-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N7SN+D1eNCbptee2WRVNH/YXXt/qcwMuAlUKm5ImOlqGk65pUrIuJvv1qbgXYQNW lfYeVqtsomDp7B8JZINBrg== 0001047469-99-038235.txt : 19991018 0001047469-99-038235.hdr.sgml : 19991018 ACCESSION NUMBER: 0001047469-99-038235 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990828 FILED AS OF DATE: 19991008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRIFFIN LAND & NURSERIES INC CENTRAL INDEX KEY: 0001037390 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY [5200] IRS NUMBER: 060868486 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12879 FILM NUMBER: 99725528 BUSINESS ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2122187910 MAIL ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the 13 Weeks Ended Commission File No. AUGUST 28, 1999 0-29288 GRIFFIN LAND & NURSERIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-0868496 (state or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) ONE ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020 (Address of Principal Executive Offices) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (212) 218-7910 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT SEPTEMBER 30, 1999: 4,862,704 GRIFFIN LAND & NURSERIES, INC. FORM 10Q
PART I FINANCIAL INFORMATION PAGE CONSOLIDATED STATEMENT OF OPERATIONS 13 WEEKS ENDED AUGUST 28, 1999 AND AUGUST 29, 1998 3 CONSOLIDATED STATEMENT OF OPERATIONS 39 WEEKS ENDED AUGUST 28, 1999 AND AUGUST 29, 1998 4 CONSOLIDATED BALANCE SHEET AUGUST 28, 1999 AND NOVEMBER 28, 1998 5 CONSOLIDATED STATEMENT OF CASH FLOWS 39 WEEKS ENDED AUGUST 28, 1999 AND AUGUST 29, 1998 6 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 39 WEEKS ENDED AUGUST 28, 1999 AND AUGUST 29, 1998 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8-12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13-16 PART II OTHER INFORMATION 17 SIGNATURES 18
PART I ITEM 1. FINANCIAL STATEMENTS GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share data)
FOR THE 13 WEEKS ENDED, ----------------------- AUG. 28, AUG. 29, 1999 1998 --------- --------- Net sales and other revenue $14,409 $ 11,019 Cost and expenses: Cost of goods sold 9,238 7,424 Selling, general and administrative expenses 4,206 3,955 --------- --------- Operating profit (loss) 965 (360) Interest expense 233 47 Interest income 19 66 --------- --------- Income (loss) before income tax provision (benefit) 751 (341) Income tax provision (benefit) 275 (127) --------- --------- Income (loss) before equity investments 476 (214) --------- --------- Loss from equity investments: Investment in Centaur Communications, Ltd. (167) (89) Investment in Linguaphone Group plc - (423) --------- --------- Loss from equity investments (167) (512) --------- --------- Net income (loss) $ 309 $ (726) --------- --------- --------- --------- Basic net income (loss) per common share $0.06 $ (0.15) --------- --------- --------- --------- Diluted net income (loss) per common share $0.06 $ (0.15) --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share data)
FOR THE 39 WEEKS ENDED, ---------------------- AUG. 28, AUG. 29, 1999 1998 --------- --------- Net sales and other revenue $46,867 $ 38,240 Cost and expenses: Cost of goods sold 31,783 26,719 Selling, general and administrative expenses 12,207 11,387 --------- --------- Operating profit 2,877 134 Interest expense 415 129 Interest income 44 253 --------- --------- Income before income tax provision 2,506 258 Income tax provision 977 95 --------- --------- Income before equity investments 1,529 163 --------- --------- Income (loss) from equity investments: Investment in Centaur Communications, Ltd. 227 579 Investment in Linguaphone Group plc (12) (460) --------- --------- Income from equity investments 215 119 --------- --------- Net income $ 1,744 $ 282 --------- --------- --------- --------- Basic net income per common share $0.36 $ 0.06 --------- --------- --------- --------- Diluted net income per common share $0.34 $ 0.05 --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. GRIFFIN LAND & NURSERIES, INC CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
AUG. 28, NOV. 28, 1999 1998 ASSETS --------- --------- CURRENT ASSETS Cash and cash equivalents $ 3,358 $2,059 Accounts receivable, less allowance of $637 and $490 4,931 4,654 Inventories 28,630 26,746 Deferred income taxes 3,220 3,220 Other current assets 2,496 2,625 --------- --------- TOTAL CURRENT ASSETS 42,635 39,304 Real estate held for sale or lease, net 33,324 31,519 Investment in Centaur Communiciations, Ltd. 16,380 16,153 Property and equipment, net 13,532 12,635 Other assets 5,934 5,305 --------- --------- TOTAL ASSETS $111,805 $104,916 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 3,531 $ 5,586 Long-term debt due within one year 340 322 Income taxes payable - 92 --------- --------- TOTAL CURRENT LIABILITIES 3,871 6,000 Long-term debt 8,877 2,666 Deferred income taxes 2,074 1,097 Other noncurrent liabilities 4,053 3,967 --------- --------- TOTAL LIABILITIES 18,875 13,730 --------- --------- Commitments and contingencies - - Common stock, par value $0.01 per share, authorized 10,000,000 shares, issued and outstanding 4,842,704 shares 48 48 Additional paid in capital 93,491 93,491 Accumulated deficit (609) (2,353) --------- --------- Total stockholders' equity 92,930 91,186 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $111,805 $104,916 --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE 39 WEEKS ENDED, ----------------------- AUG. 28, AUG. 29, 1999 1998 -------- -------- OPERATING ACTIVITIES: Net income $ 1,744 $ 282 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,740 1,550 Income from equity investments (215) (119) Deferred income taxes 977 95 Changes in assets and liabilities: Accounts receivable (424) 836 Inventories (1,884) (1,186) Income tax refund received 926 -- Accounts payable and accrued liabilities (1,895) (1,259) Other, net (592) (745) -------- -------- Net cash provided by (used in) operating activities 377 (546) -------- -------- INVESTING ACTIVITIES: Additions to real estate held for sale or lease (2,566) (3,805) Additions to property and equipment (1,845) (940) Additional investment in Linguaphone Group plc (377) -- Additional investment in Centaur Communications, Ltd. -- (2,966) Proceeds from litigation settlement -- 500 -------- -------- Net cash used in investing activities (4,788) (7,211) -------- -------- FINANCING ACTIVITIES: Increase in debt 8,173 -- Payments of debt (2,132) (240) Other (331) 91 -------- -------- Net cash provided by (used in) financing activities 5,710 (149) -------- -------- Net increase (decrease) in cash and cash equivalents 1,299 (7,906) Cash and cash equivalents at beginning of period 2,059 11,519 -------- -------- Cash and cash equivalents at end of period $ 3,358 $ 3,613 -------- -------- -------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
SHARES OF ADDITIONAL COMMON COMMON PAID-IN ACCUMULATED STOCK STOCK CAPITAL DEFICIT TOTAL --------- --------- ---------- ----------- --------- Balance at November 29, 1997 4,743,590 $ 47 $ 92,950 $ (2,474) $ 90,523 Net income -- -- -- 282 282 Exercise of stock options (including income tax benefit of $451) 99,114 1 541 -- 542 --------- --------- --------- --------- --------- Balance at August 29, 1998 4,842,704 $ 48 $ 93,491 $ (2,192) $ 91,347 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Balance at November 28, 1998 4,842,704 $ 48 $ 93,491 $ (2,353) $ 91,186 Net income -- -- -- 1,744 1,744 --------- --------- --------- --------- --------- Balance at August 28, 1999 4,842,704 $ 48 $ 93,491 $ (609) $ 92,930 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) 1. BASIS OF PRESENTATION The unaudited consolidated financial statements of Griffin Land & Nurseries, Inc. ("Griffin") have been prepared in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board ("FASB"). Also, the accompanying financial statements have been prepared in accordance with the accounting policies stated in Griffin's audited 1998 Financial Statements included in the Report on Form 10-K as filed with the Securities and Exchange Commission on February 26, 1999, and should be read in conjunction with the Notes to Financial Statements appearing in that report. All adjustments, comprising only normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods have been reflected. The results of operations for the thirteen and thirty-nine weeks ended August 28, 1999, are not necessarily indicative of the results to be expected for the full year. Certain amounts from the prior year have been reclassified to conform to the current presentation. 2. INDUSTRY SEGMENT INFORMATION Griffin's reportable segments are defined by their products and services, and are comprised of the landscape nursery and real estate segments. Griffin has no operations outside the United States. Griffin's export sales and transactions between segments are not material.
FOR THE 13 WEEKS ENDED, FOR THE 39 WEEKS ENDED ----------------------- ---------------------- AUG. 28, AUG. 29, AUG. 28, AUG. 29, 1999 1998 1999 1998 ---- ---- ---- ---- NET SALES AND OTHER REVENUE Landscape nursery $ 12,287 $ 10,218 $ 42,804 $ 36,048 Real estate 2,122 801 4,063 2,192 -------- -------- -------- -------- $ 14,409 $ 11,019 $ 46,867 $ 38,240 -------- -------- -------- -------- -------- -------- -------- -------- OPERATING PROFIT (LOSS) Landscape nursery $ 461 $ 136 $ 3,084 $ 1,882 Real estate 904 158 914 (165) -------- -------- -------- -------- Industry segment totals 1,365 294 3,998 1,717 General corporate expense 400 654 1,121 1,583 Interest expense (income), net 214 (19) 371 (124) -------- -------- -------- -------- Income (loss) before income tax provision (benefit) $ 751 $ (341) $ 2,506 $ 258 -------- -------- -------- -------- -------- -------- -------- --------
AUG. 28, NOV. 28, 1999 1998 ---- ---- IDENTIFIABLE ASSETS Landscape nursery $50,629 $46,881 Real estate 38,475 35,480 ------ ------ Industry segment totals 89,104 82,361 General corporate 22,701 22,555 ------ ------ $111,805 $104,916 ------ ------ ------ ------
See Note 3 for information on Griffin's equity investment in Centaur Communications, Ltd. 3. INVESTMENTS INVESTMENT IN CENTAUR COMMUNICATIONS, LTD. Griffin accounts for its investment in Centaur Communications, Ltd. ("Centaur") under the equity method of accounting for investments. The summarized financial data of Centaur shown below was derived from Centaur's financial statements which are prepared in accordance with generally accepted accounting principles in the United Kingdom. Griffin's equity income (loss) from Centaur reflects adjustments necessary to present Centaur's results in accordance with generally accepted accounting principles in the United States.
NINE MONTHS ENDED, ------------------ AUG. 28, AUG. 29, 1999 1998 ---- ---- Net sales $ 63,774 $ 52,967 Costs and expenses 59,115 46,075 -------- -------- Operating profit 4,659 6,892 Nonoperating expense 1,846 874 -------- -------- Income before taxes 2,813 6,018 Income taxes 959 2,755 -------- -------- Net income $ 1,854 $ 3,263 -------- -------- -------- -------- AUG. 28, NOV. 28, 1999 1998 -------- -------- Current assets $ 29,392 $ 20,637 Intangible assets 25,163 8,752 Other noncurrent assets 10,864 8,074 -------- -------- Total assets $ 65,419 $ 37,463 -------- -------- -------- -------- Current liabilities $ 27,387 $ 21,897 Debt 40,425 19,800 Noncurrent liabilities 3,529 3,493 -------- -------- Total liabilities 71,341 45,190 Accumulated deficit (5,922) (7,727) -------- -------- Total liabilities and deficit $ 65,419 $ 37,463 -------- -------- -------- --------
On March 31, 1999, Centaur acquired a group of United Kingdom magazines and trade shows in the engineering field from Miller Freeman UK, Ltd. for approximately $20 million. Centaur financed this acquisition with debt. INVESTMENT IN LINGUAPHONE GROUP PLC On January 22, 1999, Linguaphone Group plc ("Linguaphone") completed an offering of its common stock in which Griffin participated to a limited extent. As a result of the issuance of additional shares of Linguaphone common stock, Griffin's common equity ownership was reduced to approximately 14% of Linguaphone's outstanding common stock after the offering. As a result, Griffin is accounting for its investment in Linguaphone under the cost method of accounting for investments subsequent to the reduction in its common equity ownership interest in Linguaphone. Prior to the reduction in its common equity ownership interest, Griffin accounted for its investment in Linguaphone under the equity method of accounting for investments. Griffin's investment in Linguaphone was approximately $2.3 million at August 28, 1999, and is included in other assets on Griffin's consolidated balance sheet. 4. LONG-TERM DEBT Long-term debt includes:
AUG. 28, NOV. 28, 1999 1998 ---- ---- Mortgages $8,731 $2,495 Credit Agreement - - Capital leases 486 493 ------ ------ Total 9,217 2,988 Less: due within one year 340 322 ------ ------ Total long-term debt $8,877 $2,666 ------ ------ ------ ------
On June 24, 1999, Griffin entered into a nonrecourse mortgage of $8.2 million on several of its buildings in the New England Tradeport. The mortgage has an interest rate of 8.54% and a ten year term, with payments based on a thirty year amortization schedule. Proceeds were used to reduce amounts then outstanding under the Imperial Nurseries, Inc. Credit Agreement (the "Imperial Credit Agreement") and to repay an existing mortgage on certain of those buildings. The existing mortgage had a balance of $1.9 million at the time of repayment and an interest rate of 8.63%. The book value of the buildings covered by the new mortgage was $6.8 million at August 28, 1999. On August 3, 1999 Griffin completed a new $20 million Revolving Credit Agreement (the "Griffin Credit Agreement") to replace the $10 million Imperial Credit Agreement. The Griffin Credit Agreement is an unsecured facility with the same lender as the Imperial Credit Agreement and terminates in May 2001. Borrowings under the Griffin Credit Agreement may be, at Griffin's option, on an overnight basis or for periods of one, two, three or six months. Overnight borrowings bear interest at the lender's prime rate plus 1/4% per annum. Borrowings of one month and longer bear interest at the London Interbank Offerred Rate ("LIBOR") plus 1 3/4% per annum. There are no compensating balance agreements, and Griffin will pay a commitment fee of 1/4 of 1% per annum on unused borrowing capacity. Borrowings under the Griffin Credit Agreement will be used principally to finance working capital requirements at Griffin's landscape nursery and real estate businesses. The Griffin Credit Agreement includes financial covenants with respect to Griffin's debt service coverage (as defined), net worth, operating profit and capital expenditures. There were no borrowings under the Griffin Credit Agreement in the 1999 third quarter. 5. STOCK OPTIONS On January 11, 1999, Griffin's Board of Directors approved an amendment to Griffin's 1997 Stock Option Plan which made available an additional 300,000 shares for grant. On May 10, 1999, Griffin's stockholders approved the 1997 Griffin Stock Option Plan, as amended. The Board also approved a total of 248,100 options to be granted at $13.25 per share, the market price of Griffin's common stock at the time of grant. The options granted have a ten year life and vest in equal installments on the third, fourth and fifth anniversaries from the date of grant. Under the terms of Griffin's 1997 Stock Option Plan, the Independent Directors were granted non-qualified stock options upon their reelection to the Board of Directors at Griffin's 1999 Annual Meeting. A total of 4,000 options were granted to the Independent Directors at $13.00 per share, the market price of Griffin's common stock at the time of grant. Activity under Griffin's 1997 Stock Option Plan is summarized as follows:
NUMBER OF WEIGHTED AVG. EXERCISE PRICE SHARES --------- ---------------------------- Options outstanding at November 28, 1998 369,607 $10.79 Options issued after November 28, 1998 252,100 $13.25 ------- Options outstanding at August 28, 1999 621,707 $11.78 ------- ------- Number of option holders as of August 28, 1999 39 -- --
At August 28, 1999, there were 160,607 vested options outstanding under the Griffin Stock Option Plan with a weighted average price of $5.65 per share. 6. PER SHARE RESULTS Basic and diluted per share results were based on the following:
FOR THE 13 WEEKS ENDED, FOR THE 39 WEEKS ENDED, ----------------------- ----------------------- AUG. 28, AUG. 29, AUG. 28, AUG. 29, 1999 1998 1999 1998 ---- ---- ---- ---- Net income (loss) as reported for computation of basic per share results $ 309 $ (726) $ 1,744 $ 282 Adjustment to net income (loss) for assumed exercise of options of equity investee (Centaur) -- -- (48) (39) ----------- ----------- ----------- ----------- Adjusted net income (loss) for computation of diluted per share results $ 309 $ (726) $ 1,696 $ 243 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average shares outstanding for computation of basic per share results 4,843,000 4,771,000 4,843,000 4,754,000 Incremental shares from assumed exercise of stock options 82,000 -- 82,000 189,000 ----------- ----------- ----------- ----------- Adjusted weighted average shares for computation of diluted per share results 4,925,000 4,771,000 4,925,000 4,943,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
7. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION INVENTORIES Inventories consist of:
AUG. 28, NOV. 28, 1999 1998 ---- ---- Nursery stock $25,997 $ 24,329 Finished goods 1,728 1,420 Materials and supplies 905 997 ------- ------- $28,630 $26,746 ------- ------- ------- -------
PROPERTY AND EQUIPMENT Property and equipment consist of:
AUG. 28, NOV. 28, 1999 1998 ---- ---- Land and improvements $ 7,372 $ 6,336 Buildings 3,964 3,871 Machinery and equipment 13,860 13,297 --------- -------- 25,196 23,504 Accumulated depreciation (11,664) (10,869) --------- -------- $13,532 $12,635 --------- -------- --------- --------
Griffin incurred capital lease obligations of $188 and $199, respectively, in the thirty-nine weeks ended August 28, 1999 and August 29, 1998. REAL ESTATE HELD FOR SALE OR LEASE Real estate held for sale or lease consists of:
AUG. 28, NOV. 28, 1999 1998 ---- ---- Land $ 4,745 $ 4,761 Land improvements 12,832 12,716 Buildings 23,772 21,498 ------- ------ 41,349 38,975 Accumulated depreciation (8,025) (7,456) -------- ------- $33,324 $31,519 -------- ------- -------- -------
On July 20, 1999 Griffin's real estate division, Griffin Land, completed the sale of undeveloped land for proceeds of $1.0 million. The book value of the land sold and expenses of sale were $0.1 million. ITEM 2 GRIFFIN LAND & NURSERIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Griffin's operations are comprised of two segments: the landscape nursery business and the real estate business. The following discussion contains information relating to the consolidated operations of Griffin and, where appropriate, separate information regarding each of these segments. As used in this discussion the term "Imperial" refers to Griffin's landscape nursery operations (conducted by Griffin's wholly-owned subsidiary, Imperial Nurseries, Inc.) and the term "Griffin Land" refers to Griffin's real estate operations. RESULTS OF OPERATIONS Thirteen Weeks Ended August 28, 1999 Compared to the Thirteen Weeks Ended August 29, 1998 Griffin's net sales and other revenue were $14.4 million in the thirteen weeks ended August 28, 1999 (the "1999 third quarter") as compared to net sales and other revenue of $11.0 million in the thirteen weeks ended August 29, 1998 (the "1998 third quarter"). The increase of $3.4 million reflects higher net sales at both Imperial and Griffin Land. Imperial's net sales increased $2.1 million to $12.3 million in the 1999 third quarter from $10.2 million in the 1998 third quarter. The increase reflects higher volume at Imperial's wholesale sales and service centers and an increase in sales of containerized plants from Imperial's farm operations. Net sales and other revenue at Griffin Land increased $1.3 million to $2.1 million in the 1999 third quarter from $0.8 million in the 1998 third quarter. The increase at Griffin Land principally reflects a land sale in the 1999 third quarter which generated proceeds of $1.0 million (there were no land sales in the 1998 third quarter) and higher rental revenue due to new leases entered into during 1998, including the approximately 98,000 square foot warehouse facility completed in mid-1998 that became fully leased at the beginning of 1999. Griffin's operating profit (before interest) was $1.0 million in the 1999 third quarter as compared to an operating loss of $0.4 million in the 1998 third quarter. Operating profit at Imperial increased to $0.5 million in the 1999 third quarter from $0.1 million in the 1998 third quarter. The increase in Imperial's operating profit reflects a $0.6 million increase in gross profit, partially offset by higher operating expenses. The higher gross profit reflected the increased sales volume noted above. Imperial's operating expenses increased from $3.1 million in the 1998 third quarter to $3.3 million in the 1999 third quarter, primarily due to the volume increase at its wholesale centers. As a percentage of net sales, operating expenses were 27.3% of net sales in the 1999 third quarter as compared to 30.8% of net sales in the 1998 third quarter. Griffin Land had an operating profit of $0.9 million in the 1999 third quarter as compared to an operating profit of $0.2 million in the 1998 third quarter. The increase in operating profit reflects a gain of $0.9 million on the land sale in the current quarter and the higher rental revenue in the current quarter, partially offset by higher operating expenses. The higher expenses in the 1999 third quarter reflect the effect of a litigation settlement in the 1998 third quarter which resulted in a $0.2 million reduction of operating expenses in last year's third quarter. Excluding the effect of the litigation settlement last year, Griffin Land's operating expenses were substantially unchanged in the 1999 third quarter as compared to the 1998 third quarter. Griffin's interest expense increased to $0.2 million in the 1999 third quarter as compared to less than $0.1 million in the 1998 third quarter. The higher interest expense reflects the increased debt level during the 1999 third quarter principally to fund Imperial's seasonal working capital requirements and real estate investments. In 1998, cash on hand was used to meet these requirements. The loss from Griffin's equity investment in Centaur Communications, Ltd. ("Centaur") was higher in the 1999 third quarter as compared to last year's third quarter. Higher operating expenses and higher interest expense at Centaur more than offset increased revenue at Centaur. The 1998 third quarter included an equity loss from Griffin's investment in Linguaphone Group plc ("Linguaphone"). Griffin's investment in Linguaphone was reduced in the first quarter of this year and is now accounted for under the cost method of accounting for investments. Accordingly, there are no equity results from Linguaphone in the 1999 third quarter. Thirty-nine Weeks Ended August 28, 1999 Compared to the Thirty-nine Weeks Ended August 29, 1998 Griffin's net sales and other revenue were $46.9 million in the thirty-nine weeks ended August 28, 1999 (the "1999 nine month period") as compared to net sales and other revenue of $38.2 million in the thirty-nine weeks ended August 29, 1998 (the "1998 nine month period"). The increase of $8.7 million reflects higher net sales at both Imperial and Griffin Land. Imperial's net sales increased $6.8 million to $42.8 million in the 1999 nine month period from $36.0 million in the 1998 nine month period. The higher net sales at Imperial principally reflects increased volume at its wholesale sales and service centers, which benefitted from favorable weather conditions during Imperial's peak spring selling season in the second quarter. Net sales and other revenue at Griffin Land increased to $4.1 million in the 1999 nine month period from $2.2 million in the 1998 nine month period. The increase reflected the land sale in the 1999 third quarter and an increase in rental revenue in the 1999 nine month period from new leases, including the approximately 98,000 square foot warehouse in the New England Tradeport, which was completed in mid-1998 and was fully leased for the 1999 nine month period. Griffin's operating profit (before interest) in the 1999 nine month period increased $2.8 million to $2.9 million from $0.1 million in the 1998 nine month period. Operating profit at Imperial increased $1.2 million to $3.1 million in the 1999 nine month period as compared to $1.9 million in the 1998 nine month period. Imperial's higher operating profit principally reflects increased gross profit on the higher sales at its wholesale centers. Imperial's gross profit increased to $12.9 million in the 1999 nine month period from $10.7 million in the 1998 nine month period. In addition to the higher volume, Imperial's gross profit margin increased to 30.1% in the 1999 nine month period from 29.8% in the 1998 nine month period. Imperial's operating expenses were $9.8 million in the 1999 nine month period as compared to $8.8 million in the 1998 nine month period. As a percentage of net sales, operating expenses decreased to 22.9% of net sales in the 1999 nine month period from 24.6% in the 1998 nine month period. In the 1999 nine month period, Griffin Land had operating profit of $0.9 million as compared to an operating loss of $0.2 million in the 1998 nine month period. Griffin Land's improved results principally reflect profit on the 1999 third quarter land sale and higher rental revenue in the 1999 nine month period, partially offset by higher operating expenses. Griffin Land's rental properties generated an operating profit, before depreciation, of $2.1 million in the 1999 nine month period as compared to $1.5 million in the 1998 nine month period. The increase reflects a higher occupancy rate and the increase in available space as a result of completely leasing, effective at the beginning of 1999, the warehouse completed in mid-1998. Operating expenses at Griffin Land increased $0.3 million in the 1999 nine month period as compared to the 1998 nine month period due principally to the effect of a litigation settlement in the 1998 nine month period which resulted in a $0.2 million credit to operating expenses last year. Griffin's interest expense increased to $0.4 million in the 1999 nine month period as compared to $0.1 million in the 1998 nine month period. The higher interest expense principally reflects borrowings in the current year to finance seasonal working capital requirements at Imperial and additional investments in its real estate assets by Griffin Land. In the 1998 nine month period, these requirements were financed from cash on hand. Griffin had equity income from Centaur of $0.2 million in the 1999 nine month period as compared to equity income of $0.6 million in the 1998 nine month period. The effect of higher revenue at Centaur was more than offset by higher operating expenses and higher interest expense. The increase in Centaur's interest expense reflects borrowings incurred in August 1998 in connection with Centaur's repurchase of a portion of its outstanding common stock at that time and additional borrowings by Centaur earlier this year to finance an acquisition. As a result of Griffin's limited participation in a share offering by Linguaphone earlier this year, Griffin's investment in Linguaphone was reduced and Griffin now accounts for that investment under the cost method of accounting. LIQUIDITY AND CAPITAL RESOURCES Griffin's net cash provided by operating activities was $0.4 million in the 1999 nine month period as compared to net cash used in operating activities of $0.5 million in the 1998 nine month period. The increase in cash from operations principally reflects higher net income and an income tax refund of $0.9 million received in the current year, partially offset by increased accounts receivable and inventories. Net cash used in investing activities was $4.8 million in the 1999 nine month period as compared to $7.2 million in the 1998 nine month period. The change reflects an additional investment in Centaur of $3.0 million in the 1998 nine month period and lower expenditures in the current year for real estate by Griffin Land, partially offset by a $0.9 million increase in additions to property and equipment in the 1999 nine month period as compared to the 1998 nine month period. The increase in additions to property and equipment in the 1999 nine month period principally reflects the acquisition of land adjacent to Imperial's Cincinnati wholesale sales and service center to expand that center. Additions to real estate held in the 1999 nine month period principally reflect completion of an approximately 100,000 square foot warehouse in the New England Tradeport. The shell of this new warehouse was substantially completed at the end of the 1999 second quarter. There are no leases on this new building. In the 1999 third quarter, Griffin entered into an $8.2 million nonrecourse mortgage on several of its buildings in the New England Tradeport. Proceeds were used to reduce the amount then outstanding under the Imperial Credit Agreement and to repay an existing mortgage on certain of those properties. The new warehouse completed in the second quarter this year is not mortgaged. Also in the 1999 third quarter, Griffin entered into a $20 million revolving credit loan (the "Griffin Credit Agreement") to replace the $10 million revolving credit facility with Imperial. The Griffin Credit Agreement is an unsecured facility that terminates in May 2001 and will provide financing for working capital requirements of Griffin's landscape nursery and real estate businesses. In the 1999 third quarter, Imperial started several capital projects to improve and expand its containerized plant production facilities in Florida and Connecticut. These projects are expected to be completed over the next six to twelve months at a projected cost of approximately $4.0 million. Additionally, Imperial entered into an agreement to acquire land in central New Jersey for a new wholesale sales and service center. Completion of the land purchase is contingent upon receiving all required regulatory approvals to operate a wholesale sales and service center on that site. If such approval is received, expenditures for the land acquisition and site work is projected to be approximately $2.5 million over the next twelve months. Management believes that in the near term, based on the current level of operations and anticipated growth, that its cash on hand, cash flow from operations and borrowings under the Griffin Credit Agreement will be sufficient to finance the working capital requirements and expected capital expenditures of its landscape nursery business and fund development of its real estate assets. Over the intermediate and long term, selective mortgage placements may also be required to fund capital projects. YEAR 2000 Griffin is continuing to address its year 2000 ("Y2K") issue and has identified its critical computer applications that were not Y2K compliant. All of the computer applications that were not Y2K compliant have been modified, successfully tested and are now Y2K compliant. The modification of the computer applications for Y2K compliance was performed by Griffin employees. Costs attributed to such work were less than $0.1 million in the aggregate. Griffin has initiated a company-wide review of major customers, vendors and other third parties to determine the extent, if any, to which Griffin would be vulnerable to those third parties' failure to remedy their own Y2K issues. Those third parties contacted have indicated that they have Y2K readiness programs in place or they anticipate being Y2K compliant on or before December 31, 1999. We will continue to assess the progress of our critical business partners in reaching Y2K readiness. Griffin believes that its efforts to address the Y2K issue will be successful. However, failure of critical third parties adequately to address their respective Y2K issues could have a material adverse effect on Griffin's business, financial condition and results of operations. Therefore, Griffin's program for Y2K compliance includes the development of contingency plans for continuing operations in the event such problems arise. However, there can be no assurance that such contingency plans will be adequate to handle all problems which may arise. FORWARD-LOOKING INFORMATION The information in Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although Griffin believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved, particularly with respect to leasing of its recently constructed warehouse, the improvements and expansion of Imperial's farm operations, and the opening of a wholesale sales and service center in central New Jersey. The projected information disclosed herein is based on assumptions and estimates that, while considered reasonable by Griffin as of the date hereof, are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, many of which are beyond the control of Griffin. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. PART II OTHER INFORMATION Items 1 - 5 not applicable Item 6. Exhibits and Reports on Form 8K (a) Exhibits
Exhibit No. Description ----------- ----------- 10.17 Loan Agreement dated June 24, 1999 10.18 Revolving Credit Agreement dated August 3, 1999 27 Financial Data Schedule
(b) There were no reports filed on Form 8K by the Registrant during the 1999 third quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GRIFFIN LAND & NURSERIES, INC. /s/ Frederick M. Danziger ------------------------------------- Date: October 8, 1999 Frederick M. Danziger President and Chief Executive Officer /s/ Anthony J. Galici ------------------------------------- Date: October 8, 1999 Anthony J. Galici Vice President, Chief Financial Officer and Secretary EX-10.17 2 EXHIBIT 10.17 Exhibit 10.17 Loan No. 76-0011316 ================================================================================ GENERAL ELECTRIC CAPITAL CORPORATION (Lender) to GRIFFIN LAND & NURSERIES, INC. (Borrower) ---------------------------------------------------------- LOAN AGREEMENT ---------------------------------------------------------- Dated as of: June 24, 1999 Property Location: East Granby/Windsor, Connecticut DOCUMENT PREPARED BY: Andrews & Kurth LLP 1717 Main Street, Suite 3700 Dallas, Texas 75201 Attention: Steven R. Smith ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1 - CERTAIN DEFINITIONS................................................1 Section 1.1 Certain Definitions.................................1 ARTICLE 2 - LOAN TERMS.........................................................3 Section 2.1 The Loan............................................3 Section 2.2 Interest Rate; Late Charge..........................4 Section 2.3 Terms of Payment....................................4 Section 2.4 Security; Establishment of Funds....................4 ARTICLE 3 - INSURANCE, CONDEMNATION, AND IMPOUNDS .............................6 Section 3.1 Insurance...........................................6 Section 3.2 Use and Application of Insurance Proceeds...........7 Section 3.3 Condemnation Awards.................................7 Section 3.4 Impounds............................................8 ARTICLE 4 - ENVIRONMENTAL MATTERS .............................................8 Section 4.1 Certain Definitions.................................8 Section 4.2 Representations and Warranties on Environmental Matters.............................................9 Section 4.3 Covenants on Environmental Matters..................9 Section 4.4 Allocation of Risks and Indemnity..................10 Section 4.5 No Waiver..........................................10 ARTICLE 5 - LEASING MATTERS ..................................................10 Section 5.1 Representations and Warranties on Leases...........10 Section 5.2 Standard Lease Form; Approval Rights...............10 Section 5.3 Covenants..........................................11 Section 5.4 Tenant Estoppels...................................11 ARTICLE 6 - REPRESENTATIONS AND WARRANTIES ...................................11 Section 6.1 Organization, Power and Authority..................11 Section 6.2 Validity of Loan Documents.........................11 Section 6.3 Liabilities; Litigation............................11 Section 6.4 Taxes and Assessments..............................12 Section 6.5 Other Agreements; Defaults.........................12 Section 6.6 Compliance with Law................................12 Section 6.7 Location of Borrower..............................12 Section 6.8 ERISA..............................................12 Section 6.9 Forfeiture.........................................13 Section 6.10 Tax Filings........................................13 Section 6.11 Solvency...........................................13 Section 6.12 Full and Accurate Disclosure.......................13 Section 6.13 Flood Zone.........................................13 Section 6.14 Year 2000 Compliance...............................13 ARTICLE 7 - FINANCIAL REPORTING...............................................14 Section 7.1 Financial Statements...............................14 Section 7.2 Accounting Principles..............................14 ii Section 7.3 Other Information; Access..........................14 Section 7.4 Annual Budget......................................14 ARTICLE 8 - COVENANTS.........................................................14 Section 8.1 Due On Sale and Encumbrance; Transfers of Interests..........................................14 Section 8.2 Taxes; Utility Charges.............................14 Section 8.3 Control; Management................................15 Section 8.4 Operation; Maintenance; Inspection.................15 Section 8.5 Taxes on Security..................................15 Section 8.6 Legal Existence; Name, Etc.........................15 Section 8.7 Further Assurances.................................15 Section 8.8 Estoppel Certificates..............................15 Section 8.9 Notice of Certain Events...........................16 Section 8.10 Indemnification....................................16 Section 8.11 Cooperation........................................16 Section 8.12 Payment For Labor and Materials....................16 Section 8.13 Year 2000 Compliance...............................17 Section 8.14 Limitation on Additional Borrowing Secured by Other Real Estate Indebtedness.....................17 Section 8.15 Limitation on Indebtedness.........................17 Section 8.16 Optional Letters of Credit.........................17 ARTICLE 9 - EVENTS OF DEFAULT.................................................18 Section 9.1 Payments...........................................18 Section 9.2 Insurance..........................................18 Section 9.3 Sale, Encumbrance, Etc.............................18 Section 9.4 Covenants..........................................18 Section 9.5 Representations and Warranties.....................18 Section 9.6 Other Encumbrances.................................18 Section 9.7 Involuntary Bankruptcy or Other Proceeding.........18 Section 9.8 Voluntary Petitions, etc...........................18 ARTICLE 10 - REMEDIES.........................................................19 Section 10.1 Remedies - Insolvency Events.......................19 Section 10.2 Remedies - Other Events............................19 Section 10.3 Lender's Right to Perform the Obligations..........19 ARTICLE 11 - MISCELLANEOUS....................................................19 Section 11.1 Notices............................................19 Section 11.2 Amendments and Waivers.............................20 Section 11.3 Limitation on Interest.............................20 Section 11.4 Invalid Provisions.................................21 Section 11.5 Reimbursement of Expenses..........................21 Section 11.6 Approvals; Third Parties; Conditions...............21 Section 11.7 Lender Not in Control; No Partnership..............21 Section 11.8 Contest of Certain Claims..........................22 Section 11.9 Time of the Essence................................22 Section 11.10 Successors and Assigns.............................22 Section 11.11 Renewal, Extension or Rearrangement................22 Section 11.12 Waivers............................................22 Section 11.13 Cumulative Rights; Joint and Several Liability.....22 Section 11.14 Singular and Plural................................22 iii Section 11.15 Phrases............................................22 Section 11.16 Exhibits and Schedules.............................23 Section 11.17 Titles of Articles, Sections and Subsections.......23 Section 11.18 Promotional Material...............................23 Section 11.19 Survival...........................................23 Section 11.20 Waiver of Jury Trial...............................23 Section 11.21 Waiver of Punitive or Consequential Damages........23 Section 11.22 Governing Law......................................23 Section 11.23 Entire Agreement...................................23 Section 11.24 Counterparts.......................................24 ARTICLE 12 - LIMITATIONS ON LIABILITY.........................................24 Section 12.1 Limitation on Liability............................24 Section 12.2 Limitation on Liability of Lender's Officers, Employees, etc...........................24 LIST OF EXHIBITS AND SCHEDULES EXHIBIT A LEGAL DESCRIPTION OF PROJECT SCHEDULE I DEFEASANCE SCHEDULE II REQUIRED REPAIRS iv LOAN AGREEMENT This Loan Agreement (this "AGREEMENT") is entered into as of June 24, 1999 between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("LENDER"), and GRIFFIN LAND & NURSERIES, INC., a Delaware corporation ("BORROWER"). ARTICLE 1 CERTAIN DEFINITIONS SECTION 1.1 CERTAIN DEFINITIONS. As used herein, the following terms have the meanings indicated: "AGREEMENT" means this Loan Agreement, as amended from time to time. "ASSIGNMENT OF LEASES AND RENTS" means the Assignment of Leases and Rents, executed by Borrower for the benefit of Lender, and pertaining to leases of space in the Project. "AWARD" has the meaning assigned in Section 3.3. "BANKRUPTCY PARTY" has the meaning assigned in Section 9.7. "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. "CASUALTY" has the meaning assigned in Section 3.2. "CLOSING DATE" means the date the Loan is funded by Lender. "COMMITMENT" means the commitment letter, dated May 4, 1999, issued by Lender and accepted by Borrower on May 6, 1999. "CONDEMNATION" has the meaning assigned in Section 3.3. "CONTRACT RATE" has the meaning assigned in Section 2.2. "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, and (f) 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. "DEBT SERVICE" means the aggregate interest, fixed principal, and other payments due under the Loan, and on any other outstanding permitted Debt relating to the Project approved by Lender for the period of time for which calculated. "DEFAULT RATE" means the lesser of (a) the maximum rate of interest allowed by applicable law, and (b) five percent (5%) per annum in excess of the Contract Rate. "DEFEASANCE OPTION" has the meaning assigned in Section 2.3(c). "ENVIRONMENTAL LAWS" has the meaning assigned in Section 4.1(a). "ERISA" has the meaning assigned in Section 6.8. "EVENT OF DEFAULT" has the meaning assigned in Article 9. "FEDERAL EXPRESS ESCROW" has the meaning assigned in Section 2.4. "FUNDS" means the Required Repair Fund, the Replacement Escrow Fund, the Rollover Escrow Fund, the Hartford Insurance Rent Concession Escrow, the Federal Express Escrow and the Hartford Insurance Termination Escrow. "HARTFORD INSURANCE RENT CONCESSION ESCROW" has the meaning assigned in Section 2.4. "HARTFORD INSURANCE TERMINATION ESCROW" has the meaning assigned in Section 2.4. "HAZARDOUS MATERIALS" has the meaning assigned in Section 4.1(b). "INSURANCE PREMIUMS" has the meaning assigned in Section 3.1(c). "LETTER OF CREDIT" has the meaning assigned in Section 8.15. "LIEN" means any interest, or claim thereof, in the Project securing an obligation owed to, or a claim by, any Person other than the owner of the Project, 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 Project. "LOAN" means the loan made by Lender to Borrower under this Agreement and all other amounts secured by the Loan Documents. "LOAN DOCUMENTS" means: (a) this Agreement, (b) the Note, (c) the Mortgage, (d) the Assignment of Leases and Rents, (e) Uniform Commercial Code financing statements, (f) such assignments of management agreements, contracts and other rights as may be required under the Commitment or otherwise requested by Lender, (g) all other documents evidencing, securing, governing or otherwise pertaining to the Loan, and (h) all amendments, modifications, renewals, substitutions and replacements of any of the foregoing; provided however, in no event shall the term "Loan Documents" include that certain Hazardous Materials Indemnity Agreement (the "ENVIRONMENTAL INDEMNITY AGREEMENT") dated the date hereof in favor of Lender. "LOAN YEAR" means (a) for the first Loan Year, the period between the date hereof and one calendar year from the last day of the month in which the Closing Date occurs (unless the Closing Date is on the first day of a month, in which case the first Loan Year shall commence on such Closing Date and end one calendar year from the last day of the month immediately preceding the Closing Date) and (b) each consecutive twelve month calendar period after the first Loan Year until the Maturity Date. "MATURITY DATE" means, as applicable, the earlier of (a) July 1, 2009, 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. 2 "MORTGAGE" means the Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Borrower in favor of Lender, covering the Project. "NOTE" means the Promissory Note of even date, in the stated principal amount of $8,173,000, executed by Borrower, and payable to the order of Lender in evidence of the Loan. "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. "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. "PROJECT" means collectively, the four properties located respectively at 14, 15 and 16 International Drive, East Granby, Connecticut, and 35 International Drive, Windsor, Connecticut and any improvements now or hereafter located on the real property described in EXHIBIT A. "RATING AGENCIES" means each of Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., or any other nationally-recognized statistical rating agency which has been approved by Lender; "REPLACEMENT ESCROW FUND" has the meaning assigned in Section 2.4. "REQUIRED REPAIR FUND" has the meaning assigned in Section 2.4. "ROLLOVER ESCROW FUND" has the meaning assigned in Section 2.4. "SECONDARY MARKET TRANSACTION" has the meaning assigned in Section 8.11. "SITE ASSESSMENT" means an environmental engineering report for the Project prepared at Borrower's expense by an engineer engaged by Borrower, or Lender on behalf of Borrower, and approved by Lender, and in a manner reasonably satisfactory to Lender, based upon an investigation relating to and making appropriate inquiries concerning the existence of Hazardous Materials on or about the Project, and the past or present discharge, disposal, release or escape of any such substances, all consistent with ASTM Standard E1527-93 (or any successor thereto published by ASTM) and good customary and commercial practice. "STATE" means the State of Connecticut. "TAX AND INSURANCE ESCROW FUND" has the meaning assigned in Section 3.4. "TAXES" has the meaning assigned in Section 8.2. "YEAR 2000 COMPLIANT" and "YEAR 2000 COMPLIANCE" means that (a) the performance and functionality of the operating systems for Borrower's computers, all software applications that run on Borrower's computers, all of Borrower's machinery and equipment (including, without limitation, any machinery or equipment with an embedded microprocessor) shall accurately process date data (including, without limitation, dates prior to, during, spanning or after January 1, 2000), and (b) Borrower's business operations and financial condition will not be materially interrupted, delayed, decreased or otherwise materially adversely affected by the advent of the Year 2000. "YIELD MAINTENANCE AMOUNT" has the meaning assigned in SCHEDULE 1. 3 ARTICLE 2 LOAN TERMS SECTION 2.1 THE LOAN. Upon satisfaction of all the terms and conditions set forth in the Commitment, Lender agrees to make a Loan of EIGHT MILLION ONE HUNDRED SEVENTY THREE THOUSAND AND NO/100 DOLLARS ($8,173,000) to the Borrower, which shall be funded in one advance and repaid in accordance with the terms of this Agreement and the Note. Borrower hereby agrees to accept the Loan on the Closing Date, subject to and upon the terms and conditions set forth herein. SECTION 2.2 INTEREST RATE; LATE CHARGE. The outstanding principal balance of the Loan shall bear interest at a rate of interest equal to eight and fifty-four hundredths percent (8.54 %) per annum (the "CONTRACT RATE"). Interest at the Contract Rate shall be computed on the basis of a fraction, the denominator of which is three hundred sixty (360) days and the numerator of which is the actual number of days elapsed from the date of the initial disbursement under the Loan or the date of the preceding interest installment due date, as the case may be, to the date of the next interest installment due date or the Maturity Date. If Borrower fails to pay any installment of interest or principal within five (5) days of (and including) the date on which the same is due, Borrower shall pay to Lender a late charge on such past-due amount, as liquidated damages and not as a penalty, equal to five percent (5%) of such amount, but not in excess of the maximum amount of interest allowed by applicable law. While any Event of Default exists, the Loan shall bear interest at the Default Rate. SECTION 2.3 TERMS OF PAYMENT. The Loan shall be payable as follows: (a) INTEREST AND PRINCIPAL. A payment of interest only on the date hereof for the period from the date hereof through the last day of the current month. Thereafter, a constant payment of $63,075.14, on the first day of August, 1999, and on the first day of each calendar month thereafter; each of such payments, to be applied (i) to the payment of interest computed at the Contract Rate and (ii) the balance applied toward reduction of the principal sum. The constant payment required hereunder is based on a thirty (30) year amortization schedule. (b) MATURITY. On the Maturity Date, Borrower shall pay to Lender all outstanding principal, accrued and unpaid interest, default interest, late charges and any and all other amounts due under the Loan Documents. (c) PREPAYMENT. Except as set forth herein, the Loan is closed to prepayment in whole or in part, until the ninety (90) day period prior to the Maturity Date. Notwithstanding the foregoing, from the earlier to occur of (i) two (2) years after the sale of the Loan in a Secondary Market Transaction or (ii) the fourth (4th) anniversary of the Closing Date, provided no Event of Default exists, Borrower may obtain the release of the Project from the lien of the Mortgage in accordance with the terms and provisions of SCHEDULE I attached hereto (the "DEFEASANCE OPTION"). If the Loan is accelerated for any reason other than casualty or condemnation, and the Loan is otherwise closed to prepayment, Borrower shall pay, in addition to all other amounts outstanding under the Loan Documents, a prepayment premium equal to the sum of (A) the Yield Maintenance Amount, if any, that would be required under the Defeasance Option and (B) five percent (5%) of the outstanding balance of the Loan. If for any reason the Loan is prepaid on a day other than a scheduled monthly payment date, the Borrower shall pay, in addition to the principal, interest and premium, if any, required under this Section, an amount equal to the interest that would have accrued on the Loan from the date of prepayment to the next scheduled monthly payment date. In the event of a prepayment resulting from Lender's application of insurance or condemnation proceeds pursuant to Article 3 hereof, no prepayment penalty or premium shall be imposed. SECTION 2.4 SECURITY; ESTABLISHMENT OF FUNDS. (a) The Loan shall be secured by the Mortgage creating a first lien on the Project, the Assignment of Leases and Rents and the other Loan Documents. Borrower agrees to establish the following reserves with Lender, to be held by Lender as further security for the Loan: (i) on the Closing Date, Borrower shall deposit with Lender the amount of $0 (the "REQUIRED REPAIR FUND") which shall be held by Lender for the completion of the required repairs set forth on SCHEDULE II annexed hereto on or before six (6) months 4 from the date hereof; and (ii) Borrower shall deposit with Lender on the first day of each calendar month a scheduled payment is due the amount of $1,980 which shall be held by Lender for replacements and repairs required to be made to the Project during the calendar year (the "REPLACEMENT ESCROW FUND"); (iii) Borrower shall deposit with Lender on the first day of each calendar month a scheduled payment is due the amount of $7,025 which shall be held by Lender for tenant improvement and leasing commission obligations incurred following the date hereof (the "ROLLOVER ESCROW FUND"); provided, however, a scheduled monthly payment into the Rollover Escrow Fund shall not be required if the amount in the Rollover Escrow Fund immediately prior to such monthly payment is at least $100,000; (iv) on the Closing Date Borrower shall deposit with Lender the amount of $25,000 (the "HARTFORD INSURANCE RENT CONCESSION ESCROW") which shall be released to Borrower in one lump sum payment if Hartford Insurance does not extend its lease for a seven year period on or before November 30, 1999, and the Borrower has made the Hartford Insurance Termination Escrow or if the Hartford Insurance lease is extended for seven years in monthly amounts of $309.08 (until the entire Hartford Insurance Rent Concession Escrow is returned to Borrower); (v) upon the receipt by Borrower of notice that Federal Express has exercised the termination clause in its lease the Borrower shall deposit with Lender the amount of $80,000 (the "FEDERAL EXPRESS ESCROW") which shall be held by Lender until such vacated space is leased to a tenant acceptable to Lender pursuant to a lease containing terms and provisions acceptable to Lender and such tenant has occupied the premises and paid rent for at least three (3) consecutive months; and (vi) upon the failure of the Hartford Insurance to timely exercise their option to extend the term of their lease for seven (7) years, the Borrower shall deposit the amount of $200,000 with Lender (the "HARTFORD INSURANCE TERMINATION ESCROW") which shall be held by Lender until such vacated space is leased to a tenant acceptable to Lender pursuant to a lease containing terms and provisions acceptable to Lender and such tenant has occupied the premises and paid rent for at least three consecutive months. Notwithstanding the above provisions, the Borrower, in lieu of the Federal Express Escrow and/or the Hartford Insurance Termination Escrow may deliver to Lender the letters of credit as provided in Section 8.15 hereof. (b) PLEDGE AND DISBURSEMENT OF FUNDS. Borrower hereby pledges to Lender, and grants a security interest in, any and all monies now or hereafter deposited in the Funds as additional security for the payment of the Loan. Lender may reasonably reassess its estimate of the amount necessary for the Funds from time to time and may adjust the monthly amounts required to be deposited into the Funds upon thirty (30) days notice to Borrower. Lender shall make disbursements from the Funds as requested by Borrower, and approved by Lender in its reasonable discretion, on a quarterly basis in increments of no less than $5,000.00 upon delivery by Borrower of Lender's standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if required by Lender, lien waivers and releases from all parties furnishing materials and/or services in connection with the requested payment. Lender may require an inspection of the Project at Borrower's expense prior to making a quarterly disbursement in order to verify completion of replacements and repairs for which reimbursement is sought. The Funds shall be held with interest in Lender's name and may be commingled with Lender's own funds at financial institutions selected by Lender in its reasonable discretion. All earnings or interest on the Funds shall be added to and become a part of the applicable Fund and shall be disbursed as set forth herein. Upon the occurrence of an Event of Default, Lender may apply any sums then present in the Funds to the payment of the Loan in any order in its reasonable discretion. Until expended or applied as above provided, the Funds shall constitute additional security for the Loan. Lender shall have no obligation to release any of the Funds while any Event of Default or Potential Default exists or any material adverse change has occurred in Borrower, or the Project. All reasonable costs and expenses incurred by Lender in the disbursement of any of the Funds shall be paid by Borrower promptly upon demand or, at Lender's sole discretion, deducted from the Funds. (c) INTEREST PAYABLE BY LENDER. Lender shall cause all monies on deposit in the Funds to be deposited into interest bearing accounts of the type customarily maintained by Lender or its servicing agent for the investment of (and may be commingled with) similar reserves, which accounts may not yield the highest interest rate then available. The Funds shall be held in an account in Lender's name (or such other account name as Lender may elect) at a financial institution or other depository selected by Lender (or its servicer) in its sole discretion (collectively, the "DEPOSITORY INSTITUTION"). Borrower shall earn no more than an amount of interest on the Funds equal to an amount determined by applying to the average monthly balance of such Funds the quoted interest rate for the Depository Institution's money market savings account, as such rate is determined from time to time (such allocated amount being referred to as "BORROWER'S INTEREST"). Lender or its Depository Institution shall be entitled to report under Borrower's Federal tax identification number the Borrower's Interest on the Funds. If the Depository Institution does not have an established 5 money market savings account (or if an interest rate for such account cannot otherwise be determined in connection with the deposit of such Funds), a comparable interest rate quoted by the Depository Institution and acceptable to Lender (or its servicer) in its reasonable discretion shall be used. The amount of Borrower's Interest allocated to Funds shall be added to the balance in the applicable Fund, and shall be disbursed for payment of the items for which the applicable Fund is to be disbursed. Any interest earned above the Borrower's Interest shall be retained by Lender as compensation for its administration and investment of such Funds. ARTICLE 3 INSURANCE, CONDEMNATION, AND IMPOUNDS SECTION 3.1 INSURANCE. Borrower shall maintain insurance as follows: (a) CASUALTY; BUSINESS INTERRUPTION. Borrower shall keep the Project insured against damage by fire and the other hazards covered by a standard extended coverage and all-risk insurance policy for the full insurable value thereof on a replacement cost claim recovery basis (without reduction for depreciation or co-insurance), and shall maintain such other casualty insurance as reasonably required by Lender. Lender reserves the right to require from time to time the following additional insurance: boiler and machinery; flood; earthquake/sinkhole; worker's compensation and/or building law or ordinance. Borrower shall keep the Project insured against loss by flood if the Project is located currently or at any time in the future in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (as such acts may from time to time be amended) in an amount at least equal to the lesser of (i) the maximum amount of the Loan or (ii) the maximum limit of coverage available under said acts. Any such flood insurance policy shall be issued in accordance with the requirements and current guidelines of the Federal Insurance Administration. Borrower 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, attributable to the Project. Borrower shall not maintain any separate or additional insurance which is contributing in the event of loss unless it is properly endorsed and otherwise reasonably satisfactory to Lender in all respects. The proceeds of insurance paid on account of any damage or destruction to the Project shall be paid to Lender to be applied as provided in Section 3.2. (b) LIABILITY. Borrower shall maintain (i) commercial general liability insurance with respect to the Project providing for limits of liability of not less than $5,000,000 for both injury to or death of a person and for property damage per occurrence, and (ii) other liability insurance as reasonably required by Lender. (c) 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 general company and financial size rating of "A-IX" or better as established by Best's Rating Guide and "AA" or better by Standard & Poor's Ratings Group. Each policy shall provide that such policy may not be canceled or materially changed except upon thirty (30) days' prior written notice of intention of non-renewal, cancellation or material change to Lender and that no act or thing done by Borrower shall invalidate any policy as against Lender. Blanket policies shall be permitted only if Lender receives appropriate endorsements and/or duplicate policies containing Lender's right to continue coverage on a pro rata pass-through basis and that coverage will not be affected by any loss on other properties covered by the policies. Borrower authorizes Lender to pay the premiums for such policies (the "INSURANCE PREMIUMS") from the Tax and Insurance Escrow Fund as the same become due and payable annually in advance. If Borrower fails to deposit funds into the Tax and Insurance Escrow Fund sufficient to permit Lender to pay the premiums when due, Lender may obtain such insurance and pay the premium therefor and Borrower shall, on demand, reimburse Lender for all expenses incurred in connection therewith. Borrower 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 6 for the payment of the Loan. Borrower 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. (d) ADJUSTMENTS. Borrower shall give immediate written notice of any loss to the insurance carrier and to Lender. Borrower hereby irrevocably authorizes and empowers Lender, as attorney-in-fact for Borrower 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 reasonable expenses incurred in the collection of such proceeds. Nothing contained in this Section 3.1(d), however, shall require Lender to incur any expense or take any action hereunder. SECTION 3.2 USE AND APPLICATION OF INSURANCE PROCEEDS. (a) If the Project shall be damaged or destroyed, in whole or in part, by fire or other casualty (a "CASUALTY"), Borrower shall give prompt notice thereof to Lender. Following the occurrence of a Casualty, Borrower, provided Lender makes insurance proceeds available to Borrower for such purposes, shall promptly proceed to restore, repair, replace or rebuild the same to be of at least equal value and of substantially the same character as prior to such damage or destruction, all to be effected in accordance with applicable law. (b) Lender shall apply insurance proceeds to costs of restoring the Project or to the payment of the Loan as follows (unless existing tenant leases require restoration of the Project in which case, the insurance proceeds shall be used for restoration of the Property). (i) if the loss is less than or equal to $200,000, Lender shall apply the insurance proceeds to restoration provided (A) no Event of Default or Potential Default exists, and (B) Borrower promptly commences and is diligently pursuing restoration of the Project; (ii) if the loss exceeds $200,000 but is not more than 33-1/3% of the replacement value of the improvements, Lender shall apply the insurance proceeds to restoration provided that (A) at all times during such restoration no Event of Default or Potential Default exists; (B) Lender determines throughout the restoration that there are sufficient funds available to restore and repair the Project to a condition of at least equal value and of substantially the same character as existed prior to such damage; (C) Lender determines that the net operating income of the Project during restoration, taking into account rent loss or business interruption insurance, will be sufficient to pay Debt Service; (D) Lender determines (based on leases which will remain in effect after restoration is complete if the Project is not a multi-family project) that after restoration the ratio of net operating income to Debt Service will equal at least the ratio that existed on the Closing Date; (E) Lender determines that the ratio of the outstanding principal balance of the Loan to appraised value of the Project after restoration will not exceed the loan-to-value ratio that existed on the Closing Date; (F) Lender determines that restoration and repair of the Project to a condition approved by Lender will be completed within nine months after the date of loss or casualty and in any event ninety (90) days prior to the Maturity Date; (G) Borrower promptly commences and is diligently pursuing restoration of the Project; and (H) the Project after the restoration will be in compliance with and permitted under all applicable zoning, building and land use laws, rules, regulations and ordinances; and (iii) if the conditions set forth in (i) and (ii) above are not satisfied in Lender's reasonable discretion, Lender may apply any insurance proceeds it may receive to the payment of the Loan (unless existing tenant leases require restoration of the Project, in which case, the insurance proceeds shall be used for restoration of the Project) or allow all or a portion of such proceeds to be used for the restoration of the Project. (c) Insurance proceeds applied to restoration will be disbursed on receipt of reasonably satisfactory plans and specifications, contracts and subcontracts, schedules, budgets, lien waivers and architects' certificates, and otherwise 7 in accordance with prudent commercial construction lending practices for construction loan advances (including appropriate retainages to ensure that all work is completed in a workmanlike manner). SECTION 3.3 CONDEMNATION AWARDS. Borrower shall promptly give Lender written notice of the actual or threatened commencement of any condemnation or eminent domain proceeding (a "CONDEMNATION") and shall deliver to Lender copies of any and all papers served in connection with such Condemnation. Following the occurrence of a Condemnation, Borrower, provided any award or compensation (an "AWARD") is made available to Borrower, shall promptly proceed to restore, repair, replace or rebuild the same to the extent practicable to be of at least equal value and of substantially the same character as prior to such Condemnation, all to be effected in accordance with applicable law. Lender may participate in any such proceeding and Borrower will deliver to Lender all instruments necessary or required by Lender to permit such participation. Without Lender's prior consent, Borrower (a) shall not agree to any Award, and (b) shall not take any action or fail to take any action which would cause the Award to be determined. All Awards for the taking or purchase in lieu of condemnation of the Project or any part thereof are hereby assigned to and shall be paid to Lender. Borrower authorizes Lender to collect and receive such Awards, 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 Project; provided, however, if the Award is less than or equal to $100,000 and Borrower requests that such proceeds be used for non-structural site improvements (such as landscape, driveway, walkway and parking area repairs) required to be made as a result of such condemnation, Lender will apply the Award to such restoration in accordance with disbursement procedures applicable to insurance proceeds provided there exists no Potential Default or Event of Default. Borrower, upon request by Lender, shall execute all instruments requested to confirm the assignment of the Awards to Lender, free and clear of all liens, charges or encumbrances. SECTION 3.4 IMPOUNDS. Borrower shall deposit with Lender, monthly, (a) one-twelfth (1/12th) of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to their respective due dates, and (b) one-twelfth (1/12th) of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the insurance policies required by Lender upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to expiration (said amounts in (a) and (b) above hereinafter called the "TAX AND INSURANCE ESCROW FUND"). At or before the advance of the Loan, Borrower 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. Borrower hereby grants 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. Borrower 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 Borrower before such charges are payable, is insufficient to pay such charges, Borrower 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. 8 ARTICLE 4 ENVIRONMENTAL MATTERS SECTION 4.1 CERTAIN DEFINITIONS. As used herein, the following terms have the meanings indicated: (a) "ENVIRONMENTAL LAWS" means any federal, state or local law (whether imposed by statute, ordinance, rule, regulation, administrative or judicial order, or common law), now or hereafter enacted, governing health, safety, industrial hygiene, the environment or natural resources, or Hazardous Materials, including, without limitation, such laws governing or regulating (i the use, generation, storage, removal, recovery, treatment, handling, transport, disposal, control, release, discharge of, or exposure to, Hazardous Materials, (ii the transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of such property, or (iii requiring notification or disclosure of releases of Hazardous Materials or other environmental conditions whether or not in connection with a transfer of title to or interest in property. (b) "HAZARDOUS MATERIALS" means (i petroleum or chemical products, whether in liquid, solid, or gaseous form, or any fraction or by-product thereof, (ii asbestos or asbestos-containing materials, (iii polychlorinated biphenyls (pcbs), (iv radon gas, (v underground storage tanks, (vi any explosive or radioactive substances, (vii lead or lead-based paint, or (viii 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. SECTION 4.2 REPRESENTATIONS AND WARRANTIES ON ENVIRONMENTAL MATTERS. To Borrower's knowledge, except as set forth in the Site Assessment, (a) no Hazardous Material is now or was formerly used, stored, generated, manufactured, installed, treated, discharged, disposed of or otherwise present at or about the Project or any property adjacent to the Project (except for cleaning and other products currently used in connection with the routine maintenance or repair of the Project in full compliance with Environmental Laws) and no Hazardous Material was removed or transported from the Project, (b) all permits, licenses, approvals and filings required by Environmental Laws have been obtained, and the use, operation and condition of the Project does not, and did not previously, violate any Environmental Laws, (c) no civil, criminal or administrative action, suit, claim, hearing, investigation or proceeding has been brought or been threatened, nor have any settlements been reached by or with any parties or any liens imposed in connection with the Project concerning Hazardous Materials or Environmental Laws; and (d) no underground storage tanks exist on any part of the Project. SECTION 4.3 COVENANTS ON ENVIRONMENTAL MATTERS. (a) Borrower shall (i comply strictly and in all respects with applicable Environmental Laws; (ii notify Lender immediately upon Borrower's discovery of any spill, discharge, release or presence of any Hazardous Material at, upon, under, within, contiguous to or otherwise affecting the Project; (iii promptly remove such Hazardous Materials and remediate the Project in full compliance with Environmental Laws or as reasonably required by Lender based upon the recommendations and specifications of an independent environmental consultant approved by Lender; and (iv promptly forward to Lender copies of all orders, notices, permits, applications or other communications and reports in connection with any spill, discharge, release or the presence of any Hazardous Material or any other matters relating to the Environmental Laws or any similar laws or regulations, as they may affect the Project or Borrower. (b) Borrower shall not cause, shall prohibit any other Person within the control of Borrower from causing, and shall use prudent, commercially reasonable efforts to prohibit other Persons (including tenants) from (i causing any spill, discharge or release, or the use, storage, generation, manufacture, installation, or disposal, of any Hazardous Materials at, upon, under, within or about the Project or the transportation of any Hazardous Materials to or from the Project (except for cleaning and other products used in connection with routine maintenance or repair of the Project in full compliance with Environmental Laws), (ii installing any underground storage tanks at the Project, or (iii conducting any activity that requires a permit or other authorization under Environmental Laws. 9 (c) Borrower shall provide to Lender, at Borrower's 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 Project. Borrower 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 Section 4.3(a), a reasonable suspicion of Hazardous Materials at or near the Project, 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 Borrower's expense. (d) Within sixty (60) days after the date hereof, Borrower shall cause to be prepared by environmental engineers approved by Lender, and Borrower shall implement, an Operations and Maintenance Program (the "O&M PROGRAM") delivered to and approved by Lender for the removal or encapsulation of, or other action for handling, asbestos-containing materials for the building and improvements located at 15 International Drive, East Granby, Connecticut ("15 INTERNATIONAL DRIVE"). Prior to the commencement of any construction, rehabilitation, modification or renovation which requires the removal of any materials or improvements containing asbestos-containing materials (the "ACM-RELATED WORK"), all ACM-Related Work shall be implemented in accordance with the procedures and programs in the O&M Program and all applicable governmental requirements. The O&M Program and work resulting therefrom shall be conducted by an accredited, licensed, abatement contractor using state-of-the-art work practices and procedures and shall include all monitoring and project management performed by an accredited asbestos consultant. Borrower shall deliver to Lender promptly when available, copies of all reports, notices, submittals, permits, licenses, and certificates relating to the O&M Program. Until all matters in the O&M Program have been satisfied, Borrower shall deliver a certification to Lender, on or before the first day of each Loan Year, addressing the status of affected space requiring ACM-Related Work or other action with respect to Hazardous Materials. SECTION 4.4 ALLOCATION OF RISKS AND INDEMNITY. As between Borrower and Lender, all risk of loss associated with non-compliance with Environmental Laws, or with the presence of any Hazardous Material at, upon, within, contiguous to or otherwise affecting the Project, shall lie solely with Borrower. Accordingly, Borrower 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 reasonably required by Lender or required by law. Borrower shall indemnify, defend and hold Lender and its shareholders, directors, officers, employees and agents harmless from and against all loss, liabilities, damages, claims, costs and expenses (including reasonable costs of defense and consultant fees, investigation and laboratory fees, court costs, and other litigation expenses) arising out of or associated, in any way, with (a) the non-compliance with Environmental Laws, or (b) the existence of Hazardous Materials in, on, or about the Project, (c) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to Hazardous Materials; (d) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials, (e) a breach of any representation, warranty or covenant contained in this Article 4, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, or (f) the imposition of any environmental lien encumbering the Project; provided, however, Borrower shall not be liable under such indemnification to the extent such loss, liability, damage, claim, cost or expense results solely from Lender's gross negligence or willful misconduct. Borrower's obligations under this Section 4.4 shall arise 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 Project (by foreclosure, deed in lieu of foreclosure or otherwise). Additionally, if any Hazardous Materials affect or threaten to affect the Project, Lender may (but shall not be obligated to) give such notices and take such actions as it deems necessary or advisable at the expense of the Borrower in order to abate the discharge of any Hazardous Materials or remove the Hazardous Materials. Any amounts payable to Lender by reason of the application of this Section 4.4 shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Lender until paid. The obligations and liabilities of Borrower under this Section 4.4 shall survive any termination, satisfaction, assignment, entry of a judgment of foreclosure or delivery of a deed in lieu of foreclosure. 10 SECTION 4.5 NO WAIVER. Notwithstanding any provision in this Article 4 or elsewhere in the Loan Documents, or any rights or remedies granted by the Environmental Indemnity Agreement or 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 Environmental Indemnity Agreement or 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. Borrower represents and warrants to Lender with respect to leases of the Project that: (a) the rent roll delivered to Lender is true and correct, and the leases are valid and in and full force and effect; (b) the leases (including amendments) are in writing, and there are no oral agreements with respect thereto; (c) the copies of the leases delivered to Lender are true and complete; (d) neither the landlord nor any tenant is in default under any of the leases; (e) Borrower has no knowledge of any notice of termination or default with respect to any lease; (f) Borrower has not assigned or pledged any of the leases, the rents or any interests therein except to Lender; (g) no tenant or other party has an option to purchase all or any portion of the Project; (h) no tenant has the right to terminate its lease prior to expiration of the stated term of such lease except as set forth therein; (i) no tenant has prepaid more than one month's rent in advance (except for bona fide security deposits not in excess of an amount equal to two month's rent); and (j) all existing leases are subordinate to the Mortgage either pursuant to their terms or a recorded subordination agreement. SECTION 5.2 STANDARD LEASE FORM; APPROVAL RIGHTS. All leases and other rental arrangements shall in all respects be approved by Lender and shall be on a standard lease form approved by Lender with no material modifications (except as approved by Lender, which approval will not be unreasonably withheld or delayed). Such lease form shall provide that (a) the lease is subordinate to the Mortgage, (b) the tenant shall attorn to Lender, and (c) that any cancellation, surrender, or amendment of such lease without the prior written consent of Lender shall be voidable by Lender. Borrower shall hold, in trust, all tenant security deposits in a segregated account, and, to the extent required by applicable law, shall not commingle any such funds with any other funds of Borrower. Within ten (10) days after Lender's request, Borrower shall furnish to Lender a statement of all tenant security deposits, and copies of all leases not previously delivered to Lender, certified by Borrower as being true and correct. Notwithstanding anything contained in the Loan Documents, Lender's approval shall not be required for future leases or lease extensions if the following conditions are satisfied: (i there exists no Potential Default or Event of Default; (ii the lease is on the standard lease form approved by Lender with no material modifications; (iii the lease does not conflict with any restrictive covenant affecting the Project or any other lease for space in the Project; (iv the lease provides for an effective rental rate that is a market rate; and (v the lease is for less than 20,000 square feet. Leases that require the approval of Lender shall be submitted to Lender and shall be deemed approved by Lender unless Lender disapproves the same within ten (10) business days of receipt. All costs and expenses incurred by Lender in its review and approval of any lease shall be paid by Borrower promptly upon request. SECTION 5.3 COVENANTS. Borrower (a) shall perform the obligations which Borrower is required to perform under the leases; (b) shall enforce the obligations to be performed by the tenants; (c) shall promptly furnish to Lender any notice of default or termination received by Borrower from any tenant, and any notice of default or termination given by Borrower to any tenant; (d) shall not collect any rents for more than thirty (30) days in advance of the time when the same shall become due, except for bona fide security deposits not in excess of an amount equal to two month's rent; (e) shall not enter into any ground lease or master lease of any part of the Project; (f) shall not further assign or encumber any lease; (g) shall not, except with Lender's prior written consent, cancel or accept surrender or termination of any lease; (h) 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 (i) shall deposit with Lender 11 any lease termination or cancellation fees which shall be held in the Rollover Escrow Fund. Any action in violation of clauses (e), (f), (g), and (h) of this Section 5.3 shall be void at the election of Lender. SECTION 5.4 TENANT ESTOPPELS. At Lender's request, Borrower shall obtain and furnish to Lender, written estoppels in form and substance reasonably satisfactory to Lender, executed by tenants under leases in the Project and confirming the term, rent, and other provisions and matters relating to the leases. ARTICLE 6 REPRESENTATIONS AND WARRANTIES Borrower represents, warrants and covenants to Lender that: SECTION 6.1 ORGANIZATION, POWER AND AUTHORITY.. Borrower (a) is duly organized, validly existing and in good standing under the laws of the state of its formation or existence, (b) is in compliance with all legal requirements applicable to doing business in the State, and (c) has the necessary governmental approvals to own and operate the Project and conduct the business now conducted or to be conducted thereon. Borrower has the full power, authority and right to execute, deliver and perform its obligations pursuant to this Loan Agreement and the other Loan Documents, and to mortgage the Project pursuant to the terms of the Mortgage and to keep and observe all of the terms of this Loan Agreement and the other Loan Documents on Borrower's part to be performed. Borrower is not 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 Borrower of the Loan Documents: (a) are duly authorized and do not require the consent or approval of any other party or governmental authority which has not been obtained; and (b) 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 Borrower, 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. (a) The financial statements delivered by Borrower are true and correct 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 Project or Borrower. 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 Borrower, threatened, against the Project or Borrower which if adversely determined could have a material adverse effect on such party, the Project or the Loan. (b) Borrower is not 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 Borrower has no knowledge of any Person contemplating the filing of any such petition against it. SECTION 6.4 TAXES AND ASSESSMENTS. The Project 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 Borrower's best knowledge, proposed, special or other assessments for public improvements or otherwise affecting the Project, nor are there any contemplated improvements to the Project that may result in such special or other assessments. SECTION 6.5 OTHER AGREEMENTS; DEFAULTS. Borrower is not a party to any agreement or instrument or subject to any court order, injunction, permit, or restriction which might adversely affect the Project or the business, operations, or condition (financial or otherwise) of Borrower. Borrower is not in violation of any agreement which violation would have an adverse effect on the Project, Borrower, or any of Borrower's business, properties, or assets, operations or condition, financial or otherwise. 12 SECTION 6.6 COMPLIANCE WITH LAW. (a) Borrower has all requisite licenses, permits, franchises, qualifications, certificates of occupancy or other governmental authorizations to own, lease and operate the Project and carry on its business, and the Project 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 Project does not constitute, in whole or in part, a legally non-conforming use under applicable legal requirements; (b) No condemnation has been commenced or, to Borrower's knowledge, is contemplated with respect to all or any portion of the Project or for the relocation of roadways providing access to the Project; and (c) The Project has adequate rights of access to public ways and is 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 Project are located in the public right-of-way abutting the Project, and all such utilities are connected so as to serve 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 Project. All roads necessary for the full utilization of the Project for its current purpose have been completed and dedicated to public use and accepted by all governmental authorities. SECTION 6.7 LOCATION OF BORROWER. Borrower's principal place of business and chief executive offices are located at the address stated in Section 11.1. SECTION 6.8 ERISA. (a) As of the date hereof and throughout the term of the Loan, (i Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA, and (ii the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; and (b) As of the date hereof and throughout the term of the Loan (i Borrower is not and will not be a "governmental plan" within the meaning of Section 3(3) of ERISA and (ii transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans. SECTION 6.9 FORFEITURE. There has not been and shall never be committed by Borrower or any other person in occupancy of or involved with the operation or use of the Project any act or omission affording the federal government or any state or local government the right of forfeiture as against the Project or any part thereof or any monies paid in performance of Borrower's obligations under any of the Loan Documents. Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture. SECTION 6.10 TAX FILINGS. Borrower has 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 Borrower. Borrower believes that its tax returns properly reflect the income and taxes of Borrower for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit. SECTION 6.11 SOLVENCY. Giving effect to the Loan, the fair saleable value of Borrower's assets exceeds and will, immediately following the making of the Loan, exceed Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrower's assets is and will, immediately following the making of the Loan, be greater than Borrower's probable liabilities, including the maximum amount of its contingent liabilities on its Debts as such Debts become absolute and matured, 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. Borrower does not intend to, and does not believe that it will, 13 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 Borrower and the amounts to be payable on or in respect of obligations of Borrower). Except as expressly disclosed to Lender in writing, no petition in bankruptcy has been filed against Borrower in the last seven (7) years, and Borrower in the last seven (7) years has never made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors. SECTION 6.12 FULL AND ACCURATE DISCLOSURE. No statement of fact made by or on behalf of Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no fact presently known to Borrower which has not been disclosed to Lender which adversely affects, nor as far as Borrower can foresee, might adversely affect, the Project or the business, operations or condition (financial or otherwise) of Borrower. SECTION 6.13 FLOOD ZONE. No portion of the improvements comprising the Project is located in an area identified by the Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Act of 1994, as amended, or any successor law, or, if located within any such area, Borrower has obtained and will maintain the insurance prescribed in Section 3.1 hereof. SECTION 6.14 YEAR 2000 COMPLIANCE. Borrower has made (or will make on a timely basis) written inquiry of each of its key suppliers, vendors, and customers as to whether such persons will, on a timely basis, be Year 2000 Compliant in all material respects and on the basis of such inquiry believes that all such persons will be Year 2000 Compliant. For purposes hereon, "key suppliers, vendors and customers" refers to those suppliers, vendors, and customers of Borrower whose business failure would, with reasonable probability, result in a material adverse change in the business, properties, or condition (financial or otherwise) of Borrower. Borrower reasonably anticipates that it will be Year 2000 Compliant on a timely basis. Borrower shall permit Lender and its agents, representatives and employees, upon reasonable prior notice to Borrower, to enter the Project and conduct inspections relating to Year 2000 Compliance as Lender may require, from time to time, while the Loan remains outstanding; however, to the extent Lender engages third party consultants to conduct any testing of the building systems, Lender shall require such consultants to conduct the tests at a time designed to minimize disruption of the building's operations during normal business hours. ARTICLE 7 FINANCIAL REPORTING SECTION 7.1 FINANCIAL STATEMENTS. (a) MONTHLY REPORTS. During the first six (6) months of the term of the Loan, Borrower shall furnish to Lender within fifteen (15) days after the end of each calendar month, a detailed operating statement of the Project (showing monthly activity and year-to-date activity) stating operating revenues, operating expenses, operating income and net cash flow for the calendar month just ended. (b) QUARTERLY REPORTS. Within forty-five (45) days after the end of each fiscal quarter, Borrower shall furnish to Lender a detailed operating statement (showing quarterly activity and year-to-date) stating operating revenues, operating expenses, operating income and net cash flow for the fiscal quarter just ended. (c) ANNUAL REPORTS. Within ninety (90) days after the end of each fiscal year of Borrower's operation of the Project, Borrower shall furnish to Lender a current (as of the end of such fiscal year) balance sheet, a detailed operating statement stating operating revenues, operating expenses, operating income and net cash flow for each of Borrower and the Project, and, if required by Lender, prepared on a review basis and certified by an independent public accountant reasonably satisfactory to Lender. Additionally, Borrower shall include with its annual financial statement (i a list of the tenants, if any, occupying more than twenty percent (20%) of the total floor area of the Project, (ii a breakdown showing the year in which each lease then in effect at the Project expires, and (iii a breakdown of the 14 percentage of total floor area of the Project and the percentage of base rent with respect to which leases shall expire in each year, each such percentage to be expressed on both a per year and a cumulative basis. (d) CERTIFICATION; SUPPORTING DOCUMENTATION. Each such financial statement shall be in scope and detail reasonably satisfactory to Lender and certified by the chief financial representative of Borrower. SECTION 7.2 ACCOUNTING PRINCIPLES. All financial statements shall be prepared in accordance with generally accepted accounting principles in the United States of America in effect on the date so indicated and consistently applied (or such other accounting basis reasonably acceptable for Lender). SECTION 7.3 OTHER INFORMATION; ACCESS. Borrower shall deliver to Lender such additional information regarding Borrower, its subsidiaries, its business and the Project within 30 days after Lender's request therefor. Borrower shall permit Lender to examine such records, books and papers of Borrower which reflect upon its financial condition and the income and expenses of the Project. SECTION 7.4 ANNUAL BUDGET. At least thirty (30) days prior to the commencement of each fiscal year, Borrower will provide to Lender its proposed annual operating and capital improvements budget for the Project for such fiscal year for review and approval by Lender. ARTICLE 8 COVENANTS 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, neither Borrower nor any other Person having an ownership or beneficial interest in Borrower shall sell, transfer, convey, mortgage, pledge, or assign any interest in the Project or any part thereof or further encumber, alienate, grant a Lien or grant any other interest in the Project or any part thereof, whether voluntarily or involuntarily, in violation of the covenants and conditions set forth in the Mortgage. SECTION 8.2 TAXES; UTILITY CHARGES. Except to the extent sums sufficient to pay all Taxes (defined herein) have been previously deposited with Lender as part of the Tax and Insurance Escrow Fund and subject to Borrower's right to contest in accordance with Section 11.8 hereof, Borrower shall pay before any fine, penalty, interest or cost may be added thereto, and shall not enter into any agreement to defer, any real estate taxes and assessments, franchise taxes and charges, and other governmental charges (the "TAXES") that may become a Lien upon the Project or become payable during the term of the Loan. Borrower's compliance with Section 3.4 of this Agreement relating to impounds for Taxes shall, with respect to payment of such Taxes, be deemed compliance with this Section 8.2. Borrower shall not suffer or permit the joint assessment of the Project with any other real property constituting a separate tax lot or with any other real or personal property. Borrower shall promptly pay for all utility services provided to the Project. SECTION 8.3 CONTROL; MANAGEMENT. The Project is self managed by Borrower. If Borrower retains another entity to manage the Project, such entity shall be subject to the approval of Lender, which approval will not be unreasonably withheld. Further such manager shall execute a subordination agreement in form and substance reasonably acceptable to Lender. Each manager shall hold and maintain all necessary licenses, certifications and permits required by law. Borrower shall fully perform all of its covenants, agreements and obligations under the management agreement. The management fee payable under the management agreement shall not exceed five percent (5%) of rental collections. SECTION 8.4 OPERATION; MAINTENANCE; INSPECTION. Borrower shall observe and comply with all legal requirements applicable to the ownership, use and operation of the Project. Borrower shall maintain the Project in good condition and promptly repair any damage or casualty. Borrower shall permit Lender and its agents, representatives 15 and employees, upon reasonable prior notice to Borrower, to inspect the Project and conduct such environmental and engineering studies as Lender may require, provided such inspections and studies do not materially interfere with the use and operation of the Project. SECTION 8.5 TAXES ON SECURITY. Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted any law (a) deducting the Loan from the value of the Project for the purpose of taxation, (b) affecting any Lien on the Project, or (c) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof; however, if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Lender may declare all amounts owing under the Loan Documents to be immediately due and payable. SECTION 8.6 LEGAL EXISTENCE; NAME, ETC. Borrower shall preserve and keep in full force and effect its entity status, franchises, rights and privileges under the laws of the state of its formation, and all qualifications, licenses and permits applicable to the ownership, use and operation of the Project. Borrower shall not wind up, liquidate, dissolve, reorganize with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of all or substantially all of its assets. Borrower shall not change its name, identity, or organizational structure in any material manner, or the location of its principal place of business unless Borrower (a) shall have obtained the prior written consent of Lender to such change which consent shall not be unreasonably withheld or delayed, and (b) shall have taken all actions necessary or requested by Lender to file or amend any financing statement or continuation statement to assure perfection and continuation of perfection of security interests under the Loan Documents. SECTION 8.7 FURTHER ASSURANCES. Borrower shall promptly (a) cure any defects in the execution and delivery of the Loan Documents and the Environmental Indemnity Agreement, and (b) execute and deliver, or cause to be executed and delivered, all such other documents, agreements and instruments as Lender may reasonably request to further evidence and more fully describe the collateral for the Loan, to correct any omissions in the Loan Documents, to perfect, protect or preserve any liens created under any of the Loan Documents and the Environmental Indemnity Agreement, or to make any recordings, file any notices, or obtain any consents, as may be necessary or appropriate in connection therewith. Borrower grants Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender under the Loan Documents and the Environmental Indemnity Agreement, at law and in equity, including without limitation such rights and remedies available to Lender pursuant to this Section 8.7. SECTION 8.8 ESTOPPEL CERTIFICATES. Borrower, within ten (10) days after request, shall furnish to Lender a written statement, duly acknowledged, setting forth the amount due on the Loan, the terms of payment of the Loan, the date to which interest has been paid, whether any offsets or defenses exist against the Loan and, if any are alleged to exist, the nature thereof in detail, and such other matters as Lender reasonably may request. SECTION 8.9 NOTICE OF CERTAIN EVENTS. Borrower shall promptly notify Lender of (a) any Potential Default or Event of Default, together with a detailed statement of the steps being taken to cure such Potential Default or Event of Default; (b) any notice of default received by Borrower under other obligations relating to the Project or otherwise material to Borrower's business; and (c) any threatened or pending legal, judicial or regulatory proceedings, including any dispute between Borrower and any governmental authority, affecting Borrower or the Project. SECTION 8.10 INDEMNIFICATION. Borrower shall protect, defend, indemnify and save harmless Lender its shareholders, directors, officers, employees and agents from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including without limitation reasonable attorneys' fees and expenses), imposed upon or incurred by or asserted against Lender by reason of (a) ownership of the Mortgage, the Project or any interest therein or receipt of any rents; (b) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Project or any part thereof or on the adjoining sidewalks, curbs, adjacent property or 16 adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the Project or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (d) performance of any labor or services or the furnishing of any materials or other property in respect of the Project or any part thereof; and (e) the failure of any Person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Agreement, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Agreement is made. Any amounts payable to Lender by reason of the application of this section shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Lender until paid. SECTION 8.11 COOPERATION. Borrower acknowledges that Lender and its successors and assigns may (a) sell this Agreement, the Mortgage, the Note, the other Loan Documents, and the Environmental Indemnity Agreement, and any and all servicing rights thereto to one or more investors as a whole loan, (b) participate the Loan to one or more investors, (c) deposit this Agreement, the Note, other Loan Documents, and the Environmental Indemnity Agreement with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (d) otherwise sell the Loan or interest therein to investors (the transactions referred to in clauses (a) through (d) are hereinafter each referred to as "SECONDARY MARKET TRANSACTION"). Borrower shall cooperate with Lender in effecting any such Secondary Market Transaction and shall cooperate to implement all requirements imposed by any Rating Agency involved in any Secondary Market Transaction. Borrower shall provide such information, legal opinions and documents relating to the Borrower, the Project and any tenants of the Project as Lender may reasonably request in connection with such Secondary Market Transaction at no third-party professional expense unless otherwise required by the Loan Documents. In addition, Borrower shall make available to Lender all information concerning its business and operations that Lender may reasonably request. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms and other third-party advisory firms involved with the Loan and the Loan Documents or the applicable Secondary Market Transaction. It is understood that the information provided by Borrower to Lender may ultimately be incorporated into the offering documents for the Secondary Market Transaction and thus various investors may also see some or all of the information. Lender and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Borrower and Borrower indemnifies Lender as to any losses, claims, damages or liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such information or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information, or in light of the circumstances under which they were made, not misleading. SECTION 8.12 PAYMENT FOR LABOR AND MATERIALS. Subject to Borrower's right to contest in accordance with Section 11.8 hereof, Borrower will promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with the Project and never permit to exist beyond the due date thereof in respect of the Project or any part thereof any Lien, even though inferior to the Liens hereof, and in any event never permit to be created or exist in respect of the Project or any part thereof any other or additional Lien other than the Liens hereof, except for the Permitted Encumbrances (defined in the Mortgage). SECTION 8.13 YEAR 2000 COMPLIANCE. Borrower shall cause the Project and Borrower's operations to be Year 2000 Compliant prior to September 30, 1999 and at all times thereafter while the Loan remains outstanding. SECTION 8.14 LIMITATION ON ADDITIONAL BORROWING SECURED BY OTHER REAL ESTATE INDEBTEDNESS. Borrower shall not mortgage any of its property to an extent greater than eighty percent (80%) loan-to-value (at the time the mortgage is executed) or a debt service coverage ratio below 1.25x (at the time the mortgage is executed) related to any property so mortgaged. This provision shall be deleted from the Loan Agreement if the Project is transferred to a single purpose entity by Borrower in accordance with Section 3.9 of the Mortgage. SECTION 8.15 LIMITATION ON INDEBTEDNESS. Borrower shall not create, assume, incur or have outstanding at any time liabilities in excess of sixty percent (60%) of its total assets as reflected on its balance sheet. This provision 17 shall be deleted from the Loan Agreement if the Project is transferred to a single purpose entity by Borrower in accordance with Section 3.9 of the Mortgage. SECTION 8.16 OPTIONAL LETTERS OF CREDIT. (a) As additional credit support for the Loan, Borrower may deliver to Lender in lieu of the Federal Express Escrow and/or the Hartford Insurance Termination Escrow the irrevocable and unconditional letters of credit drawn for the Borrower's account from a bank reasonably acceptable to Lender in the amount of the Federal Express Escrow ($80,000) and/or the Hartford Insurance Termination Escrow ($200,000) as applicable (each a "LETTER OF CREDIT"). No less than thirty (30) days prior to the expiration date of the Letter of Credit and each renewal or extension thereof (until such time as the Letter of Credit has been released by Lender as provided below), Borrower shall deliver to Lender a renewal or extension of the Letter of Credit for a term of not less than one year, in form, content and issued by a bank acceptable to Lender in its sole discretion. If requested by Lender, the Letter of Credit (and each renewal or extension thereof) shall, at Borrower's sole cost and expense, be accompanied by an opinion of counsel regarding its due authorization, execution and enforceability (which opinion shall be in form, content and from counsel acceptable to Lender in its sole discretion). (b) Lender shall be entitled to draw upon the Letter of Credit upon the occurrence of any Event of Default (including, without limitation, Borrower's failure to deliver a renewal or extension of the Letter of Credit in the time and manner required hereinabove) or if Lender believes, in its sole judgment, that its rights to draw on the Letter of Credit could be in jeopardy. Without limiting the generality of the foregoing, Lender shall also be entitled to draw if the credit rating or financial condition of the issuing bank is no longer acceptable to Lender in its sole discretion. (c) Proceeds of any draw upon the Letter of Credit (after reimbursement of any costs and expenses, including but not limited to reasonable attorney's fees and disbursements, incurred by Lender in connection with such draw) may be applied to the Loan in such order and manner as Lender shall determine in its sole discretion. (d) Lender shall, upon request, release its rights in the Letter of Credit and surrender the Letter of Credit to the issuing bank after the earlier of: (i) Payment in full of all sums due under this Agreement, the Note and all other amounts secured by the Loan Documents; or (ii) Satisfaction of the condition set forth in Section 2.4(a)(v) and (vi) respectively. ARTICLE 9 EVENTS OF DEFAULT Each of the following shall constitute an Event of Default under the Loan: SECTION 9.1 PAYMENTS. Borrower's failure to pay any regularly scheduled installment of principal, interest or other amount due under the Loan Documents within five (5) days of (and including) the date when due, or Borrower's failure to pay the Loan at the Maturity Date, whether by acceleration or otherwise. SECTION 9.2 INSURANCE. Borrower's failure to maintain insurance as required under Section 3.1 of this Agreement. SECTION 9.3 SALE, ENCUMBRANCE, ETC. The sale, transfer, conveyance, pledge, mortgage or assignment of any part or all of the Project, or any interest therein, or of any interest in Borrower, in violation of the Mortgage. SECTION 9.4 COVENANTS. Borrower's failure to perform or observe any of the agreements and covenants contained in this Agreement or in any of the other Loan Documents (other than payments under Section 9.1, insurance 18 requirements under Section 9.2, transfers and encumbrances under Section 9.3, and the Events of Default described in Sections 9.7 and 9.8 below), and the continuance of such failure for ten (10) days after notice by Lender to Borrower; however, subject to any shorter period for curing any failure by Borrower as specified in any of the other Loan Documents, Borrower shall have an additional sixty (60) days to cure such failure if (a) such failure does not involve the failure to make payments on a monetary obligation; (b) such failure cannot reasonably be cured within ten (10) days; (c) Borrower is diligently undertaking to cure such default; and (d) Borrower has provided Lender with security reasonably satisfactory to Lender against any interruption of payment or impairment of collateral as a result of such continuing failure. SECTION 9.5 REPRESENTATIONS AND WARRANTIES. Any representation or warranty made in any Loan Document proves to be untrue in any material respect when made or deemed made. SECTION 9.6 OTHER ENCUMBRANCES. Any default under any document or instrument, other than the Loan Documents, evidencing or creating a Lien on the Project or any part thereof, not cured within any applicable grace or cure period therein. SECTION 9.7 INVOLUNTARY BANKRUPTCY OR OTHER PROCEEDING. Commencement of an involuntary case or other proceeding against Borrower, or any other Person having an ownership or security interest in the Project (each, a "BANKRUPTCY PARTY") which seeks liquidation, reorganization or other relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of 60 days; or an order for relief against a Bankruptcy Party shall be entered in any such case under the Federal Bankruptcy Code. SECTION 9.8 VOLUNTARY PETITIONS, ETC. Commencement by a Bankruptcy Party of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any of its property, or consent by a Bankruptcy Party to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or the making by a Bankruptcy Party of a general assignment for the benefit of creditors, or the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its inability, to pay its debts generally as they become due, or any action by a Bankruptcy Party to authorize or effect any of the foregoing. ARTICLE 10 REMEDIES SECTION 10.1 REMEDIES - INSOLVENCY EVENTS. Upon the occurrence of any Event of Default described in Section 9.7 or 9.8, all amounts due under the Loan Documents immediately shall become due and payable, all without written notice and without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or any other notice of default of any kind, all of which are hereby expressly waived by Borrower; however, if the Bankruptcy Party under Section 9.7 or 9.8 is other than Borrower, then all amounts due under the Loan Documents shall become immediately due and payable at Lender's election, in Lender's sole discretion. SECTION 10.2 REMEDIES - OTHER EVENTS. Except as set forth in Section 10.1 above, while any Event of Default exists, Lender may (a) declare the entire Loan to be immediately due and payable without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or other notice of default of any kind, all of which are hereby expressly waived by Borrower, and (b) exercise all rights and remedies therefor under the Loan Documents and at law or in equity. SECTION 10.3 LENDER'S RIGHT TO PERFORM THE OBLIGATIONS. If Borrower shall fail, refuse or neglect to make any payment or perform any act required by the Loan Documents, then while any Event of Default exists, and 19 without notice to or demand upon Borrower and without waiving or releasing any other right, remedy or recourse Lender may have because of such Event of Default, Lender may (but shall not be obligated to) make such payment or perform such act for the account of and at the expense of Borrower, and shall have the right to enter upon the Project for such purpose and to take all such action thereon and with respect to the Project as it may deem necessary or appropriate. If Lender shall elect to pay any sum due with reference to the Project, Lender may do so in reliance on any bill, statement or assessment procured from the appropriate governmental authority or other issuer thereof without inquiring into the accuracy or validity thereof. Similarly, in making any payments to protect the security intended to be created by the Loan Documents, Lender shall not be bound to inquire into the validity of any apparent or threatened adverse title, lien, encumbrance, claim or charge before making an advance for the purpose of preventing or removing the same. Borrower shall indemnify Lender for all losses, expenses, damages, claims and causes of action, including reasonable attorneys' fees, incurred or accruing by reason of any acts performed by Lender pursuant to the provisions of this Section 10.3. All sums paid by Lender pursuant to this Section 10.3, and all other sums expended by Lender to which it shall be entitled to be indemnified, together with interest thereon at the Default Rate from the date of such payment or expenditure until paid, shall constitute additions to the Loan, shall be secured by the Loan Documents and shall be paid by Borrower to Lender upon demand. ARTICLE 11 MISCELLANEOUS SECTION 11.1 NOTICES. Any notice required or permitted to be given under this Agreement shall be in writing and either shall be mailed by certified mail, postage prepaid, return receipt requested, or sent by overnight air courier service, or personally delivered to a representative of the receiving party, or sent by telecopy (provided an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this Section 11.1). All such communications shall be mailed, sent or delivered, addressed to the party for whom it is intended at its address set forth below. If to Borrower: Griffin Land & Nurseries, Inc. 204 West Newberry Road Bloomfield, Connecticut 06002 Attention: Anthony Galici Telecopy: (860) 286-7653 with a copy to: Murtha, Cullina, Richter 185 Asylum Street Hartford, Connecticut 06103 Attention: Tom Daniells Telecopy: (860) 240-6150 If to Lender: General Electric Capital Corporation _ GE Capital Loan Services, Inc. 363 North Sam Houston Parkway East, Suite 1200 Houston, Texas 77060 Attention: Portfolio Manager/Access Program Telecopy: (281) 405-7132 with a copy to: General Electric Capital Corporation 16479 Dallas Parkway, Suite 500 Two Bent Tree Tower Addison, Texas 75001-2512 Attention: David R. Martindale Telecopy: (972) 728-7650 20 Any communication so addressed and mailed shall be deemed to be given on the earliest of (a) when actually delivered, (b) on the first Business Day after deposit with an overnight air courier service, or (c) on the third Business Day after deposit in the United States mail, postage prepaid, in each case to the address of the intended addressee, and any communication so delivered in person shall be deemed to be given when receipted for by, or actually received by Lender or Borrower, as the case may be. If given by telecopy, a notice shall be deemed given and received when the telecopy is transmitted to the party's telecopy number specified above and confirmation of complete receipt is received by the transmitting party during normal business hours or on the next Business Day if not confirmed during normal business hours. Either party may designate a change of address by written notice to the other by giving at least ten (10) days prior written notice of such change of address. SECTION 11.2 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of the Environmental Indemnity Agreement and the Loan Documents shall be effective unless in writing and signed by the party against whom enforcement is sought. SECTION 11.3 LIMITATION ON INTEREST. It is the intention of the parties hereto to conform strictly to applicable usury laws. Accordingly, all agreements between Borrower and Lender with respect to the Loan are hereby expressly limited so that in no event, whether by reason of acceleration of maturity or otherwise, shall the amount paid or agreed to be paid to Lender or charged by Lender for the use, forbearance or detention of the money to be lent hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan would be usurious under applicable law (including the laws of the State and the laws of the United States of America), then, notwithstanding anything to the contrary in the Loan Documents: (a) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under the Loan Documents shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on the Note by the holder thereof; and (b) if maturity is accelerated by reason of an election by Lender, or in the event of any prepayment, then any consideration which constitutes interest may never include more than the maximum amount allowed by applicable law. In such case, excess interest, if any, provided for in the Loan Documents or otherwise, to the extent permitted by applicable law, shall be amortized, prorated, allocated and spread from the date of advance until payment in full so that the actual rate of interest is uniform through the term hereof. If such amortization, proration, allocation and spreading is not permitted under applicable law, then such excess interest shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Note. The terms and provisions of this Section 11.3 shall control and supersede every other provision of the Loan Documents. The Loan Documents are contracts made under and shall be construed in accordance with and governed by the laws of the State, except that if at any time the laws of the United States of America permit Lender to contract for, take, reserve, charge or receive a higher rate of interest than is allowed by the laws of the State (whether such federal laws directly so provide or refer to the law of any state), then such federal laws shall to such extent govern as to the rate of interest which Lender may contract for, take, reserve, charge or receive under the Loan Documents. SECTION 11.4 INVALID PROVISIONS. If any provision of any Loan Document or the Environmental Indemnity Agreement is held to be illegal, invalid or unenforceable, such provision shall be fully severable; the Environmental Indemnity Agreement and the Loan Documents shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof; the remaining provisions thereof shall remain in full effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom; and in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of such Environmental Indemnity Agreement and such Loan Document a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible to be legal, valid and enforceable. SECTION 11.5 REIMBURSEMENT OF EXPENSES. Borrower shall pay all reasonable expenses incurred by Lender in connection with the Loan, including reasonable fees and expenses of Lender's attorneys, environmental, engineering and other consultants, and fees, charges or taxes for the recording or filing of Loan Documents. Borrower shall pay all reasonable expenses of Lender in connection with the administration of the Loan, including audit costs, inspection fees, settlement of condemnation and casualty awards, and premiums for title insurance and endorsements thereto. Borrower shall, upon request, promptly reimburse Lender for all reasonable amounts expended, advanced or 21 incurred by Lender to collect the Note, or to enforce the rights of Lender under this Agreement, the Environmental Indemnity Agreement, or any Loan Document, or to defend or assert the rights and claims of Lender under the Environmental Indemnity Agreement or the Loan Documents or with respect to the Project (by litigation or other proceedings), which amounts will include all court costs, reasonable attorneys' fees and expenses, fees of auditors and accountants, and investigation expenses as may be incurred by Lender in connection with any such matters (whether or not litigation is instituted), together with interest at the Default Rate on each such amount from the date of disbursement until the date of reimbursement to Lender, all of which shall constitute part of the Loan and shall be secured by the Loan Documents. SECTION 11.6 APPROVALS; THIRD PARTIES; CONDITIONS. All approval rights retained or exercised by Lender with respect to leases, contracts, plans, studies and other matters are solely to facilitate Lender's credit underwriting, and shall not be deemed or construed as a determination that Lender has passed on the adequacy thereof for any other purpose and may not be relied upon by Borrower or any other Person. This Agreement is for the sole and exclusive use of Lender and Borrower and may not be enforced, nor relied upon, by any Person other than Lender and Borrower. All conditions of the obligations of Lender hereunder, including the obligation to make advances, are imposed solely and exclusively for the benefit of Lender, its successors and assigns, and no other Person shall have standing to require satisfaction of such conditions or be entitled to assume that Lender will refuse to make advances in the absence of strict compliance with any or all of such conditions, and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by Lender at any time in Lender's sole discretion. SECTION 11.7 LENDER NOT IN CONTROL; NO PARTNERSHIP. None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Lender the right or power to exercise control over the affairs or management of Borrower, the power of Lender being limited to the rights to exercise the remedies referred to in the Environmental Indemnity Agreement or the Loan Documents. The relationship between Borrower and Lender is, and at all times shall remain, solely that of debtor and creditor. No covenant or provision of the Environmental Indemnity Agreement or the Loan Documents is intended, nor shall it be deemed or construed, to create a partnership, joint venture, agency or common interest in profits or income between Lender and Borrower or to create an equity in the Project in Lender. Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any other person with respect to the Project or the Loan, except as expressly provided in the Environmental Indemnity Agreement and the Loan Documents; and notwithstanding any other provision of the Environmental Indemnity Agreement or the Loan Documents: (a) Lender is not, and shall not be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of Borrower or its stockholders, members, or partners and Lender does not intend to ever assume such status; (b) Lender shall in no event be liable for any Debts, expenses or losses incurred or sustained by Borrower; and (c) Lender shall not be deemed responsible for or a participant in any acts, omissions or decisions of Borrower or its stockholders, members, or partners. Lender and Borrower disclaim any intention to create any partnership, joint venture, agency or common interest in profits or income between Lender and Borrower, or to create an equity in the Project in Lender, or any sharing of liabilities, losses, costs or expenses. SECTION 11.8 CONTEST OF CERTAIN CLAIMS. Borrower may contest the validity of Taxes or any mechanic's or materialman's lien asserted against the Project so long as (a) Borrower notifies Lender that it intends to contest such Taxes or liens, as applicable, (b) Borrower provides Lender with an indemnity, bond or other security reasonably satisfactory to Lender assuring the discharge of Borrower's obligations for such Taxes or liens, as applicable, including interest and penalties, (c) Borrower is diligently contesting the same by appropriate legal proceedings in good faith and at its own expense and concludes such contest prior to the tenth (10th) day preceding the earlier to occur of the Maturity Date or the date on which the Project is scheduled to be sold for non-payment, (d) Borrower promptly upon final determination thereof pays the amount of any such Taxes or liens, as applicable, together with all costs, interest and penalties which may be payable in connection therewith, and (e) notwithstanding the foregoing, Borrower shall immediately upon request of Lender pay any such Taxes or liens, as applicable, notwithstanding such contest if, in the opinion of Lender, the Project or any part thereof or interest therein may be in danger of being sold, forfeited, 22 foreclosed, terminated, canceled or lost. Lender may pay over any cash deposit or part thereof to the claimant entitled thereto at any time when, in the reasonable judgment of Lender, the entitlement of such claimant is established. SECTION 11.9 TIME OF THE ESSENCE. Time is of the essence with respect to this Agreement. SECTION 11.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of Lender and Borrower and their respective successors and assigns, provided that Borrower shall not, without the prior written consent of Lender, assign any rights, duties or obligations hereunder. SECTION 11.11 RENEWAL, EXTENSION OR REARRANGEMENT. All provisions of the Environmental Indemnity Agreement and the Loan Documents shall apply with equal effect to each and all promissory notes and amendments thereof hereinafter executed which in whole or in part represent a renewal, extension, increase or rearrangement of the Loan. SECTION 11.12 WAIVERS. No course of dealing on the part of Lender, its officers, employees, consultants or agents, nor any failure or delay by Lender with respect to exercising any right, power or privilege of Lender under the Environmental Indemnity Agreement and any of the Loan Documents, shall operate as a waiver thereof. SECTION 11.13 CUMULATIVE RIGHTS; JOINT AND SEVERAL LIABILITY. Rights and remedies of Lender under the Environmental Indemnity Agreement and the Loan Documents shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. If more than one person or entity has executed this Agreement as "Borrower," the obligations of all such persons or entities hereunder shall be joint and several. SECTION 11.14 SINGULAR AND PLURAL. Words used in this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in the singular in this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement shall apply to such words when used in the plural where the context so permits and vice versa. SECTION 11.15 PHRASES. Except as otherwise expressly provided herein, when used in this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement, the phrase "including" shall mean "including, but not limited to," the phrase "satisfactory to Lender" shall mean "in form and substance satisfactory to Lender in all respects," the phrase "with Lender's consent" or "with Lender's approval" shall mean such consent or approval at Lender's sole discretion, and the phrase "acceptable to Lender" shall mean "acceptable to Lender at Lender's sole discretion." SECTION 11.16 EXHIBITS AND SCHEDULES. The exhibits and schedules attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein. SECTION 11.17 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles or headings to articles, sections, subsections or other divisions of this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement or the exhibits hereto and thereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto. SECTION 11.18 PROMOTIONAL MATERIAL. Borrower authorizes Lender to issue press releases, advertisements and other promotional materials in connection with Lender's own promotional and marketing activities, including in connection with a Secondary Market Transaction, and such materials may describe the Loan in general terms or in detail and Lender's participation therein in the Loan. All references to Lender contained in any press release, advertisement or promotional material issued by Borrower shall be approved in writing by Lender in advance of issuance. 23 SECTION 11.19 SURVIVAL. All of the representations, warranties, covenants, and indemnities hereunder (including environmental matters under Article 4), under the indemnification provisions of the other Loan Documents and under the Environmental Indemnity Agreement, shall survive the repayment in full of the Loan and the release of the liens evidencing or securing the Loan, and shall survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all right, title and interest in and to the Project to any party, whether or not an affiliate of Borrower. SECTION 11.20 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE ENVIRONMENTAL INDEMNITY AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AGREEMENT OR IN ANY WAY RELATING TO THE LOAN OR THE PROJECT (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN. SECTION 11.21 WAIVER OF PUNITIVE OR CONSEQUENTIAL DAMAGES. Neither Lender nor Borrower shall be responsible or liable to the other or to any other Person for any punitive, exemplary or consequential damages which may be alleged as a result of the Loan or the transaction contemplated hereby, including any breach or other default by any party hereto. SECTION 11.22 GOVERNING LAW. The Loan Documents and the Environmental Indemnity Agreement shall be governed by and construed in accordance with the laws of the State and the applicable laws of the United States of America. SECTION 11.23 ENTIRE AGREEMENT. This Agreement, the other Loan Documents and the Environmental Indemnity Agreement embody the entire agreement and understanding between Lender and Borrower and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Loan Documents and the Environmental Indemnity Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. If any conflict or inconsistency exists between the Commitment and this Agreement, any of the other Loan Documents, or the Environmental Indemnity Agreement, the terms of this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement shall control. SECTION 11.24 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which shall constitute one document. ARTICLE 12 LIMITATIONS ON LIABILITY 24 SECTION 12.1 LIMITATION ON LIABILITY. Except as provided below, Borrower shall not be personally liable for amounts due under the Loan Documents. Borrower shall be personally liable to Lender for any deficiency, loss or damage suffered by Lender because of: (a) Borrower's commission of a criminal act; (b) the failure to comply with provisions of the Loan Documents prohibiting the sale, transfer or encumbrance of the Project, any other collateral, or any direct or indirect ownership interest in Borrower; (c) the misapplication by Borrower of any funds derived from the Project, including security deposits, insurance proceeds and condemnation awards in violation of this Agreement or any of the other Loan Documents; (d) the fraud or misrepresentation by Borrower made in or in connection with the Loan Documents or the Loan; (e) Borrower's collection of rents more than one month in advance or entering into or modifying leases, or receipt of monies by Borrower in connection with the modification of any leases, in violation of this Agreement or any of the other Loan Documents; (f) Borrower's failure to apply proceeds of rents or any other payments in respect of the leases and other income of the Project or any other collateral when received to the costs of maintenance and operation of the Project and to the payment of taxes, lien claims, insurance premiums, Debt Service, the Funds, and other amounts due under the Loan Documents to the extent the Loan Documents require such proceeds to be then so applied; (g) Borrower's interference with Lender's exercise of rights under the Assignment of Leases and Rents; (h) Borrower's failure to maintain insurance as required by this Agreement; (i) damage or destruction to the Project caused by the acts or omissions of Borrower, its agents, employees, or contractors; (j) Borrower's obligations with respect to environmental matters under Article 4; (k) Borrower's failure to pay for any loss, liability or expense (including attorneys' fees) incurred by Lender arising out of any claim or allegation made by Borrower, its successors or assigns, or any creditor of Borrower, that this Agreement or the transactions contemplated by the Loan Documents and the Environmental Indemnity Agreement establishes a joint venture, partnership or other similar arrangement between Borrower and Lender; or (l) any brokerage commission or finder's fees claimed in connection with the transactions contemplated by the Loan Documents. Nothing herein shall be deemed to be a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of the United States Bankruptcy Code, to file a claim for the full amount due to Lender under the Loan Documents or to require that all collateral shall continue to secure the amounts due under the Loan Documents. SECTION 12.2 LIMITATION ON LIABILITY OF LENDER'S OFFICERS, EMPLOYEES, ETC. Any obligation or liability whatsoever of Lender which may arise at any time under this Agreement, any other Loan Document, or the Environmental Indemnity Agreement shall be satisfied, if at all, out of the Lender's assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of Lender's shareholders, directors, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. [SIGNATURE PAGE FOLLOWS] 25 EXECUTED as of the date first written above. LENDER: GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation By: /s/ David R. Martindale David R. Martindale, Authorized Signatory BORROWER: GRIFFIN LAND & NURSERIES, INC., a Delaware corporation By: /s/ Anthony Galici Name: Anthony Galici Title: Vice President and Chief Financial Officer 26 SCHEDULE I DEFEASANCE 1. In accordance with Section 2.3 of the Loan Agreement, Borrower may obtain the release of the Project from the lien of the Mortgage upon the satisfaction of the following conditions precedent: (a) not less than thirty (30) days prior written notice to Lender specifying a regularly scheduled payment date (the "RELEASE DATE ") on which the Defeasance Deposit (hereinafter defined) is to be made; (b) the payment to Lender of interest accrued and unpaid on the principal balance of the Note to and including the Release Date; (c) the payment to Lender of all other sums, not including scheduled interest or principal payments, due under the Note, the Mortgage, the Assignment of Leases and Rents, and the other Loan Documents; (d) the payment to Lender of the Defeasance Deposit; (e) the delivery by Borrower to Lender of: i) a security agreement in form and substance satisfactory to Lender, creating a first priority lien on the Defeasance Deposit and the U.S. Obligations (hereinafter defined) purchased on behalf of Borrower with the Defeasance Deposit in accordance with this provision of this Schedule I (the "SECURITY AGREEMENT"); ii) a release of the Project from the lien of the Mortgage (for execution by Lender) in a form appropriate for the jurisdiction in which the Project is located; iii) an officer's certificate of Borrower certifying that the requirements set forth in this paragraph (e) have been satisfied; iv) an opinion of counsel for Borrower in form satisfactory to Lender stating, among other things, that Lender has a perfected first priority security interest in the Defeasance Deposit and the U.S. Obligations purchased by Lender on behalf of Borrower; v) evidence in writing from the applicable Rating Agencies to the effect that such release will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to such defeasance for any securities issued in connection with a Secondary Market Transaction; and vi) such other certificates, documents or instruments as Lender may reasonably request. (f) if the Loan has been sold in a Secondary Market Transaction, Lender shall have received an opinion of counsel acceptable to Lender in form satisfactory to Lender stating, among other things, that the substitution of collateral shall not cause the holder of the Loan to fail to maintain its status as a real estate mortgage investment conduit; and (g) Lender shall have received a certificate from an independent certified public accountant acceptable to Lender, in form and substance satisfactory to Lender, certifying that the U.S. Obligations purchased with the Defeasance Deposit will generate sufficient sums to satisfy the obligations of Borrower under the Note as and when such obligations become due. In connection with the conditions set forth in paragraph 1(e) above, Borrower hereby appoints Lender as its agent and attorney-in-fact for the purpose of using the Defeasance Deposit to purchase U.S. Obligations which provide payments on or prior to, but as close as possible to, all successive scheduled payment dates after the Release Date upon which interest and principal payments are required under the Note (including the amounts due on the Maturity Date) and in amounts equal to the scheduled payments due on such dates under the Note (the "SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the Security Agreement or other appropriate document, shall authorize and direct that the payments received from the U.S. Obligations may be made directly to Lender and applied to satisfy the obligations of Borrower under the Note. 2. Upon compliance with the requirements of this Schedule I, the Project shall be released from the lien of the Mortgage and the pledged U.S. Obligations shall be the sole source of collateral securing the Note. Any portion of the Defeasance Deposit in excess of the amount necessary to purchase the U.S. Obligations required by the preceding paragraph and to otherwise satisfy the Borrower's obligations under this Schedule I shall be remitted to Borrower with the release of the Project from the lien of the Mortgage. In connection with such release, Lender shall establish or designate a successor entity (the "SUCCESSOR BORROWER") and Borrower shall transfer and assign all obligations, rights and duties under and to the Note together with the pledged U.S. Obligations to such Successor Borrower. The obligation of Lender to establish or designate a Successor Borrower shall be retained by Lender notwithstanding the sale or transfer of the Mortgage unless such obligation is specifically assumed by the transferee. Such Successor Borrower shall assume the obligations under the Note and the Security Agreement and Borrower shall be relieved of its obligations thereunder. Borrower shall pay $1,000.00 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement. Notwithstanding anything in the Mortgage to the contrary, no other assumption fee shall be payable upon a transfer of the Note in accordance with this paragraph, but Borrower shall pay all costs and expenses incurred by Lender, including Lender's reasonable attorneys' fees and expenses, incurred in connection with this Schedule. 3. For purposes of this Schedule I, the following terms shall have the following meanings: (a) The term "DEFEASANCE DEPOSIT" shall mean an amount equal to the remaining principal amount of the Note, the Yield Maintenance Amount, any costs and expenses incurred or to be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance Payments and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note or otherwise required to accomplish the agreements of this Schedule I. (b) The term "YIELD MAINTENANCE AMOUNT" shall mean the amount (if any) which, when added to the remaining principal amount of the Note, will be sufficient to purchase U.S. Obligations providing the required Scheduled Defeasance Payments; and (c) The term "U.S. OBLIGATIONS" shall mean direct non-callable obligations of the United States of America. EX-10.18 3 EXHIBIT 10.18 Exhibit 10.18 REVOLVING LOAN AGREEMENT THIS REVOLVING LOAN AGREEMENT made this third day of August, 1999, by and between GRIFFIN LAND & NURSERIES, INC., a Delaware corporation with its chief executive office and principal place of business at 1 Rockefeller Plaza, Suite 2301, New York, New York 10020-2919 (hereinafter called the "Borrower"), IMPERIAL NURSERIES, INC., a Delaware corporation with its chief executive office and principal place of business at 90 Salmon Brook Street, Granby, Connecticut 06035 (hereinafter called the "Guarantor") and FLEET NATIONAL BANK, a national banking association with an office at 777 Main Street, Hartford, Connecticut 06115 (hereinafter called the "Lender"). The Borrower, Guarantor and the Lender hereby agree as follows: SECTION 1. DEFINITIONS. As used herein: 1.1. OBLIGATIONS - means all loans, advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Lender of every kind and description (whether or not evidenced by any note or other instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, in each case related to the transaction described in this Loan Agreement, including without limitation, all interest, fees, charges, expenses and attorneys' fees chargeable to the Borrower or incurred by the Lender in connection with the Borrower's account whether provided for herein or in any Supplemental Agreement. 1.2. COMMITMENT AMOUNT - means twenty million ($20,000,000) dollars. 1.3. LOAN AGREEMENT - means this Revolving Loan Agreement, as the same may hereafter be supplemented, modified or amended. 1.4. SUPPLEMENTAL AGREEMENTS - means any and all agreements, instruments, or documents, executed by Borrower or Guarantor in connection with the Obligations, and any amendments, modifications or replacements thereof. 1.5. EFFECTIVE DATE - means the date of execution of this Loan Agreement. 1.6. GUARANTOR - means any person, firm or corporation which has guaranteed or endorsed or has agreed to act as surety for any of the Obligations, including, without limitation, Imperial Nurseries, Inc. 1.7. NOTE - means the Revolving Promissory Note from Borrower in favor of Lender dated of even date herewith in the principal amount of $20,000,000, as the same may be amended, restated, modified, extended or replaced. 1.8. MATURITY DATE - means May 31, 2001. 1.9. DEFAULT RATE - shall have the meaning set forth in the Note. 1.10. ADDITIONAL DEFINITIONS. Unless otherwise specifically defined herein, all terms used in this Loan Agreement and in all documents referred to herein and which have been defined in Articles 1, 2 or 9, Uniform Commercial Code, shall be interpreted and construed in light of the sections, the definitions, the "official comment", and the definitional and substantive cross-references of the Uniform Commercial Code. SECTION 2. TERMS OF BORROWING. 2.1. REVOLVING LOAN. Pursuant to the terms of this Agreement, the Lender shall lend to the Borrower, and the Borrower may borrow from the Lender, from time to time (the "Revolving Loan") advances not to exceed the Commitment Amount. Nothing shall prohibit the Lender from lending in excess of the Commitment Amount. There will be a $10,000,000 sublimit for real estate development-related borrowings. The Revolving Loan will support Borrower's on-going working capital needs, real estate development activities and loans to the Guarantor. At the time of each advance, the Borrower shall designate the use of each such advance in such detail as the Lender may reasonably require. The Borrower shall be permitted to use cash on hand sourced from the Guarantor through intercompany advances, dividends, or distributions ("Guarantor Cash Flow") to support real estate development related activities, but not advances from the Revolving Loan allocated to Guarantor. Requests for real estate development advances shall contain a description of the project, a construction schedule, and budget for the project, together with such other information as the Lender may reasonably request. Advances which will be loaned by the Borrower to the Guarantor to support its working capital needs shall be required to be paid down to not more than $3,500,000 for thirty (30) consecutive days during each 12 consecutive month period during the term of the Loan. The minimum advance under the Revolving Loan for real estate development-related advances shall be $500,000. Advances for real estate development-related borrowings will be required to be repaid within eighteen (18) months of the date of advance. Funds used for repayment of real estate-related advances may come from: (1) the Borrower's own funds derived from its real estate operations or other assets; or (2) Guarantor Cash Flow. Guarantor may, at any time, make a loan or pay a dividend or distribution to Borrower provided that (i) funds from such loan, dividend or distribution are used to repay amounts outstanding under the Revolving Loan or for the general operating expenses of the corporate office or (ii) for any purpose, if no borrowings are outstanding under 2 the Revolving Loan which have been used for investments, or advances, to Guarantor. At the time of the initial borrowing under the Revolving Loan, Borrower is permitted to make a loan or advance to Guarantor to provide all funds necessary for Guarantor to repay amounts outstanding under the Guarantor's existing credit agreement. In no event shall the aggregate amount of Guarantor Cash Flow loaned or distributed to Borrower exceed a net amount of $10,000,000 at any time after November 28, 1998. Real estate development-related borrowings will be reported and aged for the Lender's review on a quarterly basis. 2.2. REPAYMENT OF THE REVOLVING LOAN. In the event the Revolving Loan at any time exceeds the Commitment Amount, or any sublimit established under Section 2.1, the Borrower will immediately, upon notification thereof from the Lender, repay to the Lender the amount by which the Revolving Loan exceeds the Commitment Amount or such sublimit. Advances will be evidenced by the Note. However, at the time of each advance under the Revolving Loan, the Borrower will, upon request of the Lender, execute a replacement or supplemental promissory note evidencing such advance, such note to be in such form and to contain such provisions as the Lender shall deem desirable. If the Lender shall elect not to have the Borrower execute notes, each advance shall be recorded in an account on the Lender's books in which shall also be recorded accrued interest on advances, payments on such advances, and other appropriate debits and credits as herein provided, and such account shall, absent manifest error, constitute prima facie evidence of the information contained therein. 2.3. INTEREST ON THE REVOLVING LOAN. Interest on the Revolving Loan will be payable monthly in arrears on the first business day of each month, commencing on the first business day of the month subsequent to the date of this Loan Agreement, and will be charged to the Borrower upon any and all balances due to the Lender at that rate set forth in the Revolving Note. The Borrower agrees to pay the Lender a late charge fee equal to five percent (5%) of any payment due to the Lender which is not received before the expiration of ten (10) days after the payment is due. It is further agreed that upon an Event of Default and at any time thereafter, the Borrower shall pay interest to the Lender at the Default Rate until the Obligations are paid in full. 2.4. TERMINATION. All outstanding balances under the Revolving Loan shall be payable on the Maturity Date. Notwithstanding the foregoing, should either the Lender or the Borrower become insolvent or go out of business, the other party shall have the right to terminate this Agreement at any time without notice. Upon the effective date of termination, all Obligations, whether or not incurred under this Loan Agreement or any Supplemental Agreement or otherwise, shall become immediately due and payable without notice or demand. Notwithstanding termination, until all Obligations have been fully satisfied, except for those specific covenants and conditions dealing with the making of advances, all terms and conditions of all agreements between the Borrower and the Lender shall remain in full force and effect. 3 2.5. ADDITIONAL PAYMENTS. If the Lender shall deem applicable to this Loan Agreement (including the borrowed and the unused portion thereof) any requirement of any law of the United States of America, any regulation, order, interpretation, ruling, official directive or guideline (whether or not having the force of law) of the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation or any other board or governmental or administrative agency of the United States of America which shall impose, increase, modify or make applicable to this Loan Agreement, or cause to be included in, any reserve, special deposit, calculation used in the computation of regulatory capital standards, assessment or other requirement which imposes on the Lender any cost that is attributable to the maintenance of this Loan Agreement, then, and in each such event, the Borrower shall promptly pay the Lender, upon its demand, such amount as will compensate the Lender for any such cost, which determination may be based upon the Lender's reasonable allocation of the aggregate of such costs resulting from such events. In the event any such cost is a continuing cost, a fee payable to the Lender may be imposed upon the Borrower periodically for so long as any such cost is deemed applicable to the Lender, in an amount reasonably determined by the Lender to be necessary to compensate the Lender for any such cost. The determination by the Lender of the existence and amount of any such cost shall, in the absence of manifest error, be conclusive. 2.6. LINE FEE. As further inducement for the Lender to enter into the Revolving Loan pursuant to Section 2 hereof, Borrower shall pay on the first business day of each month during the term of this Loan Agreement a fee (the "Line Fee") equal to one-twelfth of one quarter percent (0.25 %) of the average daily unused portion of the Revolving Loan for the immediately preceding month. Said average daily unused portion shall refer to that amount which is equal to the difference between the Commitment Amount and the average daily outstanding balance of the Revolving Loan for the immediately preceding month for which such Line Fee is due. The Line Fee will, at the option of the Lender, be charged to the account of Borrower when due. 2.7. METHOD OF PAYMENT. The Borrower hereby authorizes the Lender to charge from time to time against its disbursement account any amount due under this Loan Agreement. Whenever any payment to be made under this Loan Agreement shall be stated to be due on a day other than a Banking Day (hereafter defined), such charge shall be made in the next Banking Day and such extension of time shall, in such case, be included in the computation of the payment of accrued interest. For the purpose hereof, "Banking Day" means any day other than Saturday, Sunday or other days on which commercial banks in Hartford, Connecticut are authorized or required to close according to the laws of the State of Connecticut. SECTION 3. REPRESENTATIONS AND WARRANTIES. As part of the consideration for this Loan Agreement and as part of the inducement to the Lender 4 to enter into and perform this Agreement, Borrower hereby makes each of the following representations and warranties, the only exceptions to which, if any, are expressly set forth in the applicable schedules attached hereto (all references in this section to "initial advance" or "initial loan advance" under this Agreement shall mean the initial loan advance to be made on the date hereof pursuant to Section 2.1 hereof): 3.1. SOLVENCY. Upon the initial loan advance required under this Agreement, the fair salable value of Borrower's assets shall be greater than the amount required to pay its total liabilities and Borrower will be able to pay its debts as they mature. The Borrower will maintain such solvent condition, giving effect to all indebtedness due to the Lender pursuant to this Agreement, so long as Borrower is obligated to the Lender under this Agreement or in any other manner whatsoever. 3.2. CORPORATE STATUS. Schedule 3.2 states (a) the correct jurisdiction of Borrower's organization, (b) the number and nature of all outstanding securities of Borrower, and (c) the number of authorized, issued and treasury shares of Borrower. 3.3. GOOD STANDING; AUTHORITY. Borrower (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has all requisite power and authority and necessary licenses and permits to own and operate its properties and to carry on its businesses now and as proposed to be conducted; and (c) has duly qualified and is authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary or desirable. 3.4. NATURE OF BUSINESS; CORPORATE NAME. Schedule 3.4 correctly describes the general nature of the businesses and principal properties (including all owned real property, leases and leasehold interests) of Borrower as of the time of the initial advance pursuant to this Agreement. Except as set forth on Schedule 3.4, Borrower has not as of the time of the initial loan advance hereunder and within the two (2) years prior thereto changed its name, been the surviving entity of a merger of consolidation or acquired all or substantially all of the assets of any person or entity. 3.5. INTENTIONALLY DELETED. 3.6. TITLE TO PROPERTY. Borrower shall, at or before the time of the initial advance of the loan hereunder, have fee simple title sufficient for Borrower's operations (or its equivalent under applicable law) to all the real property, and good title to all the other property, it then purports to own, including that reflected on Schedule 3.4 and in the most recent financial statements provided by said Borrower to the Lender (except as sold or otherwise disposed of in the ordinary course of business), free from liens not permitted by the terms of this Agreement but subject to liens to which the Lender has expressly consented and which are expressly disclosed in the security agreements delivered pursuant to Section 7.4 hereof. 5 3.7. YEAR 2000 COMPLIANCE. Borrower has reviewed the "Year 2000 Risk" (that is the risk that computer applications used by Borrower may be unable to recognize and perform without error date-sensitive functions involving certain dates prior to and any date after December 31, 1999) and represents that it is taking such actions as may be necessary to insure that the Year 2000 Risk will not adversely affect its business operations and/or financial condition. 3.8. EMPLOYMENT AGREEMENTS. Except as reflected in Schedule 3.8, Borrower has never nor will have as of the time of the initial loan advance hereunder entered into any employment agreements or other obligations or contracts providing for the retaining or employment of personnel. Furthermore, the employees of Borrower are not and will not be as of the time of the initial loan advance hereunder a party to any collective bargaining agreement with Borrower, and, to the best knowledge of Borrower and its officers, there are no material grievances, disputes or controversies with any union or any other organization of any of Borrower's employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. Copies of all of the foregoing agreements and contracts disclosed on Schedule 3.8 have been provided to the Lender. 3.9. ERISA. Borrower has not nor will it have as of the time of the initial advance of the loan any "Pension Plan," as that term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Borrower will notify Lender if it subsequently creates such a Pension Plan and shall thereafter comply with all laws applicable to such Plan, and notify Lender in the event of any non-compliance. 3.10. LITIGATION. No legal action of any material nature, either in law or in equity, has been instituted or is otherwise pending against Borrower or with respect to any properties of Borrower and no threats or intimations of material litigation have been received by Borrower with respect to itself or its properties. 3.11. BUSINESS RECORDS. The books of account of Borrower since its organization have been kept and maintained in accordance with generally accepted accounting principles and practices applied on a consistent basis and reflect all moneys due or to become due from or to Borrower for any reason whatsoever. 3.12. CORPORATE DOCUMENTS. The By-laws and Charter of the Borrower as contained in those certificates delivered to the Lender pursuant to Section 7.10 of this Agreement, respectively, are the duly adopted By-laws and Charter of Borrower and have not been modified, amended or repealed. 3.13. CORPORATION TAXES. Borrower has duly paid any and all franchise and annual corporation taxes, duties or charges, levied, assessed or imposed upon it, or upon any of its property, of whatsoever kind or description. 3.14. STOCKHOLDER DISTRIBUTIONS. No dividends or other payments of profits, surplus, or 6 reserves of Borrower have been declared to the stockholders of Borrower nor are at the date hereof due and payable, declared, or provided for by Borrower or in any other manner presently existing obligations of Borrower. 3.15. AUTHORIZATION. This Loan Agreement, and each of the transactions contemplated hereby, has been duly authorized by proper action of Borrower and approved by its stockholders and directors and when executed, this Loan Agreement will constitute a binding obligation on Borrower in accordance with its terms. 3.16. FINANCIAL INFORMATION. The financial statements for fiscal year end November 28, 1998 and other financial information provided by or on behalf of Borrower to the Lender in contemplation of the loans to be made hereunder to the best of Borrower's knowledge do not contain any untrue statement of a material fact nor omit any material fact necessary to reflect Borrower's financial condition or its ability to continue ordinary business operations. 3.17. CHANGES IN OPERATIONS. There has been no change in the business, operations, prospects, profits, properties or condition (financial or otherwise) of Borrower since the date of the most recent financial statement provided by Borrower to the Lender except changes in the ordinary course of business, none of which, either individually or in the aggregate, has been materially adverse. 3.18. INTANGIBLE RIGHTS. Borrower owns or possesses all of the patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any known conflict with the rights of others, and all patents and trademarks owned are set forth on Schedule 3.18. 3.19. TAXES. All tax returns required to be filed by Borrower in any jurisdiction have in fact been filed, and all taxes, assessments, fees and other governmental charges upon Borrower or upon any of its properties, income or franchises, which are due and payable have been paid. The provisions for taxes on the books of Borrower are adequate for all open years and for its current fiscal period. 3.20. PROHIBITIONS IN CONTRACTS. Borrower is not a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects the business of Borrower. Borrower is not a party to any material contract or agreement which restricts its right or ability to enter into this Agreement or any of the transactions contemplated hereby except such as will be discharged upon conclusion of the transaction contemplated hereby. 3.21. GOVERNMENT CONSENT. Neither the nature of Borrower nor of any of its businesses or properties, nor any relationship between the Borrower and any other person, nor any circumstance in connection with the execution or delivery of this Agreement or any instruments contemplated hereby is such as to require a consent, approval or 7 authorization of or filing, registration or qualification with, any governmental authority on the part of Borrower as a condition of the execution, delivery or performance of this Agreement and any note, agreement or document contemplated hereby. 3.22. SECURITIES COMPLIANCE. Borrower hereby agrees that neither it nor anyone acting on its behalf has offered or will offer the notes issued pursuant hereto or any part thereof or any similar securities for issue or sale to, or solicit any offer to acquire any of the same from anyone so as to bring the issuance of said notes within the provisions of Section 5 of the Securities Act of 1933, as amended. 3.23. COMPLIANCE WITH LAWS. Borrower to the best of its knowledge (a) is not in violation of any laws, ordinances, governmental rules and regulations to which it is subject, or (b) has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Property or to the conduct of its business, which violation or failure to obtain materially and adversely affects the business, prospects, profits, properties or condition (financial or otherwise) of said Borrower. 3.24. BORROWED MONEY. At the time that the initial loan advance is made hereunder, Borrower will not be liable in respect of any obligations for borrowed money except in favor of Lender or except as otherwise set forth on Schedule 3.24 hereto. SECTION 4. NEGATIVE COVENANTS. As long as any obligations are outstanding under this Loan Agreement, or otherwise, between Borrower and the Lender, Borrower agrees that it will not, without the prior written consent of the Lender or except as indicated on an appropriate schedule attached hereto numbered to correspond to the specific section to which such exception relates: 4.1. LOANS. Lend money to or guarantee the payment or performance of any liability or obligation of any person or entity; 4.2. MERGER. Be a party to any consolidation or merger without the prior written consent of Lender, not to be unreasonably withheld or delayed; 4.3. INVESTMENTS. Except for acquisitions or investments in nursery or real estate development related industries, invest in or otherwise acquire any stock or substantially all the assets of any corporation, firm, or business, or division thereof the value of which exceeds $200,000 without the prior written consent of Lender, not to be unreasonably withheld or delayed and provided, in any event, that such investment or acquisition (i) will not, after taking into account such investment or acquisition, cause a default hereunder and (ii) will be considered a capital expenditure for the purposes of Section 4.15 hereof. 8 4.4. CHANGE BUSINESS. Change the general character of its business as conducted at the date hereof, or engage in any type of business not reasonably related to its business as normally conducted; 4.5. LIENS. Create or suffer to exist any mortgage, security interest, or lien on any of its property other than (1) security interests or liens which may secure any indebtedness in an aggregate amount not to exceed $100,000 at any one time, or (2) mortgages or other liens the proceeds of which are applied to the Revolving Loan and which are (x) non-recourse to the Borrower and its subsidiaries, or (y) subject to an intercreditor agreement acceptable to the Lender in its sole discretion. The anticipated refinancing of the existing mortgage on 14, 15, and 16 International Drive are excluded from this restriction; 4.6. SUBSIDIARIES. Cause, suffer or permit any of its subsidiaries to do with respect to itself or its property, any of the things prohibited in its case; 4.7. DISTRIBUTIONS. Upon or after an Event of Default, declare or pay any dividend on its capital shares of any class, make any distribution to any stockholders as such, purchase, redeem or otherwise acquire for value any shares of its stock of any class and/or any warrants or options for the acquisition of such shares, or make any loan to stockholders; 4.8. INTENTIONALLY DELETED. 4.9. BORROWED MONEY. Incur or in any other manner become liable in respect of any obligation for borrowed money except in favor of the Lender provided, however, Borrower shall be permitted (i) to borrow from Guarantor such amounts as it deems necessary and, provided no Event of Default has occurred and is continuing, Borrower may repay any loans or advances made by Guarantor to Borrower and (ii) to borrow on a non-recourse basis provided that the proceeds of such borrowing shall be applied to the real estate-related borrowings outstanding under the Revolving Loan; 4.10. SALE OF ASSETS. Sell or otherwise dispose of any of its assets, except that Borrower shall be permitted to sell or otherwise dispose of any of its real estate assets, for fair value, provided that the proceeds thereof (if they exceed $100,000) are applied to the real estate-related borrowings outstanding under the Revolving Loan; 4.11. ACQUIRE ASSETS. Acquire assets for less than fair value; 4.12. AFFILIATE TRANSACTIONS. Except as set forth in Schedule 4.12 without the prior written consent of Lender, not to be unreasonably withheld or delayed, enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service with any affiliate except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's business and upon fair and reasonable terms no less favorable to the Borrower than would pertain in a comparable arms-length transaction with a party other than an affiliate; 9 4.13. INTENTIONALLY DELETED. 4.14. LEASES. Become lessee under any lease of real property except as indicated on Schedule 3.4 to this Agreement. 4.15. CAPITAL EXPENDITURES. Make, directly or indirectly, capital expenditures in excess of an aggregate of $12,000,000 per annum. Proceeds from non-recourse debt will be added to the permitted amount in the year received. To the extent that Borrower does not make capital expenditures up to the permitted limit during any year, the difference (up to a maximum of $8,000,000 per year) shall be added to maximum dollar limit for the following year but, in any event, Borrower shall not be permitted to make capital expenditures in excess of the aggregate of $20,000,000 per year. 4.16 MINIMUM DEBT SERVICE COVERAGE RATIO. Permit the ratio of Cash Flow to Debt Service to be less than 2.0 to 1.0 at all times through August 31, 1999; 2.25 to 1.0 at fiscal year end November 27, 1999 through August 26, 2000, and 2.5 to 1.0 thereafter, tested quarterly and measured on a rolling four quarter basis. For purposes of this paragraph, "Cash Flow" is defined as earnings before interest, taxes, depreciation and amortization ("EBITDA") minus dividends and distributions. For the purposes of this paragraph, "Debt Service" is defined as Borrower's (i) interest expense less interest income plus (ii) current maturities of long term debt (including capital leases), plus (iii) cash income taxes paid. Cash dividends received, net of income taxes, from equity investments will be included in EBITDA. Further, non-cash earnings and non-cash losses from equity investments will be excluded from EBITDA. Interest expense and current maturities of long term debt for all future non-recourse mortgages shall be excluded from this coverage, as will the cash flow from the related properties up to and including the amount necessary to satisfy the corresponding annual non-recourse debt service, provided Borrower is not in default under any of such obligations; otherwise, all cashflow from non-recourse debt related properties will be excluded from EBITDA. This includes the GE Capital $8,173,000 non-recourse mortgage loan entered into on June 24, 1999. 4.17. MAXIMUM DEBT TO WORTH. Permit the ratio of its total liabilities to tangible net worth to exceed 0.5 to 1.0. 4.18 OPERATING LOSS. Permit Griffin Land (a division of Borrower) to have during any fiscal year an operating loss (after interest and depreciation but before gain on sale of real estate) greater than One Million Dollars ($1,000,000) AND Borrower's EBITDA (exclusive of income from equity investments) shall not be less than Three Million Dollars ($3,000,000) in such fiscal year. 4.19 OUTCOME-ORIENTED YEAR 2000 COVENANT. The Borrower will be "Year 2000 Compliant" by January 1, 2000. As used herein, the term "Year 2000 Compliant" means with respect to the Borrower, that all software, imbedded microchips, and other 10 processing capabilities utilized by and material to the business operations or a financial condition of, such entity are able to interpret and manipulate data on and involving all calendar dates correctly and without causing any abnormal ending scenario, including in relation to dates on and after January 1, 2000. SECTION 5. AFFIRMATIVE COVENANTS. So long as any obligations are outstanding under this Loan Agreement between Borrower and the Lender, the Borrower expressly covenants and agrees with the Lender that, except as the Lender may expressly agree in writing and except as otherwise expressly permitted by any appropriate Schedule attached hereto numbered to correspond to the specific section to which such exception relates: 5.1. PAYMENT OF LOANS. It will promptly pay or cause to be paid the principal and interest to become due on the notes provided for herein and the Line Fee at the times and places and in the manner specified therein and herein. 5.2. FINANCIAL INFORMATION. The Borrower will deliver to the Lender, so long as Lender remains a holder of any of the notes provided for herein: A. As soon as practical and in any event within thirty (30) days after the end of each monthly period, interim financial statements for Borrower and for Guarantor disclosing results for such month and results for the period from the beginning of the current fiscal year to the end of such monthly period and a balance sheet as of the end of such monthly period, all in reasonable detail and certified as correct, except for such changes as may result from year-end adjustments, by an authorized financial officer of the Borrower and Guarantor, and in a form consistent with those previously provided to Lender and which need not include footnotes. B. Within fifty (50) days of the end of each quarter a report containing an itemization and aging of all real estate development-related advances. Such report shall further contain a description of each project for which real estate development-related advances remain outstanding and the status of construction and completion of the project, together with an anticipated completion date. Borrower shall submit to Lender its quarterly 10-Q report prepared on a consolidated and consolidating basis within fifty (50) days of the end of each quarter, and audited year-end financial statements within one hundred (100) days of Borrower's fiscal year end prepared by a certified public accountant acceptable to Lender presented on a consolidated basis without 11 qualification. Such annual audit and statements shall set forth in reasonable detail the results of operations and financial condition of the Borrower and Guarantor and shall be prepared by and accompanied by the certificate of a certified public accountant or firm of certified public accountants reasonably satisfactory to the Lender (who may be the accountant or firm of accountants regularly employed by the Borrower to audit and examine its books). Such statement shall be prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year and accompanied by a statement thereon containing an opinion unqualified as to scope limitations imposed by such firm of certified public accountants. Borrower shall also provide to Lender promptly upon receipt thereof, (i) copies of all detailed audit reports, if any, submitted by the Borrower's independent certified public accountant in connection with each annual audit of the books of Borrower, (ii) internal reports prepared by Borrower as they relate to Guarantor, and (iii) copies of all financial statements and reports the Borrower shall send to its stockholders and with reasonable promptness such other financial data in such manner and in such detail as the Lender may reasonably request. C. As soon as practicable, and in any event within fifty (50) days of the end of each quarterly period in each fiscal year of Borrower, a covenant compliance certificate certifying that the Borrower and Guarantor are each in compliance with all of the covenants set forth in this Loan Agreement in such form as Lender may reasonably require. D. As soon as practicable, and in any event within sixty (60) days of the end of each fiscal year of Borrower and Guarantor, an annual budget projection for the immediately succeeding fiscal year, all in reasonable detail and in such form as Lender may reasonably require. E. With reasonable promptness, such other financial data as Lender may reasonably request. 5.3. FINANCIAL CERTIFICATE. Borrower and Guarantor will deliver to the Lender annually and within one hundred (100) days after the end of each fiscal year, a certificate by their independent certified public accountant and by an officer of the Borrower that to the best of their knowledge no default exists under this Loan Agreement, or under any indenture pursuant to which any other indebtedness of the Borrower is outstanding in excess of $50,000, and that all the terms of this Loan Agreement have been fully performed, or if to the knowledge of either of them, any of the terms of this Loan 12 Agreement have not been fully performed, such certificate shall specify the nature of the default and the steps taken by the Borrower to correct such default. 5.4. BOOKS AND RECORDS. Borrower and Guarantor will at all times keep proper books and records of account in which full, true, and correct entries will be made of each of their transactions in accordance with sound accounting practice. 5.5. INSURANCE. Borrower will at all times keep all its insurable properties insured against loss or damage by fire and by other risks usually insured against by entities operating like properties and will maintain liability insurance and all such workmen's compensation, motor vehicle or similar insurance as may be required by law, in such reasonable amounts as Lender may reasonably require sufficient to cover the lendable value thereof. All such insurance shall be effected under valid and enforceable policies of insurance issued by insurers of recognized responsibility. 5.6. NO WASTE. Borrower will maintain, preserve, and keep its buildings, machinery, and equipment in good condition, repair and working order for the proper and efficient operation of its business. 5.7. TAXES. Borrower will pay all taxes, assessments, or governmental charges levied, assessed, or imposed against it or its properties or arising out of its operations promptly as they become due and payable, provided, however, that if Borrower shall have set aside on its books reserves deemed by the Borrower adequate therefor, said Borrower shall have the right to contest in good faith by appropriate proceedings any such taxes, assessments, or governmental charges or levies, and pending such contest may delay or defer the payment thereof unless thereby property of the Borrower will be in danger of being forfeited or lost. 5.8. COMPLIANCE WITH LAW. Borrower will comply in all material respects with all laws and regulations of the Federal Government and of any State of the United States or any of their subdivisions, departments, or agencies applicable to the business or properties of the Borrower, provided, however, that if the Borrower shall have set aside on its books reserves deemed by the Borrower adequate to defray the cost of such compliance, the Borrower shall have the right to contest in good faith by appropriate proceedings any such laws or regulations and pending such contest may delay or defer compliance therewith unless by such delay property of the Borrower will be in danger of being forfeited or lost. 5.9. FICA. Borrower will, upon request after an Event of Default or in connection with any audit conducted by Lender, furnish Lender with proof satisfactory to the Lender of the payment or deposit of FICA and withholding taxes required of Borrower by applicable law. Such proof shall be furnished within a reasonable time after request. 5.10. MAINTENANCE OF EXISTENCE. Borrower will maintain its corporate existence and will maintain its right to carry on business and will continuously operate its businesses 13 except for interruptions caused by acts of God, catastrophe, or any other events over which it has no control. 5.11. INSPECTION. Borrower will permit representatives of the Lender, at the Lender's reasonable request, to visit and inspect any of the properties of Borrower and to examine Borrower's books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss Borrower's affairs, finances and accounts with the officers, employees and independent public accountants of Borrower, in each case at such reasonable times as the Lender may request. 5.12. BENEFIT PLANS. Borrower shall, with respect to all pension, profit sharing or other employee benefit plans maintained at any time by Borrower, meet all requirements on its part to be met and pay all sums required to be paid in connection therewith. 5.13. INTENTIONALLY DELETED 5.14. COOPERATION. Borrower will from time to time execute and deliver to the Lender such other instruments, certificates and documents and will take such other action and do all other things as may from time to time be reasonably requested by the Lender in order to implement or effectuate the provisions of, or more fully perfect the rights granted or intended to be granted by Borrower to the Lender pursuant to the terms of, this Agreement or any other agreement or instrument contemplated hereby. 5.15. LEGAL ACTIONS. In the event any material legal action is commenced against Borrower, Borrower shall promptly notify the Lender of same. To the extent Borrower disputes such legal action, Borrower shall contest same in good faith by appropriate proceedings and shall maintain reserves deemed adequate by the Borrower in the exercise of reasonable discretion (giving effect to the likelihood of any adverse judgment and the nature and amount of the obligation which would be imposed thereby) to satisfy the obligations which would be imposed by any adverse judgment rendered in such legal action. 5.16. PERMIT COMPLIANCE. Borrower shall maintain in full force and effect all of its material franchises, leases, commitments, consents, permits, agreements, contracts and licenses (whether written or oral), materially affecting or relating to the business of Borrower, in full force and effect. 5.17. ENVIRONMENTAL COMPLIANCE. The Borrower will comply withany and all orders, ordinances, laws or statutes of any city, state or other governmental department having jurisdiction with respect to Borrower's owned or leased business premises or the conduct of business thereon. SECTION 6. DEFAULT. 14 If any one of the following events shall occur and be continuing beyond any cure period (each herein referred to as an Event of Default), all obligations of the Borrower to the Lender, whether pursuant to those notes described in Sections 1 and 2 to this Agreement or otherwise, together with the accrued interest thereon, shall, at the option of the Lender, forthwith become due and payable without presentment, demand, protest or notice of any kind, all of which are expressly waived; and the Borrower shall thereupon forthwith pay in full, or make provisions for the payment in full, of all said obligations, and the Lender shall be entitled to exercise all rights, and avail itself of all remedies, in order to effect such payment in full: 6.1. Borrower defaults in the payment of any sum due pursuant to any of the notes described in Sections 1 and 2 to this Agreement which default continues for more that five (5) Business Days beyond the applicable due date; or 6.2. The failure to pay the Line Fee when due pursuant to Section 2.6 hereof; or 6.3. Borrower defaults in the performance of any covenant or agreement contained in this Agreement, other than the defaults described in Sections 6.1 and 6.2 hereof and such default shall not have been remedied within twenty (20) days after Lender notifies Borrower of the occurrence of said default, provided that if such default cannot reasonably be cured within such twenty (20) day period it shall not be an Event of Default if Borrower commences to cure such default within such twenty (20) day period and diligently pursues the cure to completion within sixty (60) days thereafter; or 6.4. Any of the following events occur with respect to Borrower or any Guarantor: A. Borrower or any Guarantor makes an assignment for the benefit of creditors; or B. A trustee or receiver of the Borrower or any Guarantor or of any substantial part of the assets of the Borrower or any Guarantor is appointed, and if such trustee or receiver is appointed in a proceeding brought against the Borrower or any Guarantor, the Borrower or the Guarantor by any action indicates its approval of, consent to, or acquiescence in such appointment, or any such trustee or receiver is not discharged within sixty (60) days; or C. Any proceeding involving the Borrower or any Guarantor is commenced by or against the Borrower or any Guarantor under any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation laws or statute of the Federal Government or any State Government, and if such proceeding is instituted against the Borrower or any Guarantor, the Borrower or any Guarantor by any action indicates its approval of, consent to, 15 or acquiescence therein, or the same shall remain undismissed for sixty (60) days; or 6.5. Borrower or any Guarantor defaults in the performance of any other term, condition, or covenant contained in any Supplemental Agreement which now or hereafter exists between the Lender and Borrower or any Guarantor which default continues beyond the expiration of all applicable notice and cure periods; or 6.6. Borrower defaults in any payment of principal or interest on any obligation for borrowed money in excess of $50,000 beyond any period of grace provided with respect thereto, or in the performance of any other term, condition, or covenant contained in any agreement under which any such obligation is created, the effect of which default is to cause such obligation to become due and payable prior to its stated maturity; or 6.7. If any material representation or warranty made by Borrower or any Guarantor herein or pursuant hereto or to any agreement executed pursuant hereto is untrue or incomplete in any material respect, or any Schedule, statement, report, notice or writing furnished by Borrower or any Guarantor or on behalf of Borrower or any Guarantor to the Lender is untrue or incomplete in any material respect as of the date to which the facts set forth are stated or certified. 6.8. Notice of termination of guaranty is given by any party who has executed and delivered to the Lender a guaranty agreement pursuant to Section 7.3 of this Agreement. 6.9. The issuance, filing or levy against the Borrower or any Guarantor of an attachment, injunction, execution, lien or judgment for an amount in excess of $100,000 which is not discharged in full or stayed within thirty (30) days after issuance or filing. 6.10. Material loss, theft, damage, destruction or diminution in market value of any material portion of Borrower's assets; provided, however, that such event shall not be deemed an Event of Default if such loss is covered by insurance in such amounts as Lender reasonably deems satisfactory. 6.11. Termination by Borrower of the loan arrangement provided pursuant to Section 2 of this Agreement. SECTION 7. - CLOSING CONDITIONS. The closing shall be held at the offices of Brown, Rudnick, Freed & Gesmer in Hartford, Connecticut on August 3, 1999 (herein referred to as the Closing Date). The obligation of the Lender to make the initial loan advances specified pursuant to this Agreement shall be subject to the satisfaction or waiver by Lender of each of the following conditions precedent (all references to the Closing Checklist hereinafter contained shall mean that Closing Checklist attached hereto as Schedule 7): 16 7.1. The Lender shall have received from counsel for the Borrower and the Guarantor a closing opinion in form and substance reasonably satisfactory to the Lender and its counsel dated as of the date of the initial loan advance. 7.2. The Note shall have been duly executed and delivered to the Lender. 7.3. Each of the guaranty agreements identified in the Closing Checklist shall have been duly executed and delivered to the Lender. 7.4. There shall have been duly executed and delivered to the Lender such agreements as the Lender may require, in form and substance reasonably satisfactory to the Lender. 7.5. There shall have been duly executed and delivered to the Lender a clerk's certificate with respect to the Borrower, together with all schedules and exhibits thereto, in form and substance satisfactory to the Lender. SECTION 8. MISCELLANEOUS. 8.1. COSTS AND EXPENSES. Borrower agrees to pay (1) all reasonable costs and expenses, including reasonable counsel fees and expenses, incurred by the Lender in connection with the financing being concluded hereunder, Lender's commitment fee of $45,000 and its loan service fee of $30,000, and (2) any fees and expenses, including reasonable counsel fees and expenses, which the Lender may hereafter incur in reasonably protecting, enforcing or realizing any of its rights against Borrower in connection with any security held by the Lender or against any guarantor or endorser. All said fees and expenses referenced in Clause (2) of this Section 8.1 shall be repayable on demand, together with interest from the date incurred until repaid, at the Default Rate. Borrower specifically authorizes Lender to pay all such fees and expenses and charge the same to its disbursement account. 8.2. WAIVERS. Every right and remedy provided in this Loan Agreement shall be cumulative of every other right or remedy of the Lender, whether herein or by law conferred, and may be enforced concurrently herewith; and no waiver by the Lender of the performance of any obligation by Borrower shall be construed as a waiver of the same or any other default then, theretofore, or thereafter existing. 8.3. ADDITIONAL DOCUMENTS. Borrower agrees that, any time or from time to time upon the written request of Lender, Borrower will execute and deliver such further documents and do such other acts and things as Lender may reasonably request in order to fully effect the purpose of this Agreement. 8.4. SUCCESSORS. This Loan Agreement and all of the covenants and conditions hereinabove contained shall be for the benefit of and shall apply to and bind the parties hereto and 17 their respective successors, assigns, heirs and legal representatives. 8.5. GOVERNING LAW. This Loan Agreement shall be governed in all respects by the laws of the State of Connecticut. 8.6. SURVIVAL. All agreements, representations and warranties made herein and in any statement, notices, invoices, certificates, schedules, consignments, designations, documents or other instruments delivered to Lender hereunder or as security in connection with this Agreement shall survive the closing of the loans provided for hereunder. 8.7. REFERENCES. Whenever used, the singular number shall include the plural, the plural the singular, and the use of any gender shall include all genders and the use of reference to any entity as a Borrower herein shall refer and include all entities who are Borrowers hereunder. 8.8. NOTICES. All notices or demands by any party to the other relating to this Agreement shall, except as otherwise provided herein, be in writing and sent by Certified Mail, Return Receipt Requested or by telecopier to the following fax numbers if also delivered by certified mail, return receipt requested. Notice shall be deemed received on the earlier of (i) when received by telecopier if transmitted on a Business Day during normal business hours or (ii) three (3) Business Days after deposit in a United States Post Office Box, postage prepaid, properly addressed to recipient at the mailing addresses set forth below or to such other addresses as Borrower or the Lender may from time to time specify in writing: As to Guarantor: 90 Salmon Brook Street Granby, CT 06035 Attention: Mr. Anthony Galici Fax No. (860) 653-2919 As to Borrower: 1 Rockefeller Plaza, Suite 2301 New York, NY 10020-2102 Attention: Mr. Frederick M. Danziger Fax No. (212) 218-7917 18 As to Lender: 777 Main Street Hartford, CT 06103 Attention: Mr. Jeffrey White Fax No. (860) 986-7536 8.9. PRIOR AGREEMENTS. This Agreement, including the Exhibits, Schedules and other agreements referred to herein, is the entire agreement between the parties relating to the subject matter hereof, incorporates or rescinds all prior agreements and understanding between the parties hereto relating to the subject matter hereof, and cannot be changed or terminated orally. 8.10. ADDITIONAL TERMS. The additional terms and conditions set forth on Exhibit A hereto are specifically made a part hereof. 8.11. WAIVER OF RIGHT TO PREJUDGMENT REMEDY NOTICE AND HEARING. The Borrower acknowledges its understanding that the Lender may have rights against the Borrower, now or in the future, in its capacity as secured party, creditor, or in any other capacities. Such rights may include the right to deprive the Borrower of or affect the use of or possession or enjoyment of the Borrower's property; and in the event the Lender deems it necessary to exercise any of such rights prior to the rendition of a final judgment against the Borrower, or otherwise, the Borrower may be entitled to notice and/or hearing under the Constitution of the United States and/or State of Connecticut, Connecticut statutes (to determine whether or not the Lender has a probable cause to sustain the validity of the Lender's claim), or the right to notice and/or hearing under other applicable state or federal laws pertaining to prejudgment remedies, prior to the exercise by the Lender of any such rights. The Borrower expressly waives any such right to prejudgment remedy notice or hearing to which the Borrower may be entitled; and further waives any requirement that the Lender post a bond or other security in connection with such action, provided, however, that this waiver shall not include a waiver of such rights as the Borrower shall have to prior notice of the proposed disposition of Collateral by the Lender. Specifically and without limiting the generality of the foregoing, the Borrower recognizes that the Lender has and shall continue to have an absolute right after the occurrence of an Event of Default to effect collection of any of the Receivables or Collateral with respect to which the Lender holds a security interest without the necessity of according to the Borrower any prior notice or hearing. This shall be a continuing waiver and remain in full force and effect so long as the Borrower is obligated to the Lender. 8.12. WAIVER OF RIGHT TO TRIAL BY JURY AND CONSENT TO JURISDICTION. THE BORROWER 19 AND EACH GUARANTOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT OF THIS LOAN AGREEMENT, THE SUPPLEMENTAL AGREEMENTS OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE BETWEEN THE BORROWER, ANY GUARANTOR AND THE LENDER. The Borrower and each Guarantor hereby further agrees that the following courts: State Court - Any state or local court of the State of Connecticut Federal Court - United States District Court for the District of Connecticut or at the option of the Lender, any court in which the Lender shall initiate legal or equitable proceedings and which has subject matter jurisdiction over the matter in controversy, shall have exclusive jurisdiction to hear and determine any claims or disputes between the Borrower, Guarantor and the Lender pertaining directly or indirectly to this Loan Agreement or to any matter arising in connection with this Loan Agreement. The Borrower and Guarantor expressly submits and consents in advance to such jurisdiction in any action or proceeding commenced in such courts. The exclusive choice of forum set forth herein shall not be deemed to preclude the enforcement of any judgment obtained in such forum or the taking of any action under this Loan Agreement to enforce the same in any appropriate jurisdiction. 8.13. PARTICIPATIONS. Lender shall have the unrestricted right at any time and from time to time, and without the consent of or notice to, but at no cost or expense to, Borrower or any Guarantor, to grant to one or more banks or other financial institutions (each a "Participant") participating interest in Lender's obligations to lend hereunder and/or any or all of the loans held by Lender hereunder. In the event that any such grant by Lender of a participating interest to a Participant, whether or not upon notice to the Borrower, Lender shall remain responsible for the performance of its obligations hereunder and Borrower shall continue to deal solely and directly with Lender in connection with Lender's rights and obligations hereunder. Lender may furnish any information concerning Borrower and Guarantor in its possession from time to time to prospective assignees and Participants, provided that Lender shall require any such prospective assignee or Participant to agree in writing to maintain the confidentiality of such information. Lender shall notify Borrower of the names of such participants and the percentage interest sold to a participant within thirty (30) days after such grant. 8.14 LOST NOTES. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, Borrower will issue, in lieu 20 thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like tender. IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be duly executed and delivered by the proper and duly authorized officers as of the date and year first above written. WITNESS: BORROWER: GRIFFIN LAND & NURSERIES, INC. /s/ Jeffrey J. White By: /s/ Anthony Galici Anthony Galici Its Vice President and Chief Financial Officer Duly Authorized /s/ Brian Courtney 21 LENDER: FLEET NATIONAL BANK /s/ Brian Courtney By: /s/ Jeffrey J. White Jeffrey J. White Its Senior Vice President Duly Authorized /s/ Anthony Galici ACCEPTED AND AGREED TO BY THE GUARANTOR WITNESS: GUARANTOR: IMPERIAL NURSERIES, INC. /s/ Brian Courtney By: /s/ Anthony Galici Its Senior Vice President Duly Authorized /s/ Jeffrey J. White 22 EXHIBIT A TO REVOLVING LOAN AND TERM LOAN AGREEMENT OTHER TERMS AND CONDITIONS 1. USE OF PROCEEDS. The proceeds of the Revolving Loan shall be used by the Borrower for general working capital purposes and/or the purposes set forth in Section 2.1 hereof. 2. ACCOUNTING TERMS. All accounting terms not specifically defined in this Loan Agreement shall be construed in accordance with generally accepted accounting principles and all financial data submitted pursuant to this Loan Agreement shall be prepared in accordance with such principles. 3. MAINTENANCE OF DEPOSITORY ACCOUNTS. The Borrower shall maintain all of its disbursement accounts with the Lender and shall pay all associated bank fees for maintenance and service of those accounts. The Lender acknowledges that the Borrower maintains depository accounts with banks other than the Lender for each of the Borrower's wholesale locations. EX-27 4 EXHIBIT 27
5 1,000 9-MOS NOV-27-1999 AUG-28-1999 3,358 0 5,568 (637) 28,630 42,635 25,196 (11,664) 111,805 3,871 8,731 0 0 48 92,882 111,805 42,804 46,867 31,783 43,990 0 153 415 2,506 977 1,744 0 0 0 1,744 0.36 0.34
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