JUNIOR MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING

Exhibit 10.2

Wal-Mart Store

 

 

 

 

 

_____________________________________________________________________________________

Prepared By And When Recorded Return or Mail To: Nyemaster Goode, P.C., 700 Walnut St., Suite 1600, Des Moines, Iowa 50309, Attention: Anthony A. Longnecker, Esq.

 

JUNIOR MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING

 

 

THIS JUNIOR FIRST MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (“Mortgage”), made as of June 22, 2009, by and between COLE WM ALBUQUERQUE NM, LLC, a Delaware limited liability company (“Mortgagor”), with the mailing address of 2555 E. Camelback Road, Suite 400, Phoenix, AZ 85016, Attention: Legal Department, and AVIVA LIFE AND ANNUITY COMPANY, an Iowa corporation (“Mortgagee”), with an office at c/o Aviva Investors North America, Inc., 699 Walnut Street, Dept. H-15, Des Moines, Iowa 50309.

 

W I T N E S S E T H:

 

WHEREAS, Mortgagee has made a loan to Mortgagor, on the date hereof (the "Senior Loan") evidenced by a Promissory Note in the amount of $9,935,000.00 (the "Senior Note"); and

 

WHEREAS, the Senior Loan is secured by, among other things, that certain "First Mortgage, Security Agreement and Fixture Filing" of even date herewith (herein the "Senior Mortgage"), in which Mortgagor has granted Mortgagee a lien against the Mortgaged Premises (as defined below), the lien of said Senior Mortgage being prior and superior to the lien created by this Mortgage; and

 

WHEREAS, Cole WG South Yale Avenue (Tulsa) OK, LLC, a Delaware limited liability company; Cole MT Las Vegas NV, LLC, a Delaware limited liability company; and Cole WG Fredericksburg VA, LLC, a Delaware limited liability company have each executed and delivered to Mortgagor a Promissory Note dated on or about this same date in the principal amounts of $2,065,000.00; $14,025,000.00 and $3,865,000.00, respectively, (which Promissory Notes, together with all notes issued and accepted in substitution or exchange therefor, and as any of the foregoing may from time to time be modified, extended, renewed, consolidated, restated or replaced, are hereinafter sometimes collectively referred to as the "Affiliate Notes"), which Affiliate Notes provide, among other things, for final payment of principal and interest

 

 

under the Affiliate Notes, if not sooner paid or payable as provided therein, to be due on or before the first day of March, 2013, the Affiliate Notes by this reference thereto being incorporated herein; and

 

WHEREAS, Mortgagee has required that Mortgagor guaranty to Mortgagee the payment of and performance under the Affiliate Notes and performance of certain other obligations (the "Guarantied Obligations") as more particularly described in that certain Guaranty of Affiliate Loans dated this same date (as modified, amended, or restated from time to time, the "Affiliate Guaranty") executed by Mortgagor; and

 

WHEREAS, Mortgagee desires to secure performance of the Affiliate Guaranty;

 

NOW, THEREFORE, Mortgagor, for the purpose of securing the Affiliate Guaranty and payment of all Guarantied Obligation and the faithful performance of all covenants, conditions, stipulations and agreements therein and herein contained, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby grants, bargains, sells, conveys, transfers, assigns, sets over, mortgages, grants a security interest in, and warrants to Mortgagee, its successors and assigns forever, with mortgage covenants and upon the statutory mortgage condition for breach of which this Mortgage is subject to foreclosure as provided by law (provided, however, to the extent of a conflict between the provisions of the statutory mortgage condition and this Mortgage, the terms of this Mortgage will prevail), the following property and rights (collectively referred to as the “Mortgaged Premises”):

 

A.

All of the following described real property (hereinafter called the “Land”), located in Bernalillo County, New Mexico to wit:

 

The real estate described in Exhibit “A” attached hereto;

 

B.

All and singular, the buildings and improvements, situated, constructed, or placed thereon, and all right, title and interest of Mortgagor in and to all streets, boulevards, avenues or other public thoroughfares in front of and adjoining the Land, including all easements, licenses and rights of way, thereunto attached or belonging, and also all right, title and interest of Mortgagor in and to all strips and gores of land adjacent to the Land;

 

C.

All right, title and interest of Mortgagor in and to any and all leases, subleases, licenses, concessions or grants of other possessory interests now or hereafter in force, oral or written, covering or affecting the Land or any buildings or improvements belonging or in anyway appertaining thereto, or any part thereof;

 

D.

All right, title and interest of Mortgagor in and to all the rents, issues, uses, profits, insurance claims and proceeds and condemnation awards now or hereafter belonging or in any way pertaining to (1) the Land; (2) each and every building and improvement and all of the properties included within the provisions of the foregoing paragraph B; and (3) each and every lease, sublease and agreement

 

 

described in the foregoing paragraph C and each and every right, title and interest thereunder, from the date of this Mortgage until the terms hereof are complied with and fulfilled;

 

E.

All instruments (including promissory notes), documents, accounts, chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights, supporting obligations, any other contract rights or rights to the payment of money, and all general intangibles (including, without limitation, payment intangibles, and all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications and schematics) now or hereafter belonging or in any way pertaining to (1) the Land; (2) each and every building and improvement and all of the properties on the Land; and (3) each and every lease, sublease and agreement described in the foregoing paragraph C and each and every right, title and interest thereunder; and

 

F.

All machinery, apparatus, equipment, fixtures and articles of personal property of every kind and nature now or hereafter located on the Land or upon or within the buildings and improvements belonging or in anyway appertaining to the Land and used or usable in connection with any present or future operation of the Land or any building or improvement now or hereafter located thereon and the fixtures and the equipment which may be located on the Land and now owned or hereafter acquired by Mortgagor (hereinafter called the “Equipment”), including, but without limiting the generality of the foregoing, any and all furniture, furnishings, partitions, carpeting, drapes, dynamos, screens, awnings, storm windows, floor coverings, stoves, refrigerators, dishwashers, disposal units, motors, engines, boilers, furnaces, pipes, plumbing, elevators, cleaning, call and sprinkler systems, fire extinguishing apparatus and equipment, water tanks, maintenance equipment, and all heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and air-cooling equipment, gas and electric machinery and all of the right, title and interest of Mortgagor in and to any Equipment which may be subject to any title retention or security agreement superior in lien to the lien of this Mortgage and all additions, accessions, parts, fittings, accessories, replacements, substitutions, betterments, repairs and proceeds of all of the foregoing, all of which shall be construed as fixtures and will conclusively be construed, intended and presumed to be a part of the Land. It is understood and agreed that all Equipment, whether or not permanently affixed to the Land and the buildings and improvements thereon, shall for the purpose of this Mortgage be deemed conclusively to be conveyed hereby and, as to all such Equipment, whether personal property or fixtures, or both, a security interest is hereby granted by Mortgagor and hereby attached thereto, all as provided by the Uniform Commercial Code as adopted, amended and in force in New Mexico.

 

Together with all and singular other tenements, hereditaments and appurtenances belonging to the aforesaid properties, or any part thereof with the reversions, remainders and benefits and all other revenues, rents, earnings, issues and income and profits arising or to arise out of or to be

 

 

received or had of and from the properties hereby mortgaged or intended so to be or any part thereof and all the estate, right, title, interest and claims, at law or in equity which Mortgagor now or may hereafter acquire or be or become entitled to in and to the aforesaid properties and any and every part thereof. The “Mortgaged Premises” are hereby declared to be subject to the lien of this Mortgage as security for the payment of the aforementioned indebtedness up to twice the amount of the Affiliate Notes.

 

SUBJECT TO (i) the Senior Mortgage; (ii) liens for ad valorem taxes and special assessments or installments thereof not now delinquent; (iii) building and zoning ordinances and building and use restrictions; (iv) documents of record on the date hereof; and (v) such minor defects, irregularities, encumbrances, easements, and rights of way as normally exist with respect to property similar in character to the Mortgaged Premises which do not individually or in the aggregate materially detract from the value of the Mortgaged Premises or impair the use thereof for the purpose intended (all of the foregoing being herein referred to as “Permitted Encumbrances”).

 

PROVIDED, HOWEVER, that if Mortgagor, its successors or assigns shall well and truly pay, or cause to be paid, the Guarantied Obligations, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Mortgage and the Junior Assignment of Leases, Rents and Income dated as of the date hereof (herein called the “Assignment”) to be kept, performed and observed by it, and shall pay to Mortgagee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then this Mortgage and the rights hereby granted shall cease, terminate and be void and Mortgagee shall execute and record a document evidencing the satisfaction of this Mortgage; otherwise, this Mortgage shall be and remain in full force and effect. The Affiliate Guaranty, this Mortgage and the Assignment are referred to herein collectively as the “Affiliate Guaranty Documents.”

 

Mortgagor covenants and agrees with Mortgagee as follows:

 

ARTICLE ONE

 

GENERAL COVENANTS

 

Section 1-1. Payment of Guarantied Obligations . Mortgagor shall pay when due all amounts at any time owing under the Affiliate Guaranty secured by this Mortgage and shall perform and observe each and every term, covenant and condition contained herein and in the Affiliate Guaranty.

 

Section 1-2. Title and Instruments of Further Assurance . Mortgagor represents, warrants, covenants and agrees that it is the lawful owner of the Mortgaged Premises and that it has good right and lawful authority to mortgage, assign and pledge the same as provided herein; that it has not made, done, executed or suffered, and will not make, do, execute or suffer, any act or thing whereby its estate or interest in and title to the Mortgaged Premises or any part thereof shall or may be impaired or changed or encumbered in any manner whatsoever except by Permitted Encumbrances; that it does warrant and will defend the title to the Mortgaged Premises

 

 

against all claims and demands whatsoever not specifically excepted herein; and that it will do, execute, acknowledge and deliver all and every further act, deed, conveyance, transfer and assurance necessary or proper for the carrying out more effectively of the purpose of this Mortgage and, without limiting the foregoing, for conveying, mortgaging, assigning and confirming unto Mortgagee all of the Mortgaged Premises, or property intended so to be, whether now owned or hereafter acquired, including without limitation the preparation, execution and filing of any documents, such as control agreements, financing statements and continuation statements, deemed advisable by Mortgagee for maintaining its lien on any property included in the Mortgaged Premises.

 

Section 1-3. Junior Lien . The lien created by this Mortgage is a first and prior lien on the Mortgaged Premises, subordinate only to the Senior Mortgage, and Mortgagor will keep the Mortgaged Premises and the rights, privileges and appurtenances thereto free from all lien claims of every kind whether superior, equal, or inferior to the lien of this Mortgage subject only to Permitted Encumbrances and if any such lien be filed, Mortgagor, within forty-five (45) days after such filing shall cause same to be discharged by payment, bonding or otherwise to the satisfaction of Mortgagee. Mortgagor further agrees to protect and defend the title and possession of the Mortgaged Premises so that this Mortgage shall be and remain a lien thereon with priority as stated above until said debt be fully paid, or if foreclosure shall be had hereunder so that the purchaser at said sale shall acquire good title in fee simple to the Mortgaged Premises free and clear of all liens and encumbrances.

 

Section 1-4. Due on Sale or Encumbrance . Except as permitted in the Senior Mortgage, in the event Mortgagor directly or indirectly sells, conveys, transfers, disposes of, or further encumbers all or any part of the Mortgaged Premises or any interest therein, or in the event any ownership interest in Mortgagor is directly or indirectly transferred or encumbered, or in the event Mortgagor or any owner of Mortgagor agrees so to do, in any case without the written consent of Mortgagee being first obtained (which consent Mortgagee may withhold in its sole and absolute discretion), then, at the sole option of Mortgagee, Mortgagee may accelerate the Loan and declare the principal of and the accrued interest of the Note, and including all sums advanced hereunder with interest, to be forthwith due and payable, and thereupon the Note, including both principal and all interest accrued thereon, and including all sums advanced hereunder and interest thereon, shall be and become immediately due and payable without presentment, demand or further notice of any kind. Without limiting the generality of the foregoing, a merger, consolidation, reorganization, entity conversion or other restructuring or transfer by operation of law, whereunder the Mortgagor or, in the case of an ownership interest, the holder of an ownership interest in Mortgagor, is not the surviving entity as such entity exists on the date hereof, shall be deemed to be a transfer of the Mortgaged Premises or of an ownership interest in Mortgagor. Consent as to any one transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Without limiting the generality of the foregoing, there shall be no subordinate financing relating to the Mortgaged Premises.

 

Notwithstanding the foregoing, and provided no Event of Default (as hereinafter defined) has occurred and is continuing beyond any applicable notice and cure period, with the prior written consent of Mortgagee, which it may withhold in its sole and absolute discretion, one

 

 

transfer or conveyance of the Mortgaged Premises or interest in Mortgagor to a transferee approved by Mortgagee in its sole and absolute discretion shall be permitted upon (a) execution by the transferee of an assumption agreement satisfactory to Mortgagee; (b) receipt by Mortgagee of a non-refundable fee equal to one percent (1%) of the outstanding amount of the Note at the time of such transfer and assumption; (c) receipt by Mortgagee of an endorsement to Mortgagee’s title policy, in form and substance acceptable to Mortgagee; and (d) receipt by Mortgagee of opinions of counsel, and authorization documents of Mortgagor and the transferee, satisfactory to Mortgagee. Further, Mortgagee, in its sole and absolute discretion, may require individuals specifically named by Mortgagee to deliver to Mortgagee an Environmental Indemnification Agreement on Mortgagee’s standard form. The rights granted to Mortgagor in this paragraph are personal to the original Mortgagor, shall be extinguished after the exercise thereof, and shall not inure to the benefit of any transferee. Any such transfer and assumption will not release the original Mortgagor or any guarantor from any liability to Mortgagee without the written consent of Mortgagee, which consent may be given or withheld in Mortgagee’s sole and absolute discretion and may be conditioned upon the execution of new guaranties from the principals of the transferee, execution by the principals of the transferee of Mortgagee’s standard Environmental Indemnification Agreement, and such other requirements as Mortgagee may deem appropriate in its discretion.

 

Further, notwithstanding the foregoing, either of the following may occur without the consent of Mortgagee: (a) transfers of shares in Cole Credit Property Trust II, Inc., Cole Credit Property Trust III, Inc. or any other Cole-sponsored entity whose ownership interests are bought, sold and redeemed through U.S. broker-dealers, and (b) transfers of ownership interests in any Restricted Party and ownership interests in any member, partner or shareholder of any Restricted Party to any affiliate or subsidiary of a Restricted Party, provided that, at all times, Christopher H. Cole, Cole Holdings Corporation, Cole Credit Property Trust II, Inc. or Cole Credit Property Trust III, Inc. continues to “control” the Restricted Party, where the term “control” means the power to direct the management and policies of the Restricted Party. For purposes of this paragraph, “Restricted Party” means Mortgagor and/or a guarantor of the Note.

 

In all events, Mortgagee shall be notified in advance of any proposed transfer, and Mortgagor shall pay, or reimburse Mortgagee for, all costs and expenses associated with any proposed transfer of the Mortgaged Premises or interests in Mortgagor that requires the consent of Mortgagee, whether or not consummated, including legal fees and costs.

 

Section 1-5. Covenants, Representations and Warranties of Mortgagor . Mortgagor hereby covenants, represents and warrants to Mortgagee that:

 

(a)

Mortgagor (i) is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware; (ii) has the power and authority to own its properties and to carry on its business as now being conducted; (iii) is qualified to do business in New Mexico; and (iv) is in compliance with all laws, regulations, ordinances, and orders of public authorities applicable to it.

 

(b)

The execution, delivery and performance by Mortgagor of the Affiliate Guaranty Documents: (i) are within the powers of Mortgagor; (ii) have been duly

 

 

authorized by all requisite action; (iii) have received all necessary governmental approval; and (iv) will not violate any provision of law, any order of any court or other agency of government, or the organizational or chartering documents and agreements of Mortgagor.

 

(c)

This Mortgage, the Note, the Assignment and other Loan Documents constitute the legal, valid and binding obligations of Mortgagor and other obligors named therein, if any, enforceable in accordance with their respective terms.

 

(d)

Neither the execution and delivery of the Affiliate Guaranty Documents, the consummation of the transactions contemplated hereby, or thereby, nor the fulfillment of or compliance with the terms and conditions of the Affiliate Guaranty Documents, conflicts with or results in a breach of any of the terms, conditions or provisions of any restriction or any agreement or instrument to which Mortgagor is now a party or by which it is bound.

 

(e)

None of Mortgagor, any affiliate of Mortgagor, or any person owning an interest in Mortgagor or any such affiliate, is or will be an entity or person (i) listed in the Annex to, or is otherwise subject to the provisions of, Executive Order 13224 issued on September 23, 2001 (the “Executive Order”), (ii) included on the most current list of “Specially Designated Nationals and Blocked Persons” published by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) (which list may be published from time to time in various media including, but not limited to, the OFAC website page, http:www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf), (iii) which or who commits, threatens to commit or supports “terrorism,” as that term is defined in the Executive Order, or (iv) affiliated with any entity or person described in clauses (i), (ii) or (iii) above (any and all parties or persons described in clauses (i) through (iv) are herein referred to individually and collectively as a “Prohibited Person”). Mortgagor covenants and agrees that none of Mortgagor, any affiliate of Mortgagor, or any person owning an interest in Mortgagor or any such affiliate, will (i) conduct any business, or engage in any transaction or dealing, with any Prohibited Person, including, but not limited to the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person, or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order. Mortgagor further covenants and agrees to deliver (from time to time) to Mortgagee any such certification or other evidence as may be requested by Mortgagee in its sole and absolute discretion, confirming that (i) Mortgagor is not a Prohibited Person and (ii) Mortgagor has not engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person.

 

(f)

During the time the Note remains outstanding, the Mortgagor (i) will not engage

 

 

in any business unrelated to the Mortgaged Premises, (ii) will not have any assets other than those related to the Mortgaged Premises, (iii) will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation or merger, and, except as otherwise expressly permitted by the Loan Documents, will not engage in, seek or consent to any asset sale, transfer of membership interests, or amendment of its articles of organization or operating agreement, (iv) will not fail to correct any known misunderstanding regarding the separate identity of Mortgagor, (v) will not with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest (A) file a bankruptcy, insolvency or reorganization petition or otherwise institute insolvency proceedings or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally; (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such entity or all or any portion of such entity’s properties; (C) make any assignment for the benefit of such entity’s creditors; or (D) take any action that might cause such entity to become insolvent, (vi) will maintain its accounts, books and records separate from any other person or entity, (vii) will maintain its books, records, resolutions and agreements as official records, (viii) has not commingled and will not commingle its funds or assets with those of any other person or entity, (ix) has held and will hold its assets in its own name, (x) will conduct its business in its name, (xi) will maintain its financial statements, accounting records and other entity documents separate from any other person or entity, (xii) will pay its own liabilities out of its own funds and assets, (xiii) will observe all entity formalities, (xiv) has maintained and, except as otherwise expressly permitted or required by the Loan Documents, will maintain an arms-length relationship with its affiliates, (xv) will have no indebtedness other than as evidenced by the Loan Documents and commercially reasonable unsecured trade payables in the ordinary course of business relating to the ownership and operation of the Mortgaged Premises that are paid before becoming delinquent, (xvi) except as expressly permitted or required by the Loan Documents, will not assume or guarantee or become obligated for the debts of any other person or entity or hold out its credit as being available to satisfy the obligations of any other person or entity, except as evidenced by the Loan Documents, (xvii) will not acquire obligations or securities of its owners (members, partners, shareholders), (xviii) will allocate fairly and reasonably shared expenses, including, without limitation, shared office space and use separate stationery, invoices and checks, (xix) will not pledge its assets for the benefit of any other person or entity, (xx) will hold itself out and identify itself as a separate and distinct entity under its own name and not as a division or part of any other person or entity, (xxi) will not make loans to any person or entity, (xxii) will not identify its owners (members, partners, shareholders) or any affiliates of any of them as a division or part of it, (xxiii) except as otherwise expressly permitted or required by the Loan Documents, will not enter into or be a party to, any transaction with its owners (members, partners, shareholders) or its affiliates except in the ordinary course of its business and on terms which are intrinsically fair and are no less favorable to it than would be obtained in a comparable arms-length transaction with an unrelated

 

 

third party, (xxiv) will pay the salaries of its own employees from its own funds, (xxv) will maintain adequate capital in light of its contemplated business operations, and (xxvi) shall continue (and not dissolve) for so long as a solvent managing member, partner or shareholder exists.

 

ARTICLE TWO

 

MAINTENANCE, OBLIGATIONS UNDER LEASES,

 

TAXES AND LIENS, INSURANCE AND FINANCIAL REPORTS

 

Section 2-1. Maintenance . Mortgagor will, or will cause Tenant (as hereinafter defined) to, cause the Mortgaged Premises and every part thereof to be maintained, preserved and kept in safe and good repair, working order and condition, will abstain from and not permit the commission of waste in or about the Mortgaged Premises, and will comply with all laws and regulations of any governmental authority with reference to the Mortgaged Premises and the manner of using or operating the same, and with all restrictive covenants, if any, affecting the title to the Mortgaged Premises, or any part thereof. Mortgagor also will, or will cause Tenant to, from time to time make all necessary and proper repairs, renewals, replacements, additions and betterments thereto, so that the value and efficient use thereof shall be fully preserved and maintained and so as to comply with all laws and regulations as aforesaid. Mortgagor will not otherwise make any material modifications to the Mortgaged Premises without the written consent of Mortgagee; provided, however, that Mortgagee’s consent will not be required for any modification to the Mortgaged Premises that may be completed by Tenant under the terms of the Lease (as hereinafter defined) without the consent of Mortgagor.

 

If Mortgagee has reasonable cause to believe that the Mortgaged Premises is not in compliance with applicable laws and regulations (including environmental, health and safety laws and regulations), at the request of Mortgagee, from time to time, Mortgagor, at its sole cost and expense will furnish Mortgagee with engineering studies and soil tests with respect to the Mortgaged Premises, the form, substance and results of which shall be satisfactory and certified to Mortgagee. Mortgagee agrees that Mortgagor shall not be required to pay the costs associated with such studies and tests more than once in any Loan Year (as defined in the Note). If any such engineering studies or soil tests indicate any violation, of environmental, health, safety or similar laws or regulations, then Mortgagor, at its sole cost and expense, will promptly take whatever corrective action is necessary to assure the Mortgaged Premises is in full compliance with law.

 

Section 2-2. Lease Obligations . As further security for the indebtedness secured hereby, Mortgagor has, concurrently herewith, executed and delivered to Mortgagee the Assignment, wherein and whereby, among other things, Mortgagor has assigned to Mortgagee all of Grantor’s right, title and interest to the rents, issues and profits and any and all leases and the rights of management of the Mortgaged Premises, all as therein more specifically set forth, which Assignment is hereby incorporated herein by reference as fully and with the same effect as if set forth herein at length. Mortgagor agrees that it will duly perform and observe all of the terms and provisions on the landlord’s part to be performed and observed under any and all leases of

 

 

the Mortgaged Premises and that it will refrain from any action or inaction which would result in the termination by the tenants thereunder of any such leases or in the diminution of the value thereof or of the rents, issues, profits and revenues thereunder. Nothing herein contained shall be deemed to obligate Mortgagee to perform or discharge any obligation, duty or liability of landlord under any lease of the Mortgaged Premises, and Mortgagor shall and does hereby agree to indemnify and hold Mortgagee harmless from any and all liability, loss or damage which Mortgagee may or might incur under any lease of the Mortgaged Premises or by reason of the Assignment; and any and all such liability, loss or damage incurred by Mortgagee, together with the costs and expenses, including reasonable attorneys’ fees, incurred by Mortgagee in the defense of any claims or demands therefor (whether successful or not), shall be so much additional indebtedness hereby secured, and Mortgagor shall reimburse Mortgagee therefor on demand, together with interest at a rate equal to twelve percent (12%) per annum or, if less, the highest legal rate permitted under applicable law, until paid.

 

Mortgagor shall not lease or sublease any portion of the Mortgaged Premises without the prior written consent of Mortgagee, nor will Mortgagor permit or enter into any sublease, assignment, modification, amendment or termination of any prior approved lease or sublease without the prior written consent of Mortgagee; provided, however, that Mortgagee’s consent will not be required for any assignments, subleases or other transfers that may be completed by Tenant under the terms of the Lease as hereinafter defined) without the consent of Mortgagor.

 

Section 2-3. Taxes, Other Governmental Charges, Liens and Utility Charges . Mortgagor shall, before any penalty attaches thereto, pay and discharge or cause to be paid and discharged all taxes, assessments, utility charges and other governmental charges imposed upon or against the Mortgaged Premises or upon or against the Affiliate Guaranty and the obligations secured hereby, and will not suffer to exist any mechanic’s, statutory or other lien on the Mortgaged Premises or any part thereof unless consented to by Mortgagee in writing. If Mortgagee is required by legislative enactment or judicial decision to pay any such tax, assessment or charge, then at the option of Mortgagee, the Affiliate Notes and any accrued interest thereon together with any additions to the mortgage debt shall be and become due and payable at the election of Mortgagee upon notice of such election to Mortgagor; provided, however, said election shall be unavailing and this Mortgage and the Affiliate Notes shall be and remain in effect as though said law had not been enacted or said decision had not been rendered if, notwithstanding such law or decision, Mortgagor lawfully pays such tax, assessments or charge to or for Mortgagee. Copies of paid tax and assessment receipts shall be furnished to Mortgagee not less than ten (10) days prior to the delinquent dates.

 

Nothing in this Section shall require the payment or discharge of any obligation imposed upon Mortgagor by this Section so long as Mortgagor, upon first notifying Mortgagee of its intent to do so, shall in good faith and at its own expense contest the same or the validity thereof by appropriate legal proceeding which permit the items contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom, unless Mortgagee shall notify Mortgagor that, in its opinion, by nonpayment of any such items, the lien of the Mortgage as to any part of the Mortgaged Premises will be materially endangered or the Mortgaged Premises, or any part thereof, will be subject to loss or forfeiture in which event such taxes, assessments or charges shall be paid promptly.

 

 

 

Section 2-4. Insurance .

 

(a)       Mortgagor shall procure and maintain continuously in effect with respect to the Mortgaged Premises policies of insurance against such risks and in such amounts as are customary for a prudent owner of property comparable to that comprising the Mortgaged Premises. Irrespective of, and without limiting the generality of the foregoing provision, Mortgagor shall specifically maintain the following insurance coverages:

 

(i)        Direct damage insurance providing “special form” or “other perils” coverage, including but not limited to coverage for the following risks of loss:

 

(A)

Fire

 

(B)

Extended Coverage Perils

 

(C)

Vandalism and Malicious Mischief

 

on a replacement cost basis in an amount equal to the full insurable value thereof (“full insurable value” shall include the actual replacement cost of all buildings and improvements and the contents therein, without deduction for depreciation, architectural, engineering, legal and administrative fees).

 

The policies required by this Paragraph (i) shall be either subject to no coinsurance clause or contain an agreed amount clause and may include a deductibility provision not exceeding Ten Thousand Dollars ($10,000).

 

(ii)       Commercial general liability insurance against liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the condition of the Mortgaged Premises or any part thereof, in the maximum amounts required by any of the leases of the Mortgaged Premises, but in no event less than a minimum annual aggregate limit of Two Million and No/100 Dollars ($2,000,000.00) provided that the requirements of this paragraph (ii) with respect to the amount of insurance may be satisfied by an excess coverage policy.

 

(iii)      Business interruption or loss of rental income insurance in an amount equal to not less than the gross revenue from the Mortgaged Premises for twelve (12) months from the operation and rental of all improvements now or hereafter forming part of the Mortgaged Premises, based upon one hundred percent (100%) occupancy of such improvements naming Mortgagee in a standard mortgagee loss payable clause thereunder.

 

(iv)      Insurance against such other casualties and contingencies as Mortgagee may from time to time require (but excluding terrorism), if such insurance against such other casualties and contingencies is available, all in such

 

 

manner and for such amounts as may be reasonably satisfactory to Mortgagee.

 

(b)       All insurance provided for in Subsection (a) shall be effective under a valid and enforceable policy or policies issued by an insurer of recognized responsibility approved by Mortgagee (an insurer with a Best Class rating of at least A-/VIII shall be deemed approved).

 

(c)       All policies of insurance required in Subsections (a)(i) and (iii) shall be written in the names of Mortgagor and Mortgagee as their respective interests may appear. These policies shall provide that the proceeds of such insurance shall be payable to Mortgagee pursuant to a standard mortgagee clause to be attached to each such policy.

 

(d)       Mortgagor shall deposit with Mortgagee policies evidencing all such insurance, or a certificate or certificates of the respective insurers stating that such insurance is in force and effect. At least seven (7) days prior to the date the premiums on each such policy shall become due and payable, Mortgagee shall be furnished with proof of such payment reasonably satisfactory to it. Each policy of insurance herein required shall contain a provision that the insurer shall not cancel, refuse to renew or materially modify it without giving written notice to Mortgagee at least thirty (30) days before the cancellation, non-renewal or modification becomes effective. Before the expiration of any policy of insurance herein required, Mortgagor shall furnish Mortgagee with evidence satisfactory to Mortgagee that the policy has been renewed or replaced by another policy conforming to the provisions of this Article or that there is no necessity therefor under the terms hereof. In lieu of separate policies, Mortgagor may maintain blanket policies having the coverage required herein, in which event it shall deposit with Mortgagee a certificate or certificates of the respective insurance as to the amount of coverage in force on the Mortgaged Premises.

 

Notwithstanding anything in Section 2-4 to the contrary, so long as that certain Ground Lease dated April 27, 2004 by and between Mortgagor and Wal-Mart Stores East, Limited Partnership (“Tenant”), as amended by First Modification of Ground Lease dated April 19, 2005; Second Modification of Ground Lease dated May 24, 2005; Third Modification of Ground Lease dated September 14, 2005; Fourth Modification of Ground Lease dated November 4, 2005; Fifth Modification of Ground Lease dated January 9, 2006; Sixth Modification of Ground Lease dated march 30, 2006; and Full Rent Commencement Date Agreement dated June 17, 2008 (“Lease”) encumbering the Mortgaged Premises remains in full force and effect and Wal-Mart self-insures or maintains the insurance required to be maintained under the Lease, Mortgagor shall be deemed to be in compliance with the insurance requirements set forth herein.

 

Section 2-5. Advances . If Mortgagor shall fail to comply with any of the terms, covenants and conditions herein with respect to the procuring of insurance, the payment of taxes, assessments and other charges, the keeping of the Mortgaged Premises in repair, or any other term, covenant or condition herein contained, Mortgagee may make advances to perform the same and, where necessary, enter the Mortgaged Premises for the purpose of performing any such term, covenant or condition, and without limitation of the foregoing, Mortgagee may procure and place insurance coverage in accordance with the requirements of this Section. Mortgagor agrees to repay all sums so advanced upon demand, with interest at a rate equal to twelve percent (12%) per annum or, if less, the highest legal rate permitted under applicable law,

 

 

until paid. All sums so advanced, with interest, shall be secured hereby in priority to the indebtedness evidenced by the Note, but no such advance shall be deemed to relieve Mortgagor from any default hereunder. After making any such advance, payments made pursuant to the Note shall be first applied toward reimbursement for any such advance and interest thereon, prior to the application toward accrued interest and principal payments due pursuant to the Note.

 

Section 2-6. Financial Information . Mortgagor shall furnish Mortgagee (a) within ninety (90) days after the close of each fiscal year of the operation of the Mortgaged Premises, an annual operating statement of Mortgagor in form and detail satisfactory to Mortgagee, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year and signed by a Certified Public Accountant acceptable to Mortgagee or supported by affidavit of a principal in the ownership of the Mortgaged Premises; and (b) from time to time such other information in the possession of Mortgagor or subject to its control, in such detail as Mortgagee may require, as will enable Mortgagee to determine whether Mortgagor is in compliance with the provisions of the Note and of this Mortgage.

 

Section 2-7. Use of Mortgaged Premises . Mortgagor shall furnish and keep in force a Certificate of Occupancy, or its equivalent, and comply, or cause Tenant to comply, with all restrictions affecting the Mortgaged Premises and with all laws, ordinances, acts, rules, regulations and orders of any legislative, executive, administrative or judicial body, commission or officer, (whether Federal, state or local) exercising any power of regulation or supervision over Mortgagor, or any part of the Mortgaged Premises, whether the same be directed to the erection, repair, manner of use or structural alteration of buildings or otherwise. Mortgagor shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, or other public or private restriction, if such change materially limits or defines the uses which may be made of the Mortgaged Premises or any part thereof, nor shall Mortgagor initiate, join in, acquiesce in, or consent to any zoning change or zoning matter affecting the Mortgaged Premises. If under applicable zoning provisions the use of all or any portion of the Mortgaged Premises is or shall become a nonconforming use, Mortgagor will not cause or permit such nonconforming use to be discontinued or abandoned without the express written consent of Mortgagee. Mortgagor shall not permit or suffer to occur any waste on or to the Mortgaged Premises or to any portion thereof and shall not take any steps whatsoever to convert the Mortgaged Premises, or any portion thereof, to a condominium or cooperative form of management. Mortgagor will not install or permit to be installed on the Mortgaged Premises any underground storage tank.

 

Section 2-8. Escrows . Mortgagor shall pay to Mortgagee, together with and in addition to the monthly payments of principal and interest provided for in the Senior Note (which shall be by Automated Clearing House if provided for in the Note for installment payments thereunder), an amount reasonably estimated by Mortgagee to be sufficient to pay one twelfth (1/12) of the estimated annual real estate taxes (including other charges against the Mortgaged Premises by governmental or quasi-governmental bodies but excluding special assessments which are to be paid as the same become due and payable) and one-twelfth (1/12) of the annual premiums on insurance required in Section 2-4 hereof to be held by Mortgagee and used to pay said taxes and insurance premiums when same shall fall due; provided that upon the occurrence of an Event of Default that continues beyond applicable notice and cure period, Mortgagee may apply such

 

 

funds as Mortgagee shall deem appropriate. If at the time that payments are to be made, the funds set aside for payment of either taxes or insurance premiums are insufficient, Mortgagor shall upon demand pay such additional sums as Mortgagee shall determine to be necessary to cover the required payment. Mortgagee need not segregate such funds. No interest shall be payable to Mortgagor upon any such payments.

 

Notwithstanding the foregoing, Mortgagee waives the collection of escrow deposits for insurance and real estate taxes for so long as all of the f