GRIFFIN LAND & NURSERIES INC (Form: 10-Q, Received: 11/03/2005 06:16:08)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MAY 28, 2005

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 1-12879

GRIFFIN LAND & NURSERIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		06-0868496
(state or other jurisdiction of incorporation or organization)		(IRS Employer 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

(Former name, former address and former fiscal year, if changed since last report)

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 o No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

Number of shares of Common Stock outstanding at October 17, 2005: 4,999,604

GRIFFIN LAND & NURSERIES, INC.

Form 10-Q

PART I -	FINANCIAL INFORMATION

	ITEM 1 -	Financial Statements

		Consolidated Statements of Operations 13 and 26 Weeks Ended May 28, 2005 and May 29, 2004

		Consolidated Balance Sheets May 28, 2005 and November 27, 2004

		Consolidated Statements of Changes in Stockholders’ Equity 26 Weeks Ended May 28, 2005 and May 29, 2004

		Consolidated Statements of Cash Flows 26 Weeks Ended May 28, 2005 and May 29, 2004

		Notes to Consolidated Financial Statements

	ITEM 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	ITEM 4 -	Controls and Procedures

PART II -	OTHER INFORMATION

	ITEM 1-	Legal Proceedings

	ITEM 4 -	Submission of Matters to a Vote of Security Holders

	ITEM 6 -	Exhibits

	SIGNATURES

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(unaudited)

	For the 13 Weeks Ended,						For the 26 Weeks Ended,
				May 29, 2004						May 29, 2004
				(As Restated)						(As Restated)
	May 28, 2005			(Note 11)			May 28, 2005			(Note 11)
Landscape nursery net sales	$	17,174		$	19,125		$	17,638		$	19,547
Rental revenue and property sales	3,533			2,910			6,398			5,397
Total revenue	20,707			22,035			24,036			24,944

Costs of landscape nursery sales	14,470			16,619			15,067			17,061
Costs related to rental revenue and property sales	2,183			1,982			4,441			3,891
Total costs of goods sold	16,653			18,601			19,508			20,952

Gross profit	4,054			3,434			4,528			3,992
Selling, general and administrative expenses	3,319			2,808			5,637			4,731
Operating profit (loss)	735			626			(1,109		)	(739		)
Gain on sale of Centaur Communications, Ltd.	—			51,107			—			51,107
Foreign currency exchange gain	—			1,070			—			1,070
Interest expense	(502		)	(947		)	(1,038		)	(1,718		)
Interest income, dividend income and gains on short-term investments	334			99			520			105
Income (loss) before income tax provision (benefit) and equity investment	567			51,955			(1,627		)	49,825
Income tax provision (benefit)	193			17,565			(560		)	16,772
Income (loss) before equity investment	374			34,390			(1,067		)	33,053
Equity income from Centaur Communications, Ltd.	—			417			—			328
Net income (loss)	$	374		$	34,807		$	(1,067	)	$	33,381

Basic net income (loss) per common share	$	0.08		$	7.10		$	(0.21	)	$	6.83
Diluted net income (loss) per common share	$	0.07		$	6.79		$	(0.21	)	$	6.58

See Notes to Consolidated Financial Statements .

GRIFFIN LAND & NURSERIES, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)

			Nov. 27, 2004
			(As Restated)
	May 28, 2005		(Note 11)
ASSETS
Current Assets:
Cash and cash equivalents	$	2,033	$	8,827
Short-term investments	23,527		30,173
Accounts receivable, less allowance of $214 and $188	11,675		2,162
Inventories, net	32,081		32,184
Deferred income taxes	2,175		1,572
Other current assets	2,930		3,423
Total current assets	74,421		78,341
Real estate held for sale or lease, net	70,964		65,675
Property and equipment, net	11,193		11,310
Investment in Centaur Holdings, plc	9,984		11,290
Other assets	10,408		10,274
Total assets	$	176,970	$	176,890

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	869	$	855
Accounts payable and accrued liabilities	8,077		6,044
Total current liabilities	8,946		6,899
Long-term debt	31,101		31,479
Deferred income taxes	1,839		1,758
Other noncurrent liabilities	2,684		2,624
Total liabilities	44,570		42,760

Commitments and contingencies (Note 10)

Stockholders’ Equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 4,974,604 and 4,959,162 shares issued and outstanding, respectively	50		50
Additional paid-in capital	94,885		94,699
Retained earnings	33,110		34,177
Accumulated other comprehensive income, net of tax	4,355		5,204
Total stockholders’ equity	132,400		134,130
Total liabilities and stockholders’ equity	$	176,970	$	176,890

See Notes to Consolidated Financial Statements .

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Twenty-Six Weeks Ended May 28, 2005 and May 29, 2004

(dollars in thousands)

(unaudited)

	Shares of Common Stock	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Total			Total Comprehensive Income (Loss)
	Shares of Common Stock	Common Stock		Additional Paid-in Capital		(As Restated) (Note 11)			Accumulated Other Comprehensive Income			(As Restated) (Note 11)			(As Restated) (Note 11)
Balance at Nov. 29, 2003 (as restated)	4,876,916	$	49	$	93,392	$	3,189		$	271		$	96,901		$	—

Exercise of stock options including tax benefit of $115	26,146	—		307		—			—			307			—

Net income (as restated)	—	—		—		33,381			—			33,381			33,381

Other comprehensive income	—	—		—		—			3,779			3,779			3,779

Balance at May 29, 2004 (as restated)	4,903,062	$	49	$	93,699	$	36,570		$	4,050		$	134,368		$	37,160

Balance at Nov. 27, 2004 (as restated)	4,959,162	$	50	$	94,699	$	34,177		$	5,204		$	134,130		$	—

Exercise of stock options including tax benefit of $85	15,442	—		186		—			—			186			—

Net loss	—	—		—		(1,067		)	—			(1,067		)	(1,067		)

Other comprehensive loss	—	—		—		—			(849		)	(849		)	(849		)

Balance at May 28, 2005	4,974,604	$	50	$	94,885	$	33,110		$	4,355		$	132,400		$	(1,916	)

See Notes to Consolidated Financial Statements.

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

	For the 26 Weeks Ended,
				May 29, 2004
				(As Restated)
	May 28, 2005			(Note 11)
Operating activities:
Net (loss) income	$	(1,067	)	$	33,381
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	2,318			2,339
Gain on sale of properties	(593		)	(158		)
Provision for inventory losses	587			—
Real estate asset write-offs	169			—
Provision for bad debts	150			76
Deferred income taxes	(65		)	(350		)
Amortization of debt issuance costs	28			387
Unrealized gains on trading securities	22			—
Gain on sale of Centaur Communications, Ltd.	—			(51,107		)
Tax payment included in other comprehensive income	—			(2,959		)
Gain on foreign exchange contract	—			(1,070		)
Income from equity investment	—			(328		)
Changes in assets and liabilities:
Short-term investments	6,624			—
Accounts receivable	(9,539		)	(11,154		)
Inventories	(484		)	2,544
Other current assets	543			639
Accounts payable and accrued liabilities	317			1,006
Income taxes payable	—			9,824
Other noncurrent assets and noncurrent liabilities, net	(747		)	1,399
Net cash used in operating activities	(1,737		)	(15,531		)

Investing activities:
Additions to real estate held for sale or lease	(5,057		)	(4,043		)
Proceeds from sale of properties, net of expenses	889			172
Additions to property and equipment	(548		)	(427		)
Proceeds from the sale of Centaur Communications, Ltd.	—			68,852
Proceeds from foreign exchange contract	—			1,070
Investment in Shemin Acquisition Corporation	—			(143		)
Net cash (used in) provided by investing activities	(4,716		)	65,481

Financing activities:
Payments of debt	(442		)	(11,122		)
Exercise of stock options	101			192
Increase in debt	—			1,500
Other, net	—			(159		)
Net cash used in financing activities	(341		)	(9,589		)
Net (decrease) increase in cash and cash equivalents	(6,794		)	40,361
Cash and cash equivalents at beginning of period	8,827			18
Cash and cash equivalents at end of period	$	2,033		$	40,379

See Notes to Consolidated Financial Statements.

GRIFFIN LAND & NURSERIES, INC.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

1. Basis of Presentation

The unaudited consolidated financial statements of Griffin Land & Nurseries, Inc. (“Griffin”) include the accounts of Griffin’s real estate division (“Griffin Land”) and Griffin’s wholly-owned subsidiary, Imperial Nurseries, Inc. (“Imperial”), and have been prepared in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and 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 financial statements for the year ended November 27, 2004 included in the Report on Form 10-K/A as filed with the Securities and Exchange Commission, 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 year end consolidated balance sheet data as of November 27, 2004 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Griffin has restated its consolidated financial statements for the thirteen weeks ended February 26, 2005, for the thirteen and twenty-six weeks ended May 29, 2004 and for the fiscal years ended November 27, 2004, November 29, 2003 and November 30, 2002, including the financial information of the interim periods in fiscal years 2004 and 2003 to correct: (a) rental revenue and depreciation and amortization expense of its real estate business as a result of an incorrect allocation of the purchase price for Griffin’s fiscal 2003 acquisition of a controlling interest in a joint venture that owned two office buildings in Windsor, Connecticut (Griffin had previously held a 30% interest in the joint venture), (b) depreciation expense of its real estate business for tenant improvements related to certain leases in other of Griffin Land’s buildings as a result of the incorrect recording of the useful lives of certain tenant improvements and the misclassification of certain improvements as tenant improvements rather than as building improvements, (c) rental revenue and depreciation expense of its real estate business due to the misclassification of a payment received in the 2004 second quarter from a tenant for tenant improvements made by Griffin in accordance with the lease agreement and (d) the classification of the amortization of debt issuance costs related to Griffin’s financing agreements from selling, general and administrative expenses to interest expense.

The corrected allocation of the purchase price increased by $1.5 million the amount of intangible assets related to the value of in-place leases and tenant relationships and reduced by $1.5 million the amount previously allocated to Griffin’s tangible real estate assets. The effect of this correction to the purchase price allocation was to decrease Griffin’s operating profit by $65 and increase Griffin’s operating loss by $131 in the thirteen and twenty-six weeks ended May 29, 2004, respectively, as a result of an increase in depreciation and amortization expense because of the shorter time period over which the intangible assets are amortized as compared to the depreciable lives of the tangible real estate assets.

The adjustment to depreciation expense related to the correction of the useful lives used to determine the amount of depreciation and amortization for tenant improvements related to certain leases and the change in classification of certain improvements from tenant improvements to building improvements increased Griffin’s operating profit by $65 and decreased Griffin’s operating loss by $99 in the thirteen and twenty-six weeks ended May 29, 2004, respectively.

Griffin determined that a payment received in the 2004 second quarter from a tenant for tenant improvements made by Griffin in accordance with the lease agreement should have been recorded as deferred rental revenue and amortized into rental revenue over the term of the lease. Griffin had recorded the payment received as a reduction of its tenant improvements. The effect of this adjustment was to increase Griffin’s rental revenue and increase depreciation expense by $20 for the thirteen and twenty-six weeks ended May 29, 2004. There was no effect on Griffin’s operating profit because the depreciable lives of the tenant improvements were the same as the lease term over which the amount received from the tenant will be recognized as rental revenue.

The effect of the correction to the classification of the amortization of debt issuance costs was to increase Griffin’s operating profit and increase interest expense by $323 in the thirteen weeks ended May 29, 2004 and to decrease Griffin’s operating loss and increase interest expense by $387 in the twenty-six weeks ended May 29, 2004.

In aggregate, the above adjustments resulted in no change to Griffins net income for the thirteen weeks ended May 29, 2004 and a decrease to Griffin’s net income of $22 in the twenty-six weeks ended May 29, 2004. The changes in rental revenue and depreciation and amortization expense described herein affected only noncash credits and charges and did not affect Griffin’s cash position. In addition, the adjustments related to the amortization of debt issuance costs did not affect Griffin’s pretax income (loss), net income (loss) or net income (loss) per share in any period. The effect of the above adjustments on Griffin’s consolidated statement of cash flows for the twenty-six weeks ended May 29, 2004 was to decrease net cash used in operating activities from $16,760 to $15,531 and to decrease net cash provided by investing activities from $66,710 to $65,481. There were no changes to net cash used in financing activities for the twenty-six weeks ended May 29, 2004. Griffin’s consolidated balance sheet as of November 27, 2004 was restated for the effects of the above adjustments, but such adjustments were not material to Griffin’s consolidated balance sheet (see Note 11).

Griffin revised the amounts reported on the quarterly data from those originally reported in its Report on Form 10-Q for the thirteen and twenty-six weeks ended May 29, 2004 for rental revenue and costs related to rental revenue because Griffin determined that it had inadvertently reported certain intercompany revenue and expenses of the same amount in each period related to property management activities at Griffin’s real estate business. The revisions decreased both revenue and related costs in the thirteen and twenty-six weeks ended May 29, 2004 by $254 and $443, respectively, to eliminate those offsetting intercompany amounts that were inadvertently included in the prior periods. The revisions had no effect on previously reported gross profit, operating profit (loss), net income (loss) or net income (loss) per share in any of Griffin’s previously issued consolidated statements of operations. In addition, the revisions had no effect on an y of Griffin’s previously issued consolidated balance sheets or consolidated statements of cash flows.

The results of operations for the thirteen and twenty-six weeks ended May 28, 2005 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.

Griffin accounts for stock options under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and has adopted SFAS No. 123, which requires disclosure of the pro forma effect on earnings and earnings per share of the fair value method of accounting for stock-based compensation, and SFAS No. 148, which prescribes a method of disclosure. Griffin’s results would have been the following pro forma amounts under the method prescribed by SFAS No. 123:

	For the 13 Weeks Ended,						For the 26 Weeks Ended,
				May 29, 2004						May 29, 2004
				(As Restated)						(As Restated)
	May 28, 2005			(Note 11)			May 28, 2005			(Note 11)
Net income (loss), as reported	$	374		$	34,807		$	(1,067	)	$	33,381
Total stock based employee compensation expense determined under fair value method for all awards, net of tax effects	(32		)	(28		)	(35		)	(56		)
Net income (loss), pro forma	342			34,779			(1,102		)	33,325

Adjustment to net income (loss) for exercise of options of equity investee	—			(38		)	—			(38		)

Adjusted net income (loss) for computation of diluted per share results, pro forma	$	342		$	34,741		$	(1,102	)	$	33,287

Basic net income (loss) per common share, as reported	$	0.08		$	7.10		$	(0.21	)	$	6.83
Basic net income (loss) per common share, pro forma	$	0.07		$	7.10		$	(0.22	)	$	6.82

Diluted net income (loss) per common share, as reported	$	0.07		$	6.79		$	(0.21	)	$	6.58
Diluted net income (loss) per common share, pro forma	$	0.07		$	6.78		$	(0.22	)	$	6.57

There were 6,268 stock options granted during the twenty-six weeks ended May 28, 2005. The fair value of the options granted was $11.15, estimated as of the date of grant using the Black-Scholes option pricing model. The assumptions used in determining the fair value of the options granted were an expected volatility of 44.06%, risk free interest rate of 3.77%, a five year option term and no dividend yield. There were no stock options granted during the twenty-six weeks ended May 29, 2004.

2. Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs (an amendment of ARB No. 43, Chapter 4).” This new standard requires the recognition of abnormal inventory costs related to idle facility expenses, freight, handling costs and spoilage as period costs. SFAS No. 151 will be effective for Griffin in fiscal 2006 and is not expected to have a material impact on Griffin’s consolidated financial statements.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets” (“SFAS No. 153”). This Statement amends the guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions” (“APB No. 29”). APB No. 29 provided an exception to the basic measurement principle (fair value) for exchanges of similar assets, requiring that some nonmonetary exchanges be recorded on a carryover basis. SFAS No. 153 eliminates the exception to fair value for exchanges of similar productive assets and replaces it with a general exception for exchange transactions that do not have commercial substance, that is, transactions that are not expected to result in significant changes in the cash flows of the reporting entity. SFAS No. 153 will be effective for Griffin in the fourth

quarter of fiscal 2005 and is not expected to have any impact on Griffin’s consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” This new standard supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. SFAS No. 123R requires an issuer to recognize the compensation cost of employee services received in exchange for an award of equity instruments. Therefore, the cost of rewarding individuals with equity instruments will be recognized in Griffin’s financial statements rather than disclosed in a pro forma statement in the financial statement footnotes. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 related to the valuation of share-based payment arrangements under SFAS No. 123R. Management has utilized the guidance in this bulletin in preparing its estimates for the effect of SFAS No. 123R. SFAS No. 123R will be effective for Griffin in the first quarter of fiscal 2006. Management expects to adopt SFAS No. 123R in the 2006 first quarter using the modified prospective application method, and expects that the adoption of SFAS No. 123R will decrease Griffin’s annual basic and diluted per share results by $0.01 to $0.04 per share.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations (an interpretation of FASB Statement No. 143),” (“Fin No. 47”). Fin No. 47 clarifies the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived assets. Fin No. 47 will be effective for Griffin in fiscal 2006 and is not expected to have a material impact on Griffin’s consolidated financial statements.

3. 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. Management operates and receives reporting based upon these segments. Griffin has no operations outside the United States of America. Griffin’s export sales and transactions between segments are not material.

	For the 13 Weeks Ended,						For the 26 Weeks Ended,
				May 29, 2004						May 29, 2004
				(As Restated)						(As Restated)
	May 28, 2005			(Note 11)			May 28, 2005			(Note 11)
Total revenue:
Landscape nursery net sales	$	17,174		$	19,125		$	17,638		$	19,547
Rental revenue and property sales	3,533			2,910			6,398			5,397
	$	20,707		$	22,035		$	24,036		$	24,944
Operating profit (loss):
Landscape nursery	$	1,026		$	899		$	13		$	26
Real estate	685			349			637			349
Industry segment totals	1,711			1,248			650			375
General corporate expense	(976		)	(622		)	(1,759		)	(1,114		)
Operating profit (loss)	735			626			(1,109		)	(739		)
Gain on sale of Centaur Communications, Ltd.	—			51,107			—			51,107
Foreign currency exchange gain	—			1,070			—			1,070
Interest expense, net of interest income, dividend income and gains on short-term investments	(168		)	(848		)	(518		)	(1,613		)
Income (loss) before income tax provision (benefit)	$	567		$	51,955		$	(1,627	)	$	49,825

			Nov. 27, 2004
			(As Restated)
	May 28, 2005		(Note 11)
Identifiable assets:
Landscape nursery	$	59,458	$	50,330
Real estate	77,396		73,451
Industry segment totals	136,854		123,781
General corporate (consists primarily of investments)	40,116		53,109
Total assets	$	176,970	$	176,890

Griffin restated its financial statements for the thirteen weeks ended February 26, 2005, for the thirteen and twenty-six weeks ended May 29, 2004 and for the fiscal years ended November 27, 2004, November 29, 2003 and November 30, 2002 (see Note 11).

Griffin revised previously reported rental revenue and related costs by the same amount to eliminate certain duplicated amounts included in the prior year (see Note 1). The effect of these revisions, which Griffin believes were not material, was to decrease both revenue and related costs of the real estate segment in the thirteen and twenty-six weeks ended May 29, 2004 by $254 and $443, respectively. The revisions had no effect on previously reported real estate segment operating profit or previously reported identifiable assets of the real estate segment.

Revenue of the real estate segment in the thirteen and twenty-six weeks ended May 28, 2005 includes property sales revenue of $808 and $915, respectively. Revenue of the real estate segment in the thirteen and twenty-six weeks ended May 29, 2004 includes property sales revenue of $185.

See Note 4 for information on Griffin’s previously held equity investment in Centaur.

4. Equity Investment

On March 10, 2004, Griffin completed the sale of its equity investment in Centaur to a newly formed company, Centaur Holdings, plc (“Centaur Holdings”). At the time of the sale, Griffin held 5,428,194 B Ordinary shares of Centaur common stock, representing approximately 32% of Centaur’s outstanding common stock. The sale agreement between Griffin, holders of A Ordinary shares of Centaur and the holder of C Ordinary shares of Centaur (collectively, the “Sellers”) and Centaur Holdings contains certain warranties. Warranty claims by Centaur Holdings must first exceed £1 million in the aggregate (approximately $1.8 million based on the foreign currency exchange rate in effect at May 28, 2005) before the Sellers are required to make any payments. The warranty period expired on September 30, 2005, except for warranties related to income taxes and pension liabilities, which expire on September 30, 2010. To date, there have not been any warranty claims made. In conjunction with this transaction, Centaur Holdings completed an initial public offering of its common stock which currently trades on the London Stock Exchange.

The consideration received by Griffin included cash proceeds of $68.9 million after transaction expenses of $1.5 million but before income tax payments. In addition to the cash proceeds, Griffin received 6,477,150 shares of Centaur Holdings common stock (representing approximately 4.4% of its newly issued outstanding common stock), which was valued at approximately $11.7 million based on the £1.00 per share price of the initial public offering of shares by Centaur Holdings and the foreign currency exchange rate in effect at that time. Subsequent to the sale, a portion of the cash proceeds from the sale were used to repay all of the amount outstanding ($18.4 million) under Griffin’s Credit Agreement with Fleet National Bank.

Included in Griffin’s pretax income for the thirteen and twenty-six weeks ended May 29, 2004 is a gain on the sale of Centaur of $51.1 million and a foreign currency exchange gain of $1.1 million related to the sale. In connection with the Centaur transaction, substantially all of the stock options of Centaur were exercised immediately prior to the closing of the transaction, which resulted in Griffin’s ownership being reduced from 35% to 32%. The gain of approximately $2.3 million that resulted from the dilution of Griffin’s ownership is included in the gain on the sale of that investment. Griffin’s remaining investment in Centaur Holdings is recorded based on the fair market value of that investment. At the time of the sale, approximately $5.4 million was reported as other comprehensive income, reflecting the difference, net of tax, between the estimated fair market value of Griffin’s investment in Centaur Holdings and the book value of the pro rata portion of the investment in Centaur that remained as a result of receiving Centaur Holdings common stock as part of the sale proceeds. Griffin has retained its ownership interest in Centaur Holdings and accounts for that investment as an available-for-sale security under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”

Prior to the sale, Griffin accounted for its investment in Centaur under the equity method of accounting for investments. The unaudited summarized financial data of Centaur presented below were derived from consolidated financial information of Centaur for the 100 day period from December 1, 2003 through March 9, 2004. Griffin’s equity income for that period included $101 for amortization of publishing rights and reflected adjustments necessary to present Centaur’s results in accordance with generally accepted accounting principles in the United States of America.

	From
	Dec. 1, 2003
	through
	Mar. 9, 2004
Net sales	$	31,972
Costs and expenses	(29,753		)
Operating profit	2,219
Nonoperating expenses	(319		)
Pretax income	1,900
Income tax provision	(670		)
Net income	$	1,230

5. Long-Term Debt

Long-term debt includes:

	May 28, 2005			Nov. 27, 2004
Nonrecourse mortgages:
8.54% due July 1, 2009	$	7,801		$	7,842
6.08% due January 1, 2013	9,338			9,433
6.30% due May 1, 2014	1,379			1,436
8.13% due April 1, 2016	5,766			5,853
7.0% due October 1, 2017	7,343			7,410
Total nonrecourse mortgages	31,627			31,974
Capital leases	343			360
Total	31,970			32,334
Less: current portion	(869		)	(855		)
Total long-term debt	$	31,101		$	31,479

In March 2004, as a result of the proceeds received from the sale of Centaur (see Note 4), Griffin repaid the entire amount then outstanding ($18.4 million) under its Credit Agreement (the “Credit Agreement”) with Fleet National Bank and subsequently terminated the Credit Agreement, which was scheduled to expire in February 2005.

At May 28, 2005 and November 27, 2004, the fair values of Griffin’s mortgages were $34.6 million and $33.2 million, respectively. Fair value is based on the present value of future cash flows discounted at estimated borrowing rates for comparable risks, maturities and collateral.

On July 7, 2005, a subsidiary of Griffin completed a mortgage for $12.7 million on two industrial buildings. This new mortgage has an interest rate of 5.46% and a ten year term, with payments based on a thirty year amortization schedule. The mortgage is nonrecourse, however Griffin entered into a master lease with its subsidiary for the space in the mortgaged buildings that was not leased to third-party tenants at the inception of the new mortgage (the “Initial Vacant Space”). As Griffin Land enters into approved leases for the Initial Vacant Space, the master lease between Griffin and its subsidiary on that portion of the Initial Vacant Space will be terminated.

6. Stock Options

Activity under the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the “Griffin Stock Option Plan”) is summarized as follows:

	For the 26 Weeks Ended,
	May 28, 2005				May 29, 2004
	Number of Shares		Weighted Avg. Exercise Price		Number of Shares		Weighted Avg. Exercise Price
Outstanding at beginning of period	584,514		$	12.78	659,542		$	12.57
Issued	6,268		25.53		—		—
Exercised	(15,442	)	6.60		(26,146	)	7.36
Cancelled	(9,667	)	13.70		—		—
Outstanding at end of period	565,673		$	13.07	633,396		$	12.78

Number of option holders at May 28, 2005			24

Range of Exercise Prices	Outstanding at May 28, 2005	Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (in years)
$4.00-$9.00	96,172	$	7.55	0.7
$9.00-$18.00	456,015	13.88		3.7
Over $18.00	13,486	25.21		9.5
	565,673

At May 28, 2005, 528,857 options outstanding under the Griffin Stock Option Plan were exercisable with a weighted average exercise price of $12.74 per share.

7. Per Share Results

Basic and diluted per share results were based on the following:

	For the 13 Weeks Ended,					For the 26 Weeks Ended,
			May 29, 2004						May 29, 2004
			(As Restated)						(As Restated)
	May 28, 2005		(Note 11)			May 28, 2005			(Note 11)
Net income (loss) as reported for computation of basic per share results	$	374	$	34,807		$	(1,067	)	$	33,381
Adjustment to net income (loss) for exercise of options of equity investee	—		(38		)	—			(38		)
Net income (loss) for computation of diluted per share results	$	374	$	34,769		$	(1,067	)	$	33,343

Weighted average shares outstanding for computation of basic per share results (a)	4,970,000		4,899,000			4,965,000			4,889,000
Incremental shares from assumed exercise of Griffin stock options	201,000		223,000			—			179,000
Weighted average shares outstanding for computation of diluted per share results	5,171,000		5,122,000			4,965,000			5,068,000

(a) Incremental shares from the exercise of Griffin stock options were not included in the period where the inclusion of such shares would be anti-dilutive. For the twenty-six weeks ended May 28, 2005, the incremental shares from the assumed exercise of stock options would have been 205,000.

8. Supplemental Financial Statement Information

Short-Term Investments

Griffin’s short-term investments are comprised of debt securities and are accounted for as trading securities under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Accordingly, the securities are carried at their fair values based upon the quoted market prices of those investments at the balance sheet date, and net realized and unrealized gains and losses on those investments are included in pretax income (loss). The composition of short-term investments at May 28, 2005 and November 27, 2004 is as follows:

	As of May 28, 2005				As of Nov. 27, 2004
	Cost		Market Value		Cost		Market Value
Auction Rate Fixed Income Securities	$	12,620	$	12,647	$	4,500	$	4,506
Commercial Paper	6,098		6,106		15,015		15,032
Certificates of Deposit	4,760		4,774		7,368		7,415
Federal Agency Coupon Notes	—		—		3,219		3,220
Total short-term investments	$	23,478	$	23,527	$	30,102	$	30,173

Income from investments for the thirteen and twenty-six weeks ended May 28, 2005 and May 29, 2004 consists of:

	For the 13 Weeks Ended,					For the 26 Weeks Ended,
	May 28, 2005			May 29, 2004		May 28, 2005			May 29, 2004
Interest and dividend income	$	153		$	99	$	186		$	105
Net realized gains on the sales of investments	202			—		356			—
Change in net unrealized gains on investments	(21		)	—		(22		)	—
	$	334		$	99	$	520		$	105

Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income for the twenty-six weeks ended May 28, 2005 and May 29, 2004 consist of the following:

	For the 26 Weeks Ended,
	May 28, 2005			May 29, 2004
Balance at beginning of period	$	5,204		$	271
Effect of foreign currency exchange rate changes related to equity investment in Centaur Communications, Ltd.	—			302
Transfer to pretax income as a result of the sale of Centaur Communications, Ltd.	—			(494		)
Increase to record the initial investment in Centaur Holdings, plc at fair market value, net of tax of $2,958	—			5,414
Decrease in fair market value at end of period of Centaur Holdings, plc, net of tax benefit of $322 and $837, respectively	(598		)	(1,553		)
(Decrease) increase in value of Centaur Holdings, plc, due to foreign currency (loss) gain, net of tax benefit of $135 and tax provision of $59, respectively	(251		)	110
Balance at end of period	$	4,355		$	4,050

Supplemental Cash Flow Information

Included in accounts payable and accrued liabilities at May 28, 2005 and November 27, 2004 were $3,925 and $2,209, respectively, for additions to real estate held for sale or lease.

Inventories

Inventories consist of:

	May 28, 2005			Nov. 27, 2004
Nursery stock	$	30,684		$	31,737
Materials and supplies	2,374			1,096
	33,058			32,833
Reserves	(977		)	(649		)
	$	32,081		$	32,184

Property and Equipment

Property and equipment consist of:

	Estimated Useful Lives	May 28, 2005			Nov. 27, 2004
Land		$	1,304		$	1,283
Land improvements	10 to 20 years	5,377			5,274
Buildings and improvements	10 to 40 years	3,057			3,033
Machinery and equipment	3 to 20 years	16,516			16,054
		26,254			25,644
Accumulated depreciation		(15,061		)	(14,334		)
		$	11,193		$	11,310

Griffin incurred capital lease obligations of $78 and $108, respectively, in the twenty-six weeks ended May 28, 2005 and May 29, 2004.

Real Estate Held for Sale or Lease

Real estate held for sale or lease consists of:

	Estimated	May 28, 2005
	Useful Lives	Held for Sale			Held for Lease				Total
Land		$		1,237	$		4,288		$	5,525
Land improvements	15 years	—			4,951				4,951
Buildings and improvements	10 to 40 years	—			54,242				54,242
Tenant improvements	Shorter of useful life or terms of related lease	—			6,691				6,691
Development costs		5,016			13,354				18,370
		6,253			83,526				89,779
Accumulated depreciation		—			(18,815			)	(18,815			)
		$	6,253		$	64,711			$		70,964

		November 27, 2004
				Held for Lease				Total
	Estimated Useful Lives	Held for Sale		(As Restated) (Note 11)				(As Restated) (Note 11)
Land		$	1,252	$		4,287		$	5,539
Land improvements	15 years	—		4,951				4,951
Buildings and improvements	40 years	—		54,185				54,185
Tenant improvements	Shorter of useful life or terms of related lease	—		6,627				6,627
Development costs		4,939		6,998				11,937
		6,191		77,048				83,239
Accumulated depreciation		—		(17,564			)	(17,564			)
		$	6,191	$	59,484			$		65,675

Deferred Income Taxes

A deferred tax asset of $457 and deferred tax liability of $2,180 were included as a credit and a charge, respectively, to other comprehensive income in the twenty-six weeks ended May 28, 2005 and May 29, 2004, respectively, related to mark to market adjustments on the investment in Centaur Holdings.

Postretirement Benefits

Griffin maintains a postretirement benefits program which provides principally health and life insurance benefits to certain of its retirees. The liability for postretirement benefits is included in other noncurrent liabilities on the consolidated balance sheets. Because Griffin’s obligation for retiree medical benefits is fixed under the terms of Griffin’s postretirement benefits program, any increase in the medical cost trend would have no effect on the accumulated postretirement benefit obligation, service cost or interest cost. Griffin’s postretirement benefits are unfunded, with benefits to be paid from Griffin’s general assets. Griffin’s contributions for the twenty-six weeks ended May 28, 2005 and May 29, 2004 were $4 and $6 respectively, with an expected contribution of $10 for the fiscal 2005 full year. The components of Griffin’s postretirement benefits expense are as follows:

	For the 13 Weeks Ended,				For the 26 Weeks Ended,
	May 28, 2005		May 29, 2004		May 28, 2005		May 29, 2004

Service cost	$	9	$	5	$	18	$	11
Interest	12		12		25		23
Amortization of unrecognized loss	3		2		5		5
	$	24	$	19	$	48	$	39

9. Subsequent Event

Prior to May 28, 2005, Griffin held an approximate 14% equity interest in Shemin Acquisition Corporation (“Shemin Acquisition”) at a carrying value of $4.7 million, which Griffin accounted for under the cost method of accounting for investments. On May 31, 2005, Griffin received initial cash proceeds of $5.9 million from the sale of its remaining common stock of Shemin Acquisition. Immediately prior to that sale, Griffin exchanged a portion of its holdings in Shemin Acquisition for an

approximate 14% equity interest in Shemin Nurseries Holding Corp. (“Shemin Nurseries”), which operates a landscape nursery distribution business through its subsidiary that previously was a wholly-owned subsidiary of Shemin Acquisition. On June 29, 2005, Griffin received a cash distribution of $1.5 million from Shemin Nurseries. Subsequent to these transactions, Shemin Nurseries paid $0.2 million to the buyer of Shemin Acquisition, on behalf of Griffin, for Griffin’s share of the purchase price adjustment related to the determination of Shemin Acquisition’s working capital as of the closing date. The sale of its investment in Shemin Acquisition resulted in a gain to Griffin that will be reflected in Griffin’s results of operations for the thirteen weeks ended August 27, 2005. Griffin continues to hold its investment in Shemin Nurseries.

10. Commitments and Contingencies

As of May 28, 2005, Griffin had committed purchase obligations of $3.8 million, principally for construction of new industrial buildings at Griffin Land, tenant improvement work related to new leases in Griffin Land’s industrial buildings and for the purchase of raw materials by Imperial.

Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of counsel, the ultimate liability, if any, with respect to these matters will not be material to Griffin’s consolidated financial position, results of operations or cash flows.

11. Restatement of Prior Periods

The corrected allocation of the purchase price increased by $1.5 million the amount of intangible assets related to the value of in-place leases and tenant relationships and reduced by $1.5 million the amount previously allocated to Griffin’s tangible real estate assets. The effect of this correction to the purchase price allocation was to decrease Griffin’s operating profit by $65 and increase Griffin’s operating loss by $131 in the thirteen and twenty-six weeks ended May 29, 2004, respectively, and to decrease per share results by $0.01 and $0.02 in the thirteen and twenty-six weeks ended May 29, 2004, respectively, as a result of an increase in depreciation and amortization expense because of the shorter time period over which the intangible assets are amortized as compared to the depreciable lives of the tangible real estate assets.

The adjustment to depreciation expense related to the correction of the useful lives used to determine the amount of depreciation for tenant improvements related to certain leases and the change in classification of certain improvements from tenant improvements to building improvements. The effect of this adjustment was to increase Griffin’s operating profit by $65 and decrease Griffin’s operating loss

by $99 in the thirteen and twenty-six weeks ended May 29, 2004, respectively, and to increase per share results by $0.01 and $0.02 in the thirteen and twenty-six weeks ended May 29, 2004, respectively.

In aggregate, the above adjustments resulted in no change to Griffin’s net income for the thirteen weeks ended May 29, 2004 and a decrease to Griffin’s net income of $22 in the twenty-six weeks ended May 29, 2004. The changes in rental revenue and depreciation and amortization expense described herein affected only noncash credits and charges and did not affect Griffin’s cash position. In addition, the adjustments related to the amortization of debt issuance costs did not affect Griffin’s pretax income (loss), net income (loss) or net income (loss) per share in any period. The effect of the above adjustments on Griffin’s consolidated statement of cash flows for the twenty-six weeks ended May 29, 2004 was to decrease net cash used in operating activities from $16,760 to $15,531 and to decrease net cash provided by investing activities from $66,710 to $65,481. There were no changes to net cash used in financing activities for the twenty-six weeks ended May 29, 2004. Griffin’s consolidated balance sheet as of November 27, 2004 was restated for the effects of the above adjustments, but such adjustments were not material to Griffin’s consolidated balance sheet.

The following table sets forth additional detail regarding the effects of the restatement on Griffin’s consolidated financial statements for the thirteen and twenty-six weeks ended May 29, 2004:

Statement of Operations Data

	For the thirteen weeks ended,									For the twenty-six weeks ended,
	May 29, 2004									May 29, 2004
	As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated

Landscape nursery net sales	$	19,125		$	—		$	19,125		$	19,547		$	—		$	19,547
Rental revenue and property sales	2,886			24		(a)	2,910			5,370			27		(a)	5,397
Total revenue	22,011			24			22,035			24,917			27			24,944

Costs of landscape nursery sales	16,619			—			16,619			17,061			—			17,061
Costs related to rental revenue and property sales	1,940			42		(b)	1,982			3,832			59		(b)	3,891
Total costs of goods sold	18,559			42			18,601			20,893			59			20,952

Gross profit	3,452			(18		)	3,434			4,024			(32		)	3,992
Selling, general and administrative expenses	3,149			(341		)(c)	2,808			5,118			(387		)(c)	4,731
Operating profit (loss)	303			323			626			(1,094		)	355			(739		)
Gain on sale of Centaur Communications, Ltd.	51,107			—			51,107			51,107			—			51,107
Foreign currency exchange gain	1,070			—			1,070			1,070			—			1,070
Interest expense	(624		)	(323		)(d)	(947		)	(1,331		)	(387		)(d)	(1,718		)
Interest income, dividend income and gains on short-term investments	99			—			99			105			—			105
Income before income tax benefit and equity investment	51,955			—			51,955			49,857			(32		)	49,825
Income tax provision	17,565			—			17,565			16,782			(10		)(e)	16,772
Income before equity investment	34,390			—			34,390			33,075			(22		)	33,053
Equity income from Centaur Communications, Ltd.	417			—			417			328			—			328
Net income	$	34,807		$	—		$	34,807		$	33,403		$	(22	)	$	33,381
Basic net income per common share	$	7.10		$	—		$	7.10		$	6.83		$	—		$	6.83
Diluted net income per common share	$	6.79		$	—		$	6.79		$	6.58		$	—		$	6.58

Balance Sheet Data

	November 27, 2004
	As Reported		Adjustments			As Restated

Total current assets	$	78,341	$	—		$	78,341
Real estate held for sale or lease, net	66,043		(368		)(f)	65,675
Property and equipment, net	11,310		—			11,310
Investment in Centaur Holdings, plc	11,290		—			11,290
Other assets	9,413		861		(g)	10,274
Total assets	$	176,397	$	493		$	176,890

Total current liabilities	$	6,776	$	123	(h)	$	6,899
Long-term debt	31,479		—			31,479
Deferred income taxes	1,979		(221		)(i)	1,758
Other noncurrent liabilities	1,600		1,024		(j)	2,624
Total liabilities	41,834		926			42,760
Total stockholders’ equity	134,563		(433		)(k)	134,130
Total liabilities and stockholders’ equity	$	176,397	$	493		$	176,890

(a) Reflects an increase in rental revenue of $20 for the thirteen and twenty-six weeks ended May 29, 2004 to reflect the amortization of deferred rental revenue as a result of a payment received from a tenant for tenant improvements made by Griffin in accordance with the lease terms. Also reflects increases of $4 and $7 for the thirteen and twenty-six weeks ended May 29, 2004, respectively, for amortization of above-market and below-market leases reflecting a change in the value of above-market and below-market leases as a result of the reallocation of a portion of the purchase price of a fiscal 2003 acquisition as described in Note (b)(i) below.

(b) Reflects: (i) net increases in depreciation and amortization expense of intangible assets of $69 and $138 in the thirteen and twenty-six weeks ended May 29, 2004, respectively, as a result of the reallocation of $1.5 million of the purchase price from real estate held for sale or lease to the values of in-place leases and tenant relationships with respect to Griffin’s fiscal 2003 acquisition of a controlling interest in a joint venture that owned two office buildings; (ii) decreases in depreciation expense of $65 and $99 for the thirteen and twenty-six weeks ended May 29, 2004, respectively, to correct the depreciation related to certain tenant improvements as a result of incorrect useful lives of these assets used to determine the amount of depreciation and the change in classification of certain improvements from tenant improvements to building improvements; (iii) an increase in depreciation expense of $20 in the thirteen and twenty-six weeks ended May 29, 2004 as a result of recording a payment received from a tenant for tenant improvements made by Griffin in accordance with the lease agreement as deferred rental revenue instead of as a reduction to tenant improvements as originally recorded; and (iv) an increase in costs related to rental revenue of $18 for the thirteen weeks ended May 29, 2004 to reclassify depreciation expense from selling, general and administrative expenses to costs related to rental revenue.

(c) Reflects decreases in selling, general and administrative expenses of $323 and $387 in the thirteen and twenty-six weeks ended May 29, 2004 as a result of the correction to the classification of the amortization of debt issuance costs to interest expense. Also reflects a decrease of $18 in the thirteen weeks ended May 29, 2004 for the reclassification of depreciation expense to costs related to rental revenue from selling, general and administrative expenses.

(d) Reflects increases in interest expense of $323 and $387 in the thirteen and twenty-six weeks ended May 29, 2004 for the correction to the classification of amortization of debt issuance costs from selling, general and administrative expenses to interest expense.

(e) Reflects a decrease in the income tax provision as a result of the decrease in income before income tax provision in the twenty-six weeks ended May 29, 2004 as a result of the adjustments described above.

(f) Reflects: (i) a decrease in real estate held for sale or lease of $1,364 as a result of the correction to the allocation of the purchase price of the fiscal 2003 acquisition as described in Note (b)(i) above; (ii) an increase in real estate held for sale or lease of $1,147 for the recording of a payment received from a tenant for tenant improvements made by Griffin as deferred rental revenue instead of as a reduction of tenant improvements, as originally recorded; and (iii) a decrease in real estate held for sale or lease of $151 to correct the depreciation related to certain tenant improvements as a result of the incorrect useful lives of these assets being used to determine the amount of depreciation partially offset by the effect of the change in classification of certain tenant improvements from tenant improvements to building improvements.

(g) Reflects an increase in the values of in-place leases and tenant relationships, which are included in other assets on Griffin’s consolidated balance sheet, of $861 as of as a result of the reallocation of a portion of the purchase price of a fiscal 2003 acquisition as described in Note (b)(i) above.

(h) Reflects an increase to current liabilities for the current portion of deferred rental revenue as a result of a payment received from a tenant for tenant improvements made by Griffin as described in Note (b)(iii) above. The deferred rental revenue is being amortized to rental revenue over the term of the lease.

(i) Reflects the cumulative tax effect related to the adjustments discussed above.

(j) Reflects an increase in other noncurrent liabilities for deferred rental revenue as a result of a payment received from a tenant for tenant improvements made by Griffin as described in Note (b)(iii) above. The deferred rental revenue is being amortized to rental revenue over the term of the lease.

(k) Reflects the cumulative effect of the above adjustments on stockholders’ equity.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The consolidated financial statements of Griffin Land & Nurseries, Inc. (“Griffin”) include the accounts of Griffin’s subsidiary in the landscape nursery business, Imperial Nurseries, Inc. (“Imperial”), and Griffin’s Connecticut and Massachusetts based real estate business (“Griffin Land”). Through March 9, 2004, Griffin had an equity investment in Centaur Communications, Ltd. (“Centaur”), a privately held magazine publishing business based in the United Kingdom. On March 10, 2004, Griffin completed the sale of its equity investment in Centaur, receiving cash proceeds of $68.9 million after transaction expenses of $1.5 million but before income tax payments, and 6,477,150 shares of common stock of Centaur Holdings, plc (“Centaur Holdings”), the newly formed acquiring company. Griffin has retained its ownership interest in Centaur Holdings and accounts for that investment as an available-for-sale security under SFAS No. 115, “Accounting For Certain Investments in Debt and Equity Securities.”

The corrected allocation of the purchase price increased by $1.5 million the amount of intangible assets related to the value of in-place leases and tenant relationships and reduced by $1.5 million the amount previously allocated to Griffin’s tangible real estate assets. The effect of this correction to the purchase price allocation was to decrease Griffin’s operating profit by $65,000 and increase Griffin’s operating loss by $131,000 in the thirteen and twenty-six weeks ended May 29, 2004, respectively, as a result of an increase in depreciation and amortization expense because of the shorter time period over which the intangible assets are amortized as compared to the depreciable lives of the tangible real estate assets.

The adjustment to depreciation expense related to the correction of the useful lives used to determine the amount of depreciation for tenant improvements related to certain leases and the change in classification of certain improvements from tenant improvements to building improvements increased Griffin’s operating profit by $65,000 and decreased Griffin’s operating loss by $99,000 in the thirteen and twenty-six weeks ended May 29, 2004, respectively.

Griffin determined that a payment received from a tenant in the 2004 second quarter for tenant improvements made by Griffin in accordance with the lease agreement should have been recorded as deferred rental revenue and amortized into rental revenue over the term of the lease. Griffin had recorded the payment received as a reduction of its tenant improvements. The effect of this adjustment was to

increase Griffin’s rental revenue and increase depreciation expense by $20,000 in the thirteen and twenty-six weeks ended May 29, 2004. There was no effect on Griffin’s operating profit because the depreciable lives of the tenant improvements were the same as the lease term over which the amount received from the tenant will be recognized as rental revenue.

The effect of the correction to the classification of the amortization of debt issuance costs was to increase Griffin’s operating profit and increase interest expense by $323,000 in the thirteen weeks ended May 29, 2004 and to decrease Griffin’s operating loss and increase interest expense by $387,000 in the twenty-six weeks ended May 29, 2004.

In aggregate, the above adjustments resulted in no change to Griffin’s net income for the thirteen weeks ended May 29, 2004 and a decrease to Griffin’s net income of $22,000 in the twenty-six weeks ended May 29, 2004. The changes in rental revenue and depreciation and amortization expense described herein affected only noncash credits and charges and did not affect Griffin’s cash position. In addition, the adjustments related to the amortization of debt issuance costs did not affect Griffin’s pretax income (loss), net income (loss) or net income (loss) per share in any period. The effect of the above adjustments on Griffin’s consolidated statement of cash flows for the twenty-six weeks ended May 29, 2004 was to decrease net cash used in operating activities from $16.8 million to $15.5 million and to decrease net cash provided by investing activities from $66.7 million to $65.5 million. There were no changes to net cash used in financing activities for the twenty-six weeks ended May 29, 2004. Griffin’s consolidated balance sheet as of November 27, 2004 was restated for the effects of the above adjustments, but such adjustments were not material to Griffin’s consolidated balance sheet. See Note 11 to Griffin’s consolidated financial statements in Item 1 for additional information regarding the effects of the restatement on previously issued financial statements.

The significant accounting policies and methods used in the preparation of Griffin’s consolidated financial statements included in Item 1 are consistent with those used in the preparation of Griffin’s audited financial statements for the year ended November 27, 2004 included in Griffin’s Report on Form 10-K/A as filed with the Securities and Exchange Commission. The preparation of Griffin’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the periods reported. Actual results could differ from those estimates. The significant accounting estimates used by Griffin in preparation of its financial statements for the thirteen and twenty-six weeks ended May 28, 2005 are consistent with those used by Griffin in preparation of its fiscal 2004 financial statements.

Summary

Griffin’s net income for the thirteen weeks ended May 28, 2005 (the “2005 second quarter”) is substantially lower than the net income for the thirteen weeks ended May 29, 2004 (the “2004 second quarter”) due primarily to the gain on the sale of Centaur and the related foreign currency exchange gain included in the 2004 second quarter. Griffin’s consolidated operating profit increased in the 2005 second quarter as compared to the 2004 second quarter. Operating profit at Griffin Land increased in the 2005 second quarter as compared to the 2004 second quarter due principally to higher profit from land sales in the current period. Operating profit at Imperial increased in the 2005 second quarter as compared to the 2004 second quarter due to higher gross profit, due principally to improved gross margins on sales, which more than offset the effect of a decline in Imperial’s sales volume. General corporate expense increased in the 2005 second quarter as compared to the 2004 second quarter, primarily related to Griffin’s preparations to comply with Section 404 of the Sarbanes-Oxley Act.

Griffin incurred a net loss in the twenty-six weeks ended May 28, 2005 (the “2005 six month period”) as compared to net income in the twenty-six weeks ended May 29, 2004 (the “2004 six month period”). The 2004 six month period included the gain on the sale of Centaur and the related foreign currency exchange gain. Griffin’s consolidated operating loss in the 2005 six month period was higher than the consolidated operating loss in the 2004 six month period. Operating profit at Griffin Land was higher in the 2005 six month period as compared to the 2004 six month period due principally to higher profit from land sales. At Imperial, operating results were essentially break even in both the 2005 and 2004 six month periods, as the benefit of higher gross margins on sales in the current year period was offset by the effect of a decline in Imperial’s sales volume. Griffin’s general corporate expense was higher in the 2005 six month period as compared to the 2004 six month period due to Griffin’s preparations to comply with Section 404 of the Sarbanes-Oxley Act.

Results of Operations

Thirteen Weeks Ended May 28, 2005 Compared to the Thirteen Weeks Ended May 29, 2004

Griffin’s consolidated total revenue decreased from $22.0 million in the 2004 second quarter to $20.7 million in the 2005 second quarter. The decrease of $1.3 million reflects a $1.9 million decrease in net sales at Imperial partially offset by an increase in revenue of $0.6 million at Griffin Land.

Revenue at Griffin Land increased from $2.9 million in the 2004 second quarter to $3.5 million in the 2005 second quarter. The revenue increase of $0.6 million reflects higher revenue from land sales. Revenue from leasing operations was unchanged in the 2005 second quarter as compared to the 2004 second quarter. The increase in land sales revenue principally reflects the sale of commercial land in Windsor, Connecticut. In its leasing operations as of May 28, 2005, Griffin Land owned 1,267,000 square feet of industrial, flex and office space, including a new 137,000 square foot industrial building in the New England Tradeport (“Tradeport”), Griffin Land’s industrial park located in Windsor and East Granby, Connecticut. This new industrial building was built on speculation and completed at the end of the 2005 second quarter. Currently, 1,011,000 square feet (80%) is under lease, including 70,400 square feet in the new industrial building in Tradeport (see below). Leases in that new building will commence in the third quarter. At the end of the 2004 second quarter, Griffin Land had 1,130,000 square feet of industrial, flex and office space, with 921,000 square feet (82%) leased. Rental revenue in the 2005 second quarter from new leases of space that was vacant in the 2004 second quarter was offset by vacancies in the current year including the expiration of leases for space that had been leased in the 2004 second quarter but is currently vacant.

There was a significant increase in real estate market activity through the second quarter this year as compared to the prior year, particularly by users of industrial and warehouse space, as evidenced by the number of requests for proposals to Griffin Land by prospective users for that type of space and interest by certain current tenants seeking to increase the amount of industrial and warehouse space they currently lease. However, market activity appears to have softened in the 2005 third quarter, as evidenced by a decline in inquiries from prospective tenants. In the 2005 second quarter, Griffin Land executed a lease for an additional approximately 39,000 square feet of its 117,000 square foot Tradeport industrial building that was built in 2003. Also in the 2005 second quarter, Griffin Land completed a lease for approximately 31,300 square feet of the new 137,000 square foot Tradeport industrial building (a lease for 39,100 square feet in the new building was executed earlier in the year). The new lease for 31,300 square feet is with a current tenant of one of Griffin Land’s other industrial buildings in the Tradeport. That tenant required additional space and subsequent to the 2005 second quarter vacated the 25,000 square feet it had leased and moved into the newly built industrial building. The space that was vacated has been leased to the building’s remaining tenant, which was also seeking to increase the amount of space it currently leases. Subsequent to the end of the 2005 second quarter, Griffin Land executed a lease

for 23,000 square feet in the 117,000 square foot Tradeport building, and that facility is now fully leased. Also subsequent to the 2005 second quarter, Griffin Land agreed to a lease termination with a tenant that had leased 22,500 square feet in one of Griffin Land’s buildings in Griffin Center South. The lease that was terminated was scheduled to extend through January 2008. Griffin Land received $0.3 million in connection with this lease termination.

Imperial’s business is highly seasonal, with second quarter sales volume comprising a majority of Imperial’s annual sales volume. Net sales and other revenue at Imperial decreased from $19.1 million in the 2004 second quarter to $17.2 million in the 2005 second quarter. The decrease in Imperial’s net sales and other revenue reflects lower unit sales volume, which decreased 20% in the 2005 second quarter as compared to the 2004 second quarter. The decrease in unit sales volume reflects, in part, reduced sales to Imperial’s mass merchant customers in connection with efforts to increase sales to garden center customers in order to move a greater percentage of Imperial’s available product to a customer segment with more profitable pricing. In addition, poor weather, especially in the early part of spring, negatively impacted Imperial’s sales in the current year.

Griffin’s consolidated operating profit increased from $0.6 million in the 2004 second quarter to $0.7 million in the 2005 second quarter. The increase in consolidated operating profit principally reflects increases in operating profit of $0.3 million at Griffin Land and $0.1 million at Imperial offset by an increase of $0.3 million in general corporate expense.

Operating profit at Griffin Land increased from $0.4 million in the 2004 second quarter to $0.7 million in the 2005 second quarter, reflecting the following:

				2004
	2005			Second Qtr.
	Second Qtr.			(As Restated)
	(amounts in thousands)
Rental revenue	$	2,725		$	2,725
Revenue from land sales	808			185
Total revenue	3,533			2,910
Costs related to rental revenue excluding depreciation and amortization (a)	1,142			1,037
Costs related to land sales	221			142
Total costs excluding depreciation and amortization	1,363			1,179
Profit from leasing activities before general and administrative expenses and before depreciation and amortization expense (a)	1,583			1,688
Profit from land sales	587			43
General and administrative expenses excluding depreciation and amortization expense (a)	(657		)	(578		)
Profit before depreciation and amortization expense	1,513			1,153
Depreciation and amortization expense related to costs of rental revenue	(820		)	(803		)
Depreciation and amortization expense - other	(8		)	(1		)
Operating profit	$	685		$	349

(a) The costs related to rental revenue excluding depreciation and amortization, profit from leasing activities before general and administrative expenses and before depreciation and amortization expense and general and administrative expenses excluding depreciation and amortization expense are disclosures not in conformity with generally accepted accounting principles. They are presented because Griffin believes they are useful financial indicators for measuring the results in its real estate division. However, they should not be considered as an alternative to operating profit as a measure of operating results in accordance with generally accepted accounting principles.

Although rental revenue was essentially flat in the 2005 second quarter as compared to the 2004 second quarter, profit from leasing activities before general and administrative expenses and before depreciation and amortization expense decreased due principally to higher building operating expenses, principally utilities and maintenance costs. The higher profit from land sales in the 2005 second quarter reflects the completion of a sale of commercial land in Windsor, Connecticut. Griffin Land’s general and administrative expenses were higher in the 2005 second quarter as compared to the 2004 second quarter due principally to an increase in bad debt expenses of $0.1 million.

Operating profit at Imperial increased from $0.9 million in the 2004 second quarter to operating profit of $1.0 million in the 2005 second quarter, as follows:

	2005		2004
	Second Qtr.		Second Qtr.
	(amounts in thousands)
Net sales and other revenue	$	17,174	$	19,125
Cost of goods sold	14,470		16,619
Gross profit	2,704		2,506
Selling, general and administrative expenses	1,678		1,607
Operating profit	$	1,026	$	899

The $0.1 million increase in operating profit at Imperial reflects the $0.2 million increase in gross profit partially offset by an increase of $0.1 million in selling, general and administrative expense. The higher gross profit reflects an increase in gross margins from 13.1% in the 2004 second quarter to 15.7% in the 2005 second quarter. The gross margin increase reflects improved pricing that resulted from increased sales to garden center customers which also comprised a greater percentage of Imperial’s total net sales in the 2005 second quarter as compared to the 2004 second quarter. Net sales to garden center customers, which generally have more favorable pricing than other customer segments, accounted for 46% of net sales in the 2005 second quarter as compared to 39% in the 2004 second quarter. In addition, increased delivery charges to customers and lower delivery expenses also contributed to the increase in gross margins in the current year. The lower delivery expenses were principally due to purchasing additional portable shelving units for use in shipments from Imperial’s Florida location and obtaining additional availability of trucking services out of Florida, which substantially eliminated the cost of having empty trucks return to that location. The effect of the improved pricing was partially offset by increased plant costs and charges aggregating $0.4 million to reserve for inventory shipped on consignment that will not be sold and to reserve for certain inventories which will be sold below their current carrying value or disposed. Gross margins on sales in the second half of the year may be negatively impacted by efforts to sell inventory that was available for sale but not sold in the first half of the year. Imperial’s selling, general and administrative expenses were slightly higher in the 2005 second quarter as compared to the 2004 second quarter. As a percentage of net sales, selling, general and

administrative expenses increased from 8.4% in the 2004 second quarter to 9.8% in the 2005 second quarter.

Griffin’s general corporate expense increased from $0.6 million in the 2004 second quarter to $1.0 million in the 2005 second quarter due principally to expense of $0.3 million incurred in the 2005 second quarter related to Griffin’s preparations to comply with Section 404 of the Sarbanes-Oxley Act and an expense of $0.1 million in the current year for a retrospective insurance charge related to a former affiliate of Griffin. Under an agreement with Griffin’s former parent company, Griffin is responsible for such charges related to certain former affiliates.

In the 2004 second quarter Griffin completed the sale of its investment in Centaur to Centaur Holdings, plc (“Centaur Holdings”), a newly formed company. Griffin received cash proceeds of approximately $68.9 million after transaction expenses of approximately $1.5 million. In addition to the cash proceeds, Griffin received 6,477,150 shares of common stock of Centaur Holdings, which was valued at approximately $11.7 million based on the £1.00 per share price of the initial public offering of shares by Centaur Holdings and the foreign currency exchange rate in effect at that time. Griffin recorded a pretax gain of $51.1 million on the sale and a foreign currency exchange gain of approximately $1.1 million related to the sale. In connection with the Centaur transaction, substantially all of the stock options of Centaur were exercised immediately prior to the closing of the Centaur transaction, which resulted in Griffin’s ownership being reduced from 35% to 32%. The gain of approximately $2.3 million that resulted from the dilution of Griffin’s ownership is included in the gain on the sale of that investment. In addition, Griffin recorded other comprehensive income of approximately $4.0 million in the 2004 second quarter, reflecting the difference, net of tax, between the value of Griffin’s investment in Centaur Holdings and the book value of the pro rata portion of the investment in Centaur that remained as a result of receiving the Centaur holdings common stock as a part of the sale proceeds, adjusted to reflect market pricing of Centaur Holdings as of the balance sheet date.

Griffin’s consolidated interest expense decreased from $0.9 million in the 2004 second quarter to $0.5 million in the 2005 second quarter. The lower interest expense in the 2005 second quarter reflects lower average outstanding debt in the current period and capitalized interest of $0.1 million in the current period as compared to no capitalized interest in the 2004 second quarter. Additionally, the 2004 second quarter interest expense includes $0.3 million for the amortization of debt issuance costs related to Griffin’s revolving credit agreement, which was terminated in the 2004 second quarter. Griffin’s average outstanding debt in the 2005 second quarter was $32.0 million as compared to average outstanding debt of $36.2 million in the 2004 second quarter. The lower average debt in the current period reflects the paydown of Griffin’s revolving credit agreement debt in the 2004 second quarter with a portion of the proceeds received from the sale of Centaur last year. Griffin’s current debt is comprised of nonrecourse mortgages on certain of its properties and a small amount of capital lease obligations.

Griffin’s interest income, dividend income and gains on investments increased from $0.1 million in the 2004 second quarter to $0.3 million in the 2005 second quarter, reflecting higher earnings from the investment of the remaining proceeds from the sale of Centaur. The increased investment earnings reflects the general increase in short term interest rates in the current year.

Griffin’s effective income tax rate was 34.0% in the 2005 second quarter as compared to 33.8% in the 2004 second quarter. The effective income tax rate in the current period reflects a federal income tax rate of 34% adjusted for the effect of state income taxes. In the 2004 second quarter, the effective tax rate reflected a 35% federal income tax rate adjusted for state income taxes and certain tax credits related to foreign income taxes paid by Centaur.

There was no equity income in the 2005 second quarter as a result of the sale of Centaur last year. Griffin included equity income of $0.4 million from Centaur in the 2004 second quarter.

Twenty-Six Weeks Ended May 28, 2005 Compared to the Twenty-Six Weeks Ended May 29, 2004

Net sales and other revenue decreased from $24.9 million in the 2004 six month period to $24.0 million in the 2005 six month period, reflecting a decrease in net sales of $1.9 million at Imperial, partially offset by an increase in revenue of $1.0 million at Griffin Land.

Net sales and other revenue at Griffin Land increased from $5.4 million in the 2004 six month period to $6.4 million in the 2005 six month period. The increase of $1.0 million reflects increased revenue of $0.7 million from land sales in the 2005 six month period and an increase of $0.3 million of revenue from leasing operations. The increased revenue from land sales reflects the completion of the sale of commercial land in Windsor, Connecticut in the 2005 six month period. Revenue from leasing operations increased from $5.2 million in the 2004 six month period to $5.5 million in the 2005 six month period. The increase principally reflects the net effect of revenue from certain leases being included for the entire 2005 six month period as compared to being included for only a portion of the 2004 six month period and new leases in the current year offset by the loss of revenue from leases included in the 2004 six month period that have expired and were not renewed.

Net sales and other revenue at Imperial decreased from $19.5 million in the 2004 six month period to $17.6 million in the 2005 six month period. Unit sales volume decreased 19.8% in the 2005 six month period as compared to the 2004 six month period. The decrease in net sales in the 2005 six month period reflects the factors as discussed in the 2005 second quarter results.

Griffin incurred a consolidated operating loss of $1.1 million in the 2005 six month period as compared to a consolidated operating loss of $0.7 million in the 2004 six month period. Operating profit at Griffin Land increased by $0.2 million. Operating results at Imperial were essentially break even in both the 2005 and 2004 six month periods. General corporate expense increased by $0.6 million in the 2005 six month period as compared to the 2004 six month period.

Operating profit at Griffin Land increased from $0.4 million in the 2004 six month period to $0.6 million in the 2005 six month period, reflecting the following:

	2005 Six Month Period			2004
				Six Month Period
				(As Restated)
	(amounts in thousands)
Rental revenue	$	5,483		$	5,212
Revenue from land sales	915			185
Total revenue	6,398			5,397
Costs related to rental revenue excluding depreciation and amortization (a)	2,502			2,087
Costs related to land sales	339			212
Total costs excluding depreciation and amortization	2,841			2,299
Profit from leasing activities before general and administrative expenses and before depreciation and amortization expense (a)	2,981			3,125
Gain (loss) from land sales	576			(27		)
General and administrative expenses excluding depreciation and amortization expense (a)	(1,306		)	(1,151		)
Profit before depreciation and amortization expense	2,251			1,947
Depreciation and amortization expense related to costs of rental revenue	(1,600		)	(1,592		)
Depreciation and amortization expense - other	(14		)	(6		)
Operating profit	$	637		$	349

The decrease of $0.1 million in Griffin Land’s profit from leasing activities before general and administrative expenses and before depreciation and amortization expense principally reflects a charge of $0.2 million in the 2005 six month period to write off capitalized costs related to a lease that was terminated in the current year. The lease termination was related to a new longer-term lease with a new tenant for that building, with lease rates that are equal to the rental rates under the terminated lease over the remaining term of the terminated lease. Increased rental revenue in the current year was substantially offset by higher building expenses, principally due to winter related costs incurred in the 2005 first quarter. The gain from land sales principally reflects the sale of commercial land in Windsor, Connecticut. The prior year results from land sales reflect a profit of $0.2 million from the sale of undeveloped residential land offset by the writeoff of $0.2 million of costs on two potential land sale transactions that did not proceed. The increase of $0.2 million in general and administrative expenses reflects higher bad debt expenses and higher insurance costs. Depreciation and amortization expense was essentially unchanged in the 2005 six month period as compared to the 2004 six month period.

Imperial’s operating results were essentially break even in the 2005 and 2004 six month periods, as follows:

	2005		2004
	Six Month Period		Six Month Period
	(amounts in thousands)
Net sales and other revenue	$	17,638	$	19,547
Cost of goods sold	15,067		17,061
Gross profit	2,571		2,486
Selling, general and administrative expenses	2,558		2,460
Operating profit	$	13	$	26

Although net sales were lower in the 2005 six month period as compared to the 2004 six month period, an increase in gross margin on sales resulted in a small increase in gross profit dollars in the 2005 six month period as compared to the 2004 six month period. Imperial’s gross margin on sales increased from 12.7% in the 2004 six month period to 14.6% in the 2005 six month period. The higher gross margin on sales reflects the improved pricing as a result of an increase in sales to garden center customers in the current year and garden center customers becoming a greater percentage of Imperial’s total sales. In addition, increased delivery charges to customers and lower delivery expenses also contributed to the higher gross margins in the current year. Gross margins on sales in the second half of the year may be negatively impacted by efforts to sell inventory that was available for sale but not sold in the first half of the year. Imperial’s selling, general and administrative expenses increased by $0.1 million in the 2005 six month period as compared to the 2004 six month period. The increase principally reflects consulting expenses in the current year. As a percentage of net sales, selling, general and administrative expenses increased from 12.6% in the 2004 six month period to 14.5% in the 2005 six month period.

Griffin’s general corporate expense increased $0.6 million in the 2005 six month period as compared to the 2004 six month period. The increase in general corporate expense in the 2005 six month period principally reflects $0.3 million related to Griffin’s preparation to comply with Section 404 of the Sarbanes-Oxley Act, $0.1 million for a donation expense and $0.1 million for a retrospective insurance charge related to a former affiliate of Griffin.

In the 2004 six month period, Griffin completed the sale of its investment in Centaur, recording a pretax gain on the sale of $51.1 million. Griffin also recorded a foreign currency exchange gain of $1.1 million in the 2004 six month period related to a foreign currency exchange contract entered into as a result of the sale of Centaur (see discussion of these transactions in the second quarter results).

Griffin’s consolidated interest expense decreased from $1.7 million in the 2004 six month period to $1.0 million in the 2005 six month period. Griffin’s average outstanding debt in the 2005 six month period was $32.2 million as compared to $39.8 million in the 2004 six month period. The higher interest expense in the 2004 six month period reflects higher amortization of debt issuance costs in the 2004 six month period as a result of Griffin’s Credit Agreement being terminated in the 2004 six month period, interest expense incurred under Griffin’s Credit Agreement prior to the borrowings under that credit facility being repaid with a portion of the proceeds from the sale of Centaur and capitalized interest of $0.2 million in the 2005 six month period as compared to no capitalized interest in the 2004 six month period.

Griffin’s income from interest, dividends and gains on sale of investments was $0.5 million in the 2005 six month period as compared to $0.1 million in the 2004 six month period. The increase of investment income in the current year reflects the benefit of the investment of the remaining proceeds from the sale of Centaur for the entire six month period in 2005 as compared to having the proceeds from the sale of Centaur for only a portion of the 2004 six month period. In addition, higher short-term interest rates in the current year contributed to the higher investment income in the 2005 six month period.

Griffin’s effective income tax benefit rate was 34.4% for the 2005 six month period, as compared to 33.7% for the 2004 six month period. The effective tax rate for the 2005 six month period reflects a 34% rate for federal income taxes adjusted for state income taxes. The 2004 six month period effective tax rate reflects a 35% rate for federal income taxes adjusted for state income taxes and certain tax credits related to foreign income taxes paid by Centaur.

As a result of the sale of its investment in Centaur last year, Griffin did not have any income from equity investments in the current year. Griffin’s 2004 six month period included equity income of $0.3 million through the date of Griffin’s sale of its investment in Centaur.

Liquidity and Capital Resources

Net cash used in operating activities decreased from $15.5 million in the 2004 six month period to $1.7 million in the 2005 six month period. The large decrease in net cash used in operating activities reflects the effect of income tax payments of $10.0 million made in the 2004 six month period, as compared to no income tax payments made in the 2005 six month period. In addition, the 2005 six month period included $6.7 million of cash from the reduction of short-term investments.

In the 2005 six month period, Griffin used net cash of $4.7 million in investing activities, as compared to net cash provided by investing activities of $65.5 million in the 2004 six month period, principally reflecting the cash proceeds from the sale of Centaur last year. Additions to real estate held for sale or lease increased from $4.0 million in the 2004 six month period to $5.1 million in the 2005 six month period, reflecting increased construction activity related to the shell of a 137,000 square foot industrial building in the Tradeport and tenant improvement work related to new leases. Additions to property and equipment, principally for Imperial, were $0.5 million in the 2005 six month period as compared to $0.4 million in the 2004 six month period. The current year expenditures were principally to purchase additional portable shelving units that are used on trucks in delivering product to customers. The prior year additions at Imperial were principally for completion of the expansion of its Florida operations. Proceeds from land sales were $0.9 million in the 2005 six month period as compared to $0.2 million in the 2004 six month period. The increase principally reflects the proceeds from the sale of commercial land in Windsor, Connecticut that was completed this year.

Net cash used in financing activities was $0.3 million in the 2005 six month period as compared to net cash of $9.6 million used in financing activities in the 2004 six month period. The net cash used in financing activities in the 2005 six month period principally reflects payments of principal on Griffin Land’s mortgages. The net cash used in financing activities in the 2004 six month period included the repayment of Griffin’s debt under its revolving credit agreement with a portion of the proceeds from the sale of Centaur.

In the balance of fiscal 2005, Griffin plans to continue to invest in its real estate business. As a result of the recent completion of new leases for industrial space and expressions of interest by potential users of that type of space, Griffin Land started construction in the 2005 second quarter on the shell of an

additional 137,000 square foot industrial building in the Tradeport. This new construction is also being done on speculation. Griffin Land recently entered into leases for approximately 69,000 square feet in this building, which will result in this new building being at least 50% leased when it comes on line at the end of this year. Griffin Land also expects to incur expenditures to build out the interiors of its new buildings as leases are completed, and to continue to invest in infrastructure improvements required for present and future development in its office and industrial parks.

Last year, Griffin Land received approval for its proposed residential development, Stratton Farms, in Suffield, Connecticut. An owner of certain land adjacent to Stratton Farms has filed an appeal of the approval issued by the town’s land use commission. A recent court ruling has denied that appeal, however, the adjacent landowner has requested a rehearing. Infrastructure work on this residential development may begin later this year, as all required permits have been obtained. Griffin Land is continuing development activities to obtain approvals for its proposed residential development in Simsbury, Connecticut. Griffin Land intends to proceed with residential development plans on other of its lands that are also appropriate for that use. Thus far in fiscal 2005, Griffin Land has completed sales of commercial and residential land which generated total cash proceeds of $2.4 million.

On May 31, 2005, Griffin received initial cash proceeds of $5.9 million from the sale of its remaining common stock of Shemin Acquisition Corporation (“Shemin Acquisition”). Immediately prior to that sale, Griffin exchanged a portion of its holdings in Shemin Acquisition for common stock in Shemin Nurseries Holding Corp. (“Shemin Nurseries”), which operates a landscape nursery distribution business through its subsidiary that previously was a subsidiary of Shemin Acquisition. On June 29, 2005, Griffin received a cash distribution of $1.5 million from Shemin Nurseries. Subsequent to these transactions, Shemin Nurseries paid $0.2 million to the buyer of Shemin Acquisition, on behalf of Griffin, for Griffin’s share of the purchase price adjustment related to the determination of Shemin Acquisition’s working capital as of the closing date. Griffin continues to hold its investment in Shemin Nurseries.

On July 7, 2005, a subsidiary of Griffin Land completed a $12.7 million mortgage on two of its Tradeport industrial buildings, the 137,000 square foot building completed at the end of the 2005 second quarter and the 117,000 square foot building completed in 2003. The new mortgage has an interest rate of 5.46% and a ten year term with payments based on a thirty year amortization schedule. The new mortgage is nonrecourse, however, Griffin entered into a master lease with its subsidiary for the space in the buildings that was not leased to third-party tenants at the inception of the mortgage (the “Initial Vacant Space”). As Griffin Land enters into approved leases for the Initial Vacant Space, the master lease between Griffin and its subsidiary on that portion of the Initial Vacant Space will be terminated. Mortgage payments under this new mortgage will be $0.9 million per year.

Griffin’s payments (including principal and interest) under contractual obligations as of May 28, 2005 are as follows:

	Total		Due Within One Year		Due From 1-3 Years		Due From 3-5 Years		Due in More Than 5 Years
	(in millions)
Mortgages	$	48.0	$	3.0	$	6.0	$	12.8	$	26.2
Capital Lease Obligations	0.4		0.1		0.2		0.1		—
Operating Lease Obligations	0.6		0.2		0.3		0.1		—
Purchase Obligations (1)	3.8		3.8		—		—		—
Other (2)	1.5		—		—		—		1.5
	$	54.3	$	7.1	$	6.5	$	13.0	$	27.7

(1) Includes obligations for the construction of new industrial buildings and tenant improvement work for new leases at Griffin Land and for the purchase of raw materials by Imperial.

(2) Includes Griffin’s deferred compensation plan and other postretirement benefit liabilities.

Management believes that the significant amount of cash and short-term investments held by Griffin will be sufficient to finance the working capital requirements of Griffin’s businesses and fund continued investment in Griffin’s real estate assets for the foreseeable future. Griffin Land may also continue to seek nonrecourse mortgage placements on selected properties. Griffin also anticipates seeking to purchase either or both land and buildings with a substantial portion of its cash and short-term investment balances. There are no specific real estate acquisitions planned at this time. Such acquisitions may or may not occur based on many factors, including real estate pricing.

Recent Accounting Pronouncements

under SFAS No. 123R. Management has utilized the guidance in this bulletin in preparing its estimates for the effect of SFAS No. 123R. SFAS No. 123R will be effective for Griffin in the first quarter of fiscal 2006. Management expects to adopt SFAS No. 123R using the modified prospective application method, and expects that the adoption of SFAS No. 123R will decrease Griffin’s annual basic and diluted per share results by $0.01 to $0.04 per share.

Forward-Looking Information

The above 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 improvement in operating results of Imperial, leasing of currently vacant space, construction of additional facilities in the real estate business, completion of a land sale currently under contract and approval of currently proposed residential subdivisions. 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 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Griffin maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to Griffin’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), Griffin carried out an evaluation, under the supervision and with the participation of Griffin’s management, including Griffin’s Chief Executive Officer and Griffin’s Chief Financial Officer, of the effectiveness of the design and operation of Griffin’s disclosure controls and procedures as of the end of the fiscal period covered by this report.

Based on such evaluation, Griffin concluded that it would restate financial results for the fiscal years ended November 29, 2003 and November 27, 2004 and the unaudited quarterly financial information for fiscal 2003, fiscal 2004 and the consolidated financial statements for the first quarter of fiscal 2005 to correct the previously reported accounting for an acquisition of real estate assets that took place in fiscal 2003 and was reported upon in its 2003 and 2004 consolidated financial statements. In analyzing the effect of a lease termination in one of its office buildings on its consolidated financial statements for the thirteen weeks ended May 28, 2005, Griffin determined that the allocation of the purchase price for the acquisition in fiscal 2003 of a controlling interest in a joint venture that owned two office buildings was incorrect. Griffin previously held a 30% interest in the joint venture. As described in Note 11 to the consolidated financial statements included in Item 1, Griffin determined that a greater portion of the purchase price should have been allocated to intangible assets rather than to Griffin’s tangible real estate assets and has restated its financial results to reflect the correct allocation. The effect of this change was to increase depreciation and amortization expense for the fiscal years ended November 29, 2003 and November 27, 2004, the related interim periods, and the thirteen weeks ended February 26, 2005 because of the shorter time period over which the intangible assets are amortized as compared to the depreciable lives of the tangible real estate assets.

In the process of preparing the restatement of its consolidated financial statements, Griffin determined that the useful lives of certain tenant improvements were not adjusted at the time a lease was extended in fiscal 2003, the useful lives of tenant improvements related to certain other leases were incorrectly recorded in its fixed asset system, there was a misclassification of certain improvements as tenant improvements rather than as building improvements and the recording of a payment received in the 2004 second quarter from a tenant for tenant improvements made by Griffin in accordance with the lease agreement should have been recorded as deferred rental revenue instead of reducing the amount of Griffin’s tenant improvements. These issues resulted in errors in reported rental revenue and depreciation and amortization expense related to certain of Griffin’s properties prior to fiscal 2002, during fiscal 2003, fiscal 2004, the related interim periods and the 2005 first quarter (the effect of this issue on previously reported results for fiscal 2002 was immaterial). Accordingly, Griffin adjusted its rental revenue and depreciation and amortization expense for those respective periods. Griffin also determined that the amortization of debt issuance costs for the periods covered by the restatement had been misclassified in selling, general and administrative expenses rather than being included in interest expense.

As a result of the error in allocation of the purchase price for the controlling interest in the joint venture, the incorrect useful lives used to determine depreciation expense of certain tenant improvements, the misclassification of certain improvements as tenant improvements rather than as building improvements, the incorrect recording of a payment received in fiscal 2004 from a tenant for tenant improvements made by Griffin in accordance with the lease agreement and the misclassification of the amortization of debt issuance costs, Griffin’s Chief Executive Officer and Chief Financial Officer determined that Griffin’s disclosure controls and procedures were not effective at a reasonable assurance level as of the end of the period covered by this report because these errors resulted from material weaknesses in Griffin’s internal control over financial reporting, which are described below.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of May 28, 2005, Griffin did not maintain effective controls over (i) the accounting for acquisitions; (ii) the recording of depreciation and amortization expense and the recording of deferred rental revenue from tenants and (iii) accounting for amortization of debt issuance costs. Specifically, controls over the allocation of the purchase price and the recording of tenant improvement information into Griffin’s fixed asset system were ineffective. The purchase price was incorrectly allocated between intangible and tangible real estate assets, the useful lives of certain tenant improvements were incorrect, certain improvements were misclassified as tenant improvements rather than as building improvements and a payment received from a tenant for tenant improvements made by Griffin was not properly recorded as deferred rental revenue, resulting in misstatements to rental revenue and depreciation and amortization expense. Finally, Griffin’s accounting for the amortization of debt issuance costs was incorrect. These control deficiencies resulted in the restatement of Griffin’s 2002, 2003 and 2004 consolidated financial statements, for each of the unaudited quarterly interim financial information of 2003 and 2004 as well as the 2005 first quarter consolidated financial statements. Additionally, these control deficiencies could result in a misstatement of the aforementioned accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has concluded that each of these internal control deficiencies constitutes a material weakness. Because of these material weaknesses, management has concluded that Griffin did not maintain effective internal control over financial reporting as of May 28, 2005, based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Although Griffin has not entered into any transactions similar to the acquisition of real estate assets in fiscal 2003, Griffin’s management has educated its accounting staff regarding the proper methodology of allocating the purchase price of future acquisitions. In addition, Griffin has changed its procedures for the recording, reviewing, approving and documenting of information entered into its real estate asset depreciation system to ensure that the correct information is used in determining depreciation expense. Griffin has also educated its accounting staff regarding the proper recording of payments received from tenants for tenant improvements made by Griffin and the proper recording of the amortization of debt issuance costs.

Changes in Internal Control over Financial Reporting

Each of the changes to Griffin’s internal control over financial reporting discussed above occurred subsequent to the fiscal 2005 second quarter. There was no change in Griffin’s internal control over financial reporting during the 2005 second quarter that has materially affected, or is reasonably likely to materially affect, Griffin’s internal control over financial reporting.

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings

	In 1999, Griffin Land filed land use applications with the land use commissions of Simsbury, Connecticut for Meadowood, a proposed residential development on approximately 363 acres of land. In 2000, Simsbury’s land use commissions issued denials of Griffin Land’s Meadowood application. As a result of those denials, Griffin Land brought several separate, but related, suits appealing those decisions. In 2002, the trial court upheld two of Griffin Land’s appeals and ordered the town’s Planning and Zoning Commissions to approve the Meadowood application. The town appealed those decisions. In 2004, the Connecticut Supreme Court ordered the Zoning Commission to approve the zoning regulations proposed by Griffin Land for Meadowood. The Connecticut Supreme Court also ruled that the denial of the Meadowood application by the Planning Commission can be upheld because Griffin Land had not obtained the required sewer usage permits at the time the application was made to the Planning Commission. The required sewer usage permits for Meadowood have been subsequently obtained. Also in 2004, the Connecticut Supreme Court reversed a lower court decision that had denied Griffin Land a wetlands permit, and remanded the case to Superior Court for further proceedings to determine if a wetlands permit must be issued. On June 6, 2005, the Superior Court ruled that Griffin Land must again apply to the town’s Conservation and Inland Wetlands Commission for a wetlands permit for its proposed Meadowood development. This ruling is not yet final because Griffin Land has petitioned the Appellate Court to review and reverse this ruling.

	In 2004, the Planning and Zoning Commission of Suffield, Connecticut approved Griffin Land’s proposed residential development known as Stratton Farms. An owner of certain land adjacent to Stratton Farms then filed an appeal of the approval issued by the town’s land use commission. On September 26, 2005, the Superior Court of Hartford, Connecticut denied the appeal by the adjoining landowner, however, the landowner has requested a rehearing.

ITEMS 2 - 3.	Not Applicable

ITEM 4.	Submission of Matters to a Vote of Security Holders

	(a)	Annual Meeting of Stockholders: May 18, 2005

	(b)	The following were elected as Directors at the Annual Meeting, representing all of the directors:

	(c)(i)	1) Mr. Winston Churchill, Jr. was elected a Director for 2005 with 4,826,348 votes in favor, 7,116 withheld, and 139,974 not voting.

		2) Mr. Edgar M. Cullman was elected a Director for 2005 with 4,828,395 votes in favor, 5,069 withheld, and 139,974 not voting.

		3) Mr. Frederick M. Danziger was elected a Director for 2005 with 4,828,598 votes in favor, 4,866 withheld, and 139,974 not voting.

		4) Mr. John L. Ernst was elected a Director for 2005 with 4,816,373 votes in favor, 17,091 withheld, and 139,974 not voting.

		5) Mr. Thomas C. Israel was elected a Director for 2005 with 4,816,523 votes in favor, 16,941 withheld, and 139,974 not voting.

		6) Mr. Alan Plotkin was elected a Director for 2005 with 4,828,448 votes in favor, 5,016 withheld, and 139,974 not voting.

		7) Mr. David F. Stein was elected a Director for 2005 with 4,817,523 votes in favor, 15,941 withheld, and 139,974 not voting.

	(ii)	The authorization of the selection of PricewaterhouseCoopers LLP as independent registered public accountants for 2005 was approved with 4,831,345 votes in favor, 1,414 opposed, and 140,679 not voting.

ITEM 5.	Not Applicable

ITEM 6.	Exhibits

	Exhibit No.		Description

	10.29		Mortgage Deed Security Agreement, Fixture Filing, Financing Statement and Assignment of Leases and Rents dated July 6, 2005 by Tradeport Development II, LLC in favor of First Sunamerica Life Insurance Company

	10.30		Promissory Note dated July 6, 2005

	10.31		Guaranty Agreement as of July 6, 2005 by Griffin Land and Nurseries, Inc. in favor of Sunamerica Life Insurance Company

	31.1		Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2		Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1		Certifications of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2		Certifications of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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: November 1, 2005	Frederick M. Danziger
	President and Chief Executive Officer


			/s/ ANTHONY J. GALICI
DATE: November 1, 2005	Anthony J. Galici
	Vice President, Chief Financial Officer and Secretary

Exhibit 10.29

MORTGAGE DEED, SECURITY AGREEMENT, FIXTURE FILING,

FINANCING STATEMENT

AND ASSIGNMENT OF LEASES AND RENTS

THIS MORTGAGE DEED, SECURITY AGREEMENT, FIXTURE FILING, FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND RENTS (this “Mortgage”) is executed as of July 6, 2005, by TRADEPORT DEVELOPMENT II, LLC, a Connecticut limited liability company (“Mortgagor”), in favor of, and for the use and benefit of, FIRST SUNAMERICA LIFE INSURANCE COMPANY, a New York corporation (“Mortgagee”).

ARTICLE 1
PARTIES, PROPERTY, AND DEFINITIONS

The following terms and references shall have the meanings indicated:

1.1 Agreement Concerning Master Lease: The Agreement Concerning Master Lease of even date herewith by and between Mortgagor, Mortgagee, and Guarantor.

1.2 Application: As defined in Section 9.20 .

1.3 Chattels: All goods, fixtures, inventory, equipment, building and other materials, supplies, and other tangible personal property of every nature, to the extent now owned or hereafter acquired by Mortgagor and used or intended for use in the construction, development, or operation of the Property, together with all accessions thereto, replacements and substitutions therefor, and proceeds thereof.

1.4 Controlling Persons: Collectively, (a) Guarantor, (b) any other party directly or indirectly liable for payment of the Secured Obligations, whether as maker, endorser, guarantor, surety, general partner, or otherwise, and (c) any successor to any of the foregoing. Pursuant to the foregoing, River Bend Associates, Inc., a Connecticut corporation, is not a Controlling Person as of the date of this Mortgage. No shareholder, officer, or director of Guarantor shall be considered a Controlling Person.

1.5 Default: Any matter which, with the giving of notice, passage of time, or both, would constitute an Event of Default.

1.6 Environmental Indemnity Agreement: The Environmental Indemnity Agreement of even date herewith made by Mortgagor and Guarantor for the benefit of Mortgagee.

1.7 ERISA: The Employee Retirement Income Security Act of 1974, as amended, together with all rules and regulations issued thereunder.

1.8 Event of Default: As defined in Article 6 .

1.9 Guarantor: Griffin Land & Nurseries, Inc., a Delaware corporation.

1.10 Guaranty Agreement: The Guaranty Agreement of even date herewith made by Guarantor for the benefit of Mortgagee.

1.11 Insurance Agreement: The Agreement Concerning Insurance Requirements of even date herewith executed by Mortgagor for the benefit of Mortgagee.

1.12 Intangible Personalty: To the extent now owned or hereafter acquired by Mortgagor, the right to use all trademarks and trade names and symbols or logos used in connection therewith, or any modifications or variations thereof, in connection with the operation of the improvements existing or to be constructed on the Property, together with all accounts, deposit accounts, letter of credit rights, investment property, monies in the possession of Mortgagee (including without limitation proceeds from insurance, retainages and deposits for taxes and insurance), Permits, contract rights (including, without limitation, rights to receive insurance proceeds) and general intangibles (whether now owned or hereafter acquired, and including proceeds thereof) relating to or arising from Mortgagor’s ownership, use, operation, leasing, or sale of all or any part of the Property, specifically including but in no way limited to any right which Mortgagor may have or acquire to transfer any development rights from the Property to other real property, and any development rights which may be so transferred.

1.13 Lease Certificate: The certificate of even date herewith made by Mortgagor to Mortgagee concerning Leases.

1.14 Leases: Any and all leases, subleases and other agreements under the terms of which any person other than Mortgagor has or acquires any right to occupy or use the Property, or any part thereof.

1.15 Loan: The loan from Mortgagee to Mortgagor evidenced by the Note.

1.16 Loan Documents: The Note, all of the deeds of trust, mortgages and other instruments and documents securing or executed and delivered in connection with the Note, including this Mortgage; the Insurance Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Lease Certificate; Agreement Concerning Master Lease (as defined in Section 1.1 above); Tenant Improvements and Leasing Commissions Escrow Agreement (as defined in Section 1.25 below) and each other document executed or delivered in connection with the transaction pursuant to which the Note has been executed and delivered. The term “Loan Documents” also includes all modifications, extensions, renewals, and replacements of each document referred to above.

1.17 Mortgagee: The Mortgagee named in the introductory paragraph of this Mortgage, whose legal address is c/o AIG Global Investment Corp., 1 SunAmerica Center, 38 ^th Floor, Century City, Los Angeles, California 90067-6022, together with any future holder of the Note.

1.18 Mortgagor: The Mortgagor named in the introductory paragraph of this Mortgage (Taxpayer Identification No. 20-2650579; Organizational I.D. No. 0814512), whose legal address is 204 West Newberry Road, Bloomfield, Connecticut 06002-1308, together with any future owner of the Property or any part thereof or interest therein.

1.19 Note: Mortgagor’s promissory note of even date herewith, payable to the order of Mortgagee in the principal face amount of $12,700,000.00, the last payment under which is due on August 1, 2015, or, if extended by Mortgagee pursuant to its terms, August 1, 2020, unless such due date is accelerated, together with all renewals, extensions and modifications of such promissory note. All terms and provisions of the Note are incorporated by this reference in this Mortgage.

1.20 Permits: All permits, licenses, certificates and authorizations necessary for the beneficial development, ownership, use, occupancy, operation and maintenance of the Property.

1.21 Permitted Exceptions: The matters (excluding matters of survey) set forth in Schedule B-I of the title insurance policy insuring the lien created by this Mortgage, in form and substance satisfactory to, and accepted by, Mortgagee, that Mortgagor has caused to be delivered to Mortgagee in connection with the Loan.

1.22 Property: The tract or tracts of land described in Exhibit A attached, together with the following:

(a) All buildings, structures, and improvements now or hereafter located on such tract or tracts, as well as all rights-of-way, easements, and other appurtenances thereto;

(b) All of Mortgagor’s right, title, and interest in and to any land lying between the boundaries of such tract or tracts and the center line of any adjacent street, road, avenue, or alley, whether opened or proposed;

(d) To the extent now owned or hereafter acquired by Mortgagor, all (i) water and water rights (whether decreed or undecreed, tributary, nontributary or not nontributary, surface or underground, or appropriated or unappropriated); (ii) ditches and ditch rights; (iii) spring and spring rights; (iv) reservoir and reservoir rights; and (v) shares of stock in water, ditch and canal companies and all other evidence of such rights, and which are appurtenant to or which have been used in connection with such tract or tracts or improvements;

(e) Any minerals, crops, timber, trees, shrubs, flowers, and landscaping features now or hereafter located on, under or above such tract or tracts;

(f) Subject to the rights of any utility or public service provider, all machinery, apparatus, equipment, fittings, fixtures (whether actually or constructively attached, and including all trade, domestic, and ornamental fixtures) now or hereafter located in, upon, or

under such tract or tracts or improvements and used or usable in connection with any present or future operation thereof, including but not limited to all heating, air-conditioning, freezing, lighting, laundry, incinerating and power equipment; engines; pipes; pumps; tanks; motors; conduits; switchboards; plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, cooking, and communications apparatus; boilers, water heaters, ranges, furnaces, and burners; appliances; vacuum cleaning systems; elevators; escalators; shades; awnings; screens; storm doors and windows; stoves; refrigerators; attached cabinets; partitions; ducts and compressors; rugs and carpets; draperies; and all additions thereto and replacements therefor, except any such items owned by tenants under Leases or leased by such tenants from any entity other than Mortgagor;

(g) Any development rights associated with such tract or tracts, whether previously or subsequently transferred to such tract or tracts from other real property or now or hereafter susceptible of transfer from such tract or tracts to other real property;

(h) Subject to the rights of tenants under Leases, any awards and payments, including interest thereon, resulting from the exercise of any right of eminent domain or any other public or private taking of, injury to, or decrease in the value of, any of such property; and

(i) Any other and greater rights and interests of every nature in such tract or tracts and in the possession or use thereof and income therefrom, to the extent now owned or subsequently acquired by Mortgagor.

1.23 Secured Obligations: The principal sum of $12,700,000.00 and all other present and future obligations of Mortgagor to Mortgagee evidenced by or contained in the Note, the Environmental Indemnity Agreement, this Mortgage and all other Loan Documents, whether stated in the form of promises, covenants, representations, warranties, conditions, or prohibitions or in any other form. If the maturity of the Note secured by this Mortgage is accelerated, the Secured Obligations shall include an amount equal to any prepayment premium which would be payable under the terms of the Note as if the Note were prepaid in full on the date of the acceleration. If under the terms of the Note no voluntary prepayment would be permissible on the date of such acceleration, then the prepayment fee or premium to be included in the Secured Obligations shall be equal to one hundred fifty percent (150%) of the highest prepayment fee or premium set forth in the Note, calculated as of the date of such acceleration, as if prepayment were permitted on such date.

1.24 State: The State in which the Property is located.

1.25 Tenant Improvements and Leasing Commissions Escrow Agreement: The Tenant Improvements and Leasing Commissions Escrow Agreement of even date herewith by and between Mortgagor, Mortgagee, and the “Escrow Agent” named therein.

Article 2
GRANTING CLAUSE

2.1 Grant to Mortgagee. As security for the Secured Obligations, Mortgagor hereby gives, grants, bargains, sells, conveys, mortgages, assigns, confirms and warrants unto Mortgagee the entire right, title, interest and estate of Mortgagor in and to the Property, whether now owned or hereafter acquired; TO HAVE AND TO HOLD the same, together with all and singular the rights, hereditaments, and appurtenances in anywise appertaining or belonging thereto, unto Mortgagee and Mortgagee’s successors, substitutes and assigns forever, to its and their own proper use and behoof.

2.2 Security Interest to Mortgagee. As additional security for the Secured Obligations, Mortgagor hereby grants to Mortgagee a security interest in the Property, Chattels and Intangible Personalty. To the extent any of the Property, Chattels or the Intangible Personalty may be or have been acquired with funds advanced by Mortgagee under the Loan Documents, this security interest is a purchase money security interest. This Mortgage constitutes a Security Agreement under the Uniform Commercial Code of the state in which the Property is located (the “Code”) with respect to any part of the Property, Chattels and Intangible Personalty that may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (all collectively hereinafter called “Collateral”); all of the terms, provisions, conditions and agreements contained in this Mortgage pertain and apply to the Collateral as fully and to the same extent as to any other property comprising the Property, and the following provisions of this Section shall not limit the generality or applicability of any other provisions of this Mortgage but shall be in addition thereto:

(a) The Collateral shall be used by Mortgagor solely for business purposes, and all Collateral (other than the Intangible Personalty) shall be installed upon the real estate comprising part of the Property for Mortgagor’s own use or as the equipment and furnishings furnished by Mortgagor, as landlord, to tenants of the Property;

(b) Subject to Section 5.7 below, the Collateral (other than the Intangible Personalty) shall be kept at the real estate comprising a part of the Property, and shall not be removed therefrom without the consent of Mortgagee (being the Secured Party as that term is used in the Code); and the Collateral (other than the Intangible Personalty) may be affixed to such real estate but shall not be affixed to any other real estate;

(c) No financing statement covering any of the Collateral or any proceeds thereof is on file in any public office; and Mortgagor will, at its cost and expense, upon demand, furnish to Mortgagee such further information and will execute and deliver to Mortgagee such financing statements and other documents in form satisfactory to Mortgagee and will do all such acts and things as Mortgagee may at any time or from time to time reasonably request or as may be necessary or appropriate to establish and maintain a perfected first-priority security interest in the Collateral as security for the Secured Obligations, subject to no adverse liens or encumbrances; and Mortgagor will pay the cost of filing the same or filing or recording such financing statements or other documents and this instrument in all public offices wherever filing or recording is deemed by Mortgagee to be necessary or desirable;

(d) The terms and provisions contained in this Section and in Section 7.6 of this Mortgage shall, unless the context otherwise requires, have the meanings and be construed as provided in the Code; and

(e) This Mortgage constitutes a financing statement under the Code with respect to the Collateral. As such, this Mortgage covers all items of the Collateral that are or are to become fixtures. The filing of this Mortgage in the real estate records of Windsor, Connecticut, where the Property is located shall constitute a fixture filing in accordance with the Code. Information concerning the security interests created hereby may be obtained at the addresses set forth in Article 1 of this Mortgage. Mortgagor is the “Debtor” and Mortgagee is the “Secured Party” (as those terms are defined and used in the Code) insofar as this Mortgage constitutes a financing statement.

THE CONDITION OF THIS DEED IS SUCH THAT Mortgagor is indebted to Mortgagee in the principal sum of TWELVE MILLION SEVEN HUNDRED THOUSAND DOLLARS and NO/100THS DOLLARS, as evidenced by the Note and is indebted for the other Secured Obligations, and Mortgagor further covenants and agrees as follows:

ARTICLE 3
MORTGAGOR’S REPRESENTATIONS AND WARRANTIES

3.1 Warranty of Title. Mortgagor represents and warrants to Mortgagee that:

(a) Mortgagor has good and marketable fee simple title to the Property, and such fee simple title is free and clear of all liens, encumbrances, security interests and other claims whatsoever, subject only to the Permitted Exceptions;

(b) Mortgagor is the sole and absolute owner of the Chattels and the Intangible Personalty, free and clear of all liens, encumbrances, security interests and other claims whatsoever, subject only to the Permitted Exceptions;

(c) This Mortgage is a valid and enforceable first lien and security interest on the Property, Chattels and Intangible Personalty, subject only to the Permitted Exceptions;

(d) Mortgagor, for itself and its successors and assigns, hereby agrees to warrant and forever defend, all and singular of the property and property interests granted and conveyed pursuant to this Mortgage, against every person whomsoever lawfully claiming, or to claim, the same or any part thereof; and

The representations, warranties and covenants contained in this Section shall survive foreclosure of this Mortgage, and shall inure to the benefit of and be enforceable by any person who may acquire title to the Property, the Chattels, or the Intangible Personalty pursuant to any such foreclosure.

3.2 Due Authorization. If Mortgagor is other than a natural person, then each individual who executes this document on behalf of Mortgagor represents and warrants to Mortgagee that such execution has been duly authorized by all necessary corporate, partnership, limited liability company or other action on the part of Mortgagor. Mortgagor represents that Mortgagor has obtained all consents and approvals required in connection with the execution, delivery and performance of this Mortgage;

3.3 Other Representations and Warranties. Mortgagor represents and warrants to Mortgagee as follows:

(a) Mortgagor is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Connecticut. The sole Controlling Person of Mortgagor is Guarantor. Guarantor is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware;

(b) The execution, delivery and performance by Mortgagor of the Loan Documents are within Mortgagor’s power and authority and have been duly authorized by all necessary action;

(c) This Mortgage is, and each other Loan Document to which Mortgagor or Guarantor is a party will, when delivered hereunder, be valid and binding obligations of Mortgagor and Guarantor enforceable against Mortgagor and Guarantor in accordance with their respective terms, except as limited by equitable principles and bankruptcy, insolvency and similar laws affecting creditors’ rights;

(d) The execution, delivery and performance by Mortgagor and Guarantor of the Loan Documents will not contravene any contractual or other restriction binding on or affecting Mortgagor or any Controlling Person and will not result in or require the creation of any lien, security interest, other charge or encumbrance (other than pursuant hereto) upon or with respect to any of its properties;

(e) The execution, delivery and performance by Mortgagor and Guarantor of the Loan Documents does not contravene any applicable law;

(f) No authorization, approval, consent or other action by, and no notice to or filing with, any court, governmental authority or regulatory body is required for the due execution, delivery and performance by Mortgagor and Guarantor of any of the Loan Documents or the effectiveness of any assignment of any of Mortgagor’s rights and interests of any kind to Mortgagee;

(g) No part of the Property, Chattels, or Intangible Personalty is in the hands of a receiver, no application for a receiver is pending with respect to any portion of the Property, Chattels, or Intangible Personalty, and no part of the Property, Chattels, or Intangible Personalty is subject to any foreclosure or similar proceeding;

(h) Neither Mortgagor nor any Controlling Person has made any assignment for the benefit of creditors, nor has Mortgagor or any Controlling Person filed, or had filed against it, any petition in bankruptcy;

(i) There is no pending or, to the best of Mortgagor’s knowledge, threatened, litigation, action, proceeding or investigation, including, without limitation, any condemnation proceeding, against Mortgagor or the Property before any court, governmental or quasi-governmental, arbitrator or other authority, and no such action against any Controlling Person which could have a material adverse effect on its financial condition;

(j) Mortgagor is a “non-foreign person” within the meaning of Sections 1445 and 7701 of the United States Internal Revenue Code of 1986, as amended, and the regulations issued thereunder;

(k) Access to and egress from the Property are available and provided by public streets, and Mortgagor has no knowledge of any federal, state, county, municipal or other governmental plans to change the highway or road system in the vicinity of the Property or to restrict or change access from any such highway or road to the Property which would adversely affect the Property, access to the Property or the operation of the Property as it is currently being used;

(l) All public utility services necessary for the operation of all improvements constituting part of the Property for their intended purposes are available at the boundaries of the land constituting part of the Property, including water supply, storm and sanitary sewer facilities, and natural gas, electric and telephone facilities;

(m) The Property is located in a zoning district designated I-1 (Industrial Zone), by the Town of Windsor, Connecticut. Such designation permits the development, use and operation of the Property as it is currently operated as a permitted, and not as a non-conforming use. Mortgagor’s use of the Property and the uses of the Property permitted to tenants under Leases comply in all respects with all zoning ordinances, regulations, requirements, conditions and restrictions, including but not limited to deed restrictions and restrictive covenants, applicable to the Property;

(n) There are no special or other assessments for public improvements or otherwise now affecting the Property, nor does Mortgagor know of any pending or threatened special assessments affecting the Property or any contemplated improvements affecting the Property that may result in special assessments. There are no tax abatements or exceptions affecting the Property;

(o) Mortgagor and each Controlling Person has filed all tax returns it is required to have filed, and has paid all taxes as shown on such returns or on any assessment received pertaining to the Property;

(p) Mortgagor has not received any notice from any governmental body having jurisdiction over the Property as to any violation of any applicable law, or any notice from any insurance company or inspection or rating bureau setting forth any requirements as a condition to the continuation of any insurance coverage on or with respect to the Property or the continuation thereof at premium rates existing at present which have not been remedied or satisfied;

(q) Neither Mortgagor nor any Controlling Person is in default, in any manner which would adversely affect its properties, assets, operations or condition (financial or otherwise), in the performance, observance or fulfillment of any of the obligations, covenants or conditions set forth in any agreement or instrument to which it is a party or by which it or any of its properties, assets or revenues are bound;

(r) Except as set forth in the Lease Certificate, there are no occupancy rights (written or oral), Leases or tenancies (other than subleases) presently affecting any part of the Property. To Mortgagor’s knowledge, there are no subleases presently affecting any part of the Property. The Lease Certificate contains a true and correct description of all Leases presently affecting the Property (other than subleases). No written or oral agreements or understandings exist between Mortgagor and the tenants under the Leases described in the Lease Certificate that grant such tenants any rights greater than those described in the Lease Certificate or that are in any way inconsistent with the rights described in the Lease Certificate;

(s) There are no purchase options, purchase contracts or other similar agreements of any type (written or oral) presently affecting any part of the Property;

(t) There exists no brokerage agreement with respect to any part of the Property, except as otherwise disclosed to Mortgagee in writing;

(u) Except as otherwise disclosed to Mortgagee in writing prior to the date hereof, (i) there are no contracts presently affecting the Property (“Contracts”) having a term in excess of one hundred eighty (180) days or not terminable by Mortgagor (without penalty) on thirty (30) days’ notice; (ii) Mortgagor has heretofore delivered to Mortgagee true and correct copies of each of the Contracts together with all amendments thereto; (iii) Mortgagor is not in default of any obligations under any of the Contracts; and (iv) the Contracts represent the complete agreement between Mortgagor and such other parties as to the services to be performed or materials to be provided thereunder and the compensation to be paid for such services or materials, as applicable, and except as otherwise disclosed herein, such other parties possess no unsatisfied claims against Mortgagor. Mortgagor is not in default under any of the Contracts and no event has occurred which, with the passing of time or the giving of notice, or both, would constitute a default under any of the Contracts;

(v) Mortgagor has obtained all Permits required to be obtained by Mortgagor for the operation, use, ownership, development, occupancy and maintenance of the Property as an industrial distribution center, as it is currently being operated. None of the Permits has been suspended or revoked, and all of the Permits are in full force and effect, are fully paid for, and Mortgagor has made or will make application for renewals of any of the Permits prior to the expiration thereof;

(w) All insurance policies held by Mortgagor relating to or affecting the Property are in full force and effect, and Mortgagor shall keep the property fully insured as required hereunder until all Secured Obligations are satisfied. Mortgagor has not received any notice of default or notice terminating or threatening to terminate any such insurance policies. Mortgagor has made or will make application for renewals of any of such insurance policies prior to the expiration thereof;

(x) Mortgagor currently complies with ERISA. Neither the making of the Loan and secured by this Mortgage nor the exercise by Mortgagee of any of its rights under the Loan Documents constitutes or will constitute a non-exempt, prohibited transaction under ERISA; and

(y) Mortgagor’s exact legal name is correctly set out in the introductory paragraph of this Mortgage. Mortgagor’s organizational identification number is correctly set forth in the definition of “Mortgagor” set forth in Article 1 hereof. Mortgagor’s location (as such term is used in Section 5.8 hereof) is the State of Connecticut.

(z) To the best of Mortgagor’s knowledge, (i) no part of the Property has, at any time during the period of three (3) years immediately preceding the date hereof, been included in the “property description” of any real estate contiguous with the Property (within the meaning of §22a–452a(c) of the Connecticut General Statutes), (ii) no part of the Property is or has been an “establishment” or a “service station” under §22a–134 – et seq. – of the Connecticut General Statutes, and (iii) except as disclosed on the Environmental Assessment (as defined in the Environmental Indemnity Agreement), no part of the Property contains or has ever contained any underground storage tanks or facilities (as such terms are defined in §22a–449(d) – and §22a-449(d)–101 of the Regulations of the State of Connecticut.

3.4 Continuing Effect. Mortgagor shall be liable to Mortgagee for any damage suffered by Mortgagee if any of the foregoing representations are inaccurate as of the date hereof, regardless of when such inaccuracy may be discovered by, or result in harm to, Mortgagee. Mortgagor further represents and warrants that the foregoing representations and warranties, as well as all other representations and warranties of Mortgagor to Mortgagee relative to the Loan Documents, shall survive termination of this Mortgage.

ARTICLE 4
MORTGAGOR’S AFFIRMATIVE COVENANTS

4.1 Payment of Note. Mortgagor will pay all principal, interest, and other sums payable under the Note, on the date when such payments are due, without notice or demand.

4.2 Performance of Other Obligations. Mortgagor will promptly and strictly perform and comply with all other covenants, conditions, and prohibitions required of Mortgagor by the terms of the Loan Documents.

4.3 Other Encumbrances. Mortgagor will promptly and strictly perform and comply with all covenants, conditions, and prohibitions required of Mortgagor in connection with any other encumbrance affecting the Property, the Chattels, or the Intangible Personalty, or any part thereof, or any interest therein, regardless of whether such other encumbrance is superior or subordinate to the lien hereof.

4.4 Payment of Taxes.

(a) Property Taxes . Unless Mortgagor is depositing money into escrow pursuant to Section 4.4(b) , Mortgagor will (i) pay, before delinquency, all taxes and assessments, general or special, which may be levied or imposed at any time against Mortgagor’s interest and estate in the Property, the Chattels, or the Intangible Personalty, and (ii) within ten (10) days after each payment of any such tax or assessment, Mortgagor will deliver to Mortgagee, without notice or demand, an official receipt for such payment. At Mortgagee’s option, Mortgagee may retain the services of a firm to monitor the payment of all taxes and

assessments relating to the Property. The cost of such services shall be borne by Mortgagor unless Mortgagor is making deposits pursuant to Section 4.4(b) .

(b) Deposit for Taxes . On or before the date hereof, Mortgagor shall deposit with Mortgagee an amount equal to 1/12th of the amount which Mortgagee estimates will be required to make the next annual payment of taxes, assessments, and similar governmental charges referred to in this Section, multiplied by the number of whole or partial months that have elapsed since the date one month prior to the most recent due date for such taxes, assessments and similar governmental charges. Thereafter, with each monthly payment under the Note, Mortgagor shall deposit with Mortgagee an amount equal to 1/12th of the amount which Mortgagee estimates will be required to pay the next annual payment of taxes, assessments, and similar governmental charges referred to in this Section. The purpose of these provisions is to provide Mortgagee with sufficient funds on hand to pay all such taxes, assessments, and other governmental charges thirty (30) days before the date on which they become past due. If the Mortgagee, in its sole discretion, determines that the funds escrowed hereunder are, or will be, insufficient, Mortgagor shall upon demand pay such additional sums as Mortgagee shall determine necessary and shall pay any increased monthly charges requested by Mortgagee. Provided no Default or Event of Default exists hereunder, Mortgagee will apply the amounts so deposited to the payment of such taxes, assessments, and other charges when due, but in no event will Mortgagee be liable for any interest on any amount so deposited, and any amount so deposited may be held and commingled with Mortgagee’s own funds.

(c) Intangible Taxes . If by reason of any statutory or constitutional amendment or judicial decision adopted or rendered after the date hereof, any tax, assessment, or similar charge is imposed against the Note, Mortgagee, or any interest of Mortgagee in any real or personal property encumbered hereby, Mortgagor will pay such tax, assessment, or other charge before delinquency and will indemnify Mortgagee against all loss, expense, or diminution of income in connection therewith. In the event Mortgagor is unable to do so, either for economic reasons or because the legal provisions or decisions creating such tax, assessment or charge forbid Mortgagor from doing so, then the Note will, at Mortgagee’s option, become due and payable in full upon thirty (30) days’ notice to Mortgagor.

(d) Right to Contest . Notwithstanding any other provision of this Section, Mortgagor will not be deemed to be in default solely by reason of Mortgagor’s failure to pay any tax, assessment or similar governmental charge so long as, in Mortgagee’s reasonable judgment, each of the following conditions is satisfied:

(i) Mortgagor is engaged in and diligently pursuing in good faith administrative or judicial proceedings appropriate to contest the validity or amount of such tax, assessment, or charge; and

(ii) Mortgagor’s payment of such tax, assessment, or charge would necessarily and materially prejudice Mortgagor’s prospects for success in such proceedings; and

(iii) Nonpayment of such tax, assessment, or charge will not result in the loss or forfeiture of any property encumbered hereby or any interest of Mortgagee therein; and

(iv) Mortgagor deposits with Mortgagee, as security for such payment which may ultimately be required, a sum equal to the amount of the disputed tax, assessment or charge plus the interest, penalties, advertising charges, and other costs which Mortgagee estimates are likely to become payable if Mortgagor’s contest is unsuccessful.

If Mortgagee determines that any one or more of such conditions is not satisfied or is no longer satisfied, Mortgagor will pay the tax, assessment, or charge in question, together with any interest and penalties thereon, within ten (10) days after Mortgagee gives notice of such determination.

4.5 Maintenance of Insurance.

(a) Coverages Required. Mortgagor shall maintain or cause to be maintained, with financially sound and reputable insurance companies or associations satisfactory to Mortgagee, all insurance required under the terms of the Insurance Agreement, and shall comply with each and every covenant and agreement contained in the Insurance Agreement.

(b) Renewal Policies. Not less than five (5) days prior to the expiration date of each insurance policy required pursuant to the Insurance Agreement, Mortgagor will deliver to Mortgagee an appropriate renewal binder or policy (or a certified copy thereof), together with evidence satisfactory to Mortgagee that the applicable premium has been prepaid, which evidence may follow up to ten (10) days after such payment has been made.

(c) Deposit for Premiums. Upon written demand made by Mortgagee following the occurrence of any Event of Default, Mortgagor shall deposit with Mortgagee an amount equal to 1/12th of the amount which Mortgagee estimates will be required to make the next annual payments of the premiums for the policies of insurance referred to in this Section, multiplied by the number of whole and partial months which have elapsed since the date one month prior to the most recent policy anniversary date for each such policy. Thereafter, with each monthly payment under the Note, Mortgagor will deposit an amount equal to 1/12th of the amount which Mortgagee estimates will be required to pay the next required annual premium for each insurance policy referred to in this Section. The purpose of these provisions is to provide Mortgagee with sufficient funds on hand to pay all such premiums thirty (30) days before the date on which they become past due. If the Mortgagee, in its sole discretion, determines that the funds escrowed hereunder are, or will be, insufficient, Mortgagor shall upon demand pay such additional sums as Mortgagee shall determine necessary and shall pay any increased monthly charges requested by Mortgagee. Provided no Default or Event of Default exists hereunder, Mortgagee will apply the amounts so deposited to the payment of such insurance premiums when due, but in no event will Mortgagee be liable for any interest on any amounts so deposited, and the money so received may be held and commingled with Mortgagee’s own funds.

(d) Application of Hazard Insurance Proceeds. Mortgagor shall promptly notify Mortgagee of any damage or casualty to all or any portion of the Property or Chattels. Mortgagee may participate in all negotiations and appear and participate in all judicial arbitration proceedings concerning any insurance proceeds which may be payable as a result of such casualty or damage, and may, in Mortgagee’s reasonable discretion following any Event of Default, compromise or settle, in the name of Mortgagee, Mortgagor, or both any claim for any such insurance proceeds. Any such insurance proceeds in excess of $500,000.00 shall be paid to Mortgagee and shall be applied first to reimburse Mortgagee for all costs and expenses, including attorneys’ fees, incurred by Mortgagee in connection with the collection of such insurance proceeds. The balance of any insurance proceeds received by Mortgagee with respect to an insured casualty may, in Mortgagee’s sole discretion, either (i) be retained and applied by Mortgagee toward payment of the Secured Obligations, or (ii) be paid over, in whole or in part and subject to such commercially reasonable construction related advancement conditions as Mortgagee may impose, to Mortgagor to pay for repairs or replacements necessitated by the casualty; provided, however, that if all of the Secured Obligations have been performed or are discharged by the application of less than all of such insurance proceeds, then any remaining proceeds will be paid over to Mortgagor. Notwithstanding the preceding sentence, if (A) no Default or Event of Default shall exist hereunder, and (B) the proceeds received by Mortgagee (together with any other funds delivered by Mortgagor to Mortgagee for such purpose) shall be sufficient, in Mortgagee’s reasonable judgment, to pay for any restoration necessitated by the casualty, and (C) either Mortgagor is obligated under the terms of any Lease to restore or repair the Property or the annual income from Leases that will survive restoration provide a forward-looking Debt Service Coverage Ratio (as defined in the Agreement Concerning Master Lease) of at least 1.05 upon completion of restoration, and Mortgagor demonstrates to Mortgagee’s reasonable satisfaction that it will be able to attain a forward-looking Debt Service Coverage Ration of at least 1.20 times the annual debt service from Leases within six months after completion of restoration, and (D) such restoration can be completed, in Mortgagee’s judgment, at least ninety (90) days prior to the maturity date of the Note, then Mortgagee shall apply such proceeds as provided in clause (ii) of the preceding sentence. Mortgagee will have no obligation to see to the proper application of any insurance proceeds paid over to Mortgagor, nor will any such proceeds received by Mortgagee bear interest or be subject to any other charge for the benefit of Mortgagor. Mortgagee may, prior to the application of insurance proceeds, commingle them with Mortgagee’s own funds and otherwise act with regard to such proceeds as Mortgagee may determine in Mortgagee’s sole discretion.

(e) Successor’s Rights. Any person who acquires title to the Property or the Chattels upon foreclosure hereunder will succeed to all of Mortgagor’s rights under all policies of insurance maintained pursuant to this Section.

4.6 Maintenance and Repair of Property and Chattels. Mortgagor will at all times maintain the Property and the Chattels in good condition and repair, will diligently prosecute the completion of any building or other improvement which is at any time in the process of construction on the Property, and will promptly repair, restore, replace, or rebuild any part of the Property or the Chattels which may be affected by any casualty or any public or private taking or injury to the Property or the Chattels. All costs and expenses arising out of the foregoing shall be paid by Mortgagor whether or not the proceeds of any insurance or eminent domain shall be sufficient therefor. Mortgagor will comply with all statutes, ordinances, and

other governmental or quasi-governmental requirements and private covenants relating to the ownership, construction, use, or operation of the Property, including but not limited to any environmental or ecological requirements; provided, that so long as Mortgagor is not otherwise in default hereunder, Mortgagor may, upon providing Mortgagee with security reasonably satisfactory to Mortgagee, proceed diligently and in good faith to contest the validity or applicability of any such statute, ordinance, or requirement. Mortgagee and any person authorized by Mortgagee may enter and inspect the Property at all reasonable times, and may inspect the Chattels, wherever located, at all reasonable times.

4.7 Leases. Mortgagor shall timely pay and perform each of its obligations under or in connection with the Leases, and shall otherwise pay such sums and take such action as shall be necessary or required in order to maintain each of the Leases in full force and effect in accordance with its terms. Mortgagor shall immediately furnish to Mortgagee copies of any notices given to Mortgagor by the lessee under any Lease, alleging the default by Mortgagor in the timely payment or performance of its obligations under such Lease and any subsequent communication related thereto. Mortgagor agrees that Mortgagee, in its sole discretion, may advance any sum or take any action which Mortgagee believes is necessary or required to maintain the Leases in full force and effect, and all such sums advanced by Mortgagee, together with all costs and expenses incurred by Mortgagee in connection with action taken by Mortgagee pursuant to this Section, shall be due and payable by Mortgagor to Mortgagee upon demand, shall bear interest until paid at the Default Rate (as defined in the Note), and shall be secured by this Mortgage.

4.8 Eminent Domain; Private Damage. If all or any part of the Property is taken or damaged by eminent domain or any other public or private action, Mortgagor will notify Mortgagee promptly of the time and place of all meetings, hearings, trials, and other proceedings relating to such action. Mortgagee may participate in all negotiations and appear and participate in all judicial or arbitration proceedings concerning any award or payment which may be due as a result of such taking or damage, and may, in Mortgagee’s reasonable discretion following any Event of Default, compromise or settle, in the names of both Mortgagor and Mortgagee, any claim for any such award or payment. Any such award or payment in excess of $500,000.00 is to be paid to Mortgagee and will be applied first to reimburse Mortgagee for all costs and expenses, including attorneys’ fees, incurred by Mortgagee in connection with the ascertainment and collection of such award or payment. The balance, if any, of such award or payment may, in Mortgagee’s sole discretion, either (a) be retained by Mortgagee and applied toward the Secured Obligations, or (b) be paid over, in whole or in part and subject to such commercially reasonable construction related advancement conditions as Mortgagee may impose, to Mortgagor for the purpose of restoring, repairing, or rebuilding any part of the Property affected by the taking or damage. Notwithstanding the preceding sentence, if (i) no Default or Event of Default shall have occurred and be continuing hereunder, and (ii) the proceeds received by Mortgagee (together with any other funds delivered by Mortgagor to Mortgagee for such purpose) shall be sufficient, in Mortgagee’s reasonable judgment, to pay for any restoration necessitated by the taking or damage, and (iii) either Mortgagor is obligated under the terms of any Lease to restore or repair the Property or the annual income from Leases that will survive restoration provide a forward-looking Debt Service Coverage Ratio (as defined in the Agreement Concerning Master Lease) of at least 1.05 upon completion of restoration, and Mortgagor demonstrates to Mortgagee’s reasonable satisfaction that it will be able to attain a forward-looking Debt Service Coverage

Ration of at least 1.20 times the annual debt service from Leases within six months after completion of restoration, and (iv) such restoration can be completed, in Mortgagee’s judgment, at least ninety (90) days prior to the maturity date of the Note, and (v) the remaining Property shall constitute, in Mortgagee’s sole judgment, adequate security for the Secured Obligations, then Mortgagee shall apply such proceeds as provided in clause (b) of the preceding sentence. Mortgagor’s duty to pay the Note in accordance with its terms and to perform the other Secured Obligations will not be suspended by the pendency or discharged by the conclusion of any proceedings for the collection of any such award or payment, and any reduction in the Secured Obligations resulting from Mortgagee’s application of any such award or payment will take effect only when Mortgagee receives such award or payment. If this Mortgage has been foreclosed prior to Mortgagee’s receipt of such award or payment, Mortgagee may nonetheless retain such award or payment to the extent required to reimburse Mortgagee for all costs and expenses, including attorneys’ fees, incurred in connection therewith, and to discharge any deficiency remaining with respect to the Secured Obligations.

4.9 Mechanics’ Liens. Mortgagor will keep the Property free and clear of all liens and claims of liens by contractors, subcontractors, mechanics, laborers, materialmen, and other such persons, and will cause any recorded statement of any such lien to be released of record within thirty (30) days after the recording thereof. Notwithstanding the preceding sentence, however, Mortgagor will not be deemed to be in default under this Section if and so long as Mortgagor (a) contests in good faith the validity or amount of any asserted lien and diligently prosecutes or defends an action appropriate to obtain a binding determination of the disputed matter, (b) provides Mortgagee with such security as Mortgagee may require to protect Mortgagee against all loss, damage, and expense, including attorneys’ fees, which Mortgagee might incur if the asserted lien is determined to be valid.

4.10 Defense of Actions. Mortgagor will defend, at Mortgagor’s expense, any action, proceeding or claim which affects any property encumbered hereby or any interest of Mortgagee in such property or in the Secured Obligations, and will indemnify and hold Mortgagee harmless from all loss, damage, cost, or expense, including attorneys’ fees, which Mortgagee may incur in connection therewith.

4.11 Expenses of Enforcement. Mortgagor will pay all actual out-of-pocket costs and expenses, including attorneys’ fees, which Mortgagee may incur in connection with any effort or action (whether or not litigation or foreclosure is involved) to enforce or defend Mortgagee’s rights and remedies under any of the Loan Documents, including but not limited to all attorneys’ fees, appraisal fees, consultants’ fees, and other expenses incurred by Mortgagee in securing title to or possession of, and realizing upon, any security for the Secured Obligations. All such costs and expenses (together with interest thereon at the Default Rate from the date incurred) shall constitute part of the Secured Obligations, and may be included in the computation of the amount owed to Mortgagee for purposes of foreclosing or otherwise enforcing this Mortgage.

4.12 Financial Reports. During the term of the Loan, Mortgagor shall supply to Mortgagee (a) within thirty (30) days following the end of each quarter, Mortgagor’s quarterly and annual operating statements for the Property as of the end of and for the preceding quarter and fiscal year, as applicable, in each case prepared against the budget for such year;

(b) contemporaneously with Mortgagor’s delivery of each of such operating statements, a certified rent roll signed and dated by Mortgagor detailing the names of all tenants under the Leases, the portion of the improvements on the Property occupied by each tenant, the rent and any other charges payable under each Lease, and the term of each Lease; and (c) within one hundred five (105) days following the end of each year, an annual balance sheet and profit and loss statement of Mortgagor and the most recent 10K and 10Q filings of Guarantor. The financial statements and reports for Mortgagor described in (a) and (c) above shall be in such detail as Mortgagee may require, shall be prepared in accordance with generally accepted accounting principles consistently applied, and shall be certified as true and correct by Mortgagor or the applicable Guarantor (or, if required by Mortgagee after any Default or Event of Default, by an independent certified public accountant acceptable to Mortgagee). Mortgagor shall also furnish to Mortgagee within thirty (30) days of Mortgagee’s request, any other financial reports or statements of Mortgagor as Mortgagee may request, provided, however, so long as Mortgagor’s sole asset is the Property, Mortgagor may provide the annual balance sheet and profit and loss statement of the Property in lieu of financial statements of Mortgagor. Upon Mortgagee’s demand after any Default by Mortgagor, Mortgagor shall supply to Mortgagee the items required in (a) and (b) above on a monthly basis; such items shall be supplied to Mortgagee on a quarterly basis upon Mortgagor’s cure of said default and Mortgagee’s written authorization. If Mortgagee securitizes the Loan, Mortgagor shall supply to Mortgagee the items required in (a) and (b) above on a quarterly basis.

4.13 Priority of Leases. To the extent Mortgagor has the right, under the terms of any Lease, to make such lease subordinate to the lien hereof, Mortgagor will, at Mortgagee’s request and Mortgagor’s expense, take such action as may be required to effect such subordination. Conversely, Mortgagor will, at Mortgagee’s request and Mortgagor’s expense, take such action as may be necessary to subordinate the lien hereof to any future Lease designated by Mortgagee.

4.14 Inventories; Assembly of Chattels. Mortgagor will, from time to time at the request of Mortgagee, supply Mortgagee with a current inventory of the Chattels and the Intangible Personalty, in such detail as Mortgagee may require. Upon the occurrence of any Event of Default hereunder, Mortgagor will at Mortgagee’s request assemble the Chattels and make them available to Mortgagee at any place designated by Mortgagee which is reasonably convenient to both parties.

4.15 Compliance with Laws, Etc. Mortgagor shall comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, maintaining all Permits and paying before the same become delinquent all taxes, assessments and governmental charges imposed upon Mortgagor or the Property.

4.16 Records and Books of Account. Mortgagor shall keep accurate and complete records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions relating to the Property.

4.17 Inspection Rights. At any reasonable time, and from time to time, Mortgagor shall permit Mortgagee, or any agents or representatives thereof, to examine and

make copies of and abstracts from the records and books of account of, and visit and inspect the Property and to discuss with Mortgagor the affairs, finances and accounts of Mortgagor.

4.18 Change of Mortgagor’s Address or State of Organization. Mortgagor shall promptly notify Mortgagee if changes are made in Mortgagor’s address from that set forth in Section 9.10 hereof, or if Mortgagor shall either change its “location” (as such term is used in Section 5.8 hereof), its state of organization or if Mortgagor shall organize in any state other than the State of Connecticut.

4.19 Further Assurances; Estoppel Certificates. Mortgagor will execute and deliver to Mortgagee upon demand, and pay the costs of preparation and recording thereof, any further documents which Mortgagee may request to confirm or perfect the liens and security interests created or intended to be created hereby, or to confirm or perfect any evidence of the Secured Obligations. Mortgagor will also, within ten (10) days after any request by Mortgagee, deliver to Mortgagee a signed and acknowledged statement certifying to Mortgagee, or to any proposed transferee of the Secured Obligations, (a) the balance of principal, interest, and other sums then outstanding under the Note, and (b) whether Mortgagor claims to have any offsets or defenses with respect to the Secured Obligations and, if so, the nature of such offsets or defenses.

4.20 Costs of Closing. Mortgagor shall on demand pay directly or reimburse Mortgagee for any costs or expenses pertaining to the closing of the Loan, including, but not limited to, reasonable fees of counsel for Mortgagee, costs and expenses for which invoices were not available at the closing of the Loan, or costs and expenses which are incurred by Mortgagee after such closing. All such costs and expenses (together with interest thereon at the Default Rate from the date of demand if such amounts are not paid within fifteen (15) days of the date of demand) shall constitute a part of the Secured Obligations, and may be included in the computation of the amount owed to Mortgagee for purposes of foreclosing or otherwise enforcing this Mortgage.

4.21 Fund for Electronic Transfer. All monthly payments of principal and interest on the Note, and escrow deposits under this Mortgage, shall be made by Mortgagor by electronic funds transfer from a bank account established and maintained by Mortgagor for such purpose. Mortgagor shall establish and maintain such an account until the Note is fully paid and shall direct the depository of such account in writing to so transmit such payments on or before the respective due dates to the account of Mortgagee as shall be designated by Mortgagee in writing.

4.22 Use. Mortgagor shall use the Property solely for the operation of an industrial distribution center and any other use permitted by zoning and other law and for no other use or purpose.

4.23 Management. The Property shall be managed by Mortgagor or Guarantor. Mortgagor shall not permit management of the Property by any person or entity other than Mortgagor or Guarantor, without the prior written consent of Mortgagee. If the Property is managed by Guarantor, Mortgagor shall not enter into any property management agreement which would not be terminable on thirty (30) days’ notice to Guarantor.

ARTICLE 5
MORTGAGOR’S NEGATIVE COVENANTS

5.1 Waste and Alterations. Mortgagor will not commit or permit any waste with respect to the Property or the Chattels. Mortgagor shall not cause or permit any part of the Property, including but not limited to any building, structure, parking lot, driveway, landscape scheme, timber, or other ground improvement, to be removed, demolished, or materially altered without the prior written consent of Mortgagee.

5.2 Zoning and Private Covenants. Mortgagor will not initiate, join in, or consent to any change in any zoning ordinance or classification, any change in the “zone lot” or “zone lots” (or similar zoning unit or units) presently comprising the Property, any transfer of development rights, any private restrictive covenant, or any other public or private restriction limiting or defining the uses which may be made of the Property or any part thereof, without the express written consent of Mortgagee. If under applicable zoning provisions the use of all or any part of the Property is or becomes a nonconforming use, Mortgagor will not cause such use to be discontinued or abandoned without the express written consent of Mortgagee, and Mortgagor will use its best efforts to prevent the tenant under any Lease from discontinuing or abandoning such use.

5.3 Interference with Leases.

(a) Mortgagor will neither do, nor neglect to do, anything which may cause or permit the termination of any Lease of all or any part of the Property, or permit the withholding or abatement of any rent payable under any such Lease.

(b) Without Mortgagee’s prior written consent, which may be granted or withheld in Mortgagee’s reasonable discretion, Mortgagor shall not enter into or modify any Lease of all or any part of the Property. Any submission by Mortgagor for Mortgagee’s approval of a Lease or modification thereof shall be accompanied by a copy of such Lease or modification, a Lease abstract, a then-current rent roll for the Property, year-to-date and prior year operating statements for the Property, and a cover letter requesting Mortgagee’s approval which contains a signature line on which Mortgagee may evidence its approval of such Lease or modification.

(c) Except with the prior written consent of Mortgagee, which may be granted or withheld in Mortgagee’s sole discretion, Mortgagor will not (i) collect rent from all or any part of the Property for more than one month in advance, (ii) assign the rents from the Property or any part thereof, or (iii) consent to the cancellation or surrender of all or any part of any Lease, except that Mortgagor may in good faith terminate any Lease for nonpayment of rent or other material breach by the tenant.

(d) Notwithstanding the provisions of Section 5.3(b) to the contrary, Mortgagor shall have the right to enter into “Safe-Harbor Leases” (as hereinafter defined) without Mortgagee’s prior written consent. A “Safe Harbor Lease” shall mean any proposed market Lease that meets the following criteria: (i) the rent payable under such proposed Lease is a rent that is no less than $6.00 per square foot on a triple-net basis, (ii) the rentable area to be

demised pursuant to such proposed Lease which, when combined with any other space in the Property leased to affiliated entities of the tenant under such proposed Safe Harbor Lease, is less than 25,000 square feet, (iii) such Lease shall be for a term of no less than three (3) years and no greater than ten (10) years, including any tenant extension option(s); provided, however, that the term, including any extension options, may extend to fifteen (15) years if lease years 11-15 have a rental rate not less than the greater of (A) the rental rate for year 10 and (B) market rental rate, (iv) the tenant improvement allocation or allowance shall not exceed $10.00 per rentable square foot, unless Guarantor guarantees the payment of such allocation or allowance in excess of $10.00 per rentable square foot, and (v) such lease shall satisfy the additional leasing guidelines set forth in Section 5.3(e) below:

(e) A Lease will qualify as a Safe-Harbor Lease when such Lease comes into effect, provided each of the following conditions, in addition to the ones set forth above, are satisfied: (i) such Lease does not contain any options to purchase, or other rights to acquire the Property, (ii) such Lease does not contain any material restrictions on Mortgagor’s rights to lease remaining portions of the Property; provided, however, that the granting of the right or option to lease additional space within the Property upon terms which would otherwise comply with the provisions of this Section 5.3 shall not be considered a material restriction, if such right or option must be exercised upon 15 days’ notice to the tenant, (iii) such Lease does not contain any extraordinary, uncustomary, and unduly burdensome Mortgagor obligations (including obligations which an unaffiliated Mortgagor would have difficulty performing), (iv) such Lease is entered into on the standard form of Lease, without material modification thereto and provided it conforms with the leasing guidelines hereunder, (v) such Lease is entered into on arms-length terms, and (vi) within ten (10) days following the execution of such Lease, Mortgagor shall provide Mortgagee with a certified copy thereof and a certificate that such Lease complies in all respects with the requirements of a Safe Harbor Lease.

(f) Mortgagee agrees that for any proposed Lease that does not qualify as a Safe Harbor Lease, for which Mortgagor is required to obtain Mortgagee’s consent thereto, Mortgagee will attempt to respond within ten (10) business days. If Mortgagee has failed to respond to the written request for consent of a proposed Lease after ten (10) business days after its receipt thereof, together with any additional information that Mortgagee may reasonably require to evaluate such proposed lease, and Mortgagor has provided a subsequent five (5) business days’ written notice to Mortgagee requesting consent, each notice marked with a legend in bold capital letters stating: MORTGAGEE SHALL BE DEEMED TO HAVE CONSENTED TO THE MATTER CONTAINED HEREIN IF IT FAILS TO RESPOND TO THIS REQUEST FOR CONSENT WITHIN [10/5 (as applicable)] BUSINESS DAYS AFTER THE DATE HEREOF , then Mortgagee shall be deemed to have consented to the same. Mortgagee agrees to consider a written summary of a proposed lease to a specific tenant in accordance with the terms described in this Section 5.3(f) . If Mortgagee approves a written summary (or is deemed to have given its approval), Mortgagee shall be deemed to have approved a lease to that tenant prepared in accordance with such written summary on the form previously approved by Mortgagee, without material modifications (except as disclosed in the written summary).

5.4 Transfer or Further Encumbrance of Property.

(a) Without Mortgagee’s prior written consent, which consent may be granted or withheld in Mortgagee’s sole and absolute discretion, Mortgagor shall not, except as permitted in Section 5.3 , (i) sell, assign, convey, transfer or otherwise dispose of any legal, beneficial or equitable interest in any of the Property, (ii) permit or suffer any owner, directly or indirectly, of any beneficial interest in the Property or Mortgagor to transfer such interest, whether by transfer of partnership, membership, stock or other beneficial interest in any entity or otherwise, or (iii) mortgage, hypothecate or otherwise encumber or permit to be encumbered or grant or permit to be granted a security interest in all or any part of the Property or Mortgagor or any beneficial or equitable interest in either the Property or Mortgagor. The provisions of this Section shall not prohibit transfers of title or interest under any will or testament or applicable law of descent.

(b) Notwithstanding the provisions of Section 5.4(a) to the contrary, Mortgagor may transfer the Property or any beneficial interest in Mortgagor provided that (i) the transferee of the Property (in the case of a transfer of the Property) or the surviving entity (in the case of a transfer of any beneficial interest in Mortgagor) is a wholly owned subsidiary of Guarantor (and such other entity shall be a single purpose entity and shall expressly assume the obligations of Borrower under the Loan Documents in documentation satisfactory to Lender in form and content) and (ii) immediately before and immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing. Mortgagor shall be responsible for all out–of–pocket expenses incurred by Mortgagee in connection with such transfer, including without limitation reasonable attorney’s fees.

(c) Notwithstanding the provisions of Section 5.4(a) , so long as (i) Mortgagor is a wholly owned subsidiary of Guarantor and Guarantor controls Mortgagor and (ii) Guarantor is an Independent Publicly Traded Entity, there shall be no restrictions on the sale or transfer of stock in Guarantor. As used herein, the term “Independent Publicly Traded Entity” means a corporation (1) whose stock is publicly traded on the New York Stock Exchange, American Stock Exchange, NASDAQ market or similar national or nationally recognized stock exchange or over the counter market and (2) is not a subsidiary of another entity. Notwithstanding the provisions of Section 5.4(a) and (b) , Guarantor may enter into any merger, consolidation or reorganization, provided that the surviving entity following any such merger, consolidation or reorganization (A) is an Independent Publicly Traded Entity and (B) the net worth of the surviving entity (as determined by an independent certified public accounting firm) is equal to or greater than the greater of (I) the net worth of Guarantor as of the date of the closing of the Loan and (II) the net worth of Guarantor immediately prior to the consummation of such merger, consolidation or reorganization.

5.5 Further Encumbrance of Chattels. Mortgagor will neither create nor permit any lien, security interest or encumbrance against the Chattels or Intangible Personalty or any part thereof or interest therein, other than the liens and security interests created by the Loan Documents, without the prior written consent of Mortgagee, which may be withheld for any reason.

5.6 Assessments Against Property. Mortgagor will not, without the prior written approval of Mortgagee, which may be withheld for any reason, consent to or allow the creation of any so-called special districts, special improvement districts, benefit assessment districts or similar districts, or any other body or entity of any type, or allow to occur any other event, that would or might result in the imposition of any additional taxes, assessments or other monetary obligations or burdens on the Property, and this provision shall serve as RECORD NOTICE to any such district or districts or any governmental entity under whose authority such district or districts exist or are being formed that, should Mortgagor or any other person or entity include all or any portion of the Property in such district or districts, whether formed or in the process of formation, without first obtaining Mortgagee’s express written consent, the rights of Mortgagee in the Property pursuant to this Mortgage or following any foreclosure of this Mortgage, and the rights of any person or entity to whom Mortgagee might transfer the Property following a foreclosure of this Mortgage, shall be senior and superior to any taxes, charges, fees, assessments or other impositions of any kind or nature whatsoever, or liens (whether statutory, contractual or otherwise) levied or imposed, or to be levied or imposed, upon the Property or any portion thereof as a result of inclusion of the Property in such district or districts.

5.7 Transfer or Removal of Chattels. Mortgagor will not sell, transfer or remove from the Property all or any part of the Chattels with a value in excess of $25,000.00, unless the items sold, transferred, or removed are simultaneously replaced with similar items of equal or greater value.

5.8 Change of Name, Organizational I.D. No. or Location. Mortgagor will not change the name under which Mortgagor does business (or adopt or begin doing business under any other name or assumed or trade name), change its organizational identification number, or change its location, without first notifying Mortgagee of Mortgagor’s intention to do so and delivering to Mortgagee such organizational documents of Mortgagor and executed modifications or supplements to this Mortgage (and to any financing statement which may be filed in connection herewith) as Mortgagee may require. For purposes of the foregoing, Mortgagor’s “location” shall mean (a) if Mortgagor is a registered organization, Mortgagor’s state of registration, (b) if Mortgagor is an individual, the state of Mortgagor’s principal residence, or (c) if Mortgagor is neither a registered organization nor an individual, the state in which Mortgagor’s place of business (or, if Mortgagor has more than one place of business, the Mortgagor’s chief executive office) is located.

5.9 Improper Use of Property or Chattels. Mortgagor will not use the Property or the Chattels for any purpose or in any manner which violates any applicable law, ordinance, or other governmental requirement, the requirements or conditions of any insurance policy, or any private covenant.

5.10 ERISA. Mortgagor shall not engage in any transaction which would cause the Note (or the exercise by Mortgagee of any of its rights under the Loan Documents) to be a non-exempt, prohibited transaction under ERISA (including for this purpose the parallel provisions of Section 4975 of the Internal Revenue Code of 1986, as amended), or otherwise result in Mortgagee being deemed in violation of any applicable provisions of ERISA. Mortgagor shall indemnify, protect, defend, and hold Mortgagee harmless from and against any and all losses, liabilities, damages, claims, judgments, costs, and expenses (including, without

limitation attorneys’ fees and costs incurred in the investigation, defense, and settlement of claims and in obtaining any individual ERISA exemption or state administrative exception that may be required, in Mortgagee’s sole and absolute discretion) that Mortgagee may incur, directly or indirectly, as the result of the breach by Mortgagor of any warranty or representation set forth in Section 3.3(x) hereof or the breach by Mortgagor of any covenant contained in this Section. This indemnity shall survive any termination, satisfaction or foreclosure of this Mortgage and shall not be subject to the limitation on personal liability described in the Note.

5.11 Use of Proceeds. Mortgagor will not use any funds advanced by Mortgagee under the Loan Documents for household or agricultural purposes, to purchase margin stock, or for any purpose prohibited by law.

ARTICLE 6
EVENTS OF DEFAULT

Each of the following events will constitute an event of default (an “Event of Default”) under this Mortgage and under each of the other Loan Documents:

6.1 Failure to Pay Note. Mortgagor’s failure to make any payment when due under the terms of the Note or any other Loan Document.

6.2 Due on Sale or Encumbrance. The occurrence of any violation of any covenant contained in Section 5.4 , 5.5 or 5.7 hereof.

6.3 Other Obligations. The failure of Mortgagor to properly perform any obligation contained herein or in any of the other Loan Documents (other than the obligation to make payments under the Note or the other Loan Documents) and the continuance of such failure for a period of ten (10) days following written notice thereof from Mortgagee to Mortgagor; provided, however, that if such failure is not curable within such ten (10) day period, then, so long as Mortgagor commences to cure such failure within such ten (10) day period and is continually and diligently attempting to cure to completion, such failure shall not be an Event of Default unless such failure remains uncured for thirty (30) days after such written notice to Mortgagor.

6.4 Levy Against Property. The levy against any of the Property, Chattels or Intangible Personalty, of any execution, attachment, sequestration or other writ.

6.5 Liquidation. The liquidation, termination or dissolution of Mortgagor or any Controlling Person.

6.6 Appointment of Receiver. The appointment of a trustee or receiver for the assets, or any part thereof, of Mortgagor or any Controlling Person, or the appointment of a trustee or receiver for any real or personal property, or the like, or any part thereof, representing the security for the Secured Obligations.

6.7 Assignments. The making by Mortgagor or any Controlling Person of a transfer in fraud of creditors or an assignment for the benefit of creditors.

6.8 Order for Relief. The entry in bankruptcy of an order for relief for or against Mortgagor or any Controlling Person.

6.9 Bankruptcy. The filing of any petition (or answer admitting the material allegations of any petition), or other pleading, seeking entry of an order for relief for or against Mortgagor or any Controlling Person as a debtor or bankrupt or seeking an adjustment of any of such parties’ debts, or any other relief under any state or federal bankruptcy, reorganization, debtor’s relief or insolvency laws now or hereafter existing, including, without limitation, a petition or answer seeking reorganization or admitting the material allegations of a petition filed against any such party in any bankruptcy or reorganization proceeding, or the act of any of such parties in instituting or voluntarily being or becoming a party to any other judicial proceedings intended to effect a discharge of the debts of any such parties, in whole or in part, or a postponement of the maturity or the collection thereof, or a suspension of any of the rights or powers of a trustee or of any of the rights or powers granted to Mortgagee herein, or in any other document executed in connection herewith.

6.10 Misrepresentation. If any representation or warranty made by Mortgagor or any Controlling Person, or in any of the other Loan Documents or any other instrument or document modifying, renewing, extending, evidencing, securing or pertaining to the Note is false, misleading or erroneous in any material respect.

6.11 Judgments. Unless a bond or other acceptable security is posted with Mortgagee (or, if applicable, a court of competent jurisdiction), the failure of Mortgagor or any Controlling Person to pay any monetary judgment in excess of $50,000.00 before the expiration of thirty (30) days after such judgment becomes final and no longer appealable.

6.12 Admissions Regarding Debts. The admission of Mortgagor or any Controlling Person in writing of any such party’s inability to pay such party’s debts as they become due.

6.13 Assertion of Priority. The assertion of any claim of priority over this Mortgage, by title, lien, or otherwise, unless Mortgagor within thirty (30) days after such assertion either causes the assertion to be withdrawn or provides Mortgagee with such security as Mortgagee may require to protect Mortgagee against all loss, damage, or expense, including attorneys’ fees, which Mortgagee may incur in the event such assertion is upheld; provided, however, that the written agreement in form and content acceptable to Mortgagee from a title company acceptable to Mortgagee to defend Mortgagee against such assertion and to insure against any such loss, damage or exchange shall constitute adequate security.

6.14 Other Loan Documents. The occurrence of any default by Mortgagor, after the lapse of any applicable grace or cure period, or the occurrence of any event or circumstance defined as an Event of Default, under any of the Loan Documents other than this Mortgage.

6.15 Other Liens. The occurrence of any default by Mortgagor, after the lapse of any applicable grace or cure period, or the occurrence of any event or circumstance defined as an Event of Default, under any other consensual lien encumbering the Property, or any part

thereof or interest therein, or any document or instrument evidencing obligations secured thereby.

6.16 Other Indebtedness. The occurrence of any default by Mortgagor, after the lapse of any applicable grace or cure period, or the occurrence of any event or circumstance defined as an Event of Default, under any other indebtedness incurred or owing by Mortgagor, or any document or instrument evidencing any obligation to pay such indebtedness.

ARTICLE 7
MORTGAGEE’S REMEDIES

Immediately upon or any time after the occurrence of any Event of Default hereunder, Mortgagee may exercise any remedy available at law or in equity, including but not limited to those listed below and those listed in the other Loan Documents, in such sequence or combination as Mortgagee may determine in Mortgagee’s sole discretion:

7.1 Performance of Defaulted Obligations. Mortgagee may make any payment or perform any other obligation under the Loan Documents which Mortgagor has failed to make or perform, and Mortgagor hereby irrevocably appoints Mortgagee as the true and lawful attorney-in-fact for Mortgagor to make any such payment and perform any such obligation in the name of Mortgagor. All payments made and expenses (including attorneys’ fees) incurred by Mortgagee in this connection, together with interest thereon at the Default Rate from the date paid or incurred until repaid, will be part of the Secured Obligations and will be immediately due and payable by Mortgagor to Mortgagee. In lieu of advancing Mortgagee’s own funds for such purposes, Mortgagee may use any funds of Mortgagor which may be in Mortgagee’s possession, including but not limited to insurance or condemnation proceeds and amounts deposited for taxes, insurance premiums, or other purposes.

7.2 Specific Performance and Injunctive Relief. Notwithstanding the availability of legal remedies, Mortgagee will be entitled to obtain specific performance, mandatory or prohibitory injunctive relief, or other equitable relief requiring Mortgagor to cure or refrain from repeating any Default.

7.3 Acceleration of Secured Obligations. Mortgagee may, without notice or demand, declare all of the Secured Obligations immediately due and payable in full.

7.4 Suit for Monetary Relief. Subject to the non-recourse provisions of the Note, with or without accelerating the maturity of the Secured Obligations, Mortgagee may sue from time to time for any payment due under any of the Loan Documents, or for money damages resulting from Mortgagor’s default under any of the Loan Documents.

7.5 Possession of Property. To the extent permitted by law, Mortgagee may enter and take possession of the Property without seeking or obtaining the appointment of a receiver, may employ a managing agent for the Property, and may lease or rent all or any part of the Property, either in Mortgagee’s name or in the name of Mortgagor, and may collect the rents, issues, and profits of the Property. Any revenues collected by Mortgagee under this Section will be applied first toward payment of all expenses (including attorneys’ fees) incurred by Mortgagee, together with interest thereon at the Default Rate from the date incurred until repaid,

and the balance, if any, will be applied against the Secured Obligations in such order and manner as Mortgagee may elect in its sole discretion.

7.6 Enforcement of Security Interests. Mortgagee may exercise all rights of a secured party under the Code with respect to the Chattels and the Intangible Personalty, including but not limited to taking possession of, holding, and selling the Chattels and enforcing or otherwise realizing upon any accounts and general intangibles. Any requirement for reasonable notice of the time and place of any public sale, or of the time after which any private sale or other disposition is to be made, will be satisfied by Mortgagee’s giving of such notice to Mortgagor at least five (5) days prior to the time of any public sale or the time after which any private sale or other intended disposition is to be made.

7.7 Foreclosure Against Property.

(a) Mortgagee may bring an action in any court of competent jurisdiction to foreclose this Mortgage.

(b) All fees, costs and expenses of any kind incurred by Mortgagee in connection with foreclosure of this Mortgage, including, without limitation, the costs of any appraisals of the Property obtained by Mortgagee, the cost of any title reports or abstracts, all costs of any receivership for the Property advanced by Mortgagee, and all attorneys’ and consultants’ fees and expenses incurred by Mortgagee, shall constitute a part of the Secured Obligations and may be included as part of the amount owing from Mortgagor to Mortgagee at any foreclosure sale.

(c) The proceeds of any sale under this Section shall be applied first to the fees and expenses of the officer conducting the sale, and then to the reduction or discharge of the Secured Obligations in such order and manner as Mortgagee may elect in its sole discretion; any surplus remaining shall be paid over to Mortgagor or to such other person or persons as may be lawfully entitled to such surplus.

(d) Nothing in this Section dealing with foreclosure procedures or specifying particular actions to be taken by Mortgagee shall be deemed to contradict or add to the requirements and procedures now or hereafter specified by the laws of the State, and any such inconsistency shall be resolved in favor of the State’s law applicable at the time of foreclosure.

7.8 Appointment of Receiver. To the extent permitted by law, Mortgagee shall be entitled, as a matter of absolute right and without regard to the value of any security for the Secured Obligations or the solvency of any person liable therefor, and with or without taking possession of the Property, to the appointment of a receiver for the Property upon ex-parte application to any court of competent jurisdiction. Mortgagor waives any right to any hearing or notice of hearing prior to the appointment of a receiver. Such receiver and its agents shall be empowered to (a) take possession of the Property and any businesses conducted by Mortgagor or any other person thereon and any business assets used in connection therewith, (b) exclude Mortgagor and Mortgagor’s agents, servants, and employees from the Property, (c) collect the rents, issues, profits, and income therefrom, (d) complete any construction which may be in

progress, (e) do such maintenance and make such repairs and alterations as the receiver deems necessary, (f) use all stores of materials, supplies, and maintenance equipment on the Property and replace such items at the expense of the receivership estate, (g) pay all taxes and assessments against the Property and the Chattels, all premiums for insurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, and (h) generally do anything which Mortgagor could legally do if Mortgagor were in possession of the Property. All expenses incurred by the receiver or its agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys’ fees incurred by the receiver and by Mortgagee, together with interest thereon at the Default Rate from the date incurred until repaid, and the balance shall be applied toward the Secured Obligations in such order or manner as Mortgagee may in its sole discretion elect or in such other manner as the court may direct. Unless sooner terminated with the express consent of Mortgagee, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Property has passed after foreclosure sale and all applicable periods of redemption have expired.

7.9 Right to Make Repairs, Improvements. Should any part of the Property come into the possession of Mortgagee, whether before or after an Event of Default, Mortgagee may use, operate, and/or make repairs, alterations, additions and improvements to the Property for the purpose of preserving it or its value. Mortgagor covenants to promptly reimburse and pay to Mortgagee, at the place where the Note is payable, or at such other place as may be designated by Mortgagee in writing, the amount of all reasonable expenses (including the cost of any insurance, taxes, or other charges) incurred by Mortgagee in connection with its custody, preservation, use or operation of the Property, together with interest thereon from the date incurred by Mortgagee at the Default Rate, and all such expenses, costs, taxes, interest, and other charges shall be a part of the Secured Obligations. It is agreed, however, that the risk of accidental loss or damage to the Property is undertaken by Mortgagor and Mortgagee shall have no liability whatsoever for decline in value of the Property, for failure to obtain or maintain insurance, or for failure to determine whether any insurance ever in force is adequate as to amount or as to the risks insured.

7.10 Surrender of Insurance. Mortgagee may surrender the insurance policies maintained pursuant to the terms hereof, or any part thereof, and receive and apply the unearned premiums as a credit on the Secured Obligations and, in connection therewith, Mortgagor hereby appoints Mortgagee (or any officer of Mortgagee), as the true and lawful agent and attorney-in-fact for Mortgagor (with full powers of substitution), which power of attorney shall be deemed to be a power coupled with an interest and therefore irrevocable, to collect such premiums.

7.11 Prima Facie Evidence. Mortgagor agrees that, in any assignments, deeds, bills of sale, notices of sale, or postings, given by Mortgagee, any and all statements of fact or other recitals therein made as to the identity of Mortgagee, or as to the occurrence or existence of any Event of Default, or as to the acceleration of the maturity of the Secured Obligations, or as to the request to sell, posting of notice of sale, notice of sale, time, place, terms and manner of sale and receipt, distribution and application of the money realized therefrom, and without being limited by the foregoing, as to any other act or thing having been duly done by Mortgagee, shall be taken by all courts of law and equity as prima facie evidence that such statements or recitals

state facts and are without further question to be so accepted, and Mortgagor does hereby ratify and confirm any and all acts that Mortgagee may lawfully do by virtue hereof.

ARTICLE 8
ASSIGNMENT OF LEASES AND RENTS

8.1 Assignment of Leases and Rents. Mortgagor hereby unconditionally and absolutely grants, transfers and assigns unto Mortgagee all rents, royalties, issues, profits and income (“Rents”) now or hereafter due or payable to Mortgagor for the occupancy or use of the Property, and all Leases (other than subleases), whether written or oral, with all security therefor, including all guaranties thereof, now or hereafter affecting the Property; reserving unto Mortgagor, however, a license to collect and retain such Rents prior to the occurrence of any Event of Default. Such license shall be revocable by Mortgagee without notice to Mortgagor at any time after the occurrence of an Event of Default. Mortgagor represents that Mortgagor’s interest in the Rents and the Leases have not been heretofore sold, assigned, transferred or set over by any instrument now in force and will not at any time during the life of this assignment be sold, assigned, transferred or set over by Mortgagor or by any person or persons whomsoever; and Mortgagor has good right to sell, assign, transfer and set over the same and to grant to and confer upon Mortgagee the rights, interest, powers and authorities herein granted and conferred. Failure of Mortgagee at any time or from time to time to enforce the assignment of Rents and Leases under this Section shall not in any manner prevent its subsequent enforcement, and Mortgagee is not obligated to collect anything hereunder, but is accountable only for sums actually collected.

8.2 Further Assignments. Mortgagor shall give Mortgagee at any time upon demand any further or additional forms of assignment or transfer of such Rents, Leases and security as may be reasonably requested by Mortgagee, and shall deliver to Mortgagee executed copies of all such Leases and security.

8.3 Application of Rents. Mortgagee shall be entitled to deduct and retain a just and reasonable compensation from monies received hereunder for its services or that of its agents in collecting such monies. Any monies received by Mortgagee hereunder may be applied when received from time to time in payment of any taxes, assessments or other liens affecting the Property regardless of the delinquency, such application to be in such order as Mortgagee may determine. The acceptance of this Mortgage by Mortgagee or the exercise of any rights by it hereunder shall not be, or be construed to be, an affirmation by it of any Lease nor an assumption of any liability under any Lease.

8.4 Collection of Rents. Upon or at any time after an Event of Default shall have occurred and be continuing, Mortgagee may declare all sums secured hereby immediately due and payable, and may, at its option, without notice, and whether or not the Secured Obligations shall have been declared due and payable, either in person or by agent, with or without bringing any action or proceeding, or by a receiver to be appointed by a court, (a) enter upon, take possession of, manage and operate the Property, or any part thereof (including without limitation making necessary repairs, alterations and improvements to the Property); (b) make, cancel, enforce or modify Leases; (c) obtain and evict tenants; (d) fix or modify Rents; (e) do any acts which Mortgagee deems reasonably proper to protect the security thereof; and

(f) either with or without taking possession of the Property, in its own name sue for or otherwise collect and receive such Rents, including those past due and unpaid. In connection with the foregoing, Mortgagee shall be entitled and empowered to employ attorneys, and management, rental and other agents in and about the Property and to effect the matters which Mortgagee is empowered to do, and in the event Mortgagee shall itself effect such matters, Mortgagee shall be entitled to charge and receive reasonable management, rental and other fees therefor as may be customary in the area in which the Property is located; and the reasonable fees, charges, costs and expenses of Mortgagee or such persons shall be additional Secured Obligations. Mortgagee may apply all funds collected as aforesaid, less costs and expenses of operation and collection, including reasonable attorneys’ and agents’ fees, charges, costs and expenses, as aforesaid, upon any Secured Obligations, and in such order as Mortgagee may determine. The entering upon and taking possession of the Property, the collection of such Rents and the application thereof as aforesaid shall not cure or waive any default or waive, modify or affect notice of default under the Note or this Mortgage or invalidate any act done pursuant to such notice.

8.5 Authority of Mortgagee. Any tenants or occupants of any part of the Property are hereby authorized to recognize the claims of Mortgagee hereunder without investigating the reason for any action taken by Mortgagee, or the validity or the amount of secured obligations owing to Mortgagee, or the existence of any default in the Note or this Mortgage, or under or by reason of this assignment of Rents and Leases, or the application to be made by Mortgagee of any amounts to be paid to Mortgagee. The sole signature of Mortgagee shall be sufficient for the exercise of any rights under this assignment and the sole receipt of Mortgagee for any sums received shall be a full discharge and release therefor to any such tenant or occupant of the Property. Checks for all or any part of the rentals collected under this assignment of Rents and Leases shall be drawn to the exclusive order of Mortgagee.

8.6 Indemnification of Mortgagee. Nothing herein contained shall be deemed to obligate Mortgagee to perform or discharge any obligation, duty or liability of any lessor under any Lease of the Property, and Mortgagor shall and does hereby indemnify and hold Mortgagee harmless from any and all liability, loss or damage which Mortgagee may or might incur under any Lease or by reason of the assignment; and any and all such liability, loss or damage incurred by Mortgagee, together with the costs and expenses, including reasonable attorneys’ fees, incurred by Mortgagee in defense of any claims or demands therefor (whether successful or not), shall be additional Secured Obligations, and Mortgagor shall reimburse Mortgagee therefor on demand.

ARTICLE 9
MISCELLANEOUS PROVISIONS

9.1 Time of the Essence. Time is of the essence with respect to all of Mortgagor’s obligations under the Loan Documents.

9.2 Joint and Several Obligations. If Mortgagor is more than one person or entity, then (a) all persons or entities comprising Mortgagor are jointly and severally liable for all of the Secured Obligations; (b) all representations, warranties, and covenants made by Mortgagor shall be deemed representations, warranties, and covenants of each of the persons or entities comprising Mortgagor; (c) any breach, Default or Event of Default by any of the persons or

entities comprising Mortgagor hereunder shall be deemed to be a breach, Default, or Event of Default of Mortgagor; (d) any reference herein contained to the knowledge or awareness of Mortgagor shall mean the knowledge or awareness of any of the persons or entities comprising Mortgagor; and (e) any event creating personal liability of any of the persons or entities comprising Mortgagor shall create personal liability for all such persons or entities.

9.3 Waiver of Homestead and Other Exemptions. To the extent permitted by law, Mortgagor hereby waives all rights to any homestead or other exemption to which Mortgagor would otherwise be entitled under any present or future constitutional, statutory, or other provision of applicable state or federal law. Mortgagor hereby waives any right it may have to require Mortgagee to marshal all or any portion of the security for the Secured Obligations.

9.4 Non-Recourse; Exceptions to Non-Recourse. Except as expressly set forth in the Note, the recourse of Mortgagee with respect to the obligations evidenced by the Note and the other Loan Documents shall be solely to the Property, Chattels and Intangible Personalty, and any other collateral given as security for the Note.

9.5 Rights and Remedies Cumulative. Mortgagee’s rights and remedies under each of the Loan Documents are cumulative of the rights and remedies available to Mortgagee under each of the other Loan Documents and those otherwise available to Mortgagee at law or in equity. No act of Mortgagee shall be construed as an election to proceed under any particular provision of any Loan Document to the exclusion of any other provision in the same or any other Loan Document, or as an election of remedies to the exclusion of any other remedy which may then or thereafter be available to Mortgagee.

9.6 No Implied Waivers. Mortgagee shall not be deemed to have waived any provision of any Loan Document unless such waiver is in writing and is signed by Mortgagee. Without limiting the generality of the preceding sentence, neither Mortgagee’s acceptance of any payment with knowledge of a Default by Mortgagor, nor any failure by Mortgagee to exercise any remedy following a Default by Mortgagor shall be deemed a waiver of such Default, and no waiver by Mortgagee of any particular Default on the part of Mortgagor shall be deemed a waiver of any other Default or of any similar Default in the future.

9.7 No Third-Party Rights. No person shall be a third-party beneficiary of any provision of any of the Loan Documents. All provisions of the Loan Documents favoring Mortgagee are intended solely for the benefit of Mortgagee, and no third party shall be entitled to assume or expect that Mortgagee will not waive or consent to modification of any such provision in Mortgagee’s sole discretion.

9.8 Preservation of Liability and Priority. Without affecting the liability of Mortgagor or of any other person (except a person expressly released in writing) for payment and performance of all of the Secured Obligations, and without affecting the rights of Mortgagee with respect to any security not expressly released in writing, and without impairing in any way the priority of this Mortgage over the interests of any person acquired or first evidenced by recording subsequent to the recording hereof, Mortgagee may, either before or after the maturity of the Note, and without notice or consent: (a) release any person liable for payment or

performance of all or any part of the Secured Obligations; (b) make any agreement altering the terms of payment or performance of all or any of the Secured Obligations; (c) exercise or refrain from exercising, or waive, any right or remedy which Mortgagee may have under any of the Loan Documents; (d) accept additional security of any kind for any of the Secured Obligations; or (e) release or otherwise deal with any real or personal property securing the Secured Obligations. Any person acquiring or recording evidence of any interest of any nature in the Property, the Chattels, or the Intangible Personalty shall be deemed, by acquiring such interest or recording any evidence thereof, to have agreed and consented to any or all such actions by Mortgagee.

9.9 Subrogation of Mortgagee. Mortgagee shall be subrogated to the lien of any previous encumbrance discharged with funds advanced by Mortgagee under the Loan Documents, regardless of whether such previous encumbrance has been released of record.

9.10 Notices. Any notice required or permitted to be given by Mortgagor or Mortgagee under this Mortgage shall be in writing and will be deemed given (a) upon personal delivery, (b) on the first business day after receipted delivery to a courier service which guarantees next-business-day delivery, or (c) on the third business day after mailing, by registered or certified United States mail, postage prepaid, in any case to the appropriate party at its address set forth below:

If to Mortgagor:

Tradeport Development II, LLC

204 West Newberry Road

Bloomfield, Connecticut 06002-1308

Attention: Anthony Galici

with a copy to:

Murtha Cullina, LLP

Cityplace One, 185 Asylum Street

Hartford, Connecticut 06103

Attention: Thomas Daniells, Esq.

If to Mortgagee:

First SunAmerica Life Insurance Company

c/o AIG Global Investment Corp.

1 SunAmerica Center, 38th Floor

Century City

Los Angeles, California 90067-6022

Attention: Director-Mortgage Lending and Real Estate

with a copy to:

Otten, Johnson, Robinson, Neff & Ragonetti, P.C.

950 Seventeenth Street, Suite 1600

Denver, Colorado 80202

Attention: Aaron J. Hill, Esq.

Either party may change such party’s address for notices or copies of notices by giving notice to the other party in accordance with this Section.

9.11 Defeasance. Upon payment and performance in full of all of the Secured Obligations, Mortgagee will execute and deliver to Mortgagor such documents as may be required to release this Mortgage of record.

9.12 Illegality. If any provision of this Mortgage is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Mortgage, the legality, validity, and enforceability of the remaining provisions of this Mortgage shall not be affected thereby, and in lieu of each such illegal, invalid or unenforceable provision there shall be added automatically as a part of this Mortgage a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. If the rights and liens created by this Mortgage shall be invalid or unenforceable as to any part of the Secured Obligations, then the unsecured portion of the Secured Obligations shall be completely paid prior to the payment of the remaining and secured portion of the Secured Obligations, and all payments made on the Secured Obligations shall be considered to have been paid on and applied first to the complete payment of the unsecured portion of the Secured Obligations.

9.13 Usury Savings Clause. It is expressly stipulated and agreed to be the intent of Mortgagee and Mortgagor at all times to comply with the applicable law governing the highest lawful interest rate. If the applicable law is ever judicially interpreted so as to render usurious any amount called for under the Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to the Loan, or if acceleration of the maturity of the Note, any prepayment by Mortgagor, or any other circumstance whatsoever, results in Mortgagor having paid any interest in excess of that permitted by applicable law, then it is the express intent of Mortgagor and Mortgagee that all excess amounts theretofore collected by Mortgagee be credited on the principal balance of the Note (or, at Mortgagee’s option, paid over to Mortgagor), and the provisions of the Note and other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate maturity of the Note does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Mortgagee does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Mortgagee for the use, forbearance or detention of the Secured Obligations

evidenced hereby or by the Note shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such Secured Obligations until payment in full so that the rate or amount of interest on account of such Secured Obligations does not exceed the maximum rate or amount of interest permitted under applicable law. The term “applicable law” as used herein shall mean any federal or state law applicable to the Loan.

9.14 Obligations Binding Upon Mortgagor’s Successors. This Mortgage is binding upon Mortgagor and Mortgagor’s successors and assigns, and shall inure to the benefit of Mortgagee, and its successors and assigns, and the provisions hereof shall likewise be covenants running with the land. The duties, covenants, conditions, obligations, and warranties of Mortgagor in this Mortgage shall be joint and several obligations of Mortgagor and Mortgagor’s successors and assigns.

9.15 Construction. All pronouns and any variations of pronouns herein shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the identity of the parties may require. Whenever the terms herein are singular, the same shall be deemed to mean the plural, as the identity of the parties or the context requires.

9.16 Attorneys’ Fees. Any reference in this Mortgage to attorneys’ or counsel’s fees paid or incurred by Mortgagee shall be deemed to include paralegals’ fees and legal assistants’ fees. Moreover, wherever provision is made herein for payment of attorneys’ or counsel’s fees or expenses incurred by Mortgagee, such provision shall include but not be limited to, such fees or expenses incurred in any and all judicial, bankruptcy, reorganization, administrative, or other proceedings, including appellate proceedings, whether such fees or expenses arise before proceedings are commenced, during such proceedings or after entry of a final judgment.

9.17 Waiver and Agreement. MORTGAGOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PREPAYMENT CHARGE, UPON ACCELERATION OF THE MATURITY DATE OF THE NOTE, AND AGREES THAT, IF FOR ANY REASON A PREPAYMENT OF ALL OR ANY PART OF THE NOTE IS MADE, WHETHER VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THE NOTE BY MORTGAGEE ON ACCOUNT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT ARISING FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE PROPERTY OR ANY PART THEREOF SECURING THE NOTE, THEN MORTGAGOR SHALL BE OBLIGATED TO PAY, CONCURRENTLY WITH SUCH PREPAYMENT, THE PREPAYMENT PREMIUM PROVIDED FOR IN THE NOTE (OR, IN THE EVENT OF ACCELERATION WHEN THE NOTE IS CLOSED TO PREPAYMENT, AS PROVIDED IN THE DEFINITION OF “SECURED OBLIGATIONS” SET FORTH IN ARTICLE 1 HEREOF). MORTGAGOR HEREBY DECLARES THAT MORTGAGEE’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THE NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY MORTGAGOR, FOR THIS WAIVER AND AGREEMENT.

9.18 Waiver of Jury Trial. MORTGAGEE AND MORTGAGOR KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS MORTGAGE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MORTGAGE OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR MORTGAGEE AND MORTGAGOR TO ENTER INTO THE LOAN.

9.19 Governing Laws. The substantive laws of the State shall govern the validity, construction, enforcement and interpretation of this Mortgage.

9.20 Inconsistency. In the event of any inconsistency between the terms of the Loan Documents and the terms of that certain First Mortgage Loan Application between Mortgagor and Mortgagee, as amended (the “Application”), the terms of the Loan Documents shall govern and control in all respects.

9.21 Prejudgment Remedy. MORTGAGOR AND EACH ENDORSER, GUARANTOR AND SURETY OF THE NOTE, AND EACH OTHER PERSON LIABLE OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY THE NOTE, HEREBY ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THE NOTE AND THIS MORTGAGE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52–278a TO 52–278n, INCLUSIVE, OR BY OTHER APPLICABLE LAW, HEREBY WAIVE THEIR RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH MORTGAGEE OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

9.22 Anti-Terrorism.

(a) None of Mortgagor, Guarantor or any of their respective constituents or affiliates is in violation of any laws relating to terrorism or money laundering, including without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, (as the same has been, or may hereafter be, renewed, extended, amended or replaced, the “Executive Order”) and the Bank Secrecy Act (31 U.S.C. § 5311 et seq .), as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, as the same has been, or may hereafter be, renewed, extended, amended or replaced, the “Patriot Act”). As used herein, “Anti-Terrorism Laws” shall mean any laws relating to terrorism or money laundering, including the Executive Order, the Patriot Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing laws may from time to time be renewed, extended, amended, or replaced).

(b) None of Mortgagor, Guarantor, their respective affiliates, or to Mortgagor’s knowledge, any person having a beneficial interest in Mortgagor or Guarantor, any person for whom Mortgagor or Guarantor is acting as agent or nominee, any of their respective brokers or other agents acting in any capacity in connection with the Loan or, to Mortgagor’s knowledge as of the date hereof, Mortgagor’s predecessor in interest to the Property is a “Prohibited Person,” which is defined as follows:

(i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) a person or entity with whom Mortgagee or any bank or other institutional lender is prohibited from dealing or otherwise engaging in any Anti-Terrorism Law;

(iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order;

(v) a person or entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official Website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement Website or other replacement official publication of such list; and

(vi) a person or entity who is affiliated with a person or entity listed above.

(c) None of Mortgagor, Guarantor, any of their respective affiliates, to Mortgagor’s knowledge, any of their respective brokers or other agents acting in any capacity in connection with the Loan or, to Mortgagor’s knowledge as of the date hereof, the seller of the Property (if any portion of the Property is being acquired with proceeds of the Loan), does or shall (i) conduct any business or engage in any transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person or leasing any portion of the Property to any Prohibited Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(d) Mortgagor shall promptly deliver to Mortgagee any certification or other evidence reasonably requested from time to time by Mortgagee confirming Mortgagor’s compliance with this Section. The representations, warranties and covenants set forth in this Section shall be deemed repeated and reaffirmed by Mortgagor as of each date that Mortgagor makes a payment to Mortgagee under the Note, this Mortgage and the other Loan Documents or receives any payment from Mortgagee. Mortgagor shall promptly notify Mortgagee in writing

should Mortgagor become aware of any change in the information set forth in these representations, warranties and covenants.

NOW THEREFORE, if Mortgagor shall pay or cause to be paid the Secured Obligations and if Mortgagor shall keep, perform and observe all of the covenants, agreements, conditions and provisions of this Mortgage and the other Loan Documents, then this Mortgage shall be null and void and of no further force and effect and shall be released by Mortgagee after written request by, and at the expense of, Mortgagor; otherwise to remain in full force and effect.

[Balance of Page Intentionally Left Blank]

IN WITNESS WHEREOF, Mortgagor has executed and delivered this Mortgage as of the date first mentioned above.

		TRADEPORT DEVELOPMENT II, LLC, a Connecticut limited liability company

		By: River Bend Associates, Inc., a Connecticut corporation, its Sole Member

Witness:	/s/ Thomas Daniells	By:	/s/ Anthony Galici

		Name:			Anthony Galici

Witness:	/s/ Sara Taylor	Title:		Vice President

Exhibit 10.30

PROMISSORY NOTE

U.S. $12,700,000.00

July 6, 2005

FOR VALUE RECEIVED, and at the times hereinafter specified, TRADEPORT DEVELOPMENT II, LLC, a Connecticut limited liability company (“Maker”), whose address is 204 West Newberry Road, Bloomfield, Connecticut 06002–1308, hereby promises to pay to the order of FIRST SUNAMERICA LIFE INSURANCE COMPANY, a New York corporation (hereinafter referred to, together with each subsequent holder hereof, as “Holder”), at c/o AIG Global Investment Corp., 1 SunAmerica Center, 38 ^th Floor, Century City, Los Angeles, California 90067-6022, or at such other address as may be designated from time to time hereafter by any Holder, the principal sum of TWELVE MILLION SEVEN HUNDRED THOUSAND AND NO/100THS DOLLARS ($12,700,000.00), together with interest on the principal balance outstanding from time to time, as hereinafter provided, in lawful money of the United States of America.

By its execution and delivery of this promissory note (this “Note”), Maker covenants and agrees as follows:

1. Interest Rate and Payments .

(a) The balance of principal outstanding from time to time under this Note shall bear interest at the rate of five and forty–six one hundredths percent (5.46%) per annum (the “Original Interest Rate”), based on a three hundred sixty (360) day year composed of twelve (12) months of thirty (30) days each; however, interest for partial months shall be calculated by multiplying the principal balance of this Note by the applicable interest rate (i.e., the Original Interest Rate or the New Rate (hereinafter defined)), dividing the product by three hundred sixty (360), and multiplying that result by the actual number of days elapsed.

(b) Interest only shall be payable on the date the loan evidenced by this Note (the “Loan”) is funded by Holder, in advance, for the period from and including the date of funding through and including July 31, 2005.

(c) Commencing on September 1, 2005 and on the first day of each month thereafter through and including July 1, 2015 combined payments of principal and interest shall be payable, in arrears, in the amount of $71,790.80 each (such amount representing an amount sufficient to fully amortize the original principal amount of this Note over a three hundred sixty (360) month period (the “Amortization Period”)).

(d) The entire outstanding principal balance of this Note, together with all accrued and unpaid interest and all other sums due hereunder, shall be due and payable in full on August 1, 2015 (the “Original Maturity Date”).

2. Holder’s Extension Option; Net Operating Income .

(a) If Maker shall fail to pay the outstanding principal balance of this Note and all accrued interest and other charges due hereon at the Original Maturity Date, Holder shall have the right, at Holder’s sole option and discretion, to extend the term of the Loan for an additional period of five (5) years (the “Extension Term”). If Holder elects to extend the term of the Loan, Maker shall pay all fees of Holder incurred in connection with such extension, including, but not limited to, attorneys’ fees and title insurance premiums. Maker shall execute all documents reasonably requested by Holder to evidence and secure the Loan, as extended, and shall obtain and provide to Holder any title insurance policy or endorsement requested by Holder.

(b) Should Holder elect to extend the term of the Loan as provided above, Holder shall (i) reset the interest rate borne by the then-existing principal balance of the Loan to a rate per annum (the “New Rate”) equal to the greater of (A) the Original Interest Rate, or (B) Holder’s (or comparable lenders’, if Holder is no longer making such loans) then-prevailing interest rate for five (5) year loans secured by properties similar to the Property (hereinafter defined), as determined by Holder in its sole discretion; (ii) re-amortize the then-existing principal balance of the Loan over the remaining portion of the Amortization Period (the “New Amortization Period”); (iii) have the right to require Maker to enter into modifications of the non-economic terms of the Loan Documents as Holder may request (the “Non-Economic Modifications”); and (iv) notwithstanding any provision set forth in the Loan Documents to the contrary, have the right to require Maker to make monthly payments into escrow for insurance premiums and real property taxes, assessments and similar governmental charges. Hence, monthly principal and interest payments during the Extension Term shall be based upon the New Rate, and calculated to fully amortize the outstanding principal balance of the Loan over the New Amortization Period.

(c) If Holder elects to extend the term of the Loan, Holder shall advise Maker of the New Rate within fifteen (15) days following the Original Maturity Date.

(d) In addition to the required monthly payments of principal and interest set forth above, commencing on the first day of the second month following the Original Maturity Date and continuing on the first day of each month thereafter during the Extension Term (each an “Additional Payment Date”), Maker shall make monthly payments to Holder in an amount equal to all Net Operating Income (hereinafter defined) attributable to the Property for the calendar month ending on the last day of the month that is two months preceding each such Additional Payment Date. For example, assuming the Original Maturity Date is January 1, then Net Operating Income for the period from January 1 through January 31 shall be payable to Holder on March 1; Net Operating Income for the period from February 1 through February 28 shall be payable to Holder on April 1, and so on.

(e) Holder shall deposit all such Net Operating Income received from Maker into an account or accounts maintained at a financial institution chosen by Holder or its servicer in its sole discretion (the “Deposit Account”) and all such funds shall be invested in a manner acceptable to Holder in its sole discretion. All interest, dividends and earnings credited to the Deposit Account shall be held and applied in accordance with the terms hereof.

(f) On the third Additional Payment Date and on each third Additional Payment Date thereafter, Holder shall apply all Excess Funds (hereinafter defined), if any, to prepayment of amounts due under this Note, without premium or penalty.

(g) As security for the repayment of the Loan and the performance of all other obligations of Maker under the Loan Documents, Maker hereby assigns, pledges, conveys, delivers, transfers and grants to Holder a first priority security interest in and to: all Maker’s right, title and interest in and to the Deposit Account; all rights to payment from the Deposit Account and the money deposited therein or credited thereto (whether then due or in the future due and whether then or in the future on deposit); all interest thereon; any certificates, instruments and securities, if any, representing the Deposit Account; all claims, demands, general intangibles, choses in action and other rights or interests of Maker in respect of the Deposit Account; any monies then or at any time thereafter deposited therein; any increases, renewals, extensions, substitutions and replacements thereof; and all proceeds of the foregoing.

(h) From time to time, but not more frequently than monthly, Maker may request a disbursement (a “Disbursement”) from the Deposit Account for capital expenses, tenant improvement expenses, leasing commissions and special contingency expenses. Holder may consent to or deny any such Disbursement in its sole discretion.

(i) Upon the occurrence of any Event of Default (hereinafter defined) (i) Maker shall not be entitled to any further Disbursement from the Deposit Account; and (ii) Holder shall be entitled to take immediate possession and control of the Deposit Account (and all funds contained therein) and to pursue all of its rights and remedies available to Holder under the Loan Documents, at law and in equity.

(j) All of the terms and conditions of the Loan shall apply during the Extension Term, except as expressly set forth above, and except that no further extensions of the Loan shall be permitted.

(k) For the purposes of the foregoing:

(i) “Excess Funds” shall mean, on any Additional Payment Date, the amount of funds then existing in the Deposit Account (including any Net Operating Income due on the applicable Additional Payment Date), less an amount equal to the sum of three regularly scheduled payments of principal and interest due on this Note;

(ii) “Net Operating Income” shall mean, for any particular period of time, Gross Revenue for the relevant period, less Operating Expenses for the relevant period; provided, however, that if such amount is equal to or less than zero (0), Net Operating Income shall equal zero (0);

(iii) “Gross Revenue” shall mean all payments and other revenues (exclusive, however, of any payments attributable to sales taxes) received by or on behalf of Maker from all sources related to the ownership or operation of the Property, including, but not limited to, rents, room charges, parking fees, interest, security deposits (unless required to be held in a segregated account), business interruption insurance

proceeds, operating expense pass-through revenues and common area maintenance charges, for the relevant period for which the calculation of Gross Revenue is being made; and

(iv) “Operating Expenses” shall mean the sum of all ordinary and necessary operating expenses actually paid by Maker in connection with the operation of the Property during the relevant period for which the calculation of Operating Expenses is being made, including, but not limited to, (a) payments made by Maker for taxes and insurance required under the Loan Documents, and (b) monthly debt service payments as required under this Note.

3. Budgets During Extension Term .

(a) Within fifteen (15) days following the Original Maturity Date and on or before December 1 of each subsequent calendar year, Maker shall deliver to Holder a proposed revenue and expense budget for the Property for the remainder of the calendar year in which the Original Maturity Date occurs or the immediately succeeding calendar year (as applicable). Such budget shall set forth Maker’s projection of Gross Revenue and Operating Expenses for the applicable calendar year, which shall be subject to Holder’s reasonable approval. Once a proposed budget has been reviewed and approved by Holder, and Maker has made all revisions requested by Holder, if any, the revised budget shall be delivered to Holder and shall thereafter become the budget for the Property hereunder (the “Budget”) for the applicable calendar year. If Maker and Holder are unable to agree upon a Budget for any calendar year, the budgeted Operating Expenses (excluding extraordinary items) provided in the Budget for the Property for the preceding calendar year shall be considered the Budget for the Property for the subject calendar year until Maker and Holder agree upon a new Budget for such calendar year.

(b) During the Extension Term, Maker shall operate the Property in accordance with the Budget for the applicable calendar year, and the total of expenditures relating to the Property exceeding one hundred and five percent (105%) of the aggregate of such expenses set forth in the Budget for the applicable time period shall not be treated as Operating Expenses for the purposes of calculating “Net Operating Income,” without the prior written consent of Holder except for emergency expenditures which, in the Maker’s good faith judgment, are reasonably necessary to protect, or avoid immediate danger to, life or property.

4. Reports During Extension Term .

(a) During the Extension Term, Maker shall deliver to Holder all financial statements reasonably required by Holder to calculate Net Operating Income, including, without limitation, a monthly statement to be delivered to Holder concurrently with Maker’s payment of Net Operating Income that sets forth the amount of Net Operating Income accompanying such statement and Maker’s calculation of Net Operating Income for the relevant calendar month. Such statements shall be certified by an executive officer of Maker or Maker’s manager, managing member or general partner (as applicable) as having been prepared in accordance with the terms hereof and to be true, accurate and complete in all material respects.

(b) In addition, on or before February 1 of each calendar year during the Extension Term, Maker shall submit to Holder an annual income and expense statement for the Property which shall include the calculation of Gross Revenue, Operating Expenses and Net Operating Income for the preceding calendar year and shall be accompanied by Maker’s reconciliation of any difference between the actual aggregate amount of the Net Operating Income for such calendar year and the aggregate amount of Net Operating Income for such calendar year actually remitted to Holder. All such statements shall be certified by an executive officer of Maker or Maker’s manager, managing member or general partner (as applicable) as having been prepared in accordance with the terms hereof and to be true, accurate and complete in all material respects. If any such annual financial statement discloses any inconsistency between the calculation of Net Operating Income and the amount of Net Operating Income actually remitted to Holder, Maker shall immediately remit to Holder the amount of any underpayment of Net Operating Income for such calendar year or, in the event of an overpayment by Maker, such amount may be withheld from any subsequent payment of Net Operating Income required hereunder.

(c) Holder may notify Maker within ninety (90) days after receipt of any statement or report required hereunder that Holder disputes any computation or item contained in any portion of such statement or report. If Holder so notifies Maker, Holder and Maker shall meet in good faith within twenty (20) days after Holder’s notice to Maker to resolve such disputed items. If, despite such good faith efforts, the parties are unable to resolve the dispute at such meeting or within ten (10) days thereafter, the items shall be resolved by an independent certified public accountant designated by Holder within fifteen (15) days after such ten (10) day period. The determination of such accountant shall be final. All fees of such accountant shall be paid by Maker. Maker shall remit to Holder any additional amount of Net Operating Income found to be due for such periods within ten (10) days after the resolution of such dispute by the parties or the accountant’s determination, as applicable. The amount of any overpayment found to have been made for such periods may be withheld from any required future remittance of Net Operating Income.

(d) Maker shall at all times keep and maintain full and accurate books of account and records adequate to reflect correctly all items required in order to calculate Net Operating Income.

5. Prepayment .

(a) During the first five (5) years after the date of this Note, Maker shall have no right to prepay all or any part of this Note.

(b) At any time after the fifth (5 ^th ) anniversary of the date of this Note, Maker shall have the right to prepay the full principal amount of this Note and all accrued but unpaid interest hereon as of the date of prepayment, provided that (i) Maker gives not less than thirty (30) days’ prior written notice to Holder of Maker’s election to prepay this Note, and (ii) Maker pays a prepayment premium to Holder equal to the greater of (A) one percent (1%) of the outstanding principal amount of this Note or (B) the Present Value of this Note (hereinafter defined), less the amount of principal being prepaid, calculated as of the prepayment date.

(c) Holder shall notify Maker of the amount and basis of determination of the prepayment premium. Holder shall not be obligated to accept any prepayment of the principal balance of this Note unless such prepayment is accompanied by the applicable prepayment premium and all accrued interest and other sums due under this Note. Maker may not prepay the Loan on a Friday or on any day preceding a public holiday, or the equivalent for banks generally under the laws of the State in which the Property is located (the “State”).

(d) Except for making payments of Net Operating Income as required above, and except for the application of insurance proceeds or condemnation awards to the principal balance of this Note, as provided in the Mortgage (hereinafter defined), in no event shall Maker be permitted to make any partial prepayments of this Note.

(e) If Holder accelerates this Note for any reason, then in addition to Maker’s obligation to pay the then outstanding principal balance of this Note and all accrued but unpaid interest thereon, Maker shall pay an additional amount equal to the prepayment premium that would be due to Holder if Maker were voluntarily prepaying this Note at the time that such acceleration occurred, or if under the terms hereof no voluntary prepayment would be permissible on the date of such acceleration, Maker shall pay a prepayment premium calculated as set forth in the Mortgage.

(f) For the purposes of the foregoing:

(i) The “Present Value of this Note” with respect to any prepayment of this Note, as of any date, shall be determined by discounting all scheduled payments of principal and interest remaining to maturity of this Note, attributed to the amount being prepaid, at the Discount Rate. If prepayment occurs on a date other than a regularly scheduled payment date, the actual number of days remaining from the prepayment date to the next regularly scheduled payment date will be used to discount within such period;

(ii) The “Discount Rate” is the rate which, when compounded monthly, is equivalent to the Treasury Rate, when compounded semi-annually;

(iii) The “Treasury Rate” is the semi-annual yield on the Treasury Constant Maturity Series with maturity equal to the remaining weighted average life of this Note, for the week prior to the prepayment date, as reported in Federal Reserve Statistical Release H.15 - Selected Interest Rates, conclusively determined by Holder on the prepayment date. The rate will be determined by linear interpolation between the yields reported in Release H.15, if necessary. In the event Release H.15 is no longer published, Holder shall select a comparable publication to determine the Treasury Rate.

(g) Holder shall not be obligated actually to reinvest the amount prepaid in any treasury obligations as a condition precedent to receiving any prepayment premium.

(h) Notwithstanding the foregoing, (i) at any time during the Extension Term, Maker shall have the right to prepay the full principal amount of this Note and all accrued but unpaid interest thereon as of the date of prepayment, without prepayment premium thereon, and (ii) no prepayment premium shall be due in connection with the application of any insurance proceeds or condemnation awards to the principal balance of this Note, as provided in the Mortgage.

6. Payments . Whenever any payment to be made under this Note shall be stated to be due on a Saturday, Sunday or public holiday or the equivalent for banks generally under the laws of the State (any other day being a “Business Day”), such payment may be made on the next succeeding Business Day.

7. Default Rate .

(a) The entire balance of principal, interest, and other sums due upon the maturity hereof, by acceleration or otherwise, shall bear interest from the date due until paid at the greater of (i) eighteen percent (18%) per annum and (ii) a per annum rate equal to five percent (5%) over the prime rate (for corporate loans at large United States money center commercial banks) published in The Wall Street Journal on the first business day of each month (the “Default Rate”); provided, however, that such rate shall not exceed the maximum permitted by applicable state or federal law. In the event The Wall Street Journal is no longer published or no longer publishes such prime rate, Holder shall select a comparable reference.

(b) If any payment under this Note is not made when due, interest shall accrue at the Default Rate from the date such payment was due until payment is actually made.

8. Late Charges . In addition to interest as set forth herein, Maker shall pay to Holder a late charge equal to four percent (4%) of any amounts due under this Note in the event any such amount is not paid when due. Notwithstanding the foregoing, Maker shall be permitted to make one such payment within five (5) days following its due date in any consecutive twelve-month period without incurring a late charge.

9. Application of Payments . All payments hereunder shall be applied first to the payment of late charges, if any, then to the payment of prepayment premiums, if any, then to the repayment of any sums advanced by Holder for the payment of any insurance premiums, taxes, assessments, or other charges against the property securing this Note (together with interest thereon at the Default Rate from the date of advance until repaid), then to the payment of accrued and unpaid interest, and then to the reduction of principal.

10. Immediately Available Funds . Payments under this Note shall be payable in immediately available funds without setoff, counterclaim or deduction of any kind, and shall be made by electronic funds transfer from a bank account established and maintained by Maker for such purpose.

11. Security . This Note is secured by a Mortgage Deed, Security Agreement, Fixture Filing, Financing Statement and Assignment of Leases and Rents of even date herewith granted by Maker for the benefit of the named Holder hereof (the “Mortgage”) encumbering

certain real property and improvements thereon commonly known as 75 International Drive and 758 Rainbow Road, Windsor, Connecticut as more particularly described in such Mortgage (the “Property”).

12. Certain Definitions . Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Mortgage.

13. Event of Default . Each of the following events will constitute an event of default (an “Event of Default”) under this Note and under the Mortgage and each other Loan Document, and any Event of Default under any Loan Document shall constitute an Event of Default hereunder and under each of the other Loan Documents:

(a) any failure to pay when due any sum hereunder;

(b) any failure of Maker to properly perform any obligation contained herein or in any of the other Loan Documents (other than the obligation to make payments under this Note or the other Loan Documents) and the continuance of such failure for a period of ten (10) days following written notice thereof from Holder to Maker; provided, however, that if such failure is not curable within such ten (10) day period, then, so long as Maker commences to cure such failure within such ten (10) day period and is continually and diligently attempting to cure to completion, such failure shall not be an Event of Default unless such failure remains uncured for thirty (30) days after such written notice to Maker; or

(c) if, at any time during the Extension Term, Gross Revenue for any calendar month shall be less than ninety-three percent (93%) of the amount of projected Gross Revenue for such month set forth in the applicable Budget.

14. Acceleration . Upon the occurrence of any Event of Default, the entire balance of principal, accrued interest, and other sums owing hereunder shall, at the option of Holder, become at once due and payable without notice or demand. Upon the occurrence of an Event of Default described in Section 13(c) hereof, Holder shall have the option, in its sole discretion, to either (a) exercise any remedies available to it under the Loan Documents, at law or in equity, or (b) require Maker to submit a new proposed budget for Holder’s approval. If Holder agrees to accept such new proposed budget, then such budget shall become the Budget for all purposes hereunder.

15. Conditions Precedent . Maker hereby certifies and declares that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Note, and to constitute this Note the legal, valid and binding obligation of Maker, enforceable in accordance with the terms hereof, have been done and performed and happened in due and strict compliance with all applicable laws.

16. Certain Waivers and Consents . Maker and all parties now or hereafter liable for the payment hereof, primarily or secondarily, directly or indirectly, and whether as endorser, guarantor, surety, or otherwise, hereby severally (a) waive presentment, demand, protest, notice of protest and/or dishonor, and all other demands or notices of any sort whatever with respect to this Note, (b) consent to impairment or release of collateral, extensions of time for payment, and acceptance of partial payments before, at, or after maturity, (c) waive any right

to require Holder to proceed against any security for this Note before proceeding hereunder, (d) waive diligence in the collection of this Note or in filing suit on this Note, and (e) agree to pay all costs and expenses, including reasonable attorneys’ fees, which may be incurred in the collection of this Note or any part thereof or in preserving, securing possession of, and realizing upon any security for this Note.

17. Usury Savings Clause . The provisions of this Note and of all agreements between Maker and Holder are, whether now existing or hereinafter made, hereby expressly limited so that in no contingency or event whatever, whether by reason of acceleration of the maturity hereof, prepayment, demand for payment or otherwise, shall the amount paid, or agreed to be paid, to Holder for the use, forbearance, or detention of the principal hereof or interest hereon, which remains unpaid from time to time, exceed the maximum amount permissible under applicable law, it particularly being the intention of the parties hereto to conform strictly to the laws of the State and Federal law, whichever is applicable. If from any circumstance whatever, the performance or fulfillment of any provision hereof or of any other agreement between Maker and Holder shall, at the time performance or fulfillment of such provision is due, involve or purport to require any payment in excess of the limits prescribed by law, then the obligation to be performed or fulfilled is hereby reduced to the limit of such validity, and if from any circumstance whatever Holder should ever receive as interest an amount which would exceed the highest lawful rate, the amount which would be excessive interest shall be applied to the reduction of the principal balance owing hereunder (or, at Holder’s option, be paid over to Maker) and shall not be counted as interest. To the extent permitted by applicable law, determination of the legal maximum amount of interest shall at all times be made by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of this Note, all interest at any time contracted for, charged, or received from Maker in connection with this Note and all other agreements between Maker and Holder, so that the actual rate of interest on account of the indebtedness represented by this Note is uniform throughout the term hereof.

18. Non-Recourse; Exceptions to Non-Recourse . Nothing contained in this Note or any of the other Loan Documents shall be deemed to impair or limit Holder’s rights: in foreclosure proceedings or in any ancillary proceedings brought to facilitate Holder’s foreclosure on the Property or any portion thereof or to exercise any specific rights or remedies afforded Holder under any other provisions of the Loan Documents or by law or in equity, subject to the non-recourse provisions set forth below; to recover in accordance with the terms of any guarantee given in connection with the Loan; or to pursue any personal liability of Maker or any Guarantor under the Environmental Indemnity Agreement or Section 5.10 of the Mortgage. Except as expressly set forth in this Section 18, the recourse of Holder with respect to the obligations evidenced by the Loan Documents shall be solely to the Property, Chattels and Intangible Personalty (as defined in the Mortgage) and any other collateral given as security for the Loan:

(a) Notwithstanding anything to the contrary contained in this Note or in any Loan Document, nothing shall be deemed in any way to impair, limit or prejudice the rights of Holder to collect or recover from Maker and Guarantor (as defined in the Mortgage): (i) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of waste by Maker; (ii) any condemnation or insurance proceeds attributable to the Property which were not paid to Holder or used to restore the Property in accordance with the

terms of the Mortgage; (iii) any rents, profits, advances, rebates, prepaid rents or other similar sums attributable to the Property collected by or for Maker following an Event of Default (as defined in the Mortgage) and not properly applied to the reasonable fixed and operating expenses of the Property, including payments of this Note and other sums due under the Loan Documents; (iv) any security deposits collected by or for Borrower and not applied in accordance with applicable leases; (v) the amount of any accrued taxes, assessments, and/or utility charges affecting the Property (whether or not the same have been billed to Maker) that are either unpaid by Maker or advanced by Holder under the Mortgage, but excluding any amounts then in escrow with Holder for any such taxes or assessments; provided, however, that Maker shall not be obligated for those taxes, assessments and/or utility charges accruing after the date that is the earlier of (A) Maker’s tender of a deed–in–lieu of foreclosure to Holder, subject to no title exceptions other than the Permitted Exceptions or those otherwise acceptable to Holder in its sole discretion (provided the Property is free of any environmental contamination), or (B) the date Holder takes title to the Property in connection with the foreclosure of the Mortgage; (vi) any sums expended by Holder in fulfilling the obligations of Maker, as lessor, under any leases affecting the Property; provided, however, that Maker shall not be obligated for those sums expended by Holder in fulfilling the obligations of Maker accruing after the date that is the earlier of (A) Maker’s tender of a deed–in–lieu of foreclosure to Holder, subject to no title exceptions other than the Permitted Exceptions or those otherwise acceptable to Holder in its sole discretion (provided the Property is free of any environmental contamination), or (B) the date Holder takes title to the Property in connection with the foreclosure of the Mortgage; (vii) the amount of any loss suffered by Holder (that would otherwise be covered by insurance) as a result of Maker’s failure to maintain the insurance required under the terms of any Loan Document; (viii) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of the Property, or any part thereof or any interest therein, or any interest in Maker, being further encumbered by a voluntary lien securing any obligation upon which Maker, any direct or indirect general partner, manager or managing member of Maker, any guarantor of the Loan, or any principal or affiliate of Maker shall be personally liable for repayment, either as obligor or guarantor; (ix) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of any breach or violation of Section 5.4, 5.5 or 5.7 of the Mortgage; (x) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of any intentional fraud or material misrepresentation by Maker in connection with the Property, the Loan Documents, or the Application (as defined in the Mortgage); (xi) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of Maker forfeiting the Property or Chattels or any portion of the Property or Chattels due to criminal activity; and (xii) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of any amendment, modification or Maker termination of any lease to Excel Inc., Matheson Flight Extenders, Inc., or FedEx Ground Package System, Inc. (individually, a Major Tenant) or execution or subsequent amendment, modification or termination of any lease for any space currently occupied by any Major Tenant without the prior written consent of Holder, which consent shall not be unreasonably held. For purposes of the foregoing, “affiliate” shall mean any individual, corporation, trust, partnership or any other person or entity controlled by, controlling or under common control with Maker. A person or entity of any nature shall be presumed to have control when it possesses the power, directly or indirectly, to direct, or cause the direction

of, the management or policies of another person or entity, whether through ownership of voting securities, by contract, or otherwise.

(b) The agreement set forth in the introductory paragraph of this Section 18 to limit the personal liability of Maker shall become null and void and be of no further force and effect, and Maker and each Guarantor shall be personally liable for the obligations evidenced by this Note, in the event of any attempt, without a good faith defense, by Maker, any Guarantor, or any other person directly or indirectly responsible for the management of Maker or liable for repayment of Maker’s obligations under the Loan (whether as maker, endorser, guarantor, surety, general partner or otherwise) to materially delay foreclosure against the Property, Chattels and/or Intangible Personalty, which attempts shall include, without limitation (i) any claim that any Loan Document is invalid or unenforceable to an extent that would preclude any such foreclosure or other exercise of remedies by Holder to obtain possession of any collateral for the Loan; (ii) Maker filing a petition in bankruptcy, Maker failing to oppose in good faith the entry of an order for relief pursuant to any involuntary bankruptcy petition filed against it, or Maker seeking any reorganization, liquidation, dissolution or similar relief under the bankruptcy laws of the United States or under any other similar federal, state or other statute relating to relief from indebtedness; or (iii) Maker consenting to, or failing to oppose in good faith, the appointment of a receiver, trustee or liquidator with respect to Maker or the Property or any part thereof.

19. Severability . If any provision hereof or of any other document securing or related to the indebtedness evidenced hereby is, for any reason and to any extent, invalid or unenforceable, then neither the remainder of the document in which such provision is contained, nor the application of the provision to other persons, entities, or circumstances, nor any other document referred to herein, shall be affected thereby, but instead shall be enforceable to the maximum extent permitted by law.

20. Transfer of Note . Each provision of this Note shall be and remain in full force and effect notwithstanding any negotiation or transfer hereof and any interest herein to any other Holder or participant.

21. Governing Law . Regardless of the place of its execution, this Note shall be construed and enforced in accordance with the laws of the State.

22. Time of Essence . Time is of the essence with respect to all of Maker’s obligations under this Note.

23. Remedies Cumulative . The remedies provided to Holder in this Note, the Mortgage and the other Loan Documents are cumulative and concurrent and may be exercised singly, successively or together against Maker, the Property, and other security, or any guarantor of this Note, at the sole and absolute discretion of the Holder.

24. No Waiver . Holder shall not by any act or omission be deemed to waive any of its rights or remedies hereunder unless such waiver is in writing and signed by the Holder and then only to the extent specifically set forth therein. A waiver of one event shall not be

construed as continuing or as a bar to or waiver of any right or remedy granted to Holder hereunder in connection with a subsequent event.

25. Joint and Several Obligation . If Maker is more than one person or entity, then (a) all persons or entities comprising Maker are jointly and severally liable for all of the Maker’s obligations hereunder; (b) all representations, warranties, and covenants made by Maker shall be deemed representations, warranties, and covenants of each of the persons or entities comprising Maker; (c) any breach, Default or Event of Default by any of the persons or entities comprising Maker hereunder shall be deemed to be a breach, Default, or Event of Default of Maker; and (d) any reference herein contained to the knowledge or awareness of Maker shall mean the knowledge or awareness of any of the persons or entities comprising Maker.

26. WAIVER OF JURY TRIAL . MAKER AND HOLDER KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE MORTGAGE, OR ANY OTHER LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR MAKER AND HOLDER TO ENTER INTO THE LOAN.

27. WAIVER OF PREPAYMENT RIGHT WITHOUT PREMIUM . MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT PREPAYMENT PREMIUM, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND AGREES THAT, IF FOR ANY REASON A PREPAYMENT OF ALL OR ANY PART OF THIS NOTE IS MADE, WHETHER VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT ARISING FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE PROPERTY OR ANY PART THEREOF SECURING THIS NOTE, THEN MAKER SHALL BE OBLIGATED TO PAY, CONCURRENTLY WITH SUCH PREPAYMENT, THE PREPAYMENT PREMIUM PROVIDED FOR IN THIS NOTE OR, IN THE EVENT OF PREPAYMENT FOLLOWING ACCELERATION OF THE MATURITY DATE HEREOF WHEN THIS NOTE IS CLOSED TO PREPAYMENT, AS PROVIDED IN THE MORTGAGE. MAKER HEREBY DECLARES THAT HOLDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY MAKER, FOR THIS WAIVER AND AGREEMENT.

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IN WITNESS WHEREOF and intending to be legally bound, Maker has duly executed this Note as of the date first above written.

MAKER:

TRADEPORT DEVELOPMENT II, LLC, a Connecticut limited liability company

By: River Bend Associates, Inc., a Connecticut corporation, its Sole Member

By:	/s/ Anthony Galici

Name:			Anthony Galici

Title:		Vice President

Exhibit 10.31

GUARANTY AGREEMENT

This GUARANTY AGREEMENT (this “Guaranty”) is made as of July 6, 2005, by GRIFFIN LAND & NURSERIES, INC., a Delaware corporation (“Guarantor”), in favor of FIRST SUNAMERICA LIFE INSURANCE COMPANY, a New York corporation (“Lender”).

1. Loan and Note . This Guaranty is executed in connection with a $12,700,000.00 loan (“Loan”) made by Lender to Tradeport Development II, LLC, a Connecticut limited liability company (“Borrower”). The Loan is (a) evidenced by a Promissory Note of even date herewith in the original principal amount of the Loan (“Note”), and (b) secured by, among other things, a Mortgage Deed, Security Agreement, Fixture Filing, Financing Statement and Assignment of Leases and Rents of even date herewith granted by Borrower for the benefit of Lender (“Mortgage,” and, together with the Note and all other documents executed by Borrower evidencing and/or securing the Loan, “Loan Documents”) covering certain real property commonly known as 75 International Drive and 758 Rainbow Road, Windsor, Connecticut, and more particularly described in the Mortgage. All capitalized terms used herein without definition shall have the meanings given to such terms in the Mortgage.

2. Purpose and Consideration . The execution and delivery of this Guaranty by Guarantor is a condition to Lender’s willingness to make the Loan to Borrower, is made in order to induce Lender to make the Loan, and is made in recognition that Lender will be relying upon this Guaranty in making the Loan and performing any other obligations it may have under the Loan Documents. Guarantor has a significant ownership interest in Borrower, and, accordingly, acknowledges that Guarantor will receive material direct and indirect benefit from Lender making the Loan to Borrower.

3. Guaranty . Guarantor hereby guarantees absolutely, primarily, and irrevocably, payment and performance of all obligations for which Borrower has, or incurs in the future, personal liability to Lender under Section 18 of the Note (collectively, the “Obligations”).

4. Guaranty is Independent and Absolute . The obligations of Guarantor hereunder are independent of the obligations of Borrower and of any other person who may become liable with respect to the Obligations. Guarantor is jointly and severally liable with Borrower and with any other guarantor for the full and timely payment and performance of all of the Obligations. Guarantor expressly agrees that a separate action or actions may be brought and prosecuted against Guarantor (or any other guarantor), whether or not any action is brought against Borrower, any other guarantor or any other person for any Obligations guaranteed hereby and whether or not Borrower, any other guarantor or any other persons are joined in any action against Guarantor. Guarantor further agrees that Lender shall have no obligation to proceed against any security for the Obligations prior to enforcing this Guaranty against Guarantor, and that Lender may pursue or omit to pursue any and all rights and remedies Lender has against any person or with respect to any security in any order or simultaneously or in any other manner. All rights of Lender and all obligations of Guarantor hereunder shall be absolute and unconditional

irrespective of (a) any lack of validity or enforceability of the Note or any other Loan Document, and (b) any other circumstances which might otherwise constitute a defense available to, or a discharge of Borrower in respect of, the Obligations.

5. Authorizations to Lender . Guarantor authorizes Lender, without notice or demand and without affecting Guarantor’s liability hereunder, from time to time (a) to renew, extend, accelerate or otherwise change the time for payment of, change, amend, alter, cancel, compromise or otherwise modify the terms of the Note, including increasing the rate or rates of interest thereunder agreed to by Borrower, and to grant any indulgences, forbearances, or extensions of time; (b) to renew, extend, change, amend, alter, cancel, compromise or otherwise modify any of the terms, covenants, conditions or provisions of any of the Loan Documents or any of the Obligations; (c) to apply any security and direct the order or manner of sale thereof as Lender, in Lender’s discretion, may determine; (d) to proceed against Borrower, Guarantor or any other guarantor with respect to any or all of the Obligations without first foreclosing against any security therefor; (e) to exchange, release, surrender, impair or otherwise deal in any manner with, or waive, release or subordinate any security interest in, any security for the Obligations; (f) to release or substitute Borrower, any other guarantors, endorsers, or other parties who may be or become liable with respect to the Obligations, without any release being deemed made of Guarantor or any other such person; and (g) to accept a conveyance or transfer to Lender of all or any part of any security in partial satisfaction of the Obligations, or any of them, without releasing Borrower, Guarantor, or any other guarantor, endorser or other party who may be or become liable with respect to the Obligations, from any liability for the balance of the Obligations.

6. Application of Payments Received by Lender . Any sums of money Lender receives from or for the account of Borrower may be applied by Lender to reduce any of the Obligations or any other liability of Borrower to Lender, as Lender in Lender’s discretion deems appropriate; provided, however, if Lender receives any amounts from Guarantor in response to Lender’s demand for payment of any of the Obligations, the Obligations will be deemed to have been reduced (or eliminated, as the case may be, but subject to Section 15 below) by the amount paid by Guarantor, regardless of how Lender applies such Funds.

7. Waivers by Guarantor . In addition to all waivers expressed in any of the Loan Documents, all of which are incorporated herein by Guarantor, Guarantor hereby waives (a) presentment, demand, protest and notice of protest, notice of dishonor and of non-payment, notice of acceptance of this Guaranty, and diligence in collection; (b) notice of the existence, creation, or incurring of any new or additional Obligations under or pursuant to any of the Loan Documents; (c) any right to require Lender to proceed against, give notice to, or make demand upon Borrower; (d) any right to require Lender to proceed against or exhaust any security or to proceed against or exhaust any security in any particular order; (e) any right to require Lender to pursue any remedy of Lender; (f) any right to direct the application of any security held by Lender; (g) any right of subrogation, any right to enforce any remedy which Lender may have against Borrower, any right to participate in any security now or hereafter held by Lender and any right to reimbursement from the Borrower for amounts paid to Lender by Guarantor until all of the Secured Obligations (as defined in the Mortgage) have been satisfied; (h) benefits, if any, of Guarantor under any anti-deficiency statutes or single-action legislation; (i) any defense arising out of any disability or other defense of Borrower, including bankruptcy, dissolution,

liquidation, cessation, impairment, modification, or limitation, from any cause, of any liability of Borrower, or of any remedy for the enforcement of such liability; (j) any statute of limitations affecting the liability of Guarantor hereunder; (k) any right to plead or assert any election of remedies by Lender; and (l) any other defenses available to a surety under applicable law.

8. Subordination by Guarantor . Guarantor hereby agrees that any indebtedness of Borrower to Guarantor, whether now existing or hereafter created, shall be and is hereby subordinated to the indebtedness of Borrower to Lender under the Loan Documents. At any time during which a Default or Event of Default shall exist, Guarantor shall not accept or seek to receive any amounts from Borrower on account of any indebtedness of Borrower to Guarantor.

9. Bankruptcy Reimbursements . Guarantor hereby agrees that if all or any part of the Obligations paid to Lender by Borrower or any other party liable for payment and satisfaction of the Obligations (other than Guarantor) are recovered from Lender in any bankruptcy proceeding, Guarantor shall reimburse Lender immediately on demand for all amounts of such Obligations so recovered from Lender, together with interest thereon at the default rate set forth in the Note from the date such amounts are so recovered until repaid in full to Lender, and, for this purpose, this Guaranty shall survive repayment of the Loan.

10. Jurisdiction and Venue . Guarantor hereby submits itself to the jurisdiction and venue of any federal court located in the State of Connecticut or any state court located in Hartford County, Connecticut in connection with any action or proceeding brought for enforcement of Guarantor’s obligations hereunder, and hereby waives any and all personal or other rights under the law of any other country or state to object to jurisdiction within such locations for purposes of litigation to enforce such obligations. Guarantor agrees that service of process upon Guarantor shall be complete upon delivery thereof in any manner permitted by law.

11. Financial Statements . For so long as any of the Obligations remain unsatisfied, Guarantor shall furnish to Lender such financial information required to be furnished by Guarantor pursuant to Section 4.12 of the Mortgage.

12. Assignability . This Guaranty shall be binding upon Guarantor and Guarantor’s heirs, representatives, successors, and assigns and shall inure to the benefit of Lender and Lender’s successors and assigns. This Guaranty shall follow the Note and other Loan Documents which are for the benefit of Lender, and, in the event the Note and other Loan Documents are negotiated, sold, transferred, assigned, or conveyed by Lender in whole or in part, this Guaranty shall be deemed to have been sold, transferred, assigned, or conveyed by Lender to the holder or holders of the Note and other Loan Documents, with respect to the Obligations contained therein, and such holder or holders may enforce this Guaranty as if such holder or holders had been originally named as Lender hereunder.

13. Payment of Costs of Enforcement . In the event any action or proceeding is brought to enforce this Guaranty, Guarantor shall pay all actual, out-of-pocket costs and expenses of Lender in connection with such action or proceeding, including, without limitation, all attorneys’ fees incurred by Lender.

14. Notices . Any notice required or permitted to be given by Guarantor or Lender under this Guaranty shall be in writing and will be deemed given (a) upon personal delivery, (b) on the first business day after receipted delivery to a courier service which guarantees next-business day delivery, or (c) on the third business day after mailing, by registered or certified United States mail, postage prepaid, in any case to the appropriate party at its address set forth below:

If to Guarantor:

Griffin Land & Nurseries, Inc.

90 Salmon Brook Street

Granby, Connecticut 06035

Attention: Mr. Frederick Danziger

If to Lender:

First SunAmerica Life Insurance Company

c/o AIG Global Investment Corp.

1 SunAmerica Center, 38th Floor

Century City

Los Angeles, California 90067-6022

Attn: Director-Mortgage Lending and Real Estate

Either party may change such party’s address for notices or copies of notices by giving notice to the other party in accordance with this Section 14 .

15. Reinstatement of Obligations . If at any time all or any part of any payment made by Guarantor or received by Lender from Guarantor under or with respect to this Guaranty is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of any Guarantor), then the obligations of Guarantor hereunder shall, to the extent of the payment rescinded or returned, and to the extent permitted by law, be deemed to have continued in existence, notwithstanding such previous payment made by Guarantor, or receipt of payment by Lender, and the obligations of Guarantor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Guarantor had never been made.

16. Severability of Provisions . If any provision hereof or of any other Loan Document shall, for any reason and to any extent, be invalid or unenforceable, then the remainder of the document in which such provision is set forth, the application of the provision to other persons, entities or circumstances, and any other document referred to herein shall not be affected thereby but instead shall be enforceable to the maximum extent permitted by law.

17. Joint and Several Obligation . If Guarantor is more than one person or entity, then (a) all persons or entities comprising Guarantor are jointly and severally liable for all of the Obligations; (b) all representations, warranties, and covenants made by Guarantor shall be deemed representations, warranties, and covenants of each of the persons or entities comprising

Guarantor; (c) any breach, default or Event of Default by any of the persons or entities comprising Guarantor hereunder shall be deemed to be a breach, default, or Event of Default of Guarantor; and (d) any reference herein contained to the knowledge or awareness of Guarantor shall mean the knowledge or awareness of any of the persons or entities comprising Guarantor.

18. Waiver . Neither the failure of Lender to exercise any right or power given hereunder or to insist upon strict compliance by Borrower, Guarantor, any other guarantor, or any other person with any of its obligations set forth herein or in any of the Loan Documents, nor any practice of Borrower or Guarantor at variance with the terms hereof or of any Loan Documents, shall constitute a waiver of Lender’s right to demand strict compliance with the terms and provisions of this Guaranty.

19. Certain Waivers . GUARANTOR, BY SIGNING THIS GUARANTY, AND LENDER, BY ACCEPTING IT, EACH KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS GUARANTY, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER AND GUARANTOR ENTERING INTO THE LOAN.

20. Applicable Law . This Guaranty and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Connecticut.

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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and year first above written.

GUARANTOR:

GRIFFIN LAND & NURSERIES, INC., a Delaware corporation

By:	/s/ Anthony Galici

Name:			Anthony Galici

Title:		Vice President

Exhibit 31.1

I, Frederick M. Danziger, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Griffin Land & Nurseries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1 , 2005	/s/ FREDERICK M. DANZIGER
	Frederick M. Danziger
	President and Chief Executive Officer

Exhibit 31.2

I, Anthony J. Galici, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Griffin Land & Nurseries, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1 , 2005	/s/ ANTHONY J. GALICI
	Anthony J. Galici
	Vice President, Chief Financial Officer and Secretary

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 UNITED STATES CODE SS. 1350

In connection with the Quarterly Report of Griffin Land & Nurseries, Inc. (the “Company”) on Form 10-Q for the quarter ended May 28, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Frederick M. Danziger, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Periodic Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ FREDERICK M. DANZIGER
	Frederick M. Danziger
	President and Chief Executive Officer
	November 1 , 2005

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 UNITED STATES CODE SS. 1350

In connection with the Quarterly Report of Griffin Land & Nurseries, Inc. (the “Company”) on Form 10-Q for the quarter ended May 28, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Anthony J. Galici, Vice President, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Periodic Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ ANTHONY J. GALICI
	Anthony J. Galici
	Vice President, Chief Financial Officer and Secretary
	November 1 , 2005