Exhibit 10.243
JHLICO Loan No. 6518403
TRANSITIONAL SECURITY (PHASE II) RESERVE AGREEMENT
THIS TRANSITIONAL SECURITY (PHASE II) RESERVE AGREEMENT (the "AGREEMENT")
is made as of the 28th day of June, 2004 by and between INLAND WESTERN DULUTH
JOHN'S CREEK SPE, L.L.C., a Delaware limited liability company ("BORROWER") and
XXXX XXXXXXX LIFE INSURANCE COMPANY, a Massachusetts corporation ("LENDER").
WITNESSETH
WHEREAS, Borrower is the owner of certain property (the "MORTGAGED
PROPERTY") located at 00000 Xxxxxxx Xxxxxx Xxxx, Xxxxxx, Xxxxxxx, more
particularly described in the Loan Documents (as hereinafter defined); and
WHEREAS, the Mortgaged Property consists of an improved portion currently
owned by Borrower and legally described as "Phase I" on EXHIBIT A attached
hereto and made a part hereof, and the Mortgaged Property will further consist
of an adjacent portion of property ("Phase II") currently owned by Borrower and
to hereafter be improved and leased to third party tenants, as hereinafter
provided, which Phase II is shown and legally described as "Phase II" on EXHIBIT
A attached hereto and made a part hereof; and
WHEREAS, pursuant to the terms of a certain application for First
Mortgage Loan dated December 9, 2003, as amended on May 19, 2004 (the
"APPLICATION"), Lender has loaned to Borrower the principal sum of Twenty-three
Million Three Hundred Thousand and No/100 Dollars ($23,300,000.00) (the "LOAN"),
which shall be initially secured by among other things Phase I, and later by
Phase II as hereinafter provided; and
WHEREAS, the Loan is evidenced by a Note executed by Borrower as of even
date herewith in the principal amount of $23,300,000.00 payable to the order of
Lender (the "NOTE"); and
WHEREAS, the Note is secured by a Deed to Secure Debt, Assignment of
Leases and Rents and Security Agreement dated as of even date herewith
("Mortgage"), which encumbers the Mortgaged Property, and by the other "LOAN
DOCUMENTS" (as such term is defined in the Note); and
WHEREAS, Lender requires, as a condition precedent to Lender's acceptance
of the Note, that, until such time as Phase II is improved and leased as
hereinafter provided, Borrower will be required to make certain deposits with
Lender of certain funds, to be held, released and used as provided in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the covenants and
conditions contained in this Agreement and other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
JHLICO Loan No. 6518403
1. DEFINITIONS. Any capitalized term utilized herein shall have the
meaning as specified in the Mortgage, unless such term is otherwise specifically
defined herein. For the purposes of this Agreement, the following capitalized
terms shall have the meanings indicated:
(a) DEBT SERVICE COVERAGE RATIO shall mean the ratio of Gross
Income (as hereinafter defined) derived from operation of
the Mortgaged Property, less Expenses (hereinafter
defined), to Debt Service Payments.
(b) DEBT SERVICE PAYMENTS shall mean any and all monthly
installments due and owing from time to time under the Note
and the Mortgage and the other Loan Documents.
(c) EXPENSES shall mean, for any month or portion thereof, all
reasonable expenses actually incurred by the Borrower
within the categories set forth below in respect to the
ownership, operation, leasing and occupancy of the
Mortgaged Property, determined on the basis of sound cash
accounting practices consistently applied and in accordance
with generally accepted accounting practices, except that
those expenses described in subsections (a), (b), (c), (e)
and (g) below shall not be accounted for on a cash basis
but, rather, to the extent paid by Borrower [no more than
one (1) year in advance], shall be allocated to the
accounting period in which they accrue. Expenses are as
follows (but without duplication of any item): (a) general
real estate taxes paid to the appropriate taxing
authorities; (b) special assessments or similar charges
paid to the appropriate governmental authorities; (c)
personal property taxes; (d) sales and use taxes; (e) costs
of utilities, air conditioning and heating for the
Mortgaged Property; (f) maintenance and repair costs of a
non-capital nature; (g) premiums paid for insurance carried
on or with respect to the Mortgaged Property; (h) direct
labor costs, for positions at a level of building
superintendent or below, for labor used in the maintenance
and repair of the Mortgaged Property (but not to exceed
labor costs customarily charged in the Spartanburg, South
Carolina area for similar services on similar properties
and excluding any labor costs for tenant improvements); (i)
customary management fees; (j) principal and interest
payments on the Loan; and (k) leasing commissions at market
rates paid to BONA FIDE third party brokers.
Notwithstanding anything included within the above
definition of "Expenses", the following shall be excluded
from Expenses: (i) foreign, U.S., state and local income
taxes; and (ii) depreciation, amortization and other
non-cash deductions of the Borrower for income tax
purposes.
(d) LEASE shall mean a written lease for space in the Mortgaged
Property with a tenant that is not an affiliate of the
Borrower, the form of which lease has been approved by the
Lender. As used herein, the term "affiliate" shall mean any
person or entity (i) which owns beneficially, directly or
indirectly, any membership interests of the Borrower or any
constituent
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JHLICO Loan No. 6518403
entity of the Borrower, (ii) whose membership interests are
owned beneficially, directly or indirectly, by Borrower or
any constituent entity of the Borrower, (iii) which
controls or is under common control with the Borrower or
any constituent entity of the Borrower, or (iv) which is
controlled by Borrower or any constituent entity of the
Borrower. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the
direction of the management and policies of a person or
entity, whether through ownership of voting securities, by
contract or otherwise.
(e) TRANSITION PERIOD shall mean a period of twenty-four (24)
months from the date of initial funding of the Loan.
(f) RENT shall mean all rentals actually received by or paid to
the Borrower, from tenants under the Leases.
2. THE DEPOSIT. Concurrently with its execution of this Agreement,
Borrower agrees to deposit with Lender a Letter of Credit ("LETTER OF CREDIT")
in the amount of Eleven Million Two Hundred Eighty-six Thousand Six Hundred
Fifty-and No/100 Dollars ($11,286,652.00) ("DEPOSIT"). The Letter of Credit
shall be an irrevocable, unconditional, transferable site draft evergreen Letter
of Credit, in form and substance reasonably satisfactory to Lender, issued by a
bank reasonably satisfactory to Lender, and which shall be drawn upon or reduced
or released in accordance with this Agreement. The initial Letter of Credit
shall expire no earlier than June 30, 2007, and shall be automatically renewed
for successive twelve-month periods thereafter. The Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (Publication
No. 500), shall specifically waive Article 17 of such Publication, and shall
permit partial draws and reductions. The Letter of Credit shall also provide
that a draw of the Letter of Credit shall be recognized by the issuer of the
Letter of Credit by 3:00 p.m. of the date the site draft is provided to issuer,
provided such site draft is delivered to the issuer, on or before 11:00 a.m. on
such date. It is further required that the bank issuing the Letter of Credit (or
any substituted letter of credit), be reasonably acceptable to Lender not only
at the time of the issuance of said Letter of Credit, but shall also continue to
be acceptable to Lender during the entire term of said Letter of Credit,
including all extension and/or renewal periods. In the event Lender, in its
reasonable discretion, shall determine that an issuing bank is or has become
unacceptable to Lender, or in the event Lender receives notice from the issuing
bank that it will not be renewing the term of the letter of credit for any
succeeding one-year period, the Borrower shall be obligated to provide Lender
within fifteen (15) business days after Borrower's receipt of written notice
from Lender that the bank is unacceptable or will not be renewing such letter of
credit with (i) a substitute letter of credit and agreement in form and
substance reasonably satisfactory to Lender and issued by a bank satisfactory to
Lender; or (ii) Eleven Million Two Hundred Eighty-six Thousand Six Hundred
Fifty-two and No/100 Dollars ($11,286,652.00) in cash to be held by Lender in
escrow pursuant to the terms of this Agreement and such cash escrow shall be
deemed the "Reserve" hereunder. In the event that Borrower does not provide such
substitute letter of credit and agreement or cash escrow to Lender within
fifteen (15) business days after Borrower's receipt of written notice from
Lender of the unacceptability of said bank or decision by such bank not to renew
such letter of credit, such
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JHLICO Loan No. 6518403
failure shall be a default under the Loan Documents and Lender shall be
authorized to draw on the Letter of Credit and to apply the proceeds as
described below and to exercise its other remedies under the Loan Documents. The
Deposit and all other funds deposited by Borrower pursuant to this Agreement
shall hereinafter be collectively referred to as the "Reserve". The Reserve
shall be held and released by Lender, and used by Borrower, in accordance with
the terms and conditions of this Agreement.
3. USE OF THE RESERVE. Lender shall have no obligation to return the
Letter of Credit unless Borrower has satisfied the requirements for release of
the Reserve to Borrower described below.
4. RELEASE OF RESERVE. The following conditions ("TRANSFER
CONDITIONS") shall apply to the return of the Letter of Credit and/or release of
the Reserve:
(a) Borrower shall not then be in breach of any provision of
this Agreement nor shall an Event of Default then exist under any of the Loan
Documents.
(b) Borrower then continues to be the owner in fee simple of
Phase I and Phase II
(c) Borrower shall provide evidence reasonably satisfactory to
Lender that (i) Rent in an amount not less than $326,370.00 per annum shall be
currently collectible from actual occupants of Phase II under written Leases
that are in form, for periods and at rentals satisfactory in all respects to
Lender, under which Leases there shall be no concessions, free rent or rebates,
and occupancy at Phase II under such Leases shall be no less than 92%.
(d) Borrower shall provide evidence reasonably satisfactory to
Lender that Rent in an amount of not less than $2,667,373.00 per annum shall be
currently collectible from actual occupants of the combined Phase I and Phase II
under written Leases that are in form, for periods and at rentals satisfactory
in all respects to Lender, under which Leases there shall be no concessions,
free rent or rebates, and occupancy at the combined Phase I and Phase II under
such Leases shall be no less than 92%.
(e) The loan to value ratio for the combined Phase I and
Phase II shall not be greater than fifty-five percent (55%) and the Debt Service
Coverage Ratio for the Loan shall not be less than 2.40:1 as calculated by
Lender.
(f) Borrower shall provide Lender with a certified rent roll
and operating statements and calculations evidencing satisfaction of the
requirements of Paragraph 4(c) and 4(d) above and the Debt Service Coverage
Ratio as set forth in Paragraph 4(e) above.
(g) Borrower shall provide Lender with such additional
documents, certificates and affidavits as Lender may reasonably request.
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JHLICO Loan No. 6518403
If Borrower shall not then be in breach of any provision of this
Agreement nor shall an Event of Default then exist under any of the Loan
Documents, then Lender, within ten (10) business days after receipt of a
disbursement request ("Disbursement Request") in the form attached hereto as
EXHIBIT B shall, subject to the terms and conditions set forth below, return to
Borrower the Reserve and/or the original Letter of Credit then in the possession
of Lender.
Borrower agrees to use diligent efforts to satisfy the Transition
Conditions on or before expiration of the Transition Period. In the event that
the Borrower fails to satisfy the Transition Conditions on or before expiration
of the Transition Period, then Lender, in its sole discretion, may elect either
(a) to continue to hold the Letter of Credit and/or Reserve for an additional
period of time which Lender shall determine in its sole discretion, or (b) to
apply the Letter of Credit and/or Reserve as provided in Section 5 below.
5. REMEDIES.
(a) In order to secure Borrower's repayment of the Note and
performance of all other covenants and conditions required on the part of
Borrower to be observed or performed hereunder and under the Loan Documents,
Borrower, to the extent Borrower possesses any interest in the Reserve, hereby
pledges, assigns and grants to Lender a continuing first lien security interest
in the Reserve, and Lender is hereby given a lien upon, security title to, and a
security interest in the Reserve. Borrower hereby acknowledges that Lender has
complete dominion and control over the Reserve, and Borrower shall not, without
the express written consent of Lender, have any access to or right to draw
against any of the Reserve.
(b) Upon the occurrence of an Event of Default or in the event
of Borrower's breach of any provision of this Agreement, which breach is not
cured within five (5) business days after Borrower's receipt of written notice,
or in the event Lender receives notice of the non-renewal of the Letter of
Credit and does not receive from the issuer of the Letter of Credit, at least
thirty (30) days prior to the date upon which such renewal will take place, a
replacement Letter of Credit in form and substance reasonably satisfactory to
Lender in its sole discretion from an issuer reasonably satisfactory to Lender
as described herein, Lender shall have all remedies available under Article 9 of
the Uniform Commercial Code, under common law, and under any other applicable
laws and, at its sole option, may terminate this Agreement, and may draw upon
the Letter of Credit and/or retain any funds constituting the Reserve then being
held pursuant to this Agreement and apply such Reserve in such order and in such
amounts as Lender shall elect, in its sole and absolute discretion: (i) in whole
or in part, in such amount as Lender in its sole discretion may elect toward
repayment of the indebtedness evidenced by the Note and the Loan Documents;
and/or (ii) toward reimbursement of Lender for any losses or expenses
(including, without limitation, legal fees) suffered or incurred by Lender as a
result of such default.
6. INDEMNIFICATION. Borrower shall hold harmless, indemnify and
defend Lender from and against any and all liabilities, obligations, claims,
demands, damages, penalties, causes of action, losses, fines, costs and expenses
(including without limitation reasonable attorneys' fees and expenses) imposed
upon or incurred by Lender arising from, or in connection with, directly or
indirectly, this Agreement, except if caused by Lender's gross negligence or
willful misconduct.
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JHLICO Loan No. 6518403
This indemnity is in addition to any other indemnity agreements made by Borrower
to Lender in the Mortgage, the Note or in any of the other Loan Documents.
Borrower covenants and agrees that, in performing any of its duties under this
Agreement, neither Lender nor any of its successors or assigns shall be liable
for any losses, costs or damages which may be incurred by any of them as a
result thereof, except for any losses, costs or damages arising out of the
willful misconduct or gross negligence of such party.
7. FEES AND COSTS. Borrower shall reimburse Lender within ten (10)
business days after demand all reasonable fees, charges, costs and expenses
incurred by Lender in connection with all inspections made by Lender or Lender's
representatives in carrying out Lender's responsibility to make certain
determinations under this Agreement.
8. MISCELLANEOUS.
(a) Except as otherwise expressly provided herein, in any
instance where the consent or approval of Lender is required or may be given or
where any determination, judgment or decision is to be rendered by Lender under
this Agreement, such approval and consent shall be given or withheld in Lender's
reasonable discretion, and such approval and consent shall not be unreasonably
delayed or conditioned.
(b) All notices hereunder shall be given in accordance with the
provisions of the Mortgage, except all notices hereunder to Lender shall be
given to the following address: Xxxx Xxxxxxx Life Insurance Company, Xxxx
Xxxxxxx Place, 000 Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attn: Xxxxxx
Xxxxxxx, Loan Number 6518403.
(c) This Agreement shall be binding upon Borrower and its
heirs, devisees, representatives, successors and assigns, including successors
in interest of Borrower in and to all or any part of the Mortgaged Property, and
shall inure to the benefit of and may be enforced by Lender and its heirs,
successors, legal representatives, substitutes and assigns. Borrower shall not
assign any of its rights or obligations under this Agreement.
(d) This Agreement is intended solely for the benefit of
Borrower and Lender, and no third party shall have any right or interest in this
Agreement, nor any right to enforce this Agreement against any party hereto.
(e) This Agreement contains the complete and entire
understanding of the parties with respect to the matters covered and may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Borrower and Lender, but only by an
agreement in writing signed by the party against whom the enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
(f) Each and every provision for the consent, approval,
inspection, review or verification by Lender hereunder is for Lender's own
purpose and benefit only, and no other party may require that the same be given
or be entitled to assume that Lender shall refuse to make or give the same.
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JHLICO Loan No. 6518403
(g) Borrower hereby covenants that Borrower shall not further
pledge, assign or grant a security interest or any other interest in or to, the
Reserve, or any proceeds, replacement or substitutes thereto.
(h) No right or remedy conferred upon or reserved to Lender
under this Agreement is intended to be exclusive of any other right or remedy,
and each and every such right and remedy shall be cumulative and concurrent and
may be enforced separately, successively or together, and may be exercised from
time to time as often as may be deemed necessary by Lender.
(i) Nothing herein or in the Loan Documents is intended to
create, nor creates, nor shall be deemed to create, a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Borrower
and Lender, nor to grant Lender any interest in the Mortgaged Property other
than that of creditor or mortgagee.
(j) If any provisions of this Agreement shall conflict with any
provisions of the other Loan Documents regarding the Reserve, the provisions
contained in this Agreement shall control.
(k) If any term, covenant or condition of this Agreement is
held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision.
(l) For purposes of Article 9 of the Uniform Commercial Code,
the laws of the State of Georgia shall govern the perfection, the effect of
perfection or non-perfection, and the priority of any security interests in a
deposit account with a bank created by this Agreement. In all other respects,
this Agreement shall be governed and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
(m) This Agreement may be executed in multiple counterparts,
each of which when taken together shall constitute one and the same original.
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JHLICO Loan No. 6518403
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as
of the date first above written.
BORROWER:
INLAND WESTERN DULUTH JOHN'S
CREEK SPE, L.L.C., a Delaware limited liability
company
By: Inland Western Duluth John's Creek, L.L.C.,
a Delaware limited liability company, its Sole
Member
By: Inland Western Retail Real Estate
Trust, Inc., a Maryland corporation,
its Sole Member
By: /s/ Xxxxx X Xxxxxx
---------------------------
Name: Xxxxx X Xxxxxx
-------------------------
Title: asst secretary
------------------------
Borrower's Social Security or Taxpayer Identification
Number:_____________________
LENDER:
XXXX XXXXXXX LIFE INSURANCE COMPANY,
a Massachusetts corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
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JHLICO Loan No. 6518403
LIST OF EXHIBITS
Exhibit "A" - Legal Description
Exhibit "B" - Disbursement Request
JHLICO Loan No. 6518403
EXHIBIT "A"
LEGAL DESCRIPTION
JHLICO Loan No. 6518291
EXHIBIT "B"
DISBURSEMENT REQUEST
JHLICO LOAN NO. 6518403
TO: XXXX XXXXXXX LIFE INSURANCE COMPANY ("LENDER")
FROM: INLAND WESTERN DULUTH JOHN'S CREEK SPE, L.L.C. ("BORROWER")
This Disbursement Request is submitted by Borrower in accordance with the
Transitional Security (Phase II) Reserve Agreement dated as of June 28, 2004
between Borrower and Lender (the "AGREEMENT"). Terms used with initial capital
letters and not defined in this Disbursement Request have the meanings given
them in the Agreement.
1. Borrower hereby requests return of the Letter of Credit and/or
disbursement of the entire Reserve.
2. Borrower certifies, represents and warrants to Lender that (a) the
Mortgaged Property satisfies the Debt Service Coverage Ratio and minimum
loan-to-value requirements set forth in Paragraph 4(e) of the Agreement, (b) all
rent and other sums due by tenants under Leases through the date of this
Disbursement Request have been paid in full, (c) the Leases are in full
force and effect and no default or any event which with the giving of notice or
the lapse of time, or both, would become a default under the Lease by Borrower,
or to Borrower's actual knowledge, by Tenant, has occurred, (d) Borrower is
entitled to a disbursement of the Letter of Credit and/or Reserve pursuant to
the Agreement; (e) Borrower's representations and warranties made in the Loan
Documents and the Agreement are true and correct on and as of this date; and (f)
no Event of Default has occurred.
JHLICO Loan No. 6518291
Date:_______________, 20__.
BORROWER:
INLAND WESTERN DULUTH JOHN'S
CREEK SPE, L.L.C., a Delaware limited liability
company
By: Inland Western Duluth Xxxx' s Creek, L.L.C.,
a Delaware limited liability company, its Sole
Member
By: Inland Western Retail Real Estate
Trust, Inc., a Maryland corporation,
its Sole Member
By:
-------------------------------
Name:
-----------------------------
Title:
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Initial Approval -- Name:_____________________ Date:______________
Disbursement Approval -- Name:________________ Date:______________
