<PAGE> 1
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-28048
ROBERTS REALTY INVESTORS, INC.
(Exact name of small business issuer as specified in its charter)
GEORGIA 58-2122873
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8010 ROSWELL ROAD, SUITE 120, ATLANTA, GEORGIA 30350
(Address of principal executive offices)
(770) 394-6000
Issuer's telephone number
___________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock - 4,186,498
shares
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
REAL ESTATE ASSETS - At cost: (Note 4)
Land $ 20,151 $ 19,937
Buildings and improvements 81,219 80,441
Furniture, fixtures, and equipment 10,161 10,429
--------- ---------
111,531 110,807
Less accumulated depreciation (12,092) (8,915)
--------- ---------
Operating real estate assets 99,439 101,892
Construction-in-progress and real estate under development 7,074 10,230
--------- ---------
Net real estate assets 106,513 112,122
CASH AND CASH EQUIVALENTS 11,041 3,162
RESTRICTED CASH 667 532
DEFERRED FINANCING COSTS - net of accumulated amortization of $189 and 740 658
$111 at September 30, 1997 and December 31, 1996, respectively
OTHER ASSETS - Net 327 341
--------- ---------
$ 119,288 $ 116,815
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 68,179 $ 63,342
Accounts payable and accrued expenses 1,841 1,053
Dividends and distributions payable 981 870
Due to affiliates (including retainage payable of $111 and
$316 at September 30, 1997 and December 31, 1996, respectively) 1,413 2,540
Security deposits and prepaid rents 420 462
--------- ---------
Total Liabilities 72,834 68,267
COMMITMENTS AND CONTINGENCIES (Note 6)
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP 20,672 19,322
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value, 20,000,000 shares authorized,
no shares issued and outstanding
Common shares, $.01 par value, 100,000,000 shares authorized, 4,186,498 shares issued
and outstanding at September 30, 1997 and December 31, 1996, respectively 42 42
Additional paid-in capital 29,396 29,902
Accumulated deficit (3,656) (718)
--------- ---------
Total shareholders' equity 25,782 29,226
--------- ---------
$ 119,288 $ 116,815
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 3
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
------------- -----------
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 4,285 $ 3,980
Other operating income 195 155
--------- ---------
Total operating revenues 4,480 4,135
--------- ---------
OPERATING EXPENSES:
Personnel 412 370
Utilities 315 260
Repairs, maintenance, and landscaping 305 274
Real estate taxes 360 303
Management fees to related party 207
Marketing, insurance, and other 115 161
General and administrative expenses 589 286
Depreciation of real estate assets 1,432 1,294
--------- ---------
Total operating expenses 3,528 3,155
--------- ---------
INCOME FROM OPERATIONS 952 980
--------- ---------
OTHER INCOME (EXPENSES):
Interest income 117 120
Interest expense (1,212) (988)
Gain on sale of asset 1,792
Loss on disposal of assets (79)
Amortization of deferred financing costs (34) (42)
Other amortization expense (10) (5)
--------- ---------
Total other income (expenses) 574 (915)
--------- ---------
INCOME BEFORE MINORITY INTEREST
AND EXTRAORDINARY ITEMS 1,526 65
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP (681) (26)
--------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 845 39
EXTRAORDINARY ITEM - Early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (180)
--------- ---------
NET INCOME $ 665 $ 39
========= =========
PER SHARE DATA:
Income before extraordinary items $ 0.20 $ 0.01
========= =========
Extraordinary item $ (0.04)
=========
Net income $ 0.16 $ 0.01
========= =========
Dividends declared $ 0.13 $ 0.11875
========= =========
Weighted average common shares 4,186,331 4,186,180
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1997 1996
------------- ------------
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 12,651 $ 10,639
Other operating income 520 384
----------- -----------
Total operating revenues 13,171 11,023
----------- -----------
OPERATING EXPENSES:
Personnel 1,281 965
Utilities 872 680
Repairs, maintenance, and landscaping 799 688
Real estate taxes 1,093 918
Management fees to related party 211 551
Marketing, insurance, and other 605 467
General and administrative expenses 1,149 616
Depreciation of real estate assets 4,344 3,453
----------- -----------
Total operating expenses 10,354 8,338
----------- -----------
INCOME FROM OPERATIONS 2,817 2,685
----------- -----------
OTHER INCOME (EXPENSES):
Interest income 263 280
Interest expense (3,570) (2,733)
Gain on sale of asset 1,792
Loss on disposal of assets (124)
Amortization of deferred financing costs (90) (119)
Other amortization expense (26) (57)
Acquisition of Roberts Properties Management, L.L.C (5,900)
----------- -----------
Total other income (expenses) (7,655) (2,629)
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM (4,838) 56
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP 2,085 (22)
----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2,753) 34
EXTRAORDINARY ITEM - Early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (185) (100)
----------- -----------
NET LOSS $ (2,938) $ (66)
=========== ===========
PER SHARE DATA:
Income (Loss) before extraordinary item $ (0.66) $ 0.01
=========== ===========
Extraordinary item $ (0.04) $ (0.03)
=========== ===========
Net (loss) $ (0.70) $ (0.02)
=========== ===========
Dividends declared $ 0.385 $ 0.35625
=========== ===========
Weighted average common shares 4,186,330 3,669,229
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
1997 1996
------------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) $ (2,938) $ (66)
Adjustments to reconcile net (loss) to net cash provided
by operating activities:
Minority interest of unitholders in the Operating Partnership (2,085) 22
Gain on sale of asset (1,792)
Acquisition of Roberts Properties Management, L.L.C 5,900
Depreciation and amortization 4,417 3,589
Extraordinary item 185 100
Change in assets and liabilities net of amounts acquired:
(Increase) in restricted cash (135) (133)
(Increase) decrease in other assets (12) 99
Increase in accounts payable and
accrued expenses relating to operations 788 635
(Decrease) in due to affiliates relating to operations (278) (205)
(Decrease) in security deposits and prepaid rent (42) (11)
----------- -----------
Net cash provided by operating activities 4,008 4,024
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of asset 10,083
Acquisition and construction of real estate assets (6,970) (8,785)
Purchase of furniture, fixtures and equipment (1,278) (57)
Loss on disposal of assets 124
Cash acquired in mergers 164
----------- -----------
Net cash provided (used) by investing activities 1,959 (8,678)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 10,420 17,278
Payoff of mortgage note on sale of property (4,899)
Principal reductions on mortgage notes payable (643) (8,320)
Payment of note payable to affiliate (1,403)
Payment of loan costs (245) (309)
Proceeds from issuance of shares 6,589
Payment of share and unit issuance costs (613)
Payment of dividends and distributions (2,721) (1,392)
----------- -----------
Net cash provided by financing activities 1,912 11,830
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,879 7,176
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,162 1,404
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,041 $ 8,580
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized interest $ 3,569,929 $ 3,026,543
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION OF THE COMPANY
Roberts Realty Investors, Inc. (the "Company"), a Georgia corporation,
was formed July 22, 1994 to serve as a vehicle for investments in, and
ownership of, a professionally managed real estate portfolio of
multifamily apartment communities. The Company owns and operates
multifamily residential properties as a self-administered and
self-managed equity real estate investment trust (a "REIT").
Approximately 89% of the Company's total apartment units are located in
the Atlanta metropolitan area.
The Company conducts all of its operations and owns all of its assets
in and through Roberts Properties Residential, L.P., a Georgia limited
partnership (the "Operating Partnership"), of which the Company is the
sole general partner. As the sole general partner of the Operating
Partnership, the Company controls the Operating Partnership. The Board
of Directors of the Company manages the affairs of the Operating
Partnership by directing the affairs of the Company.
2. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
the Company's management in accordance with generally accepted
accounting principles for interim financial information in conformity
with the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been
included. The results of operations for the nine months ended September
30, 1997 are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read
in conjunction with the Company's December 31, 1996 audited financial
statements and notes thereto included in the Company's SEC filing on
Form 10-KSB for the fiscal year ended December 31, 1996.
3. NEW ACCOUNTING STANDARDS
In February 1997, Statement of Financial Accounting Standard ("SFAS")
No. 128, "Earnings Per Share," was issued and is effective for both
interim and annual periods ending after December 15, 1997. This
Statement simplifies the standards for computing earnings per share
("EPS") previously found in APB Opinion 15, "Earnings Per Share," ("APB
15") by replacing the presentation of primary EPS with basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. Basic EPS is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed similarly to fully
diluted EPS under APB 15. The Company intends to adopt this Statement
in the fourth quarter of 1997. Application of this statement in each
of the three and nine months ended September 30, 1997 and 1996 would
have no impact on the EPS calculation.
SFAS 130, "Reporting Comprehensive Income," and 131 "Disclosures About
Segments of an Enterprise and Related Information," are effective for
fiscal periods beginning after December 15, 1997 with early adoption
permitted. The Company is evaluating the effects these statements will
have on its financial reporting and disclosures. The statements will
have no effect on the Company's results of operations or financial
position.
4. MORTGAGE NOTES PAYABLE
In February 1996, the Company received a commitment to provide
financing in the amount of $6,420,000 secured by the Ivey Brook
Community. The financing closed on January 30, 1997. The new mortgage
note is in the amount of $6,420,000 at a fixed interest rate of 7.14%
payable in monthly installments of $43,318 based on a 30-year
amortization schedule. The note matures on February 15, 2007. In
connection with the financing, a letter of credit was issued to the
lender in the amount of $1,140,000 with an expiration date of January
30, 1998.
6
<PAGE> 7
In August 1996, the Company completed the financing of the Bentley
Place Community. The mortgage note is in the amount of $4,100,000 at a
fixed interest rate of 7.10% payable in monthly installments of $27,553
based on a 30-year amortization schedule. The note matures on August
15, 2006.
In March 1997, the Company received a commitment to provide financing
for the second phase of the Crestmark Community in the amount of
$4,000,000 at a fixed interest rate of 7.65% payable in monthly
installments of $28,381 based on a 30-year amortization schedule. The
note matures on May 1, 2001. The second phase of Crestmark was
unencumbered at June 30, 1997. The financing closed on July 17, 1997.
In March 1997, the Company and certain non-owned affiliates of the
Company established a $35,000,000 Advised Guidance Line (the "Guidance
Line") with NationsBank N.A. (South) (the "Bank") for the purpose of
providing financing for the acquisition or development of multifamily
communities. Financing under the Guidance Line is available on a
revolving basis and bears interest at LIBOR plus 1.80% or Prime plus
0%, at the option of the borrower, payable monthly. The Guidance Line
is not a commitment to lend and each loan under the Guidance Line will
be made at the Bank's discretion in accordance with normal loan
approval procedures.
Mortgage notes payable were secured by the following communities at
September 30, 1997.
<TABLE>
<CAPTION>
FIXED INTEREST
RATE AS OF PRINCIPAL OUTSTANDING
MATURITY 09/30/97 09/30/97 12/31/96
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Autumn Ridge 04/15/06 7.13% 4,950,573
Bentley Place 08/15/06 7.10% 4,055,611 4,086,703
Crestmark Club 05/01/01 7.50% 9,686,732 9,786,700
Crestmark Phase II 05/01/01 7.65% 3,994,220
Highland Park 02/15/03 7.30% 8,051,184 8,113,077
Ivey Brook 02/15/07 7.14% 6,383,523
Plantation Trace 09/15/00 7.75% 7,803,708 7,886,172
Preston Oaks 10/15/02 7.21% 8,542,595 8,611,269
River Oaks 11/15/03 7.15% 9,174,389 9,242,639
Rosewood Plantation 06/01/01 7.38% 6,379,817 6,446,506
Windsong 02/01/00 9.00% 4,107,592 4,218,747
-------------------------------
$68,179,371 $63,342,386
===============================
</TABLE>
7
<PAGE> 8
5. MINORITY INTEREST
The Company, as the general partner of the Operating Partnership, does
not hold any limited partner interests ("Units") in the Operating
Partnership. The Company's general partner interest was 55.5% and 60.2%
at September 30, 1997 and December 31, 1996, respectively. Units
outstanding at September 30, 1997 and December 31, 1996 were 3,363,430
and 2,773,430, respectively. Units held by the minority interest as a
percentage of total Units and shares of the Company's Common Stock
("Shares") outstanding was 44.5% at September 30, 1997 and 39.8% at
December 31, 1996. The minority interest of the unitholders in the
Operating Partnership was $20,672,000 and $19,322,000 at September 30,
1997 and December 31, 1996, respectively. Subject to certain
conditions, Units will become exchangeable for cash, or at the option
of the Company, for Shares on a one-for-one basis. The minority
interest of the unitholders in the Operating Partnership is calculated
based on the minority interest ownership percentage multiplied by the
Operating Partnership's net assets (total assets less total
liabilities). The minority interest percentage reflects the number of
Shares and Units outstanding and will change as additional Shares and
Units are issued.
6. COMMITMENTS AND CONTINGENCIES
The holders of Units have the right to require the Operating
Partnership to redeem their Units beginning when (a) the Shares are
listed on a national securities exchange or Nasdaq (an "Exchange"), and
(b) Shares issuable in redemption of Units have been registered with
the SEC, subject to certain conditions. Upon submittal of Units for
redemption, the Operating Partnership will have the option either (a)
to pay cash for such Units at their fair market value, which will be
based upon the then current trading price of the Shares on an Exchange,
or (b) to acquire such Units in exchange for Shares (on a one-for-one
basis). The Company anticipates it will issue Shares in exchange for
all such Units submitted. There were 3,363,430 Units outstanding at
September 30, 1997 that could be exchanged for Shares, subject to the
conditions described above.
The Company enters into contractual commitments in the normal course of
business related to the development and construction of real estate
assets. At September 30, 1997, these commitments totaled $9,650,000 as
summarized in the following table:
<TABLE>
<CAPTION>
TOTAL REMAINING
CONTRACT AMOUNT CONTRACTUAL
AMOUNT INCURRED COMMITMENT
-------- -------- -----------
<S> <C> <C> <C>
Plantation Trace - Phase II $ 3,157,000 $ $ 3,157,000
Howell Ferry 8,829,000 2,336,000 6,493,000
----------- ------------ -----------
$11,986,000 $ 2,336,000 $ 9,650,000
=========== ============ ===========
</TABLE>
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<PAGE> 9
Management does not believe that the completion of these commitments
will result in a material adverse effect on the Company's financial
position or results of operations.
On September 30, 1997, the Company's Board of Directors declared a
quarterly distribution in the amount of $0.13 per common Share and Unit
payable on October 15, 1997 to shareholders and unitholders of record
on September 30, 1997.
7. EXTRAORDINARY ITEM
The 1996 extraordinary item resulted from the write-off of unamortized
deferred financing costs associated with the January 31, 1996
refinancing of the mortgage note secured by the Highland Park
Community. The extraordinary item is net of $62,000 which was allocated
to the minority interest of the unitholders in the Operating
Partnership, calculated on the weighted average number of Units
outstanding during the nine months ended September 30, 1996.
The 1997 extraordinary item resulted from the write-off of unamortized
deferred financing costs and debt prepayment associated with the August
26, 1997 pay-off of the mortgage note secured by the Autumn Ridge
Community upon the sale of the property. The extraordinary item is net
of $140,000 which was allocated to the minority interest of the
unitholders in the Operating Partnership, calculated on the weighted
average number of Units outstanding during the nine months ended
September 30, 1997.
8. SIGNIFICANT EVENTS
On August 26, 1997, the Company completed the sale of Autumn Ridge for
$10,601,000 in cash. The sale resulted in a net gain of $1,792,000. The
Company acquired the Autumn Ridge Community in December 1995. Autumn
Ridge is a 207-unit apartment community located in Cobb County in the
Atlanta metroplitan area. Net sale proceeds were $5,045,000 after
deduction for loan repayment ($5,162,000) and closing costs and
prorations ($394,000). The purchaser, Benchmark Autumn Ridge
Associates, L.P., is not affiliated with the Company and the
transaction was negotiated at arm's-length. Roberts Properties, Inc.,
an affiliate of Mr. Charles S. Roberts, the Company's President and
Chief Executive Officer, was paid a consulting fee of $150,000 upon
the closing of the sale of Autumn Ridge.
On April 1, 1997, the Company acquired Roberts Properties Management,
L.L.C. ("Roberts Management"), the property management company that
managed the Company's multifamily apartment communities since the
Company's inception. The Operating Partnership issued a total of
590,000 Units valued at $10.00 per Unit or $5,900,000 to purchase
Roberts Management. Because Roberts Management, a related party,
managed only the properties owned by the Company, the transaction has
been accounted for as the settlement of a contract and expensed in the
quarter ended June 30, 1997. The Company now manages its own
9
<PAGE> 10
properties using Roberts Management's property management systems and
the property management personnel formerly employed by Roberts
Management. Although the Company no longer pays 5% of gross property
revenues to Roberts Management for property management services, it
does bear the actual overhead cost of managing the properties
internally.
Pro forma amounts for the three months and nine months ended September
30, 1997 and September 30, 1996, assuming the sale of Autumn Ridge and
the acquisition of Roberts Properties Management, L.L.C. had taken
place as of January 1 for the periods presented, are as follows
(dollars in thousands except per share amounts):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (396) $ 22 $ (164) $ 81
Earnings (loss) per common share $ (0.09) $ 0.01 $ (0.04) $ 0.02
</TABLE>
9. EARNINGS PER SHARE
Income (loss) before extraordinary items and net income (loss) per
common share for the nine months ended September 30, 1997 and September
30, 1996 have been computed by dividing income (loss) before
extraordinary items and net income (loss) by the weighted average
number of Shares outstanding during the periods of 4,186,330 and
3,669,229, respectively. The weighted average number of Shares
outstanding during the three months ended September 30, 1997 and
September 30, 1996 was 4,186,331 and 4,186,180, respectively.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the nine months ended
September 30, 1996 and September 30, 1997 were as follows:
A. On March 21, 1996, the Company issued 744,940 Shares in
exchange for the assets and liabilities of Roberts Properties
Bentley Place, L.P. valued at $7,076,000 including cash of
$165,000. No mortgage debt was assumed in connection with this
acquisition.
B. On June 26, 1996, the Operating Partnership issued 746,715
Units in exchange for the assets and liabilities of Crestmark
Club, L.P. valued at $7,280,000 including cash of $117,000.
Mortgage debt of $10,184,000 and a note payable to Mr. Charles
S. Roberts in the amount of $1,403,000 were assumed in
connection with this acquisition. The note to Mr. Roberts was
repaid in full immediately following the Crestmark closing.
C. On April 1, 1997, the Operating Partnership issued 590,000
Units in exchange for the assets and liabilities of Roberts
Properties Management, L.L.C. valued at $5,900,000.
10
<PAGE> 11
11. SUBSEQUENT EVENTS
The Company paid a special distribution on October 24, 1997 in the
amount of $385,000 or $0.051 per common Share and Unit.
On July 11, 1997, the Company filed a Registration Statement on Form
S-3 as amended, (the "Registration Statement") with the SEC to
register 3,363,430 Shares of the Company's Common Stock for resale, if
and to the extent the Company elects to issue such Shares to holders
of 3,363,430 Units upon the tender of such Units for redemption. The
registration Statement is being reviewed by the SEC and is not
effective.
The Company has filed an application with the American Stock Exchange
(the "AMEX") to list the Common Stock on the AMEX. The AMEX has
approved such listing application.
The Company has entered into a contract for sale of the apartment
community known as Windsong. The contract, for a sales price of
$9,750,000, is subject to the normal conditions of sale. The net book
value of the property is approximately $7,861,000.
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<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
Roberts Realty Investors, Inc. (the "Company) owns multifamily residential
properties as a self-administered and self-managed equity real estate investment
trust. At September 30, 1997, the Company owned 10 multifamily apartment
communities consisting of 2,010 apartment homes of which 254 were under
development or construction. On August 26, 1997, the Company completed the sale
of the 207-unit Autumn Ridge community for $10,601,000 resulting in a gain of
$1,792,000. In addition, the Company has entered into a contract for the sale of
the 232-unit Windsong community that is expected to close by January 1998.
This quarterly report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Although the
Company believes the expectations reflected in the forward-looking statements
are based on reasonable assumptions, the Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include, but are not limited to, the
following: occupancy rates and rents may be adversely affected by local economic
and market conditions, construction costs of a new community may exceed original
estimates, construction and lease-up of new communities may not be completed on
schedule, and financing may not be available on favorable terms. The following
discussion should be read in conjunction with the Consolidated Financial
Statements of Roberts Realty Investors, Inc. and the Notes thereto appearing
elsewhere herein and the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1997 to Three Months Ended
September 30, 1996. The change in operating results for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996 is due
primarily to (1) the gain from the sale of Autumn Ridge, (2) the completion of
leasing at Ivey Brook and the second phase of Crestmark, (3) the decrease in
occupancy from 98.1% to 94.0%, and (4) higher interest expense due primarily to
the financing of Ivey Brook and the second phase of Crestmark in January 1997
and July 1997, respectively. For the three months ended September 30, 1997, the
Company recorded net income of $665,000 or $0.16 per share (after minority
interest and extraordinary item) compared to net income of $39,000 or $0.01 per
share (after minority interest) for the three months ended September 30, 1996.
The Company's operating performance for all Communities is summarized in the
following table:
12
<PAGE> 13
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM THREE MONTHS ENDED SEPTEMBER 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues 8.3% $4,480,000 $4,135,000
Property operating expenses (1) 10.2% $1,507,000 $1,368,000
Management fees paid to related party (2) n/a $ 0 $ 207,000
General and administrative expenses 105.9% $ 589,000 $ 286,000
Depreciation of real estate assets 10.6% $1,432,000 $1,294,000
Average stabilized occupancy (3) (4.1%) 94.0% 98.1%
Operating expense ratio (4) 0.5% 33.6% 33.1%
</TABLE>
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Because the Company acquired Roberts Properties Management, L.L.C. on
April 1, 1997, no management fees were paid during the three months
ended September 30, 1997.
(3) Represents the average physical occupancy of the Company's stabilized
properties calculated by dividing the total number of vacant days by
the total possible number of vacant days for each period and
subtracting the resulting number from 100%. The Company considers a
Community to have achieved stabilized occupancy on the earlier of (a)
attainment of 95% occupancy as of the first day of any month, or (b)
one year after completion of construction. The third quarter 1997
occupancy calculation includes (1) Ivey Brook and the second phase of
Crestmark beginning in August 1997, and (2) Autumn Ridge only through
July 31, 1997 due to the sale of the property in August 1997.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
Operating results for the eight communities that were fully stabilized during
both the three months ended September 30, 1996 and the three months ended
September 30, 1997 (the River Oaks, Rosewood Plantation, Preston Oaks, Highland
Park, Plantation Trace, Windsong, Bentley Place and Crestmark phase I
communities) are summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM THREE MONTHS ENDED SEPT 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Rental income (3.7%) $3,434,000 $3,567,000
Total operating revenues (3.1%) $3,586,000 $3,702,000
Property operating expenses (1) (2.1%) $1,186,000 $1,212,000
Management fees paid to related party n/a $ 0 $ 185,000
Net operating income (2) (3.6%) $2,400,000 $2,490,000
Average stabilized occupancy (3) (5.5%) 93.8% 99.3%
Operating expense ratio (4) 0.4% 33.1% 32.7%
Average monthly rent per unit 3.8% $ 827 $ 797
</TABLE>
- ----------------------------------
13
<PAGE> 14
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Because the Company acquired Roberts Properties Management, L.L.C. on
April 1, 1997, no management fees were paid during the three months
ended September 30, 1997. Therefore, net operating income for the three
months ended September 30, 1996 has been adjusted to exclude management
fees paid to a related party totaling $185,000.
(3) Represents the average physical occupancy of the stabilized communities
calculated by dividing the total number of vacant days by the total
possible number of vacant days for each period and subtracting the
resulting number from 100%.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
The following explanation compares the Company's statements of operations for
the three months ended September 30, 1997 and September 30, 1996.
Rental income increased $305,000 or 7.7% from $3,980,000 for the three months
ended September 30, 1996 to $4,285,000 for the three months ended September 30,
1997. This increase in rental income is due primarily to the lease-up of Ivey
Brook and the second phase of Crestmark ($557,000) which was partially offset by
(1) lower rental income due to the 5.5% decline in occupancy from the eight
fully stabilized communities included in the Company's portfolio during both the
three months ended September 30, 1997 and September 30, 1996 ($134,000), and (2)
a decrease in rental income due to the sale of Autumn Ridge ($119,000).
Property operating expenses (excluding depreciation, general and administrative
expenses and management fees) increased $139,000 or 10.2% from $1,368,000 to
$1,507,000. This increase in expenses is due primarily to the start of property
operations at Ivey Brook ($123,000) and the second phase of Crestmark ($60,000)
beginning in the fourth quarter of 1996 and the first quarter of 1997,
respectively, which was partially offset by (1) lower operating expenses for the
eight fully stabilized communities included in the Company's portfolio during
both the three months ended September 30, 1997 and September 30, 1996 ($26,000),
and (2) a decrease in operating expenses due to the sale of Autumn Ridge
($5,000). In 1997, the Company began capitalizing replacements of carpets and
major appliances which previously had been expensed. Carpet and appliance
replacement totaling $44,000 was expensed during the three months ended
September 30, 1996 compared to $91,000 that was capitalized during the three
months ended September 30, 1997. Property operating expenses as a percentage of
operating revenues increased 0.5% from 33.1% for the three months ended
September 30, 1996 to 33.6% for the three months ended September 30, 1997.
14
<PAGE> 15
Depreciation expense increased $137,000 or 10.6% from $1,294,000 to $1,431,000.
The increase is due primarily to the completion of construction of Ivey Brook
and the second phase of Crestmark ($228,000) less the reduction in depreciation
expense at Autumn Ridge ($83,000).
General and administrative expenses increased $303,000 or 105.9% from $286,000
to $589,000 and include legal, accounting and tax fees, marketing and printing
fees, salaries, director fees and other costs. This increase is due primarily to
the following: (1) the overhead cost of managing the Company's properties
internally as a result of acquiring Roberts Properties Management, L.L.C. on
April 1, 1997 ($89,000), (2) the addition of administrative personnel needed to
support the Company's growth ($30,000), (3) the directors and officers liability
insurance policy obtained by the Company in September 1996 ($14,000), and (4)
the reclassification of payroll processing fees, uniforms, professional service
fees, legal and recruiting fees from the property level to general and
administrative ($157,000). General and administrative expenses as a percentage
of operating revenues increased from 6.9% for the three months ended September
30, 1996 to 13.1% for the three months ended September 30, 1997. The Company
expects that as it continues to grow and is able to spread its general and
administrative expenses over a larger revenue base, such expenses will decline
as a percentage of operating revenues, even though general and administrative
expenses will continue to increase in absolute terms.
Interest expense increased $224,000 or 22.7% from $988,000 to $1,212,000 due
primarily to the following: (1) the financing of Bentley Place in August 1996
($35,000), (2) the financing of Ivey Brook in January 1997 ($58,000), (3) the
financing of the second phase of Crestmark in July 1997 ($64,000), and
(4)reduced capitalization of interest expense in 1997 due to a lower level of
construction ($154,000). These amounts were offset by the refinancing of River
Oaks at a lower interest rate in October 1996 ($43,000) and lower interest
expense due to the sale of Autumn Ridge ($33,000).
On August 26, 1997, the Company completed the sale of the 207-unit Autumn Ridge
community for $10,601,000 in cash. The sale resulted in a gain of $1,792,000.
Net sale proceeds were $5,045,000 after deduction for loan repayment
($5,162,000) and closing costs and prorations ($394,000). The purchaser,
Benchmark Autumn Ridge Associates, L.P., is not affiliated with the Company and
the transaction was negotiated at arms-length. Roberts Properties, Inc., an
affiliate of Mr. Charles S. Roberts, the Company's President and Chief Executive
Officer, was paid a consulting fee of $150,000 at closing.
The mortgage note payable secured by Autumn Ridge was paid in full at the
closing of the sale of Autumn Ridge in August 1997, prior to its contractual
maturity. Unamortized loan costs of $73,000 and a yield maintenance fee of
$252,000 payable at the closing of the sale were charged to expense as an
extraordinary item. The extraordinary item (early extinguishment of a debt) for
the three months ended September 30, 1997 was $325,000 (including the minority
interests' share of $145,000).
15
<PAGE> 16
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996. The change in operating results for the nine months ended
September 30, 1997 compared to the nine months ended September 30, 1996 is due
primarily to (1) the gain from the sale of Autumn Ridge, (2) the acquisition of
Roberts Properties Management, L.L.C. on April 1, 1997, (3) the completion of
leasing at Ivey Brook and the second phase of Crestmark in July 1997, (4) the
acquisition of Bentley Place and Crestmark in March 1996 and June 1996,
respectively, (5) the decrease in average stabilized occupancy from 97.2% to
94.8%, and (6) higher interest expense due primarily to the financing of Bentley
Place, Ivey Brook and the second phase of Crestmark in August 1996, January
1997, and July 1997, respectively, and the assumption of mortgage debt included
with the acquisition of Crestmark in June 1996. For the nine months ended
September 30, 1997, the Company recorded a net loss of $2,938,000 or $0.70 per
share (after minority interest and extraordinary item) compared to a net loss of
$66,000 or $0.02 per share (after minority interest and extraordinary item) for
the nine months ended September 30, 1996. The Company's operating performance
for all Communities is summarized in the following table:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM NINE MONTHS ENDED SEPT 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues 19.5% $13,171,000 $11,023,000
Property operating expenses (1) 25.1% $ 4,650,000 $ 3,718,000
Management fees paid to related party (2) (61.7%) $ 211,000 $ 551,000
General and administrative expenses 86.5% $ 1,149,000 $ 616,000
Depreciation of real estate assets 25.8% $ 4,344,000 $ 3,453,000
Average stabilized occupancy (3) (2.4%) 94.8% 97.2%
Operating expense ratio (4) 1.6% 35.3% 33.7%
</TABLE>
- --------------------------------
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Because the Company acquired Roberts Properties Management, L.L.C. on
April 1, 1997, no management fees were paid to a related party
subsequent to April 1, 1997.
(3) Represents the average physical occupancy of the Company's stabilized
properties calculated by dividing the total number of vacant days by
the total possible number of vacant days for each period and
subtracting the resulting number from 100%. The calculation does not
include the following: (1) Ivey Brook, which started its lease-up phase
in September 1996 and had physical occupancy of 99% on September 30,
1997, and (2) the second phase of Crestmark, which started its lease-up
phase in January 1997 and had physical occupancy of 98% on September
30, 1997. The calculation does include the following: (1) Highland Park
beginning March 1, 1996, which is the date the community achieved
stabilized occupancy, (2) Bentley Place beginning March 1, 1996 and
Crestmark beginning June 1, 1996, which are the dates each community
was acquired by the Company, and (3) Autumn Ridge only through July 31,
1997 due to the sale of the property in August 1997.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
16
<PAGE> 17
Operating results for the five communities that were fully stabilized during
both the nine months ended September 30, 1996 and the nine months ended
September 30, 1997 (the River Oaks, Rosewood Plantation, Preston Oaks,
Plantation Trace and Windsong Communities) are summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM NINE MONTHS ENDED SEPT 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Rental income (0.4%) $6,781,000 $6,811,000
Total operating revenues (0.5%) $6,996,000 $7,031,000
Property operating expenses (1) (0.7%) $2,266,000 $2,283,000
Management fees paid to related party (66.7%) $ 117,000 $ 351,000
Net operating income (2) (0.4%) $4,730,000 $4,748,000
Average stabilized occupancy (3) (3.0%) 96.2% 99.2%
Operating expense ratio (4) (0.1%) 32.4% 32.5%
Average monthly rent per unit 3.8% $ 836 $ 805
</TABLE>
- -----------------------------
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Because the Company acquired Roberts Properties Management, L.L.C. on
April 1, 1997, no management fees were paid subsequent to April 1,
1997. Therefore, net operating income has been adjusted to exclude
management fees paid to a related party.
(3) Represents the average physical occupancy of the stabilized communities
calculated by dividing the total number of vacant days by the total
possible number of vacant days for each period and subtracting the
resulting number from 100%.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
The following explanation compares the Company's statements of operations for
the nine months ended September 30, 1997 and September 30, 1996.
Rental income increased $2,012,000 or 18.9% from $10,639,000 for the nine months
ended September 30, 1996 to $12,651,000 for the nine months ended September 30,
1997. The increase in rental income is due primarily to the acquisition of
Bentley Place and Crestmark in March 1996 and June 1996, respectively, and the
lease-up of the Ivey Brook and the second phase of Crestmark in 1997. Rental
income from the five fully stabilized communities included in the Company's
portfolio during the nine months ended September 30, 1997 and September 30, 1996
decreased $30,000 due to a 3.0% decline in occupancy. The effect of lower
occupancy was partially offset by a 3.8% increase in the average monthly rent
per unit from $805 at September 30, 1996 to $836 at September 30, 1997.
17
<PAGE> 18
Property operating expenses (excluding depreciation, general and administrative
expenses and management fees) increased $932,000 or 25.1% from $3,718,000 to
$4,650,000. The increase is due primarily to the following: (1) the acquisition
of Bentley Place and Crestmark in March 1996 and June 1996, respectively, and
(2) the commencement of property operations at Ivey Brook and the second phase
of Crestmark beginning in the fourth quarter of 1996 and the first quarter of
1997, respectively. Property operating expenses as a percentage of operating
revenues increased from 33.7% for the nine months ended September 30, 1996 to
35.3% for the nine months ended September 30, 1997.
General and administrative expenses increased $533,000 or 86.5% from $616,000 to
$1,149,000 and include legal, accounting and tax fees, marketing and printing
fees, salaries, director fees and other costs. The increase is due primarily to
the following: (1) the overhead cost of managing the Company's properties
internally as a result of acquiring Roberts Properties Management, L.L.C. on
April 1, 1997, (2) the addition of administrative personnel needed to support
the Company's growth, (3) the directors and officers liability insurance policy
obtained by the Company in September 1996, and (4) the reclassification of
payroll processing fees, uniforms, professional service fees, legal and
recruiting fees from the property level to general and administrative. General
and administrative expenses as a percentage of operating revenues increased from
5.6% for the nine months ended September 30, 1996 to 8.7% for the nine months
ended September 30, 1997.
Interest expense increased $837,000 or 30.6% from $2,733,000 to $3,570,000. The
increase is due primarily to the following: (1) the mortgage debt assumed by the
Company with the acquisition of Crestmark in June 1996, and (2) the financing of
Bentley Place and Ivey Brook in August 1996 and January 1997, respectively.
On August 26, 1997, the Company completed the sale of the 207-unit Autumn Ridge
community for $10,601,000 in cash. The sale resulted in a gain of $1,792,000.
Net sale proceeds were $5,045,000 after deduction for loan payment ($5,162,000)
and closing costs and prorations ($394,000). The purchaser, Benchmark Autumn
Ridge Associates, L.P., is not affiliated with the Company and the transaction
was negotiated at arms-length. Roberts Properties, Inc., an affiliate of Mr.
Charles S. Roberts, the Company's President and Chief Executive Officer, was
paid a consulting fee of $150,000 at closing.
On April 1, 1997, the Company acquired Roberts Properties Management, L.L.C.
("Roberts Management"), the property management company that managed the
Company's multifamily apartment communities since the Company's inception. The
Operating Partnership issued a total of 590,000 Units valued at $10.00 per Unit
or $5,900,000 to purchase Roberts Management. The Company now manages its own
properties using Roberts Management's property management systems and the
property management personnel formerly employed by Roberts Management. Although
the Company no longer pays 5% of gross property revenues to Roberts Management
for property management services, it does bear the actual overhead cost of
managing the properties internally. Because Roberts Management, a related party,
managed only the properties owned by the Company, the transaction has been
accounted for as the settlement of a contract and shown as an expense for the
nine months ended September 30, 1997.
18
<PAGE> 19
The mortgage note payable secured by Autumn Ridge was paid in full at the
closing of the sale of Autumn Ridge in August 1997, prior to its contractual
maturity. Unamortized loan costs of $73,000 and a yield maintenance fee of
$252,000 payable at the closing of the sale were charged to expense as an
extraordinary item. The extraordinary item (early extinguishment of a debt) for
the nine months ended September 30, 1997 was $325,000 (including the minority
interests' share of $140,000). The mortgage note payable secured by the Highland
Park Community was refinanced in January 1996, prior to its contractual
maturity. The unamortized loan costs related to the mortgage note payable at the
time of the refinancing were charged to expense as an extraordinary item. The
extraordinary item (early extinguishment of a debt) for the nine months ended
September 30, 1996 was $163,000 (including the minority interests' share of
$63,000).
LIQUIDITY AND CAPITAL RESOURCES
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996. Cash and cash equivalents increased $7,879,000 during the
nine months ended September 30, 1997 compared to an increase of $7,176,000
during the nine months ended September 30, 1996. This increase is due to the sum
of the cash flow provided by operating, financing and investing activities.
A primary source of liquidity to the Company is cash flow from operations.
Operating cash flows have historically been determined by the number of
apartment homes, rental rates and operating expenses with respect to such
apartment homes. Net cash provided by operating activities decreased $16,000 or
0.4%, from $4,024,000 to $4,008,000. The additional cash flow from the
operations of Bentley Place and Crestmark, which were acquired in March 1996 and
June 1996, respectively, and from the recently completed Ivey Brook and
Crestmark phase II communities, was offset by lower occupancy rates and rent
concessions from the Company's stabilized communities. The highly competitive
Atlanta apartment market is experiencing weaker market conditions during 1997
compared to 1996 due to the overbuilding of apartments in Atlanta. The Company
expects the current softness in the Atlanta apartment market to continue through
1997 with market conditions improving during 1998. The Company's average
physical occupancy decreased 2.4% from 97.2% during the nine months ended
September 30, 1996 to 94.8% during the nine months ended September 30, 1997. The
effects of revenue and expense accruals are not material in understanding the
Company's cash flow from operations. Generally, depreciation and amortization
expenses are the most significant adjustments to net income (loss) in arriving
at cash provided by operating activities.
Net cash provided by (used in) investing activities increased $10,637,000 from
$(8,678,000) for the nine months ended September 30, 1996 to $1,959,000 for the
nine months ended September 30, 1997. This increase is due primarily to the
$10,083,000 in gross sales proceeds from the sale of Autumn Ridge in August
1997. The Company invested $8,248,000 in the construction of new communities and
the purchase of furniture and equipment during the nine months ended September
30, 1997 compared to $8,842,000 for the nine months ended September 30, 1996.
The Company made no acquisitions for cash of existing apartment communities
during these periods.
19
<PAGE> 20
Net cash provided by financing activities decreased $9,918,000 from $11,830,000
for the nine months ended September 30, 1996 to $1,912,000 for the nine months
ended September 30, 1997. This decrease is due primarily to (1) net proceeds of
approximately $6,000,000 from the sale of 443,675 Shares in March 1996 and an
additional 255,500 Shares in May 1996, (2) the payment of $1,403,000 to an
affiliate of a note payable assumed in the acquisition of Crestmark in June
1996, (3) a higher level of net borrowings associated with the financing of Ivey
Brook for $6,420,000 in January 1997 and the second phase of Crestmark for
$4,000,000 in July 1997 compared to the financing of Autumn Ridge for $5,000,000
in March 1996 and Bentley Place for $4,100,000 in August 1996, (4) the payoff of
the mortgage note secured by Autumn Ridge, and (5) the payment of three
quarterly distributions on Shares and Units during the nine months ended
September 30, 1997 compared to the payment of the Company's first two quarterly
distributions in April and July 1996.
The Operating Partnership acquired (1) the fully operating Bentley Place
community in March 1996 by issuing Shares, and (2) the fully operating Crestmark
community and its 8.8 acres of adjacent undeveloped property in June 1996 by
issuing Units. Similarly, the Company issued Shares in March 1996 in an offering
of Shares for cash to acquire the land for and fund the development and
construction of the Howell Ferry community which began in April 1997. The total
estimated acquisition, development and construction cost for Howell Ferry is
$13,300,000, including the land acquisition cost of $1,628,000. The Company will
use $3,272,000 of its working capital, along with an $8,400,000 mortgage loan
(for which the Company signed a commitment on November 4, 1997 with Nationwide
Life Insurance), to develop and construct Howell Ferry.
The Operating Partnership is also developing a 50-unit second phase to
Plantation Trace and a 24-unit second phase to Preston Oaks. Construction of the
second phase of both Plantation Trace ($3,157,000) and Preston Oaks ($1,400,000)
will be funded from the Company's working capital.
The Company anticipates that each Community's rental and other operating
revenues will be adequate to provide short-term (less than 12 months) liquidity
for the payment of direct rental operating expenses, interest and amortization
of principal on related mortgage notes payable and capital expenditures. The
Company expects to meet its other short-term liquidity requirements generally
through its net cash provided by operations, which it believes will be adequate
to meet its operating requirements in both the short-term and in the long-term
(greater than 12 months). Improvements and renovations at existing Communities
are also expected to be funded from property operations. The Company expects to
meet its long-term liquidity requirements including future developments, debt
maturities and possible acquisitions, through the issuance of additional equity
securities of the Company and the proceeds from future mortgage financings and
property sales.
In February 1996, the Company received a commitment from Nationwide Life
Insurance Company for a permanent loan secured by the Ivey Brook Community. The
financing was completed on January 30, 1997. The principal amount of the note is
$6,420,000 at a fixed interest rate of 7.14% per annum for a ten-year term.
Based on a 30-year amortization schedule, the monthly payment of principal and
interest on the loan is $43,318.
20
<PAGE> 21
In March 1997, the Company received a commitment to provide financing in the
amount of $4,000,000 secured by the second phase of the Crestmark Community. The
financing was completed on July 17, 1997. The principal amount of the note is
$4,000,000 at a fixed interest rate of 7.65% per annum and a maturity date of
May 1, 2001. Based on a 30-year amortization schedule, the monthly payment of
principal and interest on the loan is $28,381.
In March 1997, the Company and certain non-owned affiliates of the Company
established a $35,000,000 Advised Guidance Line (the "Guidance Line") with
NationsBank N.A. (South) (the "Bank") for the purpose of providing financing for
the acquisition or development of multifamily communities. Financing under the
Guidance Line is available on a revolving basis and bears interest at LIBOR plus
1.80% or Prime plus 0%, at the option of the borrower, payable monthly. The
Guidance Line is not a commitment to lend, and each loan under the Guidance Line
will be made at the Bank's discretion in accordance with normal loan approval
procedures.
The Company's existing mortgage indebtedness will require balloon payments
coming due over the years 2000 to 2007 as summarized below:
<TABLE>
<S> <C>
2000 $11,253,000
2001 19,116,000
2002 8,025,000
2003 16,057,000
2006 3,554,000
2007 5,571,000
-----------
Total $63,576,000
===========
</TABLE>
Because the Company anticipates that only a small portion of the principal of
such indebtedness will be repaid prior to maturity and that the Company may not
have funds on hand sufficient to repay such indebtedness, it will be necessary
for the Company to refinance such debt through (a) debt financing collateralized
by mortgages on individual Communities or groups of Communities or
uncollateralized private or public debt offerings, and/or (b) additional equity
offerings.
Management believes that these sources of debt financing, equity capital,
operating cash flow and working capital of the Company will provide the
liquidity and adequate capital resources to begin and complete its planned
development and construction activities. The Company expects liquidity and
capital resources for additional acquisition and development activities to be
provided by a combination of secured long-term borrowing and issuance of equity
securities.
21
<PAGE> 22
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of Governors of
NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property and non-recurring items, plus real estate
related depreciation and amortization. The Company computes Funds from
Operations in accordance with the standards established by the White Paper,
which may differ from the methodology for calculating Funds from Operations
utilized by other equity REITs, and accordingly, may not be comparable to such
other REITs. Funds from Operations does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, property acquisitions, development and
distributions, or other commitments and uncertainties. Funds from Operations
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
cash flows from operating activities (determined in accordance with GAAP) as a
measure of the Company's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including its ability to make distributions. The
Company considers Funds from Operations ("FFO") to be an important measure of
its operating performance. While FFO does not represent cash flows from
operating, investing or financing activities as defined by generally accepted
accounting principles ("GAAP"), FFO does provide investors with additional
information with which to evaluate the ability of a REIT to pay dividends, meet
required debt service payments and fund capital expenditures. The Company
believes that in order to gain a clear understanding of its operating results,
FFO should be evaluated in conjunction with net income (determined in accordance
with GAAP). The following table reconciles net income (loss) to FFO.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 665,000 $ 39,000 $(2,938,000) $ (66,000)
Minority interest of Unitholders 681,000 26,000 (2,085,000) 22,000
Extraordinary item 180,000 185,000 100,000
Acquisition of RPM 5,900,000
Gain on sale of asset (1,792,000) (1,792,000)
Loss on disposal of assets 79,000 124,000
Amortization (real estate related) 10,000 5,000 26,000 57,000
Depreciation expense 1,432,000 1,294,000 4,344,000 3,453,000
----------- ---------- ----------- ----------
Funds From Operations $ 1,255,000 $1,364,000 $ 3,764,000 $3,566,000
Weighted average Shares and Units
outstanding during the period 7,549,761 6,959,759 7,355,254 6,003,478
</TABLE>
22
<PAGE> 23
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". Such adoption had no material
effect on the financial statements.
In February 1997, SFAS No. 128, "Earnings Per Share", was issued and is
effective for both interim and annual periods ending after December 15, 1997.
This Statement simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion 15, "Earnings Per Share", ("APB 15") by
replacing the presentation of primary EPS with basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed similarly to fully
diluted EPS under APB 15. The Company intends to adopt this Statement in the
fourth quarter of 1997. Application of this Statement in each of the three and
nine months ended September 30, 1997 and 1996 would have no impact on the EPS
calculation.
SFAS 130, "Reporting Comprehensive Income", and SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information", are effective for fiscal
periods beginning after December 15, 1997 with early adoption permitted. The
Company is evaluating the effects these Statements will have on its financial
reporting and disclosures. The Statements will have no effect on the Company's
results of operations or financial position.
INFLATION
Substantially all apartment leases are for an initial term of not more than 12
months and thus may enable the Company to seek increases in rents after the
expiration of each lease. Additionally, the construction contract for Howell
Ferry is based upon a fixed price and equals substantially all of the
anticipated construction costs. The short-term nature of these leases and the
fixed price construction contract serve to reduce the risk to the Company of the
adverse effects of inflation.
23
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits required by Item 601 of Regulation S-B are described
in the following Index to Exhibits and are filed as part of this
report on Form 10-QSB.
Exhibit No. Description
----------- -----------
10.1 Agreement for Sale and Purchase of Improved Property dated
April 14, 1997, by and between Roberts Properties
Residential, L.P. and ACG Partnership Holdings, L.P.
10.2 Deed to Secure Debt, Assignment of Leases and Rent and
Security Agreement dated July 17, 1997 by and between
Roberts Properties Residential, L.P. and The Canada Life
Assurance Company.
10.3 Real Estate Note in the amount of $4,000,000 dated July 17,
1997.
10.4 Sales Contract dated July 30, 1997 by and between Roberts
Properties Residential, L.P. and Great Bear Investment
Company.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ROBERTS REALTY INVESTORS, INC.
Date: November 14, 1997 By: /s/ Charles S. Roberts
-------------------------------------
Charles S. Roberts, Chairman of the
Board, Chief Executive Officer, and
President
Date: November 14, 1997 By: /s/ Charles R. Elliott
-------------------------------------
Charles R. Elliott
Chief Financial Officer
24
<PAGE> 25
EXHIBIT INDEX
The exhibits required by Item 601 of Regulations S-B are described in this
Index to Exhibits and are filed as part of this report on Form 10-QSB.
Exhibit No. Description
----------- -----------
10.1 Agreement for Sale and Purchase of Improved Property dated
April 14, 1997, by and between Roberts Properties
Residential, L.P. and ACG Partnership Holdings, L.P.
10.2 Deed to Secure Debt, Assignment of Leases and Rent and
Security Agreement dated July 17, 1997 by and between
Roberts Properties Residential, L.P. and The Canada Life
Assurance Company.
10.3 Real Estate Note in the amount of $4,000,000 dated July 17,
1997.
10.4 Sales Contract dated July 30, 1997 by and between Roberts
Properties Residential, L.P. and Great Bear Investment
Company.
27 Financial Data Schedule (for SEC use only).
25
<PAGE> 1
AGREEMENT FOR SALE AND PURCHASE
OF
IMPROVED PROPERTY
THIS AGREEMENT FOR SALE AND PURCHASE OF IMPROVED PROPERTY (the
"Agreement"), dated this 14th day of April, 1997, by and between Roberts
Properties Residential, L.P., 8010 Roswell Road, Suite 120, Atlanta, Georgia
30350, a Georgia limited partnership (the "Seller") and ACG Partnership
Holdings, L.P., 4053 Maple Road, Amherst, New York 14226-1072, a Delaware
limited partnership, or its nominee (the "Buyer");
RECITALS:
WHEREAS, Seller is the owner of the Property (as hereinafter defined); and
WHEREAS, Buyer desires to purchase the Property in accordance with the
terms and conditions of this Agreement for the purpose of using the Property
for a two hundred seven (207) unit apartment complex (the "Intended Use");
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby mutually acknowledged and in consideration of the terms and
conditions of this Agreement as hereinafter set forth, Seller and Buyer hereby
covenant and agree as follows:
ARTICLE I
SALE AND PURCHASE OF PROPERTY
1.01 The Agreement to Sell and Purchase.
Seller agrees to sell the Property to Buyer, and Buyer agrees to purchase the
Property from Seller, at the price and upon the terms and conditions set forth
in this Agreement.
1.02 The Property.
(a) The Property is defined as and shall include all of the
following:
(i) That certain parcel of land located in Cobb County,
Georgia, more particularly described in Exhibit A attached hereto (the "Land");
(ii) All rights, title and interest of Seller in and to
all buildings and improvements situated on, above or under the Land (hereinafter
collectively referred to as the "Improvements");
<PAGE> 2
(iii) All rights, title and interest of Seller, if any, in
and to any and all streets, roads, rights-of-way and easements adjacent,
contiguous or beneficial to the Land; provided, however, except as may be
expressly provided herein no representation or warranty is made by Seller with
respect to title to such streets, roads, rights-of-way or easements, however,
Seller represents that there is access to the Property via adjacent streets and
roads;
(iv) All furniture, furnishings, fixtures, machinery,
trade names, excluding the trademark "Creating Communities For Superior
Lifestyles", telephone numbers (to the extent transferable) and equipment
appurtenant to or used in connection with the operation of the Land or
Improvements, including, but not limited to that inventory described on Exhibit
B attached hereto (hereinafter collectively referred to as the "Personal
Property"); and
(v) All other appurtenances, and any other right, title,
interest or estate of Seller in or to the Land, Improvements or the Personal
Property, including without limitation both tangible and intangible rights
related thereto such as plans and specifications, surveys, studies, reports,
tenant lists, contracts, permits, licenses, approvals or other rights relating
to the ownership, use or operation of the Property.
(b) The Property is located at 2650 Bentley Road, Marietta,
Georgia, and is commonly known or referred to as "Autumn Ridge Apartments".
ARTICLE II
PURCHASE PRICE AND TERMS OF PAYMENT
2.01 Purchase Price.
The purchase price to be paid by Buyer to Seller for the Property shall be Ten
Million Four Hundred Fifty-Seven Thousand Dollars ($10,457,000.00) (the
"Purchase Price").
2.02 Terms of Payment.
(a) The Purchase Price shall be paid by Buyer as follows:
(i) Upon the execution of this Agreement, Buyer shall
deposit the sum of One Thousand Dollars ($1,000.00) (the "Initial Deposit") with
Commonwealth Land Title Insurance Company, Atlanta, Georgia (the "Escrow
Agent"). The Deposit shall be held by the Escrow Agent in a separate
interest-bearing money market account maintained by a federally-insured bank. In
no event, however, shall Escrow Agent bear any responsibility for the solvency
of the institution into whose accounts the Deposit is placed. For purposes of
this Agreement and in order to account for any interest earned on any sums paid
or deposited pursuant to this Agreement, the tax identification number of Seller
is 58-2122875 and of Buyer is 16-1364563. All interest accrued on the Deposit
shall be added to and become a part of the Deposit.
(ii) Unless this Agreement is terminated prior to the
expiration of the
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<PAGE> 3
Inspection Period (as hereinafter defined), Buyer shall deposit with Escrow
Agent an additional earnest money deposit of Ninety-Nine Thousand Dollars
($99,000.00) no later than the end of the Inspection Period. The Initial
Deposit and this additional Deposit shall be referred to as the "Deposit." If
the sale hereunder is consummated in accordance with the terms hereof, the
Deposit shall be applied to the Purchase Price to be paid by Buyer at the
closing. The Deposit shall also constitute Seller's liquidated damages in
accordance with Section 13.02 hereof.
(iii) The Purchase Price, less the Deposit and less such
amounts as may be required as the result of credits, prorations and adjustments
described in this Agreement, by wire transferred funds through a Federal Reserve
Bank to Seller's bank account as designated by Seller.
2.03 Deposit with Escrow Agent.
(a) The Escrow Agent shall hold the Deposit, together with any
other sums paid on account of the Purchase Price prior to the Closing, in escrow
in the type of account described in Section 2.02(a)(i) of this Agreement until
the Closing or sooner termination of this Agreement and shall pay over or apply
such proceeds in accordance with the terms of this Section 2.03. At the Closing
if Buyer closes this transaction, the Deposit shall be paid to Seller and
credited against the Purchase Price.
After the expiration of the Inspection Period referenced in Section 3.04
hereof, if for any reason the Closing does not occur and either party makes a
written demand upon Escrow Agent for payment of the Deposit, Escrow Agent shall
give written notice to the other party of such demand. If Escrow Agent does not
receive a written objection from the other party to the proposed payment within
five (5) business days after giving such notice, Escrow Agent is hereby
authorized to make such payment. If Escrow Agent does receive written objection
to the proposed payment within such 5 business day period or if for any other
reason Escrow Agent in good faith shall elect not to make such payment, Escrow
Agent shall continue to hold such amount until otherwise directed by written
instructions from both parties to this Agreement or by a final judgment of a
court of competent jurisdiction. However, Escrow Agent shall have the right at
any time to interplead the Deposit with the clerk of the Superior Court of Cobb
County, Georgia. Escrow Agent shall serve Seller and Buyer in the interpleader
action. Upon such deposit Escrow Agent shall be relieved and discharged of all
further obligations and responsibilities hereunder. Escrow Agent may recover
its reasonable out-of-pocket costs and expenses of instituting any interpleader
action from the non-prevailing party in the interpleader action.
(b) The parties acknowledge that Escrow Agent is acting
solely as a stakeholder at their request and for their convenience; that Escrow
Agent when acting in such capacity shall not be deemed to be the agent of either
of the parties; and that Escrow Agent shall not be liable to either of the
parties for any act or omission on its part unless taken or suffered in bad
faith, in wilful disregard of this Agreement or involving gross negligence.
Seller and Buyer shall jointly and severally indemnify, defend and hold Escrow
Agent harmless from and against all costs, claims and expenses, including
reasonable attorneys' fees, incurred in connection with the
3
<PAGE> 4
performance of Escrow Agents' duties hereunder, except with respect to actions
or omissions taken or suffered by Escrow Agent in bad faith, in wilful
disregard of this Agreement or involving gross negligence on the part of Escrow
Agent.
(c) In order to acknowledge its agreement to the provisions of this
Section 2.03, Escrow Agent shall sign this Agreement but shall not be a party to
or otherwise subject to the terms and conditions of this Agreement.
ARTICLE III
TITLE TO PROPERTY
3.01 Title Insurance Commitment.
(a) Within fifteen (15) days following the Contract Date (as
hereinafter defined), Buyer shall obtain, at Buyer's expense, a Commitment for
Title Insurance, (hereinafter called the "Title Commitment") issued by
Commonwealth Land Title Insurance Company (the "Title Insurer") with copies of
all referenced documents attached, evidencing that there is access to the Land,
suitable for the Intended Use, from a public roadway and that Seller is vested
with fee simple title to the Land, free and clear of all liens, encumbrances,
exceptions or qualifications whatsoever except for those exceptions to title:
(i) which are described on the attached Exhibit D (the "Permitted Exceptions"),
and (ii) which are monetary in nature. The Title Commitment shall also evidence
that upon the execution, delivery, and recordation of the Deed to be delivered
pursuant to this Agreement and the satisfaction of all requirements specified in
Schedule B, Section 1 of the Title Commitment, Buyer shall acquire fee simple
title to the Land subject only to the Permitted Exceptions, and those other
matters identified on the Title Commitment which are not timely objected to by
Buyer as being Title Defects. Buyer shall notify Seller prior to the expiration
of the Inspection Period of those liens, encumbrances, exceptions,
qualifications or other matters listed in the Title Commitment, other than the
Permitted Exceptions, which must be discharged by Seller at or before Closing
hereunder (any such liens, encumbrances, exceptions or qualifications referred
to above being herein referred to as "Title Defects"). If Seller shall, prior to
the time of Closing, cure or eliminate the Title Defects to the satisfaction of
the title insurance company issuing the Title Commitment in such manner as to
permit the Title Insurer to either (i) endorse the Title Commitment so as to
delete the Title Defects from the Title Commitment or (ii) issue a new title
insurance commitment that deletes the Title Defects, the Closing shall take
place on the date and in the manner elsewhere specified in this Agreement. If
Seller shall not so cure or eliminate the Title Defects, then Buyer, as its only
rights and remedies, may cancel this Agreement on written notice to Seller and
Escrow Agent and the Deposit and interest thereon shall be returned to Buyer or
Buyer may close on this Agreement as if no such Title Defect existed.
(b) A delay in delivery of the Title Commitment shall not be
deemed a Buyer default unless the delay exceeds fifteen (15) days after the date
upon which delivery is required by this Agreement.
4
<PAGE> 5
(c) Notwithstanding anything herein contained to the contrary, Seller
shall have no obligation to cure any Title Defects, except the payment and
discharge at Closing of the Nationwide Life Insurance Company first mortgage
loan (the "First Mortgage")
(d) Seller will deliver a title affidavit in the form customarily
utilized in Atlanta, Georgia so as to eliminate from the Title Commitment at
Closing (and from the title insurance policy when issued) the printed exceptions
for unrecorded mechanics' liens and parties in possession (other than apartment
tenants and service contract providers).
3.02 Survey.
(a) Seller will provide Buyer within ten (10) days of the
Contract Date with a copy of the most recent survey for the Land that Seller may
have, which survey shall have been prepared by a registered Georgia surveyor and
all matters shown on such survey shall be considered Permitted Exceptions.
Buyer, at its expense and prior to the end of the Inspection Period, may have
the surveyor update the survey of the Property in accordance with the 1992
"Minimum Standard Detail Requirements for Land Title Surveys" jointly
established by the ALTA and the ACSM so that the survey meets the requirements
of an Urban Survey, as defined in the current accuracy standards jointly adopted
ALTA and ACSM and includes Items 2, 3, 4, 6, 8, 9, 10, 11 and 13 of Table A
thereof. The updated survey shall also include a metes and bounds legal
description of the land and contain a surveyor's certification in form
reasonably acceptable to Buyer. If the survey shows any unpermitted
encroachments, overlaps, rights-of-way or easements on the Land, or that any
improvements located on the Land encroach on other land, written notice to that
effect shall be given to Seller before the expiration of the Inspection Period,
and Seller shall have the same time to remove such survey defects as this
Agreement allows for curing Title Defects. If Seller fails to remove or cure all
material survey defects within the above-stated period, then at the option of
Buyer (i) the Escrow Agent shall return the Deposit to Buyer and this Agreement
shall be terminated, whereupon Seller and Buyer shall be relieved of all
obligations to each other under this Agreement, other than the Inspection
Indemnity, or (ii) Buyer may close on this Agreement as if no such survey defect
existed. For purposes of this Agreement, a survey defect shall not be deemed a
material defect if the Title Insurer issuing the Title Commitment agrees to
remove from the Title Commitment and the resulting title insurance policy
thereto the standard printed exception relating to matters that would be
disclosed by an accurate survey and such title company does not insert in place
of such standard printed exception a specific exception relating to the
particular survey defect or to matters appearing on the survey in general.
3.03 Failure to Cure Title or Survey Defects.
If Seller shall not cure or eliminate the Title Defects, and Seller shall
have no obligation to do so, Buyer, as its only rights or remedies, may elect
to accept such title to the Land as Seller may be able to convey, without
reduction of Purchase Price payable at Closing or Buyer may terminate this
Agreement and the Deposit shall be refunded to Buyer by the Escrow Agent. Upon
such refund and reimbursements, this Agreement shall be null and void and the
parties
5
<PAGE> 6
hereto shall be relieved of all further obligations and liabilities, except for
the Inspection Indemnity.
6
<PAGE> 7
3.04 Inspection Period.
(a) Buyer shall have through the forty-fifth (45th) day
following the Contract Date within which to undertake such physical inspections
and investigations and inquiries concerning the Property (including both Land
and Improvements) and any matters relating to the use, operation and occupancy
of the Property as shall be necessary or desirable for Buyer to evaluate the
feasibility and advisability of purchasing the Property (the "Inspection
Period"). This shall include, without limitation of the foregoing, independent
investigations and inquiries concerning all applicable building, zoning,
environmental and other codes, ordinances, statutes, rules and regulations
affecting the Property and its use, as well as the availability of access and
all utility services thereto and shall include interviews of the employees of
Seller; provided, however, Buyer agrees that an Owner's representative must be
present during such interviews and that there will be no discussion with said
employees with regard to said employees' future employment by Buyer. Buyer may
also conduct such physical inspections of the Improvements as shall be necessary
or desirable, including but not limited to structural inspections, appraisals,
review of electrical, heating, air conditioning and plumbing systems, termite
inspections and other investigations and inquiries. Buyer shall bear all costs
of any such inspections and investigations, and in no event, shall any of the
cost thereof be paid by or charged or apportioned to Seller. For purposes of
undertaking physical inspections and investigations of the Property, including
any non-destructive soil borings or surveys required or desired by Buyer, Seller
hereby grants to Buyer and its agents full right of access and entry upon the
Property and any part thereof during the Inspection Period, subject to the
rights of all tenants in possession. Buyer, as a condition to its exercise of
such right of access, specifically agrees to defend, indemnify and save and hold
Seller harmless from and against any and all loss, damage, liability, suit,
claim, cost or expense (including reasonable attorney's fees) arising from the
exercise by Buyer or its agents of this right of access and entry. The indemnity
and hold harmless obligation in the preceding sentence is herein referred to as
the "Inspection Indemnity" which shall survive the Closing and any termination
of this Agreement. Prior to entry on the Property, Buyer shall furnish Seller
with a certificate of insurance insuring Buyer and Seller against liability in a
combined single limit amount of at least $1,000,000.00. Buyer and its agents
and employees also shall have the right during normal business hours during the
Inspection Period to inspect any and all books and records relating to the
Property and to make copies thereof at Buyer's cost and expense. No discount on
the Purchase Price will be allowed based upon the outcome of the Buyer's
investigation during the Inspection Period. Buyer agrees that it will give
Seller forty-eight (48) hours prior notice of its intent to go on the Property
to conduct its inspection per the terms of this paragraph. Buyer may do only
non-destructive and not any destructive tests on the Property.
(b) In the event that the results of any inspections,
investigations or inquiries are, in Buyer's sole opinion and within Buyer's sole
discretion, unacceptable to Buyer for any or no reason, and Buyer notifies
Seller in writing of that fact within the Inspection Period, then, at the
Buyer's sole option, Buyer may terminate this Agreement and forthwith receive a
full and immediate return of the Deposit less $100.00 which shall be paid to
Seller in consideration of Seller's having held the Property off the market. In
such event and upon Buyer's receipt of the
7
<PAGE> 8
Deposit, this Agreement and the rights and obligations of the parties hereunder
shall thereupon cease, terminate and be null and void, except for the
Inspection Indemnity and Buyer's obligation to maintain as confidential all
information concerning the Property or Seller learned as a result of Seller's
disclosures to Buyer pursuant to this Section 3.04. If Buyer fails to notify
Seller in writing before the conclusion of the Inspection Period of Buyer's
intention to terminate this Agreement, then the Deposit shall become
nonrefundable absent Seller's breach of this Agreement and Buyer shall deposit
the $99,000.00 additional Deposit with the Escrow Agent prior to the end of the
Inspection Period.
(c) On or within ten (10) days from the Contract Date, Seller shall
furnish to Buyer true and correct copies, to the extent in Seller's possession
and to the extent that same were prepared for Seller, of real estate tax bills
and utility bills for the period of Seller's ownership, and Seller's most recent
survey, soil reports, environmental reports, site plans, termite reports,
certificates of occupancy, notice of any insurance claims during the period of
Seller's ownership, copies of all pending, known or threatened litigation
against the Property or Seller relating to the Property, existing owner's title
insurance policies and any updates thereto and all service and maintenance
contracts pertaining to the Land and Improvements. Seller shall also provide to
Buyer within such time period a copy of Seller's income, expense and other
operating statements for the period of Seller's ownership through the Contract
Date including a current rent roll and make available to Buyer for review
Seller's books and records relating to the Property. During the Inspection
Period Seller will make available for Buyer's review a copy of Seller's
insurance policy covering the Property
(d) Buyer hereby agrees to hold and maintain as confidential all
information acquired from Seller pursuant to the rights of inspection and
disclosure provided for pursuant to this Section 3.04. Buyer may, however,
disclose the information to its partners, investors, lenders, accountants,
attorneys, engineers, consultants, and other professional advisors to the extent
Buyer deems it necessary regarding the purchase of the Property. Whenever Buyer
deems it necessary to disclose the information to such third parties, however,
Buyer shall inform them of the confidentiality requirements of this Agreement.
In the event Buyer should breach this covenant of confidentiality, either prior
to Closing or subsequent to the termination of this Agreement should a Closing
not occur for any reason, then Seller, upon a showing of Buyer's breach of the
confidentiality requirements referenced in this paragraph, shall be entitled to
an immediate injunction to preclude any further disclosures and Seller shall be
entitled to recover from Buyer, after a court finding of a breach on the part of
Buyer, all damages, both direct and consequential, including reasonable
attorney's fees and costs, incurred as a result thereof. Buyer hereby agrees
that a proper jurisdiction and venue to bring any action to enforce this
Subsection 3.04(d) shall be in the state or federal courts of Cobb County,
Georgia.
8
<PAGE> 9
ARTICLE IV
LEASES
4.01 Existing Leases.
(a) Seller represents to Buyer that all existing apartment
leases at the Property (the "Leases") and any other rights to the use or
occupancy of the apartments at the Property (the "Tenancies") are identified on
Exhibit E attached hereto.
(b) Between the Contract Date and the Closing Date, Seller
shall perform or cause to be performed all obligations of Seller or the landlord
under the terms of the Leases.
(c) To the best of Seller's knowledge, Seller warrants to Buyer
that all the Leases are in full force and effect and that no tenant under any of
the Leases has any pending claim or basis for any claim for any reduction,
deduction or set off against the landlord or the rent due thereunder. Seller
further warrants that to the best of Seller's knowledge, except as respects the
First Mortgage, Seller has the sole right to collect the rents due under the
Leases and that neither the Leases nor the right to collect the rents due
thereunder has been assigned, pledged, hypothecated or otherwise encumbered by
Seller. During the Inspection Period, Buyer shall have the right to review and
inspect copies of all documents comprising the Leases and to make necessary
copies thereof. Buyer shall also have the right to review and inspect all
Tenants' files and documents therein including, but not limited to, applications
and credit histories. Seller warrants that to the best of Seller's knowledge,
there are no amendments, modifications, extensions or renewals of such Leases
that are not reflected by such documents and Exhibit E. Exhibit E shall set
forth the following information with respect to each Lease: (i) the name of each
tenant residing in each unit number designation; (ii) the apartment number(s)
occupied by such tenant; (iii) the commencement and termination dates of the
Lease; and (iv) all allowances, concessions, free rent or reduced rent payable
thereunder; and (v) the amounts of security deposits for each unit and tenancy.
(d) At Closing, Seller shall certify a rent roll and
collections report to Buyer properly containing information with respect to each
of the tenants under each Lease, as follows: (i) the full and correct name of
each tenant residing in each unit number designation; (ii) the date upon which
the last rent payment was made and the period such payment was attributable to;
(iii) the amount of the last rent payment made; (iv) the amount of any prepaid
rent, security deposit, key deposit, pet deposit and the like paid to Seller or
the landlord under each Lease, including accrued interest, if any; and (v) all
arrearages owing from said tenant.
4.02 Status of Leases and Tenancies at Closing.
If any apartment unit is vacant on the Closing Date, Buyer shall
accept the Property subject to such vacancy, provided that Seller shall not
grant any concessions or rent abatements for any period following the Closing
Date without Buyer's prior written consent, except in
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<PAGE> 10
accordance with market conditions. Seller agrees to make rent ready any
apartment unit at the Property which becomes vacant five (5) or more days prior
to the Closing Date.
ARTICLE V
SERVICE CONTRACTS
During the Inspection Period, Buyer shall have the right to review
and inspect and make necessary copies of all service, maintenance, and
commission agreements presently in effect with respect to the use or operation
of the Property, which contracts are described on the attached Exhibit G (the
"Service Contracts"). Seller and Buyer agree that any existing Management
Contract will be canceled at Closing. All of the Service Contracts shall be
assigned by Seller to Buyer at the Closing, and shall be assumed by Buyer.
Between the Contract Date and the Closing Date, Seller shall not enter into any
additional Service Contracts that are not terminable on 30 or fewer days notice
and shall not renew, amend, extend, unless cancellable on 30 or fewer days
notice, or terminate any existing Service Contracts without the written consent
of Buyer, which consent may not be withheld unreasonably.
ARTICLE VI
TIME
6.01 Time of the Essence.
Time, and timely performance, is of the essence of this Agreement
and of the covenants and provisions hereunder. Any time period that shall end on
a Saturday, Sunday, legal holiday, or bank holiday shall extend to 5:00 P.M. of
the next full business day.
6.02 Contract Date.
The date from which commences any time period used for measuring performance or
events hereunder shall be the date when the last one of Seller and Buyer has
properly executed this Agreement as evidenced on the signature page (the
"Contract Date").
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.01 Seller Representations and Warranties.
Seller represents and warrants to Buyer as follows:
(a) To the best of Seller's knowledge, the conveyance of the
Property to Buyer pursuant to this Agreement will not be a violation by Seller
of any applicable statute, ordinance, governmental restriction, or regulation,
or any private restriction or agreement.
(b) To the best of Seller's knowledge, no special assessments
of any kind (special,
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bond or otherwise) are pending or levied against the Property which are
outstanding and unpaid.
(c) The books and records to be made available by Seller to
Buyer are the true books and records maintained by Seller in connection with the
Property.
(d) Seller has no written employment contracts with any
employees of the Property, or if Seller has any such contracts, they will be
terminated effective as of the Closing Date and Seller shall indemnify Buyer in
respect of any such written employment contracts.
(e) To the best of Seller's knowledge, Seller has not received
notices of any violations by the Property of state or municipal ordinances,
orders or requirements.
(f) The Rent Roll delivered by Seller to Buyer accurately sets
forth for each apartment unit at the Property, the tenant's name, apartment
number, monthly rental and security deposit held. There are no leases for
apartments which affect the Property other than as set forth on the Rent Roll,
and there are no non-residential leases at the Property other than an existing
lease to the laundry room equipment company.
(g) There is no litigation or proceeding pending for which
Seller has received notice or service of process or, to the best of Seller's
knowledge, threatened against Seller or the Property which could affect Buyer or
the Property upon or subsequent to the Closing Date.
(h) To the best of Seller's knowledge, there are no
condemnation or environmental proceedings pending, nor are there any proposed
changes in zoning or other land use regulations contemplated, against all or any
part of the Property. No portion of the Property has been affected by fire or
other casualty, except for such portions as have been fully repaired or restored
to their condition prior to such fire or other casualty.
(i) To the best of Seller's knowledge, Seller has received no
notice of default under any of the Service Contracts.
(j) Seller is not a "foreign person" as such term is defined in
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended.
(k) Each person executing and delivering this Agreement and all
documents to be executed and delivered by Seller at Closing represents and
warrants to Buyer that he has due and proper authority to execute and deliver
same. Seller has the full right, power and authority to sell and convey the
Property to Buyer as provided herein and to carry out its obligations hereunder.
The consummation by Seller of the transaction which is the subject of this
Agreement will not conflict with or result in a breach of any of the terms of
any agreement or instrument to which Seller is bound or constitute a default
thereunder and the Board of Directors of Seller's sole general partner, Roberts
Realty Investors, Inc., has authorized and approved the execution and delivery
of this Agreement, the transaction which is the subject of this Agreement, and
all documents to be executed and delivered by Seller at Closing, and the consent
of the limited
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partners in Seller or the shareholders in Roberts Realty Investors, Inc. is not
required therefor.
(l) To the best of Seller's knowledge, the schedule of Personal
Property listed on Exhibit B to this Agreement contains a correct and complete
list of all material personal property owned by Seller and located at or used in
connection with the operation of the Property. All Personal Property is, and as
of the Closing Date will be, owned by Seller free from encumbrances or liens
except for the First Mortgage.
(m) To the best of Seller's knowledge, Seller has not received
any notice from any applicable governmental agency seeking any information or
alleging any violation of Environmental Law (as hereinafter defined). To the
best of Seller's knowledge, and except as disclosed in that certain
environmental report dated March 16, 1996 prepared by Law Engineering and
Environmental Services, Inc., which Seller has previously delivered to Buyer,
Seller has not caused or permitted the Property to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer, produce
or process any Hazardous Materials (as hereinafter defined) or solid waste,
except in compliance with all applicable Environmental Laws, and Seller has not
caused or permitted, and has no knowledge of, any Release (as hereinafter
defined) by Seller of any hazardous materials on-site or off-site of the
Property. "Hazardous Materials" shall mean all substances regulated or deemed or
defined as toxic or hazardous under Environmental Law, including, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related
materials, asbestos or any materials containing asbestos. "Environmental Law"
shall mean any Federal, state or local environmental law, ordinance, rule, or
regulation including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section
Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(40 U.S.C. Section Section 9601 et seq.), and the rules and regulations adopted
and publications promulgated pursuant thereto. "Release" shall mean releasing,
spilling, leaking, pumping, emitting, emptying, discharging, ejecting, escaping,
leaching, disposing, seeping, infiltrating, draining or dumping, including both
the present and past tense, as appropriate.
(n) To the best of Seller's knowledge, neither Seller nor
Seller's managing agent has received any written notice which remains
outstanding 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 the
existing premium rates. Seller has received no notice from the holder of the
First Mortgage of a default thereunder or the existence of a fact, condition or
circumstance that will, if not remedied, cause a default thereunder with the
passing of time or the giving of notice, or both.
The term "knowledge" when applied to Seller in this Agreement,
means the actual, but not constructive, knowledge of Charles S. Roberts, the
President of the sole general partner of Seller, after due inquiry of the
resident manager of the Property, the maintenance supervisor of the Property,
the staff accountant for the Property, and the Vice President of Operations of
the property management company for the Property, and not anything which he
should have known, but did not know. Whenever reference is made in this
Agreement to a notice having been
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received by Seller the same shall mean a notice which actually has been
received by Charles S. Roberts or of which he has been advised after due
inquiry of the resident manager of the Property.
Seller's warranties and representations shall survive the consummation of
the transaction contemplated herein through December 15, 1997. Any lawsuit or
other proceeding by Buyer against Seller in respect of any such warranties or
representations must be commenced by Buyer, if at all, no later than December
31, 1997. If Buyer fails to notify Seller no later than December 15, 1997 of a
breach by Seller of any warranty or representation contained in this Agreement,
or if Buyer fails to file suit against Seller no later than December 31, 1997
in respect of any breach by Seller of a warranty or representation contained in
this Agreement, Buyer's right to file suit against Seller or otherwise recover
against Seller in respect of any such breach of a warranty or representation
shall be terminated and null and void. Notwithstanding the foregoing, if Buyer
has knowledge that any of the representations and warranties of Seller in this
Agreement are inaccurate in any respect prior to the Closing Date, and if such
inaccuracy does not result from any act or omission of Seller between the date
hereof and the Closing Date, Buyer's sole and exclusive remedy, waiving all
other remedies, is either to (i) terminate this Agreement by giving notice to
Seller in which event the Escrow Agent promptly shall return to Buyer so much
of the Deposit as is then held by Escrow Agent, and thereafter this Agreement
shall terminate and be null and void and of no further force or effect, except
for the Inspection Indemnity, and neither Buyer nor Seller shall have any
further rights, remedies, duties, liabilities or obligations to the other, or
(ii) waive that representation and warranty as to such inaccuracy and proceed
to consummate the transaction contemplated herein. Buyer acknowledges that
Seller shall have no liability for any representations or warranties of Seller
in this Agreement which were true when made and as of the Closing Date, but
which become untrue following the Closing Date.
7.02 Representations and Acknowledgments of Buyer.
(a) Buyer shall have the right to assign, on the Closing Date,
but not before, its interest in this Agreement to any limited partnership, the
sole general partner of which is a related entity of American Equity Corp. Buyer
shall not have the right to assign its interest in this Agreement to any other
party without obtaining the written consent of Seller. Any assignment or
attempted assignment by Buyer in violation of this Section 7.02(a) shall be null
and void and of no force and effect. Buyer hereby agrees that any assignment by
Buyer will not relieve Buyer of its obligations and liabilities hereunder.
(b) Buyer's execution and performance of this Agreement will
not cause Buyer to be in default under, or in breach of, any other existing
agreement or obligation.
(c) Buyer will take prior to Closing all necessary legal
actions to authorize or confirm its authority to enter into and perform all the
terms of this Agreement.
7.03 Seller's Obligation to Cure Violations.
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(a) Except as otherwise provided herein, all notices of
violations of law or governmental ordinances, orders or requirements which were
noted or issued prior to the Closing by any governmental department, agency or
bureau having jurisdiction as to conditions affecting the Property and all liens
which have attached to the Property prior to the Closing pursuant to any
applicable governmental ordinances, orders or requirements shall be removed or
complied with by Seller, so long as the cost of removal or compliance does not
exceed $5,000.00. If the cost of such removal or compliance exceeds $5,000.00
and Buyer is unwilling to waive compliance, then Seller shall have the option to
terminate this Agreement and the Deposit shall be returned to Buyer. If such
removal or compliance has not been completed prior to the Closing, and such
removal or compliance can be accomplished by the payment of a specified sum of
money, then Seller shall pay to Buyer at the Closing such sum, not to exceed
$5,000.00, as is necessary to effect or complete such removal or compliance, and
Buyer shall be required to accept title to the Property subject thereto.
ARTICLE VIII
CONTINGENCIES OF CLOSING
8.01 Buyer's Contingencies.
The obligation of Buyer to close is expressly made subject to the following
conditions, each of which is for the sole benefit of Buyer and may be waived in
writing by Buyer, at its sole option and discretion:
(a) the truth and accuracy as of the date hereof and the
Closing Date of each and every warranty and representation herein made by
Seller, and the execution by Seller of a certificate reaffirming the truth of
such warranties and representations as of the day of Closing;
(b) the timely performance by Seller of each and every
obligation imposed upon Seller hereunder; and
(c) the execution and delivery by Seller to Buyer of each and
every instrument required by this Agreement to be executed and delivered by
Seller to Buyer.
8.02 Seller's Contingencies.
The obligation of Seller to close is expressly made subject to the following
conditions, each of which is for the sole benefit of Seller and may be waived
in writing by Seller, at its sole option and discretion:
(a) the execution and delivery by Buyer to Seller of each and
every instrument required by this Agreement to be executed and delivered by
Buyer to Seller;
(b) the timely performance by Buyer of each and every
obligation imposed upon it
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hereunder; and
(c) the payment of the monies by Buyer to Seller as provided in
Article II hereof.
ARTICLE IX
THE CLOSING
9.01 Closing Date.
(a) The closing and transfer of title pursuant to this
Agreement ("Closing") shall take place on or before sixty (60) days following
the expiration of the Inspection Period (the "Closing Date"). The Closing shall
take place on the Closing Date at 10:00 A.M. at the offices of Holt, Ney,
Zatcoff & Wasserman, 100 Galleria Parkway, Suite 600, Atlanta, Georgia 30339, or
at such other place upon which Seller and Buyer may agree in writing. If Buyer
and Seller are not able to agree on the Closing Date, the Closing Date shall be
on the 60th day following expiration of the Inspection Period.
(b) Buyer may extend the Closing Date for one (1) thirty (30)
day period. For each thirty (30) day extension, Buyer shall deposit with the
Escrow Agent at least five (5) days prior to the otherwise scheduled Closing
Date an additional Thirty Thousand Dollars ($30,000.00) which additional deposit
or deposits plus interest shall become a part of the Deposit, shall be
non-refundable except as otherwise herein specifically provided, and shall be
credited against the Purchase Price, or otherwise applied as herein specified.
9.02 Seller's Closing Expenses.
Seller shall pay at or prior to Closing the cost of (i) recording any documents
required to cure any title defects or objections; (ii) Georgia transfer tax
required to be affixed to the Deed; and (ii) such other expenses incurred by
Seller or necessary to Seller's performance of the Agreement.
9.03 Buyer's Closing Expenses.
Buyer shall pay at Closing the cost of (i) recording the instruments of
conveyance; (ii) title insurance commitment and policy premiums and title
examination expenses; (iii) survey; and (iv) such other expenses incurred by
Buyer or necessary to Buyer's performance of the Agreement.
9.04 Closing Prorations and Adjustments.
(a) The following prorations and adjustments shall be made
between the parties at the Closing as of 11:59 p.m. on the day prior to the
Closing Date:
(i) Prepaid rent, and all other income and expense in
respect of the Property, with Seller being entitled to all such income and
obligated for all expenses through the day prior to the Closing Date. Tenant
Security Deposits will be transferred by credit against the Purchase
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Price and Buyer will hold and apply the Security Deposits as the Leases and
Georgia law require and will indemnify, defend and hold Seller harmless in
respect thereto. No proration shall be made in relation to delinquent rents
existing, if any, as of the Closing Date. In adjusting for uncollected rents,
no adjustment shall be made in Seller's favour for rents which have accrued and
are unpaid as of Closing, but Buyer shall pay Seller such accrued and unpaid
rents, as and when collected by Buyer, it being agreed that Buyer shall not be
deemed to have collected any such arrearages attributable to the period prior
to Closing until such time as the tenant is current in the payment of all rents
accruing in the month of and after the Closing. Buyer agrees to bill tenants
of the Property for all past due rents and to take any additional reasonable
actions requested by Seller to collect rents that are accrued but unpaid as of
the Closing, provided that Buyer shall not be obligated to incur any
out-of-pocket third party expense in connection with such actions and Buyer
shall not be obligated to take any action to terminate a tenancy. Seller
reserves the right to bring suit against tenants of the Property to collect for
accrued but unpaid rents owed Seller as of the Closing Date, but Seller may
not, subsequent to Closing, bring suit for possession of the premises occupied
by such tenants;
(ii) ad valorem real estate and personal property taxes
imposed upon or levied against the Property, the Land, the Improvements or the
Personal Property;
(iii) water, sewer, electric, gas and other utility
charges, if any, on the basis of final meter readings taken on the day prior to
the Closing Date. Buyer shall open a new account in Buyer's name;
(iv) charges under Service Contracts assigned to and
assumed by Buyer, as provided in this Agreement; and
(v) In the event that Seller pays a prepayment penalty
to the holder of the First Mortgage (based on the yield maintenance formula) in
an amount less than $108,000.00, Buyer shall receive a credit against the
Purchase Price in an amount equal to the difference between $108,000.00 and the
amount of the prepayment penalty paid by Seller. In the event that the
prepayment penalty paid by Seller exceeds $108,000.00, Buyer will pay to Seller
as an addition to the Purchase Price that part of the prepayment penalty which
exceeds $108,000.00.
(b) If the Closing shall occur at a time when the current
year's tax assessment for the Land, Improvements or Personal Property has not
been fixed, the proration of taxes at the Closing shall be upon the basis of the
tax imposed for the immediately preceding period applied to latest assessed
valuation. Promptly after the new tax assessment is fixed and the rate
established, the proration of taxes shall be recomputed if a recomputation would
result in a difference of at least $100.00 to either party. Any discrepancy
resulting from such recomputation and any other errors or omissions in computing
other prorations at Closing shall be promptly corrected upon notice and demand
by either party, which obligations shall survive the Closing. All reprorations
must be effected no later than December 15, 1997 and thereafter Seller and Buyer
shall have no further reproration obligation.
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9.05 Closing Documents to be Executed by Seller.
Seller shall deliver or cause to be delivered to Buyer on or before the
Closing Date, at Seller's sole cost and expense, the following original
documents, each of which must be properly executed by Seller:
(a) Limited Warranty Deed.
(b) A Bill of Sale, having warranties of title only, otherwise
on an "as is, where is" basis without warranty or representation, transferring
to Buyer all of Seller's right, title and interest in the Improvements, the
Personal Property, and any and all other rights of Seller described in Section
1.02 which are not included in the Deed.
(c) All Leases pertaining to the Property.
(d) A schedule of all security deposits and credit to Buyer in
the amount of such security deposits, including any interest thereon, held by
Seller on the Closing Date under the Leases.
(e) A certified rent roll.
(f) A notice to each tenant under each of the Leases
instructing the tenants to forward all further payments and correspondence to
Buyer.
(g) An assignment to Buyer of the Leases set forth on Exhibit E
and any other leases permitted hereby which will contain an assumption by Buyer
and a cross-indemnity.
(h) An assignment of all Service Contracts which are in effect
on the Closing Date and which are to be assigned by Seller to Buyer which will
contain an assumption by Buyer and a cross-indemnity.
(i) The Service Contracts, any warranties of the equipment,
fixtures and improvements, including any general warranties regarding
improvements constructed within one year prior to the Closing Date in Seller's
possession.
(j) Assignment of all written warranties and guarantees which
Seller has received from subcontractors and materialmen with respect to the
Property, along with a general assignment of all miscellaneous warranties and
guaranties made by third parties with respect to the Property (all without
representation or warranty by Seller).
(k) To the extent they are then in Seller's possession and not
posted at the Property, certificates, licenses, permits, authorizations and
approvals issued for or with respect to the Property by governmental and
quasi-governmental authorities having jurisdiction.
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(l) Assignment from Seller to Buyer of all rights of Seller to
use the name "Autumn Ridge Apartments" in connection with the operations of the
Property, only, Seller reserving right to use of name outside Cobb County,
Georgia.
(m) A closing statement setting forth all of the closing
expenses of Seller and Buyer, including closing prorations and adjustments, and
setting forth the net cash due to Seller and the cash required to close on the
part of Buyer (the "Closing Statement").
9.06 Closing Documents to be Executed by Buyer.
Buyer shall deliver or cause to be delivered to Seller on or before the Closing
Date, at Buyer's sole cost and expense, the following:
(a) If Buyer is a corporation, a resolution of Buyer's Board of
Directors authorizing the purchase of the Property.
(b) Properly executed copies of the Closing Statement.
(c) All other certificates and documents required of Buyer by
the Title Insurer in order to issue the title insurance policies in accordance
with this Agreement.
(d) Any other documents required under this Agreement.
ARTICLE X
DESTRUCTION, DAMAGE OR CONDEMNATION
10.01 Insurance.
Between the Contract Date and the Closing Date, Seller shall keep the Property
insured as presently insured.
10.02 Non-Material Damage.
If the property is damaged by fire, act or God, or other casualty prior to the
Closing and if the Property can be restored prior to Closing at a cost less
than One Million Dollars ($1,000,000.00) to substantially the same condition
existing prior to such damage, Seller shall so restore the Property and the
Closing Date shall be as set forth in this Agreement. In the event that the
Property cannot be so restored prior to Closing and the cost to repair is less
than $1,000,000.00, Seller shall deliver to Buyer at Closing all insurance
proceeds plus that additional amount, if any, which is required to repair or
restore such damage, which amount shall be mutually determined by Buyer and
Seller, and there shall be no reduction of the Purchase Price.
10.03 Material Damage.
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If the Property is materially damaged by fire, act of God, or other casualty
prior to the Closing, and the Property cannot be restored to substantially the
same condition existing prior to such damage, Buyer may elect to (i) terminate
this Agreement and receive as Buyer's sole remedy a return of the Deposit, or
(ii) Buyer may elect to take title to the Property on the Closing Date provided
herein, together with such insurance proceeds as may be available to Seller or
Buyer for the repair or restoration of such damage, and there shall be no
reduction of the Purchase Price. If Buyer elects to take title to the Property
in its damaged condition, Seller shall assign or deliver to Buyer any and all
insurance proceeds or insurance contracts or contract rights for the repair and
restoration of the Property. Materially is herein defined to mean damage to
the Property costing in excess of $1,000,000.00 to repair.
10.04 Condemnation.
If any condemnation or eminent domain proceedings are commenced by any
competent public authority with respect to the Property, or any part thereof,
prior to the Closing, Seller shall promptly give Buyer written notice thereof,
and Buyer shall have the option, to be exercised within fifteen (15) days of
such notice, to (i) close the purchase of the Property on the Closing Date
subject to such proceedings, whereupon any award paid or to be paid in
connection therewith shall be paid to or assigned to Buyer by Seller at the
Closing, or (ii) terminate this Agreement and receive a return of the Deposit,
whereupon the rights and obligations of the parties to this Agreement shall
cease and terminate.
ARTICLE XI
REAL ESTATE COMMISSION
11.01 Real Estate Commission.
(a) This Agreement was not brought about, directly or
indirectly, by any real estate agency or broker other than Butler & Bixler (the
"Broker") and no commission or fee will be payable on the sale hereunder other
than to the Broker. American Equity and Realty Corporation of New York
("AERCNY") has been employed by Buyer to act as a consultant with respect to
this transaction and Buyer agrees to pay AERCNY its agreed-upon fees and to
indemnify, defend and hold Seller harmless in respect thereto. AERCNY agrees
that in no event will Seller be obligated to it for any compensation whatsoever.
In the event of a Closing, Seller shall pay the Broker a real estate commission
in the amount of One Hundred Thousand Dollars ($100,000.00). Each party hereto
represents and warrants that it has employed no brokers or real estate agencies
in the creation of or the negotiations relating to this Agreement other than the
Broker, and each party shall indemnify and hold the other harmless against any
cost, claims or expenses (including attorneys fees), arising by reason of any
breach by such party of its warranty and representation under this section.
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(b) In the event of a default by Buyer, the failure of a
Closing condition, or in the event for any other reason, including a default by
Seller or Buyer, no Closing occurs, no real estate commission will be owing or
paid to the Broker, nor shall the Broker be entitled to any portion of the
forfeited Deposit. The Broker has joined in the execution of this Agreement for
the sole purpose of acknowledging the provisions of this section and agreeing to
execute a broker's lien waiver at closing and that this Agreement may be amended
by Seller and Buyer without execution by Broker provided such amendment does not
affect Broker's entitlement to its commission.
ARTICLE XII
ACCOUNTS PAYABLE
12.01 Accounts Payable.
Unless prorated with Buyer at Closing, any and all of Seller's accounts payable
as of the date of Closing shall be paid by Seller not later than thirty (30)
days subsequent to the Closing Date, or, in the event that Seller has not been
billed for any such accounts payable accruing on or before the date of Closing,
payment shall be made within thirty (30) days after Seller actually receives
any such later billing.
ARTICLE XIII
DEFAULT
13.01 Notice of Default.
No default as to any provision of this Agreement shall be claimed or charged by
either party against the other until notice thereof has been given to the
defaulting party in writing, and such default remains uncured for a period of
five (5) days after the defaulting party's receipt of such notice.
Notwithstanding the above, the Closing Date shall not be changed, delayed,
postponed, or extended by any requirement for notice of default, if such
default consists of failure to appear at Closing.
13.02 Default by Buyer.
In the event that the transaction contemplated herein is not closed and
consummated because of Buyer's failure or breach to perform its obligations
hereunder, Seller may obtain so much of the Deposit as is then held by Escrow
Agent from Escrow Agent as agreed-upon liquidated damages and not as a penalty,
it being otherwise difficult or impossible to estimate or determine Seller's
actual damages, and which liquidated damages shall be in lieu of any other
damages or the right to specific performance, and, upon Seller's receipt of
such liquidated damages, this Agreement shall terminate and be null and void
and of no further force or effect, and neither Seller nor Buyer shall have any
further rights, remedies, duties, liabilities or obligations to the other
hereunder, except for the Inspection Indemnity.
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13.03 Default by Seller.
In the event that the transaction contemplated herein is not closed and
consummated because of Seller's failure or breach to perform its obligations
hereunder or because of a breach by Seller of any of the representations and
warranties made herein by Seller, Buyer shall have the right only (i) to
terminate this Agreement by giving notice thereof to Seller and Escrow Agent,
and upon receipt of such notice Escrow Agent shall return so much of the
Deposit as is then held by Escrow Agent to Buyer and thereafter this Agreement
shall terminate and be null and void and of no further force or effect, except
for the Inspection Indemnity, and neither Seller nor Buyer shall have any
further rights, remedies, duties, liabilities or obligations to the other
hereunder, or (ii) to sue Seller for specific performance of its obligations
under this Agreement; which remedies specified in (i) and (ii) shall be in lieu
of any other rights or remedies for Buyer, including, without limitation, any
right or claim for damages; provided, however, in the event that the remedy of
specific performance is not available to Buyer because Seller has conveyed or
encumbered the Property, Buyer may pursue a claim against Seller for
compensatory damages not to exceed $700,000.00. If Buyer consummates the
transaction contemplated in this Agreement it shall be conclusively deemed to
have waived any breach by Seller of any covenant, representation or warranty
under this Agreement which the Buyer knew existed prior to the Closing.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.01 Binding Effect.
The rights and obligations created by this Agreement shall be binding upon and
inure to the benefit of Seller and Buyer and their successors and assigns.
Whenever used the singular number shall include the plural, the plural the
singular, and the use of any gender shall include all genders, as the context
requires.
14.02 Non-Merger of Certain Provisions.
Only the provisions of the last paragraph of Section 7.01, and Sections
3.04(a), 9.04(b), 11.01(a), and 12.01 of this Agreement shall survive the
Closing as herein provided, and shall not be merged into the documents of
conveyance from Seller to Buyer at Closing. If either party shall violate any
of the provisions that survive the Closing of this Agreement, the other party
will be entitled to recover all costs and attorney's fees incurred in
connection with the enforcement of such provisions.
14.03 Entire Agreement.
This Agreement contains the entire understanding between Buyer and Seller and
each agrees that no representation has been made by or on behalf of the other
that is not contained in this
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Agreement, and that in entering into this Agreement neither party relied upon
any representation not herein contained.
14.04 Applicable Law.
This Agreement shall be interpreted and enforced in accordance with the laws of
the State of Georgia. Each party acknowledges that all parties hereto
participated in the drafting of this Agreement and that, accordingly, no court
construing this Agreement shall construe it more stridently against one party
than the other.
14.05 Captions.
The captions for each section of this Agreement are for convenience of
reference only and in no way define, describe, extend, or limit the scope or
intent of this Agreement, or the intent of any provision hereof.
14.06 Recording Prohibited.
Neither this Agreement nor any memorandum thereof may be recorded by Buyer in
the Public Records of any County in the State of Georgia, and if this Agreement
or any memorandum thereof is recorded by Buyer, at the option of Seller the
Agreement will become null and void by the act and fact of recording and Buyer
will forfeit the Deposit.
14.07 Severability.
If any provision of this Agreement shall be held to be invalid or unenforceable
to any extent, the same shall not affect in any respect whatsoever the validity
or enforceability of the remainder of this Agreement.
14.08 Counterparts and Execution by Facsimile.
This Agreement may be executed in two or more counterparts, each of which shall
be and be taken to be an original, and all shall collectively be deemed one
instrument. For purposes of determining the Contract Date, the parties may
execute this Agreement and transmit a copy thereof by facsimile to the other
party, and any copy of the Agreement so executed shall be effective as an
original on the date of the facsimile. The original executed copy shall be
delivered no later than five (5) days following the date of the facsimile.
14.09 Amendments and Waivers.
This Agreement may not be amended, modified, altered, or changed in any
respect whatsoever except by a further agreement in writing duly executed by
the parties hereto. No failure by Buyer or Seller to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy upon a breach thereof shall
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constitute a waiver of any such breach or of such or any other covenant,
agreement, term, or condition. Either party hereto, by notice, may but shall be
under no obligation to, waive any of its rights or any conditions to its
obligations hereunder. No waiver shall affect or alter this Agreement but each
and every covenant, agreement, term, and condition of this Agreement shall
continue in full force and effect with respect to any other then-existing or
subsequent breach thereof.
14.10 Typewritten or Handwritten Provisions.
Handwritten and typewritten provisions inserted into this Agreement initialed
by both parties shall control over the typewritten provisions in conflict
therewith.
14.11 Notices. Any notice or demand which either party hereto is
required or may desire to give or deliver to or make upon the other party shall
be in writing and may be personally delivered, or by overnight courier (FedEx,
UPS etc.) return receipt requested, addressed as follows:
To Seller: Roberts Properties Residential, L.P.
Brian J. Sullivan
Roberts Properties, Inc.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Copy to: Sanford H. Zatcoff, Esq.
Holt, Ney, Zatcoff & Wasserman
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339
To Buyer: The Benchmark Group
4053 Maple Road
Amherst, New York 14226-1072
Attn: David F. Fedak
Copy to: Warren B. Gelman, Esq.
McGee & Gelman
200 Summer Street
Buffalo, New York 14222
Any such notice, demand or document shall be deemed to be given, delivered or
made upon receipt of the same by the party to whom the same is to given,
delivered or made. Buyer and Seller may from time to time notify the other of
changes with respect to whom and where notices should be sent by sending
notification of such changes pursuant to this section. Any notice or demand
may be executed by and sent by and to the counsel for the Seller and the Buyer.
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14.12 Exhibits.
All Exhibits attached hereto are incorporated herein by this reference. In the
event of an inconsistency between the provisions of this Agreement and the
information set forth on any Exhibit, the terms of the Exhibit shall control.
14.13 Litigation and Attorney's Fees.
In the event it shall be necessary for either party to this Agreement to bring
suit to enforce or construe any provision hereof (before or after Closing) or
for damages on account of any breach of this Agreement, the prevailing party
shall be entitled to recover from the other in addition to any damages or other
relief granted as a result of such litigation, all costs and expenses of such
litigation and reasonable attorney's fees (including attorney's fees and costs
of appeals) as determined by the Court.
14.14 Section 1031 Exchange.
Seller may wish to consummate an exchange of the Property for other property of
like kind to be held by Seller as an investment and have the transaction
qualify as an exchange pursuant to Section 1031 of the United States Internal
Revenue Code, as amended. Buyer agrees to cooperate with Seller in effecting
such an exchange provided that Buyer shall not be required to take title to any
exchange property, such cooperation shall be at no cost or expense whatsoever
to Buyer, and such exchange shall not delay Buyer in the Closing of its
acquisition of the Property, nor excuse Seller from performing its obligations
under this Agreement in the event that Seller is unable or is delayed in
effecting such an exchange. Buyer also agrees that Buyer will, at the
direction of Seller or a third party intermediary acting at Seller's direction,
pay all proceeds of the sale of the Property to the third party intermediary
who will facilitate the "like-kind" exchange for Seller pursuant to an
intermediary exchange agreement between Seller and such third party
intermediary, and Buyer will execute documents to effectuate the exchange
provided that such documents impose no liability upon Buyer and do not require
Buyer to take title to any other property.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement for
Sale and Purchase Of Improved Property as of the date first above written.
ROBERTS PROPERTIES
RESIDENTIAL, L.P.
a Georgia limited partnership
By: Roberts Realty Investors, Inc.,
a Georgia corporation and its sole
General Partner
April 14, 1997 By: /s/ Charles Roberts
--------------------------
Name: Charles Roberts
-------------------------
Title: President
------------------------
ACG PARTNERSHIP HOLDINGS, L.P.
a Delaware limited partnership
By: Its General Partner
AMERICAN EQUITY CORP.
April 14, 1997 By: /s/ Martin J. Lauer
--------------------------
Name: Martin J. Lauer
-------------------------
Title: Vice President
------------------------
BUTLER & BIXLER, INC.
April 15, 1997 By: /s/ Brad Brown
--------------------------
Name: Brad Brown
-------------------------
Title: Sales Agent
------------------------
AMERICAN EQUITY AND REALTY
CORPORATION OF NEW YORK
April 14, 1997 By: /s/ David F. Fedar
--------------------------
Name: David F. Fedar
-------------------------
Title: President
------------------------
25
<PAGE> 26
Commonwealth Land Title Insurance Company joins in the execution of this
Agreement for the sole purpose of acknowledging the agreements as to the
holding and disbursement of the Deposit.
COMMONWEALTH LAND TITLE
INSURANCE COMPANY
April 21, 1997 By: /s/ Linda R. Thurman
--------------------------
Name: Linda R. Thurman
-------------------------
Title: Vice President
------------------------
26
<PAGE> 1
This Instrument was prepared by
and after recording return to:
Kate Schaffarzick
Holt, Ney, Zatcoff, & Waserman
100 Golleria Parkway, Suite 600
Atlanta, Georgia 30339
STATE OF GEORGIA
COUNTY OF FULTON
DEED TO SECURE DEBT, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
THIS DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
AGREEMENT ("Security Deed" or "Deed to Secure Debt") made and entered into this
17th day of July, 1997, by and between ROBERTS PROPERTIES RESIDENTIAL, L.P., a
Georgia limited partnership (hereinafter referred to as "Grantor"), and THE
CANADA LIFE ASSURANCE COMPANY, a corporation organized and existing under the
laws of Canada, whose mailing address is 330 University Avenue, Toronto,
Ontario, Canada M5G 1R8, as secured party (hereinafter referred to as
"Grantee");
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00)
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in order to secure the indebtedness and other
obligations of Grantor hereinafter set forth, Grantor does hereby grant,
bargain, sell, warrant, convey, assign, transfer, release, pledge and set over
unto Grantee and the successors, successors-in-title and assigns of Grantee all
of the following described land and interests in land, estates, easements,
rights, improvements, personal property, fixtures, equipment, furniture,
furnishings, appliances and appurtenances (hereinafter collectively referred to
as the "Premises"):
(a) ALL THOSE CERTAIN tracts, pieces or parcels of land
located in Douglas County, Georgia and more particularly described in Exhibit
"A" attached hereto and by this reference incorporated herein and made a part
hereof (hereinafter referred to as the "Land");
(b) TOGETHER WITH all buildings, structures and improvements
of every nature whatsoever now or hereafter situated on the Land, and all gas
and electric fixtures, radiators,
<PAGE> 2
heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing
and heating fixtures, carpeting and other floor coverings, fire extinguishers
and any other safety equipment required by governmental regulation or law,
washers, dryers, water heaters, mirrors, mantels, air conditioning apparatus,
refrigerating plants, refrigerators, cooking apparatus and appurtenances, window
screens, awnings and storm sashes, which are or shall be attached to said
buildings, structures or improvements and all other furnishings, furniture,
fixtures, machinery, equipment, appliances, vehicles (excluding Grantor's
personal automobiles, if any), building supplies and materials, books and
records, chattels, inventory, accounts, farm products, consumer goods, general
intangibles and personal property of every kind and nature whatsoever now or
hereafter owned by Grantor and located in, on or about, or used or intended to
be used with or in connection with the use, operation or enjoyment of the
Premises, including all extensions, additions, improvements, betterments,
after-acquired property, renewals, replacements and substitutions, or proceeds
from a permitted sale of any of the foregoing, and all the right, title and
interest of Grantor in any such furnishings, furniture, fixtures, machinery,
equipment, appliances, vehicles and personal property subject to or covered by
any prior security agreement, conditional sales contract, chattel mortgage or
similar lien or claim, together with the benefit of any deposits or payments now
or hereafter made by Grantor or on behalf of Grantor, all tradenames,
trademarks, servicemarks, logos and goodwill related thereto which in any way
now or hereafter belong, excluding, however, the service-mark "Creating
Communities for Superior Lifestyles", relate or appertain to the Premises or any
part thereof or are now or hereafter acquired by Grantor; and all inventory,
accounts, chattel paper, documents, equipment, fixtures, farm products, consumer
goods and general intangibles constituting proceeds acquired with cash proceeds
of any of the property described hereinabove, all of which are hereby declared
and shall be deemed to be fixtures and accessions to the Land and a part of the
Premises as between the parties hereto and all persons claiming by, through or
under them, and which shall be deemed to be a portion of the security for the
indebtedness herein described and to be secured by this Deed to Secure Debt. The
location of the above-described collateral is also the location of the Land;
(c) TOGETHER WITH all easements, rights-of-way, strips and
gores of land, vaults, streets, ways, alleys, passages, sewer rights, waters,
water courses, water rights and powers, minerals, flowers, shrubs, crops, trees,
timber and other emblements now or hereafter located on the Land or under or
above the same or any part or parcel thereof, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances,
reversion and reversions, remainder and remainders, whatsoever, in any way
belonging, relating or appertaining to the Premises or any part thereof, or
which hereafter shall in any way belong, relate or be appurtenant thereto,
whether now owned or hereafter acquired by Grantor;
(d) TOGETHER WITH all income, rents, issues, profits, and
revenues of the Premises (collectively, the "Rents") from time to time accruing
(including without limitation all payments under leases or tenancies, tenant
security deposits whether held by Grantor or in a trust
2
<PAGE> 3
account, and escrow funds), and all the estate, right, title, interest,
property, possession, claim and demand whatsoever at law, as well as in equity,
of Grantor of, in and to the same; reserving only a revocable license to Grantor
to collect the same so long as no "Default" (as such term is hereinafter
defined) shall exist hereunder. Although this assignment constitutes a present
and current assignment of all the Rents, so long as Grantor is not in Default
hereunder, Grantee shall not demand that such Rents be paid directly to Grantee,
and Grantor shall have a revocable license to collect, but no more than one (1)
month prior to accrual, all such Rents; provided that such revocable license
shall ipso facto terminate without further action by Grantee and without notice
to Grantor upon the occurrence of a Default; provided further, however, if
Grantee in its sole and absolute discretion elects to accept a cure of any
Default, the foregoing license shall be reinstated; provided, however, nothing
herein shall be deemed to require Grantee to accept a cure of any Default; and
(e) TOGETHER WITH all unearned premiums, accrued, accruing or
to accrue under insurance policies now or hereafter obtained, or caused to be
obtained, by Grantor and Grantor's interest in and to all proceeds of the
conversion, voluntary or involuntary, of the Premises or any part thereof into
cash or liquidated claims, including, without limitation, proceeds of casualty
insurance, title insurance or any other insurance maintained on the Premises or
any part of either thereof, and all awards and/or other compensation heretofore
and hereafter made to the present and all subsequent owners of the Premises or
any part of either thereof by any governmental or other lawful authorities for
the taking by eminent domain, condemnation or otherwise, of all or any part of
the Premises or any easement or other right therein, including awards for any
change of grade of streets.
TO HAVE AND TO HOLD the Premises and all parts, rights, members and
appurtenances thereof, to the use, benefit and behoof of Grantee and the
successors, successors-in-title and assigns of Grantee, IN FEE SIMPLE forever;
THIS INSTRUMENT IS A DEED passing legal title pursuant to the laws of
the State of Georgia governing deeds to secure debt, and is also a security
agreement granting a present and continuing security interest and security title
in the portion of the Premises constituting personal property or fixtures,
pursuant to the Uniform Commercial Code of the State of Georgia, and it is not a
mortgage. This deed to secure debt and security agreement is made and intended
to secure payment and performance of: (i) an indebtedness of Grantor to Grantee
evidenced by that certain Real Estate Note of even date herewith, made by
Grantor and payable to the order of Grantee, in the stated principal amount of
Four Million and No/100 Dollars ($4,000,000.00) bearing interest and default
interest and payable as therein provided in installments, the final installment
of which is due and payable on May 1, 2001, if not sooner paid (hereinafter
called the "Note") (the Note, this Deed to Secure Debt and any and all other
documents, agreements and/or instruments, evidencing, securing or in any way
related to the Indebtedness (as hereinafter defined) are hereinafter
3
<PAGE> 4
collectively referred to as the "Loan Documents"); (ii) any and all renewals,
extension or extensions, modification or modifications of the Note, and
substitution or substitutions for the Note, either in whole or in part; (iii)
all advances, if any, made by Grantee pursuant to the terms of this Deed to
Secure Debt; (iv) all expenses incident to the collection of the indebtedness
secured by this Deed to Secure Debt; and (v) all duties and obligations of
Grantor under this Deed to Secure Debt. The obligations and indebtedness which
this deed to secure debt and security agreement is given to secure are
hereinafter sometimes collectively called the "Indebtedness".
SHOULD THE INDEBTEDNESS BE PAID according to the tenor and effect
thereof when the same shall become due and payable, and should Grantor perform
all covenants herein contained in a timely manner, then Grantee, at the request
of Grantor shall cancel and satisfy this Security Deed of record.
Grantor hereby further covenants and agrees with Grantee as follows:
ARTICLE 1
COVENANTS AND AGREEMENTS
Section 1.01 Payment of Indebtedness. Grantor shall pay the
Note according to the tenor thereof all in the coin and currency of the United
States of America and the remainder of the Indebtedness promptly as the same
shall become due.
Section 1.02 Warranty of Title to the Premises. Grantor
covenants that to Grantor's actual knowledge Grantor is lawfully seized and
possessed of the Premises as aforesaid, and has good right to convey the same,
that the same are unencumbered except for those matters expressly set forth in
Exhibit "B" attached hereto and by this reference incorporated herein and made a
part hereof (hereinafter referred to as the "Permitted Encumbrances"), and that
Grantor does warrant and will forever defend the title thereto against the
claims of all persons whomsoever, except as to the Permitted Encumbrances.
Section 1.03 Taxes, Liens and Other Charges.
(a) Subject to Section 1.05, Grantor shall pay, on or before
the due date thereof, all taxes, assessments, levies, license fees, permit fees
and all other charges (in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen) of every character whatsoever (including
all penalties and interest thereon) now or hereafter levied, assessed, confirmed
or imposed on, or in respect of, or which may be a lien upon, the Premises, or
any part thereof, or any estate, right or interest therein, or upon the Rents,
and shall submit to Grantee such evidence of the due and punctual payment of all
such taxes, assessments and other fees and charges as Grantee may
4
<PAGE> 5
require. Notwithstanding the foregoing, Grantor shall have the right to contest
in good faith any of the foregoing taxes, assessments or other charges provided
that (i) Grantor notifies Grantee of Grantor's intention to contest any of such
items, (ii) Grantee's security interest in the Premises is not and will not be
adversely affected by such action as determined by Grantee in its reasonable
discretion, (iii) at the option of Grantee, Grantor shall deposit with Grantee
the amount of any of the foregoing items to be contested by Grantor, which
amount shall be held by Grantee for the payment of such items, and (iv) any such
action undertaken by Grantor shall not result in any additional lien or other
encumbrance being filed against the Premises.
(b) Grantor shall pay, on or before the due date thereof, all
taxes, assessments, charges, expenses, costs and fees which may now or hereafter
be levied upon, or assessed or charged against, or incurred in connection with,
the Note, the other Indebtedness, this Deed to Secure Debt or any other
instrument now or hereafter evidencing, securing or otherwise relating to the
Indebtedness, other than income, franchise and doing business taxes, and shall
submit to Grantee such evidence of the due and punctual payment of all such
taxes, assessments, charges, expenses, costs and fees as Grantee may require.
(c) Subject to Section 1.05, Grantor shall pay, on or before
the due date thereof, all premiums on policies of insurance covering, affecting
or relating to the Premises, as required pursuant to Section 1.04. Grantor shall
submit to Grantee such evidence of the due and punctual payment of all such
premiums, as Grantee may reasonably require.
(d) Grantor shall pay or cause to be paid any and all taxes,
charges, filing, registration and recording fees, excises and levies imposed
upon Grantee by reason of its ownership of the Note, this Deed to Secure Debt or
the other Loan Documents, any security instrument with respect to the equipment
of Grantor or with respect to its interest therein and any instrument of further
assurance, other than income, franchise and doing business taxes, and shall pay
or cause to be paid all stamp taxes, intangible taxes and other taxes required
to be paid on the Note, the Deed to Secure Debt or the other Loan Documents. In
the event Grantor fails to make such payments or fails to cause such payments to
be made within five (5) days after written notice thereof from Grantee, then
Grantee shall have the right, but no the obligation, to pay the amounts due, and
Grantor shall, on demand, reimburse Grantee for said amounts, together with
interest thereon at the Default rate from the date said amounts are so advanced
until the same are paid to Grantee. In the event of the passage of any state,
federal, municipal or other governmental law, order, rule or regulation,
subsequent to the date hereof, in any manner changing or modifying the laws now
in force governing the taxation of deeds to secure debt or debts secured thereby
or the manner of collecting such taxes so as to adversely affect Grantee,
Grantor will pay any such tax on or before the due date thereof. If Grantor
fails to make such prompt payment or if, in the opinion of Grantee, any such
state, federal, municipal, or other governmental law, order, rule or regulation
prohibits Grantor from making such payment or would penalize Grantee if Grantor
makes such payment or
5
<PAGE> 6
if, in the opinion of Grantee, the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by applicable law,
then the entire balance of the Indebtedness and all interest accrued thereon
shall, at the option of Grantee, become due and payable 60 days after notice.
(e) Grantor will not suffer any mechanic's, materialman's,
laborer's, statutory or other lien to be filed of record or to remain
outstanding against the Premises; provided that Grantor shall have thirty (30)
days after Grantor has actual knowledge of any such lien being filed to bond off
or otherwise discharge any such lien.
Section 1.04 Insurance.
(a) Grantor shall procure for, deliver to and maintain for the
benefit of Grantee during the term of this Deed to Secure Debt, original
insurance policies having a term of not less than one (1) year with the premium
prepaid issued by insurance companies having a Best Rating of A-7 or better, in
such amounts, in such form and substance, and with such expiration dates as are
acceptable to Grantee, and containing non-contributory standard mortgagee
clauses, their equivalent and a satisfactory mortgagee loss payable endorsement
in favor of Grantee, such policies to provide that the insurer shall give
Grantee at least thirty (30) days prior written notice of cancellation or
termination, and to provide that no act or thing done by Grantor, as "Insured"
shall invalidate or diminish the insurance provided to Grantee, and providing
the following types of insurance covering the Premises and the interest and
liabilities incident to the ownership, possession and operation thereof;
(1) "All Risk" hazard insurance insuring, without
limitation, against loss or damage by fire, lightning, windstorm, hail,
explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles,
smoke, flood (if applicable), collapse, vandalism and malicious mischief and
against such other hazards as, under good insurance practices, from time to time
are insured against for properties of similar character and location, the amount
of which insurance shall be not less than one hundred percent (100%) of the full
replacement cost of the insurable portions of the Premises without deduction for
depreciation and including a replacement cost endorsement, an agreed amount
endorsement and an inflation guard endorsement;
(2) Comprehensive general public liability
insurance against claims for bodily injury, death or property damage occurring
in, on or about the Premises, covering liabilities incident to the construction,
ownership, possession and operation of the Premises, and naming Grantee as an
additional insured thereunder, in the minimum amount of $1,000,000.00;
(3) Rental insurance against loss of rental income
(including, but not limited to apartment rent, garage and storage rent) arising
out of any hazard against which the
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<PAGE> 7
Premises are required to be insured under Subsection 1.04(a)(1) above for one
(1) year, in an amount not less than $834,000.00; provided, however, if and when
the rental income rises above the sum of $834,000.00, Grantor shall increase
promptly the amount of rent loss insurance pari passu with the rental income
increase;
(4) Flood insurance in the same minimum amount as
required for hazard insurance if any portions of the Premises is located in a
flood hazard area; and
(5) Such other insurance on the Premises or any
replacements or substitutions therefor and in such amounts as may from time to
time be reasonably required by Grantee against other insurable casualties which
at the time are commonly insured against in the case of properties of similar
character and location, due regard being given to the height and type of the
improvements, their construction, location, use and occupancy, or any
replacements or substitutions therefor including, without limitation, boiler
insurance and flood hazard insurance, if applicable.
(b) Grantor is hereby authorized and empowered to enter into
negotiations to adjust or compromise any loss under any insurance policies
maintained pursuant to this Section 1.04, provided, however, the settlement
derived from any such negotiations shall be subject to the approval of Grantee.
All such proceeds shall be paid to Grantee and, subject to satisfaction of items
(i) through (iv) hereinafter immediately set forth, Grantee shall disburse said
proceeds to Grantor for restoration of the Premises, subject to reasonable
conditions on the disbursement of such proceeds to assure such proceeds shall be
used solely for the restoration of the damaged Premises; (i) Grantor is not then
in Default hereunder or in default under any other Loan Documents beyond any
applicable cure period, (ii) the costs and expenses incurred in connection with,
and the plans and specifications prepared for, such restoration shall have been
previously approved in writing by Grantee, (iii) the damage can be repaired in
less than twelve (12) months from the date of such damage or destruction, and
(iv) the damage can be completely repaired for the lesser of twenty-five percent
(25%) of the outstanding principal balance of the Note or $1,000,000.00. In the
event any insurance company fails to disburse directly and solely to Grantee but
disburses instead either solely to Grantor or to Grantor and Grantee jointly,
Grantor agrees immediately to endorse and transfer such proceeds to Grantee.
Upon the failure of Grantor to endorse and transfer such proceeds as aforesaid,
Grantee may execute such endorsements or transfers for and in the name of
Grantor and Grantor hereby irrevocably appoints Grantee as Grantor's agent and
attorney-in-fact so to do. If items (i) through (iv) are not satisfied, then
after deducting from said insurance proceeds all of its expenses incurred in the
collection and administration of such sums, including attorneys' fees, Grantee
may apply the net proceeds or any part thereof, at its option, (i) to the
payment of the Indebtedness, whether or not due and in whatever order Grantee
elects, (ii) to the repair and/or restoration of the Premises, and/or (iii) for
any other purposes or objects for which Grantee is entitled to advance funds
under this Deed to Secure Debt, all without affecting the security interest
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<PAGE> 8
created by this Deed to Secure Debt; and any balance of such moneys then
remaining shall be paid to Grantor or the person or entity lawfully entitled
thereto. Grantee shall not be held responsible for any failure to collect any
insurance proceeds due under the terms of any policy regardless of the cause of
such failure.
(c) Prior to the expiration date of each policy maintained
pursuant to this Section 1.04, a certificate of insurance evidencing a
replacement of, or an endorsement evidencing a renewal of each existing policy
in form and content satisfactory to Grantee shall be delivered to Grantee. In
addition, within a commercially reasonable time, Grantor shall deliver to
Grantee the renewals or replacements thereof of each existing policy maintained
pursuant to this Section 1.04, in form and content satisfactory to Grantee.
Grantor shall deliver to Grantee receipts evidencing the payment for all such
insurance policies and renewals or replacements. The delivery of any insurance
policies hereunder shall constitute an assignment of all unearned premiums as
further security hereunder. In the event of the foreclosure of this Deed to
Secure Debt or any other transfer of title to the Premises in extinguishment or
partial extinguishment of the Indebtedness, all right, title and interest of
Grantor in and to all insurance policies then in force shall pass to the
purchaser or to Grantee, as the case may be, and Grantee is hereby irrevocably
appointed by Grantor as attorney-in-fact for Grantor to assign any such policy
to said purchaser or to Grantee, as the case may be, without accounting to
Grantor for any unearned premiums thereon.
Section 1.05 Monthly Deposits. Grantor shall deposit with
Grantee, commencing on September 1, 1997 and continuing on the due date of each
installment under the Note, (1) such amounts as, in the estimation of Grantee,
shall be necessary to pay as they become due (a) the taxes and assessments
referred to in Section 1.03 and (b) the premiums for insurance referred to in
Section 1.04, (and Grantor shall deposit with Grantee, contemporaneously with
the execution hereof, such amounts which, together with the monthly payment,
shall be sufficient to pay such taxes and premiums when due). Said deposits to
be held by Grantee, free of interest, and free of any liens or claims on the
part of creditors of Grantor and as part of the security of Grantee, and to be
used by Grantee to pay current taxes and assessments on the Premises or
insurance premiums with respect to the Premises as the same accrue and are
payable. Payment from said sums for said purposes shall be made by Grantee and
may be made even though such payments will benefit subsequent owners of the
Premises. Said deposits shall not be, nor be deemed to be, trust funds but may
be commingled with the general funds of Grantee. If said deposits are
insufficient to pay the taxes and assessments or insurance premiums in full as
the same become payable, Grantor will deposit with Grantee such additional sum
or sums as may be required in order for Grantee to pay such taxes and
assessments or insurance premiums in full. Upon any default or Default in the
provisions of this Deed to Secure Debt or the Note which is not cured within any
applicable cure period, or any instrument evidencing, securing or in any way
relating to the Indebtedness, Grantee may, at its option, apply any money in its
possession or control resulting from said deposits to the payment of the
Indebtedness in such manner as it may elect
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Section 1.06 Condemnation. If all or any "Material Portion"
(as such term is hereinafter defined) of the Premises shall be damaged or taken
through condemnation (which term when used in this Deed to Secure Debt shall
include any damage or taking by any governmental or quasi-governmental authority
and any transfer by private sale in lieu thereof), either temporarily or
permanently, then the entire Indebtedness shall at the option of Grantee,
immediately become due and payable. For purposes of this Section 1.06, the terms
"Material Portion" shall mean: (i) all or any portion of any of the buildings
located on the Premises, (ii) any access to the Premises, unless other access
reasonably acceptable to Grantee remains (iii) a reduction in the number of
parking spaces available on the Premises from that which existed immediately
prior to such condemnation, unless Grantor is able to provide replacement
parking on the Premises or on property immediately adjacent thereto so that the
Premises have adequate parking to accommodate the residents of the Premises and
to satisfy all applicable zoning requirements; or (iv) any other portion of the
Premises the loss of which shall have a material adverse effect on the Premises
or the operation thereof. Grantor, immediately upon obtaining knowledge of the
institution, or the proposed, contemplated or threatened institution, of any
action or proceeding for the taking through condemnation of the Premises or any
part thereof, will notify Grantee, and Grantor is hereby authorized, in good
faith, to commence, appear in and prosecute, any action or proceeding relating
to condemnation. Any compensation, awards, damages, claims, rights of action and
proceeds and the right thereto are hereby assigned by Grantor to Grantee, and
Grantee is authorized, at its option, to settle, collect and receive all such
compensation, awards or damages and to give proper receipts and acquittances
therefor without any obligation to question the amount of any such compensation,
awards or damages. After deducting from said condemnation proceeds all of its
expenses incurred in the collection and administration of such sums, including
attorney's fees, Grantee may apply the net proceeds or any part thereof, at its
option, (a) to the payment of the Indebtedness, whether or not due and in
whatever order Grantee elects, (b) to the repair and/or restoration of the
Premises, and/or (c) for any other purposes or objects for which Grantee is
entitled to advance funds under this Deed to Secure Debt, all without affecting
the security interest created by this Deed to Secure Debt, and any balance of
such moneys then remaining shall be paid to Grantor or any other person or
entity lawfully entitled thereto. In the event Grantee applies such proceeds to
the payment of the Indebtedness, such proceeds to be applied without any
prepayment penalty, and the monthly installments due and payable under the note
shall be adjusted accordingly.
Section 1.07 Care of Premises.
(a) Grantor will keep the buildings, parking areas, roads and
walkways, recreational facilities, landscaping and all other improvements of any
kind now or hereafter erected on the Land or any part thereof in good condition
and repair, will not commit or suffer any waste or will not do or suffer to be
done anything which would or could increase the risk of fire or other hazard to
the Premises or any other part thereof or which would or could result in the
cancellation of any insurance policy carried with respect to the Premises.
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(b) Grantor will not remove, demolish or alter the structural
character of any improvement located on the Land without the written consent of
Grantee.
(c) If the Premises or any part thereof is damaged by fire or
other cause, Grantor will give immediate written notice thereof to Grantee.
(d) Grantee or its representative is hereby authorized to
enter upon and inspect the Premises at any time during normal business hours
upon 24 hours advance written notice.
(e) Grantor will promptly comply with all present and future
laws, ordinances, rules and regulations of any governmental authority affecting
the Premises or any part thereof.
(f) If all or any part of the Premises shall be damaged by
fire or other casualty, Grantor will promptly restore the Premises to the
equivalent of its original condition; and if a part of the Premises shall be
damaged through condemnation, Grantor will promptly restore, repair or alter the
remaining portions of the Premises in a manner satisfactory to Grantee. In the
event all or any portion of the Premises shall be damaged or destroyed by fire
or other casualty or by condemnation, Grantor shall promptly deposit with
Grantee a sum equal to the amount by which the estimated cost of the restoration
of the Premises (as determined by Grantee in its good faith judgment) exceeds
the actual net insurance or condemnation proceeds with respect to such damage or
destruction, if any, being paid to Grantee and/or Grantor.
Secton 1.08 Leases, Contracts. Etc.
(a) As additional collateral and further security for the
Indebtedness, Grantor does hereby presently, absolutely and unconditionally
assign to Grantee, Grantor's interest in the Rents, together with any and all
leases, tenant contracts, rental agreements, franchise agreements, management
contracts, construction contracts, and other contracts, licenses and permits now
or hereafter affecting the Premises, or any part thereof, and Grantor agrees to
execute and deliver to Grantee such additional instruments, in form and
substance satisfactory to Grantee, as may hereafter be requested by Grantee
further to evidence and confirm said assignment; provided, however, that
acceptance of any such assignment shall not be construed as a consent by Grantee
to any lease, tenant contract, rental agreement, franchise agreement, management
contract, construction contract, or other contract, license or permit, or to
impose upon Grantee any obligation with respect thereto. Grantor shall
faithfully keep and perform, or cause to be kept and performed, all of the
covenants, conditions and agreements contained in each of said instruments, now
or hereafter existing, on the part of Grantor to be kept and performed and shall
at all times do all things necessary to compel performance by each other party
to said instruments of all obligations, covenants and agreements by such other
party to be performed thereunder. Notwithstanding anything to the contrary
contained herein, this assignment is intended and shall be construed to create,
an absolute, present assignment
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from Grantor to Grantee. It is the further intent of Grantee and Grantor that
the Rents absolutely assigned are no longer, during the term of this Deed to
Secure Debt, property of Grantor or property of the estate of Grantor as defined
in 11 U.S.C. ss. 541 and shall not constitute collateral, cash or otherwise, of
Grantor.
(b) Grantor shall not execute a further assignment of the
Rents, or any part thereof, from the Premises unless Grantee shall first consent
to such assignment and unless such assignment shall expressly provide that it is
subordinate to the assignment contained in this Deed to Secure Debt and any
assignment executed pursuant hereto or concerning the Indebtedness.
(c) Grantor shall furnish to Grantee, within ten (10) days
after a request by Grantee to do so, a sworn statement setting forth the names
of all lessees and tenants of the Premises, the terms of their respective
leases, tenant contracts or rental agreements, the space occupied, and the
rentals payable thereunder, and stating whether any defaults, off-sets or
defenses exist under or in connection with any of said leases, tenant contracts
or rental agreements.
(d) Each lease, tenant contract and rental agreement
pertaining to the Premises, or any part thereof and created after the date
hereof, shall be for a term of not more than one year and shall provide that the
tenant thereunder does not have a leasehold interest in the Premises.
(e) Intentionally Omitted.
Section 1.09 Security Agreement.
(a) With respect to the machinery, apparatus, equipment,
fittings, fixtures, building supplies and materials, articles of personal
property, chattels, chattel paper, documents, inventory, accounts, farm
products, consumer goods and general intangibles referred to or described in
this Deed to Secure Debt, or in any way connected with the use and enjoyment of
the Premises, this Deed to Secure Debt is hereby made and declared to be a
security agreement encumbering each and every item of such property included
herein as a part of the Premises, in compliance with the provisions of the
Uniform Commercial Code as enacted in the State of Georgia. Upon request by
Grantee, at any time and from time to time, a financing statement or statements
reciting this Deed to Secure Debt to be a security agreement affecting all of
such property shall be executed by Grantor and Grantee and appropriately filed.
The remedies for any violation of the covenants, terms and conditions of the
security agreement contained in this Deed to Secure Debt shall be (i) as
prescribed herein, or (ii) as prescribed by general law, or (iii) as prescribed
by the specific statutory consequences now or hereafter enacted and specified in
said Uniform Commercial Code, all at Grantee's sole election. Grantor and
Grantee agree that the filing of any such financing statement or statements in
the records normally having to do with personal property shall not in any way
affect the agreement of Grantor and Grantee that everything used in connection
with the production of
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income from the Premises or adapted for use therein or which is described or
reflected in this Deed to Secure Debt, is, and at all times and for all purposes
and in all proceedings, both legal and equitable, shall be, regarded as part of
the real estate conveyed hereby regardless of whether (A) any such item is
physically attached to the improvements, (B) serial numbers are used for the
better identification of certain items capable of being thus identified in an
exhibit to this Deed to Secure Debt, or (C) any such item is referred to or
reflected in any such financing statement or statements so filed at any time.
Similarly, the mention in any such financing statement or statements of the
rights in and to (1) the proceeds of any fire and/or hazard insurance policy, or
(2) any award in eminent domain proceedings for a taking or for loss of value,
or (3) Grantor's interest as lessor in any present or future lease or rights to
income growing out of the use and/or occupancy of the Premises, whether pursuant
to lease or otherwise, shall not in any way alter any of the rights of Grantee
as determined by this Deed to Secure Debt or affect the priority of Grantee's
security interest granted hereby or by any other recorded document, it being
understood and agreed that such mention in such financing statement or
statements is solely for the protection of Grantee in the event any court shall
at any time hold with respect thereto, that notice of Grantee's priority of
interest, to be effective against a particular class of persons, must be filed
in the Uniform Commercial Code records.
(b) Grantor warrants that (i) Grantor's (that is, "Debtor's")
name, identity or corporate structure and residence or principal place of
business are as set forth in the first paragraph of this Security Deed; (ii)
Grantor (that is "Debtor") has been using or operating under said name, identity
or corporate structure without change since July 22, 1994; and (iii) the
location of the collateral is upon the Land. Grantor covenants and agrees that
Grantor will furnish Grantee with notice of any change in the matters addressed
by clauses (i) or (iii) of this Subsection 1.09(b) within thirty (30) days of
the effective date of any such change and Grantor will promptly execute any
financing statements or other instruments deemed necessary by Grantee to prevent
any filed financing statement from becoming misleading or losing its perfected
status.
Section 1.10 Further Assurances; After-Acquired Property. At
any time, and from time to time, upon request by Grantee, Grantor will make,
execute and deliver, or cause to be made, executed and delivered, to Grantee
and, where appropriate, cause to be recorded and/or filed and from time to time
thereafter to be re-recorded and/or refiled at such time and in such offices and
places as shall reasonably be deemed desirable by Grantee, any and all such
other and further mortgages, deeds to secure debt, deeds of trust, security
agreements, financing statements, continuation statements, instruments of
further assurance, certificates and other documents as may, in the reasonable
opinion of Grantee, be necessary or desirable in order to effectuate, complete
or perfect, or to continue and preserve (a) the obligation of Grantor under the
Note and under this Deed to Secure Debt and (b) the security interest created by
this Deed to Secure Debt as a first and prior security interest upon and
security title in and to all of the Premises, whether now owned or hereafter
acquired by Grantor. Upon any failure by Grantor so to do, Grantee may make,
execute,
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record, file, re-record and/or refile any and all such deeds to secure debt,
security agreements, financing statements, continuation statements, instruments,
certificates and documents for and in the name of Grantor, and Grantor hereby
irrevocably appoints Grantee the agent and attorney-in-fact of Grantor so to do.
The security title of this Deed to Secure Debt and the security interest created
hereby will automatically attach, without further act, to all after-acquired
property attached to and/or used in the operation of the Premises or any part
thereof.
Section 1.11 Expenses. Grantor will pay or reimburse
Grantee, upon demand therefor, for all attorney's fees actually incurred being
defined as attorneys fees based on the attorneys normal hourly rate and the
number of hours worked (and not the attorney's fees statutorily defined in
O.C.G.A. ss.13-1-11, costs and expenses incurred by Grantee in any suit, action,
legal proceeding or dispute of any kind in which Grantee is made a party or
appears as party plaintiff or defendant, affecting the Indebtedness, this Deed
to Secure Debt or the interest created herein, or the Premises, including, but
not limited to, any condemnation action involving the Premises or any action to
protect the security hereof, and any such amounts paid by Grantee shall be added
to the Indebtedness and shall be secured by this Deed to Secure Debt.
Section 1.12 Estoppel Affidavits. Grantor, upon ten (10)
days' prior written notice, shall furnish Grantee a written statement, duly
acknowledged, setting forth the unpaid principal of, and interest on the
Indebtedness, stating whether or not to Grantor's knowledge any offsets or
defenses exist against the Indebtedness, or any portion thereof, and, if such
offsets or defenses exist, stating in detail the specific facts relating to each
such offset or defense.
Section 1.13 Subrogation. To the full extent of the
Indebtedness, Grantee is hereby subrogated to the liens, claims and demands, and
to the rights of the owners and holders of each and every lien, claim, demand
and other encumbrance on the Premises which is paid or satisfied, in whole or in
part, out of the proceeds of the Indebtedness, and the respective liens, claims,
demands and other encumbrances shall be, and each of them is hereby, preserved
and shall pass to and be held by Grantee as additional collateral and further
security for the Indebtedness, to the same extent they would have been preserved
and would have been passed to and held by Grantee had they been duly and legally
assigned, transferred, set over and delivered unto Grantee by assignment,
notwithstanding the fact that any instrument providing public notice of the same
may be satisfied and canceled of record.
Section 1.14 Books, Records, Accounts and Annual Reports.
Grantor shall keep and maintain or shall cause to be kept and maintained, at
Grantor's cost and expense and in accordance with generally accepted accounting
principles, proper and accurate books, records and accounts reflecting all items
of income and expense in connection with the operation of the Premises and in
connection with any services, equipment or furnishings provided in connection
with the operation of the Premises. Grantee, by Grantee's agents, accountants
and attorneys, shall
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have the right from time to time to examine such books, records and accounts at
the office of Grantor or such other person or entity maintaining such books,
records and accounts, to make copies or extracts thereof as Grantee shall desire
and to discuss Grantor's affairs, finances, and accounts with Grantor and with
the officers and principals of Grantor, at such reasonable times as may be
requested by Grantee. Grantor will furnish to Grantee (i) annually within ninety
(90) days after the end of Grantor's fiscal year an unaudited financial
statement for the Premises for such fiscal year, containing a profit and loss
statement and all supporting schedules covering the operation of the Premises
(including, without limitation, a current rent roll, all in reasonable detail,
prepared in accordance with generally accepted accounting standards consistently
applied; and otherwise satisfactory to Grantee, and certified as true, correct
and complete by Grantor's principal financial or accounting officer; and (ii) at
any time within thirty (30) days after demand by Grantee, unaudited statements,
certified by Grantor's principal financial or accounting officer, and covering
such financial matters as Grantee may reasonably request, including, without
limitation, monthly operating statements with respect to the Premises.
Section 1.15 Limit of Validity. If from any circumstances
whatsoever, fulfillment of any provision of this Deed to Secure Debt or of the
Note, at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law, with regard to obligations of like
character and amount, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall any exaction be
possible under this Deed to Secure Debt or under the Note that is in excess of
the current limit of such validity, but such obligation shall be fulfilled to
the limit of such validity. The provisions of this Section 1.15 shall control
every other provision of this Deed to Secure Debt and of the Note.
Section 1.16 No Default Affidavits. At Grantee's request,
all payments made under the Note or hereunder shall be accompanied by the
affidavit of Grantor or a principal financial or accounting officer of Grantor,
dated within five (5) days of the delivery of such payment to Grantee, swearing
that he knows of no Default (as hereinafter defined), nor of any circumstances
which after notice or lapse of time or both would constitute a Default, which
has occurred and is continuing or, if any such Default has occurred and is
continuing, specifying the nature and period of existence thereof and the action
Grantor has taken or proposes to take with respect thereto and, except as
otherwise specified, stating that Grantor has fulfilled all of Grantor's
obligations under this Deed to Secure Debt which are required to be fulfilled on
or prior to the date of such affidavit. Notwithstanding anything contained
herein to the contrary, Grantee shall not request such affidavit more than two
(2) times in any twelve month period.
Section 1.17 Use and Management of Premises. Grantor shall
at all time operate the Premises as an apartment project. Grantor shall not be
permitted to alter or change the use of the Premises or to abandon the Premises
without the prior written consent of Grantee.
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Section 1.18 Conveyance of Premises. Grantor hereby
acknowledges to Grantee that (a) the identity and expertise of Grantor were and
continue to be material circumstances upon which Grantee has relied in
connection with, and which constitute valuable consideration to Grantee for, the
extending to Grantor of the Indebtedness evidenced by the Note and (b) any
change in such identity or expertise could materially impair or jeopardize the
security for the payment of the Note granted to Grantee by this Deed to Secure
Debt. Grantor hereby covenants and agrees with Grantee, as part of the
consideration for the extending to Grantor of the Indebtedness evidenced by the
Note, that without the express prior written approval of Grantee (which Grantee
may withhold at its sole discretion), Grantor shall not encumber, pledge,
convey, transfer or assign any or all of its interest in the Premises, and, if
Grantor is a corporation, partnership or other artificial entity, there shall be
no encumbrance, pledge, conveyance, transfer or assignment of any legal or
beneficial interest whatsoever in Grantor. Such consent of Grantee may be given
or withheld by Grantee at its sole discretion. This Section 1.18 is subject to
Section 1.21.
Section 1.19 Acquisition of Collateral. Grantor shall not
acquire any portion of the personal property covered by this Deed to Secure Debt
subject to any security interest, conditional sales contract, title retention
arrangement or other charge or lien taking precedence over the security interest
granted by this Deed to Secure Debt.
Section 1.20 Environmental Matters. Contemporaneously
herewith, Grantor and Roberts Realty Investors, Inc. (hereinafter referred to
collectively as "Indemnitor") have executed and delivered to and in favor of
Grantee the "Indemnity Agreement" (as hereinafter defined) pursuant to which
Indemnitor indemnified Grantee in accordance with the terms thereunder.
Section 1.21 Transfer of Interest.
(a) No Transfer. In the event Grantor sells, conveys,
alienates or otherwise transfers all or any portion of its rights, title and
interest in and to the Premises without the prior written consent of Grantee
(collectively referred to as a "Transfer"), a Default shall occur and exist
under this Deed to Secure Debt and Grantee shall be entitled to exercise any and
all of the rights and remedies available to it under this Deed to Secure Debt,
any other Loan Document, at law or in equity, whether such Transfer occurs
voluntarily or by operation of law, and including, without limitation:
(1) Any Transfer of, or the grant of a security
interest in all or any part of the legal and/or equitable title to the Premises,
except for a transfer to Roberts Realty Investors, Inc.;
(2) Any Transfer of, or the grant of a security
interest in any portion of the general partner's interest in Grantor; and
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(3) Any Transfer of, or the grant of a security
interest in any portion of any beneficial interest in any land trust holding
title to the Premises;
provided however, a Transfer shall not include the following: (i) transfers
occasioned by death as hereinafter set forth; (ii) transfers required by law
(but specifically excepting transfers as a result of foreclosure sale or
bankruptcy or insolvency proceedings); or (iii) transfers of partnership
interests by and among limited partners and between limited partners and general
partners, or intra-family or estate transfers, or transfers of stock in the
Roberts Realty Investors, Inc., so long as the Roberts Realty Investors, Inc.
remains as the general partner of Grantor or owner of the Premises.
For avoidance of doubt, in the event of the death or permanent
incompetency of Principal, Grantee will allow the Transfer of the interest of
the deceased or incompetent Principal to his or her heirs or devisees or any
other now existing partners of Grantor, if any, provided (aa) that ownership and
management of the Premises does not change, and (bb) that such death or
incompetency does not result in the dissolution of Grantor. Principal shall
include an individual or entity with more than a ten percent (10%) ownership
interest in the owner of the Premises.
(b) Permitted Transfer. Notwithstanding the foregoing
limitations on transfer and those limitations set forth in Section 1.18 hereof,
and as it relates only to Grantor and Roberts Realty Investors, Inc., and not to
a subsequent owner or purchaser, Grantor or Roberts Realty Investors, Inc. may
transfer all or any portion of the Premises subject to Grantee's approval, which
approval shall not be unreasonably withheld and which approval shall be based
upon the satisfaction of the following terms and conditions:
(1) The purchaser(s) has a minimum net worth of Five
Million and No/100 Dollars ($5,000,000.00), as evidenced by a current financial
statement(s), certified by purchaser and satisfactory in form and content to
Grantee;
(2) Grantee, at Grantor's expense, is supplied with a
credit report, and such other information and data as Grantee shall reasonably
require, from a credit reporting agency or other source satisfactory to Grantee,
which credit report confirms that the new purchaser(s) (and principal(s) of the
purchaser(s)):
(A) demonstrate a credit history regarding both
personal and business credit which is acceptable to Grantee;
(B) have no bankruptcy history; and
(C) are not convicted felons or under indictment
for any matter but specifically including fraud or racketeering
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(3) The purchaser(s)(and Principal(s) of the
purchaser(s)) shall deliver to Grantee a completed financial questionnaire(s),
certified to be true, complete and correct and signed by the purchaser(s) (and
Principal(s) of the purchaser(s)), satisfactory in form and content to Grantee;
(4) The purchaser(s) has ten (10) years building
management and leasing experience and is experienced in the market where the
Premises is located, or shall retain an experienced and qualified management
company and leasing agent, which company must be approved by Grantee;
(5) The purchaser(s) is neither a public syndication
nor a public syndicator unless approved by Grantee, which approval shall not be
unreasonably withheld;
(6) The purchaser(s) (and Principal(s) of the
purchaser(s)) shall provide Grantee with such financial information and
background data and in such detail as Grantee shall reasonably require;
(7) The purchaser(s) (and Principal(s) of the
purchaser(s)) shall execute and deliver to Grantee an indemnification agreement
in form substantially similar to the Indemnity Agreement and acceptable to
Grantee and Grantee's legal counsel indemnifying Grantee for matters occurring
subsequent to the date of the permitted transfer; provided, however, Indemnitor
shall remain liable to Grantee for all matters occurring on or before the date
of the permitted transfer but shall be released for all matters occurring
subsequent thereto;
(8) The ratio of the outstanding balance due and owing
under the Note to the cash purchase price is no greater than 65%; the part of
the purchase price in excess of the balance of the Note shall be paid in cash at
the closing of the permitted transfer;
(9) The ratio of the Premises's current net operating
income and the net operating income during each of the two (2) years immediately
preceding the then current calendar year (if applicable), is at least equal to
or greater than 1.35 to 1 to the annual debt service then due and owing under
the Note. Evidence of the previous two years' net operating income history (if
applicable) shall be provided in the form of annual financial statement(s)
provided in accordance with the terms and conditions of Section 1.14 hereof; and
(10) All requests for Transfers submitted by Grantor
shall be accompanied by a non-refundable processing fee ("Processing Fee") in
the amount of $2,500 payable to Grantee which shall be applied against the fee
specified in ss.1.21(d) if applicable.
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Failure to meet the conditions set forth in this Section 1.21 shall be cause for
denial of Grantee's approval.
(c) No Waiver. Any consent by Grantee permitting a Transfer
otherwise prohibited under this Deed to Secure Debt shall not constitute a
consent to or waiver of any right, remedy or power of Grantee to withhold its
consent on a subsequent occasion to a Transfer not otherwise permitted by the
provisions of this Section 1.21.
(d) Assumption Fee Upon Approval of Transfer. If a consent to
a Transfer is granted by Grantee, there shall be no change in the terms of the
Note, this Deed to Secure Debt or the other Loan Documents; however, Grantee
shall be paid a non-refundable assumption fee of one percent (1.00%) of the
outstanding principal balance due under the Note at the time of the Transfer to
cover cost to review documents and perform other related duties. In addition,
Grantor shall provide to Grantee immediately upon closing the Transfer, a copy
of the deed or other instrument or document conveying title to the Premises and
a signed indemnification agreement from the transferee and such other persons as
deemed appropriate by Grantee and Grantee's legal counsel in identical form to
the Indemnity Agreement Regarding Hazardous Materials and Handicapped Access
Laws ("Indemnity Agreement") executed by Indemnitor, as one of the Loan
Documents satisfactory to Grantee and Grantee's legal counsel. In the event the
requested Transfer is declined, all such fees shall be returned to Grantor, less
the assumption fee. Transfers among related entities of Grantor are not subject
to the aforesaid one percent (1%) processing fee (Grantee shall determine if the
assuming party is a related entity), however the Processing Fee shall be charged
by Grantee for review of a proposed transfer to a related entity.
(e) Payment of Expenses. In connection with the permitted
transfer or any subsequent sale approved by Grantee, if any, the purchaser or
Grantor shall pay all out-of-pocket expenses relating to consent of sale,
including, but not limited to, the fees and expenses of Grantee's legal counsel
and a title policy endorsement, if necessary. Grantee may impose such reasonable
requirements in connection with such permitted transfer or any subsequent sale
approved by Grantee, if any, as shall be deemed necessary to assure the
enforceability and continued perfection of the lien and security interest
securing the Indebtedness.
(f) Environmental Assessment Report. Approval of any sale or
assumption shall, at Lender's sole option, require a later date environment
assessment report or an update of the most current environmental assessment
report for the Premises.
(g) Subsequent Sale. In the event Grantor makes a Transfer of
all or any portion of the Premises subsequent to a permitted transfer, or if
during the period in which all or any portion of the Indebtedness remains
unpaid, Grantor makes, or a transfer in any manner substantially equivalent to a
sale of an ownership interest in the Premises occurs (such subsequent
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sale or transfer in either event is hereinafter referred to as a "Subsequent
Sale"), Grantee shall have the option to declare the entire outstanding
principal balance under the Note immediately due and payable, or to increase the
interest rate, or to otherwise modify the terms of the Loan Documents.
(h) Delivery by Grantor. Immediately upon the closing of the
permitted transfer or any Subsequent Sale approved by Grantee, Grantor shall
deliver to Grantee (i) a copy of the deed or other instrument conveying title to
the Premises and (ii) an indemnity agreement complying with the terms of
Subsection 1.21(b)(7), executed by the transferee and satisfactory to Grantee.
Section 1.22 Additional Covenants.
Grantor shall diligently pursue completion of (i) the
top-coating and striping of the parking areas on the Land and (ii) certain
landscaping as more particularly set forth in that certain Completion Escrow
Agreement among Grantor, Grantee, and Wilson & Nolan, Inc. (as escrow agent),
dated of even date herewith, and shall complete all of such items on or before
ninety (90) days after the date hereof.
Section 1.23 Future Advances. This Deed to Secure Debt
secures such future or additional advances (in addition to the principal amount
of the Note) as may be made by Grantee or the holder hereof, at its exclusive
option, to Grantor or its successors or assigns in title, provided that all such
advances are made within such period of time as may be provided by law as a
prerequisite for the sufficiency of actual notice or record notice of such
optional future or additional advances as against the rights of creditors or
subsequent purchasers for valuable consideration to the same extent as if such
future or additional advances were made on the date of the execution of this
Deed to Secure Debt. The total amount of Indebtedness secured by this Deed to
Secure Debt may be increased or decreased from time to time. It is the intent of
the parties that this Deed to Secure Debt shall secure the payment of the Note
and any additional advances as permitted hereunder made from time to time to
protect Grantee's collateral pursuant to any additional notes or otherwise, all
of said indebtedness being equally secured hereby and having the same priority
as any amounts advanced as of the date of this Deed to Secure Debt. It is agreed
that any additional sum or sums advanced hereunder to protect Grantee's
collateral by Grantee shall be equally secured with, and have the same priority
as, the original Indebtedness and shall be subject to all of the terms,
provisions and conditions of this Deed to Secure Debt, whether or not such
additional advances are evidenced by other promissory notes of Grantor and
whether or not identified by a recital that it or they are secured by this Deed
to Secure Debt.
Section 1.24 Additional Advances and Disbursements. Grantor
shall pay or shall cause to be paid when due all payments and charges required
to be paid by Grantor under each of the leases and all liens, encumbrances, and
security interests which may be or become superior or inferior to the lien of
this Deed to Secure Debt, and in default thereof, Grantee shall have the right,
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but shall not be obligated, to pay, without notice to Grantor, such payments and
charges and Grantor shall, on demand, reimburse Grantee for all amounts so paid
and all costs and expenses incurred in connection therewith, together with
interest thereon at the Default Rate (as such term is defined in the Note) from
the date such payments and charges are so advanced until the same are paid to
Grantee. In addition, upon default of Grantor in the performance of any other
terms, covenants, conditions or obligations by it to be performed under any such
prior or subordinate lien or encumbrance, or under any of the leases, or any
other lease or security interest, or upon default of Grantor in the performance
of any of the terms, covenants, conditions or obligations by it to be performed
hereunder, Grantee shall have the right, but shall not be obligated, to cure
such default in the name and on behalf of Grantor; which right to cure any
default is intended by Grantor and Grantee to be in addition to, and not in
limitation of or in lieu of or as a waiver of, any right which Grantee may have
to cure any default under any of the leases, as expressly set forth therein. All
sums advanced and reasonable expenses incurred at any time by Grantee pursuant
to this Section 1.24 or as otherwise provided under the terms and provisions of
this Deed to Secure Debt or under applicable law shall bear interest from the
date that such sum is advanced to and including the date of reimbursement,
computed at a rate equal to the lesser of (i) the Default Rate, or (ii) the
maximum rate permitted by applicable law, computed from the original due date to
the date of receipt of such payment by Grantee in good and immediately available
funds. Grantor agrees that any such charges shall not be deemed to be additional
interest or a penalty, but shall be deemed to be liquidated damages because of
the difficulty in computing the actual amount of damages in advance; provided,
however, that any sums collected by Grantee as liquidated damages, as aforesaid,
which are held to be interest in excess of the maximum rate permitted by
applicable law, shall be deemed a payment in reduction of the principal sum then
outstanding under the Note and shall be so applied.
ARTICLE 2
DEFAULT AND REMEDIES
Section 2.01 Default. The terms "Default" or "Defaults",
wherever used in this Deed to Secure Debt, shall mean any one or more of the
following events:
(a) Failure by Grantor to pay any portion of the Indebtedness
within five days (5) days of the due date thereof, whether regularly scheduled,
by maturity, acceleration or otherwise provided, however, as to the first such
payment of principal and interest within any twelve month period which is not
paid when due, Grantee shall provide Grantor with written notice of the failure
to pay and the opportunity to pay the amount of any such payment so due, without
payment of any "Late Charge" (as that term is defined in the Note), on or before
five (5) days after receipt of said notice (but after once giving such notice of
failure to pay during any twelve month period, no
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additional notice of failure to pay shall be required to be given by Lender
during that twelve month period); or
(b) Failure by Grantor duly to observe or perform any other
term, covenant, condition or agreement in this Deed to Secure Debt, the Note, or
in any other Loan Document for thirty (30) days after receipt from Grantee of
written notice of such failure, however, in the event the default is incapable
of being cured within such thirty (30) day period this cure period shall be
extended for a reasonable time thereafter so long as Grantor commences to cure
such default within such thirty (30) day period and thereafter continues to
diligently pursue the cure to completion; provided further, however, the cure
period set forth in this subsection (b) shall not apply to any other default
expressly set forth in this Section 2.01 or to any other covenant or condition
with respect to which a limitation as to time or cure period or right to cure is
expressly provided in this Deed to Secure Debt or in any other Loan Document;
(c) The occurrence of a default or event of default under the
Note or under any other Loan Document, after the lapse of any applicable cure or
grace period, if any;
(d) Any representation or warranty of Grantor contained in
this Deed to Secure Debt, the Note, or in any other Loan Document, proves to be
untrue or misleading in any material respect; or
(e) The filing by Grantor or any endorser or guarantor of the
Note of a voluntary petition in bankruptcy or the filing by Grantor or any such
endorser or guarantor of any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for itself under any present or future federal, state or other
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or Grantor's or any such endorser's or guarantor's seeking or
consenting to or acquiescing in the appointment of any trustee, receiver or
liquidator of Grantor, such endorser or guarantor, or of all or any substantial
part of the Premises or of any other property or assets of Grantor, such
endorser or guarantor, or of any or all of the Rents, or the making by Grantor,
or any such endorser or guarantor, of any general assignment for the benefit of
creditors, or the admission in writing by Grantor, or any such endorser or
guarantor, of its inability to pay its debts generally as they become due or the
commission by Grantor or any such endorser or guarantor of an act of bankruptcy;
or
(f) The filing of a petition against Grantor, or any endorser
or guarantor of the Note, seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal, state or other law or regulation relating to bankruptcy,
insolvency or other relief for debtors, or the appointment of any trustee,
receiver or liquidator of Grantor, or of any such endorser or guarantor or of
all or any substantial part of the Premises or of any or all of the Rents unless
such petition shall be dismissed within sixty (60) days
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after such filing, but in any event prior to the entry of an order, judgment or
decree approving such petition; or
(g) The Premises are subjected to actual or threatened waste,
or any part thereof is removed, demolished or materially altered without the
prior written consent of Grantee; or
(h) Grantor or any endorser or guarantor of the Note (if a
corporation) is liquidated or dissolved or its charter expires or is revoked, or
Grantor or such endorser or guarantor (if a partnership or business association)
is dissolved or partitioned, or Grantor or such endorser or guarantor (if a
trust) is terminated or expires; or
(i) the occurrence of a default or event of default under
Section 1.21 hereof; or
(j) the occurrence of a default or event of default under
the Indemnity Agreement.
Section 2.02 Remedies.
(a) Acceleration of Maturity. If a Default shall have
occurred, then the entire Indebtedness shall, at the option of Grantee,
immediately become due and payable without notice or demand, time being of the
essence of this Deed to Secure Debt; and no omission on the part of Grantee to
exercise such option when entitled to do so shall be construed as a waiver of
such right.
(b) Power of Sale. If a Default shall have occurred, Grantee
may sell the Premises, or any part or parcel thereof or any interest of Grantor
therein separately, at Grantee's discretion, with or without taking possession
thereof, at a public sale or public sales before the Courthouse door of the
County in which the Premises or any part thereof is located, to the highest
bidder for cash, after first giving notice of the time, place and terms of such
sale or sales by advertisement published once a week for four weeks (without any
regard for the number of days between the date the first such notice is
published and the date on which any such sale commences) in the newspaper in
which advertisements of sheriff's sales are published in such county. Such
advertisement so published shall be notice to Grantor, and Grantor hereby
expressly waives all other notices. Grantee may bid and purchase at any such
sale, and Grantee, as agent and attorney-in-fact for Grantor and in Grantor's
name, may execute and deliver to the purchaser or purchasers at any such sale a
sufficient conveyance of the Premises, or the part or parcel thereof or the
interest therein which is sold. Grantee's conveyance may contain recitals as to
the occurrence of any Default under this Security Deed, and such recitals shall
be presumptive evidence that all preliminary acts prerequisite to any such sale
and conveyance were in all respects duly complied with. The recitals made by
Grantee shall be binding and conclusive upon Grantor, and the sale and
conveyance made by Grantee shall divest Grantor of all right, title, interest
and equity that Grantor
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<PAGE> 23
may have or have had in, to and under the Premises, or the part or parcel
thereof or the interest therein which is sold, and shall vest the same in the
purchaser or purchasers at such sale or sales. Grantor hereby constitutes and
appoints Grantee as Grantor's agent and attorney-in-fact to make such sale or
sales, to execute and deliver such conveyance or conveyances, and to make such
recitals, and Grantor hereby ratifies and confirms all of the acts and doings of
Grantee as Grantor's agent and attorney-in-fact hereunder. Grantee's agency and
power as attorney-in-fact hereunder are coupled with an interest, cannot be
revoked by bankruptcy, insolvency, incompetency, death, dissolution or
otherwise, and shall not be exhausted until the Indebtedness has been satisfied
in full. Grantor covenants and agrees that, in the event of any sale pursuant to
the agency and power herein granted, Grantor shall be and become a tenant
holding over and shall deliver possession of the Premises, or the part thereof
or interest therein sold, to the purchaser or purchasers at the sale or be
summarily dispossessed in accordance with the provisions of law applicable to
tenants holding over.
(c) Right to Enter and Take Possession.
(1) If a Default shall have occurred, Grantor, upon
demand of Grantee, shall forthwith surrender to Grantee the actual possession of
the Premises and if, and to the extent, permitted by law, Grantee itself, or by
such officers or agents as it may appoint, may enter and take possession of all
of the Premises without the appointment of a receiver, or an application
therefor, and may exclude Grantor and its agents and employees wholly therefrom,
and may have joint access with Grantor to the books, papers and accounts of
Grantor.
(2) If Grantor shall for any reason fail to surrender
or deliver the Premises or any part thereof after such demand by Grantee,
Grantee may obtain a judgment or decree conferring upon Grantee the right to
immediate possession or requiring Grantor to deliver immediate possession of the
Premises to Grantee, and Grantor hereby specifically covenants and agrees that
Grantor will not oppose, contest or otherwise hinder or delay Grantee in any
action or proceeding by Grantee to obtain such judgment or decree. Grantor will
pay to Grantee, upon demand, all expenses of obtaining such judgment or decree,
including reasonable compensation to Grantee, its attorneys and agents, and all
such expenses and compensation shall, until paid, become part of the
Indebtedness and shall be secured by this Deed to Secure Debt.
(3) Upon every such entering upon or taking of
possession, Grantee may hold, store, use, operate, manage and control the
Premises and conduct the business thereof, and, from time to time (A) make all
necessary and proper maintenance, repairs, renewals, replacements, additions,
betterments and improvements thereto and thereon and purchase or otherwise
acquire additional fixtures, personalty and other property; (B) insure or keep
the Premises insured; (C) manage and operate the Premises and exercise all the
rights and powers of Grantor to the same extent as Grantor could in its own name
or otherwise act with respect to the same; and (D) enter
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<PAGE> 24
into any and all agreements with respect to the exercise by others of any of the
powers herein granted to Grantee, all as Grantee from time to time may determine
to be in its best interest. Grantee may collect and receive all the Rents,
including those past due as well as those accruing thereafter, and Grantee may
apply any moneys and proceeds received by Grantee, in whatever order or priority
Grantee in its sole discretion may determine, to the payment of (1) all expenses
of taking, holding, managing and operating the Premises (including compensation
for the services of all persons employed for such purposes); (2) the cost of all
such maintenance, repairs, renewals, replacements, additions, betterments,
improvements, purchases and acquisitions; (3) the cost of such insurance; (4)
such taxes, assessments and other similar charges as Grantee may at its option
pay; (5) other proper charges upon the Premises or any part thereof; (6) the
reasonable compensation, expenses and disbursements of the attorneys and agents
of Grantee; (7) accrued interest; (8) deposits required in Section 1.05 and
other sums required to be paid under this Deed to Secure Debt; or (9) overdue
installments of principal. Notwithstanding anything in this Section 2.02(c) to
the contrary, Grantee shall not be obligated to discharge or perform the duties
of a landlord to any tenant or incur any liability as the result of any exercise
by Grantee of its rights under this Deed to Secure Debt, and Grantee shall be
liable to account only for the Rents actually received by Grantee.
(4) In the event that all such interest, deposits and
principal installments and other sums due under any of the terms, covenants,
conditions and agreements of this Deed to Secure Debt shall be paid and all
Defaults shall be cured, and as a result thereof Grantee surrenders possession
of the Premises to Grantor, the same right of taking possession shall continue
to exist if any subsequent Default shall occur.
(d) Performance by Grantee. If Grantor shall Default in the
payment, performance or observance of any term, covenant or condition of this
Deed to Secure Debt, Grantee may, at its option, pay, perform or observe the
same, and all payments made or costs or expenses incurred by Grantee in
connection therewith shall be secured hereby and shall be, without demand,
immediately repaid by Grantor to Grantee with interest thereon at the Default
Rate; provided, however, any such payments by Grantee shall not release Grantor
from Grantor's obligations or constitute a waiver of Grantor's Default
hereunder. Grantee shall be the sole judge of the necessity for any such actions
and of the amounts to be paid. Grantee is hereby empowered to enter and to
authorize others to enter upon the Premises or any part thereof for the purpose
of performing or observing any such defaulted term, covenant or condition
without hereby becoming liable to Grantor or any person in possession holding
under Grantor.
(e) Enforcement. Upon the occurrence of a Default, Grantee is
authorized to take any one or more of the following actions:
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<PAGE> 25
(1) Foreclose and obtain possession of the Premises by
any lawful procedure.
(2) Exercise any right or remedy available to Grantee
as a secured party under the Georgia Uniform Commercial Code, as it from time to
time is in force and effect, with respect to any portion of the Premises; or
Grantee, at its option, may elect to treat the Premises as real property, or an
interest therein, for remedial purposes.
(3) Apply, on ex parte motion to any Court of
competent jurisdiction, for the appointment of a receiver to take charge of,
manage, preserve, protect, complete construction of, sell, lease and operate the
Premises, or any portion thereof, and any business or businesses situated
thereon, or any combination; to collect the Rents; to make all necessary and
needed repairs; to pay all taxes, assessments, insurance premiums, and all other
costs incurred in connection with the Premises; and, after payment of the
expenses of the receivership, including reasonable attorneys' fees, and after
compensation to the receiver for management and completion of the Premises, to
apply all net proceeds derived therefrom in reduction of the Indebtedness or in
such other manner as the Court shall direct. The appointment of such receiver
shall be a matter of strict right to Grantee, regardless of the adequacy of the
security or of the solvency of any party obligated for payment of the
Indebtedness. All expenses, fees, and compensation incurred pursuant to any such
receivership shall be secured by the lien of this Deed to Secure Debt until
paid. The receiver, personally or through agents, may exclude Grantor wholly
from the Premises and have, hold, use, operate, manage, and control the
Premises, and may in the name of Grantor exercise all of Grantor's rights and
powers and all other rights and powers permitted under the laws of the State of
Georgia, to maintain, construct, operate, restore, insure, and keep insured the
Premises in such manner as such receiver deems appropriate.
(4) Proceed to realize upon any and all other security
for the Indebtedness in such order as Grantee may elect; and no such action,
suit, proceeding, judgment, levy, execution, or other process will constitute an
election of remedies by Grantee or will in any manner alter, diminish, or impair
the security interest created by this Deed to Secure Debt, unless and until the
Indebtedness is paid in full.
(5) Advance such monies, and take such other action,
as is authorized by the terms of this Deed to Secure Debt.
(f) Separate Sales. In the event of any foreclosure of
this Deed to Secure Debt the Premises may be sold as an entirety or in separate
parcels in such manner or order as Grantee in its sole discretion may elect; and
if Grantee so elects, it may sell any personal property covered by this Deed to
Secure Debt at one or more separate sales in any manner permitted by the Uniform
Commercial Code of Georgia; and one or more exercises of the powers herein
granted shall not
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<PAGE> 26
extinguish nor exhaust such powers, until the entire Premises are sold or the
Indebtedness is paid in full. If the Indebtedness is now or hereafter further
secured by any chattel mortgages, pledges, contracts of guaranty, assignments of
lease or other security, Grantee may at its option exhaust the remedies granted
under any of said security, either concurrently or independently, and in such
order as it may determine.
(g) Separate Suits. Grantee shall have the right, at any time
and from time to time, to sue for any sums required to be paid under the Loan
Documents, as the same become due and payable, without regard to whether or not
the entire Indebtedness shall be due on demand, and without prejudice to the
right of Grantee thereafter to enforce any appropriate remedy against Grantor,
including foreclosure or any other action for a Default or Defaults by Grantor
existing at the time such earlier action was commenced.
(h) Discontinuance of Proceedings. In case Grantee shall have
proceeded to enforce any right, power or remedy under this Deed to Secure Debt
by foreclosure, entry or otherwise or in the event Grantee institutes
foreclosure proceedings provided hereunder and such proceedings shall have been
withdrawn, discontinued or abandoned for any reason, or shall have been
determined adversely to Grantee, then in every such case (i) Grantor and Grantee
shall be restored to their former positions and rights, (ii) all rights, powers
and remedies of Grantee shall continue as if no such proceeding had been taken,
(iii) each and every Default declared or occurring prior or subsequent to such
withdrawal, discontinuance or abandonment shall and shall be deemed to be a
continuing Default and (iv) neither this Deed to Secure Debt, nor the Note, nor
said Indebtedness, nor any other instrument concerned therewith, shall be or
shall be deemed to have been reinstated or otherwise affected by such
withdrawal, discontinuance or abandonment; and Grantor hereby expressly waives
the benefit of any statute or rule of law now provided, or which may hereafter
be provided, which would produce a result contrary to or in conflict with the
above.
(i) Subrogation. To the full extent of said Indebtedness,
Grantee is hereby subrogated to the liens, claims and demands, and to the rights
of the owners and holders of each and every lien, claim, demand and other
encumbrance on the Premises which is paid or satisfied in whole or in part, out
of the proceeds of said Indebtedness, and the respective liens, claims, demands
and other encumbrances shall be, and each of them is hereby preserved and shall
pass to, and be held by, Grantee as, additional collateral and further security
for said Indebtedness, to the same extent they would have been preserved and
would have been passed to and held by Grantee had they been duly and legally
assigned, transferred, set over and delivered unto Grantee by assignment,
notwithstanding the fact that the same may be satisfied and canceled of record.
(j) Purchase of Premises; Application of Proceeds; Possession
of Premises. Upon any foreclosure sale or sales of all or any portion of the
Premises under the power herein granted, (i) Grantee may bid for and purchase
the Premises and upon compliance with the terms of sale, may
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hold, retain and possess and dispose of such property in its own absolute right
without further accountability; (ii) Grantee may, if permitted by law, and after
allowing for costs and expenses of sale, compensation, and other charges, in
paying the purchase price, apply the proceeds of said sale in whatever order
Grantee in its sole discretion may decide to all or any part of the Indebtedness
outstanding and all other sums due to Grantee under the Note, this Deed to
Secure Debt or any other Loan Document, including, without limitation,
attorney's fees, to insurance premiums, liens, assessments, taxes and charges
including utility charges advanced by Grantee, or to the accrued interest on all
of the foregoing; and the remainder, if any, shall be paid to Grantor, or to the
person or entity lawfully entitled thereto; and (iii) Grantor shall be deemed a
tenant holding over and shall forthwith deliver possession to the purchaser or
purchasers at such sale or be summarily dispossessed according to provisions of
law applicable to tenants holding over.
Section 2.03 Waiver of Appraisement, Valuation, etc. Grantor
agrees, to the full extent permitted by law, that in case of a Default on the
part of Grantor hereunder, neither Grantor nor anyone claiming through or under
Grantor will set up, claim or seek to take advantage of any moratorium,
reinstatement, forbearance, appraisement, valuation, stay, extension, homestead,
exemption or redemption laws now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this Deed to Secure Debt, or the
absolute sale of the Premises, or the delivery of possession thereof immediately
after such sale to the purchaser at such sale, and Grantor, for itself and all
who may at any time claim through or under it, hereby waives to the full extent
that it may lawfully so do, the benefit of all such laws, and any and all right
to have the assets subject to the security interest of this Deed to Secure Debt
marshalled upon any foreclosure or sale under the power herein granted.
Section 2.04 Waiver of Homestead. Grantor hereby waives and
renounces all homestead and exemption rights provided for by the Constitution
and the laws of the United States and of any state, in and to the Premises as
against the collection of the Indebtedness, or any part thereof.
Section 2.05 Leases. Grantee, at its option, is authorized
to foreclose this Deed to Secure Debt subject to the rights of any tenants of
the Premises, and the failure to make any such tenants parties to any such
foreclosure proceedings and to foreclose their rights will not be, nor be
asserted to be by Grantor, a defense to any proceedings instituted by Grantee to
collect the Indebtedness.
Section 2.06 Remedies Cumulative. No right, power or remedy
conferred upon or reserved to Grantee by this Deed to Secure Debt is intended to
be exclusive of any other right, power or remedy, but each and every such right,
power and remedy shall be cumulative and concurrent and, subject to Section
3.08, shall be in addition to any other right, power and remedy given hereunder
or now or hereafter existing at law, in equity or by statute.
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Section 2.07 No Waiver.
(a) No delay or omission by Grantee or by any holder of the
Note to exercise any right, power or remedy accruing upon any breach or Default
shall exhaust or impair any such right, power or remedy or shall be construed to
be a waiver of any such breach or Default, or acquiescence therein, and every
right, power and remedy given by this Deed to Secure Debt to Grantee may be
exercised from time to time and as often as may be deemed expedient by Grantee.
No consent or waiver, expressed or implied, by Grantee to or of any breach or
Default by Grantor in the performance of the obligations of Grantor hereunder
shall be deemed or construed to be a consent or waiver to or of any other breach
or Default in the performance of the same or any other obligations of Grantor
hereunder. Failure on the part of Grantee to complain of any act or failure to
act or to declare a Default, irrespective of how long such failure continues,
shall not constitute a waiver by Grantee of its rights hereunder or impair any
rights, powers or remedies of Grantee hereunder.
(b) No act or omission by Grantee shall release, discharge,
modify, change or otherwise affect the original liability (subject to the terms
of Section 3.08 hereof) under the Note, this Deed to Secure Debt or any other
obligation of Grantor or any subsequent purchaser of the Premises or any part
thereof, or any maker, co-signer, endorser, surety or guarantor, or preclude
Grantee from exercising any right, power or privilege herein granted or intended
to be granted in the event of any Default then made or of any subsequent
Default, or alter the security title, security interest of this Deed to Secure
Debt except as expressly provided in an instrument or instruments executed by
Grantee. Without limiting the generality of the foregoing, Grantee may (i) grant
forbearance or an extension of time for the payment of all or any portion of the
Indebtedness; (ii) take other or additional security for the payment of the
Indebtedness; (iii) waive or fail to exercise any right granted hereunder or in
the Note; (iv) release any part of the Premises from the security interest of
this Deed to Secure Debt or otherwise change any of the terms, covenants,
conditions or agreements of the Note or this Deed to Secure Debt; (v) consent to
the filing of any map, plat or replat affecting the Premises; (vi) consent to
the granting of any easement or other right affecting the Premises; (vii) make
or consent to any agreement subordinating the security title, security interest
or lien hereof; or (viii) take or omit to take any action whatsoever with
respect to the Note, this Deed to Secure Debt, the Premises or any document or
instrument evidencing, securing or in any way relating to the Indebtedness; all
without releasing, discharging, modifying, changing or affecting any such
liability, or precluding Grantee from exercising any such right, power or
privilege or affecting the security title, security interest of this Deed to
Secure Debt. In the event of the sale or transfer by operation of law or
otherwise of all or any part of the Premises, Grantee, without notice, is hereby
authorized and empowered to deal with any such vendee or transferee with
reference to the Premises or the Indebtedness, or with reference to any of the
terms, covenants, conditions or agreements hereof, as fully and to the same
extent as it might deal with the original
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parties hereto and without in any way releasing and/or discharging any
liabilities, obligations or undertakings.
Section 2.08 Suits to Protect the Premises. Grantee shall
have power to institute and maintain such suits and proceedings as it may deem
expedient (a) to prevent any impairment of the Premises by any acts which may be
unlawful or constitute a Default under this Deed to Secure Debt, (b) to preserve
or protect its interest in the Premises and in the Rents and (c) to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid, if
the enforcement of or compliance with such enactment, rule or order would impair
the security hereunder or by prejudicial to the interest of Grantee.
Section 2.09 Proof of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Grantor, its creditors or its
property, Grantee, to the extent permitted by law, shall be entitled to file
such proofs of claim and other documents as may be necessary or advisable in
order to have the claims of Grantee allowed in such proceeding for the entire
amount of the Indebtedness at the date of the institution of such proceedings
and for any additional amount of the Indebtedness after such date.
Section 2.10 Interest After Default. If any payment due
hereunder or under the Note is not paid either as stated or upon accelerated
maturity or pursuant to any of the terms hereof, then and in such event, Grantor
shall pay or shall cause to be paid interest thereon from and after the date on
which such payment first becomes due at the Default Rate and such interest shall
be due and payable, on demand, at such rate until the entire amount due is paid
to Grantee, whether or not any action shall have been taken or proceeding
commenced to recover the same or to foreclose this Deed to Secure Debt. Nothing
in this Section 2.10 or in any other provision of this Deed to Secure Debt shall
constitute an extension of the time of payment of the Indebtedness.
Section 2.11 Grantor's Actions After Default. After the
occurrence of a Default hereunder, under the Note or any other Loan Document,
and immediately upon the commencement of any action, suit or other legal
proceedings by Grantee to obtain judgment for the Indebtedness, or of any other
nature in aid of the enforcement of the Note or of this Deed to Secure Debt,
Grantor shall if required by Grantee, consent to the appointment of a receiver
or receivers of the Premises and of all the profits thereof.
Section 2.12 Control by Grantee After Default.
Notwithstanding the appointment of any receiver, liquidator or trustee of
Grantor, or of any of its property, or of the Premises or any part thereof,
Grantee shall be entitled to retain possession and control of the Premises.
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Section 2.13 Payment of Indebtedness After Default. Upon the
occurrence of a Default and the acceleration of the maturity hereof, if, at any
time prior to foreclosure sale, Grantor or any other person tenders payment of
the amount necessary to satisfy the Indebtedness, the same shall constitute an
evasion of the payment terms hereof and shall be deemed to be a voluntary
prepayment hereunder, in which case such payment must include the premium
required under the Note, if any. This provision shall be of no force or effect
if at the time that such tender of payment is made Grantor has the right under
this Deed to Secure Debt or the Note to prepay the Indebtedness without premium.
ARTICLE 3
MISCELLANEOUS
Section 3.06 Binding Obligations. This Deed to Secure Debt
shall inure to the benefit of and be binding upon Grantor and Grantee and their
respective heirs, executors, legal representatives, successors,
successors-in-title and assigns. Whenever a reference is made in this Deed to
Secure Debt to "Grantor" or "Grantee", such reference shall be deemed to include
a reference to the heirs, executors, legal representatives, successors,
successors-in-title and assigns of Grantor and Grantee, as the case may be. The
provisions of this Section 3.01 are subject to the restrictions on transfer
contained in Section 1.18 and Section 1.21 hereof.
Section 3.07 Terminology. All personal pronouns used in this
Deed to Secure Debt whether used in the masculine, feminine or neuter gender,
shall include all other genders; the singular shall include the plural, and vice
versa. Titles of articles and Sections are for convenience only and neither
limit nor amplify the provisions of this Deed to Secure Debt, and all references
herein to articles, Sections or subSections shall refer to the corresponding
articles, Sections or subSections of this Deed to Secure Debt unless specific
reference is made to articles, Sections or subSections of another document or
instrument.
Section 3.08 Severability. If any provisions of this Deed to
Secure Debt or the application thereof to any person or circumstance shall be
invalid or unenforceable to any extent, the remainder of this Deed to Secure
Debt and the application of such provisions to other persons or circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 3.09 Applicable Law. This Deed to Secure Debt shall
be interpreted, construed and enforced according to the Laws of the State of
Georgia.
Section 3.010 Notices. Any and all notices, elections or
demands permitted or required to be given under this Deed to Secure Debt shall
be in writing, signed by or on behalf of
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the party giving such notice, election or demand, and shall be deemed to have
been properly given and shall be effective upon being personally delivered, or
upon being deposited in the United States mail, postage prepaid, certified with
return receipt requested, or upon being deposited with an overnight commercial
delivery service requiring proof of delivery, to the other party at the address
of such other party set forth below or at such other address within the
continental United States as such other party may designate by notice
specifically designated as a notice of change of address and given in accordance
herewith; provided, however, that the time period in which a response to any
such notice, election, demand or request must be given shall commence on the
date of receipt thereof; and provided further that no notice of change of
address shall be effective until the date of receipt thereof. Personal delivery
to a party or to any officer, partner, agent or employee of such party at said
address shall constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no notice has been
received shall also constitute receipt. Any such notice, election, demand,
request or response, if given to Grantee, shall be addressed as follows:
The Canada Life Assurance Company
330 University Avenue
Toronto, Ontario
Canada M5G 1R8
Attn: U.S. Mortgage Investment Department
with a copy to:
Wilson & Nolan Southeast, Inc.
Eleven Piedmont Center
Ninth Floor
Atlanta, Georgia 30305
and if given to Grantor shall be addressed as follows:
Roberts Properties Residential, L.P.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
with a copy to:
Holt, Ney, Zatcoff & Wasserman, LLP
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339-5911
Attn: Sanford H. Zatcoff, Esq.
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Section 3.06 Indemnity. Subject to the terms of Section
3.08 hereof, Grantor shall protect, indemnify and save harmless Grantee from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including attorneys' fees and expenses) imposed upon
or incurred by Grantee by reason of (a) any claim for brokerage fees or other
such commissions relating to the Premises or the Indebtedness, or (b) the
condition of the Premises, or (c) failure to pay recording, mortgage,
intangibles or similar taxes, fees or charges relating to the Indebtedness
evidenced by the Note or any other Loan Document. In the event Grantee incurs
any liability, loss or damage by reason of the foregoing, or in the defense of
any claim or demand arising out of or in connection with the foregoing, the
amounts of such liability, loss or damage shall be added to the Indebtedness and
secured by this Deed to Secure Debt, shall bear interest at the interest rate
specified in the Note from the date incurred until paid and shall be payable on
demand.
Section 3.07 Replacement of Note. Upon receipt of evidence
reasonably satisfactory to Grantor of the loss, theft, destruction, mutilation
of the Note, and in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to Grantor or, in the
case of any such mutilation, upon surrender and cancellation, Grantor will
execute and deliver, in lieu thereof, a replacement Note, identical in form and
substance to the Note and dated as of the date of the Note and upon such
execution and delivery all references in this Deed to Secure Debt to the Note
shall be deemed to refer to such replacement Note.
Section 3.08 Limitation on Liability. Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Grantor shall not be personally liable for (i) the repayment of any of the
principal or interest, due under the Note, the Deed to Secure Debt or any other
Loan Document, (ii) failure to perform any other covenants, obligations or
agreements under any of the Loan Documents, or (iii) or for any deficiency
judgment which Grantee may obtain after foreclosure on the Premises or any other
collateral after default by Grantor PROVIDED, HOWEVER, the foregoing limitation
on liability shall not apply to, and the Grantor shall be and remain fully and
personally liable for, and shall indemnify and hold harmless Grantee from and
against, any loss, cost, claim, damage, liability or expense (including
attorney's fees actually incurred and expenses related thereto) suffered or
incurred by Grantee and arising, directly or indirectly, from any of the
following:
(a) any breach, violation, default or failure to perform by
the Obligors under any of the terms, covenants and conditions of that certain
Indemnity Agreement Regarding Hazardous Materials and Handicapped Access Laws
(the "Indemnity Agreement") dated of even date herewith by and among Grantor,
Indemnitor and Grantee;
(b) the misappropriation or misapplication of rents, issues,
profits and revenues (including without limitation security or similar deposits,
guarantees and prepaid rents paid by
32
<PAGE> 33
tenants of the Premises) received or applicable to the period after receipt of a
notice of default and prior to a foreclosure of the Premises, to the extent that
such rents, issues, profits or revenues to the extent that such rents, issues,
profits or revenues are not paid over to Grantee or not applied to taxes,
insurance or other expenses attributable to the Premises;
(c) the misappropriation or misapplication of (i) proceeds
paid prior to a foreclosure under any insurance policies by reason of damage,
loss or destruction to any portion of the Premises, to the full extent of such
proceeds, or (ii) proceeds or awards resulting from the condemnation or other
taking in lieu of condemnation, prior to any such foreclosure, of any portion of
the Premises, to the full extent of such proceeds or awards;
(d) any fraud, misrepresentation of the Obligors contained
herein or in any of the other Loan Documents;
(e) any breach of the terms and conditions of Section 1.18 of
the Deed to Secure Debt;
(f) any failure to deliver to Grantee after acceleration of
the indebtedness evidenced by the Note any security or other deposits or rents
paid for more than thirty (30) days in advance;
(g) any failure to pay taxes or insurance premiums or charges
for labor or material or any and all other costs, the non-payment of which could
result in a lien being filed or imposed on the Premises;
(h) amounts necessary to repair or restore, as may be required
by the Loan Documents, or any of them, any portion of the Premises encumbered by
the Loan Documents, or any of them, caused by the willful or wanton acts or
omissions of the Grantor or the Indemnitor in purposely damaging the Premises;
(i) all out-of-pocket costs and expenses incurred by Grantee
as a result of enforcing its rights and remedies under the terms and provisions
the Loan Documents, or any of them.
Nothing contained in this paragraph shall (i) be deemed to be
a release or impairment of (a) the Indebtedness, or (b) the lien and security
title of the Loan Documents upon the Premises, or (ii) preclude Grantee from (a)
foreclosing the Loan Documents in case of any default or (ii) preclude Holder
from (a) foreclosing the Loan Documents in case of any default or (b) enforcing
any of the other rights of Grantee except as stated in this paragraph.
33
<PAGE> 34
Section 3.09 Assignment. This Deed to Secure Debt is
assignable by Grantee, and any assignment hereof by Grantee shall operate to
vest in the assignee all rights and powers herein conferred upon and granted to
Grantee.
34
<PAGE> 35
Section 3.010 Time of the Essence. Time is of the essence
with respect to each and every covenant, agreement and obligation of Grantor
under this Deed to Secure Debt, the Note and any other Loan Document.
Section 3.11 Waiver of Grantor's Rights. BY EXECUTION OF
THIS DEED TO SECURE DEBT, AND BY INITIALLING THIS SECTION 3.11, GRANTOR
EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT OF GRANTEE TO ACCELERATE THE INDEBTEDNESS
EVIDENCED BY THE NOTE AND ANY OTHER INDEBTEDNESS AND THE POWER OF ATTORNEY GIVEN
HEREIN TO GRANTEE TO SELL THE PREMISES BY NON-JUDICIAL FORECLOSURE UPON DEFAULT
BY GRANTOR; WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS
SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED TO SECURE
DEBT; (B) WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE
CONSTITUTION OF THE UNITED STATES OF AMERICA (INCLUDING, WITHOUT LIMITATION, THE
FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE
CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW,
(1) TO NOTICE PRIOR TO THE EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN
PROVIDED TO GRANTEE, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO
BE GIVEN UNDER THE PROVISIONS OF THIS DEED TO SECURE DEBT AND (2) CONCERNING THE
APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION OR ANY MORATORIUM,
REINSTATEMENT, MARSHALLING, FORBEARANCE, APPRAISEMENT, VALUATION, STAY
EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS; (C) ACKNOWLEDGES THAT
GRANTOR HAS READ THIS DEED TO SECURE DEBT AND ANY AND ALL QUESTIONS OF GRANTOR
REGARDING THE LEGAL EFFECT OF THIS DEED TO SECURE DEBT AND ITS PROVISIONS HAVE
BEEN EXPLAINED FULLY TO GRANTOR, AND GRANTOR HAS CONSULTED WITH COUNSEL OF
GRANTOR'S CHOICE PRIOR TO EXECUTING THIS DEED TO SECURE DEBT AND INITIALLING
THIS SECTION AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF
GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART
OF A BARGAINED FOR LOAN TRANSACTION.
Initialed by Grantor
------------------------
Section 3.12 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, GRANTOR HEREBY WAIVES ANY RIGHT TO DEMAND A JURY
TRIAL WITH REGARD TO ANY ISSUES ARISING OUT OF OR RELATED TO THIS DEED TO SECURE
DEBT OR THE LOAN EVIDENCED BY THE NOTE. GRANTEE, BY ACCEPTANCE OF THIS DEED TO
SECURE DEBT, SHALL ALSO
35
<PAGE> 36
BE DEEMED TO HAVE WAIVED ANY RIGHT TO A JURY TRIAL WITH REGARD TO SUCH ISSUES.
Initialed by Grantor
------------------------
Section 3.13 Not Joint Venture or Partnership. Grantor and
Grantee intend that the relationship created hereunder, under the Note and all
other Loan Documents be solely that of grantor and grantee or borrower and
lender, as the case may be. Nothing herein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship between
Grantor and Grantee, nor to grant Grantee any interest in the Premises other
than that of mortgagee or lender; it being the intent of the parties hereto that
Grantee shall not share in any losses whatsoever generated by the Premises and
that Grantee shall have no control over the day-to-day management and operation
of the Premises.
Section 3.14 Non-Residential Status of Premises. Grantor
represents and warrants to Grantee that neither all of the Premises nor any part
thereof is to be used as a dwelling place by Grantor at the time this Security
Deed is entered into and, accordingly, the notice requirements of O.C.G.A.
ss.44-14-162.2 shall not be applicable to any exercise of the power of sale
contained in this Security Deed.
Section 3.15 Commercial Transaction. The interest of Grantee
under this Security Deed and the liability and obligation of Grantor for the
payment of the Indebtedness arise from a "commercial transaction" within the
meaning of O.C.G.A. ss.44-14-260(1). Accordingly, pursuant to O.C.G.A.
ss.44-14-263, Grantor waives any and all rights which Grantor may have to notice
prior to seizure by Grantee of any interest in personal property of Grantor
which constitutes part of the Premises, whether such seizure is by writ of
possession or otherwise.
Section 3.16 Credits Waived. Grantor shall not claim nor
demand nor be entitled to any credit or credits against the Indebtedness for so
much of the taxes assessed against the Premises or any part thereof as is equal
to the tax rate applied to the amount due on this Deed to Secure Debt or any
part thereof, and no deductions shall otherwise be made or claimed from the
taxable value of the Premises or any part thereof by reason of this Deed to
Secure Debt or the Indebtedness.
36
<PAGE> 37
Section 3.17 Definitions. Defined terms used herein, as
indicated by the initial letter thereof being capitalized, and not specifically
defined herein shall have the meaning assigned to such term elsewhere in the
Loan Documents.
37
<PAGE> 38
IN WITNESS WHEREOF, Grantor has executed this Deed to Secure
Debt under seal, as of the date and year first above written.
GRANTOR:
--------
Signed, sealed and delivered ROBERTS PROPERTIES RESIDENTIAL, L.P.,
in the presence of: a Georgia limited partnership
By: Roberts Realty Investors, Inc., a
Georgia corporation, its general
/s/ Charles R. Elliott partner
- --------------------------------
Unofficial Witness
By:/s/ Charles S. Roberts
-------------------------------
Charles S. Roberts, President
/s/ Shirley S. Sokolowski
- --------------------------------
Notary Public [CORPORATE SEAL]
My commission expires:____________
[NOTARIAL SEAL]
38
<PAGE> 1
REAL ESTATE NOTE
$4,000,000.00 July 17, 1997
Fulton County, Georgia
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned ROBERTS
PROPERTIES RESIDENTIAL, L.P., a Georgia limited partnership (hereinafter
referred to as "Maker"), promises to pay to the order of THE CANADA LIFE
ASSURANCE COMPANY, a corporation organized and existing under the laws of Canada
(hereinafter referred to as "Payee"; Payee, and any subsequent holder(s) hereof,
being hereinafter referred to collectively as "Holder"), at the office of Wilson
& Nolan Southeast, Inc., Eleven Piedmont Center, Ninth Floor, Atlanta, Georgia
30305, or at such other place as Holder may designate to Maker in writing from
time to time, the principal sum of FOUR MILLION AND NO/l00 DOLLARS
($4,000,000.00), or so much thereof as is from time to time outstanding and
unpaid, together with any and all interest thereon, from the date hereof, at the
rate hereinafter set forth, in lawful money of the United States of America,
which shall at the time of payment be legal tender in payment of all debts and
dues, public and private, such principal and interest to be paid as provided
herein (the "Loan").
2. Security. This Note is secured, inter alia, by (i) that certain Deed
to Secure Debt and Security Agreement (the "Deed to Secure Debt") dated of even
date herewith, given by Maker to Payee and to be recorded in Douglas County,
Georgia records, which encumbers certain real property located in Douglas
County, Georgia and described in the Deed to Secure Debt (the "Premises"), (ii)
that certain Assignment of Leases and Rents dated of even date herewith and
given by Maker to Payee and to be recorded in Douglas County, Georgia records
(the "Assignment"), and (iii) all other documents and instruments evidencing,
governing, securing or in any way relating or pertaining to the indebtedness
evidenced hereby (collectively, the "Other Security Documents"; this Note, the
Deed to Secure Debt, the Assignment, and the Other Security Documents are
hereinafter collectively referred to as the "Loan Documents").
3. Interest.
3.1 Note Rate. From and after the date hereof until the
Maturity Date (as such term is hereinafter defined) or default as hereinafter
provided, interest shall accrue at the rate of 7.65% per annum (the "Note
Rate"). Principal and interest shall be due and payable in equal consecutive
monthly installments (the "Monthly Payments") equal to TWENTY-EIGHT THOUSAND
THREE HUNDRED EIGHTY-ONE AND 00/100 DOLLARS ($28,381.00) each, commencing on
September 1, 1997, and continuing on the first (1st) day of each and every month
thereafter until May 1, 2001, on which date the entire unpaid principal balance
hereof, together with all accrued but unpaid interest thereon, shall be due and
payable in full (the "Maturity Date"). Each such monthly installment shall be
applied first to Late Charges (as such term is hereinafter defined) and other
fees, costs and charges, if any, reimbursable to Holder as provided herein or in
any of the other Loan Documents in such order as Holder determines in its sole
discretion, and then to the
<PAGE> 2
payment of accrued interest, and last to unpaid principal. Interest shall be
calculated on a three hundred sixty (360) day year consisting of twelve (12)
thirty (30) day months. The interest paid hereunder shall equal the per diem
charge times the actual number of days the indebtedness evidenced hereby is
outstanding. Realty tax and insurance escrow deposits may be commingled with the
Holder's other funds and shall not bear interest.
3.2 Prepayment. The indebtedness evidenced hereby may be prepaid in
full only and not in part, upon sixty (60) days' prior written notice to Holder
and upon payment to Holder of the entire unpaid principal balance hereof,
together with all accrued and unpaid interest thereon, together with all other
sums due Holder hereunder, and together with a prepayment premium equal to the
greater of:
3.2.1 One percent (1%) of the principal balance outstanding
under the Loan at the date of such prepayment or:
3.2.2 The difference between:
(i) the discounted value of all required monthly
payments for the remaining term of the Loan and
the discounted value of the outstanding
principal balance of the Loan at the Maturity
Date, calculated utilizing a discount rate
equal to the monthly equivalent
yield-to-maturity rate of a U.S. Treasury Note
or Bond, and
(ii) the principal balance outstanding under the
Loan at the date of such prepayment.
The monthly equivalent yield-to-maturity rate shall be predicated on the U.S.
Treasury Note or Bond closest in maturity to the Maturity Date, as selected by
Holder on the fifth (5th) business day preceding the date of prepayment (as
reported in The Wall Street Journal, or if The Wall Street Journal is no longer
published, as reported in a similar daily financial publication of national
circulation and selected by Holder).
Notwithstanding the foregoing, upon five (5) business days' prior
written notice to Holder, Maker shall have the option to prepay the indebtedness
evidenced hereby in full during the final ninety (90) days of the term of the
Loan without the payment of such prepayment premium. Further, in the event a
prepayment is made as a result of the application of condemnation proceeds or a
casualty insurance loss settlement and the Loan is not in default beyond any
applicable cure period at the time of such prepayment, then Holder shall waive
the payment of a prepayment premium. For the avoidance of doubt, and except as
set forth below, any prepayment made at any time, other than during the final
ninety (90) days of the term of this Note and with funds not derived from
condemnation or insurance proceeds, shall include a prepayment premium computed
as
2
<PAGE> 3
aforesaid. Any notice to Holder pursuant to the provisions of this paragraph
shall be given in accordance with the requirements of the Deed to Secure Debt.
Maker expressly agrees that in the event of the acceleration of the
Maturity Date of the indebtedness evidenced hereby as the result of any default
hereunder or under any of the other Loan Documents (which default remains
uncured after the lapse of any applicable cure or grace period) including,
without limitation, any acceleration arising from an unpermitted transfer of any
interest in the Premises, a tender by or on behalf of Maker of the amount
necessary to satisfy in full the indebtedness evidenced hereby made at any time
prior to the completion of any foreclosure proceeding and the final and
irrevocable divestiture of all of Maker's right, title and interest in and to
the Premises, shall constitute an evasion of the prepayment provisions hereof
and shall be deemed to be a voluntary prepayment hereunder. Accordingly, in any
of the aforesaid events, Holder shall have no obligation to accept any tender of
the entire unpaid principal balance hereof together with all accrued and unpaid
interest thereon and all other sums due Holder hereunder or under any of the
other Loan Documents unless the payment of said amounts is accompanied by the
payment of such prepayment premium computed as aforesaid.
Maker hereby expressly waives the provisions of any statute or rule
of law or equity now provided, or which may hereafter be provided, which would
prohibit the collection of such prepayment premium or be in conflict with or
produce a result contrary to the foregoing provisions of this paragraph.
3.3 Default Interest. It is hereby expressly agreed that should any
payment of principal or interest as stipulated above or any deposit as
stipulated in Section 1.05 of the Deed to Secure Debt not be paid on or before
five (5) days from the due date thereof, provided, however, as to the first
such payment of principal and interest within any twelve month period which is
not paid when due, Holder shall provide Maker with written notice of the
failure to pay and the opportunity to pay the amount of any such payment so
due, without payment of any "Late Charge" (as hereinafter defined), on or
before five (5) days after receipt of said notice (but after once giving such
notice of failure to pay during any twelve month period, no additional notice
of failure to pay shall be required to be given by Lender during that twelve
month period) or should any default be made in the performance of any of
the non-monetary covenants or conditions contained in the Loan Documents, which
remains uncured for a period of thirty (30) days from receipt of written notice
from Holder (or in the event such default may not be reasonably cured within
such thirty (30) day cure period such cure period shall be extended for a
reasonable time thereafter so long as Maker commences to cure such default
within the thirty (30) day grace period and thereafter diligently pursues such
cure to completion) then, and in such event, the principal indebtedness
evidenced hereby, and any other sums advanced hereunder or under the other Loan
Documents, or any of them, together with all unpaid interest accrued thereon,
shall, at the option of Holder and without notice, or further notice, to Maker
at once become due and payable and may be collected forthwith, regardless of
the stipulated Maturity Date. Interest shall accrue on the outstanding
principal balance of this Note from the date of any default hereunder and for
so long as such default continues,
3
<PAGE> 4
regardless of whether or not there has been an acceleration of the indebtedness
evidenced hereby as set forth herein, at the rate of the Note Rate, plus three
percent (3%) per annum (the "Default Rate"); provided however, no default shall
occur until after expiration of the applicable notice and right to cure
period. All such interest, together with the Late Charge, if applicable, shall
be paid at the time of and as a condition precedent to the curing of any such
default should Holder, at its sole option, allow such default to be cured. Time
is of the essence of this Note. In the event this Note, or any part thereof, is
collected by or through an attorney-at-law, Maker agrees to pay all costs of
collection including, but not limited to, attorney's fees actually incurred
being defined as attorneys fees based on the attorneys normal hourly rate and
the number of hours worked (and not the attorney's fees statutorily defined in
O.C.G.A. Section 13-1-11) and expenses related thereto.
3.4 Late Charges. In addition to, and not in lieu of, any
other right or remedy of Holder hereunder or under any other Loan Documents,
Holder shall have the right to charge and collect (but only as to such
installment then due) and Maker hereby agrees to pay, for any installment not
received by Holder within five (5) days of the due date thereof, a Late Charge
(the "Late Charge" or "Late Charges") in an amount equal to four percent (4.0%)
of the installment which is then due and payable (including without limitation
any escrow deposits for taxes and insurance required to be paid as a part of
such installment, if any). In no event and under no circumstances shall the
provisions of this paragraph or the immediately preceding paragraph be deemed or
construed to constitute any waiver of the terms hereof or of any of the other
Loan Documents as to the time for performance by Maker hereunder or thereunder.
Any Late Charge imposed by Holder in accordance with this paragraph 3.4 shall be
due and payable on demand. Maker acknowledges and agrees that any such Late
Charge shall not be deemed to be additional interest or a penalty, but shall be
deemed to be liquidated damages because of the difficulty in computing the
actual amount of damages in advance. If any such Late Charge is in excess of the
amount permitted to be charged to Maker under applicable law, Holder shall be
entitled to collect the Late Charge at the highest rate permitted by such law.
Until any and all Late Charges and interest after default are paid in full the
amount thereof shall be added to the indebtedness evidenced hereby and shall
accrue interest at the Note Rate.
4. Intentionally Omitted
5. Waiver; No Waiver. Presentment for payment, demand, protest and
notice of demand, protest and non-payment and all other notices, except as
provided herein or in any of the other Loan Documents, are hereby waived by
Maker. No failure to accelerate the debt evidenced hereby by reason of default
hereunder, acceptance of a past due installment, or indulgences granted from
time to time shall be construed (i) as a novation of this Note or as a
reinstatement of the indebtedness evidenced hereby or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note, or (ii) to prevent the exercise of such
right of acceleration or any other right granted hereunder or by the laws of the
State of Georgia; and Maker hereby expressly waives the benefit of any statute
or rule of law or equity now provided, or which may hereafter be provided, which
would produce a result contrary to or in
4
<PAGE> 5
conflict with the foregoing. No extension of the time for the payment of this
Note or any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note shall operate to release,
discharge, modify, change or affect the original liability, subject to
paragraph 7 hereof, of Maker under this Note, either in whole or in part unless
Holder agrees otherwise in writing. This Note may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification or discharge is sought.
Maker hereby waives and renounces for itself, its heirs, successors and
assigns, all rights to the benefit of any statute of limitations and any
moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, exemption and homestead now provided, or which may
hereafter be provided by the Constitution and laws of the United States of
America and of any state thereof, both as to itself and in and to all of its
property, real and personal, against the enforcement and collection of the
obligations evidenced by this Note. Maker hereby transfers, conveys and assigns
to Holder a sufficient amount of such homestead or exemption as may be set apart
in bankruptcy, to pay this Note in full, with all reasonable costs of
collection, and does hereby direct any trustee in bankruptcy having possession
of such homestead or exemption to deliver to Holder a sufficient amount of
property or money set apart as exempt to pay the indebtedness evidenced hereby,
or any renewal thereof, and does hereby appoint Holder the attorney-in-fact for
Maker to claim any and all homestead exemptions allowed by law.
6. Maximum Rate; Severability. It is the intention of the parties
hereto to conform strictly to the usury laws, whether state or federal, from
time to time in force and applicable to this Note. If from any circumstances
whatsoever, fulfillment of any provision of this Note or of any other instrument
evidencing or securing the indebtedness evidenced hereby, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity presently described by any applicable usury statute or any other
applicable law, with regard to obligations of like character and amount, then
ipso facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, so that in no event shall any exaction be possible under this Note or
under any other instrument evidencing or securing the indebtedness evidenced
hereby, that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity. The terms and
provisions of this paragraph shall control and supersede every other provision
of all agreements between Holder and Maker.
7. Limitation on Liability. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, the Maker shall not be
personally liable for (i) the repayment of any of the principal or interest due
under this Real Estate Note, or (ii) failure to perform any other covenants,
obligations or agreements under any of the Loan Documents; PROVIDED, HOWEVER,
the foregoing limitation on liability shall not apply to, and the Maker, shall
be and remain fully and personally liable for,and shall indemnify and hold
harmless Holder from and against, any loss, cost, claim, damage, liability or
expense (including attorney's fees actually
5
<PAGE> 6
incurred and expenses related thereto) suffered or incurred by Holder and
arising, directly or indirectly, from any of the following:
7.1 any breach, violation, default or failure to perform by the
Maker under any of the terms, covenants and conditions of that certain Indemnity
Agreement Regarding Hazardous Materials and Handicapped Access Laws (the
"Indemnity Agreement") dated of even date herewith by and among Maker, Roberts
Realty Investors, Inc. (collectively the "Indemnitor") and Payee;
7.2 the misappropriation or misapplication of rents, issues,
profits and revenues (including without limitation security or similar deposits,
guarantees and prepaid rents paid by tenants of the Premises) received or
applicable to the period after receipt of a notice of default and prior to a
foreclosure of the Premises, to the extent that such rents, issues, profits or
revenues are not paid over to Holder or not applied to taxes, insurance or other
expenses attributable to the Premises;
7.3 the misappropriation or misapplication of (i) proceeds paid
prior to a foreclosure under any insurance policies by reason of damage, loss or
destruction to any portion of the Premises, to the full extent of such proceeds,
or (ii) proceeds or awards resulting from the condemnation or other taking in
lieu of condemnation, prior to any such foreclosure, of any portion of the
Premises, to the full extent of such proceeds or awards;
7.4 any fraud or misrepresentation of the Maker contained herein
or in any of the other Loan Documents;
7.5 any breach of the terms and conditions of Section 1.18 of the
Deed to Secure Debt;
7.6 any failure to deliver to Holder after acceleration of the
indebtedness evidenced hereby any security or other deposits or rents paid for
more than thirty (30) days in advance;
7.7 any failure to pay taxes or insurance premiums or charges for
labor or material or any and all other costs, the non-payment of which could
result in a lien being filed or imposed on the Premises;
7.8 amounts necessary to repair or restore, as may be required by
the Loan Documents, or any of them, any portion of the Premises encumbered by
the Loan Documents, or any of them, caused by the willful or wanton acts or
omissions of the Maker and Indemnitor in purposely damaging the Premises;
7.9 all out-of-pocket costs and expenses incurred by Holder as a
result of enforcing its rights and remedies under the terms and provisions of
the Loan Documents, or any of them.
6
<PAGE> 7
Nothing contained in this paragraph shall (i) be deemed to be a release
or impairment of (a) the indebtedness evidenced by this Note, or (b) the lien
and security title of the Loan Documents upon the Premises, or (ii) preclude
Holder from (a) foreclosing the Loan Documents in case of any default or (b)
enforcing any of the other rights of Holder except as stated in this paragraph.
8. Consent to Jurisdiction. Maker hereby submits to personal
jurisdiction in the State of Georgia for the enforcement of Maker's obligations
hereunder and under the other Loan Documents, and waives any and all personal
rights under the laws of any other state to object to jurisdiction within the
State of Georgia for purposes of litigation to enforce such obligation of Maker.
In the event such litigation is commenced, Maker agrees that service of process
may be made and personal jurisdiction over Maker obtained, by service of a copy
of the summons, complaint and other pleadings required by applicable law to
commence such litigation upon Maker's appointed Agent for Service of Process in
the State of Georgia which Agent Maker hereby designates to be Sanford H.
Zatcoff, Esq., Holt, Ney, Zatcoff & Wasserman, LLP, 100 Galleria Parkway, Suite
600, Atlanta, Georgia 30339-5911; provided, however, Maker may replace such
Agent with such other appointed Agent for service of process upon thirty (30)
days prior written notice to Holder. Notwithstanding anything in this paragraph
to the contrary, the State of Georgia is not the exclusive jurisdiction for
actions under this Note, and personal jurisdiction may be had against Maker and
suit may be brought by Holder with respect to the enforcement of Maker's
obligations hereunder and under the other Loan Documents in any other states or
jurisdictions permitted by law.
9. Notices. Any and all notices, elections or demands permitted or
required to be given under this Note shall be in writing, signed by or on behalf
of the party giving such notice, election or demand, and shall be deemed to have
been properly given and shall be effective upon being personally delivered, or
upon being deposited in the United States mail, postage prepaid, certified with
return receipt requested, or upon being deposited with an overnight commercial
delivery service requiring proof of delivery, to the other party at the address
of such other party set forth below or at such other address within the
continental United States as such other party may designate by notice
specifically designated as a notice of change of address and given in accordance
herewith; provided, however, that the time period in which a response to any
such notice, election, demand or request must be given shall commence on the
date of receipt thereof; and provided further that no notice of change of
address shall be effective until the date of receipt thereof. Personal delivery
to a party or to any officer, partner, agent or employee of such party at said
address shall constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no notice has been
received shall also constitute receipt.
If to Maker: Roberts Properties Residential, L.P.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Copy to: Hold, Ney,Zatcoff & Wasserman, LLP
7
<PAGE> 8
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339-5911
Attention: Sanford H. Zatcoff, ESq.
If to Payee: The Canada Life Assurance Company
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Copy to: Wilson & Nolan Southeast, Inc.
Eleven Piedmont Center
Ninth Floor
Atlanta, Georgia 30305
Attention: Geoffrey Nolan
Any party to this Note may change the address for service from time to
time by giving notice in accordance with the foregoing.
10. Governing Law. This Note is intended as a contract under and shall
be construed and enforceable in accordance with the laws of the State of
Georgia.
11. Successors, Assigns; Joint Liability. As used herein, the terms
"Maker" and "Holder" shall be deemed to include their respective heirs,
successors, legal representatives and assigns, whether by voluntary action of
the parties or by operation of law. In the event that more than one person, firm
or entity is a "Maker" hereunder, then all references to "Maker" shall be deemed
to refer equally to each of said persons, firms, or entities, all of whom shall
be jointly and severally liable for all of the obligations of Maker hereunder.
12. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, MAKER HEREBY WAIVES ANY RIGHT TO DEMAND A JURY TRIAL WITH REGARD TO ANY
ISSUES ARISING OUT OF OR RELATED TO THIS NOTE OR THE LOAN EVIDENCED BY THIS
NOTE. PAYEE, BY ACCEPTANCE OF THIS NOTE, SHALL ALSO BE DEEMED TO HAVE WAIVED ANY
RIGHT TO A JURY TRIAL WITH REGARD TO SUCH ISSUES.
8
<PAGE> 9
IN WITNESS WHEREOF, Maker has executed this Note under seal on the day
and year first above written.
MAKER:
ROBERTS PROPERTIES RESIDENTIAL, L.P.,
a Georgia limited partnership
By: Roberts Realty Investors, Inc., a
Georgia corporation, its general
partner
By: /s/ Charles S. Roberts
----------------------------------
Charles S. Roberts, President
[CORPORATE SEAL]
9
<PAGE> 1
SALES CONTRACT
THIS AGREEMENT is made and entered into this 30th day of July,
1997, by and between ROBERTS PROPERTIES RESIDENTIAL, L.P., a Georgia limited
partnership (hereinafter referred to as the "Seller") and GREAT BEAR INVESTMENT
COMPANY, a Georgia corporation (hereinafter referred to as the "Purchaser").
ARTICLE I - PROPERTY TO BE CONVEYED
A. Seller shall sell to Purchaser, and Purchaser shall
purchase from Seller, upon the terms and conditions hereinafter set forth, that
certain parcel of land (hereinafter referred to as the "Land") described on
Exhibit A attached hereto with the buildings and improvements on the Land
(hereinafter referred to as the "Improvements") and the appliances, furniture,
fixtures, machinery, equipment, supplies and other personal property attached
thereto, located at, or used in connection with the operation, management or
maintenance of the Land or the Improvements, other than personal property owned
by tenants (all of the foregoing real and personal property is hereinafter
collectively referred to as the "Property").
B. The Property shall include all right, title and interest,
if any, of Seller in and to any land lying in the bed of any street, road,
highway or avenue, open or proposed, in front of or adjoining all or any part of
the Land and in all strips, gores or rights-of-way, riparian rights and
easements, and all right, title and interest of Seller, if any, in and to (a)
any award or payment made or to be made (i) for any taking in condemnation or
eminent domain of land lying in the bed of any street, road, highway or avenue,
open or proposed, in front of or adjoining all or any part of the Land, (ii) for
damage to the Property or any part thereof by reason of change of grade or
closing of any such street, road, highway or avenue, (iii) for any taking in
condemnation or eminent domain of any part of the Property, (b) all tenant
leases, rents and profits from and after the Closing Date (as hereinafter
defined), (c) all refundable tenants' security deposits not refunded prior to
the Closing (as hereinafter defined), (d) all intangible assets related to the
Property, including all of Seller's right, title and interest in and to all
warranties and guaranties, and (e) all of Seller's right, title and interest in
and to the name "Windsong Apartments" as used in connection with the Property,
subject to the following sentence. Neither the Property nor the tradename
"Windsong Apartments" and variations thereof includes Seller's trademark
"Creating Communities For Superior Lifestyles", and Purchaser hereby agrees not
to use such trademark at any time. Purchaser's agreement contained in the
preceding sentence shall survive the Closing.
C. The Property is known as The Windsong Apartments and
consists of 232 apartment units and townhouses and related amenities, and is
located on St. Simons Island, Georgia.
ARTICLE II - PURCHASE PRICE
The purchase price (hereinafter referred to as the "Purchase
Price") for the Property shall be Nine Million Seven Hundred Fifty Thousand and
No/100 Dollars
<PAGE> 2
($9,750,000.00), and subject to all prorations and adjustments provided herein,
the Purchase Price shall be paid as follows:
A. Concurrently with the execution of this Agreement,
Purchaser shall pay to Commonwealth Land Title Insurance Company (the
"Escrowee") (Atlanta, Georgia office) $250,000.00 by check subject to collection
or by wire-transfer, such amount to be deposited in an interest-bearing money
market account (which amount, together with all interest earned thereon, is
hereinafter referred to as the "Deposit"). Purchaser hereby certifies that its
federal tax identification number is 58-1829248. The Deposit shall be applied
toward the cash portion of the Purchase Price due at Closing only if the Closing
contemplated hereby is consummated as herein provided, or shall otherwise be
applied as elsewhere provided in this Agreement, including, without limitation,
as specified in Section XII A of this Agreement.
B. The outstanding principal balance on the Closing Date
evidenced by the "Promissory Note" (as hereinafter defined) shall be paid by
Purchaser's assumption of the loan (the "Loan") evidenced by the Promissory Note
and secured by the "Security Deed" (as hereinafter defined), but subject to the
non-recourse provisions contained in the Promissory Note and the Security Deed.
C. An amount equal to the Purchase Price less (i) the
outstanding principal balance on the Closing Date of the Loan, and (ii) the
amount of the Deposit which shall be paid by Escrowee to Seller at Closing,
shall be paid by Purchaser to Seller at Closing by wire-transfer to Seller of
funds immediately available to Seller or to Seller's qualified intermediary, as
directed by Seller.
D. (i) The Escrowee joins in the execution of this Agreement
for the purpose of acknowledging and agreeing to the provisions of this Section
II D. The duties of the Escrowee shall be as follows:
(a) During the term of this Agreement, the Escrowee shall
hold and disburse the Deposit in accordance with the terms and provisions of
this Agreement.
(b) If this Agreement shall be terminated by the mutual
written agreement of Seller and Purchaser, or if the Escrowee shall be unable to
determine at any time to whom the Deposit should be paid, or if a dispute shall
develop between Seller and Purchaser concerning to whom the Deposit should be
paid, then and in any such event, the Escrowee shall pay the Deposit in
accordance with the joint written instructions of the Seller and Purchaser. In
the event that such written instructions shall not be received by the Escrowee
within ten (10) days after the Escrowee has served a written request for
instructions upon Seller and Purchaser, then the Escrowee shall have the right
to pay the Deposit into the Superior Court of Fulton County, Georgia, which
court Seller and Purchaser agree shall have jurisdiction and venue as respects
any dispute in regard to the Deposit, and interplead Seller and Purchaser in
respect thereof, and thereupon the Escrowee shall be discharged of any
obligations in connection with this Agreement.
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<PAGE> 3
(c) If costs or expenses are incurred by the Escrowee in its
capacity as Escrowee because of litigation or a dispute between the Seller and
Purchaser arising out of the holding of the Deposit in escrow, Seller and
Purchaser shall each pay the Escrowee one-half of such reasonable costs and
expenses. Except for such costs or expenses, no fee or charge shall be due or
payable to the Escrowee for its services as escrow holder only.
(d) By joining herein, the Escrowee undertakes only to perform
the duties and obligations imposed upon the Escrowee under the terms of this
Agreement and expressly does not undertake to perform any of the other
covenants, terms and provisions incumbent upon the Seller and the Purchaser
hereunder.
(e) Purchaser and Seller hereby agree and acknowledge that the
Escrowee assumes no liability in connection herewith except for breach of trust
or willful misconduct; that the Escrowee shall never be responsible for the
validity, correctness or genuineness of any document or notice referred to under
this Agreement; and that in the event of any dispute under this Agreement, the
Escrowee may seek advice from its own counsel and shall be fully protected in
any action taken by it in good faith in accordance with the opinion of its
counsel. Seller and Purchaser each hereby agrees to indemnify and hold harmless
the Escrowee against any and all losses, liability, claims, demands, damages,
actions, causes of action and suits (other than for willful misconduct or breach
of trust) which may be imposed upon the Escrowee in connection with the
performance of its duties hereunder.
E. Purchaser and Seller hereby expressly acknowledge and agree
that, subject to the truthfulness and accuracy of all representations and
warranties of Seller contained in this Agreement (which are not intended to be
modified or affected by this Section II E) and the performance by Seller of all
its obligations contained in this Agreement, Purchaser is to acquire the
Property (and the Improvements comprising a part thereof) in an "as-is"
condition and that Seller shall have no obligation or liability whatsoever to
Purchaser in respect to the quality, integrity, nature or condition of
construction or merchantability or habitability of the Improvements or any
particular use which may be made thereof. The substance of this Section II E
shall survive the consummation of the transaction contemplated herein and shall
be included in the Special Stipulations to the Closing Statement to be executed
by Purchaser and Seller at Closing.
ARTICLE III - SELLER'S DELIVERY OF DOCUMENTS
Seller has delivered the following to Purchaser concurrently
with the execution of this Agreement:
A. A copy of the latest dated title insurance policy with
respect to the Property in Seller's possession, if any.
B. A complete inventory of all of the personal property,
appliances, furniture, fixtures, equipment, and supplies to be conveyed
hereunder (the "Personal Property").
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<PAGE> 4
C. A schedule and copies of all the permits, licenses, service
contracts and other agreements which affect the Property or the operation or
maintenance thereof [other than any property management agreement with respect
to the Property, it being agreed and understood that any such property
management agreement will be terminated at Closing and Purchaser will have no
responsibility under such agreement], which Seller represents to Purchaser are,
to the best of Seller's knowledge, all of such items which Seller has been using
to operate the Property. Seller shall assign and transfer to Purchaser at
Closing all of Seller's interest under all of said contracts and agreements
which Purchaser elects to assume; provided, however, that Purchaser must assume
at Closing all contracts and agreements which cannot be terminated by Seller
upon no more than 30 days notice and at no cost to Seller. Seller shall cancel
all the agreements and contracts not assumed by Purchaser; and Purchaser shall
notify Seller no later than August 15, 1997, as to which of the agreements that
Purchaser has the right not to assume as herein specified Purchaser has elected
not to assume. At Closing, Seller shall deliver to Purchaser the original, if
available to Seller, or otherwise a copy of all agreements assumed by Purchaser.
Seller and Purchaser shall execute at the Closing appropriate documents to
evidence the assignment of all agreements and contracts assumed by Purchaser and
the assumption by Purchaser of the obligations in respect thereto arising from
and after the Closing Date which documents shall also contain a cross-indemnity
between Seller and Purchaser with respect to fees payable and obligations for
performance in connection with such agreements and contracts assumed by
Purchaser.
D. A complete and accurate rent roll (the "Rent Roll") for the
Property as of the date of this Agreement, setting forth in respect of each
apartment: the apartment number; the name of the tenant, if any; the current
monthly rental; and the amount of the security deposit held under the lease, if
any.
E. A complete list of all full-time employees engaged in the
operation or maintenance of the Property, setting forth in respect of each
employee: his or her name; his or her position; his or her current salary or
wages; and his or her apartment number if he or she lives on the Property, and
information as to any rent reduction or free rent for such apartment. All of the
employees shall be paid by Seller for all amounts owing to them for all time
periods prior to the Closing including all accrued vacation pay and fringe
benefits.
F. A copy of the latest ad valorem tax bill in respect of the
Property in Seller's possession.
G. A copy of the latest dated survey of the Land and the
Improvements in Seller's possession, if any.
H. True and correct copies of the "Promissory Note" and the
"Security Deed". As used herein, the term "Promissory Note" shall mean that
certain Promissory Note dated March 1, 1988, executed by Roberts Properties-St.
Simons, L.P., a Georgia limited partnership formerly named Roberts
Properties-St. Simons, Ltd. ("St. Simons") in favor of John Hancock Mutual Life
Insurance Company ("Lender") in the original principal amount of $4,400,000.00,
which was amended by that certain Amendment to Promissory Note dated as of March
1, 1988,
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<PAGE> 5
executed by St. Simons and Lender, as further amended and restated by that
certain Amended and Restated Promissory Note dated January 28, 1993, in the
original principal amount of $4,350,000.00 attached as Exhibit A to that certain
Note Modification Agreement dated January 28, 1993 between Lender and St.
Simons, which Amended and Restated Promissory Note was amended by that certain
Modification to Promissory Note and Security Instruments dated January 28, 1993
between Lender and St. Simons, recorded in Deed Book 46-U, page 50, Glynn
County, Georgia records (the "Modification"), as assumed by Seller pursuant to
that certain Assumption Agreement (the "Assumption Agreement") dated as of
September 27, 1995, between Seller, successor-by-merger to St. Simons, and
Lender, recorded in Deed Book 60-A, page 275, aforesaid records. As used herein,
the term "Security Deed" shall mean that certain Deed to Secure Debt and
Security Agreement dated March 1, 1988, executed by St. Simons in favor of
Lender, recorded in Deed Book 30-J, page 455, aforesaid records, as amended by
that certain Modification to Security Instruments (the "Modification to Security
Instruments") dated January 28, 1993, between Lender and St. Simons, recorded in
Deed Book 46-C, page 305, aforesaid records, and by the Modification, as assumed
by Seller pursuant to the Assumption Agreement; and (ii) that certain Assignment
of Rents, dated March 1, 1988, executed by St. Simons in favor of Lender,
recorded in Deed Book 30-J, page 474, aforesaid records, as amended by the
Modification to Security Instruments and as assumed by Seller pursuant to the
Assumption Agreement; and (iii) that certain UCC Financing Statement No.
88-00321, having St. Simons as Debtor, and Lender as Secured Party, filed in the
aforesaid records on March 3, 1988, as continued by Continuation Statement filed
in the aforesaid records on January 14, 1993, as assumed by Seller pursuant to
the Assumption Agreement; and (iv) UCC Financing Statement No. 692900, having
St. Simons as Debtor, and Lender as Secured Party, filed in the Fulton County,
Georgia records on March 4, 1988, as continued by Continuation Statement filed
in the Fulton County, Georgia records on January 13, 1993, and as assumed by
Seller pursuant to the Assumption Agreement; and (v) UCC Financing Statement
having Seller as Debtor, and Lender as Secured Party, being File No. 63-95-02359
in the Glynn County, Georgia records; and UCC-2 Financing Statement having
Seller as Debtor, and Lender as Secured Party, recorded in Book 60-A, page 280,
in the Glynn County, Georgia records.
I. Information from the Glynn County Zoning Office in Seller's
possession evidencing the zoning approval to construct a clubhouse at the
Property.
J. A copy of Seller's existing hazard insurance policy as
respects the Property. Seller will deliver to Purchaser Seller's new hazard
insurance policy with respect to the Property as soon as it is obtained by
Seller.
K. Operating statements as respects the Property for 1994,
1995, 1996 and 1997 year-to-date.
ARTICLE IV - ITEMS TO BE DELIVERED BY SELLER AT CLOSING
At Closing Seller agrees to deliver the following items to
Purchaser. Except as elsewhere herein specified, drafts of all documents to be
delivered at Closing as specified in this Agreement (except for those specified
in Section V A) shall be prepared by Purchaser's counsel
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<PAGE> 6
and submitted to Seller's counsel for review and approval no later than five (5)
days prior to the Closing Date.
A. Title to the Land shall be conveyed by a limited warranty
deed (herein called the "Deed") which will (i) contain a limited warranty of
title to the effect that Seller will warrant title to the Purchaser as against
any claim by any person owning, holding or claiming by, through or under Seller,
but not otherwise, and (ii) be subject only to those title exceptions contained
on Exhibit B attached hereto and made a part hereof (herein called the
"Permitted Exceptions"). Purchaser agrees to acquire title to the Property
subject to the Permitted Exceptions.
Purchaser shall obtain prior to August 1, 1997 (the "Title Out
Date"), the expense of which shall be paid by Purchaser, an owner's title
insurance binder (the "Binder") issued by Commonwealth Land Title Insurance
Company (the "Title Company") committing to insure Purchaser with respect to the
Property in the amount of the Purchase Price. In the event that Purchaser
notifies the Seller no later than the Title Out Date of Material Title
Objections (as hereinafter defined) or of objections as to matters of survey
(the "Survey Objections") in the event Purchaser elects to obtain, at
Purchaser's sole cost and expense, a survey of the Property, affecting the
marketability of the Land, Seller shall within ten (10) days after receipt of
such notice from Purchaser notify Purchaser as to whether or not Seller will be
able to satisfy all such Material Title Objections and Survey Objections as to
which Purchaser has notified Seller. In the event that (i) Seller fails to
notify Purchaser within such ten (10) days as to whether or not Seller will be
able to satisfy such Material Title Objections and Survey Objections or (ii)
Seller notifies Purchaser within such ten (10) days that Seller will not be able
to satisfy such Material Title Objections and Survey Objections, Purchaser shall
have the right only to either (i) elect to terminate this Agreement and receive
from the Escrowee a return of the Deposit after which return this Agreement
shall be null and void and of no further force or effect and neither Purchaser
nor Seller shall have any further rights, duties, liabilities or obligations to
the other by reason hereof, except for the Inspection Indemnity (as hereinafter
defined); or (ii) elect to waive such Material Title Objections and Survey
Objections, in which event Purchaser shall be obligated to accept title with
such Material Title Objections and Survey Objections and to purchase the
Property without reduction of the Purchase Price.
In the event that within such ten (10) days Seller notifies
Purchaser that Seller will be able to satisfy such Material Title Objections and
Survey Objections, Seller shall have until the Closing Date the right to satisfy
all such Material Title Objections and Survey Objections, and if Seller fails to
satisfy such Material Title Objections and Survey Objections by the Closing,
Purchaser shall have the right only to either (i) elect to terminate this
Agreement and receive from the Escrowee a return of the Deposit after which
return this Agreement, except for the Inspection Indemnity, shall be null and
void and of no further force or effect and neither Purchaser nor Seller shall
have any further rights, duties, liabilities or obligations to the other by
reason hereof; or (ii) elect to waive such Material Title Objections and Survey
Objections, in which event the Purchaser shall be obligated to accept title with
such Material Title Objections and Survey Objections and to purchase the
Property without reduction of the Purchase Price.
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<PAGE> 7
Additionally, Purchaser shall have the right to update its
title examination of the Property until the Closing Date. In the event that a
Material Title Objection first arises after the effective date of Purchaser's
original title examination as respects the Property (as to title matters) or in
the event an objection as to matters of survey (a "Survey Objection") first
arises after the date of the survey in the event Purchaser elects to obtain a
survey of the Property (as to survey matters), Purchaser shall have the right to
notify Seller prior to the Closing Date as to such new Material Title Objections
and Survey Objections, and if Seller fails to satisfy such Material Title
Objections and Survey Objections by the Closing, Purchaser shall have the right
only to either (i) elect to terminate this Agreement and receive from the
Escrowee a return of the Deposit after which return this Agreement, except for
the Inspection Indemnity, shall be null and void and of no further force or
effect and neither Purchaser nor Seller shall have any further rights, duties,
liabilities or obligations to the other by reason hereof; or (ii) as to any such
new Material Title Objections and Survey Objections which can be cured by the
payment of a liquidated amount of money (other than the documents evidencing and
securing the Loan) Purchaser shall be entitled to pay at Closing the amount
required to cure and remove such matter from the title to the Property and
deduct the amount thereof from the Purchase Price otherwise payable to Seller at
Closing.
The words Material Title Objections as used herein shall mean
any matter which the Title Company is unwilling to insure against in an owner's
title insurance policy (1986 ALTA Form) other than (i) the Permitted Exceptions,
or (ii) a matter caused by any act or omission of Purchaser. In the event
Purchaser fails to notify Seller no later than the Title Out Date of a Material
Title Objection which was in existence on the effective date of the Binder, such
failure of Purchaser to notify Seller shall mean that Purchaser agrees to accept
title to the Property subject to such matter and that such matter is no longer a
Material Title Objection but is a Permitted Exception.
B. A duly executed Bill of Sale, with a list of inventory
attached (which list will be the same as that previously delivered by Seller to
Purchaser pursuant to Section III B hereof subject to additions and deletions
incurred in the normal course of business), conveying to Purchaser that portion
of the Property which is or may be considered to be personal property, with a
warranty of title, except for the Permitted Exceptions, but with no other
warranty or representation, as such property is being conveyed to Purchaser on
an "as is" basis.
C. A duly executed Assignment assigning to Purchaser the
Seller's interest as lessor in the leases with respect to the Property, with a
warranty only as to free and clear title except for the Permitted Exceptions.
Purchaser shall execute such Assignment to assume Seller's obligations as lessor
in the leases with respect to the Property from and after the Closing. This
Assignment shall contain a cross-indemnity pursuant to which Seller shall
indemnify and hold Purchaser harmless as to tenant claims arising prior to
Closing and Purchaser shall indemnify and hold Seller harmless as to tenant
claims arising after Closing.
D. An Affidavit of Seller's general partner (in a form
customarily utilized in Georgia and which is acceptable to the Title Company and
will enable the Title Company to remove the mechanic's lien exception from the
owner's title insurance policy to be issued to
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<PAGE> 8
Purchaser) showing that all debts for labor and materials in respect of the
Property have been paid in full and that there are no outstanding claims, suits,
debts, liens or judgments against the Property, except for the Permitted
Exceptions.
E. Such evidence or documents as reasonably may be required by
the Purchaser or the Title Company evidencing the status and capacity of Seller
and the authority of the person or persons who are executing the various
documents on behalf of Seller in connection with the sale of the Property.
F. A certification from Seller that Seller is not a foreign
partnership (as defined in the Internal Revenue Code and Income Tax
Regulations).
G. A Certificate which will have attached to it a rent roll as
of three days prior to the Closing Date, pursuant to which Certificate Seller
will certify that the rent roll attached thereto is to the best of Seller's
knowledge true, correct and complete in all material respects.
H. An Affidavit of Seller's Residence as respects O.C.G.A. ss.
48-7-128.
I. An IRS Form 1099, and a Designation of Reporting Agent and
Transferor Identification Form.
J. Such documents as may reasonably be required by the Lender
in connection with Purchaser's assumption of the Loan and the release by Lender
of Seller's liability in respect thereto.
K. Appropriate corporate resolutions of Seller's general
partner's directors signed and sealed by such general partner's secretary
certifying that Seller is a corporate validly existing and in good standing
under the laws of the State of Georgia, with full power and authority to carry
on the business in which it is engaged, to enter into this Agreement, to sell
the Property, and to perform Seller's obligations contemplated herein, and
authorizing one or more officers of such general partner to sign this Agreement
and all necessary documentation involved in this transaction, together with a
certificate of incumbency as respects such officers of Seller's general partner.
L. Any other documents referred to or specified in this
Agreement or reasonably requested by Purchaser.
M. With respect to the Breezeway Work specified in Section XI
C of this Agreement, the contracts, invoices and lien waivers unless Seller has
ceased doing the Breezeway Work as instructed by Purchaser as set forth in
Section XI C hereof.
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<PAGE> 9
ARTICLE V - ITEMS TO BE DELIVERED BY PURCHASER AT CLOSING
At Closing, Purchaser agrees to deliver the following items to
Seller. Drafts of the documents to be delivered at Closing by Purchaser which
are specified in Section V A are to be prepared by Purchaser's counsel and shall
be submitted to Seller's counsel for review no later than five (5) days prior to
the Closing Date.
A. Appropriate corporate resolutions of Purchaser's directors
signed and sealed by Purchaser's secretary certifying that Purchaser is a
corporation validly existing and in good standing under the laws of the state of
its incorporation, duly qualified to do business in the State of Georgia, with
full power and authority to carry on the business in which it is engaged, to own
the Property which it is purchasing hereunder, to enter into this Agreement, and
to perform Purchaser's obligations contemplated herein, and authorizing the
president or a vice president and the secretary or an assistant secretary of
Purchaser to sign this Agreement and all necessary documentation involved in
this transaction, and if Purchaser's rights hereunder are assigned to anyone
other than an individual, appropriate corporate resolutions of such
corporation's shareholders and directors signed and sealed by such corporation's
secretary certifying that such assignee is a corporation validly existing and in
good standing under the laws of the state of its incorporation, duly qualified
to do business in the State of Georgia, with full power and authority to carry
on the business in which it is engaged, to own the Property which it is
purchasing hereunder, to enter into this Agreement, and to perform such
corporation's obligations contemplated herein, and authorizing an officer of
such corporation to sign this Agreement and all necessary documentation involved
in this transaction. If such assignee is other than a corporation, similar
documents acceptable to Seller's counsel with respect to the authority of those
acting for such assignee, and in particular, if such assignee is a limited
partnership, a true and correct copy of such assignee's partnership agreement
and recorded certificate of limited partnership, and if such assignee is a
limited liability company, a true and correct copy of such assignee's articles
of organization and operating agreement.
B. An Indemnity Agreement in favor of Seller to the effect
that the tenants' refundable security deposits being transferred by Seller to
Purchaser will be safeguarded, held, administered and paid out by Purchaser as
provided by applicable Georgia law and in accordance with the applicable tenant
leases, and that Purchaser agrees to indemnify, defend and hold harmless Seller
from any loss, cost, or expense (including attorney's fees) suffered or incurred
by Seller in respect thereto.
C. The cash portion of the Purchase Price as required by and
in the manner specified in Section II C hereof.
D. An Assumption of the service contracts as specified in
Section III C hereof and an Assumption with respect to the leases specified in
Section IV C hereof.
E. Such documents as may reasonably be required by the Lender
in respect to Purchaser's assumption of the Loan.
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<PAGE> 10
F. Any other documents referred to or specified in this
Agreement or reasonably requested by Seller.
ARTICLE VI - TIME AND PLACE OF CLOSING AND CLOSING COSTS
A. The consummation of the transaction contemplated herein
shall take place at the offices of Purchaser's counsel in Atlanta, Georgia
commencing at 10:00 A.M. on November 17, 1997, which date for consummation of
the transaction contemplated herein is subject to being postponed as specified
in Article XVIII hereof. The date such consummation occurs is herein referred to
as the "Closing" or "Closing Date".
B. At Closing, Seller shall be responsible for and shall pay
the Georgia transfer tax incident to the Deed. Seller and Purchaser will each
pay their own attorney's fees, and their own other costs and expenses, including
those costs and expenses specifically elsewhere herein mentioned. Purchaser
shall pay the cost of any survey obtained by Purchaser, all recording fees, the
premium incident to any title insurance policies to be issued to Purchaser, any
incidental escrow fees charged by the Title Company in connection with the
transaction contemplated hereby, and all costs associated with obtaining
approval from the holder of the Loan to the transaction contemplated herein and
the assumption of the Loan by Purchaser. Purchaser shall reimburse to Seller at
Closing up to $90,000 for the Breezeway Work specified in Section XI C hereof
which has been completed as of the Closing Date, upon presentation by Purchaser
to Seller of the contracts and invoices and paid receipts in respect to such
completed Breezeway Work.
C. Possession of the Property, subject to the rights of
tenants in possession, will be delivered by Seller to Purchaser on the Closing
Date.
ARTICLE VII - APPORTIONMENTS, SECURITY DEPOSITS
The following items shall be apportioned at Closing and as of
the Closing Date:
A. Collected rents;
B. Interest accrued on the Promissory Note for the month
during which the Closing Date occurs. Purchaser shall pay to Seller the amount
of any escrows for taxes and insurance held in connection with the Loan and
Seller shall transfer and assign to Purchaser all of Seller's right, title and
interest thereunto;
C. Payments under service contracts assumed by Purchaser;
D. Fees for transferable licenses and permits, if any;
E. All real property taxes, including the current installment
for any assessment (special, bond, or otherwise), and personal property ad
valorem taxes, if any. In the event that the current year's taxes are not
available as of the Closing Date, the current year's taxes
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shall be based upon such taxes for 1996, but the tax proration shall be
readjusted between Purchaser and Seller as soon as the current year's taxes are
available and upon demand being made by either party. Seller shall be entitled
to receive a return of all utility deposits placed with any utility company, and
Purchaser shall be responsible to place its own deposits with any such utility
company. Seller shall be entitled to receive all income in respect of the
Property and shall be obligated to pay all expenses, including utility charges,
in respect of the Property for all time periods prior to and including the day
prior to the Closing Date. Purchaser shall be entitled to receive all such
income and shall be obligated to pay all such expenses, including utility
charges, for all time periods commencing with the Closing Date. In the event
that any rent or other income or any expense item relating to the period prior
to the Closing Date is received or appears after the Closing, such item(s) shall
be adjusted between the Seller and the Purchaser immediately after such is
discovered, but in any event within sixty (60) days after the Closing Date after
which sixty (60) days, such prorations shall be final as between Seller and
Purchaser, except that the readjustment of the tax proration shall occur as soon
as practicable after the amount of such taxes has become final at the conclusion
of the currently pending appeal of such taxes. This Section VII E shall survive
the Closing of the transaction contemplated herein.
F. At the Closing, Seller shall pay to Purchaser by means of a
credit against the cash portion of the Purchase Price due at Closing a sum equal
to the aggregate of the as-then unrefunded refundable tenants' security
deposits, and such refundable security deposits shall be safeguarded, held,
administered and paid out by the Purchaser as provided by applicable Georgia law
and in accordance with the applicable leases, and Purchaser shall execute at
Closing in favor of Seller the Indemnity Agreement hereinbefore mentioned.
G. Purchaser shall use its reasonable efforts in collecting
Seller's accounts receivable for rent attributable to the period prior to the
Closing Date which are outstanding on the Closing Date. Rents collected by
either Seller or Purchaser after the Closing Date shall be applied first to
rents due and payable for the month during which the Closing Date occurs; then
to rents then owing for any month subsequent to the month during which the
Closing Date occurs; and then to rents owing to Seller for months prior to the
month during which the Closing Date occurs.
H. If on the Closing Date fewer than 220 of the apartment
units at the Property (including those units, but not to exceed 5, for which
tenants will move in within five (5) days after the Closing Date) are occupied
by bona fide tenants paying full rent in accordance with their respective
leases, including as bona fide tenants paying full rent, no more than three
employees of the Property paying rent in accordance with signed leases and as
reflected on the Rent Roll (collectively, "bona fide tenants"), then, at
Closing, an escrow shall be established with the Escrowee, pursuant to an Escrow
Agreement mutually satisfactory to Seller, Purchaser and the Escrowee, out of
the cash portion of the Purchase Price otherwise payable by Purchaser to Seller
as herein specified, in an amount equal to (i) multiplied by (ii) multiplied by
(iii), where: (i) is the number of apartment units at the Property fewer than
220 occupied by bona fide tenants; and (ii) is $638.00; and (iii) is 2. On the
65th day after the Closing Date (or the next business day thereafter if the 65th
day is not a business day), Seller and Purchaser shall give the Escrowee
instructions as to the disbursement of the money being held in escrow as
follows: (a) in the event
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that the number of apartment units at the Property occupied by bona fide tenants
each day during the sixty (60) days after Closing is the same or fewer than the
number of apartment units occupied by bona fide tenants on the Closing Date, all
of the funds being held in escrow shall be disbursed to Purchaser; or (b) in the
event that at any time during the sixty (60) days after the Closing Date the
number of apartment units at the Property occupied by bona fide tenants is more
than the number of apartment units occupied by bona fide tenants on the Closing
Date, a proration of the monies held in escrow shall be effected between Seller
and Purchaser equitably so that Seller receives out of the escrowed funds an
amount thereof equal to the amount of the escrowed funds multiplied by a
fraction, the numerator of which is equal to the aggregate number of days each
apartment unit at the Property is occupied by a bona fide tenant in excess of
the number of apartment units at the Property occupied by bona fide tenants on
the Closing Date, and the denominator of which is equal to sixty (60) multiplied
by the number of apartment units at the Property on the Closing Date fewer than
220 occupied by bona fide tenants; and the balance of the escrow funds shall be
disbursed to Purchaser.
ARTICLE VIII - PURCHASER'S CONDITIONS PRECEDENT
Purchaser shall not be required to purchase the Property
unless the following conditions precedent have been satisfied:
A. The Property shall be maintained in its current condition
by Seller until the Closing Date, normal wear and tear excepted.
B. Purchaser and its agents and representatives shall have
been permitted to make a complete physical inspection of the Property and
investigation of Seller's income and expense records for 1994, 1995, 1996 and
1997 year-to-date pertaining to Seller's ownership and operation of the
Property. Seller shall permit Purchaser to make the foregoing investigations.
Subsequent to such inspection, Purchaser shall determine whether the physical,
financial and general condition of the Property is in Purchaser's estimation,
satisfactory for operation and ownership by Purchaser in the manner and on the
basis contemplated by Purchaser. If Purchaser, in its sole discretion,
determines not to conclude its purchase of the Property, Purchaser shall, on or
before the close of business on July 28, 1997, so notify Seller and Escrowee
that the Property is not satisfactory and this condition precedent shall have
failed and Escrowee shall return the Deposit (less $100.00 which shall be paid
by Escrowee to Seller in consideration of Seller's having held the Property off
the market) to Purchaser and thereafter this Agreement shall terminate and be
null and void and of no further force or effect, and no party shall have any
further liabilities or obligations to the others hereunder, except for the
Inspection Indemnity.
C. Intentionally deleted.
D. All apartment units at the Property which become vacant at
least two (2) days prior to the Closing Date shall be in rent-ready condition on
the Closing Date.
E. All payments due in respect to the Loan shall be current.
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ARTICLE IX - DAMAGE, DESTRUCTION OR EMINENT DOMAIN
A. If, prior to the Closing Date, there is $100,000.00 (based
upon estimates to repair by third party contractors) or more of damage to the
Property by fire or other casualty whether or not insured against by Seller
under its property damage insurance policy, Seller shall promptly give Purchaser
notice of such fact, and Purchaser may elect to terminate this Agreement within
ten (10) business days after receiving written notice from Seller of the
occurrence of such casualty. If Purchaser so elects to terminate this Agreement,
it shall give Seller and Escrowee written notice thereof and the Deposit shall
be returned by Escrowee to Purchaser, and this Agreement shall terminate and be
null and void and of no further force or effect, except for the Inspection
Indemnity, and neither Purchaser nor Seller shall have any further rights,
duties, liabilities or obligations to the other hereunder. Failure of Purchaser
to so notify Seller and Escrowee within said ten (10) business days that
Purchaser has elected to terminate this Agreement shall be deemed to mean that
Purchaser has elected not to terminate this Agreement. If Purchaser has elected
not to terminate this Agreement in the event of $100,000.00 or more of damage to
the Property, and if the damage has not been repaired prior to Closing,
Purchaser shall proceed to the Closing and shall pay the full Purchase Price,
less the amount of the deductible under Seller's applicable insurance policy,
and shall receive all insurance proceeds paid or payable as a result of such
damage or destruction, except for the amount of rental loss insurance applicable
to the period prior to the Closing Date, which shall be paid to and retained by
Seller. If prior to the Closing Date there is less than $100,000.00 of damage or
destruction to the Property by fire or other casualty which is covered by
insurance, this Agreement shall not terminate, and Purchaser shall proceed to
Closing, and if the damage has not been repaired prior to Closing, shall pay the
full Purchase Price and receive all insurance proceeds payable as a result of
such damage or destruction, except for the amount of rental loss insurance
applicable to the period prior to the Closing Date which shall be retained by
Seller. Until the Closing, Seller agrees to maintain in respect of the Property
hazard insurance and rental loss insurance and until Closing all risk of loss
shall be on the Seller.
B. If, prior to the Closing Date, all of the Property is taken
by condemnation or eminent domain or same is pending, this Agreement shall
terminate as of the day title to the Property or possession thereof vests in the
condemning authority, the Deposit shall be returned by Escrowee to Purchaser,
and upon such return this Agreement shall terminate and be null and void and of
no further force or effect, except for the Inspection Indemnity, and neither
Purchaser nor Seller shall have any further rights, remedies, duties,
liabilities or obligations to the other hereunder. If, prior to the Closing
Date, there shall be any condemnation or eminent domain proceedings instituted
or pending against less than all of the Property, and same would interfere with
Purchaser's ability to operate the Property as an apartment complex, then
Purchaser may elect to terminate this Agreement by written notice given to
Seller and Escrowee within ten (10) business days after Purchaser has received
notice from Seller of such proceedings. Upon such notice to Seller and Escrowee
the Deposit shall be returned to Purchaser by Escrowee, and upon such return
this Agreement shall terminate and be null and void and of no further force or
effect, except for the Inspection Indemnity, and neither Purchaser nor Seller
shall have any further rights, remedies, duties, liabilities or obligations to
the other hereunder. Failure of Purchaser to so notify Seller and Escrowee
within said ten (10) business days that Purchaser has elected to
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<PAGE> 14
terminate this Agreement shall be deemed to mean that Purchaser has elected not
to terminate this Agreement. If Purchaser does not so elect to terminate this
Agreement, then the Closing shall take place as provided herein without
abatement of the Purchase Price, and there shall be assigned to Purchaser at the
Closing, all interest of Seller in and to any condemnation awards which may be
payable to Seller on account of such occurrence.
ARTICLE X - SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Purchaser that:
A. To the best of Seller's knowledge, the conveyance of the
Property to Purchaser pursuant to this Agreement will not be a violation by
Seller of any applicable statute, ordinance, governmental restriction, or
regulation, or any private restriction or agreement.
B. To the best of Seller's knowledge, no special assessments
of any kind (special, bond or otherwise) are pending or levied against the
Property which are outstanding and unpaid.
C. The books and records to be made available by Seller to
Purchaser are the true books and records maintained by Seller in connection with
the Property.
D. Seller has no written employment contracts with any
employees of the Property, or if Seller has any such contracts, they will be
terminated effective as of the Closing Date and Seller shall indemnify Purchaser
in respect of any such written employment contracts.
E. Seller has not received notices of any violations by the
Property of state or municipal ordinances, orders or requirements.
F. The Rent Roll delivered by Seller to Purchaser accurately
sets forth for each apartment unit at the Property, the tenant's name, apartment
number, monthly rental and security deposit held. There are no leases for
apartments which affect the Property other than as set forth on the Rent Roll,
and there are no non-residential leases at the Property other than a lease to
the laundry room equipment company.
G. There is no litigation or proceeding pending for which
Seller has received notice or service of process or, to the best of Seller's
knowledge, threatened against Seller or the Property which could affect
Purchaser or the Property upon or subsequent to the Closing Date.
H. To the best of Seller's knowledge, there are no
condemnation or environmental proceedings pending, nor are there any proposed
changes in zoning or other land use regulations contemplated, against all or any
part of the Property. No portion of the Property has been affected by fire or
other casualty, except for such portions as have been fully repaired or restored
to their condition prior to such fire or other casualty.
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<PAGE> 15
I. Seller has received no notice of default under any of the
service contracts delivered by Seller to Purchaser in accordance with Section
III C of this Agreement.
J. Seller is not a "foreign person" as such term is defined in
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended.
K. Each person executing and delivering this Agreement and all
documents to be executed and delivered by Seller at Closing represents and
warrants to Purchaser that he has due and proper authority to execute and
deliver same. Seller has the full right, power and authority to sell and convey
the Property to Purchaser as provided herein and to carry out its obligations
hereunder. The consummation by Seller of the transaction which is the subject of
this Agreement will not conflict with or result in a breach of any of the terms
of any agreement or instrument to which Seller is a party or by which Seller is
bound or constitute a default thereunder and the Board of Directors of Seller's
sole general partner, Roberts Realty Investors, Inc., has authorized and
approved the execution and delivery of this Agreement, the transaction which is
the subject of this Agreement, and all documents to be executed and delivered by
Seller at Closing, and the consent of the limited partners in Seller or the
shareholders in Roberts Realty Investors, Inc. is not required therefor.
L. To the best of Seller's knowledge, the schedule of Personal
Property delivered by Seller to Purchaser pursuant to Section III B of this
Agreement contains a correct and complete list of all material personal property
owned by Seller and located at or used in connection with the operation of the
Property. All Personal Property is, and as of the Closing Date will be, owned by
Seller free from encumbrances or liens except for the Security Deed.
M. To the best of Seller's knowledge, Seller has not received
any notice from any applicable governmental agency seeking any information or
alleging any violation of Environmental Law (as hereinafter defined). To the
best of Seller's knowledge, and except as disclosed in that certain
environmental report dated August 1, 1995 prepared by Environmental Corporation
of America, which Seller has previously delivered to Purchaser, Seller has not
caused or permitted the Property to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process any
Hazardous Materials (as hereinafter defined) or solid waste, except in
compliance with all applicable Environmental Laws, and Seller has not caused or
permitted, and has no knowledge of, any Release (as hereinafter defined) by
Seller of any hazardous materials on-site or off-site of the Property.
"Hazardous Materials" shall mean all substances regulated or deemed or defined
as toxic or hazardous under Environmental Law, including, without limitation,
any flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or related materials, asbestos or any
materials containing asbestos. "Environmental Law" shall mean any Federal, state
or local environmental law, ordinance, rule, or regulation including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 9601 et
seq.), and the rules and regulations adopted and publications promulgated
pursuant thereto. "Release" shall mean releasing, spilling, leaking, pumping,
emitting, emptying, discharging,
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<PAGE> 16
ejecting, escaping, leaching, disposing, seeping, infiltrating, draining or
dumping, including both the present and past tense, as appropriate.
N. To the best of Seller's knowledge, neither Seller nor
Seller's managing agent has received any written notice which remains
outstanding 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 the
existing premium rates. The Promissory Note, the Security Deed and the other
loan documents (collectively, the "Loan Documents") have not been further
amended, and Seller has received no notice from Lender of a default under the
Loan Documents or of the existence of a fact, condition or circumstance that
will, if not remedied, cause a default thereunder with the passing of time or
the giving of notice, or both.
The term "knowledge" when applied to Seller in this Agreement,
means the actual, but not constructive, knowledge of Charles S. Roberts, the
President of the sole general partner of Seller, after due inquiry of the
resident manager of the Property, the maintenance supervisor of the Property,
the staff accountant for the Property, and the Vice President of Operations of
the property management company for the Property, and not anything which he
should have known, but did not know. Whenever reference is made in this
Agreement to a notice having been received by Seller the same shall mean a
notice which actually has been received by Charles S. Roberts or of which he has
been advised after due inquiry of the resident manager of the Property.
Seller's warranties and representations shall survive the
consummation of the transaction contemplated herein through May 1, 1998. Any
lawsuit or other proceeding by Purchaser against Seller in respect of any such
warranties or representations must be commenced by Purchaser, if at all, no
later than May 15, 1998. If Purchaser fails to notify Seller no later than May
1, 1998 of a breach by Seller of any warranty or representation contained in
this Agreement, or if Purchaser fails to file suit against Seller no later than
May 15, 1998 in respect of any breach by Seller of a warranty or representation
contained in this Agreement, Purchaser's right to file suit against Seller or
otherwise recover against Seller in respect of any such breach of a warranty or
representation shall be terminated and null and void. Notwithstanding the
foregoing, if Purchaser has knowledge that any of the representations and
warranties of Seller in this Agreement are inaccurate in any respect prior to
the Closing Date, and if such inaccuracy does not result from any act or
omission of Seller between the date hereof and the Closing Date, Purchaser's
sole and exclusive remedy, waiving all other remedies, is either to (i)
terminate this Agreement by giving notice to Seller in which event Escrowee
promptly shall return to Purchaser the Deposit, and thereafter this Agreement
shall terminate and be null and void and of no further force or effect, except
for the Inspection Indemnity, and neither Purchaser nor Seller shall have any
further rights, remedies, duties, liabilities or obligations to the other, or
(ii) waive that representation and warranty as to such inaccuracy and proceed to
consummate the transaction contemplated herein. Purchaser acknowledges that
Seller shall have no liability for any representations or warranties of Seller
in this Agreement which were true when made and as of the Closing Date, but
which become untrue following the Closing Date. As used in the previous
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<PAGE> 17
sentence, Purchaser's knowledge shall mean the actual, but not constructive
knowledge, of Geoffrey Nolan, and not anything which he should have known, but
did not know.
ARTICLE XI - SELLER'S COVENANTS PRIOR TO CLOSING
Seller covenants and agrees that:
A. Seller will cancel the currently existing management
agreement for the Property effective as of the Closing.
B. From the date of execution hereof until the Closing (i)
Seller shall make every reasonable effort to do nothing which might materially
damage the reputation of the Property or Seller's relations with its tenants,
(ii) Seller will continue to operate the Property in the same manner as Seller
is currently operating the Property, and (iii) Seller will continue to maintain
the Property in its current condition, including the roof, paving, landscaping
and HVAC units, normal wear and tear excepted.
C. Seller has just recently commenced certain work with
respect to the breezeways of the buildings at the Property (herein referred to
as the "Breezeway Work"). Within thirty (30) days of the date of this Agreement,
representatives of Purchaser shall meet with representatives of the Seller at
the Property so that Seller can explain to Purchaser the proposed scope of the
Breeezeway Work with the scope fully outlined in writing, and so that Purchaser
can inform Seller whether or not to continue with the Breezeway Work. In the
event that Purchaser instructs Seller within thirty (30) days after the date of
this Agreement to terminate the Breezeway Work, Seller will cease the Breezeway
Work, and there will be no obligation of Purchaser to reimburse Seller for the
cost of the Breezeway Work. In the event Purchaser does not within thirty (30)
days after the date of this Agreement instruct Seller to terminate the Breezeway
Work, at the Closing, Purchaser shall reimburse Seller for that part of the
Breezeway Work which has been completed prior to the Closing Date, up to, but
not in excess of $90,000, based upon copies of the contracts and paid invoices
for such work. While the Breezeway Work is underway, Seller will provide to
Purchaser copies of the lien waivers obtained by Seller as it makes payment for
the Breezeway Work. Seller will obtain and deliver to Purchaser at Closing, a
one year warranty from the subcontractor effecting the Breezeway Work with
respect to its workmanship and installation, and a manufacturer's warranty with
respect to the materials being used for the Breezeway Work.
ARTICLE XII - DEFAULT AND REMEDIES
A. In the event that the transaction contemplated herein is
not closed and consummated because of Purchaser's failure or breach to perform
its obligations hereunder, Seller may obtain the Deposit from Escrowee as
agreed-upon liquidated damages and not as a penalty, it being otherwise
difficult or impossible to estimate or determine Seller's actual damages, and
which liquidated damages shall be in lieu of any other damages or the right to
specific performance, and, upon Seller's receipt of such liquidated damages,
this Agreement shall terminate and be null and void and of no further force or
effect, and neither Seller nor Purchaser
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<PAGE> 18
shall have any further rights, remedies, duties, liabilities or obligations to
the other hereunder, except for the Inspection Indemnity.
B. In the event that the transaction contemplated herein is
not closed and consummated because of Seller's failure or breach to perform its
obligations hereunder or because of a breach by Seller of any of the
representations and warranties made herein by Seller, Purchaser shall have the
right only (i) to terminate this Agreement by giving notice thereof to Seller
and Escrowee, and upon receipt of such notice Escrowee shall return the Deposit
to Purchaser and thereafter this Agreement shall terminate and be null and void
and of no further force or effect, except for the Inspection Indemnity, and
neither Seller nor Purchaser shall have any further rights, remedies, duties,
liabilities or obligations to the other hereunder, or (ii) to sue Seller for
specific performance of its obligations under this Agreement; which remedies
specified in (i) and (ii) shall be in lieu of any other rights or remedies for
Purchaser, including, without limitation, any right or claim for damages;
provided, however, in the event that the remedy of specific performance is not
available to Purchaser because Seller has conveyed or encumbered the Property,
Purchaser may pursue a claim against Seller for compensatory damages not to
exceed $100,000.00. If Purchaser consummates the transaction contemplated in
this Agreement it shall be conclusively deemed to have waived any breach by
Seller of any covenant, representation or warranty under this Agreement which
the Purchaser knew existed prior to the Closing.
ARTICLE XIII - NOTICES
Whenever any notice, demand, or request is required or
permitted hereunder, such notice, demand or request shall be in writing and
shall be hand-delivered in person or sent by FedEx or similar expedited courier
service, to the addresses set forth below:
To Seller:
Roberts Properties Residential, L.P.
c/o Roberts Properties, Inc.
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Attention: Mr. Brian Sullivan
Facsimile No. (770) 396-0706
With a copy to:
Sanford H. Zatcoff, Esq.
Holt Ney Zatcoff & Wasserman, LLP
100 Galleria Parkway
Suite 600
Atlanta, Georgia 30339
Facsimile No. (770) 956-1490
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<PAGE> 19
To Purchaser:
Great Bear Investment Company
c/o Wilson & Nolan Southeast, Inc.
11 Piedmont Center
9th Floor
Atlanta, Georgia 30305
Attn: Mr. Geoffrey N. Nolan
Facsimile No. (404) 231-2360
With a Copy to:
Alexander W. Suto, Esq.
Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Facsimile No. (404) 888-4190
To Escrowee:
Commonwealth Land Title Insurance Company
3350 Cumberland Circle
Suite 1895
Atlanta, Georgia 30339
Attention: Ms. Linda R. Thurman
Facsimile No. (770) 980-9799
Any notice, demand, or request which shall be served upon any of the parties in
the manner aforesaid shall be deemed sufficiently given for all purposes
hereunder (i) at the time such notice, demand or request is hand-delivered in
person, or (ii) on the day such notices, demands or requests are deposited with
FedEx or other expedited courier service in accordance with the preceding
portion of this Article XIII. Either Purchaser or Seller or Escrowee shall have
the right from time to time to designate by written notice to the other such
other person or persons and at such other places in the United States as
Purchaser or Seller or Escrowee desires written notices, demands, or requests to
be delivered or sent in accordance herewith; provided, however, at no time shall
any party be required to send more than an original and two (2) copies of any
such notice, demand or request required or permitted hereunder. Anything
contained in this Article XIII to the contrary notwithstanding, all notices from
Purchaser to Seller or from Seller to Purchaser may be executed by and sent by
and to their respective counsel, Sanford H. Zatcoff, Esquire, Seller's attorney
and Alexander W. Suto, Esquire, Purchaser's attorney.
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<PAGE> 20
ARTICLE XIV - SETTLEMENT ITEMS
In addition to the items specifically mentioned in this
Agreement to be delivered at the Closing, Seller shall deliver the following
items to Purchaser at the Closing: a then current employee list; a then current
rent roll; warranties and guaranties of suppliers and contractors, if any, (and
an assignment thereof); an assignment of all of Seller's right, title and
interest in and to the name "Windsong Apartments"; Seller's supply of printed
brochures, floor plans and other advertising literature; all original tenant
leases and all amendments and modifications thereof; all original service
contracts being assumed by Purchaser, if available, otherwise copies of such
service contracts; any sewer, water and other utility bills and assessment bills
any part of which is to be paid by Purchaser; and a complete and accurate
statement setting forth the necessary information upon which any adjustment
shall be made at the Closing.
ARTICLE XV - ACCESS
Purchaser and its agents and representatives shall have the
right to enter upon the Property prior to the Closing Date on a not-to-interfere
basis with the tenants of the Property after having given Seller no less than
forty-eight hours prior written notice, for any lawful purpose, including,
without limitation, investigations, tests and studies, structural inspection,
and survey purposes; provided, however, Purchaser shall pay for all such work
performed on the Property and shall not permit the creation of any lien in favor
of any contractor, subcontractor, materialman, mechanic, surveyor, architect or
laborer, and Purchaser hereby expressly agrees to indemnify and hold Seller
harmless with respect thereto; and provided further, however, that Purchaser
hereby expressly agrees to indemnify and hold Seller harmless against any claim,
damage or injury to either persons or property arising out of Purchaser's or its
agent's, employees' or representatives' actions under this Article XV. This
Article XV shall survive the Closing of the transaction contemplated herein or
any other termination of this Agreement. The indemnifications and hold harmless
provisions of this Article XV are referred to in this Agreement as the
"Inspection Indemnity". Purchaser may conduct conversations with employees of
the Property only in the presence of either Brian J.Sullivan or Charles S.
Roberts or after having obtained express written permission from either of them,
including discussing the possibility of future employment with Purchaser if it
does in fact acquire the Property, but no such conversations shall be had with
the employees as to the amount of compensation or benefits proposed to be paid.
ARTICLE XVI - BROKERS
Purchaser and Seller warrant and represent each to the other
that neither has dealt with any broker, agent or finder in connection with the
purchase and sale of the Property except Wilson & Nolan Southeast, Inc. (the
"Broker") to whom Seller shall pay a real estate commission in the amount of
$150,000.00 only in the event the transaction contemplated in this Agreement is
closed in accordance with the terms hereof. In the event any other claim(s) for
real estate commissions, fees or compensation arise in connection with this
Agreement and the transaction contemplated herein, the party so incurring or
causing such other claim(s) shall indemnify, defend and hold harmless the other
party from any loss, claim or damage which the other party
-20-
<PAGE> 21
suffers because of said other claim(s). This Article XVI shall survive the
Closing of the transaction contemplated herein or any other termination of this
Agreement. By its execution hereof, Broker agrees (i) to execute on the Closing
Date an unconditional waiver and release of commercial real estate broker's lien
with respect to the transaction contemplated in this Agreement, and (ii) this
Agreement may be amended by Purchaser and Seller without execution of any such
amendment by Broker provided such amendment does not affect Broker's entitlement
to its commission.
ARTICLE XVII - CONDITION PRECEDENT FOR BOTH
PURCHASER AND SELLER
Seller shall not be required to sell the Property and Purchaser shall
not be required to purchase the Property unless Seller shall have received and
delivered to Purchaser on or before September 2, 1997 (the "Lender Approval
Date"), the written consent (the "Lender Consent") executed by the holder of the
Promissory Note and the Security Deed or its authorized agent, in a form
reasonably satisfactory to Seller and Purchaser, to the transaction contemplated
herein and the assumption of the Loan by Purchaser subject to the non-recourse
provisions thereof, the secondary financing to be placed against the Property by
Purchaser, and the release of Seller from any liability in connection with the
Loan, with no changes required in the amounts to be paid or the interest rate
under the First Note, and without the requirement of the payment of any fee or
compensation to such holder, except for a transfer fee plus reimbursement of
such holder's attorney's fees and out-of-pocket expenses incurred in connection
with obtaining such consent. Seller and Purchaser agree to cooperate with each
other and to use their good faith reasonable efforts in order to obtain such
consent. Seller will initiate contact with the holder of the Promissory Note or
its authorized agent within five (5) days after the date of this Agreement.
Purchaser agrees to furnish whatever information is reasonably required by the
holder of the First Note as respects the background, financial and management
ability of Purchaser and the like so as to allow the holder the of the
Promissory Note to evaluate Purchaser as the owner of the Property subject to
the Loan. Although the matters set forth in this Article XVII are a condition
precedent for both Seller and Purchaser, as long as Purchaser and Seller use
their good faith reasonable efforts to obtain the consent from the holder of the
Promissory Note and provide such information in connection therewith as herein
specified, neither Seller nor Purchaser shall have any liability to the other
for failure to obtain such consent. If the Lender Consent has not been obtained
on or before the Lender Approval Date, the Escrowee shall return the Deposit to
Purchaser and thereafter this Agreement shall terminate and be null and void and
of no further force or effect, and no party shall have any further liabilities
or obligations to the others hereunder, except for the Inspection Indemnity.
ARTICLE XVIII - SELLER'S TAX-FREE EXCHANGE
AND CONDITION PRECEDENT FOR SELLER
A. Rather than sell the Property to Purchaser, Seller desires
to accomplish an exchange of the Property for "like-kind" property which will
qualify as such pursuant to Section 1031 of the Internal Revenue Code of 1986,
as amended, and all the Regulations promulgated thereunder. Purchaser is willing
to cooperate with Seller in an exchange, provided Purchaser
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<PAGE> 22
incurs no additional expense or liability and does not take title to the
"like-kind" exchange property. Purchaser also agrees that Purchaser will, at the
direction of Seller or a third party intermediary acting at Seller's direction,
pay all proceeds of the sale of the Property to the third party intermediary who
will facilitate the "like-kind" exchange for Seller pursuant to an intermediary
exchange agreement between Seller and such third party intermediary, and
Purchaser will execute documents to effectuate the exchange provided that such
documents impose no liability upon Purchaser and do not require Purchaser to
take title to any other property.
B. It shall be a condition precedent to the obligation of
Seller to consummate the transaction contemplated herein that Seller, no later
than November 10, 1997, shall have both (i) entered into one or more sales
contracts to acquire one or more replacement properties so as to allow Seller to
effect the ss. 1031 exchange referred to in Section XVIII A hereof, and (ii) (to
the extent such contracts contain inspection periods) either not terminated such
sales contracts within the inspection periods provided therein or waived
Seller's rights so to terminate the same (the occurrence of either such event in
this clause (ii) being referred to herein as the "Consummation Election").
Seller agrees to use its good faith reasonable efforts in order to enter into
such sales contract(s) (hereinafter collectively referred to as "Exchange
Contract") and complete Seller's related inspections (if any) no later than
November 10, 1997, and Seller shall advise Purchaser immediately upon the
execution and delivery of any Exchange Contract and upon the completion of such
inspections and Seller's decision to make or not make the Consummation Election.
In the event that Seller is not able to enter into the
Exchange Contract, complete such inspections, if any, and make the Consummation
Election (if the Exchange Contract provides for such inspections) no later than
November 10, 1997, Seller shall have the right to so notify Purchaser and to
further notify Purchaser that Seller has extended for a period of time ending on
December 10, 1997 (hereinafter referred to as the "Extended Exchange Date")
Seller's right to enter into the Exchange Contract and make the Consummation
Election, and the Closing Date shall be automatically extended to December 19,
1997 so as to allow Seller to have the full period of time until the Extended
Exchange Date, and to allow Purchaser and Seller seven business days thereafter
within which to consummate the transaction contemplated herein. Whether or not
Seller has been able to enter into a satisfactory Exchange Agreement and make
the Consummation Election no later than the Extended Exchange Date, Seller shall
be obligated to consummate the transaction contemplated in this Agreement on or
before December 19, 1997.
ARTICLE XVIX -- MISCELLANEOUS
A. This Agreement constitutes the entire agreement between the
parties hereto and cannot be changed or modified other than by a written
agreement executed by both Purchaser and Seller.
B. There shall also be executed and delivered at Closing all
other documents and instruments reasonably required or necessary to effect the
transaction contemplated herein.
-22-
<PAGE> 23
C. Irrespective of the place of execution or performance, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Georgia. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or otherwise eliminated, whether or not any other words or
phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this
Agreement and no implication or inference shall be drawn from the fact that said
words or phrases were so stricken out or otherwise eliminated. All terms and
words used in this Agreement regardless of the number or gender in which they
are used, shall be deemed to include any other number and any other gender as
the context may require.
D. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original.
E. The captions of this Agreement are inserted for convenience
or reference only and do not define, describe or limit the scope or intent of
this Agreement or any of the terms hereof.
F. Time is of the essence of this Agreement and each term and
provision hereof.
G. If any term, covenant or condition of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement and the application of
such terms, covenants and conditions to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term, covenant and condition of this Agreement shall be valid
and be enforced to the fullest extent permitted by law.
H. All rights, powers and privileges conferred hereunder upon
the parties unless otherwise provided shall be cumulative and not restricted to
those given by law.
I. No failure of any party to exercise any power given such
party hereunder or to insist upon strict compliance by any other party to its
obligations hereunder, and no custom or practice of the parties in variance with
the terms hereof, shall constitute a waiver of any party's right to demand exact
compliance with the terms hereof.
J. Purchaser shall have the right to waive any condition or
contingency herein in Purchaser's favor and Seller shall have the right to waive
any condition or contingency herein in Seller's favor.
K. Anything contained in this Agreement to the contrary
notwithstanding, (i) except as specifically set forth in this Agreement to the
contrary, the terms and provisions of this Agreement shall not survive Closing
and shall be merged into the Deed; and (ii) except as specifically set forth in
this Agreement to the contrary, Seller does not make any warranties or
-23-
<PAGE> 24
representations of any kind or character, expressed or implied, with respect to
the Property, its physical condition, income to be derived therefrom or expenses
to be incurred with respect thereto, or any other matter or thing relating to or
affecting the Property, and there are no oral or written agreements, warranties
or representations with respect to the Property, except as otherwise expressly
set forth in this Agreement.
L. The provisions of this Agreement shall extend to, bind and
inure to the benefit of the parties hereto and their respective successors,
assigns and the legal representatives of their estates.
M. This Agreement may not be assigned by Purchaser except to a
corporation, limited partnership or limited liability company in which Great
Bear Investment Company has a majority controlling interest.
N. The Disclosure of Information on Lead-Based Paint and/or
Lead-Based Paint Materials is attached hereto as Exhibit C and is incorporated
herein by reference and made a part hereof.
-24-
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, sealed and delivered the day and year first above
written.
SELLER:
ROBERTS PROPERTIES RESIDENTIAL, L.P., a
Georgia limited partnership
By: Roberts Realty Investors, Inc., a Georgia
corporation, its sole general partner
By: /s/ Charles R. Elliott
-----------------------------
Name: Charles R. Elliott
Title: Vice President
(CORPORATE SEAL)
PURCHASER:
GREAT BEAR INVESTMENT COMPANY, a
Georgia corporation
By: /s/ Geoffrey N. Nolan
---------------------------------
Geoffrey N. Nolan
Vice President
(CORPORATE SEAL)
The undersigned Broker executes this Agreement for the purpose of
agreeing to the provisions of Article XVI hereof, as of the day and year first
above written.
WILSON & NOLAN SOUTHEAST, INC.
By: /s/ Geoffrey N. Nolan
Geoffrey N. Nolan
----------------------------------
President
-25-
<PAGE> 26
Escrowee joins in the execution of this Agreement under seal
for the purpose of acknowledging the agreements as to the holding of the Deposit
in escrow.
ESCROWEE:
COMMONWEALTH LAND TITLE INSURANCE COMPANY.
By: /s/ Phillip J. Sholar
----------------------------------
Name: Phillip J. Sholar
Title: Asst. Vice President
NTS Counsel
(CORPORATE SEAL)
-26-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS OF ROBERTS REALTY INVESTORS, INC. FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,708,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,708,000
<PP&E> 118,605,000
<DEPRECIATION> 12,092,000
<TOTAL-ASSETS> 119,288,000
<CURRENT-LIABILITIES> 4,655,000
<BONDS> 68,179,000
0
0
<COMMON> 42,000
<OTHER-SE> 25,782,000
<TOTAL-LIABILITY-AND-EQUITY> 119,288,000
<SALES> 0
<TOTAL-REVENUES> 13,171,000
<CGS> 0
<TOTAL-COSTS> 10,354,000
<OTHER-EXPENSES> 7,655,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,570,000
<INCOME-PRETAX> (2,938,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,938,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (185,000)
<CHANGES> 0
<NET-INCOME> (2,938,000)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
