by Mortgagor or Borrower to Mortgagee.
(f) FINANCIAL STATEMENTS. The financial statements of Mortgagor and
Borrower, of each general partner (if Mortgagor or Borrower is a partnership),
of each member (if Mortgagor or Borrower is a limited liability company) and of
each guarantor, if any, previously delivered by Mortgagor or Borrower to
Mortgagee: (i) are materially complete and correct; (ii) present fairly the
financial condition of such party; and (iii) have been prepared in accordance
with the same accounting standard used by Mortgagor or Borrower to prepare the
financial statements delivered to and approved by Mortgagee in connection with
the making of the Loan, or other accounting standards approved by Mortgagee.
Since the date of such financial statements, there has been no material adverse
change in such financial condition, nor have any assets or properties reflected
on such financial statements been sold, transferred, assigned, mortgaged,
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pledged or encumbered except as previously disclosed in writing by Mortgagor or
Borrower to Mortgagee and approved in writing by Mortgagee.
(g) REPORTS. All reports, documents, instruments and information
delivered to Mortgagee in connection with the Loan: (i) are correct in all
material respects and sufficiently complete to give Mortgagee accurate knowledge
of their subject matter; and (ii) do not contain any misrepresentation of a
material fact or omission of a material fact which omission makes the provided
information misleading.
(h) INCOME TAXES. There are no material pending assessments or
adjustments of Mortgagor's or Borrower's income tax payable with respect to any
year.
(i) SUBORDINATION. There is no agreement or instrument to which
Borrower is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower's obligations under the
Note to an obligation owed to another party.
(j) TITLE. Mortgagor lawfully holds and possesses fee simple title
to the Property, without limitation on the right to encumber same. This Mortgage
is a first lien on the Property prior and superior to all other liens and
encumbrances on the Property except: (i) liens for real estate taxes and
assessments not yet due and payable; (ii) senior exceptions previously approved
by Mortgagee and shown in the title insurance policy insuring the lien of this
Mortgage; and (iii) other matters, if any, previously disclosed to Mortgagee by
Mortgagor in a writing specifically referring to this representation and
warranty.
(k) MECHANICS' LIENS. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to any such liens) affecting the
Property which are or may be prior to or equal to the lien of this Mortgage,
other than those (if any) previously approved by Mortgagee and shown in the
title insurance policy insuring the lien of this Mortgage.
(l) ENCROACHMENTS. Except as shown in the survey, if any, previously
delivered to Mortgagee, none of the buildings or other improvements which were
included for the purpose of determining the appraised value of the Property lies
outside of the boundaries or building restriction lines of the Property and no
buildings or other improvements located on adjoining properties encroach upon
the Property.
(m) LEASES. All existing Leases are in full force and effect and are
enforceable in accordance with their respective terms. Except as disclosed on a
rent roll provided to Mortgagee prior to the date hereof, no material breach or
default by any party, or event which would constitute a material breach or
default by any party after notice or the passage of time, or both, exists under
any existing Lease. None of the landlord's interests under any of the Leases,
including, but not limited to, rents, additional rents, charges, issues or
profits, has been transferred or assigned. Except as disclosed on a rent roll
provided to Mortgagee prior to the date hereof, no rent or other payment under
any existing Lease has been paid by any tenant for more than 1 month in advance.
(n) COLLATERAL. Mortgagor has good title to the existing Collateral,
free and clear of all liens and encumbrances except those, if any, previously
disclosed to Mortgagee by Mortgagor in writing specifically referring to this
representation and warranty. Mortgagor's chief
Page 11
executive office (or principal residence, if applicable) is located at the
address shown on page one of this Mortgage. Mortgagor is an organization
organized solely under the laws of the State of Delaware. All organizational
documents of Mortgagor delivered to Mortgagee are complete and accurate in every
respect. Mortgagor's legal name is exactly as shown on page one of this
Mortgage.
(o) CONDITION OF PROPERTY. Except as shown in the property condition
survey or other engineering reports, if any, previously delivered to or obtained
by Mortgagee, the Property is in good condition and repair and is free from any
damage that would materially and adversely affect the value of the Property as
security for the Loan or the intended use of the Property.
(p) HAZARDOUS MATERIALS. Except as shown in the environmental
assessment report(s), if any, previously delivered to or obtained by Mortgagee,
the Property is not and has not been a site for the use, generation,
manufacture, storage, treatment, release, threatened release, discharge,
disposal, transportation or presence of Hazardous Materials (as hereinafter
defined) in violation of Hazardous Materials Laws (as hereinafter defined)
except as otherwise previously disclosed in writing by Mortgagor to Mortgagee.
(q) HAZARDOUS MATERIALS LAWS. The Property complies with all
Hazardous Materials Laws.
(r) HAZARDOUS MATERIALS CLAIMS. There are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).
(s) WETLANDS. No part of the Property consists of or is classified
as wetlands, tidelands or swamp and overflow lands.
(t) COMPLIANCE WITH LAWS. All federal, state and local laws, rules
and regulations applicable to the Property, including, without limitation, all
zoning and building requirements and all requirements of the Americans With
Disabilities Act of 1990, as amended from time to time (42 U. S. C. Section
12101 et seq.) have been satisfied or complied with. Mortgagor is in possession
of all certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of the Property.
All such certificates of occupancy and other licenses, permits and
authorizations are valid and in full force and effect.
(u) PROPERTY TAXES AND OTHER LIABILITIES. All taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, and ground
rents, if any, which previously became due and owing in respect of the Property
have been paid.
(v) CONDEMNATION. There is no proceeding pending or threatened for
the total or partial condemnation of the Property.
(w) HOMESTEAD. There is no homestead or other exemption available to
Mortgagor which would materially interfere with the right to sell the Property
or the right to foreclose this Mortgage.
(x) SOLVENCY. None of the transactions contemplated by the Loan will
be or have been made with an actual intent to hinder, delay or defraud any
present or future creditors
Page 12
of Mortgagor, and Mortgagor, on the Effective Date, will have received fair and
reasonably equivalent value in good faith for the grant of the liens or security
interests effected by the Loan Documents. On the Effective Date, Mortgagor will
be solvent and will not be rendered insolvent by the transactions contemplated
by the Loan Documents. Mortgagor is able to pay its debts as they become due.
(y) SEPARATE TAX PARCEL(S). The Property is assessed for real estate
tax purposes as one or more wholly independent tax parcels, separate from any
other real property, and no other real property is assessed and taxed together
with the Property or any portion thereof.
5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS
(LEVEL V SPE). Mortgagor hereby represents, warrants and covenants to Mortgagee
that with respect to both Mortgagor and MHC-QRS STAGECOACH, INC., a Delaware
corporation, the managing member of Mortgagor:
(a) each such entity was organized solely for the purpose of (i) owning
the Properties (as defined in the Note); (ii) acting as a general partner of a
limited partnership which owns the Properties; or (iii) acting as a managing
member of a limited liability company which owns the Properties;
(b) each such entity has not engaged and will not engage in any business
unrelated to (i) the ownership of the Properties; (ii) acting as general partner
of a limited partnership which owns the Properties; or (iii) acting as a
managing member of a limited liability company which owns the Properties;
(c) each such entity has not had and will not have any assets other than
the Properties (and personal property incidental to the ownership and operation
of the Properties) or its partnership or membership interest in the limited
partnership or limited liability company which owns the Properties, as
applicable;
(d) each such entity has not and will not engage in, seek or consent to
any dissolution, winding up, liquidation, consolidation, merger, asset sale,
transfer of partnership or membership interest, or amendment of its articles of
incorporation, articles of organization, certificate of formation, operating
agreement or limited partnership agreement, as applicable;
(e) if any such entity is a limited partnership, all of its general
partners are corporations that satisfy the requirements set forth in this
Section 5.2;
(f) if any such entity is a limited liability company, it has at least one
managing member that is a corporation that satisfies the requirements set forth
in this Section 5.2;
(g) each such entity, without the unanimous consent of all of its general
partners, directors or members, as applicable, shall not file or consent to the
filing of any bankruptcy or insolvency petition or otherwise institute
insolvency proceedings with respect to itself or any other entity in which it
has a direct or indirect legal or beneficial ownership interest;
(h) each such entity has no indebtedness (and will have no indebtedness)
other than (i) the Loan (to the extent it is liable under the terms of the Loan
Documents); and (ii) unsecured
Page 13
trade debt not to exceed $1,000,000 in the aggregate with respect to Mortgagor
or $10,000 in the aggregate with respect to its managing member, which is not
evidenced by a note and is incurred in the ordinary course of its business in
connection with owning, operating and maintaining the Property (or its interest
in Mortgagor, as applicable) and is paid within thirty (30) days from the date
incurred;
(i) each such entity has not failed and will not fail to correct any known
misunderstanding regarding the separate identity of such entity;
(j) each such entity has maintained and will maintain its accounts, books
and records separate from any other person or entity;
(k) each such entity has maintained and will maintain its books, records,
resolutions and agreements as official records;
(l) each such entity (i) has not commingled and will not commingle its
funds or assets with those of any other entity; and (ii) has held and will hold
its assets in its own name;
(m) each such entity has conducted and will conduct its business in its
own name or in a registered trade name;
(n) each such entity has maintained and will maintain its accounting
records and other entity documents separate from any other person or entity;
(o) each such entity has prepared and will prepare separate tax returns
and financial statements, or if part of a consolidated group, is shown as a
separate member of such group;
(p) each such entity has paid and will pay its own liabilities and
expenses out of its own funds and assets;
(q) each such entity has held and will hold regular meetings, as
appropriate, to conduct its business and has observed and will observe all
corporate, partnership or limited liability company formalities and record
keeping, as applicable;
(r) each such entity has not assumed or guaranteed and will not assume or
guarantee or become obligated for the debts of any other entity or hold out its
credit as being available to satisfy the obligations of any other entity;
(s) each such entity has not acquired and will not acquire obligations or
securities of its partners, members or shareholders;
(t) each such entity has allocated and will allocate fairly and reasonably
the costs associated with common employees and any overhead for shared office
space and each such entity has used and will use separate stationery, invoices
and checks under its own name or under its registered trade name;
(u) each such entity has not pledged and will not pledge its assets for
the benefit of any other person or entity;
Page 14
(v) each such entity has held out and identified itself and will hold
itself out and identify itself as a separate and distinct entity under its own
name or under its registered trade name and not as a division or part of any
other person or entity;
(w) each such entity has not made and will not make loans to any person or
entity;
(x) each such entity has not identified and will not identify its
partners, members or shareholders, or any affiliates of any of the foregoing, as
a division or part of it;
(y) each such entity has not entered into and will not enter into or be a
party to, any transaction with its partners, members, shareholders, or any
affiliates of any of the foregoing, except in the ordinary course of its
business pursuant to written agreements and on terms which are intrinsically
fair and are no less favorable to it than would be obtained in a comparable
arm's-length transaction with an unrelated third party;
(z) if any such entity is a corporation, the directors of such entity
shall consider the interests of the creditors of such entity in connection with
all corporate action;
(aa) each such entity has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number of employees
in light of its contemplated business operations;
(bb) each such entity has maintained and will maintain adequate
capital in light of its contemplated business operations;
(cc) if any such entity is a limited partnership with more than one
general partner, its limited partnership agreement requires the remaining
partners to continue the partnership as long as one solvent general partner
exists;
(dd) if any such entity is a limited liability company, its operating
agreement, if any such entity is a limited partnership, its limited partnership
agreement, and if any such entity is a corporation, to the full extent permitted
by applicable law, its articles of incorporation, contain the provisions set
forth in this Section 5.2 and any such entity shall conduct its business and
operations in strict compliance with the terms contained therein;
(ee) each such entity will, as a condition to the closing of the Loan,
deliver to Mortgagee a nonconsolidation opinion in form and substance acceptable
to Mortgagee;
(ff) if any such entity is a corporation, it has maintained and will
continue to maintain at least one Independent Director (as hereinafter
defined); and
(gg) if any such entity is a corporation, it has not caused or allowed and
will not cause or allow the board of directors of such entity to take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
directors unless an Independent Director shall have participated in such vote.
An "Independent Director" shall be an individual who, except in his or her
capacity as an Independent Director of the corporation is not, and has not been
during the five (5) years
Page 15
immediately before such individual's appointment as an Independent Director: (i)
a stockholder, director, partner, officer or employee of the corporation or its
Affiliates; (ii) affiliated with a customer or supplier of the corporation or
its Affiliates; or (iii) a spouse, parent, sibling, child or other family
relative of any person described by (i) or (ii) above.
As used herein, the term "Affiliate" shall mean any person or entity other than
the corporation (i) which owns beneficially, directly or indirectly, any
outstanding shares of the corporation's stock, or (ii) which controls, is
controlled by or is under common control with the corporation. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person, whether
through ownership of voting securities, by contract or otherwise.
5.3 COMMERCIAL LOAN. Borrower warrants that the loan evidenced by
this Note is being made solely to acquire or carry on a business or commercial
enterprise, and/or Borrower is a business or commercial organization. Borrower
further warrants that all of the proceeds of the Note shall be used for
commercial purposes and stipulates that the loan evidenced by the Note shall be
construed for all purposes as a commercial loan, and is made for other than
personal, family or household purposes.
ARTICLE VI. RIGHTS AND DUTIES OF THE PARTIES
6.1 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Mortgagor shall,
or shall cause the property manager to: (a) keep the Property in good condition
and repair; (b) complete or restore promptly and in workmanlike manner the
Property or any part thereof which may be damaged or destroyed (unless, if and
to the extent permitted under Section 6.11, Mortgagee elects to require that
insurance proceeds be used to reduce the Secured Obligations and after such
repayment the ratio of Secured Obligations to the value of the Property, as
reasonably determined by Mortgagee is the same as or lower than it was
immediately before the loss or taking occurred); (c) comply and cause the
Property to comply with (i) all laws, ordinances, regulations and standards,
(ii) all covenants, conditions, restrictions and equitable servitudes, whether
public or private, of every kind and character and (iii) all requirements of
insurance companies and any bureau or agency which establishes standards of
insurability, which laws, covenants or requirements affect the Property and
pertain to acts committed or conditions existing thereon, including, without
limitation, any work of alteration, improvement or demolition as such laws,
covenants or requirements mandate; (d) operate and manage the Property at all
times in a professional manner and do all other acts which from the character or
use of the Property may be reasonably necessary to maintain and preserve its
value; (e) promptly after execution, deliver to Mortgagee a copy of any
management agreement concerning the Property and all amendments thereto and
waivers thereof; and (f) execute and acknowledge all further documents,
instruments and other papers as Mortgagee reasonably deems necessary or
appropriate to preserve, continue, perfect and enjoy the benefits of this
Mortgage and perform Mortgagor's obligations, including, without limitation,
statements of the amount secured hereby then owing and statements of no offset.
Mortgagor shall not, without Mortgagee's prior written consent: (g) remove or
demolish all or any material part of the Property; (h) alter either (i) the
exterior of the Property in a manner which materially and adversely affects the
value of the Property or (ii) the roof or other structural elements of the
Page 16
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any change
in any zoning or other land classification which affects the Property; (j)
materially alter the type of occupancy or use of all or any part of the
Property; or (k) commit or permit physical waste of the Property.
6.2 HAZARDOUS MATERIALS. Without limiting any other provision of
this Mortgage, Mortgagor agrees as follows:
(a) PROHIBITED ACTIVITIES. Mortgagor shall not cause or permit the
Property to be used as a site for the use, generation, manufacture, storage,
treatment, release, discharge, disposal, transportation or presence of any oil
or other petroleum products, flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, hazardous wastes, toxic or contaminated
substances or similar materials, including, without limitation, any substances
which are "hazardous substances," "hazardous wastes," "hazardous materials" or
"toxic substances" under the Hazardous Materials Laws (defined below) and/or
other applicable environmental laws, ordinances or regulations ("Hazardous
Materials").
The foregoing to the contrary notwithstanding, (i) Mortgagor may
store, maintain and use on the Property janitorial and maintenance supplies,
paint and other Hazardous Materials of a type and in a quantity readily
available for purchase by the general public and normally stored, maintained and
used by owners and managers of properties of a type similar to the Property; and
(ii) tenants of the Property may store, maintain and use on the Property (and,
if any tenant is a retail business, hold in inventory and sell in the ordinary
course of such tenant's business) household and consumer cleaning supplies and
other Hazardous Materials of a type and quantity readily available for purchase
by the general public and normally stored, maintained and used (and, if tenant
is a retail business, sold) by tenants of properties similar to the Property or
in similar lines of business on properties similar to the Property.
(b) HAZARDOUS MATERIALS LAWS. Mortgagor shall comply and cause the
Property to comply with all federal, state and local laws, ordinances and
regulations relating to Hazardous Materials ("Hazardous Materials Laws"),
including, without limitation: the Clean Air Act, as amended, 42 U.S.C. Section
7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (including the
Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 U.S.C.
Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29
U.S.C. Section 651; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977,
as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of
other jurisdictions or orders and regulations.
(c) NOTICES. Mortgagor shall immediately notify Mortgagee in writing
of: (i) the discovery of any Hazardous Materials on, under or about the Property
(other than Hazardous Materials permitted under Section 6.2(a)); (ii) any
knowledge by Mortgagor that the Property does not comply with any Hazardous
Materials Laws; (iii) any claims or actions ("Hazardous Materials
Page 17
Claims") pending or threatened in writing against Mortgagor or the Property by
any governmental entity or agency or any other person or entity relating to
Hazardous Materials or pursuant to the Hazardous Materials Laws; and (iv) the
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of the Property that could cause the Property or any part thereof
to become contaminated by or with Hazardous Materials.
(d) REMEDIAL ACTION. In response to knowledge of or notification to
Mortgagor of the presence of any Hazardous Materials on, under or about the
Property, Mortgagor shall immediately take, at Mortgagor's sole expense, all
remedial action required of Mortgagor by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any Hazardous
Materials Claims.
(e) INSPECTION BY MORTGAGEE. Upon reasonable prior notice to
Mortgagor (except in the event of an emergency) and during normal business
hours, Mortgagee, its employees and agents, may from time to time (whether
before or after the commencement of a nonjudicial or judicial foreclosure
proceeding), enter and inspect the Property for the purpose of determining the
existence, location, nature and magnitude of any past or present release or
threatened release of any Hazardous Materials into, onto, beneath or from the
Property.
(f) LEGAL EFFECT OF SECTION. Mortgagor and Mortgagee agree that: (i)
this Hazardous Materials Section is intended as Mortgagee's written request for
information (and Mortgagor's response) concerning the environmental condition of
the real property security as required by California Code of Civil Procedure
Section 726.5, or any other applicable law; and (ii) each representation and
warranty and covenant in this Section (together with any indemnity applicable to
a breach of any such representation and warranty) with respect to the
environmental condition of the Property is intended by Mortgagee and Mortgagor
to be an "environmental provision" for purposes of California Code of Civil
Procedure Section 736, or any other applicable law.
6.3 COMPLIANCE WITH LAWS. Mortgagor shall comply with all federal,
state and local laws, rules and regulations applicable to the Property,
including, without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990 (42 U.S.C. Section
12101 et seq.), as amended from time to time. Mortgagor shall possess and
maintain or cause Borrower to possess and maintain in full force and effect at
all times (a) all certificates of occupancy and other licenses, permits and
authorizations required by applicable law for the existing use of the Property
and (b) all permits, franchises and licenses and all rights to all trademarks,
trade names, patents and fictitious names, if any, required by applicable law
for Mortgagor and Borrower to conduct the business(es) in which Mortgagor and
Borrower are now engaged.
6.4 LITIGATION. Mortgagor shall promptly notify Mortgagee in writing
of any litigation pending or threatened in writing against Mortgagor or Borrower
claiming damages in excess of $100,000 and of all pending or threatened (in
writing) litigation against Mortgagor or Borrower if the aggregate damage claims
against Mortgagor or Borrower exceed $500,000.
6.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Mortgagor shall not:
(a) merge or consolidate with any other entity or permit Borrower to merge or
Page 18
consolidate with any other entity; (b) make any substantial change in the nature
of Mortgagor's business or structure or permit Borrower to make any substantial
change in the nature of Borrower's business or structure; (c) acquire all or
substantially all of the assets of any other entity or permit Borrower to
acquire all or substantially all of the assets of any other entity; or (d) sell,
lease, assign, transfer or otherwise dispose of a material part of Mortgagor's
assets except in the ordinary course of Mortgagor's business or permit Borrower
to sell, lease, assign, transfer or otherwise dispose of a material part of
Borrower's assets except in the ordinary course of Borrower's business.
6.6 ACCOUNTING RECORDS. Mortgagor shall maintain and cause Borrower
to maintain adequate books and records in accordance with the same accounting
standard used by Mortgagor or Borrower to prepare the financial statements
delivered to and approved by Mortgagee in connection with the making of the Loan
or other accounting standards approved by Mortgagee. Mortgagor shall permit and
shall cause Borrower to permit any representative of Mortgagee, at any
reasonable time and from time to time, upon reasonable prior notice to
Mortgagor, to inspect, audit and examine such books and records and make copies
of same.
6.7 COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor shall pay to
Mortgagee the full amount of all costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses of Mortgagee's in-house or
outside counsel, incurred by Mortgagee in connection with: (a) appraisals and
inspections of the Property or Collateral required by Mortgagee as a result of
(i) a Transfer or proposed Transfer (as defined below), or (ii) a Default; (b)
appraisals and inspections of the Property or Collateral required by applicable
law, including, without limitation, federal or state regulatory reporting
requirements; and (c) any acts performed by Mortgagee at Mortgagor's request or
wholly or partially for the benefit of Mortgagor (including, without limitation,
the preparation or review of amendments, assumptions, waivers, releases,
reconveyances, estoppel certificates or statements of amounts owing under any
Secured Obligation). In connection with appraisals and inspections, Mortgagor
specifically (but not by way of limitation) acknowledges that: (aa) a formal
written appraisal of the Property by a state certified or licensed appraiser may
be required by federal regulatory reporting requirements on an annual or more
frequent basis; and (bb) Mortgagee may require inspection of the Property by an
independent supervising architect, a cost engineering specialist, or both.
Mortgagor shall pay all indebtedness arising under this Section immediately upon
demand by Mortgagee together with interest thereon following notice of such
indebtedness at the rate of interest then applicable to the principal balance of
the Note as specified therein.
6.8 LIENS, ENCUMBRANCES AND CHARGES. Subject to the terms of Section
8.4, Mortgagor shall immediately discharge by bonding or otherwise any lien,
charge or other encumbrance which attaches to the Property in violation of
Section 6.15. Subject to Mortgagor's right to contest such matters under this
Mortgage or as expressly permitted in the Loan Documents, Mortgagor shall pay
when due all obligations secured by or reducible to liens and encumbrances which
shall now or hereafter encumber or appear to encumber all or any part of the
Property or any interest therein, whether senior or subordinate hereto,
including, without limitation, all claims for work or labor performed, or
materials or supplies furnished, in connection with any work of demolition,
alteration, repair, improvement or construction of or upon the Property, except
such as Mortgagor may in good faith contest or as to which a bona fide dispute
may arise (provided provision is made to the satisfaction of Mortgagee for
eventual payment thereof in the
Page 19
event that Mortgagor is obligated to make such payment and that any recorded
claim of lien, charge or other encumbrance against the Property is immediately
discharged by bonding or otherwise).
6.9 TAXES AND OTHER LIABILITIES. Mortgagor shall pay and discharge
when due any and all indebtedness, obligations, assessments and taxes, both real
and personal and including federal and state income taxes and state and local
property taxes and assessments. Mortgagor shall promptly provide to Mortgagee
copies of all tax and assessment notices pertaining to the Property. Mortgagor
hereby authorizes Mortgagee to obtain, at Mortgagor's expense, a tax service
contract which shall provide tax information on the Property to Mortgagee for
the term of the Loan and any extensions or renewals of the Loan.
6.10 INSURANCE COVERAGE. Mortgagor shall insure the Property against
loss or damage by fire and such other hazards as Mortgagee shall from time to
time require; provided, however, (a) Mortgagee, at Mortgagee's election, may
only require flood insurance if all or any portion of the improvements located
on the Property is or becomes located in a special flood hazard area, and (b)
Mortgagee, at Mortgagee's election, may only require earthquake insurance if all
or any portion of the Property is or becomes located in an earthquake fault
zone. Mortgagor shall also carry public liability insurance and such other
insurance as Mortgagee may reasonably require, including, without limitation,
business interruption insurance or loss of rents insurance. Such policies shall
contain a standard mortgage clause naming Mortgagee and its successors in
interest as a loss payee and requiring at least 30 days prior notice to the
holder at termination or cancellation. Mortgagor shall maintain all required
insurance throughout the term of the Loan and while any liabilities of Borrower
or Mortgagor to Mortgagee under any of the Loan Documents remain outstanding at
Mortgagor's expense, with companies, and in substance and form satisfactory to
Mortgagee. Mortgagee, by reason of accepting, rejecting, approving or obtaining
insurance shall not incur any liability for: (c) the existence, nonexistence,
form or legal sufficiency of any insurance; (d) the solvency of any insurer; or
(e) the payment of claims.
6.11 INSURANCE AND CONDEMNATION PROCEEDS.
(a) ASSIGNMENT OF CLAIMS. Mortgagor absolutely and irrevocably
assigns to Mortgagee all of the following rights, claims and amounts
(collectively, "Claims"), all of which shall be paid to Mortgagee: (i) all
awards of damages and all other compensation payable directly or indirectly by
reason of a condemnation or proposed condemnation for public or private use
affecting all or any part of, or any interest in, the Property; (ii) all other
claims and awards for damages to or decrease in value of all or any part of, or
any interest in, the Property; (iii) all proceeds of any insurance policies
payable by reason of loss sustained to all or any part of the Property; and (iv)
all interest which may accrue on any of the foregoing. Mortgagor shall give
Mortgagee prompt written notice of the occurrence of any casualty affecting, or
the institution of any proceedings for eminent domain or for the condemnation
of, the Property or any portion thereof. So long as no Default has occurred and
is continuing at the time, Mortgagor shall have the right to adjust, compromise
and settle any Claim of $100,000 or less without the consent of Mortgagee,
provided, however, all awards, proceeds and other sums described herein shall
continue to be payable to Mortgagee. Mortgagee may commence, appear in, defend
or prosecute any Claim exceeding $100,000, and may adjust, compromise and settle
all Claims (except for Claims which Mortgagor may settle as provided herein),
but shall not be responsible
Page 20
for any failure to commence, appear in, defend, prosecute or collect any such
Claim regardless of the cause of the failure. All awards, proceeds and other
sums described herein shall be payable to Mortgagee.
(b) APPLICATION OF PROCEEDS; NO DEFAULT. So long as no Default has
occurred and is continuing at the time of Mortgagee's receipt of the proceeds of
the Claims ("Proceeds") and no Default occurs thereafter, Mortgagee shall apply
the Proceeds in the following order of priority: First, to Mortgagee's expenses
in settling, prosecuting or defending the Claims; Second, to the repair or
restoration of the Property; and Third, to Mortgagor if the repair or
restoration of the Property has been completed, but to the Secured Obligations
in any order without suspending, extending or reducing any obligation of
Mortgagor to make installment payments if the repair or restoration of the
Property has not been completed. Notwithstanding the foregoing, Mortgagee shall
have no obligation to make any Proceeds available for the repair or restoration
of the Property unless and until all the following conditions have been
satisfied: (i) delivery to Mortgagee of the Proceeds plus any additional amount
which is needed to pay all costs of the repair or restoration (including,
without limitation, taxes, financing charges, insurance and rent during the
repair period); (ii) establishment of an arrangement for lien releases and
disbursement of funds acceptable to Mortgagee; (iii) delivery to Mortgagee in
form and content acceptable to Mortgagee of all of the following: (aa) plans and
specifications for the work; (bb) a contract for the work, signed by a
contractor acceptable to Mortgagee; (cc) a cost breakdown for the work; (dd) if
reasonably required by Mortgagee, a payment and performance bond for the work;
(ee) evidence of the continuation of substantially all Leases unless consented
to in writing by Mortgagee; (ff) evidence that, upon completion of the work, the
size, capacity, value, and income coverage ratios for the Property will be at
least as great as those which existed immediately before the damage or
condemnation occurred; and (gg) evidence of the satisfaction of any additional
conditions that Mortgagee may reasonably establish to protect Mortgagee's
security. Mortgagor acknowledges that the specific conditions described above
are reasonable.
(c) APPLICATION OF PROCEEDS; DEFAULT. If a Default has occurred and
is continuing at the time of Mortgagee's receipt of the Proceeds or if a Default
occurs at any time thereafter, Mortgagee may, at Mortgagee's absolute discretion
and regardless of any impairment of security or lack of impairment of security,
but subject to applicable law governing use of the Proceeds, if any, apply all
or any of the Proceeds to Mortgagee's expenses in settling, prosecuting or
defending the Claims and then apply the balance to the Secured Obligations in
any order without suspending, extending or reducing any obligation of Mortgagor
to make installment payments, and may release all or any part of the Proceeds to
Mortgagor upon any conditions Mortgagee chooses.
6.12 IMPOUNDS.
(a) POST-DEFAULT IMPOUNDS. If required by Mortgagee at any time
after a Default occurs (and regardless of whether such Default is thereafter
cured), Mortgagor shall deposit with Mortgagee such amounts ("Post-Default
Impounds") on such dates (determined by Mortgagee as provided below) as will be
sufficient to pay any or all "Costs" (as defined below) specified by Mortgagee.
Mortgagee in its reasonable discretion shall estimate the amount of such Costs
that will be payable or required during any period selected by Mortgagee not
exceeding 1 year and shall determine the fractional portion thereof that
Mortgagor shall deposit with Mortgagee
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on each date specified by Mortgagee during such period. If the Post-Default
Impounds paid by Mortgagor are not sufficient to pay the related Costs,
Mortgagor shall deposit with Mortgagee upon demand an amount equal to the
deficiency. All Post-Default Impounds shall be payable by Mortgagor in addition
to (but without duplication of) any other Impounds (as defined below).
(b) ALL IMPOUNDS. Post-Default Impounds and any other impounds that
may be payable by Borrower under the Note are collectively called "Impounds".
All Impounds shall be deposited into one or more segregated or commingled
accounts maintained by Mortgagee or its servicing agent. Except as otherwise
provided in the Note, such account(s) shall not bear interest. Mortgagee shall
not be a trustee, special depository or other fiduciary for Mortgagor with
respect to such account, and the existence of such account shall not limit
Mortgagee's rights under this Mortgage, any other agreement or any provision of
law. If no Default exists, Mortgagee shall apply all Impounds to the payment of
the related Costs, or in Mortgagee's sole discretion may release any or all
Impounds to Mortgagor for application to and payment of such Costs. If a Default
exists, Mortgagee may apply any or all Impounds to any Secured Obligation and/or
to cure such Default, whereupon Mortgagor shall restore all Impounds so applied
and cure all Defaults not cured by such application. The obligations of
Mortgagor hereunder shall not be diminished by deposits of Impounds made by
Mortgagor, except to the extent that such obligations have actually been met by
application of such Impounds. Upon any assignment of this Mortgage, Mortgagee
may assign all Impounds in its possession to Mortgagee's assignee, whereupon
Mortgagee shall be released from all liability with respect to such Impounds.
Within 60 days following full repayment of the Secured Obligations (other than
as a consequence of foreclosure or conveyance in lieu of foreclosure) or at such
earlier time as Mortgagee may elect, Mortgagee shall pay to Mortgagor all
Impounds in its possession, and no other party shall have any right or claim
thereto. "Costs" means (i) all taxes and other liabilities payable by Mortgagor
under Section 6.9, (ii) all insurance premiums payable by Mortgagor under
Section 6.10, (iii) all other costs and expenses for which Impounds are required
under the Note, and/or (iv) all other amounts that will be required to preserve
the value of the Property. Mortgagor shall deliver to Mortgagee, promptly upon
receipt, all bills for Costs for which Mortgagee has required Post-Default
Impounds.
6.13 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Mortgagor
shall protect, preserve and defend the Property and title to and right of
possession of the Property, the security of this Mortgage and the rights and
powers of Mortgagee hereunder at Mortgagor's sole expense against all adverse
claims, whether the claim: (a) is against a possessory or non-possessory
interest; (b) arose prior or subsequent to the Effective Date; or (c) is senior
or junior to Mortgagor's or Mortgagee's rights. Mortgagor shall give Mortgagee
prompt notice in writing of the assertion of any claim, of the filing of any
action or proceeding, of the occurrence of any damage to the Property and of any
condemnation offer or action.
6.14 RIGHT OF INSPECTION. Mortgagee and its independent contractors,
agents and employees may enter the Property from time to time at any reasonable
time upon reasonable prior notice to Mortgagor (except that such notice shall
not be required in the event of an emergency) for the purpose of inspecting the
Property and ascertaining Mortgagor's compliance with the terms of this
Mortgage. Mortgagee shall use reasonable efforts to assure that Mortgagee's
entry upon and inspection of the Property shall not materially and unreasonably
interfere with the business or operations of Mortgagor or Mortgagor's tenants on
the Property.
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6.15 PROHIBITION OF TRANSFER OF PROPERTY OR INTERESTS IN MORTGAGOR.
Mortgagor acknowledges that Mortgagee has relied upon the principals of
Mortgagor and Borrower and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan. Accordingly,
except with the prior written consent of Mortgagee or as otherwise expressly
permitted in the Note, Mortgagor shall not cause or permit any sale, exchange,
mortgage, pledge, hypothecation, assignment, encumbrance or other transfer,
conveyance or disposition, whether voluntarily, involuntarily or by operation of
law ("Transfer") of all or any part of, or all or any direct or indirect
interest in, the Property or the Collateral (except for equipment and inventory
in the ordinary course of its business), or cause or permit a Transfer of any
direct or indirect interest (whether general partnership interest, stock,
non-managing member limited liability company interest, trust, or otherwise) in
Mortgagor or Borrower. In the event of any Transfer that is not expressly
permitted in the Note and is without the prior written consent of Mortgagee,
Mortgagee shall have the absolute right at its option, without prior demand or
notice, to declare all of the Secured Obligations immediately due and payable,
except to the extent prohibited by law, and pursue its rights and remedies under
Section 7.3 herein. Mortgagor agrees to pay any prepayment fee as set forth in
the Note in the event the Secured Obligations are accelerated pursuant to the
terms of this Section. Consent to one such Transfer shall not be deemed to be a
waiver of the right to require the consent to future or successive Transfers.
Except for Transfers expressly permitted under the Note, Mortgagee's consent to
any Transfer may be withheld, conditioned or delayed in Mortgagee's sole and
absolute discretion.
6.16 INTENTIONALLY OMITTED.
6.17 INTENTIONALLY OMITTED.
6.18 EXCULPATION. Mortgagee shall not directly or indirectly be
liable to Mortgagor or any other person as a consequence of: (a) the exercise of
the rights, remedies or powers granted to Mortgagee in this Mortgage; (b) the
failure or refusal of Mortgagee to perform or discharge any obligation or
liability of Mortgagor under any agreement related to the Property or under this
Mortgage; or (c) any loss sustained by Mortgagor or any third party resulting
from Mortgagee's failure to lease the Property after a Default or from any other
act or omission of Mortgagee in managing the Property after a Default unless the
loss is caused by the willful misconduct and bad faith of Mortgagee and no such
liability shall be asserted or enforced against Mortgagee, all such liability
being expressly waived and released by Mortgagor.
6.19 INDEMNITY. Without in any way limiting any other indemnity
contained in this Mortgage, Mortgagor agrees to defend, indemnify and hold
harmless the Mortgagee Group (as hereinafter defined) from and against any
claim, loss, damage, cost, expense or liability directly or indirectly arising
out of: (a) the making of the Loan, except for violations of banking laws or
regulations by the Mortgagee Group; (b) this Mortgage; (c) the execution of this
Mortgage or the performance of any act required or permitted hereunder or by
law; (d) any failure of Mortgagor to perform Mortgagor's obligations under this
Mortgage or the other Loan Documents; (e) any alleged obligation or undertaking
on the Mortgagee Group's part to perform or discharge any of the
representations, warranties, conditions, covenants or other obligations
contained in any other document related to the Property; (f) any act or omission
by Mortgagor or any contractor, agent, employee or representative of Mortgagor
with respect to the Property; or (g) any claim, loss,
Page 23
damage, cost, expense or liability directly or indirectly arising out of: (i)
the use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous
Materials which are found in, on, under or about the Property (including,
without limitation, underground contamination); or (ii) the breach of any
covenant, representation or warranty of Mortgagor under Section 6.2 above. The
foregoing to the contrary notwithstanding, this indemnity shall not include any
claim, loss, damage, cost, expense or liability directly or indirectly arising
out of the gross negligence or willful misconduct of any member of the Mortgagee
Group, or any claim, loss, damage, cost, expense or liability incurred by the
Mortgagee Group arising from any act or incident on the Property occurring after
the full reconveyance and release of the lien of this Mortgage on the Property,
or with respect to the matters set forth in clause (g) above, any claim, loss,
damage, cost, expense or liability incurred by the Mortgagee Group resulting
from the introduction and initial release of Hazardous Materials on the Property
occurring after the transfer of title to the Property at a foreclosure sale
under this Mortgage, either pursuant to judicial decree or the power of sale, or
by deed in lieu of such foreclosure. This indemnity shall include, without
limitation: (aa) all consequential damages (including, without limitation, any
third party tort claims or governmental claims, fines or penalties against the
Mortgagee Group); (bb) all court costs and reasonable attorneys' fees
(including, without limitation, expert witness fees) paid or incurred by the
Mortgagee Group; and (cc) the costs, whether foreseeable or unforeseeable, of
any investigation, repair, cleanup or detoxification of the Property which is
required by any governmental entity or is otherwise necessary to render the
Property in compliance with all laws and regulations pertaining to Hazardous
Materials. "Mortgagee Group", as used herein, shall mean (1) Mortgagee
(including, without limitation, any participant in the Loan), (2) any entity
controlling, controlled by or under common control with Mortgagee, (3) the
directors, officers, employees and agents of Mortgagee and such other entities,
and (4) the successors, heirs and assigns of the entities and persons described
in foregoing clauses (1) through (3). Mortgagor shall pay immediately upon
Mortgagee's demand any amounts owing under this indemnity together with interest
from the date the indebtedness arises until paid at the rate of interest
applicable to the principal balance of the Note as specified therein. Mortgagor
agrees to use legal counsel reasonably acceptable to the Mortgagee Group in any
action or proceeding arising under this indemnity. THE PROVISIONS OF THIS
SECTION SHALL SURVIVE THE SATISFACTION AND RELEASE OF THIS MORTGAGE, BUT
MORTGAGOR'S LIABILITY UNDER THIS INDEMNITY SHALL BE SUBJECT TO THE PROVISIONS OF
THE SECTION IN THE NOTE ENTITLED "BORROWER'S LIABILITY."
6.20 INTENTIONALLY OMITTED.
6.21 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.
Without notice to or the consent, approval or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Secured Obligations ("Interested Parties"), Mortgagee may,
from time to time: (a) fully or partially release any person or entity from
liability for the payment or performance of any Secured Obligation; (b) extend
the maturity of any Secured Obligation; (c) make any agreement with Borrower
increasing the amount or otherwise altering the terms of any Secured Obligation;
(d) accept additional security for any Secured Obligation; or (e) release all or
any portion of the Property, Collateral and other security for any Secured
Obligation. None of the foregoing actions shall release or reduce the personal
liability of any of said Interested Parties, or release or impair the priority
of the lien of this Mortgage upon the Property.
Page 24
6.22 SALE OR PARTICIPATION OF LOAN. Mortgagor agrees that Mortgagee
may at any time sell, assign, participate or securitize all or any portion of
Mortgagee's rights and obligations under the Loan Documents, and that any such
sale, assignment, participation or securitization may be to one or more
financial institutions or other entities, to private investors, and/or into the
public securities market, in Mortgagee's sole discretion. Mortgagor further
agrees that Mortgagee may disseminate to any such actual or potential
purchaser(s), assignee(s) or participant(s) all documents and financial and
other information heretofore or hereafter provided to or known to Mortgagee with
respect to: (a) the Property and its operation; and/or (b) any party connected
with the Loan (including, without limitation, Mortgagor, any partner or member
of Mortgagor, any constituent partner or member of Mortgagor, any guarantor and
any nonborrower mortgagor). In the event of any such sale, assignment,
participation or securitization, Mortgagee and the other parties to the same
shall share in the rights and obligations of Mortgagee set forth in the Loan
Documents as and to the extent they shall agree among themselves. In connection
with any such sale, assignment, participation or securitization, Mortgagor
further agrees that the Loan Documents shall be sufficient evidence of the
obligations of Mortgagor to each purchaser, assignee or participant, and
Mortgagor shall, within 15 days after request by Mortgagee, (x) deliver an
estoppel certificate verifying for the benefit of Mortgagee and any other party
designated by Mortgagee the status and the terms and provisions of the Loan in
form and substance acceptable to Mortgagee, (y) provide any information, legal
opinions or documents regarding Mortgagor, Guarantor (as defined in the Loan
Documents), the Property and any tenants of the Property as Mortgagee or
Mortgagee's rating agencies may reasonably request, and (z) enter into such
amendments or modifications to the Loan Documents or the organizational
documents of Mortgagor as may be reasonably required in order to facilitate any
such sale, assignment, participation or securitization without impairing
Mortgagor's rights or increasing Mortgagor's obligations. The indemnity
obligations of Mortgagor under the Loan Documents shall also apply with respect
to any purchaser, assignee or participant.
6.23 RELEASE. Upon payment in full of the Secured Obligations, and
satisfaction of all of the covenants, warranties, undertakings and agreements
made in this Mortgage and in the other Loan Documents (including, without
limitation, repayment in full of all principal, interest and other amounts owing
under the Note) are kept and performed, and all obligations, if any, of
Mortgagee for further advances have been terminated, then, and in that event
only, Mortgagee shall release, without warranty, the Property or that portion
thereof then held hereunder. The recitals of any matters or facts in any release
executed hereunder shall be conclusive proof of the truthfulness thereof. To the
extent permitted by law, the release may describe the grantee as "the person or
persons legally entitled thereto". Mortgagee shall have no duty to determine the
rights of persons claiming to be rightful grantees of any release. When the
Property has been fully released, the last such release shall operate as a
reassignment of all future rents, issues and profits of the Property to the
person or persons legally entitled thereto.
6.24 SUBROGATION. Mortgagee shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part by
Mortgagee pursuant to this Mortgage or by the proceeds of any loan secured by
this Mortgage.
6.25 MANAGEMENT AGREEMENTS. Without the prior written consent of
Mortgagee, Mortgagor shall not terminate, modify, amend or enter into any
agreement providing for the management, leasing or operation of the Property.
Mortgagor represents,
Page 25
warrants and covenants that any existing management agreement includes, and any
future management agreement entered into by Mortgagor shall include, a provision
which provides that the management agreement is automatically terminated upon
the transfer of the Property by Mortgagor, either by sale, foreclosure, deed in
lieu of foreclosure, or otherwise, to Mortgagee or any other purchaser of the
Property. Upon a Default under the Loan Documents or a default under any
management agreement then in effect, which default is not cured within any
applicable grace or cure period, Mortgagee shall have the right to terminate, or
to direct Mortgagor to terminate, such management agreement upon thirty (30)
days' written notice and to retain, or to direct Mortgagor to retain, a new
management agent approved by Mortgagee.
ARTICLE VII. DEFAULT
7.1 DEFAULT. For all purposes hereof, "Default" shall mean either an
"Optional Default" (as defined below) or an "Automatic Default" (as defined
below).
(a) OPTIONAL DEFAULT. An "Optional Default" shall occur, at
Mortgagee's option, upon the occurrence of any of the following events:
(i) MONETARY. Borrower or Mortgagor shall fail to (aa) pay when due any
sums payable under the Loan Documents which by their express terms require
immediate payment without any grace period or sums which are payable on the
Maturity Date, or (bb) pay within 5 days when due any other sums payable under
the Note, this Mortgage or any of the other Loan Documents, including, without
limitation, any monthly payment due under the Note.
(ii) FAILURE TO PERFORM. Borrower or Mortgagor shall fail to observe,
perform or discharge any of Borrower's or Mortgagor's obligations, covenants,
conditions or agreements, other than Borrower's or Mortgagor's payment
obligations, under the Note, this Mortgage or any of the other Loan Documents,
and (aa) such failure shall remain uncured for 30 days after written notice
thereof shall have been given to Borrower or Mortgagor, as the case may be, by
Mortgagee or (bb) if such failure is of such a nature that it cannot be cured
within such 30 day period, Borrower or Mortgagor shall fail to commence to cure
such failure within such 30 day period or shall fail to diligently prosecute
such curative action thereafter.
(iii) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate or other statement (financial or otherwise) made or furnished by or
on behalf of Borrower, Mortgagor, or a guarantor, if any, to Mortgagee or in
connection with any of the Loan Documents, or as an inducement to Mortgagee to
make the Loan, shall be false, incorrect, incomplete or misleading in any
material respect when made or furnished.
(iv) CONDEMNATION; ATTACHMENT. The condemnation, seizure or appropriation
of any material portion (as reasonably determined by Mortgagee) of the Property;
or the sequestration or attachment of, or levy or execution upon any of the
Property, the Collateral or any other collateral provided by Borrower or
Mortgagor under any of the Loan Documents, or any material portion of the other
assets of Borrower or Mortgagor, which sequestration, attachment, levy or
execution is not released or dismissed within 45 days after its occurrence; or
the sale of any assets affected by any of the foregoing.
Page 26
(v) UNINSURED CASUALTY. The occurrence of an uninsured casualty with
respect to any material portion (as reasonably determined by Mortgagee) of the
Property unless: (aa) no other Default has occurred and is continuing at the
time of such casualty or occurs thereafter; (bb) Mortgagor promptly notifies
Mortgagee of the occurrence of such casualty; and (cc) not more than 45 days
after the occurrence of such casualty, Mortgagor delivers to Mortgagee
immediately available funds in an amount sufficient, in Mortgagee's reasonable
opinion, to pay all costs of the repair or restoration (including, without
limitation, taxes, financing charges, insurance and rent during the repair
period). So long as no Default has occurred and is continuing at the time of
Mortgagee's receipt of such funds and no Default occurs thereafter, Mortgagee
shall make such funds available for the repair or restoration of the Property.
Notwithstanding the foregoing, Mortgagee shall have no obligation to make any
funds available for repair or restoration of the Property unless and until all
the conditions set forth in clauses (ii) and (iii) of the second sentence of
Section 6.11(b) of this Mortgage have been satisfied. Mortgagor acknowledges
that the specific conditions described above are reasonable.
(vi) ADVERSE FINANCIAL CHANGE. Any material adverse change in the
financial condition of Borrower or any general partner or managing member of
Borrower, any guarantor, or any other person or entity from the condition shown
on the financial statement(s) submitted to Mortgagee and relied upon by
Mortgagee in making the Loan, and which change Mortgagee reasonably determines
will have a material adverse effect on (aa) the business, operations or
condition of the Property; or (bb) the ability of Borrower or Mortgagor to pay
or perform Borrower's or Mortgagor's obligations in accordance with the terms of
the Note, this Mortgage, and the other Loan Documents.
(b) AUTOMATIC DEFAULT. An "Automatic Default" shall occur
automatically upon the occurrence of any of the following events:
(i) VOLUNTARY BANKRUPTCY, INSOLVENCY, DISSOLUTION. (aa) Borrower's filing
a petition for relief under the Bankruptcy Reform Act of 1978, as amended or
recodified ("Bankruptcy Code"), or under any other present or future state or
federal law regarding bankruptcy, reorganization or other relief to debtors
(collectively, "Debtor Relief Law"); or (bb) Borrower's filing any pleading in
any involuntary proceeding under the Bankruptcy Code or other Debtor Relief Law
which admits the jurisdiction of a court to regulate Borrower or the Property or
the petition's material allegations regarding Borrower's insolvency; or (cc)
Borrower's making a general assignment for the benefit of creditors; or (dd)
Borrower's applying for, or the appointment of, a receiver, trustee, custodian
or liquidator of Borrower or any of its property; or (ee) the filing by Borrower
of a petition seeking the liquidation or dissolution of Borrower or the
commencement of any other procedure to liquidate or dissolve Borrower.
(ii) INVOLUNTARY BANKRUPTCY. Borrower's failure to effect a full dismissal
of any involuntary petition under the Bankruptcy Code or other Debtor Relief Law
that is filed against Borrower or in any way restrains or limits Borrower or
Mortgagee regarding the Loan or the Property, prior to the earlier of the entry
of any order granting relief sought in the involuntary petition or 45 days after
the date of filing of the petition.
(iii) PARTNERS, GUARANTORS. The occurrence of an event specified in
clauses (i) or (ii) as to Mortgagor, any general partner or managing member of
Borrower or Mortgagor,
Page 27
or any guarantor or other person or entity in any manner obligated to Mortgagee
under the Loan Documents.
7.2 ACCELERATION. Upon the occurrence of an Optional Default,
Mortgagee may, at its option, declare all sums owing to Mortgagee under the Note
and the other Loan Documents immediately due and payable. Upon the occurrence of
an Automatic Default, all sums owing to Mortgagee under the Note and the other
Loan Documents shall automatically become immediately due and payable.
7.3 RIGHTS AND REMEDIES. In addition to the rights and remedies in
Section 7.2 above, at any time after a Default, Mortgagee shall have all of the
following rights and remedies:
(a) ENTRY ON PROPERTY. With or without notice, and without releasing
Mortgagor from any Secured Obligation, and without becoming a mortgagee in
possession, to enter upon the Property from time to time and to do such acts and
things as Mortgagee deems necessary or desirable in order to inspect,
investigate, assess and protect the security hereof or to cure any Default,
including, without limitation: (i) to take and possess all documents, books,
records, papers and accounts of Mortgagor, Borrower or the then owner of the
Property which relate to the Property; (ii) to make, terminate, enforce or
modify leases of the Property upon such terms and conditions as Mortgagee deems
proper; (iii) to make repairs, alterations and improvements to the Property
necessary, in Mortgagee's reasonable judgment, to protect or enhance the
security hereof; (iv) to appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Mortgagee
hereunder; (v) to pay, purchase, contest or compromise any encumbrance, charge,
lien or claim of lien which, in the sole judgment of Mortgagee, is or may be
senior in priority hereto, the judgment of Mortgagee being conclusive as between
the parties hereto; (vi) to obtain insurance; (vii) to pay any premiums or
charges with respect to insurance required to be carried hereunder; (viii) to
obtain a court order to enforce Mortgagee's right to enter and inspect the
Property for Hazardous Materials, in which regard the decision of Mortgagee as
to whether there exists a release or threatened release of Hazardous Materials
onto the Property shall be deemed reasonable and conclusive as between the
parties hereto; (ix) to have a receiver appointed pursuant to applicable law to
enforce Mortgagee's rights to enter and inspect the Property for Hazardous
Materials; and/or (x) to employ legal counsel, accountants, engineers,
consultants, contractors and other appropriate persons to assist them;
(b) APPOINTMENT OF RECEIVER. With or without notice or hearing, to
apply to a court of competent jurisdiction for and obtain appointment of a
receiver, trustee, liquidator or conservator of the Property, for any purpose,
including, without limitation, to enforce Mortgagee's rights to collect Payments
and to enter on and inspect the Property for Hazardous Materials, as a matter of
strict right and without regard to: (i) the adequacy of the security for the
repayment of the Secured Obligations; (ii) the existence of a declaration that
the Secured Obligations are immediately due and payable; (iii) the filing of a
notice of default; or (iv) the solvency of Mortgagor, Borrower or any guarantor
or other person or entity in any manner obligated to Mortgagee under the Loan
Documents;
Page 28
(c) INJUNCTION. To commence and maintain an action or actions in any
court of competent jurisdiction to obtain specific enforcement of the covenants
of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be
specifically enforceable by injunction or any other appropriate equitable remedy
and that for the purposes of any suit brought under this subparagraph, Mortgagor
waives the defense of laches and any applicable statute of limitations;
(d) FORECLOSURE. Immediately commence an action to foreclose this
Mortgage or to specifically enforce its provisions or any of the indebtedness
secured hereby pursuant to the statutes in such case made and provided and sell
the Property or cause the Property to be sold in accordance with the
requirements and procedures provided by said statutes in a single parcel or in
several parcels at the option of Mortgagee.
(i) In the event foreclosure proceedings are filed by Mortgagee, all
expenses incident to such proceeding, including, but not limited to, reasonable
attorneys' fees and costs, shall be paid by Mortgagor and secured by this
Mortgage and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. The secured indebtedness and all other
obligations secured by this Mortgage, including, without limitation, interest at
the Default Rate (as defined in the Note), any prepayment charge, fee or premium
required to be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), reasonable attorneys' fees and any other amounts
due and unpaid to Mortgagee under the Loan Documents, may be bid by Mortgagee in
the event of a foreclosure sale hereunder. In the event of a judicial sale
pursuant to a foreclosure decree, it is understood and agreed that Mortgagee or
its assigns may become the purchaser of the Property or any part thereof.
(ii) Mortgagee may, by following the procedures and satisfying the
requirements prescribed by applicable law, foreclose on only a portion of the
Property and, in such event, said foreclosure shall not affect the lien of this
Mortgage on the remaining portion of the Property foreclosed.
Upon sale of the Property at any foreclosure, Mortgagee may credit
bid (as determined by Mortgagee in its sole and absolute discretion) all or any
portion of the Secured Obligations. In determining such credit bid, Mortgagee
may, but is not obligated to, take into account all or any of the following: (i)
appraisals of the Property as such appraisals may be discounted or adjusted by
Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and
costs incurred by Mortgagee with respect to the Property prior to foreclosure;
(iii) expenses and costs which Mortgagee anticipates will be incurred with
respect to the Property after foreclosure, but prior to resale, including,
without limitation, costs of structural reports and other due diligence, costs
to carry the Property prior to resale, costs of resale (e.g. commissions,
attorneys' fees, and taxes), costs of any Hazardous Materials clean-up and
monitoring, costs of deferred maintenance, repair, refurbishment and retrofit,
costs of defending or settling litigation affecting the Property, and lost
opportunity costs (if any), including the time value of money during any
anticipated holding period by Mortgagee; (iv) declining trends in real property
values generally and with respect to properties similar to the Property; (v)
anticipated discounts upon resale of the Property as a distressed or foreclosed
property; (vi) the fact of additional collateral (if any), for the Secured
Obligations; and (vii) such other factors or matters that Mortgagee (in its sole
and absolute discretion) deems appropriate. In regard to the above, Mortgagor
acknowledges and
Page 29
agrees that: (viii) Mortgagee is not required to use any or all of the foregoing
factors to determine the amount of its credit bid; (ix) this paragraph does not
impose upon Mortgagee any additional obligations that are not imposed by law at
the time the credit bid is made; (x) the amount of Mortgagee's credit bid need
not have any relation to any loan-to-value ratios specified in the Loan
Documents or previously discussed between Mortgagor and Mortgagee; and (xi)
Mortgagee's credit bid may be (at Mortgagee's sole and absolute discretion)
higher or lower than any appraised value of the Property;
(e) MULTIPLE FORECLOSURES. To resort to and realize upon the
security hereunder and any other security now or later held by Mortgagee
concurrently or successively and in one or several consolidated or independent
judicial actions and to apply the proceeds received upon the Secured Obligations
all in such order and manner as Mortgagee determines in its sole discretion;
(f) RIGHTS TO COLLATERAL. To exercise all rights Mortgagee may have
with respect to the Collateral under this Mortgage, the UCC or otherwise at law;
and
(g) OTHER RIGHTS. To exercise such other rights as Mortgagee may
have at law or in equity or pursuant to the terms and conditions of this
Mortgage or any of the other Loan Documents.
In connection with any sale or sales hereunder, Mortgagee may elect
to treat any of the Property which consists of a right in action or which is
property that can be severed from the Property (including, without limitation,
any improvements forming a part thereof) without causing structural damage
thereto as if the same were personal property or a fixture, as the case may be,
and dispose of the same in accordance with applicable law, separate and apart
from the sale of the Property. Any sale of Collateral hereunder shall be
conducted in any manner permitted by the UCC.
7.4 APPLICATION OF FORECLOSURE SALE PROCEEDS. To the fullest extent
permitted by law, proceeds of any sale under this Mortgage shall be applied to
the extent funds are so available to the following items in such order as
Mortgagee in its discretion may determine:
(a) To payment of the costs, expenses and fees of taking possession
of the Property, and of holding, operating, maintaining, using, leasing,
repairing, improving, marketing and selling the same and of otherwise enforcing
Mortgagee's right and remedies hereunder and under the other Loan Documents,
including, but not limited to, receivers' fees, court costs, reasonable
attorneys', accountants', appraisers', managers', and other professional fees,
title charges and transfer taxes.
(b) To payment of all sums expended by Mortgagee under the terms of
any of the Loan Documents and not yet repaid, together with interest on such
sums at the Default Rate.
(c) To payment of the secured indebtedness and all other obligations
secured by this Mortgage, including, without limitation, interest at the Default
Rate and, to the extent permitted by applicable law, any prepayment fee, charge
or premium required to be paid under the Note in order to prepay principal, in
any order that Mortgagee chooses in its sole discretion.
Page 30
7.5 WAIVER OF MARSHALING RIGHTS. Mortgagor, for itself and for all
parties claiming through or under Mortgagor, and for all parties who may acquire
a lien on or interest in the Property, hereby waives all rights to have the
Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured Obligation,
marshaled upon any foreclosure of this Mortgage or on a foreclosure of any other
security for any of the Secured Obligations.
7.6 NO CURE OR WAIVER. Neither Mortgagee's nor any receiver's entry
upon and taking possession of all or any part of the Property, nor any
collection of rents, issues, profits, insurance proceeds, condemnation proceeds
or damages, other security or proceeds of other security, or other sums, nor the
application of any collected sum to any Secured Obligation, nor the exercise of
any other right or remedy by Mortgagee or any receiver shall cure or waive any
Default or notice of default under this Mortgage, or nullify the effect of any
notice of default or sale (unless all Secured Obligations then due have been
paid or performed and Mortgagor has cured all other Defaults hereunder), or
impair the status of the security, or prejudice Mortgagee in the exercise of any
right or remedy, or be construed as an affirmation by Mortgagee of any tenancy,
lease or option or a subordination of the lien of this Mortgage.
7.7 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor agrees
to pay to Mortgagee immediately and upon demand all costs and expenses incurred
by Mortgagee in the enforcement of the terms and conditions of this Mortgage
(including, without limitation, court costs and attorneys' fees, whether
incurred in litigation or not) with interest from the date of expenditure until
said sums have been paid at the rate of interest applicable to the principal
balance of the Note as specified therein.
7.8 POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby
irrevocably appoints Mortgagee and its successors and assigns, as its
attorney-in-fact, which agency is coupled with an interest, to perform any
obligation of Mortgagor hereunder upon the occurrence of an event, act or
omission which, with notice or passage of time or both, would constitute a
Default, provided, however, that: (a) Mortgagee as such attorney-in-fact shall
only be accountable for such funds as are actually received by Mortgagee; and
(b) Mortgagee shall not be liable to Mortgagor or any other person or entity for
any failure to act under this Section.
7.9 REMEDIES CUMULATIVE. All rights and remedies of Mortgagee
provided hereunder are cumulative and are in addition to all rights and remedies
provided by applicable law (including specifically that of foreclosure of this
instrument as though it were a mortgage) or in any other agreements between
Mortgagor and Mortgagee. Mortgagee may enforce any one or more remedies or
rights hereunder successively or concurrently.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate
by reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan Documents
grant further rights to Mortgagee and contain further agreements and affirmative
and negative covenants by Mortgagor which apply to this Mortgage and to the
Property and such further rights and agreements are incorporated herein by this
reference. THE OBLIGATIONS AND LIABILITIES OF MORTGAGOR UNDER THIS
Page 31
MORTGAGE AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE
SECTION IN THE NOTE ENTITLED "BORROWER'S LIABILITY."
8.2 NON-WAIVER. By accepting payment of any amount secured hereby
after its due date or late performance of any other Secured Obligation,
Mortgagee shall not waive its right against any person obligated directly or
indirectly hereunder or on any Secured Obligation, either to require prompt
payment or performance when due of all other sums and obligations so secured or
to declare default for failure to make such prompt payment or performance. No
exercise of any right or remedy by Mortgagee hereunder shall constitute a waiver
of any other right or remedy herein contained or provided by law. No failure by
Mortgagee to exercise any right or remedy hereunder arising upon any Default
shall be construed to prejudice Mortgagee's rights or remedies upon the
occurrence of any other or subsequent Default. No delay by Mortgagee in
exercising any such right or remedy shall be construed to preclude Mortgagee
from the exercise thereof at any time while that Default is continuing. No
notice to nor demand on Mortgagor shall of itself entitle Mortgagor to any other
or further notice or demand in similar or other circumstances.
8.3 CONSENTS, APPROVALS AND EXPENSES. Wherever Mortgagee's consent,
approval, acceptance or satisfaction is required under any provision of this
Mortgage or any of the other Loan Documents, such consent, approval, acceptance
or satisfaction shall not be unreasonably withheld, conditioned or delayed by
Mortgagee unless such provision expressly so provides. Wherever costs or
expenses are required to be paid under any provision of this Mortgage or any of
the other Loan Documents, such costs or expenses shall be reasonable.
8.4 PERMITTED CONTESTS. After prior written notice to Mortgagee,
Mortgagor may contest, by appropriate legal or other proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any lien, levy, tax or assessment, or any lien of any laborer,
mechanic, materialman, supplier or vendor, or the application to Mortgagor or
the Property of any law or the validity thereof, the assertion or imposition of
which, or the failure to pay when due, would constitute a Default; provided that
(a) Mortgagor pursues the contest diligently, in a manner which Mortgagee
determines is not prejudicial to Mortgagee, and does not impair the lien of this
Mortgage; (b) the Property, or any part hereof or estate or interest therein,
shall not be in any danger of being sold, forfeited or lost by reason of such
proceedings; (c) in the case of the contest of any law or other legal
requirement, Mortgagee shall not be in any danger of any civil or criminal
liability; and (d) if required by Mortgagee, Mortgagor deposits with Mortgagee
any funds or other forms of assurance (including a bond or letter of credit)
satisfactory to Mortgagee to protect Mortgagee from the consequences of the
contest being unsuccessful. Mortgagor's right to contest pursuant to the terms
of this provision shall in no way relieve Mortgagor or Borrower of its
obligations under the Loan or to make payments to Mortgagee as and when due.
8.5 FURTHER ASSURANCES. Mortgagor shall, upon demand by Mortgagee,
execute, acknowledge (if appropriate) and deliver any and all documents and
instruments and do or cause to be done all further acts reasonably necessary or
appropriate to effectuate the provisions hereof.
Page 32
8.6 ATTORNEYS' FEES. If any legal action, suit or proceeding is
commenced between Mortgagor and Mortgagee regarding their respective rights and
obligations under this Mortgage or any of the other Loan Documents, the
prevailing party shall be entitled to recover, in addition to damages or other
relief, costs and expenses, reasonable attorneys' fees and court costs
(including, without limitation, expert witness fees). As used herein the term
"prevailing party" shall mean the party which obtains the principal relief it
has sought, whether by compromise settlement or judgment. If the party which
commenced or instituted the action, suit or proceeding shall dismiss or
discontinue it without the concurrence of the other party, such other party
shall be deemed the prevailing party.
8.7 MORTGAGOR AND MORTGAGEE DEFINED. The term "Mortgagor" includes
both the original Mortgagor and any subsequent owner or owners of any of the
Property, and the term "Mortgagee" includes the original Mortgagee and any
future owner or holder, including assignees, pledgees and participants, of the
Note or any interest therein.
8.8 DISCLAIMERS.
(a) RELATIONSHIP. The relationship of Mortgagor and Mortgagee under
this Mortgage and the other Loan Documents is, and shall at all times remain,
solely that of borrower and lender; and Mortgagee neither undertakes nor assumes
any responsibility or duty to Mortgagor or to any third party with respect to
the Property. Notwithstanding any other provisions of this Mortgage and the
other Loan Documents: (i) Mortgagee is not, and shall not be construed to be, a
partner, joint venturer, member, alter ego, manager, controlling person or other
business associate or participant of any kind of Mortgagor, and Mortgagee does
not intend to ever assume such status; (ii) Mortgagee's activities in connection
with this Mortgage and the other Loan Documents shall not be "outside the scope
of activities of a lender of money" within the meaning of California Civil Code
Section 3434, as amended or recodified from time to time, and Mortgagee does not
intend to ever assume any responsibility to any person for the quality,
suitability, safety or condition of the Property; and (iii) Mortgagee shall not
be deemed responsible for or a participant in any acts, omissions or decisions
of Mortgagor.
(b) NO LIABILITY. Mortgagee shall not be directly or indirectly
liable or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any person or
property arising from any construction on, or occupancy or use of, the Property,
whether caused by or arising from: (i) any defect in any building, structure,
grading, fill, landscaping or other improvements thereon or in any on-site or
off-site improvement or other facility therein or thereon; (ii) any act or
omission of Mortgagor or any of Mortgagor's agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on the Property or
any fire, flood or other casualty or hazard thereon; (iv) the failure of
Mortgagor or any of Mortgagor's licensees, employees, invitees, agents,
independent contractors or other representatives to maintain the Property in a
safe condition; or (v) any nuisance made or suffered on any part of the
Property.
8.9 SEVERABILITY. If any term of this Mortgage, or the application
thereof to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Mortgage, or the application of such term
to persons or circumstances other than those as to
Page 33
which it is invalid or unenforceable, shall not be affected thereby, and each
term of this Mortgage shall be valid and enforceable to the fullest extent
permitted by law.
8.10 RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Mortgagee under the Mortgage established by Article 1 and the security agreement
established by Article 4 are independent and cumulative, and there shall be no
merger of any lien created by the Mortgage with any security interest created by
the security agreement. Mortgagee may elect to exercise or enforce any of its
rights, remedies or interests under either or both the Mortgage or the security
agreement as Mortgagee may from time to time deem appropriate. The absolute
assignment of rents and leases established by Article 3 is similarly independent
of and separate from the Mortgage and the security agreement.
8.11 MERGER. No merger shall occur as a result of Mortgagee's
acquiring any other estate in, or any other lien on, the Property unless
Mortgagee consents to a merger in writing.
8.12 OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one
person has executed this Mortgage as "Mortgagor", the obligations of all such
persons hereunder shall be joint and several.
8.13 SEPARATE AND COMMUNITY PROPERTY. Any married person who
executes this Mortgage as a Mortgagor agrees that any money judgment which
Mortgagee obtains pursuant to the terms of this Mortgage or any other obligation
of that married person secured by this Mortgage may be collected by execution
upon any separate property or community property of that person.
8.14 INTEGRATION; INTERPRETATION. The Loan Documents contain or
expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified except
by written instrument executed by all parties. Any reference in any of the Loan
Documents to the Property or Collateral shall include all or any part of the
Property or Collateral. Any reference to the Loan Documents includes any
amendments, renewals or extensions now or hereafter approved by Mortgagee in
writing. When the identity of the parties or other circumstances make it
appropriate, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural.
8.15 CAPITALIZED TERMS. Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Note.
8.16 SUCCESSORS IN INTEREST. The terms, covenants, and conditions
herein contained shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto. The foregoing sentence shall not
be construed to permit Mortgagor to assign the Loan except as otherwise
permitted under the Note or the other Loan Documents.
8.17 GOVERNING LAW. This Mortgage was accepted by Mortgagee in the
state of California and the proceeds of the Note secured hereby were disbursed
from the state of California, which state the parties agree has a substantial
relationship to the parties and to the underlying transaction embodied hereby.
Accordingly, in all respects, including, without limiting the generality of the
foregoing, matters of construction, validity, enforceability and
Page 34
performance, this Mortgage, the Note and the other Loan Documents and the
obligations arising hereunder and thereunder shall be governed by, and construed
in accordance with, the laws of the state of California applicable to contracts
made and performed in such state and any applicable law of the United States of
America, except that at all times the provisions for the creation, perfection
and enforcement of the liens and security interests created pursuant thereto and
pursuant to the other Loan Documents shall be governed by and construed
according to the law of the state where the Property is located. Except as
provided in the immediately preceding sentence, Mortgagor hereby unconditionally
and irrevocably waives, to the fullest extent permitted by law, any claim to
assert that the law of any jurisdiction other than California governs this
Mortgage, the Note and other Loan Documents.
8.18 CONSENT TO JURISDICTION. Mortgagor irrevocably submits to the
jurisdiction of: (a) any state or federal court sitting in the state of
California over any suit, action, or proceeding, brought by Mortgagor against
Mortgagee, arising out of or relating to this Mortgage, the Note or the Loan;
(b) any state or federal court sitting in the state where the Property is
located or the state in which Mortgagor's principal place of business is located
over any suit, action or proceeding, brought by Mortgagee against Mortgagor,
arising out of or relating to this Mortgage, the Note or the Loan; and (c) any
state court sitting in the county of the state where the Property is located
over any suit, action, or proceeding, brought by Mortgagee to foreclose this
Mortgage or any action brought by Mortgagee to enforce its rights with respect
to the Collateral. Mortgagor irrevocably waives, to the fullest extent permitted
by law, any objection that Mortgagor may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such court and any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum.
8.19 EXHIBITS. Exhibit A is incorporated into this Mortgage by this
reference.
8.20 ADDRESSES; REQUEST FOR NOTICE. All requests, demands, notices
and other communications that are required or permitted to be given to a party
under this Mortgage shall be in writing, refer to the Loan number, and shall be
sent to such party, either by personal delivery, by overnight delivery service,
by certified first class mail, return receipt requested, or by facsimile
transmission to the addressee or facsimile number below. All such notices and
communications shall be effective upon receipt of such delivery or facsimile
transmission, together with a printed receipt of the successful delivery of such
facsimile transmission. The addresses of the parties are set forth on page 1 of
this Mortgage and the facsimile numbers for the parties are as follows:
Mortgagee: WELLS FARGO BANK, N.A.
FAX NO.: (925) 691-5947
Mortgagor: MHC STAGECOACH, L.L.C.
FAX NO.: (312) 279-1715
Mortgagor's principal place of business is at the address set forth on
page 1 of this Mortgage. A copy of any notice to Mortgagor shall be sent as
follows:
Page 35
Katz Randall Weinberg & Richmond
333 West Wacker Drive
Suite 1800
Chicago, Illinois 60606
Attention: Benjamin Randall
Facsimile: (312) 807-3903
Any Mortgagor whose address is set forth on page 1 of this Mortgage hereby
requests that a copy of notice of default and notice of sale be delivered to it
at that address. Failure to insert an address shall constitute a designation of
Mortgagor's last known address as the address for such notice. Any party shall
have the right to change its address for notice hereunder to any other location
within the continental United States by giving 30 days notice to the other
parties in the manner set forth above.
8.21 COUNTERPARTS. This Mortgage may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed an
original and all of which taken together, will be deemed to be one and the same
instrument.
8.22 WAIVER OF JURY TRIAL. MORTGAGEE (BY ITS ACCEPTANCE HEREOF) AND
MORTGAGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS MORTGAGE OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF MORTGAGEE OR MORTGAGOR. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR MORTGAGEE TO ENTER INTO THIS MORTGAGE.
Page 36
IN WITNESS WHEREOF, Mortgagor has executed and delivered this Mortgage as of the
day and year first above written.
WITNESS/ATTEST: MORTGAGOR:
MHC STAGECOACH, L.L.C., a Delaware
limited liability company
/s/ Lawrence M. Gritton By: MHC-QRS STAGECOACH, INC.,
Print Name: Lawrence M. Gritton a Delaware corporation,
its Managing Member
/s/ Benjamin J. Randall By: /s/ John M. Zoeller
Print Name: Benjamin J. Randall -------------------------
Name: John M. Zoeller
Its: Vice President, Chief Financial
Officer and Treasurer
STATE OF IL )
) SS:
COUNTY OF COOK )
On 8/1, 2001 before me, Jennifer Usher, Notary Public, personally
appeared John M. Zoeller, as Vice President, Chief Financial Officer and
Treasurer of MHC-QRS STAGECOACH, INC., a Delaware corporation, the managing
member of MHC STAGECOACH, L.L.C., a Delaware limited liability company,
personally known to me to be the person whose name is subscribed in the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument, the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Jennifer Usher
---------------------------
Print Name: Jennifer Usher
My Commission Expires:
1/6/03
[NOTARIAL SEAL]
NOTARY PUBLIC, State of IL
Serial No., if any:__________________
Loan No. 31-0900553R
EXHIBIT A
DESCRIPTION OF LAND
Exhibit A to MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) ("Mortgage") between MHC STAGECOACH, L.L.C., a
Delaware limited liability company, as "Mortgagor," and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Mortgagee."
Description of Land. The Land referred to in this Mortgage is situated in the
county of Brevard, state of Florida and is described as follows:
PARCEL A:
A parcel of land lying in the Northwest 1/4 of Section 21, Township 25 South,
Range 36 East, Brevard County, Florida, being more particularly described as
follows:
Commence at the Northwest corner of said Section 21, and run North 89(degrees)
50' 50" East, along the North line of said Section 21, a distance of 330.04 feet
to the Point of Beginning; thence continue North 89(degrees) 50' 50" East, along
said North line, a distance of 816.83 feet; thence South 05(degrees) 47' 10"
West, a distance of 2488.78 feet; thence North 89(degrees) 53' 00" West, a
distance of 419.86 feet; thence South 01(degrees) 04' 00" East, a distance of
150.00 feet, to a point on the North Right of Way line of Barnes Boulevard (a
100 foot Right of Way); thence North 89(degrees) 53' 00" West, along said North
Right of Way line, a distance of 100.02 feet; thence North 01(degrees) 04' 00"
West, parallel to the West line of said Northwest 1/4, a distance of 2623.29
feet, to the Point of Beginning.
PARCEL B:
A perpetual non-exclusive easement for the benefit of Parcel A for surface water
runoff from "Pod #2" through a weir on said land eastward to an existing
drainage ditch as set forth in Grant of Easement from George M. Green, Jr. and
Sandie J. Green in favor of The Indian Oaks Corporation, dated July 27, 1987,
recorded August 4, 1987, in the Public Records of Brevard County, Florida, at
Official Records Book 2826, page 2681; and modified by Stipulated Settlement in
Civil Action No. 87-9785-CA-C, The Indian Oaks Corporation, a Florida
corporation, Plaintiffs, vs. George M. Green, Jr. and Sandie J. Green, his wife,
Defendants, dated July 27, 1987, recorded August 20, 1987, in the Public Records
of Brevard County, Florida, at Official Records Book 2831, page 2211, more
particularly described as follows:
Beginning at the approximate Southwest corner of land to the East as described
in Deed recorded in Official Records Book 2471, page 2094, Public Records of
Brevard County, Florida, said point being on the public drainage ditch on the
north side of Barnes Boulevard; thence north along an existing approximately
twenty (20) foot wide drainage ditch on the westerly boundary of the land
described in said Deed for an approximate distance of 844.00 feet to an outlet
pipe which extends easterly into said drainage ditch from a Type "C" inlet weir
located on "Pod #2" of Parcel A.
EXHIBIT A
Loan No. 31-0900553R
EXHIBIT B
CALCULATION OF DOCUMENTARY STAMP AND INTANGIBLE PERSONAL PROPERTY TAX
Exhibit B to MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) ("Mortgage") between MHC STAGECOACH, L.L.C., a
Delaware limited liability company, as "Mortgagor," and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Mortgagee."
This Mortgage is part of an out-of-state loan transaction which only
partially secures the loan. This Mortgage encumbers the property described on
Exhibit A, and separate mortgages are being executed and delivered by Mortgagor
encumbering certain other property located in Florida and in other states (such
other property being further described on Exhibit C and being referred to as the
"Other Property"). The Florida collateral is located in Brevard, Volusia and
Manatee Counties, and three (3) separate mortgages (the Florida Mortgages")
encumbering three (3) properties are being executed and delivered by Mortgagor
for simultaneous recording in the various Florida counties described above. The
total indebtedness secured by this Mortgage equals $50,000,000.00, as evidenced
by one (1) promissory note in the aggregate original principal amount of
$50,000,000.00 (the "Note"). The Note was made, executed and delivered outside
the State of Florida. The value of the Florida property encumbered by the
Florida Mortgages equals $27,200,000.00. The aggregate value of all other
property securing the loan and located outside the State of Florida equals
$50,400,000.00. Thus, the total aggregate value of all property securing the
loan equals $77,600,000.00. The property encumbered by the Florida Mortgages and
located in Florida represents thirty-five (35%) percent [$27,200,000.00 /
$77,600,000.00] of the total value of all property securing the loan. In
accordance with Florida Statutes, Section 201.08, and Florida Administrative
Code, Rule 12B-4.053(32)(b), documentary stamp tax is computed based upon the
percentage of indebtedness which the value of the mortgaged property located in
Florida bears to the total value of all mortgaged property (which, in this case,
equals $17,500,000.00). Accordingly, documentary stamp tax in the amount of
$61,250.00 is due upon the recording of the Florida Mortgages in the Florida
counties listed above. Pursuant to Chapter 199, Florida Statutes, non-recurring
intangible personal property tax is computed and payable based upon that portion
of the indebtedness which bears the same relation as the value of the mortgaged
property located in Florida bears to the total value of all mortgaged property,
which, in this case, equals [$50,000,000.00 x ($27,200,000.00 /
$77,600,000.00)]. Thus, non-recurring intangible personal property tax in the
amount of $35,000.00 is due and payable upon recording of the Florida Mortgages
in the Florida counties listed above.
EXHIBIT B
EXHIBIT C
DESCRIPTION OF OTHER PROPERTY
Exhibit C to MORTGAGE AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) ("Mortgage") between MHC STAGECOACH, L.L.C., a
Delaware limited liability company, as "Mortgagor," and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as "Mortgagee."
Description of Land. The Other Property referred to in this Mortgage is
described as follows:
CABANA PROPERTY
The Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section
16, Township 21 South, Range 62 East, M.D.B. & M., Clark County, Nevada.
EXCEPTING THEREFROM the described premises:
The North Forty feet (40.00') and the East Forty feet (40.00') of the Northeast
Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 16, Township 21
South, Range 62 East, M.D.B. & M., Clark County, Nevada; together with the
certain spandrel area in the Northeast Quarter corner thereof, also being the
Southwest corner of the intersection of East Twain Avenue and Cabana Drive,
bounded as follows: on the North by the South line of the North Forty feet
(40.00'); on the East by the West line of the East Forty feet (40.00'), and on
the Southwest by the arc of a curve concave Southwesterly, having a radius of
Twenty five feet (25.00') that is tangent to the South line of said North Forty
feet (40.00') is tangent to the South line of said North Forty feet (40.00') and
tangent to the West line of said Forty feet (40.00').
ALSO BEING described as that portion of the Northeast Quarter (NE 1/4) of the
Southwest Quarter (SW 1/4) of Section 16, Township 21 South, Range 62 East,
M.D.B. & M., Clark County, Nevada, more particularly described as follows:
COMMENCING at the Northwest corner of the Northeast Quarter (NE 1/4) of the
Southwest Quarter of said Section 16; thence South 01 degree 55' 58" East a
distance of 40.01 feet to a point on the Southerly right of way line of Twain
Avenue (80.00 feet wide) said point being the TRUE POINT OF BEGINNING; thence
North 89 degrees 09' 31" East, along said Southerly right of way of Twain Avenue
a distance of 1259.02 feet to a point of tangent curve concave to the Southwest
having a radius of 25.00 feet; thence Southeasterly along the arc of said curve
through a central angle of 89 degrees 28' 02" an arc length of 39.04 feet to a
point on the Westerly right of way line of Cabana Drive (80.00 feet wide);
thence South 01 degree 22' 27" East along said Westerly right of way line of
Cabana Drive a distance of 1238.26 feet; thence South 88 degrees 17' 57" West a
distance of 1271.25 feet; thence North 01 degree 55' 58" West a distance of
1282.27 feet to the TRUE POINT OF BEGINNING.
EXHIBIT C
WOODLAND HILLS PROPERTY
Northwest 1/4 of the Southeast 1/4 and the North 1/2 of the Southwest 1/4 of
the Southeast 1/4 of Section 21, Township 2 South, Range 68 West of the 6th
P.M., County of Adams, State of Colorado,
EXCEPT portions dedicated for County roads;
AND EXCEPT that part described as follows:
Beginning at the center of Section 21, Township 2 South, Range 68 West of the
6th P.M., thence South 89 degrees 53 minutes East along the North line of the
Southeast 1/4, Section 21, a distance of 40.00 feet; thence South parallel to
the West line of the Southeast 1/4 of said Section, 30.00 feet to the True Point
of Beginning; thence South 89 degrees 53 minutes East parallel to the North line
of the Southeast 1/4 a distance of 180.00 feet; thence South parallel to the
West line of the Southeast 1/4, 150.00 feet; thence North 89 degrees 53 minutes
West parallel to the North line of the Southeast 1/4, 180.00 feet; thence North
parallel to the West line of the Southeast 1/4, 150.00 feet to the True Point of
Beginning, being in the City of Thornton, County of Adams, State of Colorado;
AND EXCEPT that part described as follows:
A part of the Southeast 1/4 of Section 21, Township 2 South, Range 68 West, of
the 6th P.M., County of Adams, State of Colorado, described as follows:
Beginning at a point 220.00 feet East and 180.00 feet South of the Northwest
corner of said Southeast 1/4; thence Southerly and parallel to the West line of
said Southeast 1/4 a distance of 393.93 feet; thence on an angle to the right of
90 degrees a distance of 180.00 feet to a point 40 feet East of the West line of
said Southeast 1/4; thence on an angle to the right of 90 degrees and parallel
to said West line a distance of 394.76 feet to a point 180.00 feet South of the
North line of said Southeast 1/4; thence on an angle to the right 90 degrees 16
minutes 40 seconds and parallel to said North line a distance of 180.00 feet to
the Point of Beginning, County of Adams, State of Colorado.
EXHIBIT C
WINDMILL PROPERTY
PARCEL A:
Begin at the Northwest corner of the Southeast 1/4 of the Northeast 1/4 of
Section 16, Township 35 South, Range 18 East, Manatee County, Florida; thence
South 00(degrees) 14' 17" East, 1327.25 feet to the Southwest corner of the
Southeast 1/4 of the Northeast 1/4 of the aforementioned Section 16; thence
North 89(degrees) 58' 09" East, 1322.53 feet to the Southeast corner of the
Southeast 1/4 of the Northeast 1/4 of Section 16; thence South 00(degrees) 24'
10" East, 137.28 feet; thence North 89(degrees) 40' 44" East, 1269.21 feet;
thence North 00(degrees) 15' 02" West, 137.28 feet; thence North 89(degrees) 40'
56" East, 42.00 feet along the South line of the Southwest 1/4 of the Northwest
1/4 of Section 15, Township 35 South, Range 18 East, Manatee County, Florida to
a point, said point being the Southwest corner of the Easterly 8.00 feet of the
Southwest 1/4 of the Northwest 1/4 of Section 15; thence North 00(degrees) 15'
02" West along the West line of said Easterly 8.00 feet, 529.06 feet; thence
North 89(degrees) 54' 48" West, 352.77 feet; thence North 83(degrees) 03' 14"
West, 41.33 feet; North 89(degrees) 58' 10" West, 384.29 feet; thence North
64(degrees) 05' 35" West, 45.06 feet; thence North 89(degrees) 49' 37" West,
69.63 feet; thence North 00(degrees) 27' 02" West, 39.77 feet; thence South
89(degrees) 57' 27" West, 229.20 feet; thence South 00(degrees) 34' 37" West,
52.86 feet; thence South 89(degrees) 50' 04" West, 69.88 feet; thence North
68(degrees) 46' 00" West, 42.84 feet; thence North 89(degrees) 02' 58" West,
70.09 feet; thence North 00(degrees) 46' 23" West, 36.15 feet; thence South
89(degrees) 58' 50" West, 204.28 feet; thence South 01(degrees) 06' 03" West,
34.82 feet; thence North 89(degrees) 55' 45" West, 69.61 feet; thence North
61(degrees) 14' 43" West, 46.29 feet; thence North 89(degrees) 47' 56" West,
49.68 feet; thence North 01(degrees) 06' 00" West, 14.20 feet; thence South
89(degrees) 37' 41" West, 244.94 feet; thence North 14(degrees) 02' 42" West,
20.66 feet; thence North 00(degrees) 04' 49" East, 50.12 feet; thence North
07(degrees) 13' 20" West, 40.26 feet; thence North 00(degrees) 29' 42" West,
229.78 feet; thence North 89(degrees) 19' 18" East, 21.87 feet; thence North
00(degrees) 01' 05" East, 69.28 feet; thence North 16(degrees) 42' 43" West,
41.53 feet; thence North 00(degrees) 18' 37" East, 70.77 feet; thence North
90(degrees) 00' 00" West, 443.35 feet; thence North 02(degrees) 07' 48" West,
80.67 feet; thence North 25(degrees) 58' 34" East, 33.85 feet; thence North
00(degrees) 07' 24" East, 93.96 feet; thence South 89(degrees) 59' 49" West,
295.60 feet to the Point of Beginning.
PARCEL B:
Perpetual non-exclusive rights-of-way and easements as contained in Agreements
recorded January 13, 1939, in Deed Book 159, page 331, and rerecorded February
16, 1939, in Deed Book 160, page 23; recorded October 30, 1939, in Deed Book
164, page 340; and recorded May 31, 1974, in Official Records Book 673, page
646, all of the Public Records of Manatee County, Florida.
EXHIBIT C
PICKWICK VILLAGE PROPERTY
PARCEL A:
A portion of the Southwest one-quarter of the Southeast one-quarter of Section
6, Township 16 South, Range 33 East, also a portion of the West one-half of the
Northeast one-quarter of Section 7, Township 16 South, Range 33 East, Volusia
County, Florida being more particularly described as follows:
As a point of reference begin at the Southwest corner of Section 6, Township 16
South, Range 33 East, thence along the South line of Section 6 South 89 degrees
35 minutes 25 seconds East a distance of 3300.00 feet to the Point of Beginning;
thence North 00 degrees 24 minutes 35 seconds East a distance of 330.00 feet;
thence North 89 degrees 35 minutes 25 seconds West a distance of 660.00 feet;
thence North 00 degrees 24 minutes 35 seconds East a distance of 200.00 feet;
thence South 89 degrees 35 minutes 25 seconds East a distance of 612.36 feet to
a point on the Southerly right-of-way line of Clyde Morris Blvd. (a 100.00 foot
right-of-way as now laid out and used); thence South 41 degrees 06 minutes 50
seconds East along the Southerly right-of-way line of said Clyde Morris Blvd. a
distance of 1067.45 feet to a point on the East line of the West one-half of the
Northeast one-quarter of Section 7, Township 16 South, Range 33 East; thence
South 00 degrees 24 minutes 35 seconds West along the said East line of the West
one-half of the Northeast one-quarter of said Section 7 a distance of 2370.82
feet; thence North 89 degrees 35 minutes 25 seconds West a distance of 1320.00
feet to a point in the West line of the West one-half of the Northeast
one-quarter of Section 7; thence North 00 degrees 24 minutes 35 seconds East
along the West line of the West one-half of the Northeast one-quarter of Section
7 a distance of 1650.00 feet; thence South 89 degrees 35 minutes 25 seconds East
a distance of 660.00 feet; thence North 00 degrees 24 minutes 35 seconds East a
distance of 990.00 feet to the Point of Beginning of this description.
PARCEL B:
A portion of the Northwest one-quarter of Section 7, Township 16 South, Range 33
East, Volusia County, Florida, being more particularly described as follows: As
a point of reference, commence at a concrete monument marking the Northwest
corner of Willow Run Subdivision, Unit 2, as per map recorded September 17,
1979, in Map Book 36, Pages 16 and 17 of the Public Records of Volusia County,
Florida; thence run North 00 degrees 41 minutes 47 seconds West along a
Northerly extension of the Westerly line of said Willow Run Subdivision, Unit 2,
a distance of 230.08 feet to a point in the North line of 230.00 foot Florida
Power and Light Company right-of-way as described in instrument recorded October
5, 1973, in Official Records Book 1664, Pages 448-450, of the Public Records of
Volusia County, Florida, said point also being in the Southerly line of Pickwick
Village Mobile Home Park, an unrecorded subdivision; thence run South 89 degrees
35 minutes 24 seconds West along the North line of said Florida Power and Light
Company right-of-way, being also the Southerly line of Pickwick Village, a
distance of 1.13 feet to a concrete monument marking the Southwest corner of
said Pickwick Village; thence North 00 degrees 24 minutes 10 seconds West, a
distance of 400.00 feet to the Point of Beginning; thence North 89 degrees 45
minutes 45 seconds West, a distance of 440.02 feet to the center line of an
80.00 foot drainage ditch easement as described in instrument
