LOAN AGREEMENT

 

                                                               Exhibit 10 (n)

                                 LOAN AGREEMENT

 

 

 

 

                                      among

 

 

 

           BAYSHORE LANDING, LLC, a Florida limited liability company,

          BAYSHORE RAWBAR, LLC, a Florida limited liability company and

          BAYSHORE RESTAURANT, LLC, a Florida limited liability company

 

                           Collectively, as Borrowers

 

 

 

                                       and

 

 

 

                        WACHOVIA BANK, NATIONAL ASSOCIATION

                                    as Lender

 

 

 

 

                              As of August 19, 2004

 

 

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                                 LOAN AGREEMENT

                                 --------------

 

          This Loan   Agreement   (this   "Agreement ") is entered into as of August

19, 2004 among WACHOVIA BANK, NATIONAL ASSOCIATION ("Lender"), BAYSHORE LANDING,

LLC,   a Florida   limited   liability   company,   BAYSHORE   RAWBAR,   LLC, a Florida

limited   liability   company   and   BAYSHORE   RESTAURANT,   LLC, a Florida   limited

liability company (collectively, "Borrowers" and individually, a "Borrower").

 

 

                                    RECITALS:

 

         1. Borrowers have requested Lender to make an acquisition, construction

and term   loan to   Borrowers   in the   principal   amount of   $13,275,000.00   (the

`Loan") for the purposes set forth in this Agreement. .

 

         2. The Loan is evidenced by a Promissory Note in the original principal

amount of $13,275,000.00 (the "Note"), made by Borrowers, jointly and severally,

payable to the order of Lender and bearing the same date as this Agreement.

 

         3. The Note is   secured   by,   inter   alia,   a   Leasehold   Mortgage   and

Security   Agreement (the   `Mortgage"),   made by Borrowers in favor of Lender and

bearing the same date as this Agreement.

 

         NOW, THEREFORE, in consideration of the mutual covenants and agreements

contained   in this   Agreement   and other good and valuable   considerations,   the

receipt and sufficiency of which Lender and Borrowers hereby acknowledge, Lender

and   Borrowers   agree   that the   foregoing   recitals   are true and   correct   and

incorporated herein and further agree as follows:

 

                                   ARTICLE 1.

 

                                CERTAIN DEFINITIONS

 

         Section 1.1. Certain   Definitions.   As used herein, the following terms

have the meanings indicated:

 

         (1)   "Acquisition   Loan" means the portion of the Loan in the amount of

$10,050,000.00 to finance acquisition of the Mortgaged Property by Borrowers.

 

         (2) "Advance Request" has the meaning assigned in Section 2.3(1).

 

         (3) "Advances" means advances of the Loan proceeds subject to the terms

and conditions of this Agreement.

 

          (4) "Affiliate"   means (a) any corporation in which any Borrower or any

general   partner,   shareholder,   director,   officer,   member,   or manager of any

Borrower directly or indirectly owns or controls more than ten percent (1 0%) of

the beneficial interest, (b) any

 

 

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partnership, joint venture or limited liability company in which any Borrower or

any general partner,   shareholder,   director, officer, member, or manager of any

Borrower   is a partner,   joint   venturer   or member,   (c) any trust in which any

Borrower   or any   general   partner,   shareholder,   director   or   officer   of any

Borrower   is a trustee   or   beneficiary,   (d) any   entity   of any type   which is

directly   or   indirectly   owned or   controlled   by any   Borrower   or any general

partner, shareholder,   director, officer, member or manager of any Borrower, (e)

any general partner,   shareholder,   director,   officer, member or manager of any

Borrower,   (1) any Person related by birth,   adoption or marriage to any general

partner,   shareholder,   director, officer, member or manager of any Borrower, or

(g) any Borrower Party.

 

         (5)   "Agreement"   means this Loan   Agreement,   as amended   from time to

time.

 

         (6) "Architect" has the meaning set forth in Schedule 2.2.

 

         (7) "Architect's Contract" has the meaning set forth in Schedule 2.2.

 

         (8) "Assignment of Leases and Rents" means the Assignment of Leases and

Rents, executed by Borrowers for the benefit of Lender, and pertaining to leases

of space in the Mortgaged Property.

 

         (9) "Bankruptcy Party" has the meaning assigned in Section 9.16.

 

         (10) "Bayshore Landing" means Bayshore Landing,   LLC, a Florida limited

liability company.

 

         (11) "Bayshore   Rawbar" means Bayshore   Rawbar,   LLC, a Florida limited

liability company.

 

         (12) "Bayshore   Restaurant" means Bayshore   Restaurant,   LLC, a Florida

limited liability company.

 

         (13) "Bonds" has the meaning assigned in Section 8.30.

 

         (14) "Borrower   Party" means each   Guarantor,   and each member and each

manager of each Borrower.

 

         (15)   "Budget"   means the detailed line item budget of Direct Costs and

Indirect Costs attached hereto as Schedule 1.1 (15), and showing the total costs

for each   line item and the   amount   of each   line   item to be   funded   from the

Construction Loan and/or Borrowers' equity, as the same may be revised from time

to time with the written approval of Lender.

 

         (16) "Business Day" means a day other than a Saturday,   a Sunday,   or a

legal holiday on which   national   banks located in the State of New York are not

open for general banking business.

 

         (17)   "Christoph   Trusts" means those trusts created under that certain

Trust   Agreement   of the   Christoph   Family   Trust   dated   March 19, 1997 by and

between Robert W.   Christoph,   Sr. as Grantor and Robert W.   Christoph,   Sr. and

Carter N. McDowell as Trustees

 

 

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         (18) "City"   means the City of Miami,   a municipal   corporation   of the

State of Florida.

 

         (19) "City Lease" as described on Schedule 1.1 (19) attached hereto.

 

         (20) "Closing Date" means August 19, 2004.

 

         (21)   "Closing   Site   Assessments   and    Environmental    Documents"   as

described on Schedule 1.1 (21) attached hereto.

 

         (22) "Completion Conditions" has the meaning assigned in Section 8.23.

 

         (23)   "Completion   Date"   means   August   19,   2005 with   respect to all

portions   of the   Project   except   for the   improvements   to be made   under   the

Restaurant   Sublease,   and February 19, 2006 with respect to the improvements to

be made under the Restaurant Sublease.

 

         (24) "Construction Contract" has the meaning set forth in Schedule 2.2.

 

         (25)   "Construction   Documents"   means the Construction   Contract,   the

Architect's   Contract and all other present and future   construction   contracts,

contracts with architects,   engineers or other design   professionals,   the Plans

and Specifications,   all present and future drawings,   budgets,   bonds and other

agreements    pertaining   to   construction   of   the   Project,   and   any   and   all

engineering,   soil and other   reports and   studies   and all   surveys   pertaining

thereto.

 

         ` (26) "Construction Lien Law" means Florida Statutes Chapter 713, Part

I, as same may be amended from time to time.

 

         (27) "Construction Loan" means the portion of the Loan in the amount of

$3,225,000.00 to finance construction of the Project.

 

         (28)   "Construction   Period" means the period of time commencing on the

Closing Date and ending on the Completion Date.

 

         (29)   "Debt "   means,   for any   Person,   without   duplication:   (a) all

indebtedness of such Person for borrowed money, for amounts drawn under a letter

of credit,   or for the deferred purchase price of property for which such Person

or its assets is liable, (b) all unfunded amounts under a loan agreement, letter

of credit,   or other credit   facility for which such Person would be liable,   if

such amounts were advanced under the credit   facility,   (c) all amounts required

to be paid by such Person as a guaranteed   payment to partners or a preferred or

special dividend, including any mandatory redemption of shares or interests, (d)

all   indebtedness   guaranteed by such Person,   directly or   indirectly,   (e) all

obligations under leases that constitute capital leases for which such Person is

liable,   (f) and all obligations of such Person under interest rate swaps, caps,

floors,   collars and other interest hedge agreements,   in each case whether such

Person is liable contingently or otherwise, as obligor,   guarantor or otherwise,

or in respect of which   obligations   such   Person   otherwise   assures a creditor

against loss.

 

         (30)   "Debt   Service   Coverage   Ratio"   means the   ratio of   Borrowers'

consolidated   (a)   (i) net   income,   plus   (ii)   depreciation   and   amortization

expense, plus (iii) interest

 

 

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expense,   minus (iv) unfinanced capital   expenditures,   minus (v) distributions,

all divided by (b) paid current   maturities of long term debt (including capital

leases) plus interest expense, all as determined in accordance with GAAP.

 

         (31)   "Default   Rate"   means the maximum   rate of   interest   allowed by

applicable law.

 

         (32)   "Development   Agreement"   means any   agreements   now or hereafter

existing   with the City of Miami or the County of Miami-   Dade or any   providing

utility company or authority relating to the Project.

 

              (33) "Direct Costs" means direct construction costs incurred by

Borrowers in connection with the construction of the Project, as itemized in the

Budget, as the same may be revised from time to time with the written approval

of Lender.

 

         (34)    "Entity    Guarantors"    means,     collectively,     HMG/Courtland

`Properties, Inc., a Delaware corporation, the Christoph Family Trust FBO Robert

Christoph, Jr. and the Christoph Family Trust FBO Hunter Christoph. Each of such

Entity Guarantors is individually referred to as an "Entity Guarantor."

 

         (35) "Environmental Laws" has the meaning assigned in Article 4.

 

         (36) "Equity   Requirement"   means an amount equal to the greater of (i)

$1,075,000.00   or (ii) twenty-   five percent   (25%) of the Direct Costs or (iii)

the amount by which in the reasonable   opinion of Lender and Lender's   Inspector

the aggregate of Direct Costs set forth in the Budget   exceeds the amount of the

Construction   Loan.   Should   the   Direct   Costs not   exceed   $4,300,000.00,   the

Construction   Loan shall be reduced to an amount equal to   seventy-five   percent

(75%) of the   reduced   Direct   Costs,   and the equity   requirement   shall be the

difference between the Direct Costs and the Construction Loan.

 

         (37) "Event of Default" has the meaning assigned in Article 9.

 

         (38)   "Excusable   Delays" means unusually   adverse   weather   conditions

which have not been taken into   account   in the   construction   schedule   for the

Project; fire, earthquake or other acts of God; strike,   lockout, acts of public

enemy,   riot or insurrection or any unforeseen   circumstances   or events (except

financial   circumstances   or events or   matters   which   may be   resolved   by the

payment of money) beyond the control of any Borrower,   not to exceed,   except as

otherwise   agreed to by Lender in   Lender's   sole and   absolute   discretion,   15

consecutive   days in any one   instance,   or more than 30 days in the   aggregate,

provided   Borrowers   shall notify Lender in writing within 5 days after any such

occurrence.

 

         (39) "General Contractor" has the meaning set forth in Schedule 2.2.

 

         (40)   "Generally   Accepted   Accounting    Principles"   or   "GAAP"   means

generally accepted accounting principles as recognized by the American Institute

of Certified Public Accountants and the Financial Accounting Standards Board, as

in effect from time to time in the United States, consistently applied.

 

 

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         (41)   "Guarantors"   means each   Person   now or   hereafter   executing   a

Guaranty,    including    initially   the   Entity   Guarantors   and   the   Individual

Guarantor.

 

         (42)   "Guaranty"   means the instruments of guaranty now or hereafter in

effect from a Guarantor to Lender.

 

         (43) "Hazardous Materials" has the meaning assigned in Article 4.

 

         (44) "Hedge   Documents" means,   collectively,   that certain ISDA Master

Agreement between Bayshore Landing and Lender,   Schedule to the Master Agreement

between   Bayshore Landing and Lender and all applicable   confirmations   relating

thereto, all of which are dated August ___, 2004.

 

         (45) "Indirect Costs" means costs, other than Direct Costs, incurred by

Borrowers in connection with the Project, as itemized in the Budget, as the same

may be revised from time to time with the written approval of Lender.

 

         (46) "Individual Guarantor" means Robert Christoph, Sr., individually.

 

         (47) "Lender's Inspector" has the meaning assigned such term in Section

2.2(6).

 

         (48) "LIBOR   Rate"   means for any day the rate for 1 month U.S.   dollar

deposits as reported on Telerate   page 3750 as of 11:00 a.m.,   London   time,   on

such day,   or if such day is not a London   business   day,   then the   immediately

preceding   London   business day (or if not so reported,   then as   determined   by

Lender from another recognized source or interbank quotation).

 

         (49) "Lien" means any   interest,   or claim   thereof,   in the   Mortgaged

Property   securing an   obligation   owed to, or a claim by, any Person other than

the   Borrowers,   whether   such   interest   is based on   common   law,   statute   or

contract,   including the lien or security interest arising from a deed of trust,

mortgage, assignment,   encumbrance, pledge, security agreement, conditional sale

or trust receipt or a lease,   consignment or bailment for security purposes. The

term "Lien" shall include reservations,   exceptions,   encroachments,   easements,

rights of way,   covenants,   conditions,   restrictions,   leases   and other   title

exceptions and encumbrances affecting the Mortgaged Property.

 

         (50) "Loan" means the loan in the aggregate amount of $13,275,000 to be

made by Lender to Borrowers   under this Agreement and all other amounts   secured

by the Loan Documents.

 

         (51) "Loan Documents" means: (a) this Agreement, (b) the Note, (c) each

Guaranty,   (d) the Hedge   Documents,   (e) the   Mortgage,   (f) the   Assignment of

Leases and Rents,   (g) Uniform   Commercial Code financing   statements,   (h) such

assignments   of   management   agreements,   contracts   and other   rights as may be

required by Lender, (i) all other documents evidencing,   securing,   governing or

otherwise   pertaining   to the   Loan,   and   (j)   all   amendments,   modifications,

renewals, substitutions and replacements of any of the foregoing.

 

 

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         (52)   "Maturity   Date"   means the earlier of (a) (i) August 19, 2020 if

the Completion   Conditions are satisfied by the Completion   Date, and no uncured

Event   of   Default   then   exists,   or (ii)   August   19,   2005 if the   Completion

Conditions   are not   satisfied   by the   Completion   Date or an uncured   Event of

Default   then   exists,   or (b) any   earlier   date on which   the   entire   Loan is

required to be paid in full, by acceleration or otherwise,   under this Agreement

or any of the other Loan Documents.

 

         (53) "Mortgage"   means the Leasehold   Mortgage and Security   Agreement,

executed by Borrowers in favor of Lender and covering the Mortgaged Property.

 

         (54) "Mortgaged Property" means, without limitation, Bayshore Landing's

leasehold interest in the real property legally described on Schedule A attached

hereto, all improvements,   structures, docks, piers and all other facilities now

or hereafter located thereon,   all easements,   licenses,   leases,   subleases and

other rights   appurtenant   thereto,   the businesses   known as the "Coconut Grove

Marina"   and   "Monty's   Restaurants"   located in   Coconut   Grove,   Florida,   all

amenities,    fixtures,   and   personal   property   appurtenant   thereto,   Bayshore

Landing's   leasehold   interest in the City Lease,   Bayshore   Rawbar's   leasehold

interest in the Rawbar Sublease and Bayshore Restaurant's   leasehold interest in

the Restaurant Sublease.

 

         (55)   "Note"   means the   Promissory   Note of even   date,   in the stated

principal amount of $13,275,000.00, executed by Borrowers jointly and severally,

and payable to the order of Lender in evidence of the Loan.

 

         (56)   "Permanent   Period" means the period of time commencing on August

20, 2005 and ending on the Maturity Date.

 

         (57) "Person" means any   individual,   corporation,   partnership,   joint

venture,   association,   joint stock company,   trust,   trustee,   estate,   limited

liability company,   unincorporated   organization,   real estate investment trust,

government or any agency or political subdivision, thereof, or any other form of

entity

 

         (58)    "Plans    and    Specifications"    means   the    final    plans   and

specifications,   including   without   limitation   all maps,   sketches,   diagrams,

surveys,   drawings and lists of materials,   for the construction of the Project,

to   prepared   by the   Architect   and   subject to the review by and   approval   of

Lender, and any and all modifications   thereof made with the written approval of

Lender.

 

                  (59) "Potential Default" means the occurrence of any event or

condition which, with the giving of notice, the passage of time, or both, would

constitute an Event of Default.

 

         (60) "Project" means the construction on the Mortgaged   Property of the

improvements described in the Plans and Specifications.

 

         (61) "Rawbar   Sublease" means that certain   sublease   agreement of even

date herewith   between Bayshore   Landing,   as lessor,   and Bayshore   Rawbar,   as

lessee.

 

 

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         (62)   "Restaurant   Sublease" means that certain   sublease   agreement of

even date herewith between Bayshore Landing, as lessor, and Bayshore Restaurant,

as lessee.

 

         (63) "Retainage"   means the greater of (a) 10% of Direct Costs actually

incurred by   Borrowers   for work in place as part of the   Project,   as certified

from time to time by Lender's Inspector, or (b) the amount actually held back by

Borrowers   from the   General   Contractor   and each   subcontractor   and   supplier

engaged in the construction of the Project.

 

         (64)   "Single   Purpose   Entity"   shall   mean a   Person   (other   than an

individual, a government, or any agency or political subdivision thereof), whose

sole business is owning the Mortgaged   Property (or applicable portion thereof),

and that conducts business only in its own name, does not engage in any business

or have any assets   unrelated   to the   Mortgaged   Property   (other than cash and

investment   grade   securities),   does not have any   indebtedness   other   than as

permitted by this Agreement,   has its own separate books,   records, and accounts

(with no commingling of assets), holds itself out as being a Person separate and

apart from any other Person, and observes corporate and partnership   formalities

independent   of any other   entity,   and   which   otherwise   constitutes   a single

purpose entity as determined by Lender.

 

                  (65) "Site Assessment" means an environmental engineering

report for the Mortgaged Property prepared by an engineer engaged by Lender at

Borrowers' expense, and in a manner satisfactory to Lender, based upon an

investigation relating to and making appropriate inquiries concerning the

existence of Hazardous Materials on or about the Mortgaged Property, and the

past or present discharge, disposal, release or escape of any such substances,

all consistent with good customary and commercial practice.

 

         (66) "State" means the State of Florida.

 

         (67) "State Lease" as described on Schedule I .1 (67) attached hereto.

 

         (68) "State Waivers" as described on Schedule 1.1 (68) attached hereto.

 

         (69) "Title Insurer" means First American Title Insurance Company.

 

         (70) "Verified   Project Costs" means the aggregate,   from time to time,

of (a) Indirect Costs actually incurred by Borrowers and approved for funding by

Lender, and (b) Direct Costs actually incurred by Borrowers for work in place as

part of the   Project,   as certified   by Lender's   Inspector,   from time to time,

pursuant to the provisions of this Agreement, minus a sum equal to the aggregate

of (i) the portion of the Equity   Requirement   which   Borrowers   are required to

have invested in the Project from time to time pursuant to this   Agreement,   and

(ii) the Retainage.

 

                                   ARTICLE 2.

 

                              LOAN TERMS; ADVANCES

 

         Section 2.1.   Acquisition Loan. The Acquisition Loan shall be funded in

one Advance to   Borrowers on the Closing Date   provided   the   conditions   as set

forth on Schedule 2.1 attached

 

 

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have been   satisfied.   The   proceeds   of the   Acquisition   Loan shall be used by

Borrowers to finance the acquisition of the Mortgaged Property.

 

         Section 2.2. Construction Loan.

 

         (1) Advances.   Subject to   compliance   by Borrowers   with the terms and

conditions of this Agreement, including without limitation,   satisfaction of the

conditions set forth on Schedule 2.2 attached hereto, Lender shall make Advances

to Bayshore Landing of the Construction Loan during the Construction   Period for

Direct   Costs and   Indirect   Costs;   provided,   however,   that in no event shall

Lender be obligated to make   disbursements of the Construction Loan in excess of

Verified   Project Costs. All Direct Costs and Indirect Costs must, to the extent

possible, be verified by fixed cost contracts,   and all items of cost reasonably

incapable of   verification   by means of fixed cost contracts must be supportable

as reasonable estimates.

 

         (2)   Equity   Requirement.   Prior   to   any   Advance   by   Lender   of   the

Construction   Loan,   Borrowers   shall   invest   an   amount   equal   to the   Equity

Requirement   into the construction of the Project in accordance with the Budget.

The Equity   Requirement shall remain invested in the Project for the term of the

Loan and   Borrowers   agree that no portion   of the   Equity   Requirement   will be

reimbursed directly or indirectly without Lender's prior written consent. At the

request of Lender,   the amount of the Equity Requirement shall be deposited with

Lender and   disbursed by Lender for   construction   of the Project in   accordance

with the terms and conditions of this Agreement.

 

         (3)    Retainage.    Lender    shall   retain   from   each   Advance   of   the

Construction   Loan an amount   equal to the   Retainage.   The   Retainage   shall be

released by Lender,   provided that no Event of Default then exists   hereunder or

under   any of the other   Loan   Documents,   at the time of,   and   subject   to the

conditions   set forth on Schedule 2.2 with respect to, the final   Advance of the

Construction Loan.

 

         (4)   Deficiency   in   Loan   Amount.   If,   prior   to any   Advance   of the

Construction Loan, for any reason, Lender shall determine in its sole discretion

that the   actual   cost to   complete   construction   of the   Project   exceeds   the

undisbursed   balance of the Construction   Loan,   Lender may require Borrowers to

deposit with Lender within seven (7) days after   written   notice from Lender the

projected   deficiency.   At Lender's option, no Advances of the Construction Loan

shall be made until   Borrowers   have fully complied with this   requirement.   All

such deposited   funds shall be additional   security for the Loan and at Lender's

option, shall be disbursed, in accordance with the provisions of this Agreement,

to pay costs to complete construction of the Project before any further Advances

of the Construction Loan.

 

         (5) Contingency Reserve. Advances from that portion of the Construction

Loan proceeds   allocated to   "contingency"   (the   "Contingency   Reserve") on the

Budget,   if any, may be disbursed in Lender's sole and absolute   discretion   for

payment of Direct Costs or Indirect   Costs as   documented   by paid   receipts and

otherwise as provided   herein.   Lender may determine in its absolute   discretion

whether to pay interest from the Contingency Reserve.

 

         (6)   Lender's   Inspector.   Lender   shall have the right to   retain,   at

Borrowers'   expense,   any   individual   designated   by   Lender   from time to time

(`Lender's Inspector") to act

 

 

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as   Lender's   consultant   in   connection   with   the   Construction   Loan   and the

construction   of the   Project,   to review and advise   Lender with respect to the

Construction Documents,   and other matters related to the design,   construction,

operation and use of the Project,   to monitor the progress of construction,   and

to review Advance Requests and change orders submitted   hereunder.   The fees and

expenses of Lender's Inspector shall be due and payable by Borrowers as provided

for   herein or   otherwise   on   demand.   Borrowers   shall   provide   to Lender and

Lender's Inspector facilities commonly made available by responsible contractors

for the inspection of the Project,   and to afford full and free access by Lender

and Lender's Inspector to all Construction Documents. Borrowers acknowledge that

(a) Lender's   inspector has been retained by Lender to act as a consultant,   and

only as a   consultant,   to Lender in   connection   with the   construction   of the

Project, (b) Lender's Inspector shall in no event have any power or authority to

make any   decision   or to give any   approval or consent or to do any other thing

which is binding upon Lender and any such purported decision,   approval, consent

or act by Lender's   Inspector   on behalf of Lender shall be void and of no force

or effect,   (c) Lender reserves the right to make any and all decisions required

to be made by Lender under this Agreement,   in its sole and absolute discretion,

and without in any instance   being bound or limited in any manner   whatsoever by

any opinion   expressed or not   expressed by Lender's   Inspector to Lender or any

other person with   respect   thereto,   and (d) Lender   reserves the right in its,

sole   and   absolute   discretion   to   replace   Lender's   Inspector   with   another

inspector at any time and without prior notice to or approval by Borrowers.

 

         (7) No Warranty by Lender.   Nothing   contained in this Agreement or any

other Loan Document shall constitute or create any duty on or warranty by Lender

regarding   (a) the   accuracy or   reasonableness   of the   Budget,   (b) the proper

application by Borrowers,   General   Contractor or any   subcontractor of the Loan

proceeds,   (c) the quality or condition of the Project, or (d) the competence or

qualifications of the General   Contractor or any other party furnishing labor or

materials in connection with the   construction   of the Project.   ` Each Borrower

(i)   acknowledges   that it has not relied and will not rely upon any experience,

awareness or expertise of Lender regarding the aforesaid matters; and (ii) shall

indemnify,   hold harmless, and defend Lender from any costs, expenses,   damages,

judgments   or   liabilities,    including   without   limitation,   attorneys'   fees,

arbitration   fees, and expert   witness fees,   arising from or connected with (A)

such matters,   (B) payment or non-payment   for labor or materials   furnished for

construction   of the Project,   (C) any claims of mechanics or materialmen or (D)

any action or inaction by any Borrower in connection with the foregoing.

 

         Section 2.3. Procedures for Advances of the Construction Loan

 

         (1) Advance Requests. For each request for an Advance,   Borrowers shall

submit to Lender, at least five (5) business days prior to the requested date of

disbursement,   a   completed   written   disbursement   request   (each,   an "Advance

Request") in such form and detail as required by Lender,   together   with a check

in the amount of the   inspection   fee set forth in Section   2.3(2)   hereof.   All

Advances   of   the   Construction   Loan   shall   be   made   from   time   to   time   as

construction   progresses   upon written   application of Borrowers   pursuant to an

Advance   Request.   Borrowers   shall file   Advance   Requests   with Lender no more

frequently   than   monthly,   covering   work   performed   since the   prior   Advance

Request. Each Advance Request shall certify in detail, acceptable to Lender, the

cost of the   labor   that has been   performed   and the   materials   that have been

incorporated   into the Project and all   Indirect   Costs that have been   incurred

since

 

 

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<PAGE>

 

 

 

the date of the previous   Advance,   and shall be accompanied by such   supporting

data as Lender may require, including,   without limitation,   receipts, vouchers,

invoices,   waivers of mechanic's and materialmen's liens, and AlA Forms G702 and

G703   certified   by the General   Contractor   and,   if   required   by Lender,   the

Architect   or engineer for the   Project.   The proceeds of each Advance   shall be

used by Borrowers   solely to pay or as   reimbursement   for the   obligations   for

which   the   Advance   is   sought.    Each   Advance   Request   shall    constitute   a

representation by Borrowers that the work done and the materials supplied to the

date thereof are in accordance with the Plans and Specifications;   that the work

and materials for which payment is requested have been   physically   incorporated

into the   Project;   that the   value is as   stated;   that the work and   materials

conform with all   applicable   rules and   regulations   of the public   authorities

having   jurisdiction;   that   payment   for the items   described   in such   Advance

Request has been made or will be made with the proceeds of the Advance for which

the Advance Request was submitted;   that such Advance Request is consistent with

the Budget; that the proceeds of the previous Advance have been actually paid by

Borrowers in   accordance   with the approved   Advance   Request for such   previous

Advance;   and that no Event of Default or event which, with the giving of notice

or the   passage of time,   or both,   would   constitute   an Event of   Default   has

occurred and is continuing.

 

         (2) Lender's Inspector.   Upon receiving each Advance Request,   Lender's

Inspector   will   determine   (a) whether the work   completed   to the date of such

Advance   Request has been done   satisfactorily   and in accordance with the Plans

and Specifications,   (b) the percentage of construction of the Project completed

as of the date of such Advance Request,   (c) the Direct Costs actually   incurred

for work in place as part of the Project as of the date of such Advance Request,

(d) the   actual   sum   necessary   to   complete   construction   of the   Project   in

accordance   with the Plans and   Specifications,   and (e) the amount of time from

the date of such Advance Request which will be required to complete construction

of the Project in accordance with the Plans and Specifications.   Borrowers shall

pay a   reasonable   inspection   fee to Lender   upon   submission   of each   Advance

Request.   All   inspections   by or on behalf of   Lender   shall be solely   for the

benefit of Lender, and Borrowers shall have no right to claim any loss or damage

against Lender or Lender's   Inspector arising from any alleged (i) negligence in

or failure to perform such inspections,   (ii) failure to monitor Advances of the

Construction   Loan or the progress or quality of construction,   or (iii) failure

to otherwise properly administer the Construction Loan.

 

         (3)   Disbursement   of   Advances.   At Lender's   option,   Lender may fund

Advances   of   the   Construction   Loan   directly   into   a   separate   construction

disbursement   account or other   account of   Bayshore   Landing   with   Lender,   to

Bayshore Landing   directly,   to a title insurance   company or other third party,

directly   to   the   General   Contractor,   subcontractor,    materialmen   or   other

suppliers   providing   labor,   services   or   materials   in   connection   with   the

construction   of the   Project,   or jointly to   Borrower(s)   and any such person.

Lender shall have no obligation after making Advances of the   Construction   Loan

in a particular   manner to continue to make Advances of the Construction Loan in

that manner.   Notwithstanding the foregoing,   Lender's records of any Advance of

the   Construction   Loan made pursuant to this Agreement shall, in the absence of

manifest error, be deemed correct and acceptable and binding upon Borrowers.

 

 

                                       10

<PAGE>

 

 

 

         (4) Stored Materials.   Lender shall not be required to make Advances of

the Construction   Loan for costs incurred by Borrowers with respect to materials

stored   on or off the   Mortgaged   Property   unless   Lender   shall,   in its   sole

discretion,   deem it advisable to do so. If Lender   elects to make an Advance of

the   Construction   Loan for   stored   materials,   all   stored   materials   must be

incorporated into the Project within forty five (45) days of Borrowers'   Advance

Request regarding such materials,   and the following additional conditions shall

apply: (a) copies of all invoices relating to such stored materials and a stored

materials inventory sheet shall be submitted with the Advance Request;   (b) with

respect to materials stored on the Mortgaged   Property,   such materials shall be

adequately secured, as determined by Lender's Inspector; and (c) with respect to

materials   stored   off   the   Mortgaged   Property,   such   materials   must   be (i)

adequately   stored at a bonded   warehouse,   (ii) insured   under an Inland Marine

Policy naming Lender as an additional insured, (iii) subject to a first priority

lien held by Lender,   and (iv)   subject to   inspection   by   Lender's   Inspector.

Lender   may impose   such   additional   conditions   and   requirements   as it deems

appropriate in its sole discretion.

 

         Section 2.4. Interest Rate; Late Charge.

 

         (1)   Interest   Rate.   The   outstanding   principal   balance   of the Loan

(including any amounts added to principal under the Loan   Documents)   shall bear

interest at a rate of interest equal to 2.45% (i.e., 245 basis points) per annum

in   excess of the   LIBOR   Rate.   Interest   shall be   computed   on the basis of a

fraction,   the   denominator   of which   is   three   hundred   sixty   (360)   and the

numerator   of which is the actual   number of days   elapsed   from the date of the

initial advance or the date on which the immediately preceding payment was due.

 

         (2) Late Charge.   If Borrowers fail to pay any   installment of interest

or   principal   within   five (5) days   after   the date on which   the same is due,

Borrowers   shall   pay to   Lender   a late   charge   on such   past due   amount,   as

liquidated   damages   and not as a penalty,   five   percent   (5%) of such   amount.

Borrowers    acknowledge   that   the   late   charge   imposed   herein   represents   a

reasonable estimate of the expenses of Lender incurred because of such lateness.

Acceptance   by Lender of any late payment   without an   accompanying   late charge

shall not be deemed a waiver of Lender's right to collect such late charge or to

collect a late   charge   for any   subsequent   late   payment   received.   Borrowers

further acknowledge that the provisions herein shall not be construed to provide

a grace period for payments of installments of principal or interest.

 

         (3) Default   Rate.   While any Event of Default   exists,   the Loan shall

bear interest at the Default Rate.

 

         Section 2.5. Terms of Payment. The Loan shall be payable as follows:

 

         (1)   Construction   Period.   During   the   Construction   Period,   monthly

payments of accrued and unpaid interest on the outstanding   principal balance of

the Loan from time to time shall be due and payable commencing on September 1 9,

2004 and continuing on the I 9th day of each successive month thereafter through

and including August 19, 2005.

 

         (2)   Permanent   Period.   During the   Permanent   Period,   principal   and

interest   shall   be due   and   payable   commencing   on   September   19,   2005   and

continuing on the 19th day of

 

 

                                       11

<PAGE>

 

 

 

each successive month thereafter in consecutive monthly installments in an

amount equal to the sum of (a) all then accrued and unpaid interest, plus (b) a

principal payment in the amount set forth in the Repayment and Prepayment

Schedule attached hereto as Schedule 2.5(2).

 

         (3) Maturity.   On the Maturity Date,   Borrowers shall pay to Lender all

outstanding   principal,   accrued and unpaid interest,   and any other amounts due

under the Loan Documents.

 

         (4)   Prepayment.   Upon not less than fifteen   (15) days' prior   written

notice to   Lender,   Borrowers   may   prepay   the Loan,   in whole but not in part,

without prepayment   premium,   provided Bayshore `Landing shall pay to Lender any

and   all   amounts   due   under   the   Hedge   Documents   in   connection   with   such

prepayment,   including   without   limitation,   breakage or unwind   costs or other

losses   incurred by Lender in order to break its   underlying   swap contract with

the financial institution provided such swap in connection with the Loan. If the

Loan is   accelerated   for any reason,   Bayshore   Landing   shall   likewise pay to

Lender any and all   amounts   due under the Hedge   Documents,   including   without

limitation, breakage or unwind costs or other such losses.

 

         (5) Application of Payments.   All payments received by Lender under the

Loan Documents   shall be applied:   first,   to any unpaid and delinquent fees and

expenses due to Lender   under the Loan   Documents;   second,   to any Default Rate

interest or late charges;   third, to accrued and unpaid interest; and fourth, to

the principal sum and other amounts due under the Loan Documents.

 

         (6) Time and Place of   Payments.   Borrowers   shall make each payment of

principal   of and interest on the Loan and fees   hereunder   not later than 12:00

noon   (local   time   Miami,   Florida)   on the date   when   due,   without   set off,

counterclaim or other deduction, in immediately available funds to Lender at its

address as directed by Lender. Whenever any payment of principal of, or interest

on, the Loan or of fees shall be due on a day which is not a Business   Day,   the

date for payment thereof shall be extended to the next succeeding   Business Day.

If the date for any payment of   principal   is extended   by   operation   of law or

otherwise, interest thereon shall be payable for such extended time.

 

         Section 2.6. Security.   The Loan, Bayshore Landing's   obligations under

the Hedge   Documents and Borrowers'   obligations   under the other Loan Documents

shall be secured   by (1) the   Mortgage   creating   a first lien on the   Mortgaged

Property,   (2) the   Assignment   of   Rents   and   Leases   and (3) the   other   Loan

Documents.

 

                                   ARTICLE 3.

 

                       INSURANCE, CONDEMNATION, AND IMPOUNDS

 

         Section 3.1. Insurance. Borrowers shall maintain insurance as follows:

 

         (1)   Casualty;   Business   Interruption.   Borrowers   shall   (a) keep the

Mortgaged   Property   insured   against   damage   by   fire   and the   other   hazards

including   windstorm   covered   by a   standard   extended   coverage   and   all-risk

insurance   policy for the full insurable   value thereof   (without   reduction for

depreciation or co-insurance), (b) during construction of the Project or any

 

 

                                       12

<PAGE>

 

 

 

other improvements on the Mortgaged Property,   maintain "all-risk" builders risk

insurance   which   must   include   windstorm,   hail   damage,   fire   and   vandalism

(non-reporting   Completed   Value with Special Cause of Loss form),   in an amount

not   less   than   the   completed   replacement   value   of the   improvements   under

construction,   endorsed to provide   that   occupancy by any person shall not void

such   coverage   and (c) maintain   such other   casualty   insurance as   reasonably

required by Lender.   Borrowers shall keep the Mortgaged Property insured against

loss by flood if the Mortgaged   Property is located in an area identified by the

Federal   Emergency   Management Agency as an area having special flood hazards in

an amount at least equal to the   principal   balance   outstanding   under the Loan

from   time to   time.   Borrowers   shall   `maintain   use and   occupancy   insurance

covering, as applicable,   rental income or business interruption,   with coverage

in an amount not less than twelve (12)-months anticipated gross rental income or

gross   business   earnings,   as   applicable   in   each   case,   with a   minimum   of

$3,600,000   in   coverage   and no   co-insurance,   attributable   to the   Mortgaged

Property.   Borrowers   shall not maintain any   separate or   additional   insurance

which is   contributing   in the event of loss unless it is properly   endorsed and

otherwise   satisfactory   to Lender in all   respects.   The   proceeds of insurance

paid, on account of any damage or destruction to the Mortgaged Property shall be

paid to Lender to be applied as provided in Section 3.2.

 

         (2)   Liability.    Borrowers   shall   maintain   (a)   commercial    general

liability   insurance with respect to the Mortgaged Property providing for limits

of liability of not less than $1 ,000,000 with an additional $4,000,000 umbrella

coverage   for both   injury to or death of a person and for   property   damage per

occurrence, and (b) other liability insurance as reasonably required by Lender.

 

         (3) Form and Quality.   All insurance policies shall be endorsed in form

and substance acceptable to Lender to name Lender as an additional insured, loss

payee or mortgagee thereunder,   as its interest may appear, with loss payable to

Lender,   without   contribution,   under a standard New York (or local equivalent)

mortgagee clause.   All such insurance   policies and endorsements   shall be fully

paid for and contain such   provisions and   expiration   dates and be in such form

and issued by such   insurance   companies   licensed   to do business in the State,

with a rating of "A-IX" or better as   established   by Best's Rating Guide (or an

equivalent rating approved in writing by Lender). Each policy shall provide that

such policy may not be cancelled or materially   changed   except upon thirty (30)

days' prior written notice of intention of non-renewal, cancellation or material

change to Lender and fiat no act or thing done by any Borrower shall   invalidate

any policy as   against   Lender.   If   Borrowers   fail to   maintain   insurance   in

compliance   with this Section 3.1,   Lender may obtain such insurance and pay the

premium   therefor   and   Borrowers   shall,   on demand,   reimburse   Lender for all

expenses incurred in connection   therewith.   Borrowers shall assign the policies

or proofs of   insurance   to Lender,   in such manner and form that Lender and its

successors and assigns shall at all times have and hold the same as security for

the payment of the Loan. Borrowers shall deliver copies of all original policies

certified to Lender by the insurance   company or authorized   agent as being true

copies,   together   with the   endorsements   required   hereunder.   The proceeds of

insurance   policies   coming into the   possession   of Lender   shall not be deemed

trust   funds,   and Lender   shall be   entitled   to apply such   proceeds as herein

provided.

 

         (4) Adjustments.   Borrowers shall give immediate   written notice of any

loss that exceeds $50,000 to the insurance carrier and to Lender.   Each Borrower

hereby irrevocably

 

 

                                       13

<PAGE>

 

 

 

authorizes and empowers Lender, as attorney- in- fact for Borrowers coupled with

an interest,   to make proof of loss,   to adjust and   compromise   any claim under

insurance   policies,   to appear in and   prosecute   any action   arising from such

insurance   policies,   to collect and receive insurance   proceeds,   and to deduct

therefrom   Lender's   expenses   incurred   in the   collection   of   such   proceeds.

Notwithstanding   the foregoing,   provided there is no Potential Default or Event

of Default,   and provided further the casualty loss is fully insured,   Borrowers

shall have the right to settle   casualty   claims of $500,000   or less,   in which

event   Borrowers   shall   keep   Lender   fully   and   immediately   informed   of any

settlement.   Nothing contained in this Section 3.1 shall require Lender to incur

any expense or take any action hereunder.

 

         Section 3.2. Use and   Application of Insurance   Proceeds.   Lender shall

apply insurance proceeds as follows: `

 

         (1) if the loss is less than or equal to   $200,000,   Lender shall apply

the insurance proceeds to restoration   provided no Event of Default or Potential

Default   exists,   and Borrowers   promptly   commence and are diligently   pursuing

restoration of the Mortgaged Property;

 

         (2) if the   loss   exceeds   $200,000   but is not more   than   $1,000,000,

Lender shall apply the insurance   proceeds to   restoration   provided that at all

times   during   such   restoration   (a) no Event of Default or   Potential   Default

exists;   (b) lender   determines   that there are   sufficient   funds   available to

restore and repair the Mortgaged Property to a condition approved by Lender; (c)

Lender   determines   that the Debt Service   Coverage   Ratio covenant set forth in

Section 8.12 hereof during restoration will be maintained; (d) Lender determines

that restoration and repair of the Mortgaged Property to a condition approved by

Lender will be   completed   within six months   after the date of loss or casualty

and in any event one (1) year   prior to the   Maturity   Date;   and (e)   Borrowers

promptly   commence and are   diligently   pursuing   restoration   of the   Mortgaged

Property;

 

         (3) if the   conditions   set forth above are not   satisfied   or the loss

exceeds the maximum amount   specified in Subsection (2) above,   in Lender's sole

discretion,   Lender   may apply any   insurance   proceeds   it may   receive   to the

payment   of the Loan or allow all or a portion of such   proceeds   to be used for

the restoration of the Mortgaged Property; and

 

         (4)   insurance   proceeds   applied to   restoration   will be disbursed on

receipt of satisfactory   plans and   specifications,   contracts and subcontracts,

schedules, budgets, lien waivers and architects' certificates,   and otherwise in

accordance   with   prudent    commercial    construction    lending    practices   for

construction loan advances.

 

         Section 3.3.   Condemnation   Awards.   Borrowers shall immediately notify

Lender of the institution of any proceeding for the condemnation or other taking

of the Mortgaged   Property or any portion   thereof Lender may participate in any

such proceeding and Borrowers will deliver to Lender all   instruments   necessary

or required   by Lender to permit   such   participation.   Without   Lender's   prior

consent,   Borrowers (1) shall not agree to any   compensation   or award,   and (2)

shall   not take any   action or fail to take any   action   which   would   cause the

compensation to be determined.   All awards and   compensation to any Borrower for

the taking or purchase in lieu of condemnation of the Mortgaged   Property or any

part thereof are hereby assigned to and

 

 

                                       14

<PAGE>

 

 

 

shall be paid to Lender.   Borrowers authorize Lender to collect and receive such

awards and compensation,   to give proper receipts and acquittances therefor, and

in Lender's   sole   discretion   to apply the same toward the payment of the Loan,

notwithstanding   that   the   Loan   may not   then be due   and   payable,   or to the

restoration of the Mortgaged Property.   Borrowers, upon request by Lender, shall

execute all   instruments   requested to confirm the   assignment of the awards and

compensation to Lender, free and clear of all liens, charges or encumbrances.

 

         Section   3.4.   Impounds.   At Lender's   option   exercisable   at any time

during the term of the Loan,   Borrowers   shall   deposit   with   Lender,   monthly,

one-twelfth (1/12th) of the annual charges for ground or other rent, if any, and

real estate taxes,   assessments   and similar   charges   relating to the Mortgaged

Property,   and for   insurance   premiums.   At Lender's   option , at or before the

initial advance of the Loan,   Borrowers shall deposit with Lender a sum of money

which together with the monthly   installments will be sufficient to make each of

such   payments   thirty   (30) days prior to the date any   delinquency   or penalty

becomes due with respect to such   payments.   Deposits shall be made on the basis

of Lender's   estimate   from time to time of the   charges   for the   current   year

(after giving effect to any reassessment or, at Lender's election,   on the basis

of the charges for the prior year, with   adjustments   when the charges are fixed

for the then   current   year).   All funds so   deposited   shall be held by Lender,

without interest,   and may be commingled with Lender's general funds.   Borrowers

hereby grant to Lender a security interest in all funds so deposited with Lender

for the   purpose of securing   the Loan.   While an Event of Default   exists,   the

funds   deposited   may be applied in payment of the   charges for which such funds

have   been   deposited,   or to the   payment   of the   Loan   or any   other   charges

affecting the security of Lender,   as Lender may elect,   but no such application

shall be   deemed   to have   been   made by   operation   of law or   otherwise   until

actually   made by Lender.   Borrowers   shall   furnish   Lender   with bills for the

charges for which such   deposits are required at least thirty (30) days prior to

the date on which the charges first become payable. If at any time the amount on

deposit with Lender,   together with amounts to be deposited by Borrowers   before

such charges are payable,   is insufficient to pay such charges,   Borrowers shall

deposit any deficiency   with Lender   immediately   upon demand.   Lender shall pay

such charges when the amount on deposit   with Lender is   sufficient   to pay such

charges and Lender has received a bill for such charges.

 

         Section 3.5.   Notices.   Notwithstanding   Section   11.1,   all notices to

Lender under Sections 3.1 and 3.2 shall be addressed as follows:

 

                          Wachovia Bank, National Association

                          P.O. Box 700308

                          Dallas, Texas 75370

 

 

                                   ARTICLE 4.

 

                              ENVIRONMENTAL MATTERS

 

          Section 4.1. Certain   Definitions.   As used herein, the following terms

have the meanings indicated:

 

         (1) "Environmental Laws" means any federal, state or local law (whether

imposed by statute,   or administrative or judicial order, or common law), now or

hereafter

 

 

                                       15

<PAGE>

 

 

 

enacted,   governing   health,   safety,   industrial   hygiene,   the   environment or

natural resources,   or Hazardous   Materials,   including,   such laws governing or

regulating the use, generation, storage, removal, recovery, treatment, handling,

transport,    disposal,    control,    discharge   of,   or   exposure   to,   Hazardous

Materials.'

 

         (2)   "Hazardous   Materials"   means (a) petroleum or chemical   products,

whether in liquid,   solid,   or   gaseous   form,   or any   fraction   or   by-product

thereof,   (b) asbestos or   asbestos-containing   materials,   (c)   polychlorinated

biphenyls   (pcbs),   (d)   radon   gas,   (e)   underground   storage   tanks,   (f) any

explosive or radioactive   substances,   (g) lead or lead-based   paint, or (h) any

other   substance,   material,   waste or   mixture   which   is or   shall be   listed,

defined, or otherwise determined by any governmental   authority to be hazardous,

toxic, dangerous or otherwise regulated,   controlled or giving rise to liability

under any Environmental Laws.

 

         (3)   "Release"   means and includes   disposal,   discharging,   injecting,

spilling,   leaking, leaching,   dumping, emitting,   escaping,   emptying, seeping,

placing, and the like, of any Hazardous Materials into or upon any land or water

or air, or otherwise entering into the environment.

 

         Section 4.2.   Representations and Warranties on Environmental   Matters.

Except as set forth in the Closing Site Assessments and Environmental Documents:

(1) no Hazardous   Material is now or to any   Borrower's   knowledge   was formerly

used,   stored,   generated,   manufactured,   installed,   disposed   of,   treated or

otherwise present at or about the Mortgaged Property or any property adjacent to

the Mortgaged Property (except for the sewage pump out facility currently on the

Mortgaged   Property,   any   recycling   facility now or   hereafter   located on the

Mortgaged Property, and cleaning and other products currently used in connection

with the routine maintenance, operation or repair of the Mortgaged Property, all

in   full   compliance   with   Environmental   Laws);   (2)   all   permits,   licenses,

approvals and filings required by Environmental Laws have been obtained, and the

use,   operation   and   condition   of the   Mortgaged   Property   does   not,   and to

Borrowers' knowledge did not previously, violate any Environmental Laws; (3) the

Mortgaged Property is presently free from contamination by Hazardous   Materials,

and the Mortgaged Property and the activities   conducted thereon do not pose any

significant   hazard to human health or the environment or violate any applicable

Environmental   Laws;   (4)   there   is no   evidence   of any   existing   Release   of

Hazardous   Materials at the Mortgaged   Property;   (5) except for the sewage pump

out facility currently on the Mortgaged Property,   any recycling facility now or

hereafter   located on the Mortgaged   Property,   and cleaning and other   products

currently used in connection with the routine   maintenance,   operation or repair

of the Mortgaged   Property,   all in full compliance with Environmental   Laws, to

each Borrower's   knowledge,   there are no surface impoundments,   lagoons,   waste

piles,   landfills,   injection wells,   underground storage areas, tanks,   storage

vessels,   drums,   containers   or   other   man-   made   facilities   which   may have

accommodated Hazardous Materials on the Mortgaged Property. Neither any Borrower

nor any   third   persons   have   stored,   placed,   buried   or   released   Hazardous

Materials on the   Mortgaged   Property,   including   the soil,   surface   water and

ground water; (6) to Borrowers'   knowledge there has been no treatment,   storage

or other   Release of any   Hazardous   Materials   on land   adjacent or near to the

Mortgaged Property which may constitute a risk of contamination of the Mortgaged

Property or surface or ground water flowing to the Mortgaged   Property;   and (7)

no   inspection,   audit,   inquiry   or   other   investigation   has been or is being

conducted by any   governmental   agency or other third person with respect to the

presence or discharge of Hazardous Materials at the Mortgaged

 

 

                                       16

<PAGE>

 

 

Property or the quality of the air, or surface or   subsurface   conditions at the

Mortgaged   Property.   Except as disclosed in the Closing   Site   Assessments   and

Environmental    Documents,   no   Borrower   has   received   notice   that   any   such

inspection,   audit, inquiry or investigation is pending or proposed, nor has any

Borrower   or to   Borrowers'   knowledge   any   previous   owner or   occupant of the

Mortgaged    Property    received   any   warning    notice,    notice   of   violation,

administrative complaint,   judicial complaint or other formal or informal notice

alleging that Hazardous Materials have been stored or Re leased at the Mortgaged

Property or that   conditions on the   Mortgaged   Property are in violation of any

Environmental Laws.

 

         Section 4.3. Covenants on Environmental Matters.

 

         (1) Each   Borrower   shall (a) comply   strictly and in all respects with

applicable   Environmental   Laws; (b) notify Lender   immediately   upon Borrower's

discovery of any spill,   discharge,   other   Release or presence of any Hazardous

Material at, upon,   under,   within,   contiguous   to or otherwise   affecting   the

Mortgaged   Property that violates   applicable   Environmental   Laws; (c) promptly

remove such   Hazardous   Materials and   remediate the Mortgaged   Property in full

compliance with   Environmental   Laws and in accordance with the   recommendations

and specifications of an independent environmental consultant approved by Lender

as to how to achieve compliance with Environmental Laws; (d) promptly forward to

Lender copies of all orders,   notices,   permits,   applications   or other written

communications   and reports in   connection   with any spill,   discharge   or other

Release   of   any   Hazardous   Material   or   any   other   matters   relating   to the

Environmental   Laws or any similar laws or   regulations,   as they may affect the

Mortgaged Property or any Borrower; and (e) promptly advise Lender in writing of

any and all enforcement,   cleanup,   removal or other   governmental or regulatory

actions instituted,   completed or threatened by any governmental   authority with

respect   to the   Mortgaged   Property   from   time to time   under   any   applicable

Environmental Laws.

 

         (2) No Borrower shall cause, and each Borrower shall prohibit any other

Person within the control of such Borrower from causing,   and shall use prudent,

commercially   reasonable efforts to prohibit other Persons   (including   tenants)

from (a)   causing   any   spill,   discharge   or   other   Release   of any   Hazardous

Materials at, upon, under, within or about the Mortgaged Property, (b) except in

full compliance with applicable   Environmental   Laws,   causing the use, storage,

generation,   manufacture,   installation,   or disposal of any Hazardous Materials

at, upon, under, within or about the Mortgaged Property or the transportation of

any Hazardous Materials to or from the Mortgaged Property (except for the sewage

pump out facility   currently on the Mortgaged   Property,   any recycling facility

now or   hereafter   located on the   Mortgaged   Property,   and   cleaning and other

products currently used in connection with the routine maintenance, operation or

repair of the Mortgaged   Property,   all in full   compliance   with   Environmental

Laws),   (c) except for repair,   upgrade or replacement   of the existing   fueling

facilities   which are   required by   Environmental   Laws or which are   reasonably

prudent   measures in the operation of such facility,   installing any underground

storage tanks at the Mortgaged   Property,   or (d)   conducting   any activity that

requires a permit or other   authorization   under Environmental Laws, except that

Borrowers   or Persons   within   Borrowers'   employ may   conduct   activities   that

require permits or other   authorizations under Environmental Laws, provided such

activities are conducted in full compliance with applicable Environmental Laws.

 

 

                                        17

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         (3) Without   Lender's   prior written   consent,   no Borrower shall enter

into any   settlement,   consent   or   compromise   with   respect   to any   Hazardous

Materials or pursuant to Environmental Laws which might, in Lender's   reasonable

judgment,   impair the value of Lender's   security under the Mortgage;   provided,

however,   that   Lender's   prior   consent shall not be necessary for Borrowers to

take any remedial   action if ordered by a court of competent   jurisdiction or if

required by applicable governmental   authorities or if the presence of Hazardous

Materials at the Mortgaged Property poses an immediate significant threat to the

health,   safety or welfare of any individual or otherwise   requires an immediate

remedial response.   In any event,   Borrowers shall promptly notify Lender of any

action so taken.

 

         (4) Borrowers shall provide to Lender,   at Borrowers   expense   promptly

upon the written   request of Lender from time to time, a Site   Assessment or, if

required by Lender,   an update to any existing   Site   Assessment,   to assess the

presence   or absence   of any   Hazardous   Materials   and the   potential   costs in

connection with abatement,   cleanup or removal of any Hazardous   Materials found

on, under, at or within the Mortgaged Property.   Borrowers shall pay the cost of

no more than one such Site Assessment or update in any twelve (12) month period,

unless Lender's   request for a Site Assessment is based on information   provided

under this Article 4, a reasonable   suspicion of Hazardous   Materials at or near

the Mortgaged   Property,   a breach of   representations   under Section 4.2, or an

Event of Default,   in which case any such Site   Assessment or update shall be at

Borrowers' expense.

 

         Section 4.4. intentionally omitted

 

         Section 4.5. Allocation of Risks and Indemnity.

 

         (1) As between   Borrowers and Lender,   all risk of loss associated with

non-compliance   with   Environmental   Jaws, or with the presence of any Hazardous

Material at, upon,   within,   contiguous to or otherwise   affecting the Mortgaged

Property, shall lie solely with Borrowers. Accordingly, Borrowers shall bear all

risks   and   costs   associated   with   any   loss   (including   any   loss   in   value

attributable to Hazardous Materials),   damage or liability therefrom,   including

all costs of removal of   Hazardous   Materials or other   remediation   required by

Environmental Laws.

 

         (2) Each Borrower hereby agrees to indemnify Lender and hold Lender and

its directors,   officers,   employees,   successors and assigns   harmless from and

against any and all claims,   losses,   damages   (including   all   foreseeable   and

unforeseeable consequential damages),   liabilities,   fines, penalties,   charges,

interest,    administrative   and   judicial   proceedings   and   orders,   judgments,

remedial action requirements, enforcement actions of any kind, and all costs and

expenses   incurred   in   connection   therewith   (including   but   not   limited   to

reasonable   attorneys' fees and expenses),   directly or indirectly   resulting in

whole or in part from

 

                  (a) the presence,   use,   generation,   treatment or storage on,

under or   about   the   Mortgaged   Property   of any   Hazardous   Materials,   or the

disposal or other Release of Hazardous Materials on, under or from the Mortgaged

Property;

 

 

                                       18

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                  (b) any claims   made or   threatened   by any party   against any

Borrower   or with   respect   to the   Mortgaged   Property   relating   to   Hazardous

Materials or Environmental Laws;

 

                  (c) the costs of any necessary   inspection,   audit, cleanup or

detoxification of the Mortgaged   Property under any Environmental   Laws, and the

preparation and implementation of any closure, remedial or other required plans,

consent orders, license applications or the like; or

 

                  (d) any activity   carried on or   undertaken   on the   Mortgaged

Property,   whether   prior to or during the term of the Loan,   by any Borrower or

any predecessor in title or any employees, agents or contractors of any Borrower

or any   predecessor   in title,   or any third   persons at any time   occupying   or

present   on the   Mortgaged   Property   lawfully   and with the   permission   of any

Borrower or a   predecessor   in title of any   Borrower,   in   connection   with the

handling,   treatment,   removal, storage,   decontamination,   clean-up, transport,

disposal or other   Release of any   Hazardous   Materials   at any time   located or

present on, under or about the Mortgaged Property;

 

         provided    however,    Borrowers    shall   not   be   liable    under    such

indemnification (i) to the extent such loss,   liability,   damage, claim, cost or

expense results solely from Lender's gross   negligence or willful   misconduct or

(ii) to the   extent   such loss,   liability,   damage,   claim,   cost or expense is

covered by insurance carried by Lender's receiver in possession of the Mortgaged

Property.   Lender's   receiver in   possession   of the   Mortgaged   Property   shall

maintain   liability   insurance   with limits equal to the lesser of $2,000,000 or

the limits required of Bayshore   Landing under the terms of the City Lease,   and

shall name Lender, Bayshore Landing and the City as additional insureds.

 

         (3) Lender shall have the right to join and   participate in, as a party

if it so elects,   any legal   proceedings or actions initiated in connection with

any matter for which it is   indemnified   under this   Section 4.5 and to have its

reasonable   attorneys'   fees   and   expenses   in   connection   therewith   paid   by

Borrowers, or be defended by Borrowers from and against any such matters.

 

         (4) All sums paid and costs   incurred   by Lender   with   respect   to any

matter   indemnified   against   hereunder   shall bear interest at the Default Rate

from the date so paid or incurred   until   reimbursed by Borrowers,   and shall be

secured   by the   Mortgage   and all   other   Loan   Documents   and shall be paid by

Borrowers to Lender not later than thirty (30) days after demand.

 

          Borrowers'   obligations   under this   Section   4.5 shall   arise upon the

discovery   of the   presence   of   any   Hazardous   Material,   whether   or not   any

governmental authority has taken or threatened any action in connection with the

presence of any Hazardous Material, and whether or not the existence of any such

Hazardous Material or potential liability on account thereof is disclosed in the

Site Assessment and shall continue   notwithstanding the repayment of the Loan or

any transfer or sale of any right,   title and interest in the Mortgaged Property

(by foreclosure, deed in lieu of foreclosure or otherwise).

 

 

                                       19

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         Section 4.6. No Waiver. Notwithstanding any provision in this Article 4

or elsewhere   in the Loan   Documents,   or any rights or remedies   granted by the

Loan   Documents,   Lender does not waive and   expressly   reserves   all rights and

benefits now or hereafter   accruing to Lender under the   "security   interest" or

"secured creditor"   exception under applicable   Environmental   Laws, as the same

may be amended.   No action taken by Lender   pursuant to the Loan Documents shall

be deemed or   construed to be a waiver or   relinquishment   of any such rights or

benefits under the "security interest exception."

 

                                   ARTICLE 5.

 

                                 LEASING MATTERS

 

         Section   5.1.   Representations   and   Warranties   on   Leases.   Borrowers

represent   and   warrant   to   Lender.   with   respect   to leases of the   Mortgaged

Property   that:   (1) the rent   roll(s)   delivered   to Lender   is (are)   true and

correct,   and the   leases are valid and in and full   force and   effect;   (2) the

leases (including   amendments) are in writing,   and there are no oral agreements

with respect thereto;   (3) the copies of the leases delivered to Lender are true

and complete;   (4) neither the landlord nor, to any   Borrower's   knowledge,   any

tenant is in default   under any of the leases;   (5) no Borrower has knowledge of

any notice of termination or default with respect to any lease;   (6) no Borrower

has assigned or pledged any of the leases,   the rents or any   interests   therein

except to Lender;   (7) no tenant or other party has an option to purchase all or

any portion of the Mortgaged Property;   (8) no tenant has the right to terminate

its lease prior to   expiration   of the stated term of such lease;   (9) no tenant

has   prepaid   more   than   one   month's   rent in   advance;   and (10) the City has

approved each of the leases to the extent such approval is required   pursuant to

the terms of the City Lease.

 

         Section 5.2. Approval Rights. All leases and other rental   arrangements

shall in all   respects be approved   by Lender and by the City.   Borrowers   shall

hold, in trust, all tenant security   deposits in a segregated   account,   and, to

the extent   required by   applicable   hw, shall not commingle any such funds with

any other   funds of   Borrowers.   Within ten (1 0) days after   Lender' 5 request,

Borrowers shall furnish to Lender a statement of all tenant   security   deposits,

and copies of all leases   not   previously   delivered   to   Lender,   certified   by

Borrowers as being true and correct.   Notwithstanding   the   foregoing,   Lender's

approval   shall   not be   required   for   future   leases   or lease   extensions   or

amendments to existing   leases with respect to premises other than those subject

to the Rawbar   Sublease   or the   Restaurant   Sublease,   provided   the   following

conditions   are   satisfied:   (1) there exists no   Potential   Default or Event of

Default; and (2) the leased premises,   when combined with all other space in the

Mortgaged Property leased to the same tenant or any affiliate   thereof,   are not

greater than 5,000 rentable square feet.

 

         Section 5.3. Covenants. Each Borrower (1) shall perform the obligations

which it is   required   to   perform   under   the   leases;   (2) shall   enforce   the

obligations to be performed by its tenants; (3) shall promptly furnish to Lender

any notice of default or termination   received by it from any tenant under which

the   leased   premises,   when   combined   with all   other   space in the   Mortgaged

Property   leased to the same tenant or any   affiliate   thereof,   are equal to or

greater   than   5,000   rentable   square   feet,   and   any   notice   of   default   or

termination given by such Borrower to any such tenant; (4) shall not collect any

rents for more than   thirty (30) days in advance of the time when the same shall

become due; (5) shall not further assign or encumber any lease; (6)

 

 

                                       20

<PAGE>

 

 

 

shall   not,   except   with   Lender's   prior   written   consent,   cancel   or accept

surrender or termination of any lease;   and (7) shall not,   except with Lender's

prior written consent, modify or amend any lease (except for minor modifications

and amendments entered into in the ordinary course of business,   consistent with

prudent property management   practices,   not affecting the economic terms of the

lease),   and any action in   violation   of this   Section 5.3 shall be void at the

election of Lender.   Notwithstanding   the   foregoing,   provided   there exists no

Potential   Default   or   Event of   Default,   Borrowers   may   cancel,   accept   the

surrender of,   terminate,   modify or amend any lease,   other than those covering

the   premises   or   portions   thereof   subject   to   the   Rawbar   Sublease   or the

Restaurant   Sublease,   under which the leased   premises,   when combined with all

other space in the Mortgaged Property leased to the same tenant or any affiliate

thereof, are not greater than 5,000 rentable square feet.

 

         Section 5.4. Tenant   Estoppels.   At Lender's   request,   Borrowers shall

obtain   and   furnish   to   Lender,    written   estoppels   in   form   and   substance

satisfactory   to Lender,   executed   by   tenants   under   leases in the   Mortgaged

Property   and   confirming   the term,   rent,   and other   provisions   and   matters

relating to the leases.

 

                                   ARTICLE 6.

 

                         REPRESENTATIONS AND WARRANTIES

 

         Each Borrower   represents and warrants to Lender with respect to itself

and the Borrower Parties related to such Borrower that:

 

         Section 6.1.   Organization   and Power.   Each Borrower and each Borrower

Party is duly organized, validly existing and in good standing under the laws of

the   state of its   formation   or   existence,   and is in   compliance   with   legal

requirements   applicable   to doing   business   in the   State.   No   Borrower   is a

"foreign   person" within the meaning of ss.   1445(f)(3) of the Internal   Revenue

Code.

 

         Section 6.2.   Validity of Loan Documents.   The execution,   delivery and

performance by Borrowers and each Borrower Party of the Loan Documents:   (1) are

duly authorized and do not require the consent or approval of any other party or

governmental authority which has not been obtained; and (2) will not violate any

law or result in the   imposition   of any lien,   charge or   encumbrance   upon the

assets of any such party, except as contemplated by the Loan Documents. The Loan

Documents   constitute the legal, valid and binding   obligations of each Borrower

and each Borrower Party,   enforceable in accordance with their respective terms,

subject   to   applicable   bankruptcy,    insolvency,   or   similar   laws   generally

affecting the enforcement of creditors' rights.

 

         Section 6.3. Liabilities; Litigation.

 

         (1) The   financial   statements   delivered   by such   Borrower   and   each

Borrower   Party   are   true   and   correct   in   every   material   respect   with   no

significant   change since the date of   preparation.   Except as disclosed in such

financial   statements,   there are no liabilities (fixed or contingent) affecting

the Mortgaged Property, such Borrower or any Borrower Party. Except as disclosed

in such financial statements, there is no litigation, administrative proceeding,

investigation or other legal action (including any proceeding under any state or

federal bankruptcy or insolvency law) pending or, to the knowledge of Borrowers,

threatened, against

 

 

                                       21

<PAGE>

 

 

 

the Mortgaged Property, any Borrower or any Borrower Party which if adversely

determined could have a material adverse effect on such party, the Mortgaged

Property or the Loan.

 

         (2) Neither any Borrower nor any Borrower Party is contemplating either

the filing of a petition by it under state or federal   bankruptcy   or insolvency

laws or the liquidation of all or a major portion of its assets or property, and

neither   any   Borrower   nor any   Borrower   Party   has   knowledge   of any   Person

contemplating the filing of any such petition against it.

 

         Section 6.4. Taxes and Assessments. The Mortgaged Property is comprised

of one or more parcels, each of which constitutes a separate tax lot and none of

which   constitutes   a portion of any other tax lot.   There are no pending or, to

Borrowers' best   knowledge,   proposed,   special or other   assessments for public

improvements or otherwise   affecting the Mortgaged   Property,   nor are there any

contemplated   improvements   to the   Mortgaged   Property   that may result in such

special or other assessments.

 

         Section 6.5. Other Agreements;   Defaults.   Neither any Borrower nor any

Borrower Party is a party to any agreement or instrument or subject to any court

order,   injunction,   permit,   or restriction   which might   adversely   affect the

Mortgaged   Property or the   business,   operations,   or condition   (financial   or

otherwise) of any Borrower or any Borrower   Party.   Neither any Borrower nor any

Borrower Party is in violation of any agreement   which   violation   would have an

adverse effect on the Mortgaged Property, any Borrower, or any Borrower Party or

any   Borrower's   or   any   Borrower   Party's   business,   properties,   or   assets,

operations or condition, financial or otherwise.

 

         Section 6.6. Compliance with Law

 

         (1) Each Borrower and each Borrower Party have all requisite   licenses,

permits,   franchises,    qualifications,    certificates   of   occupancy   or   other

governmental authorizations to own, lease and operate the Mortgaged Property and

carry on its   business,   and the Mortgaged   Property is in   compliance   with all

applicable   legal   requirements   and is   free   of   structural   defects,   and all

building   systems   contained   therein   are in good   working   order,   subject   to

ordinary wear and tear. The Mortgaged Property does not constitute,   in whole or

in part, a legally non-conforming use under applicable legal requirements;

 

         (2) No condemnation has been commenced or, to Borrowers' knowledge,   is

contemplated with respect to all or any portion of the Mortgaged Property or for

the relocation of roadways providing access to the Mortgaged Property; and

 

         (3) The   Mortgaged   Property   has   adequate   rights of access to public

ways,   and the Mortgaged   Property and Project are and shall continue to be upon

completion of the Project served by adequate   water,   sewer,   sanitary sewer and

storm drain facilities. All public utilities necessary or convenient to the full

use and enjoyment of the   Mortgaged   Property and the Project are located in the

public right-of-way abutting the Mortgaged Property,   and all such utilities are

connected so as to serve the Mortgaged   Property and the Project without passing

over other   property,   except to the extent such other   property is subject to a

perpetual easement for such utility benefiting the Mortgaged Property. All roads

necessary for the full utilization of the

 

 

                                       22

<PAGE>

 

 

 

Mortgaged Property and the Project for their current and intended purposes have

been completed and dedicated to public use and accepted by all governmental

authorities.

 

         Section 6.7. Location of Borrowers.   Each Borrower's principal place of

business   and chief   executive   offices   are   located at the   address   stated in

Section 11.1.

 

         Section 6.8.   ERISA.   No Borrower has   established any pension plan for

employees   which   would   cause   any   Borrower   to be   subject   to   the   Employee

Retirement Income Security Act of 1974, as amended.

 

         Section 6.9. Margin Stock. No part of proceeds of the Loan will be used

for purchasing or acquiring any "margin stock" within the meaning of Regulations

G, T, U or X of the Board of Governors of the Federal Reserve System.

 

         Section 6.10.   Tax Filings.   Each Borrower and each Borrower Party have

filed (or have obtained effective extensions for filing) all federal,   state and

local tax returns required to be filed and have paid or made adequate   provision

for the payment of all federal,   state and local taxes,   charges and assessments

payable by each Borrower and each Borrower Party, respectively.

 

         Section 6.11.   Solvency.   Giving effect to the Loan,   the fair saleable

value of each   Borrower's   assets   exceeds and will,   immediately   following the

making of the Loan, exceed that Borrower's total liabilities, including, without

limitation, subordinated, unliquidated, disputed and contingent liabilities. The

fair saleable value of each Borrower's assets is and will, immediately following

the making of the Loan, be greater than that   Borrower's   probable   liabilities,

including the maximum amount of its contingent   liabilities on its Debts as such

Debts   become   absolute   and   matured,    each   Borrower's   assets   do   not   and,

immediately   following the making of the Loan will not, constitute   unreasonably

small   capital to carry out its   business   as   conducted   or as   proposed   to be

conducted.   No Borrower   intends to, and each   Borrower does not believe that it

will, incur Debts and liabilities   (including   contingent   liabilities and other

commitments)   beyond its ability to pay such Debts as they mature   (taking   into

account the timing and amounts of cash to be received by that   Borrower   and the

amounts to be payable on or in respect of obligations of that Borrower).

 

         Section 6.12. Full and Accurate Disclosure. The financial statements of

Borrowers and each Borrower Party delivered to Lender are true and correct, have

been prepared in accordance with GAAP and fairly present the financial condition

of   Borrowers   and   each   Borrower   Party   as of the   respective   dates   of such

statements.   This Agreement and all financial   statements,   budgets,   schedules,

opinions, certificates,   confirmations,   statements,   applications,   affidavits,

reports,   agreements and other materials   submitted to Lender in connection with

or in   furtherance   of this   Agreement   by or on behalf of any   Borrower   or any

Borrower   Party fully and fairly   state the matters   with which they   purport to

deal,   and   neither   misstate   any   material   fact   nor,   separately   or in   the

aggregate, fail to state any material fact necessary to make the statements made

not misleading.

 

         Section 6.13.   Single Purpose   Entity.   Each Borrower is and has at all

times since its formation been operated as a Single Purpose Entity.

 

 

                                       23

<PAGE>

 

 

         Section 6.14.   No Debt; No Liens.   Except as disclosed in the financial

statements of' Borrowers previously delivered to Lender and except for unsecured

trade   payables in the ordinary   course of business,   no Borrower has Debt other

than the Loan. Other than for   non-delinquent ad valorem real property taxes, as

of the date the Loan is funded,   the Mortgaged   Property shall be free and clear

of all Liens of every nature whatsoever.

 

         Section 6.15. Ownership Interests.   Attached hereto as Schedule 6.15 is

a schedule   reflecting   all persons or entities   who are members and managers of

each Borrower and who have an equity   interest in any Borrower or in its members

and managers.

 

         Section 6.16. City Lease.   Borrowers represent and warrant to Lender as

follows with respect to the City Lease:

 

         (1) the City Lease is current and in good   standing   and full force and

effect,   and has not been   amended or modified   except as   described in Schedule

1.1(19) attached hereto;

 

         (2) to the best   knowledge   of   Borrowers',   there exist no defaults or

"Events   of   Default,"   or events,   conditions   or   circumstances   that with the

passage of time or the giving of notice or both   would   constitute   a default or

"Event of Default," under the City Lease;

 

         (3) any and all improvements and/or work the tenant is required to make

and/or   perform   pursuant to the terms of the City Lease have been completed and

are acceptable to and have been accepted by the City; and

 

         (4) the City has   consented   to the   Rawbar   Sublease,   the   Restaurant

Sublease   and all other   subleases   and   other   occupancy   agreements   currently

affecting   the   Mortgaged   Property   or any   portion   thereof to the extent such

approval is required pursuant to the terms of the City Lease.

 

         Section   6.17.   Rawbar   Sublease.   Borrowers   represent   and warrant to

Lender as follows with respect to the Rawbar Sublease:

 

         (1) the Rawbar   Sublease is current and in good standing and full force

and effect, and has not been amended or modified; and

 

         (2) to the best   knowledge   of   Borrowers',   there exist no defaults or

"Events   of   Default,"   or events,   conditions   or   circumstances   that with the

passage of time or the giving of notice or both   would   constitute   a default or

"Event of Default," under the Rawbar Sublease.

 

         Section 6.18.   Restaurant Sublease.   Borrowers represent and warrant to

Lender as follows with respect to the Restaurant Sublease:

 

         (1) the   Restaurant   Sublease is current and in good   standing and full

force and effect, and has not been amended or modified; and

 

         (2) to the best   knowledge   of   Borrowers',   there exist no defaults or

"Events   of   Default,"   or events,   conditions   or   circumstances   that with the

passage of time or the giving of notice or both   would   constitute   a default or

"Event of Default," under the Restaurant Sublease.

 

 

                                       24

<PAGE>

 

 

 

         Section 6.19. State Lease. Borrowers represent and warrant to Lender as

follows with respect to the State Lease:

 

         (1) to   Borrowers'   knowledge,   the State   Lease is current and in good

standing and full force and effect,   and has not been amended or modified except

as described in Schedule 1.1(67) attached hereto; and

 

         (2) to the best   knowledge   of   Borrowers,   there   exist no defaults or

"Events   of   Default,"   or events,   conditions   or   circumstances   that with the

passage of time or the giving of notice or both   would   constitute   a default or

"Event of Default," under the State Lease.

 

         Section 6.20. State Waivers.   Borrowers represent and warrant to Lender

as follows with respect to the State Waivers:

 

         (1) to Borrowers' knowledge,   the State Waivers are current and in good

standing and full force and effect, and have not been amended or modified except

as described in Schedule 1.1(68) attached hereto; and

 

         (2) To the best   knowledge   of   Borrowers,   there exists no defaults or

"Events   of   Default",   or events,   conditions   or   circumstances   that with the

passage of time or the giving of notice or both   would   constitute   a default or

"Event of Default", under the State Waivers.

 

         Section   6.21.    Laws,    Zoning   and   Approvals.    (1)   The   Plans   and

Specifications   (when   completed),   the use of the   Mortgaged   Property   and the

anticipated use of the Project comply with all applicable restrictive covenants,

zoning   ordinances,    building   laws   and   codes,   and   other   applicable   laws,

regulations and requirements   (including without limitation,   the Americans with

Disabilities   Act, as amended);   (2) the current   zoning   classification   of the

Mortgaged   Property and any covenants and   restrictions   affecting the Mortgaged

Property permit the current use of the Mortgaged   Property and the   construction

and intended use of the Project; and (3) Borrowers have obtained all permits and

approvals of any type required in connection with the current   operation and use

of the   Mortgaged   Property,   and all such permits and   approvals   are final and

unappealable   and   remain   in full   force   and   effect   without   restriction   or

modification.

 

         Section   6.22.   Public   Improvements.   Any and all public   improvements

included   as part of the   Project   have been   fully   authorized   by   appropriate

municipal   ordinance or other   required   municipal   action.   No Borrower is in a

party to any Development Agreement.

 

                                   ARTICLE 7.

 

                               FINANCIAL REPORTING

 

         Section 7.1. Financial Statements.

 

         (1) Periodic   Financial   Statements.   Each   Borrower   shall   deliver to

Lender, within 45 days after the end of each of that Borrower's fiscal six-month

periods   (i.e.,   by   August   15 of   each   year),   unaudited   management-prepared

financial statements, on a consolidated and consolidating basis.

 

 

                                       25

<PAGE>

 

 

         (2) Annual Financial Statements. Each Borrower shall deliver to Lender,

(a) within 120 days after the end of each of that Borrower's fiscal years (i.e.,

by April 30 of each year with respect to the previous year),   reviewed financial

statements on a consolidated   and   consolidating   basis along with a copy of the

audited   revenue   statement as provided to the City pursuant to the terms of the

Lease and that   Borrower's   financial   projections   for the coming   year and (b)

copies of any of its financial   statements   that are certified by an independent

public accountant.

 

         (3)   Borrowers'   Tax Return.   Each   Borrower   shall   deliver to Lender,

within 30 days of filing,   cornp1ete copies of federal and state tax returns, as

applicable,   each of which   shall be signed   and   certified   by that   Borrower's

managers   to be true   and   complete   copies   of such   returns.   In the   event an

extension is filed,   that Borrower shall deliver a copy of the extension   within

30 days of filing.

 

         (4) Guarantors' Financial Statements.   Borrowers shall cause Individual

Guarantor to deliver to Lender annually,   within 120 days of Bayshore   Landing's

fiscal year end, Individual   Guarantor's   personal financial   statements,   which

shall disclose all of Individual   Guarantor's   assets,   liabilities,   net worth,

income and contingent   liabilities,   all in reasonable   detail and acceptable to

Lender and   submitted   on a form to be   provided by Lender or on such other form

acceptable to Lender, signed by Individual Guarantor and certified by Individual

Guarantor to Lender to be true,   correct and   complete.   If requested by Lender,

such financial   statements   shall also be   accompanied by bank and/or   brokerage

statements to support reported liquidity.

 

         (5)    Guarantors'    Financial    Statements.    Borrowers    shall    cause

HMG/Courtland   Properties,   inc.   (one of the Entity   Guarantors)   to deliver to

Lender   annually,   within 120 days of such entity's fiscal year end, such Entity

Guarantor's 10K report,   certified by such Entity Guarantor's chief financial or

chief executive officer to Lender to be true, correct and complete.

 

         (6)   Guarantors'   Tax Returns.   Borrowers   shall cause   Individual   and

Entity   Guarantors   to   deliver to   Lender,   within 30 days of filing,   complete

copies of federal and state tax returns, including any and all schedule K-1s, as

applicable, each of which shall be signed and certified by Guarantors to be true

and   complete   copies   of such   returns.   In the   event an   extension   is filed,

Guarantors shall deliver a copy of the extension within 30 days of filing.

 

         (7) Certificate of Full Compliance.   Borrowers shall deliver to Lender,

with the annual   financial   statements   required   in   subsection   (2)   above,   a

certification   by   Borrowers'    independent   certified   public   accountant   that

Borrowers   are in full   compliance   with the   financial   covenants   contained in

Sections 8.8, 8.10 and 8.12 hereof. Additionally,   together with each submission

required by subsections (1) and (2) above, each Borrower shall deliver to Lender

a compliance   certificate in form   satisfactory   to Lender from that   Borrower's

chief financial   officer   reflecting   compliance with the covenants set forth in

Sections 8.8, 8.10 and 8.12 hereof,   and certifying that no Potential Default or

Event of   Default   with   respect   to such   covenants   then   exists   or if such a

Potential   Default or Event of Default exists,   the nature and duration   thereof

and Borrowers' intention with respect thereto, and in addition,   Borrowers shall

cause   Borrowers'   independent   auditors   (if   applicable)   to submit to Lender,

together with its audit report,   a statement   that, in the course of such audit,

it discovered   no   circumstances   which it believes   would result in a Potential

Default or Event of Default or if it discovered any such

 

 

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         Section 7.2. Accounting   Principles.   All financial statements shall be

prepared in accordance with GAAP, consistently applied from year to year.

 

         Section 7.3. Other Information.   Borrowers shall deliver to Lender such

additional information regarding any Borrower, its business, any Borrower Party,

and the Mortgaged   Property   within 30 days after   Lender's   reasonable   request

therefor.

 

                                   ARTICLE 8.

 

                                    COVENANTS

 

         Each Borrower covenants and agrees with Lender as follows:

 

         Section   8.1.   Due on Sale and   Encumbrance;   Transfers   of   Interests.

Without the prior written   consent of Lender,   each Borrower agrees with respect

to itself as follows:

 

         (1)   neither   Borrower   nor any other   Person   having an   ownership   or

beneficial interest in Borrower shall (a) directly or indirectly sell, transfer,

convey,   mortgage,   pledge,   or assign the interest of Borrower in the Mortgaged

Property or any part thereof   (including any   membership or any other   ownership

interest in Borrower); (b) further encumber, alienate, grant a Lien or grant any

other   interest in the   Mortgaged   Property or any part thereof   (including   any

membership   or other   ownership   interest   in   Borrower),   or,   with   respect to

Borrower, on any of its other assets,   whether voluntarily or involuntarily;   or

(c) enter into any easement or other agreement granting rights in or restricting

the use or development of the Mortgaged Property;

 

         (2) no new   member,   manager   or other   Person   having   the   ability to

control the affairs of Borrower shall be admitted to or created in Borrow