CONSTRUCTION LOAN AGREEMENT
MADE as of the 27th day of September, 1996, by and between
FIRST WESTERN BANK, NATIONAL ASSOCIATION ("Lender"), a national
banking association, and ▇▇▇▇ TWELVE ASSOCIATES, L.P. ("Borrower"),
a Pennsylvania limited partnership.
WITNESSETH THAT:
WHEREAS, Borrower is the owner in fee simple of the Land (all
capitalized terms not otherwise defined herein shall have the
meanings set forth in Article 1); and
WHEREAS, Borrower has requested the Loan from Lender to defray
certain costs of constructing and equipping the Improvements and
certain costs of the financing thereof.
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereby covenant and agree as follows:
1. DEFINITIONS
1.1 Definitions. As used herein, and the Exhibits attached
hereto, the following terms shall have the following meanings:
"Agreement" shall mean this Construction Loan Agreement,
including all schedules and Exhibits hereto, as the same may be
amended or supplemented from time to time.
"Architect" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇ Architects, Inc., or such
other architect as may be approved in writing by Lender.
"Architect's Agreement" shall mean that certain agreement for
the furnishing of architectural and design services dated July 20,
1995 between Borrower and Architect and all exhibits and
attachments thereto, as the same may be amended from time to time
with the consent of Lender in accordance with the terms of this
Agreement.
"Assignment of Construction Documents" shall mean that certain
Assignment of Construction Documents of even date herewith given by
Borrower to Lender, as the same may be amended, replaced or
supplemented from time to time.
"Assignment of Leases and Rents" shall mean that certain
Assignment of Leases and Rents of even date herewith given by
Borrower to Lender with respect to the Land and Improvements, as
the terms thereof may be amended, supplemented, extended, renewed,
replaced or waived from time to time.
"Commencement of Construction" shall mean the date upon which
any work related to the construction of the Improvements, including
site grading or clearing, began on the Land.
"Commitment" shall mean the commitment letter, if any, issued
by Lender for the making of the Loan, as the same may have been
amended.
"Completion Date" shall mean eighteen (18) months after the
date of this Agreement.
"Conditional Default" shall mean an event or condition which,
with the passage of time or the giving of notice, or both, shall
become an Event of Default.
"Construction Contract" shall mean that certain Standard Form
of Agreement between Owner and Contractor (Stipulated Sum) dated
February 14, 1996 between Borrower and Contractor and all exhibits
and attachments thereto, as the same may be amended from time to
time with the consent of Lender in accordance with this Agreement.
"Construction Documents" shall mean the Construction Contract,
Architect's Agreement, the Plans, all consents, licenses, permits,
authorizations and approvals relating to the construction,
completion, use and occupancy of the Improvements and all other
instruments, documents and rights relating to the design,
construction and development of the Improvements.
"Contractor" shall mean B & B Contractors & Developers, Inc.,
a corporation, or such other contractor as may be approved in
writing by Lender.
"Development Budget" shall mean the Development Budget attached
to this Agreement as Exhibit A, as the same may be amended from
time to time by Lender in accordance with this Agreement.
"Event of Default or Events of Default" shall mean an "Event of
Default" or "Events of Default" as defined in Section 7.1.
"Exhibits" shall mean those exhibits attached hereto and made
a part hereof, including Exhibit A - Development Budget; Exhibit B
- Form of Request for Disbursement; Exhibit C - Form of
Contractor's Consent; and Exhibit D - Form of Architect's Consent.
"Financing Statements" shall mean the financing statements
which Lender may from time to time require in order to perfect its
security interest in collateral described in the Mortgage and this
Agreement pursuant to the applicable Uniform Commercial Code.
"First Disbursement" shall mean the first disbursement of Loan
proceeds, to be made upon the fulfillment of the conditions set
forth in Section 6.1.
"Force Majeure" shall mean strikes, work stoppages, a general
shortage of labor or materials, acts of God, civil commotion, enemy
act, fire or other casualty.
"Guaranty" shall mean that certain Agreement of Guaranty and
Suretyship, of even date herewith, given by Guarantor to Lender, as
the terms thereof may be amended, supplemented, extended, renewed,
replaced or waived from time to time with the written consent of
Lender.
"Guarantor" shall mean ▇▇▇▇ Centers Trust, a Maryland business
trust, and ▇▇▇▇ Centers Limited Partnership, a Delaware limited
partnership, jointly and severally.
"Improvements" shall mean all improvements to be constructed on
the Land in accordance with the Plans as provided in this
Agreement.
"Inspecting Architect" shall mean such person or entity as
Lender may designate from time to time to inspect the construction
of the Improvements and to perform other services with respect
thereto on behalf of Lender.
"Land" shall mean that certain parcel or parcels of land
subject to the lien of the Mortgage.
Letter of Credit shall mean that certain automatically
renewable irrevocable letter of credit from an issuer and having
terms acceptable to Lender in an amount of not less than $7,000,000
and which Letter of Credit may reduce annually after the third year
of the Improvements operations (i.e. reduction shall be cumulative
for the first three years, but not cumulative thereafter)
predicated on a ratio of net operating income of the Improvements
to Borrower s total indebtedness of at least 1.4 to 1.0 and further
limited to an amount equal to the amortization of $7,000,000 of
Loan proceeds secured by the Letter of Credit.
"Loan" shall mean the loan to be made pursuant to this
Agreement in the maximum principal amount of $12,000,000.
"Loan Documents" shall mean the Commitment, this Agreement, the
Note, the Mortgage, the Assignment of Leases and Rents, the
Assignment of Construction Documents, the Guaranty, the Financing
Statements, and all other agreements, instruments and documents now
or hereafter executed in connection with the Loan.
"Loan Fee" shall mean (i) Fifty Thousand Dollars ($50,000.00),
$15,000 of which has been paid by Borrower and $35,000 of which
shall be paid by Borrower on the date hereof, and (ii) 1% of each
advance of Loan proceeds secured by the Letter of Credit.
"Mortgage" shall mean that certain Open-End Mortgage and
Security Agreement, of even date herewith, given by Borrower to
Lender with respect, inter alia, to the Land and Improvements, as
the terms thereof may be amended, supplemented, extended, renewed,
replaced or waived from time to time.
"Note" shall mean that certain Mortgage Note, of even date
herewith, given by Borrower to Lender in the principal face amount
of $12,000,000, as the terms thereof may be amended, supplemented,
extended, renewed, replaced or waived from time to time.
"Partners" shall mean ▇▇▇▇ Center Trust, being the sole
general partner in Borrower, and ▇▇▇▇ Centers Limited Partnership
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, being all the limited partners in
Borrower.
"Permitted Encumbrances" shall mean the liens, assignments and
security interests in favor of Lender; the easements, restrictions,
encumbrances and other matters described in and permitted to exist
under the terms of the Mortgage; such other matters as may be
expressly consented to in writing by Lender; and taxes on the Land
and Improvements not yet due and payable.
"Plans" shall mean the final plans and specifications for the
construction and equipping of the Improvements, including all
schematic and working drawings and designations of all
manufacturers and model numbers of all equipment, and any
improvements to be constructed off the Land, as the same may be
amended from time to time in accordance with this Agreement.
1.2 Construction. All references to article or section numbers
shall refer to this Agreement, unless otherwise stated. The above
recitals and the Commitment are hereby made a part of this
Agreement. To the extent that the Commitment is inconsistent with
the terms of the Loan Documents, the terms of the Loan Documents
shall govern.
REPRESENTATIONS AND WARRANTIES
2.1 Borrower hereby warrants and represents to Lender as
follows:
(a) Due Formation; Capacity. Borrower and each of the Partners
and Guarantor (other than individuals) are each duly organized,
validly existing and in good standing under the laws of the state
in which they were formed; and Borrower, the Partners and Guarantor
each have full power and authority to own and operate their
respective properties, to conduct their respective affairs as now
being conducted, to execute and deliver the Loan Documents and the
Construction Documents to be or purporting to have been executed
and delivered by them, and to perform their respective obligations
hereunder and thereunder.
(b) Compliance with Law; Authority of Signatories. Borrower,
the Partners and Guarantor each have, in connection with the
execution and delivery of the Loan Documents and the Construction
Documents to be or purporting to have been executed and delivered
by them, complied in all respects with the provisions of every
statute, regulation, decision, instrument, agreement or resolution
by which it or he or any of its or his business or property is
bound; and the execution and delivery by Borrower, the Partners and
Guarantor of such Loan Documents and the Construction Documents,
and the performance thereof has been duly authorized by all action
necessary or requisite on the part of Borrower, the Partners and
Guarantor.
(c) No Conflicts or Defaults. Neither the execution, the
delivery, nor the performance by Borrower or any of the Partners or
Guarantor of the provisions of any of the Loan Documents or the
Construction Documents does or will, with notice or lapse of time,
or both, conflict with or constitute a default under any statute,
rule, regulation, decree, decision, resolution, instrument,
document or agreement by which Borrower or any of the Partners or
Guarantor or any of their respective businesses or properties is
bound.
(d) Enforceability. Each of the Loan Documents and the
Construction Documents is in full force and effect and is valid,
binding and enforceable upon the party or parties thereto in
accordance with its terms; and there exists no default or condition
or event which, with notice or passage of time, or both, will
constitute a default under the Construction Documents.
(e) No Litigation or Investigations. There is no pending or
threatened litigation or governmental investigation (or any basis
therefor known to Borrower or Guarantor) which questions the
capacity, ability or authority of Borrower or Guarantor to execute,
deliver and perform the provisions of the Loan Documents or the
Construction Documents; or if determined adversely to Borrower or
Guarantor, would materially and adversely affect the business or
financial condition of Borrower or Guarantor.
(f) Financial Information. The information, financial
statements and other financial data furnished by Borrower, the
Partners and Guarantor to Lender are complete and correct and
present fairly the financial condition of Borrower and Guarantor in
accordance with generally accepted accounting principles applied on
a consistent basis, and the information on the Development Budget
accurately sets forth the costs of each of the categories shown
thereon.
(g) Title Aspects. Borrower has good and marketable fee simple
title in and to the Land and Improvements, free, clear and
unencumbered, of record and in fact, except for and subject only to
the Permitted Encumbrances.
(h)Licenses, etc. All easements, variances, licenses, permits,
consents, approvals and authorizations to construct the
Improvements and to occupy and operate the Land and Improvements
(except to the extent the same are of a nature so as not to be
obtainable until a later stage of construction or completion of the
Improvements) have been obtained and are valid and in full force
and effect, including, without limitation, all licenses, permits,
consents, approvals and authorizations required under federal,
state and/or local laws, statutes, regulations, rules, codes,
ordinances and orders with respect to subdivision, zoning, access
to public streets, curb cuts, drainage, safety, building, fire
protection, environmental and energy matters.
(i) Construction Documents. The only agreements by or on
behalf of Borrower in connection with the provision of labor,
materials, design or supervisory services with respect to the
Improvements are the Construction Documents.
(j) Hazardous Wastes. Neither Borrower, nor, to the best of
Borrower's knowledge, any previous owner of the Land, nor any third
party has used, generated, stored or disposed of any hazardous
waste, toxic substances or related materials ("Hazardous
Materials") on the Land. For the purposes of this representation
and warranty, Hazardous Materials shall include, but shall not be
limited to, any pollutants, dangerous substances or substances
defined as "hazardous substances" or "toxic substances" in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sec. 1802, The Resource
Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq, or any
law, statute, ordinance, rule, regulation, permit, license,
judgment, writ, injunction, decree, award and standard promulgated
by any governmental authority concerning health, safety and
protection of, or regulation of, human health or the environment.
(k) Survival. The representations and warranties made herein
and each and every other provision of this Agreement and the other
Loan Documents shall survive the delivery thereof and shall be
deemed to be made continuously until the Loan shall have been paid
in full.
3. COVENANTS
3.1 Loan Documents. The Loan shall bear interest, be repayable
and mature, all as set forth in the Note which, together with the
other Loan Documents, are incorporated herein by this reference.
3.2 Insurance. Until the Loan is paid in full, Borrower shall
maintain in full force and effect all insurance required by law or
Lender, including, without limitation, public liability, property
damage and workmen's compensation insurance, fire and casualty and
builder's risk insurance, flood and business interruption and rent
insurance. The policies shall be approved by Lender as to amounts,
form, risk coverage, deductibles, insurer and loss payable and
cancellation provisions. Lender's approval, however, will not be
deemed a representation of the solvency of any insurer or the
sufficiency of any amount of insurance.
3.3 Cooperation. Borrower will cooperate at all times with
Lender in bringing about the timely completion of the Improvements,
and Borrower will resolve all disputes arising during the work of
construction in a manner which will allow work to proceed
expeditiously in order to complete the Improvements on or before
the Completion Date.
3.4 Payment of Expenses. Borrower will pay Lender's
reasonable and customary out-of-pocket costs and expenses incurred
in connection with the making, disbursement and administration of
the Loan, the exercise of any of its rights or remedies under the
Loan Documents, and all other matters related to the transactions
contemplated hereby, including, but not limited to, title insurance
and all policy endorsements contemplated hereunder, settlement and
escrow charges, recording charges, transfer, documentary, ad
valorem, business, operating and mortgage taxes, legal fees and
disbursements, the costs and fees of the Inspecting Architect, and
all other reasonable fees and costs for services. The provisions
of this paragraph shall survive the termination of this Agreement
and the repayment of the Loan.
3.5 Accounting; Changes in Condition. Borrower shall keep true
and correct financial books and records in accordance with
generally accepted accounting principles on a consistent basis for
the construction of the Improvements and shall maintain adequate
reserves for all contingencies. If required by Lender, Borrower
shall submit to Lender, at such times as Lender requires, a
statement which accurately details the application of all Loan
proceeds and other funds expended to date as well as Borrower's
best estimate of the funds needed to defray the cost to complete
the Improvements (including all direct and indirect costs
associated therewith) and the source of those funds. Borrower
shall (i) furnish Lender within ninety (90) days after the end of
each fiscal year end of Borrower, a complete set of Borrower s
consolidating and consolidated financial statements, to include a
balance sheet and income and expense statement, prepared in
accordance with general accepted accounting principles consistently
applied by Borrower s independent accountant acceptable to Lender,
and (ii) promptly supply Lender with any financial statements and
other information concerning its affairs and properties as Lender
may reasonably request and shall promptly notify Lender of any
materially adverse change in its financial condition or in the
physical condition of the Land or Improvements.
3.6 Debt Service Coverage Ratio. Upon substantial completion
of construction of the Improvements and stabilized occupancy of the
Improvements, Borrower shall maintain at all times a ratio of the
sum of net income, non-cash expenses and interest to the total of
all annual principal and interest payments required on all loans,
direct or contingent, of Borrower of at least 1.0 to 1.0.
3.7 Anti-Dark Provision. If, prior to the Maturity Date, as
defined in the Note, either Sears ▇▇▇▇▇▇▇ and Co. or Hills
Department Store vacates its space in the Improvements, Borrower
shall, within twelve (12) months from the first day of such
vacancy, find a suitable replacement tenant therefor, acceptable
to Lender, such approval not to be unreasonably withheld.
3.8 Indemnity.
(a) Borrower shall indemnify and hold Lender harmless from and
against all liabilities, claims, damages, costs and expenses
(including, but not limited to, legal fees and disbursements) in
any actions or proceedings now or hereafter pending or threatened
against Lender arising out of or resulting from any violations of
any laws, regulations, codes, ordinances, permits, orders or the
like or any defective workmanship or materials occurring in the
construction of the Improvements. Upon demand by Lender, Borrower
shall defend any action or proceeding brought against Lender
alleging any defective workmanship or materials or Lender may elect
to conduct its own defense at the expense of Borrower. Any
inspection or approval of the Plans, Improvements or the
Construction Documents shall not be deemed or construed to limit or
impair Lender's rights under any Loan Document in any manner
whatsoever. The provisions of this subsection shall survive the
termination of this Agreement and the repayment of the Loan.
(b) Borrower shall indemnify and hold Lender harmless from and
against all liability, directly or indirectly, arising out of the
use, generation, storage or disposal of Hazardous Materials,
including, without limitation, the cost of any required or
necessary repair, cleanup or detoxification, and the preparation of
any closure or other required plans, whether such action is
required or necessary prior to or following transfer of title to
the Land, to the full extent that such action is attributable,
directly or indirectly, to the use, generation, storage or disposal
of Hazardous Materials on the Land. The foregoing indemnification
shall survive repayment of the Loan.
3.9 Partnership Agreement, Transfers of Partnership Interests,
Etc.
(a) None of the Partners shall sell, assign, give, mortgage,
pledge, hypothecate, encumber or otherwise transfer (except by
operation of law upon death) any interest in Borrower without the
prior written consent of Lender.
(b) Neither Borrower nor any Partner or Guarantor not an
individual shall dissolve or liquidate without the prior written
consent of Lender.
(c) No corporate Partner or Guarantor, if any, shall merge into
or consolidate with any entity except with and/or into such
corporate Partner, Guarantor or Borrower, nor shall any entity
merge into or consolidate with any such Partner or Guarantor except
with and/or into such corporate Partner, Guarantor or Borrower
without the prior written consent of Lender. This restriction
shall continue to apply to all subsequent mergers and
consolidations involving each such corporate Partner, Guarantor and
its successors.
(d) Neither Borrower nor Guarantor which is a limited
partnership shall terminate its partnership agreement without the
prior written consent of Lender.
3.10 Loan Fee. Borrower shall pay the Loan Fee to Lender.
3.11 Construction Documents.
(e) Borrower shall not amend or terminate any of the
Construction Documents or authorize any deletions, additions or
changes to the Improvements or the Plans without the prior written
consent of Lender.
(f) As additional security for the obligations secured by the
Mortgage, Borrower hereby transfers and assigns to Lender, its
successors and assigns, all of Borrower's right, title and interest
in and to the Construction Documents and all copies thereof,
subject to the limitations on Lender's responsibility as
hereinafter set forth.
(g) Anything herein contained to the contrary notwithstanding,
(i) Borrower shall remain liable under the Construction Documents
to perform all of Borrower's obligations thereunder in accordance
with and pursuant to the terms and provisions thereof, (ii)if,
following an Event of Default, Lender performs or causes to be
performed the obligations of Borrower under the Construction
Documents, such performance by Lender or its nominee or other
assignee shall not release Borrower therefrom and shall not result
in any assumption of any obligations by Lender, and (iii) Lender
shall have no obligation or liability under the Construction
Documents by reason of or arising out of this collateral assignment
contained in this Agreement, nor shall Lender be required or
obligated in any manner to perform or fulfill any obligations of
Borrower under or pursuant to the Construction Documents,
including, without limitation, Borrower's obligation to pay
Contractor and Architect.
(h) Borrower hereby constitutes Lender, its successors and
assigns, Borrower's true and lawful attorney-in-fact, irrevocably
with full power in the name of and on behalf of the Borrower or
otherwise, upon the occurrence of an Event of Default: (i) to make,
execute, complete and deliver to Contractor and Architect all such
documents as Lender shall consider necessary or appropriate to
complete construction under the Construction Contract and
performance under the Architect's Agreement; (ii) to make all
payments to Contractor and Architect as Lender shall consider
necessary or appropriate under the Construction Documents; (iii) to
file any claims or take any actions or institute any proceedings
which Lender may deem to be necessary or advisable in connection
with the Construction Documents; and (iv) generally, to do, execute
and perform any other act, matter, or thing whatsoever that, in the
good faith opinion of Lender, ought to be done, executed and
performed in connection with the Construction Documents, as fully
as Borrower could do in such situation.
4. CONSTRUCTION MATTERS
4.1 Construction.
(a) Commencement of Construction occurred November 16, 1995;
construction in accordance with the Plans which shall have been
approved in the manner and by the parties specified below, and the
Improvements shall be completed on or before the Completion Date.
(b) The Plans shall be prepared by Architect and, prior to the
First Disbursement, shall be approved and signed for identification
purposes by Lender, Borrower, Contractor, Architect, Inspecting
Architect, any tenant on the Land, any future tenant of the
Improvements with the right of approval with respect to any portion
thereof, all governmental authorities and all other entities and
persons with a right to approve any aspect of the work. Lender may
approve or disapprove the Plans in its good faith discretion.
(c) No changes in the Plans or the Construction Documents
(including change orders) shall be effective, unless approved in
writing by Lender. Borrower shall obtain all approvals of any
changes in the Construction Documents (including change orders)
that are required by law or under any lease or other agreement with
respect to the Land or Improvements. Lender shall have twenty (20)
days after receipt by it and by Inspecting Architect of all
documentation pertaining to any change referred to in this
subsection (c) within which to evaluate any requested change and
will not be required to consider approving any changes, unless all
other approvals which, in Lender's sole judgment, are required from
other parties shall have been obtained. If Lender, in its sole
judgment, determines that any change may increase the cost of
completion of the Improvements or any category thereof as shown on
the Development Budget, Lender may require Borrower to deposit
additional funds with Lender sufficient to cover the increased
costs as a condition to giving its approval, such funds to be held
by Lender and disbursed in accordance with Section 5.4 of this
Agreement. In the event any such cost increase is so determined,
Borrower shall cause Contractor to revise payment and performance
bonds required by this Agreement to reflect the construction cost
increases.
(d) Notwithstanding anything herein to the contrary, at any
time that Lender's consent or approval is required or at any time
that Lender is permitted to make a judgment or determination under
Articles 4, 5, or 6 hereof, Lender may, but shall not be required
to, rely conclusively on the opinion of Inspecting Architect as to
matters concerning the Construction Documents, the construction of
the Improvements and the cost thereof, and changes in any of the
foregoing.
4.2 Permits and Legal Requirements. Borrower shall comply with
and keep in effect all permits and approvals obtained from any
governmental bodies that relate to the lawful construction of the
Improvements. Borrower shall comply with all existing and future
laws, regulations, orders and requirements of all governmental,
judicial and legal authorities having jurisdiction over the Land or
Improvements and with all restrictions and agreements affecting the
Land or Improvements or Borrower's use or development thereof.
4.3 Lists of Contractors and Subcontractors. Upon the request
of Lender, Borrower shall promptly furnish to Lender, in a form
acceptable to Lender, correct lists of all contractors and
subcontractors employed in connection with the construction of the
Improvements and true and correct copies of all executed contracts
and subcontracts therefor. Lender may contact any contractor or
subcontractor to verify any facts disclosed in the lists and no
such contract or subcontract shall prohibit the disclosure of its
contents to Lender.
4.4 Purchase of Materials and Conditional Sales Contracts. No
materials, equipment, fixtures or articles of personal property
placed in or on the Land or Improvements shall be purchased by or
installed under any security agreement, financing lease or other
agreement whereby the seller reserves or purports to reserve title,
a lien, a security interest, the right of removal or repossession
or the right to consider such items personal property after their
incorporation into the Improvements, unless previously authorized
by Lender in writing.
4.5 Inspection and Right to Stop Work.
(a) Lender and its agents and representatives shall have the
right at any reasonable time to enter the Land and Improvements and
inspect the work of construction and all materials, Plans and other
matters relating to the construction. Lender shall also have the
right to examine, copy and audit the books, records, accounting
data and other documents of Borrower and its contractors relating
to the construction of the Improvements and related costs.
(b) If Lender, in good faith, determines that any work or
materials do not conform to the Plans or sound building practice or
otherwise depart from any of the requirements of this Agreement,
Lender may require the work to be stopped and may withhold
disbursements until the matter is corrected. In such event,
Borrower shall promptly correct the work. No such action by Lender
will affect Borrower's obligations to complete the Improvements on
or before the Completion Date.
(c) Lender shall be under no duty to examine, supervise or
inspect the Construction Documents, the construction of the
Improvements or any other agreements, documents, books, records or
other matters. Any inspection or examination by Lender is for the
sole purpose of protecting Lender's security and preserving
Lender's rights under this Agreement. No default of Borrower will
be waived by any inspection by Lender. In no event will any
inspection by Lender be a representation that there has been or
will be compliance with the Plans or that the construction is free
from defective materials or workmanship or as to any other matters
whatsoever.
(d) If Lender shall require, in its sole judgment, the consent
of any person or entity as to any aspect of the construction of the
Improvements, Lender may require the work to be stopped and may
withhold further disbursements, until all such consents, in
writing, shall have been delivered to Lender.
(e) Lender shall have the right to require the work to be
stopped upon the occurrence of an Event of Default.
4.6 Protection Against Lien Claims. Borrower shall promptly
pay and discharge all charges for labor done and materials and
services furnished in connection with the construction of the
Improvements and shall promptly notify Lender in writing of any
dispute with any contractor or subcontractor. Any lien claimed or
filed against any part of the Improvements for labor done or
materials or services furnished in connection with the construction
of the Improvements shall be discharged, by bond or otherwise,
within ten (10) days after the date of the filing thereof, and
Lender reserves the right to withhold further disbursement of Loan
proceeds until such lien or claim shall have been so discharged.
5. DISBURSEMENT MATTERS
5.1 Procedures.
(a) To receive disbursements of the Loan proceeds, Borrower
shall submit each disbursement request to Lender not more
frequently than once monthly, using Lender's prescribed form of
Request for Disbursement attached as Exhibit B to this Agreement
("Request"). Upon receipt of the Request, Lender may, after
disbursement of $5,000,000 of Loan proceeds, cause an inspection to
be made of the progress of construction. If Lender determines as
a result of such inspection that construction is proceeding
diligently and in accordance with the Plans approved in the manner
required by this Agreement and if all conditions to such
disbursement shall have been fulfilled, Lender will make the
disbursement as provided in this Agreement. Lender may also
require verification of the information contained in the Request by
Contractor, Architect and Inspecting Architect, and may require
separate lien waivers and releases from all contractors and
subcontractors covering the sums requested to be disbursed and all
prior disbursements for which adequate waivers and releases shall
not previously have been received by Lender. In no event shall
Lender be required to advance any Loan proceeds from and after
three (3) months after the Completion Date, provided, however, that
interest shown on the Development Budget may be disbursed, subject
to the other limitations contained in this Agreement, until the
Maturity Date (as defined in the Note). Subject to subsection (b)
of this section, all disbursements will be made, at Lender's
option, into a special disbursement account of Borrower to be
maintained with Lender or advanced directly (or jointly with
Borrower, as Lender may elect) to such party or parties as have
actually supplied labor, material or services in connection with
the construction of the Improvements. Borrower shall pay, upon
being billed therefor, Lender's normal charges for account
maintenance and wiring of funds. All Loan proceeds will be
considered to have been advanced to and received by Borrower upon,
and interest on the Loan proceeds will be payable by Borrower from
and after, the deposit or advance of the Loan proceeds as aforesaid
or the charge against the Loan proceeds as provided in subsection
(b) below.
(b) Notwithstanding the provisions of subsection (a) of this
section, Lender may elect, without further notice to or
authorization by Borrower, to use the Loan proceeds to pay, as and
when due, any Loan fees owing to Lender, interest on the Loan, fees
and disbursements of Inspecting Architect and Lender's attorneys
which are payable by Borrower as provided in the Loan Documents and
such other sums as may be owing from time to time by Borrower to
Lender with respect to the Loan or the transactions contemplated
hereby. Such payments may be made by debiting or charging the Loan
in the amount of such payments.
(c) All advances of the Loan proceeds shall be evidenced by the
Note and secured by the Loan Documents.
5.2 Disbursement Amounts.
Aggregate advances of the Loan shall be limited to the maximum
amount of the Loan. Prior to disbursement of any Loan proceeds,
Borrower shall have expended sums at least equal to the amount
shown as Borrower's equity, if any, on the Development Budget for
costs approved by Lender in the corresponding category shown on the
Development Budget, and such expenditures shall not be reimbursable
from Loan proceeds. Lender shall advance the Loan proceeds as
follows:
(i) $4,000,000, of which $3,000,000 shall be advanced upon (A)
receipt of executed leases satisfactory to Lender from Sears
▇▇▇▇▇▇▇ and Co. and Hills Department Stores, (B) acceptance from
each of their respective sites on the Land, and (C) such tenants
obligation to commence rental payments as set forth therein, and of
which $1,000,000 shall be advanced upon receipt of an executed
lease acceptable to Lender with ▇▇▇▇▇▇▇;
(ii) provided no Conditional Default or Event of Default has
occurred, $1,000,000 upon receipt of an executed lease acceptable
to Lender with Phar-Mor, or another tenant acceptable to Lender;
and
(iii) provided no Conditional Default or Event of Default has
occurred, $7,000,000 upon receipt by Lender of the Letter of
Credit.
5.3 Cost Information. If Borrower becomes aware of any change
in the approved costs set forth in the Development Budget which
would increase, change, or cause a reallocation of the costs as
shown on the Development Budget, Borrower shall immediately notify
Lender in writing and promptly submit a proposed revised
Development Budget to Lender for approval. Lender shall have no
obligation to make further disbursements, unless and until the
revised Development Budget is approved by Lender. Lender reserves
the right to withhold its approval pending the deposit of funds
pursuant to Section 5.4 of this Agreement.
5.4 Deposit of Funds by Borrower. In addition to Lender's
right to require the deposit of funds pursuant to Section 4.1(c) of
this Agreement, if Lender, at any time and from time to time,
determines that (a) the amount of the undisbursed Loan proceeds
will not be sufficient to pay in full all costs required to
complete the construction of the Improvements in accordance with
the Plans and all financing and development costs (including
operating expenses, taxes and interest on the Loan through the
Maturity Date to the extent revenues from the Improvements may not
be sufficient, in Lender's sole judgment, to pay the same) to be
incurred by Borrower, or that (b) any amount shown in any category
on the Development Budget will not be sufficient to pay in full the
items to which such amount is allocated, then Lender may make
demand on Borrower to deposit with Lender funds equal to the amount
so determined by Lender, and Borrower shall deposit the funds
required hereby with Lender within ten (10) days after the date of
Lender's demand, such funds to be held in an account to be
determined by Lender. After such demand, Lender shall have no
obligation to make further disbursements until such funds, together
with any interest earned thereon, shall have been so deposited by
Borrower with Lender. Notwithstanding the foregoing provisions, if
the whole amount allocated to any component of any such category as
set forth in the Development Budget is not, or in Lender s
judgment, will not be expended to complete the work covered by such
category, then, with Lender s approval, Borrower may cause such
excess to be reallocated and used for any other category as set
forth in the Development Budget prior to making any deposit
required by the previous sentence. Whenever Lender has any such
funds on deposit, such funds, together with any interest earned
thereon, shall be additional security for the Loan and all other
obligations from time to time secured by the Mortgage and all
disbursements will be considered to be made by Lender first from
those funds until they are exhausted. At such times that the
Development Budget is revised to reflect increased costs for work
under the Construction Contract, Borrower shall cause Contractor to
revise all payment and performance bonds required by this Agreement
to reflect construction cost increases.
5.5 Additional Security. As additional security for Borrower's
obligations under this Agreement and the other Loan Documents,
Borrower irrevocably assigns and grants to Lender a security
interest in (a) all Loan proceeds now or hereafter held by Lender,
whether or not disbursed, (b) all funds now or hereafter deposited
by Borrower with Lender under this Agreement or any of the other
Loan Documents, (c) all governmental permits and licenses now or
hereafter obtained for the lawful construction and operation of the
Improvements, and (d) all reserves, deferred payments, deposits,
refunds, cost savings and payments of any kind relating to the
construction of the Improvements. Upon the occurrence of an Event
of Default, Lender, in addition to any other rights and remedies it
may have under the Loan Documents or at law or in equity, may apply
any funds held by Lender against any of the obligations of Borrower
to Lender (whether or not the same be then due), in such order as
Lender may determine, and may use any of the other property
referred to above for any purpose for which Borrower could have
used them under this Agreement or with respect to the construction
or financing of the Improvements.
6. DISBURSEMENT CONDITIONS
6.1 First Disbursement. Lender shall not be obligated to make
the First Disbursement until Borrower, at its expense, shall have
fulfilled, to Lender's satisfaction, all provisions of this
Agreement applicable thereto, including, without limitation, the
delivery of the items referred to in the Commitment, and:
(a) No portion of the Improvements shall have been damaged by
fire or other casualty and not repaired to the condition
immediately prior to such casualty and no condemnation or taking of
the Land or the Improvements or any portion thereof shall be
pending or threatened;
(b) Lender shall have received all duly executed Loan Documents
and Construction Documents, and the Mortgage, Assignment of Leases
and Rents, Financing Statements and other documents, if any, to be
placed of record shall have been duly recorded and filed in all
appropriate offices;
(c) Lender's security interest in all personal property
described in the Mortgage, this Agreement and the other Loan
Documents shall have been duly perfected and shall be in a first
lien position;
(d) The Plans shall have been approved to the extent required
under the provisions hereof;
(e) The Loan Fee shall have been paid on or before the date of
this Agreement;
(f) Borrower shall have obtained and delivered to Lender the
consents of Contractor and Architect in the forms attached hereto
as Exhibit C and Exhibit D, respectively;
(g) Lender shall have received effective lien waivers and
releases from Contractor, all other contractors, subcontractors,
suppliers and other persons having a right to file a mechanic's or
materialman's lien with respect to all work, materials and services
for which Loan proceeds are being requested;
(h) All licenses, permits, consents, approvals and
authorizations for the construction of the Improvements shall be in
full force and effect and no notices of violation or revocation
with respect thereto shall have been received;
(i) Lender shall have received satisfactory evidence that the
Land has available to it adequate water, gas and electric supply,
storm and sanitary sewerage facilities, telephone facilities and
other required public utilities, and means of access between the
Land and public highways; and all such facilities comply with all
applicable laws, rules and regulations, and all necessary easements
to provide such utility service to the Land have been obtained;
(j) Lender shall have received, at Borrower's expense, a title
policy endorsement satisfactory to Lender insuring the priority of
the lien of the Mortgage in the amount of the First Disbursement;
(k) Lender shall have received agreements in form and substance
satisfactory to Lender, among each tenant leasing space in the
Improvements, Borrower and Lender pursuant to which each tenant
approves and accepts the leased premises without condition,
confirms that there are no defaults or conditional defaults in
existence under the Lease, subordinates its leasehold interest to
the lien of the Mortgage, agrees to attorn to Lender and
acknowledges such other matters as may be required by Lender; and
(l) No Event of Default or Conditional Default shall have
occurred and be continuing under this Agreement or any of the other
Loan Documents.
6.2 Subsequent Disbursements. Once the First Disbursement
shall have been made by Lender, Lender shall be obligated to make
further disbursements (including the Holdback disbursement referred
to in Section 6.3), subject to the fulfillment of all provisions of
this Agreement applicable thereto and the following conditions:
(a) The conditions of the preceding Section 6.1 shall continue
to be met as of the date of such subsequent disbursement;
(b) Upon the actual location of the Improvements and again upon
completion of the Improvements, the survey to be supplied in
connection with the First Disbursement shall be updated to a
current date and shall show the location of the Improvements and
the absence of any encroachment of the Improvements over any
building, zoning, right-of-way or property boundary lines; and
(c) Lender shall have received a title policy endorsement
satisfactory to Lender insuring the priority of the lien of the
Mortgage in the amount of all disbursements hereunder and insuring
the updated survey referred to above.
6.3 Final Disbursement. The final Loan disbursement by Lender
to Borrower shall be made upon the fulfillment of the following
conditions:
(a) All conditions of Section 6.1 and 6.2 shall continue to be
met as of the date of such final disbursement;
(b) Lender shall have received a certificate of Borrower,
Architect and Contractor to the effect; inter alia, that the
Improvements have been fully completed in accordance with the Plans
approved by Lender and all applicable building, fire, safety and
similar codes and the matters in such certificate shall have been
verified by Inspecting Architect;
(c) A permanent certificate of occupancy for the Improvements
and all other permits required for the use and occupancy of all
aspects of the Improvements shall have been duly issued and Lender
shall have received copies thereof; and
(d) Lender shall have received an endorsement to its title
insurance policy, in a form approved by Lender, insuring that no
encroachments exist over any building, zoning, right-of-way or
property boundary lines.
7. DEFAULTS AND REMEDIES
7.1 Events of Default. The following shall be deemed to be
Events of Default under this Agreement:
(a) Borrower shall fail to make any payment under the Note when
due or within the applicable grace period, if any, set forth
therein;
(b) Borrower shall fail to make any deposit of funds required
under this Agreement within ten (10) days after demand by Lender;
(c) Borrower shall fail to comply with any other covenant
contained in this Agreement or any of the other Loan Documents
which calls for the payment of money and shall not cure that
failure within ten (10) days after demand by Lender;
(d) Borrower shall fail to comply with any covenant contained
in this Agreement or any of the other Loan Documents, other than
those covenants referred to in (a), (b) and (c) above, and shall
not cure that failure within thirty (30) days after written notice
thereof by Lender to Borrower, or such longer period to which
Lender may agree in the case of a default not curable by the
exercise of due diligence within such thirty (30) day period,
provided that Borrower shall have commenced to cure such default
within such thirty (30) day period and shall complete such cure as
quickly as reasonable with the exercise of due diligence;
(e) Borrower or any Partner or Guarantor shall fail to comply
with Section 3.7;
(f) Construction of the Improvements is abandoned or is not
completed on or before the Completion Date;
(g) A default shall occur under any of the Construction
Documents;
(h) Any representation or warranty herein or in any of the
other Loan Documents or in any certificate or other document
delivered in connection herewith shall prove false or misleading in
any material respect;
(i) Any lien or encumbrance, other than a Permitted
Encumbrance, is entered against the Land or Improvements and not
discharged with thirty (30) days after the filing thereof;
(j) Any party shall obtain an order or decree in any court of
competent jurisdiction enjoining the construction of the
Improvements or delaying construction of the same or to enjoining
or prohibiting Lender, Borrower or any Partner from carrying out
the terms and conditions of any of the Loan Documents and such
proceedings are not discontinued or such decree is not vacated
within twenty (20) days after the filing thereof;
(k) Borrower or Guarantor shall make a general assignment for
the benefit of creditors, or file or have filed a petition in
bankruptcy, or a petition or answer seeking a readjustment of
Borrower s or Guarantor s indebtedness under the Bankruptcy Code or
any similar law or code, or Borrower or Guarantor shall consent to
the appointment of a receiver or trustee of any of its respective
properties;
(l) Borrower or Guarantor shall be adjudged bankrupt or
insolvent, or a petition or proceedings for bankruptcy shall be
filed against Borrower or Guarantor, and Borrower or Guarantor
shall admit the material allegations thereof, or an order,
judgment, or decree shall be made approving such a petition, and
such order, judgment or decree shall not be vacated or stayed
within thirty (30) days of its entry, or a receiver or trustee
shall be appointed for Borrower or Guarantor or their respective
properties or any part thereof and remain in possession thereof for
thirty (30) days; or
(m) A default, together with the expiration of any applicable
grace period, shall occur under any of the other Loan Documents.
7.2 Remedies. Upon the occurrence of any one or more of the
Events of Default pursuant to Section 7.1 (k) or (l), all
obligations on the part of Lender to make the Loan, or to make any
further disbursements hereunder shall cease and terminate, and the
Loan and all sums then or thereafter due under any and all of the
Loan Documents shall thereupon become immediately due and payable.
Upon the occurrence of any one or more of the Events of Default
other than pursuant to Section 7.1. (k) or (l), all obligations on
the part of Lender to make the Loan, or to make any further
disbursements hereunder, at Lender s option, shall cease and
terminate, and the Loan and all sums then or thereafter due under
any and all of the Loan Documents, at Lender s option, shall
thereupon immediately become due and payable. If an Event of
Default shall occur, Lender may exercise any right or remedy which
it has under this Agreement or any of the other Loan Documents or
otherwise available at law or in equity or by statute and all of
Lender's rights and remedies will be cumulative. No disbursement
of Loan proceeds by Lender shall be deemed to cure any Event of
Default, unless Lender otherwise expressly agrees in writing.
Lender shall also have the right, in its discretion, to enter the
Land and Improvements and take any and all actions necessary, in
its judgment, to secure, winterize, protect and preserve the
Improvements and any materials or supplies located on the Land, to
complete in part or in full the construction of the Improvements,
including, but not limited to, making changes in the Plans, and
entering into, modifying or terminating the Construction Documents
and other contractual arrangements, subject to Lender's right at
any time to discontinue any work without liability. If Lender
elects to continue with the construction of the Improvements, it
will not assume any liability to Borrower or any other person for
completing the Improvements or for the manner or quality of
construction of the Improvements and Borrower expressly waives any
such liability. Borrower irrevocably appoints Lender as its
attorney-in-fact, with full power of substitution, to complete the
Improvements in Borrower's name or Lender may elect to complete
construction in its own name. In any event, all sums expended by
Lender in completing construction or otherwise exercising its
rights hereunder or under the other Loan Documents will be secured
by the Mortgage and all other instruments or documents securing the
Loan and shall bear interest at the rate applicable to the Loan
from time to time as provided in the Note.
8. MISCELLANEOUS
8.1 No Waiver; Consents. Any waiver by Lender must be in
writing and will not be construed as a continuing waiver. No
waiver will be implied from any delay or failure by Lender to take
action on account of any default of Borrower. Consent by Lender to
any act or omission by Borrower will not be construed to be a
consent to any other or subsequent act or omission or to waive the
requirement for Lender's consent to be obtained in any future or
other instance.
8.2 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and benefit of Lender and
Borrower. No trust fund is created by this Agreement and no other
persons or entities will have any right of action under this
Agreement or any right against Lender to obtain any Loan proceeds.
8.3 Notices. All notices given under this Agreement shall be
given in the manner provided by the Mortgage.
8.4 Authority to File Notices. Borrower irrevocably appoints
Lender as its attorney-in-fact, with full power of substitution, to
file for record, at Borrower's cost and expense and in Borrower's
name, any notices that Lender considers necessary or desirable to
protect its interests or security.
8.5 Actions. Lender will have the right, but not the
obligation, to commence, appear in, and defend any action or
proceeding which might affect its security or its rights, duties or
liabilities relating to the Loan, the Land, the Improvements or
this Agreement. Borrower will pay promptly on demand all of
Lender's reasonable out-of-pocket costs, expenses, and legal fees
and disbursements incurred in those actions or proceedings.
8.6 Applicable Law. This Agreement will be governed by
Pennsylvania law.
8.7 Heirs, Successors and Assigns; Participants. The terms of
this Agreement will bind and benefit the heirs, legal
representatives, successors and assigns of the parties; provided,
however, that Borrower may not assign this Agreement or any Loan
funds or assign or delegate any of its rights or obligations
without the prior written consent of Lender. Lender shall have the
right to sell participations in the Loan to any other persons or
entities without the consent of or notice to Borrower. Lender may
disclose to any participants or prospective participants any
information or other data or material in Lender's possession
relating to Borrower, any Partner, the Loan and the construction
project described herein without the consent of or notice to
Borrower.
8.8 Signs; Publicity. Lender may, at Lender's expense, erect
a sign or signs as approved by Lender upon the Land and
Improvements at any reasonable location indicating the source of
the development and construction financing. The announcement of,
and the issuance of any publicity with respect to, the Loan and the
transactions contemplated hereby shall be at such time and in such
form and manner as Lender shall determine.
8.9 Survival. Except as otherwise may be expressly set forth
herein, all covenants, agreements, warranties and representations
by Borrower herein shall survive the disbursement of the Loan and
shall remain in effect until payment in full of the Loan.
8.10 Severability. The invalidity or unenforceability of any
one or more provisions of this Agreement will in no way affect any
other provisions.
8.11 Interpretation. Whenever the context requires, all words
used in the singular will be construed to have been used in the
plural, and vice versa, and each gender will include any other
gender. The captions of the sections of this Agreement are for
convenience only and do not define or limit any terms or
provisions. Time is of the essence in the performance of this
Agreement by Borrower.
8.12 Amendments. This Agreement may not be modified or
amended, except by a written agreement signed by the parties.
8.13 Counterparts. This Agreement and any attached consents or
Exhibits requiring signatures may be executed in counterparts, but
all counterparts shall constitute but one and the same document.
ATTEST/WITNESS: LENDER:
FIRST WESTERN BANK, NATIONAL
ASSOCIATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
[SEAL]
BORROWER:
WITNESS/ATTEST: ▇▇▇▇ TWELVE ASSOCIATES, L.P.,
a Pennsylvania limited
partnership
By: ▇▇▇▇ CENTERS TRUST,
a Maryland business trust,
General Partner
/s/ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
Senior Vice President and
Chief Financial Officer