SUBORDINATE PLEDGE AND SECURITY AGREEMENT
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THIS SUBORDINATE PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement") is dated as of May 31, 2002, made by SILVER CIRCLE MANAGEMENT CORP.,
a Delaware corporation, having an address c/o Brentway Management, 00 Xxxxx
Xxxxxx Xxxxxx, Xxxx Xxxxxxxxxx, Xxx Xxxx 00000 ("Pledgor"), and API RED LION
SHOPPING CENTER ASSOCIATES, a New York limited partnership, having an address
c/o Cedar Bay Realty Advisors, Inc., 00 Xxxxx Xxxxxx Xxxxxx, Xxxx Xxxxxxxxxx,
Xxx Xxxx 00000 ("Secured Party").
R E C I T A L S:
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A. Pursuant to the terms of that certain Purchase and Sale
Agreement (the "Purchase Agreement"), dated as of February 6, 2002, between
Pledgor and Xxx X. Xxxxxx (collectively, "Seller"), collectively, as seller, and
Philadelphia ARC-Cedar, LLC ("Purchaser"), as purchaser, Pledgor has agreed to
sell to Purchaser a portion of its partnership interest in the Partnership.
B. Pledgor shall, after the Final Closing (as that term is
defined in the Purchase Agreement), have retained an 11% partnership interest
(such retained interest, the "Retained Partnership Interest" or "Collateral") in
the Partnership.
C. Pursuant to the Purchase Agreement, certain representations
and warranties made by Seller survive the Closing (as that term is defined in
the Purchase Agreement), and Seller remains liable, in the event of a breach
thereof, for a period expiring twelve (12) months from the date of the Initial
Closing, as defined in the Purchase Agreement, for damages of up to $500,000 in
the aggregate (such potential liability, the "Obligation").
D. Pursuant to the Purchase Agreement, as security for the
Obligation, Seller has obligated itself to deliver at the Closing, a pledge by
Pledgor of all of Pledgor's right, title and interest as partner in the
Partnership attributable to the Retained Partnership Interest, subject to the
Loan Documents and any prior pledge contained therein.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Secured Party as follows:
1. Defined Terms. All capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Purchase
Agreement. As used in this Security Agreement, the following terms shall have
the following meanings:
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the UCC or comparable law of any jurisdiction in respect of any
of the foregoing).
"Lender" means Salomon Brothers Realty Corp., and its
successors and assigns.
"Loan Documents" mean any and all mortgages, notes, pledges or
other agreements executed by the Partnership and/or any partner therein in
connection with the loan made by Lender to the Partnership in the original
principal amount of $17,000,000.
"Partnership Agreement" means that certain Amended and
Restated Agreement of Limited Partnership of API Red Lion Shopping Center
Associates.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the UCC on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Retained Partnership
Interest, collections thereon or distributions with respect thereto.
"UCC" means the Uniform Commercial Code from time to time in
effect in the State of New York.
2. Grant of Security Interest. As security for the
Obligations, Pledgor hereby pledges, assigns, hypothecates, delivers and sets
over to Secured Party and grants to Secured Party, subject to the Loan
Documents, a lien on and security interest in the Retained Partnership Interest
and in all Proceeds thereof (collectively, the "Collateral") as collateral
security for the due and punctual payment and performance of all the
Obligations. Notwithstanding the foregoing grant, so long as no Event of Default
shall have occurred and be continuing, subject to the Loan Documents, Pledgor
shall be entitled to receive and retain and otherwise deal with, all Proceeds.
Upon the occurrence and during the continuance of an Event of Default, Pledgor's
right to receive Proceeds shall cease, and all such rights shall thereupon
become vested in Secured Party which shall thereupon have the sole right to
receive such Proceeds.
3. Exculpation. Secured Party shall have no obligation or
liability whatsoever for the obligations of Pledgor by reason of or arising out
of this Security Agreement, nor shall Secured Party be required or obligated in
any manner to perform or fulfill any of the obligations of Pledgor under or
pursuant to the Partnership Agreement. Nothing contained in this Security
Agreement shall be construed or interpreted (i) to transfer to Secured Party any
of the rights and obligations of a partner in the Partnership other than the
rights of collateral security in and to the Collateral or (ii) to constitute
Secured Party a partner in the Partnership, provided that such limitation, in no
manner, shall otherwise limit the rights of Secured Party granted under this
Security Agreement. This Security Agreement (i) shall not be deemed to terminate
Pledgor's status as a partner in the Partnership and (ii) shall not be construed
as constituting a current conveyance, but rather as creating a security interest
in the Retained Partnership Interest.
4. Limitation on Voting Rights of Pledgor. In connection with
the Partnership and the Partnership Agreement, Pledgor shall cast no vote, and
no consent, waiver or ratification shall be given or action taken that would
directly or indirectly impair the Collateral or be inconsistent with or violate
any provision of this Security Agreement.
5. Covenants of Pledgor. Pledgor hereby covenants and agrees
as follows:
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(a) Pledgor shall not sell, lease, assign, transfer, convey or
otherwise dispose of, all or any part of Pledgor's right, title or interest in
any of the Collateral or the Proceeds thereof and will not create, incur, or
permit to exist on or with respect to, all or any part of Pledgor' s right,
title and interest in any of the Collateral or the Proceeds thereof, any Lien
except for a Lien in favor of Secured Party, which shall be subordinate to the
Lien of Lender.
(b) Pledgor shall, following the occurrence of any Event of
Default, promptly reimburse Secured Party for all costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses, incurred by Secured
Party in connection with the enforcement of Secured Party's rights under this
Security Agreement, subject to the $500,000 cap on the maximum aggregate
liability.
(c) If and to the extent required, Pledgor shall file this
Security Agreement, and any other agreements or instruments which are required
to be filed with any regulatory body, in accordance with the rules and
regulations of such regulatory body.
6. Event of Default. An "Event of Default" shall exist if any
of the following shall have occurred and be continuing:
(a) Pledgor shall default in the observance or performance of
any covenant or agreement contained in this Agreement and such default continues
for more than thirty (30) days after notice from Secured Party, provided that if
such default cannot reasonably be cured within such thirty (30) day period and
Pledgor shall have commenced to cure such default in a manner reasonably
satisfactory to Secured Party within such thirty (30) day period and thereafter
diligently and expeditiously proceeds to cure the same, such thirty (30) day
period shall be extended for so long as it shall require Pledgor in the exercise
of due diligence to cure such default.
(b) If the Obligation is not satisfied on or before the date
which is thirty (30) business days after Pledgor shall have been given notice
that the Obligation is owing under the Purchase Agreement.
7. Remedies. (a) upon the occurrence of any Event of Default,
Secured Party may, without notice (except as set forth below) to or assent of
Pledgor, forthwith collect, receive, appropriate and realize upon the Collateral
or any part thereof, and/or may forthwith sell, assign, give option or options
to purchase, contract to sell or otherwise dispose of and deliver the Collateral
or any part thereof, in one or more parcels at public or private sale or sales,
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best. Secured Party shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care, safekeeping or otherwise of any and all of the said
Collateral or in any way relating to the rights of Secured Party under this
Security Agreement, including all reasonable attorneys' fees and legal expenses
actually incurred, to the payment, in whole or in part, of the Obligations in
such order as Secured Party may elect, and only after so applying such net
proceeds and after the payment by Secured Party of any other amount required by
any Legal Requirement, need Secured Party account for the surplus, if any, to
Pledgor. Pledgor agrees that Secured Party will give ten (10) business days'
notice of the time and place of any public sale or of the time after which such
a private sale may take place and that such notice is reasonable notification of
such matters. In addition to the rights and remedies granted to it in this
Security Agreement, Secured Party shall have all the rights and remedies of a
secured party under the UCC. Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of Collateral are insufficient to
pay the Obligations and the reasonable fees and disbursements of any attorneys
employed by Secured Party to collect such deficiency.
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(b) In the event of any breach of any of the covenants,
agreements, terms or conditions contained in this Security Agreement, and
notwithstanding to the contrary (but without in any way negating or impairing)
any exculpatory or nonrecourse language which may be contained herein or in any
document executed in connection herewith, Secured Party shall be entitled to
enjoin such breach and obtain specific performance of any covenant, agreement,
term or condition and Secured Party shall have the right to invoke any equitable
right or remedy as though other remedies were not provided for in this Security
Agreement.
8. Successors and Assigns. This Security Agreement shall be
binding upon Pledgor, its successors and assigns, and shall inure to the benefit
of Secured Party and its successors and assigns.
9. Governing Law. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF PLEDGOR AND SECURED PARTY UNDER THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
10. Waiver. Pledgor and Secured Party hereby irrevocably and
unconditionally waive trial by jury in any legal action or proceeding relating
to this Security Agreement and for any counterclaim therein.
11. Indemnification. Pledgor hereby saves, indemnifies and
holds harmless Secured Party from and against all expense, loss or damage,
including, without limitation, reasonable attorneys' fees and expenses, suffered
by Secured Party arising out of or in connection with an Event of Default under
this Security Agreement, subject to the $500,000 cap on maximum aggregate
liability.
12. Termination. Anything in this Security Agreement to the
contrary notwithstanding, this Security Agreement shall terminate, and all of
Secured Party's rights in and to the Collateral or Proceeds shall terminate on
the date that is one (1) year from the date hereof.
IN WITNESS WHEREOF, Pledgor has caused this Security Agreement
to be duly executed and delivered as of the day and year first above written.
SILVER CIRCLE MANAGEMENT CORP.
/s/ Xxx X. Xxxxxx
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Name: Xxx X. Xxxxxx
Title: President
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