<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------------
(Commission File No. 0-28048)
ROBERTS REALTY INVESTORS, INC.
(Exact Name of Registrant 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) (Zip Code)
Registrant's telephone number, Including Area Code: (770) 394-6000
Indicate by check X whether the registrant: (1) has filed all
reports to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
The number of outstanding shares of the registrant's Common Stock on July 31,
1998 was 4,702,019.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION........................................................................ 1
ITEM 1. FINANCIAL STATEMENTS........................................................... 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................. 11
PART II OTHER INFORMATION........................................................................... 19
ITEM 1. LEGAL PROCEEDINGS.............................................................. 19
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...................................... 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................................................... 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................... 20
</TABLE>
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i
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1998 1997
-------- ------------
(UNAUDITED)
<S> <C> <C>
REAL ESTATE ASSETS - At cost:
Land $ 19,828 $ 20,151
Buildings and improvements 87,434 81,485
Furniture, fixtures and equipment 9,438 10,150
--------- ---------
116,700 111,786
Less accumulated depreciation (14,363) (13,405)
--------- ---------
Operating real estate assets 102,337 98,381
Land held for future development 11,355 0
Construction-in-progress and real estate under development 4,145 11,320
--------- ---------
Net real estate assets 117,837 109,701
CASH AND CASH EQUIVALENTS 2,428 7,117
RESTRICTED CASH AND CASH EQUIVALENTS 1,764 468
DEFERRED FINANCING COSTS - Net of accumulated amortization of
$203 and $221 at June 30, 1998 and December 31, 1997, respectively 833 708
OTHER ASSETS - Net 314 356
--------- ---------
$ 123,176 $ 118,350
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 73,680 $ 67,951
Accounts payable and accrued expenses 2,000 959
Dividends and distributions payable 1,095 1,057
Due to affiliates (including retainage payable of $92 and $226 at
June 30, 1998 and December 31, 1997, respectively) 1,112 2,411
Security deposits and prepaid rents 374 414
--------- ---------
Total liabilities 78,261 72,792
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP 17,023 18,861
--------- ---------
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, 4,691,888 and
4,420,508 shares issued and outstanding at June 30, 1998 and 47 44
December 31, 1997, respectively
Additional paid-in-capital 30,338 29,980
Accumulated deficit (2,404) (3,327)
Unamortized restricted stock compensation (89) 0
--------- ---------
Total shareholders' equity 27,892 26,697
--------- ---------
$ 123,176 $ 118,350
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE> 4
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1997
----------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 3,969 $ 4,293
Other operating income 158 147
--------- ---------
Total operating revenues 4,127 4,440
--------- ---------
OPERATING EXPENSES:
Personnel 412 420
Utilities 254 282
Repairs, maintenance and landscaping 293 253
Real estate taxes 336 368
Marketing, insurance and other 199 198
General and administrative expenses 407 370
Depreciation of real estate assets 1,107 1,482
--------- ---------
Total operating expenses 3,008 3,373
--------- ---------
INCOME FROM OPERATIONS 1,119 1,067
--------- ---------
OTHER INCOME (EXPENSE):
Acquisition of Roberts Properties Management, L.L.C 0 (5,900)
Interest income 118 72
Interest expense (1,071) (1,217)
Amortization of deferred financing costs (33) (29)
Loss on disposal of assets (27) (26)
Other amortization expense (9) (8)
--------- ---------
Total other income (expense) (1,022) (7,108)
--------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM 97 (6,041)
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP (37) 2,694
--------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 60 (3,347)
EXTRAORDINARY ITEM - Loss on early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (158) 0
--------- ---------
NET LOSS $ (98) $ (3,347)
========= =========
INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income (loss) before extraordinary item $ 0.01 $ (0.80)
Extraordinary item (0.03) 0
--------- ---------
Net (loss) $ (0.02) $ (0.80)
========= =========
Weighted average common shares - basic 4,607,106 4,186,329
Weighted average common shares - diluted 7,550,609 7,549,759
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE> 5
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 7,770 $ 8,400
Other operating income 277 291
--------- ---------
Total operating revenues 8,047 8,691
--------- ---------
OPERATING EXPENSES:
Personnel 784 850
Utilities 498 557
Repairs, maintenance and landscaping 536 493
Real estate taxes 680 733
Management fees to related party 0 211
Marketing, insurance and other 384 410
General and administrative expenses 811 659
Depreciation of real estate assets 2,238 2,913
--------- ---------
Total operating expenses 5,931 6,826
--------- ---------
INCOME FROM OPERATIONS 2,116 1,865
--------- ---------
OTHER INCOME (EXPENSE):
Acquisition of Roberts Properties Management, L.L.C 0 (5,900)
Interest income 250 146
Interest expense (2,057) (2,358)
Amortization of deferred financing costs (66) (56)
Loss on disposal of assets (51) (45)
Other amortization expense (11) (16)
--------- ---------
Total other income (expense) (1,935) (8,229)
--------- ---------
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE ASSET, MINORITY
INTEREST AND EXTRAORDINARY ITEM 181 (6,364)
GAIN ON SALE OF REAL ESTATE ASSET 1,544 0
--------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM 1,725 (6,364)
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP (707) 2,692
--------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 1,018 (3,672)
EXTRAORDINARY ITEM - Loss on early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (93) 0
--------- ---------
NET INCOME LOSS $ 925 $ (3,672)
========= =========
INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income (loss) before extraordinary item $ 0.22 $ (0.88)
Extraordinary item (0.02) 0
--------- ---------
Net income (loss) $ 0.20 $ (0.88)
========= =========
Weighted average common shares - basic 4,552,759 4,186,329
Weighted average common shares - diluted 7,554,666 7,256,389
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE> 6
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
--------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ 925 $ (3,672)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Minority interest of unitholders in the Operating Partnership 707 (2,692)
Acquisition of Roberts Properties Management, L.L.C 0 5,900
Gain on sale of real estate asset (1,544) 0
Loss on disposal of assets 51 45
Depreciation and amortization 2,315 3,022
Extraordinary item, net of minority interest of unitholders in the
Operating Partnership 93 0
Change in assets and liabilities:
(Increase) in restricted cash and cash equivalents (96) (186)
Decrease in other assets 42 11
Increase in accounts payable and accrued expenses relating to operations 657 649
Increase (decrease) in due to affiliates relating to operations 4 (282)
Increase (decrease) in security deposits and prepaid rent (40) 39
--------- ---------
Net cash provided by operating activities 3,114 2,834
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of real estate asset 9,292 0
Acquisition and construction of real estate assets (19,102) (5,474)
--------- ---------
Net cash used in investing activities (9,810) (5,474)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 16,500 6,420
Proceeds from mortgage notes payable held in escrow (1,200) 0
Payoff of mortgage notes, including prepayment penalty (10,466) 0
Principal reductions on mortgage notes payable (384) (423)
Payment of loan costs (258) (159)
Proceeds from short term loan 350 0
Payoff of short term loan (350) 0
Repurchase of Units (52) 0
Payment of dividends and distributions (2,133) (1,740)
--------- ---------
Net cash provided by financing activities 2,007 4,098
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,689) 1,458
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,117 3,162
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,428 $ 4,620
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 2,362 $ 2,340
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 7
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. BUSINESS AND 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, self-managed
equity real estate investment trust (a "REIT"). All of the Company's
completed apartment homes 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 and had a 62.1% and 58.6% ownership interest at
June 30, 1998 and December 31, 1997, respectively. As the sole general
partner and owner of a majority interest of the Operating Partnership,
the Company controls the Operating Partnership.
At June 30, 1998, the Company owned nine completed multifamily
apartment communities totaling 1,704 apartment homes and an additional
74 apartment homes were under construction. On January 9, 1998, the
Company sold a 232-unit apartment community located on St. Simons
Island, Georgia. In addition, the Company owned two retail centers
totaling 15,698 square feet located at the entrance to two of its
multifamily apartment communities (see note 8).
The Company elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), commencing with the taxable year
ended December 31, 1994. As a result, the Company generally will not be
subject to federal and state income taxation at the corporate level to
the extent it distributes annually at least 95% of its taxable income,
as defined in the Code, to its shareholders and satisfies certain other
requirements. Accordingly, no provision has been made for federal and
state income taxes in the accompanying consolidated financial
statements.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
consolidated accounts of the Company and the Operating Partnership. All
significant intercompany accounts and transactions have been eliminated
in consolidation. The financial statements of the Company have been
adjusted for the minority interest of the unitholders in the Operating
Partnership.
The minority interests of the unitholders in the Operating Partnership
on the accompanying balance sheets are 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 of the Company's Common Stock
("Shares") and partnership units ("Units") outstanding and will change
as additional Shares and Units are issued. The minority interest of the
unitholders in the earnings or loss of the Operating Partnership on the
accompanying statements of operations is calculated based on the
weighted average number of Units outstanding during the period, which
was 39.8% and 42.3% for the six months ended June 30, 1998 and 1997,
respectively, and 39.0% and 44.6% for the three months ended June 30.
1998 and 1997, respectively. The minority interest of the unitholders
in the Operating Partnership was $17,023,000 and $18,861,000 at June
30, 1998 and December 31, 1997, respectively.
5
<PAGE> 8
Holders of Units have the right to require the Operating Partnership to
redeem their Units for Shares, subject to certain conditions. Upon
submittal of Units for redemption, the Operating Partnership has the
option either (a) to pay cash for such Units at their fair market
value, based upon the then current trading price of the Shares, or (b)
to acquire such Units in exchange for Shares (on a one-for-one basis).
The Company has adopted a policy that it will issue Shares in exchange
for all such Units submitted except as otherwise required by applicable
securities laws.
The accompanying interim unaudited financial statements have been
prepared by the Company's management in accordance with generally
accepted accounting principles for interim financial information and in
conformity with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the interim
financial statements presented herein reflect all adjustments of a
normal and recurring nature which are necessary to fairly state the
interim financial statements. The results of operations for the interim
periods are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. Certain prior period
amounts have been reclassified to conform with the 1998 presentation.
These financial statements should be read in conjunction with the
Company's audited financial statements and the notes thereto included
in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
3. NOTES PAYABLE
LINE OF CREDIT. The Company obtained a new revolving unsecured line of
credit (the "Line") in the amount of $1 million in April 1998 to
provide funds for short-term working capital purposes. The Line has a
one year credit term and bears an interest rate of LIBOR + 150 basis
points. At June 30, 1998 there was no outstanding amount due on the
Line.
MORTGAGE NOTES. Mortgage notes payable were secured by the following
Communities at June 30, 1998 and December 31, 1997, as follows:
<TABLE>
<CAPTION>
FIXED INTEREST PRINCIPAL OUTSTANDING
RATE AS OF
MATURITY 06/30/98 06/30/98 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bentley Place 08/15/06 7.10% $ 4,023,000 $ 4,045,000
Bradford Creek 06/15/08 7.15 8,400,000 0
Crestmark Club - phase I 05/01/01 7.50 9,581,000 9,652,000
Crestmark Club - phase II 05/01/01 7.65 3,967,000 3,985,000
Highland Park 02/15/03 7.30 7,986,000 8,030,000
Ivey Brook 02/15/07 7.14 6,334,000 6,367,000
Plantation Trace 09/15/00 7.75 7,716,000 7,775,000
Preston Oaks 10/15/02 7.21 8,470,000 8,519,000
River Oaks 11/15/03 7.15 9,103,000 9,151,000
Rosewood Plantation (old) 06/01/01 7.38 0 6,357,000
Rosewood Plantation (new) 07/15/08 6.62 8,100,000 0
Windsong 02/01/00 9.00% 0 4,070,000
----------- -----------
$73,680,000 $67,951,000
=========== ===========
</TABLE>
6
<PAGE> 9
The Company and certain non-owned affiliates of the Company have 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. At June 30, 1998, there was no balance outstanding
under the Guidance Line.
On December 19, 1997, the Company received a commitment to provide
financing in the amount of $8,400,000 secured by the Bradford Creek
Community. The terms of the commitment included a 10-year term with a
fixed interest rate of 7.15% payable in monthly installments of $56,734
based on a 30-year amortization schedule. This loan was closed on June
1, 1998. The lender escrowed $1,200,000 of the proceeds pending
achievement of certain operating targets, which is estimated to occur
in September 1998.
On February 12, 1998, the Company signed a mortgage loan commitment in
the amount of $11,900,000 in connection with the refinancing of the
Plantation Trace Community. The loan commitment includes a 10-year term
with a fixed interest rate of 7.09% payable in monthly installments of
$79,892 based on a 30-year amortization schedule. The loan is expected
to close in September 1998 upon the completion of construction and
leasing of the second phase of Plantation Trace. At June 30, 1998,
Plantation Trace was encumbered with a mortgage loan in the amount of
$7,716,000 at a fixed interest rate of 7.75%.
On May 21, 1998, the Company received a mortgage loan commitment in the
amount of $8,100,000 in connection with the refinancing of the Rosewood
Plantation Community. The loan commitment included a 10-year term with
a fixed interest rate of 6.62% payable in monthly installments of
$51,838 based on a 30-year amortization schedule. This loan was closed
on June 23, 1998.
Interest capitalized was $148,000 and $172,000 for the three months
ended June 30, 1998 and 1997, respectively, and $230,000 and $259,000
for the six months ended June 30, 1998 and 1997, respectively.
Real estate assets having a combined depreciated cost of approximately
$101,578,000 serve as collateral for the outstanding debt at June 30,
1998.
4. EXTRAORDINARY ITEMS
The 1998 extraordinary items are comprised of (1) the write-off of
unamortized debt premium associated with the January 9, 1998 repayment
of the mortgage note secured by the Windsong Community upon sale of the
property, and (2) the write-off of unamortized loan costs and
prepayment fee to the lender for refinancing of the mortgage note
secured by the Rosewood Plantation Community on June 23, 1998. These
extraordinary items are net of $53,000, which was allocated to the
minority interest of the unitholders in the Operating Partnership, and
calculated based on the weighted average number of Units outstanding.
7
<PAGE> 10
5. COMMITMENTS AND CONTINGENCIES
The Company and the Operating Partnership are subject to various legal
proceedings and claims that arise in the ordinary course of business.
While the resolution of these matters cannot be predicted with
certainty, management believes the final outcome of such matters will
not have a material adverse effect on the Company's financial position
or results of operations.
The Company enters into contractual commitments in the normal course of
business related to the development of real estate assets. At June 30,
1998, these remaining commitments totaled $3,660,000 as summarized in
the following table:
<TABLE>
<CAPTION>
CONTRACT CONTRACTUAL
TOTAL AMOUNT REMAINING
AMOUNT INCURRED COMMITMENT
--------- ---------- ----------
<S> <C> <C> <C>
Plantation Trace - phase II 4,770,000 1,456,000 3,314,000
Preston Oaks - phase II 1,300,000 954,000 346,000
---------- ---------- ----------
Total $6,070,000 $2,410,000 $3,660,000
========== ========== ==========
</TABLE>
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.
6. SHAREHOLDERS' EQUITY
EXCHANGES OF UNITS FOR SHARES. During the three months ended June 30,
1998 a total of 126,886 Units were exchanged for the same number of
Shares. The conversion was reflected in the accompanying consolidated
financial statements at book value. No Units were exchanged during the
three months ended June 30, 1997.
REDEMPTIONS OF UNITS FOR CASH. During the three months ended June 30,
1998, a total of 6,055 Units were redeemed for cash of $52,000. No
Units were redeemed for cash in 1997.
RESTRICTED STOCK AWARDS. In the three months ended June 30, 1998, the
Company granted 10,590 shares of restricted stock to certain employees.
The market value of these restricted stock grants totaled $90,000,
which has been recorded as unamortized restricted stock compensation
and is shown as a separate component of stockholders' equity. This
restricted stock vests 100% at the end of a three year vesting period
and is being amortized to compensation expense ratably over the vesting
period.
DIVIDENDS. On June 16, 1998, the Company's Board of Directors declared
a quarterly distribution in the amount of $0.145 per common Share and
Unit payable on July 15, 1998 to shareholders and unitholders of record
on June 30, 1998. The second quarter 1997 dividend was $0.13, and was
paid to shareholders and unitholders of record as of June 17, 1997.
8
<PAGE> 11
EARNINGS PER SHARE. The Company adopted the provisions of SFAS No. 128
in the year ended December 31, 1997. Reconciliations of income
available to common shareholders and weighted average Shares and Units
used in the Company's basic and diluted earnings per share computations
are detailed below (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
6/30/98 6/30/97 6/30/98 6/30/97
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Income (loss) before extraordinary item $ 60 $ (3,347) $ 1,018 $ (3,672)
Minority interest in income (loss) before
extraordinary item of the
Operating Partnership 37 (2,694) 707 (2,692)
----------- ----------- ----------- -----------
Income (loss) before extraordinary item - diluted $ 97 $ (6,041) $ 1,725 $ (6,364)
=========== =========== =========== ===========
Net income (loss) - basic $ (98) $ (3,347) $ 925 $ (3,672)
Minority interest in net income (loss) of the
Operating Partnership (61) (2,694) 654 (2,692)
----------- ----------- ----------- -----------
Net loss - diluted $ (159) $ (6,041) $ 1,579 $ (6,364)
=========== =========== =========== ===========
Weighted average Shares - basic 4,607,106 4,186,329 4,552,759 4,186,329
Dilutive securities - weighted average Units 2,943,503 3,363,430 3,001,907 3,070,060
----------- ----------- ----------- -----------
Weighted average Shares - diluted 7,550,609 7,549,759 7,554,666 7,256,389
=========== =========== =========== ===========
</TABLE>
The adoption of SFAS No. 128 had no impact on 1997 earnings per share
data.
7. ACQUISITIONS
On June 22, 1998, the Company purchased approximately 23.8 acres of
undeveloped land in the Ballantyne area of south Charlotte, North
Carolina for $3,546,000 from a local Charlotte investment group. The
Company intends to construct a 332-unit multifamily apartment community
on the property. As part of the closing costs, the Operating
Partnership paid Roberts Properties, Inc., an affiliate owned by Mr.
Charles S. Roberts, the President and Chairman of the Board, an
acquisition fee of $166,000 for finding the property, negotiating the
sales contract, conducting due diligence and closing the transaction.
In addition, the Operating Partnership will pay Roberts Properties a
fee of $1,350,000, or $5,000 per unit, for designing, developing, and
overseeing construction for a period of eighteen months. The
independent members of the Board of Directors approved the foregoing
arrangements with Roberts Properties.
9
<PAGE> 12
On June 24, 1998, the Company purchased approximately 49.1 acres of
undeveloped land located in north Fulton County, Georgia along Abbotts
Bridge Road for $5,294,000 from Roberts Properties. The Company
intends to construct a 405-unit multifamily apartment community on the
property. As part of the closing costs, the Operating Partnership paid
Roberts Properties an acquisition fee of $250,000 for finding the
property, negotiating the sales contract, conducting due diligence and
closing the transaction. In addition, the Operating Partnership will
pay Roberts Properties a fee of $2,025,000, or $5,000 per unit, for
designing, developing, and overseeing construction for a period of
eighteen months. The independent members of the Board of Directors
approved the foregoing arrangements with Roberts Properties after
reviewing two independent appraisals. Roberts Properties acquired the
property for $4,343,000 on March 6, 1997.
On June 25, 1998, The Company purchased approximately 35.3 acres of
undeveloped land located in Gwinnett County, Georgia on Old Norcross
Road for $2,516,000 from Roberts Properties Old Norcross, Ltd. ("Old
Norcross, Ltd."). (Mr. Roberts, who is the general partner of Old
Norcross, Ltd., received none of the sale proceeds as general partner
or otherwise.) The Company intends to construct a 249-unit multifamily
apartment community on the property. As part of the closing costs, the
Operating Partnership paid Roberts Properties an acquisition fee of
$119,250 for finding the property, negotiating the sales contract,
conducting due diligence and closing the transaction. In addition, the
Operating Partnership will pay Roberts Properties a fee of $1,245,000,
or $5,000 per unit, for designing, developing, and overseeing
construction for a period of eighteen months. The independent members
of the Board of Directors approved the foregoing arrangements with
Roberts Properties after reviewing two independent appraisals.
8. SUBSEQUENT EVENTS
On July 17, 1998, the Company completed the sale of its two retail
centers for $2,400,000 in cash resulting in a gain of $503,000. Net
sales proceeds were $2,196,000, after deducting for closing costs and
prorations of $204,000. The purchaser is unaffiliated with the Company
and the transaction was negotiated at arm's-length. The net book value
of the property was $1,702,000 at June 30, 1998. Roberts Properties
was paid $93,000 for consulting fees.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
This report 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. These statements relate to future
economic performance, plans and objectives of management for future operations
and projections of revenues and other financial items that are based on the
beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. The words
"expect," "estimate," "anticipate," "believe" and similar expressions are
intended to identify forward-looking statements. Such statements involve risks,
uncertainties and assumptions, including industry and economic conditions,
competition and other factors discussed in this and the Company's other filings
with the Securities and Exchange Commission, including the "Risk Factors"
section of the prospectus included in the Company's Registration Statement on
Form S-3 (Registration number 333-31117), as declared effective by the
Securities and Exchange Commission on December 8, 1997 (the "S-3 Registration
Statement"). If one or more of these risks or uncertainties materialize or
underlying assumptions prove incorrect, actual outcomes may vary materially from
those indicated. See "Disclosure Regarding Forward-Looking Statements" at the
end of this Item for a description of some of the important factors that may
affect actual outcomes.
OVERVIEW
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto appearing
elsewhere herein.
The Company owns multifamily residential properties as a
self-administered and self-managed equity real estate investment trust. At June
30, 1998, the Company owned nine multifamily apartment communities consisting of
1,704 apartment homes with an additional 74 apartment homes under construction.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1998 to Three Months Ended
June 30, 1997. For the three months ended June 30, 1998, the Company recorded a
net loss of $98,000 or $0.02 per share, compared to a net loss of $3,347,000 or
$0.80 per share for the three months ended June 30, 1997. The change in
operating results is due primarily to (1) the sale of the Windsong Community on
January 9, 1998, (2) the sale of Autumn Ridge on August 26, 1997, (3) the
completion of the initial lease-up phase at Ivey Brook and the second phase of
Crestmark in July 1997 and August 1997, respectively, (4) the beginning of
leasing operations in the first quarter of 1998 at the Bradford Creek Community,
and (5) the increase in average stabilized occupancy from 94.5% to 95.2%, The
Company's operating performance for all Communities is summarized in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE THREE MONTHS ENDED JUNE 30,
CHANGE FROM ---------------------------
1997 TO 1998 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues (7.0%) $4,127,000 $4,440,000
Property operating expenses (1) (1.8%) $1,494,000 $1,521,000
General and administrative expenses 10.0% $ 407,000 $ 370,000
Depreciation of real estate assets (25.3%) $1,107,000 $1,482,000
Average stabilized occupancy (2) 0.7% 95.2% 94.5%
Operating expense ratio (3) 1.9% 36.2% 34.3%
</TABLE>
(footnotes begin on following page)
11
<PAGE> 14
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) 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 includes
the following: (1) Ivey Brook beginning August 1, 1997 and the second
phase of Crestmark beginning September 1, 1997, which are the dates
each Community achieved stabilized occupancy; (2) Autumn Ridge only
through August 26, 1997, which is the date the property was sold, and
(3) Windsong only through January 9, 1998, which is the date the
property was sold.
(3) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
Operating results for the seven Communities that were fully stabilized
during both the three month periods ended June 30, 1998 and 1997 (the Bentley
Place, Crestmark, Highland Park, Plantation Trace, Preston Oaks, River Oaks, and
Rosewood Plantation Communities) are summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE THREE MONTHS ENDED JUNE 30,
CHANGE FROM ---------------------------
1997 TO 1998 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Rental income 4.5% $3,171,000 $3,034,000
Total operating revenues 5.6% $3,272,000 $3,098,000
Property operating expenses (1) 11.7% $1,168,000 $1,046,000
Net operating income (2) 2.5% $2,104,000 $2,052,000
Average stabilized occupancy (3) 1.7% 95.3% 93.6%
Operating expense ratio (4) 1.9% 35.7% 33.8%
Average monthly rent per apartment home 2.8% $ 876 $ 852
</TABLE>
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Net operating income is equal to total operating revenues minus
property operating expenses.
(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 discussion compares the Company's statements of
operations for the three month periods ended June 30, 1998 and 1997.
Property operating revenue decreased $313,000 or 7.0% from $4,440,000
for the three months ended June 30, 1997 to $4,127,000 for the three months
ended June 30, 1998. The decrease in rental income is due primarily to the sales
of Autumn Ridge and Windsong in August 1997 and January 1998, respectively,
partially offset by the lease-up of Ivey Brook and the second phase of Crestmark
in July 1997 and August 1997, respectively. Rental income from the seven
Communities that were fully stabilized during both the three months ended June
30, 1998 and 1997 increased $137,000 due to an increase in the average
stabilized occupancy from 93.6% for the three months ended June 30, 1997 to
95.3% for the three months ended June 30, 1998 and an increase in the average
monthly rent per apartment home from $852 during the three months ended June 30,
1997 to $876 during the three months ended June 30, 1998.
12
<PAGE> 15
Property operating expenses (excluding depreciation, and general and
administrative expenses) decreased $27,000 or 1.8% from $1,521,000 for the three
months ended June 30, 1997 to $1,494,000 for the three months ended June 30,
1998. The decrease is due primarily to the following: (1) the sale of Autumn
Ridge and Windsong in August 1997 and January 1998, respectively, partially
offset by the commencement of property operations at Bradford Creek beginning in
the first quarter of 1998. Property operating expenses as a percentage of
operating revenues increased from 34.3% for the three months ended June 30, 1997
to 36.2% for the three months ended June 30, 1998.
General and administrative expenses increased $37,000 or 10.0% from
$370,000 for the three months ended June 30, 1997 to $407,000 for the three
months ended June 30, 1998 and include legal, accounting and tax fees, marketing
and printing fees, salaries, director fees and other costs. The increase is due
primarily to increased staff and associated costs at the corporate office.
General and administrative expenses as a percentage of operating revenues
increased from 8.3% for the three months ended June 30, 1997 to 9.9% for the
three months ended June 30, 1998. The Company expects that as it continues to
grow, such expenses will decline as a percentage of operating revenues, even
though general and administrative expenses will increase in absolute terms.
Depreciation expense decreased $375,000 or 25.3% from $1,482,000 for
the three months ended June 30, 1997 to $1,107,000 for the three months ended
June 30, 1998. The decrease is due primarily to the sale of Autumn Ridge and
Windsong in August 1997 and January 1998, respectively, and offset by the
completion of construction of Ivey Brook and the second phase of Crestmark
(because depreciation expense is recorded as apartment homes are completed and
available for occupancy).
Interest expense decreased $146,000 or 12.0% from $1,217,000 for the
three months ended June 30, 1997 to $1,071,000 for the three months ended June
30, 1998. The decrease is due primarily to the sale of Autumn Ridge and Windsong
in August 1997 and January 1998, respectively, offset by (1) the financing of
the second phase of Crestmark in July 1997, and (2) the financing of Bradford
Creek in June 1998.
Comparison of Six Months Ended June 30, 1998 to Six Months Ended June
30, 1997. For the six months ended June 30, 1998, the Company recorded net
income of $925,000 or $0.20 per share, compared to a net loss of $3,672,000 or
$0.88 per share for the six months ended June 30, 1997. The change in operating
results is due primarily to (1) the sale of the Windsong Community in January
1998, (2) the sale of Autumn Ridge in August 1997, (3) the completion of the
initial lease-up phase at Ivey Brook and the second phase of Crestmark in July
1997 and August 1997, respectively, (4) the beginning of leasing operations at
Bradford Creek in the first quarter of 1998, (5) the decrease in average
stabilized occupancy from 95.2% to 94.6%, and (6) the acquisition of Roberts
Properties Management, LLC ("Roberts Management"), an affiliate owned by Mr.
Charles S. Roberts, the President and Chairman of the Board, on April 1, 1997.
The Company's operating performance for all Communities is summarized in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE SIX MONTHS ENDED JUNE 30,
CHANGE FROM -------------------------
1997 TO 1998 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues (7.4%) $8,047,000 $8,691,000
Property operating expenses (1) (5.3%) $2,882,000 $3,043,000
Management fees paid to related party (2) (100.0%) $ 0 $ 211,000
General and administrative expenses 23.1% $ 811,000 $ 659,000
Depreciation of real estate assets (23.2%) $2,238,000 $2,913,000
Average stabilized occupancy (3) (0.6%) 94.6% 95.2%
Operating expense ratio (4) 0.8% 35.8% 35.0%
</TABLE>
(footnotes begin on following page)
13
<PAGE> 16
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Because the Company acquired Roberts Management on April 1, 1997, no
management fees were paid to a related party subsequent to April 1,
1997; however, the Company did incur additional general and
administrative expenses as a result of managing its properties
internally.
(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 includes
the following: (1) Ivey Brook beginning August 1, 1997 and the second
phase of Crestmark beginning September 1, 1997, which are the dates
each Community achieved stabilized occupancy; (2) Autumn Ridge only
through August 26, 1997, which is the date the property was sold, and
(3) Windsong only through January 9, 1998, which is the date the
property was sold.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
Operating results for the seven Communities that were fully stabilized
during both the six month periods ended June 30, 1998 and 1997 (the Bentley
Place, Crestmark, Highland Park, Plantation Trace, Preston Oaks, River Oaks, and
Rosewood Plantation Communities) are summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE SIX MONTHS ENDED JUNE 30,
CHANGE FROM -------------------------
1997 TO 1998 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Rental income 2.2% $ 6,282,000 $ 6,146,000
Total operating revenues 1.9% $ 6,463,000 $ 6,341,000
Property operating expenses (1) 10.6% $ 2,309,000 $ 2,087,000
Management fees paid to related party (2) (100.0%) $ 0 $ 160,000
Net operating income (3) 1.5% $ 4,154,000 $ 4,094,000
Average stabilized occupancy (4) (0.3%) 94.6% 94.9%
Operating expense ratio (5) 2.8% 35.7% 32.9%
Average monthly rent per apartment home 2.9% $ 873 $ 848
</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 Management on April 1, 1997, no
management fees were paid to a related party subsequent to April 1,
1997; however, the Company did incur additional general and
administrative expenses as a result of managing its properties
internally.
(3) Net operating income is equal to total operating revenues minus
property operating expenses.
(4) 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%.
(5) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
The following discussion compares the Company's statements of
operations for the six month periods ended June 30, 1998 and 1997.
Property operating revenue decreased $644,000 or 7.4% from $8,691,000
for the six months ended June 30, 1997 to $8,047,000 for the six months ended
June 30, 1998. The decrease in rental income is due primarily to the sales of
Autumn Ridge and Windsong in August 1997 and January 1998, respectively, offset
by the lease-up of Ivey Brook and the second phase of Crestmark in July 1997 and
August 1997, respectively. Rental income from the seven Communities that were
fully stabilized during both the six months ended June 30, 1998
14
<PAGE> 17
and 1997 increased $136,000. Although the average stabilized occupancy decreased
slightly from 94.9% for the six months ended June 30, 1997 to 94.6% for the six
months ended June 30, 1998, the average monthly rent per apartment home
increased from $848 to $873 during the same period.
Property operating expenses (excluding depreciation, general and
administrative expenses and management fees) decreased $161,000 or 5.3% from
$3,043,000 for the six months ended June 30, 1997 to $2,882,000 for the six
months ended June 30, 1998. The decrease is due primarily to the following: (1)
the sale of Autumn Ridge and Windsong in August 1997 and January 1998,
respectively, and (2) the commencement of property operations at the second
phase of Crestmark and Bradford Creek beginning in the first quarter of 1997 and
the first quarter of 1998, respectively. Property operating expenses as a
percentage of operating revenues increased from 35.0% for the six months ended
June 30, 1997 to 35.8% for the six months ended June 30, 1998.
General and administrative expenses increased $152,000 or 23.1% from
$659,000 for the six months ended June 30, 1997 to $811,000 for the six months
ended June 30, 1998 and include legal, accounting and tax fees, marketing and
printing fees, salaries, director fees and other costs. The increase is
primarily due to increased staffing and recruiting costs. General and
administrative expenses as a percentage of operating revenues increased from
7.6% for the six months ended June 30, 1997 to 10.1% for the six months ended
June 30, 1998. The Company expects that as it continues to grow, such expenses
will decline as a percentage of operating revenues, even though general and
administrative expenses will increase in absolute terms.
Depreciation expense decreased $675,000 or 23.2% from $2,913,000 for
the six months ended June 30, 1997 to $2,238,000 for the six months ended June
30, 1998. The decrease is due primarily to the sale of Autumn Ridge and Windsong
in August 1997 and January 1998, respectively, and offset by the completion of
construction of the second phase of Crestmark and Bradford Creek (because
depreciation expense is recorded as apartment homes are completed and available
for occupancy).
On April 1, 1997, the Company acquired 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 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 was accounted for as the settlement of a
contract and shown as an expense for the year ended December 31, 1997.
On January 9, 1998, the Company completed the sale of the Windsong
Community for $9,750,000 in cash resulting in a gain of $1,544,000 on the sale
of real estate assets and an extraordinary gain of $110,000 on the buyer's
assumption of related mortgage indebtedness. Net sales proceeds were $5,194,000
after deduction for loan repayment of $3,959,000 and closing costs and
prorations totaling $597,000. The purchaser was unaffiliated with the Company
and the transaction was negotiated at arm's-length. The net book value of the
property at December 31, 1997 was approximately $7,749,000.
Interest expense decreased $301,000 or 12.8% from $2,358,000 for the
six months ended June 30, 1997 to $2,057,000 for the six months ended June 30,
1998. The decrease is due primarily to the sale of Autumn Ridge and Windsong in
August 1997 and January 1998, respectively, offset by (1) the financing of Ivey
Brook and the second phase of Crestmark in January 1997 and July 1997,
respectively, and (2) the financing of Bradford Creek in June 1998.
15
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Comparison of Six Months Ended June 30, 1998 to Six Months Ended June
30, 1997. Cash and cash equivalents decreased $4,689,000 during the six months
ended June 30, 1998 compared to an increase of $1,458,000 during the six months
ended June 30, 1997. The decrease is due to an increase in cash flow provided by
operating activities offset by an increase in cash used in investing activities
and a reduction in cash provided by financing 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 for the six months
ended June 30, 1998 was $3,114,000 compared to $2,834,000 during the six months
ended June 30, 1997. Cash flow generated by operations, exclusive of non-cash
items, was relatively flat from year to year. The additional cash flow from the
operations of the second phase of Crestmark and Ivey Brook were offset by the
loss of cash flow due to the sale of Autumn Ridge and Windsong in August 1997
and January 1998, respectively. The increase in cash flow from operations is
primarily attributable to the payment of management fees of $282,000 to Roberts
Management during the six months ended June 30, 1997 compared to no management
fees being paid during the six months ended June 30, 1998 as a result of the
Company acquiring Roberts Management on April 1, 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 used in investing activities increased $4,336,000 from
$5,474,000 for the six months ended June 30, 1997 to $9,810,000 for the six
months ended June 30, 1998. This increase is primarily due to (1) the purchase
of three separate parcels of land for $11,355,000, (2) the construction costs at
Bradford Creek, Preston Oaks phase II and Plantation Trace phase II of
$7,747,000 in 1998 versus construction costs at Ivey Brook and Crestmark phase
II of $5,474,000 in 1997, and (3) offset by $9,292,000 in sales proceeds from
the sale of Windsong in January 1998. The Company made no acquisitions for cash
of existing apartment communities during these periods.
Net cash provided by financing activities decreased $2,091,000 from
$4,098,000 during the six months ended June 30, 1997 to $2,007,000 during the
six months ended June 30, 1998. This decrease is due primarily to (1) the payoff
of the $3,959,000 mortgage note secured by Windsong in January 1998 as a result
of the sale of this Community in January 1998, (2) the refinancing of the
mortgage note secured by Rosewood Plantation in June 1998 that resulted in cash
provided of $1,593,000, (3) the permanent financing of Bradford Creek for cash
of $7,200,000 in June 1998, (4) the permanent financing of Ivey Brook for cash
of $6,420,000 in January 1997, and (5) an increase of $393,000 in quarterly
distributions paid from $1,740,000 for the six months ended June 30, 1997 to
$2,133,000 for the six months ended June 30, 1998.
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.
16
<PAGE> 19
The Company and certain non-owned affiliates of the Company have 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 Company, 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 (in addition to monthly principal amortization) coming due over the
years 2000 to 2008 as summarized below (excludes the Windsong Community because
the property was sold on January 9, 1998 and the mortgage debt was repaid):
<TABLE>
<S> <C>
2000 $ 7,482,000
2001 13,074,000
2002 8,025,000
2003 16,057,000
2006 3,554,000
2007 5,570,000
2008 14,229,000
-----------
Total $67,991,000
===========
</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.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS
Funds from Operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as net income (loss), computed in
accordance with generally accepted accounting principles ("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 FFO in accordance with the current NAREIT definition, which may
differ from the methodology for calculating FFO utilized by other equity REITs,
and accordingly, may not be comparable to such other REITs. FFO 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. FFO 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 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 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.
17
<PAGE> 20
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (98) $ (3,347) $ 925 $ (3,672)
Minority interest of Unitholders 37 (2,694) 707 (2,692)
Extraordinary item 158 0 93 0
Acquisition of RPM expense 0 5,900 0 5,900
Amortization (real estate related) 9 8 11 16
Loss on disposal of assets 27 26 51 45
Gain on sale of real estate asset 0 0 (1,544) 0
Depreciation expense 1,107 1,482 2,238 2,913
----------- ----------- ----------- -----------
Funds From Operations $ 1,240 $ 1,375 $ 2,481 $ 2,510
=========== =========== =========== ===========
Weighted average Shares and Units
outstanding during the period 7,550,609 7,549,759 7,554,666 7,256,389
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective for the quarter and year ended December 31, 1997, the Company
computes earnings per share under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." As prescribed by
SFAS No. 128, all prior period earnings per share data have been restated to
conform with the provisions of SFAS No. 128. Under SFAS No. 128, basic earnings
per share is computed based upon the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed to reflect
the potential dilution of all instruments or securities which are convertible
into shares of common stock. Previously reported earnings per share under prior
accounting standards were equal to basic and diluted earnings per share under
SFAS No. 128.
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 the
second phase of Preston Oaks is at 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.
YEAR 2000 COMPUTER ISSUES
Year 2000 computer issues are not expected to have a material adverse
impact on the Company's financial position, results of operations or cash flows
in future periods. The Company's software systems are either currently year 2000
compliant or will be compliant in advance of January 1, 2000.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report 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. These statements appear in a number of places
in this report and include all statements that are not historical facts. Some of
the forward-looking statements relate to the intent, belief or expectations of
the Company and its management regarding the Company's strategies and plans for
operations and growth, including construction
18
<PAGE> 21
and development of new multifamily apartment communities in its existing markets
and elsewhere in the Southeast. Other forward-looking statements relate to
trends affecting the Company's financial condition and results of operations,
and the Company's anticipated capital needs and expenditures.
Investors are cautioned that such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those that are anticipated in the
forward-looking statements as a result of:
- tax risks including the possible effects of changes in tax law
and regulation;
- risks related to the national and local economic climate;
- competition and overbuilding in the Company's markets;
- increasing operating costs that cannot be passed along to
residents through rental rate increases;
- construction risks due to factors that include unexpected
weather problems, shortages in materials and supplies, and
labor strikes;
- geographic risks of entering new markets outside the Atlanta
area,
- the Company's dependence upon the Atlanta market;
- possible environmental liability;
- costs of compliance with the Americans with Disabilities Act
and similar laws; and
- financing risks, including risks of substantial indebtedness
or not being able to obtain debt or equity financing to fund
the Company's growth strategy.
In addition, the market price of the Common Stock may from time to time
incur wide fluctuations as a result of, among other things:
- the Company's operating results;
- the operating results of other REITs, particularly apartment
REITs; and
- changes in the performance of the stock market in general.
Investors should review the more detailed description of these and
other possible risks contained in the "Risk Factors" section of the prospectus
included in the S-3 Registration Statement.
PART II
ITEM 1. LEGAL PROCEEDINGS.
Neither the Company, the Operating Partnership, nor the Communities are
presently subject to any material litigation nor, to the Company's knowledge, is
any material litigation threatened against any of them. Routine litigation
arising in the ordinary course of business is not expected to result in any
material losses to the Company and the Operating Partnership.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company did not modify, limit or qualify the rights of the holders
of Common Stock during the quarter ended June 30, 1998.
Holders of Units have the right to require the Operating Partnership to
redeem their Units for Shares, subject to certain conditions. Upon submittal of
Units for redemption, the Operating Partnership has 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, or (b) to acquire such Units in
exchange for Shares (on a one-for-one basis). The Company has adopted a policy
that it will issue Shares in exchange for all such Units submitted except as
otherwise required by applicable securities laws.
19
<PAGE> 22
During the three months ended June 30, 1998, the Company issued a total
of 126,886 Shares in exchange for Units submitted for redemption by unitholders.
The Company issued the Shares in redemption of Units in reliance upon the
"intrastate" exemption from securities registration provided under Section
3(a)(11) of the Securities Act of 1933 and Rule 147 promulgated by the
Securities and Exchange Commission regarding intrastate offerings. The Company
believes that it has satisfied the conditions of Rule 147 for each of the
issuances of Shares to unitholders. The Company has delivered a prospectus to
all unitholders that is designed to satisfy the conditions of Rule 147.
Unitholders who reside outside of the state of Georgia are offered and receive
only cash instead of Shares. All of the Communities are located in the State of
Georgia. The certificates evidencing the Shares issued in exchange for Units
have a Rule 147 "legend" describing the applicable restrictions on transfer
printed on them, and the Company has issued stop transfer instructions to its
transfer agent with respect to such Shares. Further, the offerees were notified
that the applicable restrictions on transfer and procedures will apply in
connection with the issuance of new certificates for any of the Shares that are
presented for transfer during the nine month period from the end of the offering
during which transfer of the Shares is restricted to residents of the State of
Georgia.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders of Roberts Realty Investors, Inc.
was held on July 21, 1998, for the purpose of electing three members of the
Board of Directors. Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and there was no solicitation in
opposition to management's solicitations.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
<TABLE>
<CAPTION>
VOTES VOTES
FOR WITHHELD
--------- --------
<S> <C> <C>
Weldon R. Humphries 3,237,616 60,813
Ben A. Spalding 3,237,616 60,813
George W. Wray, Jr. 3,245,419 53,010
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits described in the following Index to Exhibits are filed
as part of this report on Form 10-Q.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.4.5 Promissory Note executed by Roberts Properties Residential, L.P. in
favor of The Prudential Insurance Company of America, dated June 23,
1998, in the original principal amount of $8,100,000.00 (Rosewood).
10.4.6 Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of The Prudential Insurance
Company of America, dated June 23, 1998, and related collateral
documents (Rosewood).
10.4.7 Limited Guaranty between Roberts Realty Investors, Inc. and The
Prudential Insurance Company of America, dated June 23, 1998
(Rosewood).
10.8.6 Real Estate Note executed by Roberts Properties Residential, L.P. in
favor of Nationwide Life Insurance Company, dated June 1, 1998, in the
original principal amount of $8,400,000.00 (Bradford Creek).
</TABLE>
20
<PAGE> 23
<TABLE>
<S> <C>
10.8.7 Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of Nationwide Life Insurance
Company of America, dated June 1, 1998, and related collateral
documents (Bradford Creek).
10.8.8 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life
Insurance Company of America, dated June 1, 1998 (Bradford Creek).
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1998.
21
<PAGE> 24
SIGNATURES
In accordance with Section 13 or 15(d) 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.
By: /s/ Charles R. Elliott
---------------------------------------------------------------
Charles R. Elliott, Chief Financial Officer
(The Registrant's Principal Financial and Chief
Accounting Officer, who is duly authorized to sign this report)
Date: August 12, 1998
22
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.4.5 Promissory Note executed by Roberts Properties Residential, L.P. in
favor of The Prudential Insurance Company of America, dated June 23,
1998, in the original principal amount of $8,100,000.00 (Rosewood).
10.4.6 Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of The Prudential Insurance
Company of America, dated June 23, 1998, and related collateral
documents (Rosewood).
10.4.7 Limited Guaranty between Roberts Realty Investors, Inc. and The
Prudential Insurance Company of America, dated June 23, 1998
(Rosewood).
10.8.6 Real Estate Note executed by Roberts Properties Residential, L.P. in
favor of Nationwide Life Insurance Company, dated June 1, 1998, in the
original principal amount of $8,400,000.00 (Bradford Creek).
10.8.7 Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of Nationwide Life Insurance
Company of America, dated June 1, 1998, and related collateral
documents (Bradford Creek).
10.8.8 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life
Insurance Company of America, dated June 1, 1998 (Bradford Creek).
27 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
PROMISSORY NOTE
$8,100,000.00 June 23, 1998
Loan No. 6 102 830
FOR VALUE RECEIVED, ROBERTS PROPERTIES RESIDENTIAL, L.P., a Georgia
limited partnership ("BORROWER") promises to pay to the order of THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("LENDER", which shall
also mean successors and assigns who become holders of this Note), at One
Ravina Drive, Suite 1400, Atlanta, Georgia 30346-2110, the principal sum of
Eight Million One Hundred Thousand and No/100 U.S. Dollars ($8,100,000.00),
with interest on the unpaid balance ("BALANCE") at the rate of six and
sixty-two hundredths percent (6.62%) per annum ("NOTE RATE") from the date of
the first disbursement of Loan proceeds under this Note ("FUNDING DATE") until
Maturity (defined below). Capitalized terms used without definition shall have
the meanings ascribed to them in the Instrument (defined below).
1. Regular Payments. Principal and interest shall be payable as follows:
(a) Interest from the Funding Date through July 15, 1998 shall be due and
payable on August 15, 1998, together with the first regularly-scheduled payment
due under 1(b) below.
(b) Principal and interest shall be paid in one hundred twenty (120)
monthly installments of fifty-one thousand eight hundred thirty-eight and
forty-one/100 Dollars ($51,838.41) each commencing on August 15, 1998 and
continuing on the fifteenth (15th) day of each succeeding month to and
including July 15, 2008. Each payment due date is referred to as a "DUE DATE".
(c) The entire Obligations (as defined in the Instrument (defined below))
shall be due and payable on July 15, 2008 ("MATURITY DATE"). "MATURITY" shall
mean the Maturity Date or earlier date that the Obligations may be due and
payable by acceleration by Lender as provided in the Documents.
(d) Interest on the Balance for any full month shall be calculated on the
basis of a three hundred sixty (360) day year consisting of twelve (12) months
of thirty (30) days each. For nay partial month, interest shall be due in an
amount equal to (i) the Note Rate divided by 360 multiplied by (ii) the number
of days any Balance is outstanding through and including the day of payment.
2. Late Payment and Default Interest
(a) Late Charge. If any payment due under the Documents is not fully
paid by its Due Date, a late charge of $100.00 per day (the "DAILY CHARGE")
shall be assessed for each day that elapses until payment in full is made
(including the date payment is made); provided, however, that if any such
payments, together with all accrued Daily Charges, are not fully paid by the
fourteenth (14th) day following their Due Date, a late charge equal to four
percent (4%) of such payments (the "LATE CHARGE") shall be assessed and be
immediately
-1-
<PAGE> 2
due and payable. The Late Charge shall be payable in lieu of Daily Charges that
shall have accrued. The Late Charge may be assessed only once on each overdue
payment. These charges shall be paid to defray the expenses incurred by Lender
in handling and processing such delinquent payment(s) and to compensate Lender
for the loss of the use of such funds. The Daily Charge and Late Charge shall
be secured by the Documents. The imposition of the Daily Charge, Late Charge,
and/or requirement that interest be paid at the Default Rate (defined below)
shall not be construed in any way to (i) excuse Borrower from its obligation
to make each payment under this Note promptly when due or (ii) preclude Lender
from exercising any rights or remedies available under the Documents upon an
Event of Default.
(b) Acceleration. Upon an Event of Default, including a breach of Section
5.01 of the Instrument, Lender may declare the Balance, unpaid accrued
interest, the Prepayment Premium (defined below) and all other Obligations
immediately due and payable in full.
(c) Default Rate. Upon an Event of Default or at Maturity, whether by
acceleration (due to a voluntary or involuntary default) or otherwise, the
entire Obligations (excluding accrued but unpaid interest if prohibited by law)
shall bear interest at the Default Rate. The "DEFAULT RATE" shall be the lesser
of (i) the maximum rate allowed by the law or (ii) the greater of (A) the Note
Rate plus five percent (5%) or (B) five percent (5%) plus the prime rate (for
corporate loans at large United States money center commercial banks) published
in the Wall Street Journal on the first Business Day (defined below) of the
month in which the Event of Default or Maturity occurs or continues. The term
"BUSINESS DAY" shall mean a day which commercial banks are not authorized or
required by law to close in the Property State or in the State where payments
made by Borrower are received.
3. Application of Payments. Before an Event of Default, all payments received
under this Note shall be applied in the following order: (a) to unpaid Daily
Charges, Late Charges and costs of collection; (b) to any Prepayment Premium
due; (c) to interest on the Balance; and (d) then to the Balance. After an
Event of Default, all payments shall be applied in any order determined by
Lender in its sole discretion.
4. Prepayment. This Note may be prepaid, in whole or in part, upon at least
thirty (30) days' prior written notice to Lender and upon payment of all
accrued interest (and other Obligations due under the Documents) and a
prepayment premium ("PREPAYMENT PREMIUM") equal to the greater of (a) one
percent (1%) of the principal amount being prepaid multiplied by the quotient
of the number of full months remaining until the Maturity Date divided by the
number of full months comprising the term of this Note, or (b) the Present
Value of the Loan (defined below) less the amount of principal and accrued
interest (if any) being prepaid, calculated as of the prepayment date. The
Prepayment Premium shall be due and payable, except as provided in the
Instrument or as limited by law, upon any prepayment of this Note, whether
voluntary or involuntary, and Lender shall not be obligated to accept any
prepayment of the Note unless it is accompanied by the Prepayment Premium, all
accrued interest and all other Obligations due under the Documents. Unless
prepayment occurs on a Due Date, the actual number of days until the next Due
Date will be used to discount during that partial month. Kender shall notify
Borrower of the amount and calculation of the Prepayment Premium. Borrower
agrees that (a) Lender shall not be obligated to actually reinvest the amount
prepaid in any Treasury obligation and (b) the Prepayment Premium is directly
related to the damages that Lender will suffer as a result of the prepayment.
The "PRESENT VALUE OF THE LOAN" shall be determined by discounting all scheduled
payments remaining to the Maturity Date attributable to the amount being prepaid
at the Discount Rate (defined below).
-2-
<PAGE> 3
The "DISCOUNT RATE" is the rate which, when compounded monthly, is equivalent
to the Treasury Rate (defined below), when compounded semi-annually. The
"TREASURY RATE" is the semi-annual yield on the Treasury Constant Maturity
Series with maturity equal to the remaining weighted average life of the Loan
(defined below), for the week prior to the prepayment date, as reported in
Federal Reserve Statistical Release H.15 - Selected Interest Rates,
conclusively determined by Lender (absent a clear mathematical calculation
error) on the prepayment date. The rate will be determined by linear
interpolation between the yields reported in Release H.15, if necessary. If
Release H.15 is no longer published, Lender shall select a comparable
publication to determine the Treasury Rate. Notwithstanding the foregoing, no
Prepayment Premium shall be due if the Note is prepaid during the last thirty
(30) days prior to the Maturity Date.
5. No Usury. Under no circumstances shall the aggregate amount paid or to be
paid as interest under this Note exceed the highest lawful rate permitted under
applicable usury law ("MAXIMUM RATE"). If under any circumstances the aggregate
amounts paid on this Note shall include interest payments which would exceed
the Maximum Rate, Borrower stipulates that payment and collection of interest
in excess of the Maximum Rate ("EXCESS AMOUNT") shall be deemed the result of a
mistake by both Borrower and Lender and Lender shall promptly credit the Excess
Amount against the Balance or refund to Borrower any portion of the Excess
Amount which cannot be so credited.
6. Security and Documents Incorporated. This Note is the Note referred to and
secured by the Deed to Secure Debt and Security Agreement of even date herewith
between Borrower and Lender (the "INSTRUMENT") and is secured by the Property.
Borrower shall observe and perform all of the terms and conditions in the
Documents. The Documents are incorporated into this Note as if fully set forth
in this Note.
7. Treatment of Payments. All payments under this Note shall be made, without
offset or deduction, (a) in lawful money of the United States of America at the
office of Lender or at the place (and in the manner) Lender may specify by
written notice to Borrower, (b) in immediately available federal funds, and (c)
if received by Lender prior to 2:00 p.m. local time at such place, shall be
credited on that day or else, at Lender's option, shall be credited on the next
Business Day. Initially (unless waived by Lender), and until Lender shall
direct Borrower otherwise, Borrower shall make all payments due under this Note
in the manner set forth in Section 3.13 of the Instrument. If any Due Date
falls on a day which is not a Business Day, then the payment shall be deemed to
have fallen on the next succeeding Business Day.
8. Limited Recourse Liability. Except to the extent set forth in Paragraph 8
and Paragraph 9 of this Note, neither the Borrower nor any general partner(s) of
Borrower (singularly or collectively, the "Exculpated Parties") shall have any
personal liability for the Obligations. Notwithstanding the preceding sentence,
Lender may bring a foreclosure action or other appropriate action to enforce
the Documents or realize upon and protect the Property (including, without
limitation, naming the Exculpated Parties in the actions) and in addition THE
EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY FOR:
(a) any indemnity, guaranty, master lease or similar instrument furnished
in connection with the Loan (including, without limitation, the provisions of
Section 8.03, 8.04, 8.05, 8.06 and 8.07 of the Instrument);
(b) any assessments and taxes (accrued and/or payable) with respect to
the Property which are not paid and applicable to Borrower's period of
ownership;
-3-
<PAGE> 4
(c) any security deposits of tenants (i) not turned over to Lender upon
foreclosure, sale (pursuant to power of sale), or conveyance in lieu thereof,
or (ii) not turned over to a receiver or trustee for the Property after
appointment;
(d) any insurance proceeds or condemnation awards neither turned over to
Lender nor used in compliance with Section 3.07 and 3.08 of the Instrument;
(e) waste of the Property;
(f) any rents or other income from the Property received by any of the
Exculpated Parties after a default under the Documents and not otherwise
applied to the Obligations evidenced by this Note or to the current (not
deferred) operating expenses of the Property; PROVIDED, HOWEVER, THAT THE
EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for amounts paid as expenses
to a person or entity related to or affiliated with any of the Exculpated
Parties unless the payments are expressly permitted in the Documents;
(g) Borrower's failure to maintain any letter of credit required under
the Documents; and
(h) all actual legal fees, including the allocated costs of Lender's
staff attorneys, and other expenses incurred by Lender in enforcing the
Documents if Borrower contests, delays, or otherwise hinders or opposes
(including, without limitation, the filing of a bankruptcy) any of Lender's
enforcement actions.
9. Full Recourse Liability. Notwithstanding the provisions of Paragraph 8 of
this Note, the EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for the
Obligations if:
(a) there shall be any breach or violation of Article V of the Instrument
(the amount of such personal liability under this Paragraph 9(a), however,
shall be limited to the actual losses suffered by Lender because of such
breach); or
(b) there shall be any actual, but not constructive, fraud in connection
with the Loan by any of the Exculpated Parties in connection with the Property,
the Documents, the Loan application, or any other aspect of the Loan; or
(c) the Property shall become an asset in (i) a voluntary bankruptcy or
insolvency proceeding or (ii) an involuntary bankruptcy or insolvency proceeding
which is not dismissed within ninety (90) days of filing (which Borrower has
participated in causing to be filed or respecting which Borrower has colluded
with a creditor or a principal in Borrower to cause such involuntary proceeding
to be filed); provided, however, that this Paragraph 9(c) shall not apply if an
involuntary bankruptcy is filed by Lender.
10. Joint and Several Liability. This Note shall be the joint and several
obligation of all makers, endorsers, guarantors and sureties, and shall be
binding upon them and their respective successors and assigns and shall inure
to the benefit of Lender and its successors and assigns.
-4-
<PAGE> 5
11. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER OR BORROWER IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, this Note has been executed by Borrower as of the date
first set forth above.
BORROWER:
ROBERTS PROPERTIES RESIDENTIAL, L.P.
a Georgia limited partnership
BY: Roberts Realty Investors, Inc., a Georgia
corporation, its sole general partner
BY: /S/ Charles S. Roberts
--------------------------------------
Charles S. Roberts, President
[CORPORATE SEAL]
-5-
<PAGE> 1
================================================================================
PREPARED BY AND UPON
RECORDATION RETURN TO:
MCCULLOUGH SHERRILL, LLP
1409 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
Attention: Paul P. Mattingly
ROBERTS PROPERTIES RESIDENTIAL, L.P.
(Borrower)
to
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Lender)
--------------------------
DEED TO SECURE DEBT AND
SECURITY AGREEMENT
--------------------------
Dated: As of June 23, 1998
Location: 6516 Spalding Drive
County: Gwinnett
Loan Number: 6 102 830
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I - OBLIGATIONS............................................................. 2
Section 1.01 Obligations................................................ 2
Section 1.02 Documents.................................................. 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES......................................... 3
Section 2.01 Title, Legal Status and Authority.......................... 3
Section 2.02 Validity of Documents...................................... 3
Section 2.03 Litigation................................................. 3
Section 2.04 Status of Property......................................... 3
Section 2.05 Tax Status of Borrower..................................... 4
Section 2.06 Bankruptcy and Equivalent Value............................ 4
Section 2.07 Disclosure................................................. 4
Section 2.08 Illegal Activity........................................... 4
ARTICLE III - COVENANTS AND AGREEMENTS.............................................. 4
Section 3.01 Payments of Obligations.................................... 4
Section 3.02 Continuation of Existence.................................. 4
Section 3.03 Taxes and Other Charges.................................... 4
Section 3.04 Defense of Title, Litigation, and Rights under Documents... 5
Section 3.05 Operation and Maintenance of Property...................... 5
Section 3.06 Insurance.................................................. 6
Section 3.07 Damage and Destruction of Property......................... 7
Section 3.08 Condemnation............................................... 9
Section 3.09 Liens and Liabilities...................................... 9
Section 3.10 Taxes and Insurance Deposits............................... 10
Section 3.11 ERISA...................................................... 10
Section 3.12 Environmental Representations, Warranties, and Covenants... 11
Section 3.13 [Electronic Payments]...................................... 12
Section 3.14 Inspection................................................. 12
Section 3.15 Records, Reports, and Audits............................... 12
Section 3.16 Borrower's Certificates.................................... 13
Section 3.17 Full Performance Required; Survival of Warranties.......... 13
Section 3.18 Additional Security........................................ 13
Section 3.19 Further Acts............................................... 14
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION............................. 14
Section 4.01 Expenses and Advances...................................... 14
Section 4.02 Subrogation................................................ 14
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
Section 5.01 Due-on-Sale or Encumbrance................................. 14
Section 5.02 One-time Transfer.......................................... 14
Section 5.03 Permitted Transfers Without Fee............................ 16
ARTICLE VI - DEFAULTS AND REMEDIES.................................................. 17
</TABLE>
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 6.01 Events of Default.......................................... 17
Section 6.02 Remedies................................................... 18
Section 6.03 Expenses................................................... 19
Section 6.04 Rights Pertaining to Sales................................. 19
Section 6.05 Application of Proceeds.................................... 19
Section 6.06 Additional Provisions as to Remedies....................... 19
Section 6.07 Waiver of Rights and Defenses.............................. 20
ARTICLE VII - SECURITY AGREEMENT.................................................... 20
Section 7.01 Security Agreement......................................... 20
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES..................... 20
Section 8.01 Limited Recourse Liability................................. 20
Section 8.02 General Indemnity.......................................... 20
Section 8.03 Transaction Taxes Indemnity................................ 20
Section 8.04 ERISA Indemnity............................................ 21
Section 8.05 Environmental Indemnity.................................... 21
Section 8.06 Duty to Defend, Costs and Expenses......................... 21
Section 8.07 Recourse Obligation and Survival........................... 21
ARTICLE IX - ADDITIONAL PROVISIONS.................................................. 21
Section 9.01 Usury Savings Clause....................................... 21
Section 9.02 Notices.................................................... 21
Section 9.03 Sole Discretion of Lender.................................. 22
Section 9.04 Applicable Law and Submission to Jurisdiction.............. 22
Section 9.05 Construction of Provisions................................. 22
Section 9.06 Transfer of Loan........................................... 23
Section 9.07 Miscellaneous.............................................. 23
Section 9.08 Entire Agreement........................................... 24
Section 9.09 WAIVER OF TRIAL BY JURY.................................... 24
ARTICLE X - LOCAL LAW PROVISIONS.................................................... 24
Section 10.01 WAIVER..................................................... 24
Section 10.02 Nature of Instrument....................................... 24
Section 10.03 No Novation................................................ 24
Section 10.04 Georgia Remedies........................................... 24
</TABLE>
ii
<PAGE> 4
DEFINITIONS
The terms set forth below are defined in the following sections of this Deed to
Secure Debt and Security Agreement:
<TABLE>
<S> <C>
Action Section 9.04
Additional Funds Section 3.07(c)
Affecting the Property Section 3.12(a)
All Section 9.05(m)
Any Section 9.05(m)
Assessments Section 3.03(a)
Assignment Recitals, Section 2(B)
Awards Section 3.08(b)
Bankruptcy Code Recitals, Section 2(A)(ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07(a)
Default Rate Section 1.01(a)
Demand Section 9.12(n)
Depository Section 3.07(c)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12(a)
Environmental Liens Section 3.12(b)
Environmental Report Section 3.12(a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04(a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06(a)
GAAP Section 3.15(a)
Grace Period Section 6.01(b)
Hazardous Materials Section 3.12(a)
Impositions Section 3.10
Improvements Recitals, Section 2(A)(ii)
Include, Including Section 9.05(f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2(A)(i)
Laws Section 3.05(c)
Lease Section 9.05(k)
Leases Recitals, Section 2(A)(ix)
Lender Preamble
Lessee Section 9.05(k)
Lessor Section 9.05(k)
Liens Section 3.09
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C>
Loan Recitals, Section 1
Losses Section 8.02
Major Tenants Section 3.08(d)
Net Proceeds Section 3.07(d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05(n)
Organization State Section 2.01
Owned Section 9.05(l)
Permitted Encumbrances Recitals, Section 2(B)
Person Section 9.05(i)
Personal Property Section 6.02(j)
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2(A)
Property State Section 2.1
Provisions Section 9.05(j)
Rating Agency Section 3.06(d)
Release Section 3.12(a)
Rent Loss Proceeds Section 3.07(c)
Rents Recitals, Section 2(A)(x)
Restoration Section 3.07(a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08(a)
Tenant Recitals, Section 2(A)(vi)
Tenants Section 9.05(k)
Transaction Taxes Section 3.03(c)
U.C.C. Section 2.02
Upon Demand Section 9.05(n)
Violation Section 3.11
</TABLE>
ii
<PAGE> 6
DEED TO SECURE DEBT AND SECURITY AGREEMENT
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (this "INSTRUMENT") is made as
of the 23rd day of June, 1998, by ROBERTS PROPERTIES RESIDENTIAL, L.P., a
Georgia limited partnership, having its principal office and place of business
at c/o Roberts Properties, Inc., 8010 Roswell Road, Suite 120, Atlanta, Georgia
30350, as mortgagor ("BORROWER"), to THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation, having an office at One Ravinia Drive, Suite
1400, Atlanta, Georgia 30346, as mortgagee ("LENDER").
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT, PURSUANT TO WHICH LENDER
MAY TAKE THE PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A JUDICIAL
FORECLOSURE ACTION UPON DEFAULT BY BORROWER UNDER THIS INSTRUMENT.
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of EIGHT MILLION ONE
HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($8,100,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). THE MATURITY DATE (AS THAT TERM IS DEFINED IN THE NOTE) OF THE
NOTE IS JULY 15, 2008.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Grants, bargains, sells, assigns, transfers, pledges, warrants, and conveys
to Lender in FEE SIMPLE, subject only to the matters listed in Exhibit C, WITH
POWER OF SALE, and grants Lender security title to, and a security interest
in, the following property, rights, interests and estates owned by Borrower
(collectively, the "PROPERTY"):
(i) The real property in Gwinnett County, Georgia and described in
Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures)
now or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to all
land lying within the rights-of-way, roads, or streets, open or proposed,
adjoining the Land to the center line thereof, and all sidewalks, alleys, and
strips and gores of land adjacent to or used in connection with the Property;
(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or by
any proceeding or purchase in lieu thereof) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
<PAGE> 7
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases, licenses,
or other agreements affecting the use, enjoyment or occupancy of the Property
now or later existing (including any use or occupancy arrangements created
pursuant to Title 7 or 11 of the United States Code, as amended from time to
time, or any similar federal or state laws now or later enacted for the relief
of debtors (the "BANKRUPTCY CODE") and all extensions and amendments thereto
(collectively, the "LEASES") and all Borrower's right, title and interest under
the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or use
of the Property (including any payments received with respect to any Tenant or
the Property pursuant to the Bankruptcy Code) and all cash, security deposits,
advance rentals, or similar payments relating thereto (collectively, the
"RENTS") and all proceeds from the cancellation, termination, surrender, sale or
other disposition of the Leases, and the right to receive and apply the Rents to
the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to
Lender all of Borrower's right, title, interest and estates in and to the
Leases and the Rents, subject to the terms and license granted to the Borrower
under that certain Assignment of Leases and Rents made by Borrower to Lender
dated the same date as this Instrument (the "ASSIGNMENT"), which document shall
govern and control the provisions of this assignment.
TO HAVE AND TO HOLD the Property unto the Lender and its successors and assigns
forever, subject to the matters listed in Exhibit C ("PERMITTED ENCUMBRANCES")
and the provisions of this Instrument.
SHOULD THE OBLIGATIONS BE PAID according to the tenor and effect thereof when
the same shall become due and payable, then this Instrument shall be canceled
and surrendered (except for the obligations of Borrower set forth in Section
3.11 and 3.12 and Article VIII hereof, which shall survive such cancellation
and surrender).
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I -- OBLIGATIONS
SECTION 1.01 OBLIGATIONS. This Instrument is intended (i) to operate and to
be construed as a deed passing title to the Property to Lender, and is made
under those provisions of the existing laws of the State of Georgia relating to
deeds to secure debt, and not as a mortgage; and (ii) to constitute a security
agreement pursuant to the Uniform Commercial Code as enacted in the State of
Georgia, and (iii) executed, acknowledged, and delivered by Borrower to secure
and enforce the following obligations (collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable
and to the extent permitted by Laws (defined below), and (iii) renewals,
extensions, and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents; and
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents.
SECTION 1.02 DOCUMENTS. The "DOCUMENTS" shall mean this Instrument, the
Note, the Assignment, and any other written agreement executed in connection
with the closing of the Loan (but excluding the Loan application and Loan
commitment) and by the party against whom enforcement is sought, including
those given to evidence or further secure the payment and performance of any of
the Obligations, and any written renewals, extensions, and amendments of the
foregoing, executed by the party against whom enforcement is sought. All of the
provisions of the Documents are incorporated into this Instrument as if fully
set forth in this Instrument.
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<PAGE> 8
ARTICLE II -- REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY. Borrower (i) is seised of
the Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, deeds to secure debt, charges,
encumbrances, and security interests, except the Permitted Encumbrances; (ii)
will forever warrant and defend its title to the Property and the validity,
enforceability, and priority of the security title and security interest created
by this Instrument against the claims of all persons; (iii) is a limited
partnership duly organized, validly existing, and in good standing and qualified
to transact business under the laws of its state of organization or
incorporation ("ORGANIZATION STATE") and the state where the Property is located
("PROPERTY STATE"); and (iv) has all necessary approvals, governmental and
otherwise, and full power and authority to own its properties (including the
Property) and carry on its business.
SECTION 2.02 VALIDITY OF DOCUMENTS. The execution, delivery and
performance of the Documents and the borrowing evidenced by the Note (i) are
within the power of Borrower; (ii) have been authorized by all requisite action;
(iii) have received all necessary approvals and consents; (iv) will not violate,
conflict with, breach, or constitute (with notice or lapse of time, or both) a
default under (1) any law, order or judgment of any court, governmental
authority, or the governing instrument of Borrower or (2) any indenture,
agreement, or other instrument to which Borrower is a party or by which it or
any of its property is bound or affected; (v) will not result in the creation or
imposition of any lien, charge, security title, or encumbrance upon any of its
properties or assets except for those in this Instrument; and (vi) will not
require any authorization or license from, or any filing with, any governmental
or other body (except for the recordation of this Instrument and Uniform
Commercial Code ("U.C.C.") filings). The Documents constitute legal, valid, and
binding obligations of Borrower.
SECTION 2.03 LITIGATION. There is no action, suit, or proceeding,
judicial, administrative, or otherwise (including any condemnation or similar
proceeding), pending or, to the best knowledge of Borrower, threatened or
contemplated against, or affecting, Borrower or the Property which would have a
material adverse affect on either the Property or Borrower's ability to perform
its obligations.
SECTION 2.04 STATUS OF PROPERTY.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "FLOOD ACTS") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and
sewer) required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, security
titles, or encumbrances except the Permitted Encumbrances and those created by
this Instrument.
3
<PAGE> 9
(h) The Property is assessed for real estate tax purposes as one or more
wholly independent tax lot(s), separate from any adjoining land or improvements
and no other land or improvements is assessed and taxed together with the
Property.
SECTION 2.05 TAX STATUS OF BORROWER. Borrower is not a "foreign person"
within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or managing member of Borrower (if Borrower
is a limited liability company). Borrower has received reasonably equivalent
value for granting this Instrument.
SECTION 2.07 DISCLOSURE. Borrower has disclosed to Lender all material facts
and has not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading. There has
been no adverse change in any condition, fact, circumstance, or event that
would make any such information materially inaccurate, incomplete or otherwise
misleading.
SECTION 2.08 ILLEGAL ACTIVITY. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III -- COVENANTS AND AGREEMENTS
SECTION 3.01 PAYMENT OF OBLIGATIONS. Borrower shall timely pay and cause to
be performed the Obligations.
SECTION 3.02 CONTINUATION OF EXISTENCE. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of
law, all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent (1); (c) change its name,
address, or the name under which Borrower conducts its business without
promptly notifying Lender; or (d) do anything to cause the representations in
Section 2.02 to become untrue.
SECTION 3.03 TAXES AND OTHER CHARGES.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("Assessments")
ten (10) days prior to the date any fine, penalty, interest or charge for
nonpayment may be imposed. Unless Borrower is making deposits per Section 3.10,
Borrower shall provide Lender with receipts evidencing such payments (except
for income taxes, franchise taxes, ground rents, maintenance charges, and
utility charges) within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to
pay the Assessment as required above unless (i) Borrower gives Lender prior
written notice of its intent to contest an Assessment; (ii) Borrower
demonstrates to Lender's reasonable satisfaction that (1) the Property will not
be sold to satisfy the Assessment prior to the final determination of the legal
proceedings, (2) it has taken such actions as are required or permitted to
accomplish a stay of any such sale, or (3) it has furnished a bond or surety
(satisfactory to Lender in form and amount) sufficient to prevent a sale of the
Property; (iii) at Lender's option, Borrower has deposited the full amount
necessary to pay any unpaid portion of the Assessments with Lender; and (iv)
such proceeding shall be permitted under any other instrument to which Borrower
or the Property is subject (whether superior or inferior to this Instrument);
provided, however, that the foregoing shall not apply to the contesting of any
income taxes, franchise taxes, ground rents, maintenance charges, and utility
charges.
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(1) (which consent shall not be unreasonably withheld)
4
<PAGE> 10
(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes deeds to secure debt or other security instruments for
federal, state or local purposes or changes the manner of the collection of any
such existing taxes, and/or (iii) imposes a tax, either directly or indirectly,
on any of the Documents or the Obligations, Borrower shall, if permitted by
law, pay such tax within the statutory period or within twenty (20) days after
demand by Lender, whichever is less; provided, however, that if, in the opinion
of Lender, Borrower is not permitted by law to pay such taxes, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim or
be entitled to any credit(s) on account of the Obligations for any part of the
Assessments and no deduction shall be made or claimed from the taxable value of
the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER DOCUMENTS.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien, security title, or security interest created thereby, and any rights of
Lender under the documents against the claims of all persons, and shall
promptly notify Lender of any such claims. Lender (whether or not named as a
party to such proceedings) is authorized and empowered (but shall not be
obligated) to take such additional steps as it may deem necessary or proper for
the defense of any such proceeding or the protection of the lien, security
title, security interest, validity, enforceability, or priority of this
Instrument, title to the Property, or any rights of Lender under the Documents,
including the employment of counsel, the prosecution and/or defense of
litigation, the compromise, release, or discharge of such adverse claims, the
purchase of any tax title, the removal of such any liens, security title and
security interests, and any other actions Lender deems necessary to protect its
interests. Borrower authorizes Lender to take any actions required to be taken
by Borrower, or permitted to be taken by Lender, in the Documents in the name
and on behalf of Borrower. Borrower shall reimburse Lender on demand for all
expenses (including attorneys' fees) incurred by it in connection with the
foregoing and Lender's exercise of its rights under the Documents. All such
expenses of Lender, until reimbursed by Borrower, shall be part of the
Obligations, bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, and shall be
secured by this Instrument.
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land nor shall any
material part of the Improvements be removed, demolished, or structurally or
materially altered, without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new,
comparable fixtures or Property. Borrower will not, without Lender's prior
written consent, remove any Property covered by this Instrument unless the same
is replaced by Borrower with a new, comparable article (i) owned by Borrower
free and clear of any lien, security title or security interest (other than the
Permitted Encumbrances and those created by this Instrument) or (ii) leased by
Borrower (A) with
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<PAGE> 11
Lender's prior written consent or (B) if the replaced Property was leased at
the time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be maintained,
used, and operated in compliance with all (i) present and future laws,
Environmental Laws (defined below), ordinances, regulations, and requirements
(including zoning and building codes) of any governmental or quasi-governmental
authority or agency applicable to Borrower or the Property (collectively, the
"LAWS"); (ii) orders, rules, and regulations of any regulatory, licensing,
accrediting, insurance underwriting or rating organization, or other body
exercising similar functions; (iii) duties or obligations of any kind imposed
under any Permitted Encumbrance or by law, covenant, condition, agreement, or
easement, public or private; and (iv) policies of insurance at any time in
force with respect to the Property. If proceedings are initiated or Borrower
receives notice that it or the Property is not in compliance with any of the
foregoing, Borrower will promptly send Lender notice and a copy of the
proceeding or violation notice. If the Property is not in compliance with all
Laws, Lender may impose additional requirements upon Borrower including
monetary reserves or financial equivalents.
(d) Zoning and Title Matters. Borrower shall not, without Lender's prior
written consent, (i) initiate or support any zoning reclassification of the
Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property; (iv) execute or file any
subdivision plat affecting the Property; (v) consent to the annexation of the
Property to any municipality; (vi) permit the Property to be used by the public
or any person in a way that might make a claim of adverse possession or any
implied dedication or easement possible; (vii) cause or permit the Property to
become a non-conforming use under zoning ordinances or any present or future
non-conforming use of the Property to be discontinued; or (viii) fail to comply
with the terms of the Permitted Encumbrances.
Section 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for the
benefit of Lender by (i) an "All Risk of Physical Loss" policy or the broadest
form of extended coverage endorsement in an amount sufficient to prevent Lender
from ever becoming a co-insurer under the policy or Laws, but in no event less
than the lesser of (A) the Obligations or (B) the Full Insurable Value (defined
below) of the Property, subject to verification by Lender [, is less,] and with
a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL INSURABLE
VALUE" shall mean the one hundred percent (100%) replacement cost of the
Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender, (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available
under the Flood Acts in an amount equal to the lesser of (1) the original
amount of the Note or (2) the maximum limit of coverage available for the
Property under the Flood Acts; (iv) against damage or loss from (1) sprinkler
system leakage and (2) boilers, boiler tanks, heating and air-conditioning
equipment, pressure vessels, auxiliary piping, and similar apparatus, in the
amount required by Lender; (v) during the period of any construction, repair,
restoration, or replacement of the Property, a standard builder's risk policy
with extended coverage in an amount at least equal to the Full Insurable Value
of such Property, and worker's compensation, in statutory amounts; and (vi)
against damage or loss by earthquake (2) and other natural phenomenon in the
amounts reasonably required by the Lender.
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(2) (Lender acknowledges that the Property is located in an area that is
not considered to be at risk for earthquake damage and, accordingly,
Lender, as of the date of this Instrument, has not required insurance
against earthquake damage; Lender reserves the right to require
insurance against earthquake damage if (i) Lender reasonably
determines that the area in which the Property is located is
considered to be at risk for earthquake damage, and (ii) Lender is
generally requiring such insurance of other borrowers of commercial
mortgage loans in the metropolitan Atlanta, Georgia area)
Language indicated as being shown by strike out in the typeset
document is enclosed in brackets "[" and "]" in the electronic format.
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<PAGE> 12
(b) Liability and Other Insurance. Borrower shall maintain comprehensive
general liability insurance on an occurrence basis covering Borrower and Lender,
as an additional insured, against claims for bodily injury or death or property
damage occurring in, upon, or about the Property or any street, drive,
sidewalk, curb, or passageway adjacent thereto, in the amount required by Lender
(but in no event less than Ten Million Dollars ($10,000,000.00) combined single
limit per occurrence, which may be based on a combination of primary coverage
plus umbrella coverage), which insurance shall include operations and blanket
contractual liability coverage which insures contractual liability under the
indemnifications set forth in Section 8.02 below (but such coverage or the
amount thereof shall in no way limit such indemnifications). Upon request,
Borrower shall maintain insurance or carry additional amounts of insurance
covering Borrower or the Property as Lender shall reasonably require [including
against war risks] (3).
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in
the Property State, approved by Lender, and having (i) an investment grade
rating or claims paying ability assigned by one or more credit rating agencies
approved by Lender (a "RATING AGENCY") and (ii) a general policy rating of A or
better and a financial class of VI or better by A.M. Best Company, Inc. (or if
a rating of A.M. Best Company, Inc. is no longer available, a similar rating
from a similar or successor service). In addition, all policies shall (x)
include a standard mortgagee clause, without contribution, in the name of
Lender and (y) provide that they shall not be canceled, amended, or materially
altered (including reduction in the scope or limits of coverage) without at
least thirty (30) days' prior notice to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section
and (ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies
are unavailable or if coverage is under a blanket policy, Borrower shall
deliver duplicate originals, or, if unavailable, original certificates
evidencing that such policies are in full force and effect together with
certified copies of the original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
Section 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of the
Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender and
take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made available for Restoration (defined
below) (but regardless of whether any proceeds are sufficient for Restoration),
Borrower shall promptly commence and diligently pursue to completion the
restoration, replacement, and rebuilding of the Property as nearly as possible
to its value and condition immediately prior to the Damage or a Taking (defined
below) in accordance with plans and specifications approved by Lender
("RESTORATION"). Borrower shall comply with other reasonable requirements
established by Lender to preserve the security under this Instrument.
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(3) (provided that Lender is generally requiring such insurance of other
borrowers of commercial mortgage loans in the metropolitan Atlanta,
Georgia area)
Language indicated as being shown by strike out in the typeset
document is enclosed in brackets "[" and "]" in the electronic format.
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<PAGE> 13
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and Lender is authorized and empowered
by Borrower to settle, adjust, or compromise any claims for the Damage; (ii)
each insurance company concerned is authorized and directed to make payment
directly to Lender for the Damage; and (iii) Lender may apply the insurance
proceeds in any order it determines (1) to reimburse Lender for all Costs
(defined below) related to collection of the proceeds and (2) subject to Section
3.07(c) and at Lender's option, to (A) payment (without any Prepayment Premium)
of all or part of the Obligations, whether or not then due and payable, in the
order determined by Lender (provided that if any Obligations remains outstanding
after this payment, the unpaid Obligations shall continue in full force and
effect and Borrower shall not be excused in the payment thereof); (B) the cure
of any default under the Documents; or (C) the Restoration. Any insurance
proceeds held by Lender shall be held without the payment of interest thereon.
If Borrower receives any insurance proceeds for the Damage, Borrower shall
promptly deliver the proceeds to Lender. Notwithstanding anything in this
Instrument or at law or in equity to the contrary, none of the insurance
proceeds paid to Lender shall be deemed trust funds and Lender may dispose of
these proceeds as provided in this Section. Borrower expressly assumes all risk
of loss from any Damage, whether or not insurable or insured against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least (4) [one (1) year] prior to the maturity of the Note
and (B) Leases which are terminated or terminable as a result of the Damage
cover an aggregate of less than (5)[ten percent (10%)] of the total
rentable square footage contained in the Property at the closing of the Loan or
such Tenants agree in writing to continue their Leases; (iii) Borrower shall
have entered into a general construction contract acceptable in all respects to
Lender for Restoration, which contract must include provision for retainage of
not less than ten percent (10%) until final completion of the Restoration; and
(iv) in Lender's reasonable judgment, after Restoration has been completed the
net cash flow of the Property will be sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves required
under the Documents. Notwithstanding any provision of this Instrument to the
contrary, Lender shall not be obligated to make any portion of the Net Proceeds
available for Restoration unless, at the time of the disbursement request,
Lender has determined in its reasonable discretion that (y) Restoration can be
completed at a cost which does not exceed the aggregate of the remaining Net
Proceeds and any funds deposited with Lender by Borrower ("ADDITIONAL FUNDS")
and (z) the aggregate of any loss of rental income insurance proceeds which the
carrier has acknowledged to be payable ("RENT LOSS PROCEEDS") and any funds
deposited with Lender by Borrower are sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves required
under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically
disbursed to Borrower shall be based upon the amounts currently due under the
construction contract for Restoration and Lender's receipt of (i) appropriate
lien waivers, (ii) a certification of the percentage of Restoration completed by
an architect or engineer acceptable to Lender, and (iii) title insurance
protection against materialmen's and mechanic's liens. At Lender's election,
the disbursement of funds may be handled by a disbursing agent selected by
Lender, and such agent's reasonable fees and expenses shall be paid by Borrower.
The Net Proceeds, Rent Loss Proceeds, and any Additional Funds shall constitute
additional security for the Loan and Borrower shall execute, deliver, file
and/or record, at its expense, such instruments as Lender requires to grant to
Lender a perfected, first-priority security interest in these funds. If the Net
Proceeds are made available for Restoration and (x) Borrower refuses or fails to
complete the Restoration, (y) an Event of Default occurs, or (z) the Net
Proceeds or Additional Funds are not
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(4) six (6) months
(5) twenty percent (20%)
Language indicated as being shown by strike out in the typeset
document is enclosed in brackets "[" and "]" in the electronic format.
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applied to Restoration, then any undisbursed portion may, at Lender's option,
be applied to the Obligations in any order of priority and any application to
principal shall be deemed a voluntary prepayment subject to the Prepayment
Premium.
SECTION 3.08 CONDEMNATION.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent. Lender may
participate in these proceedings (but shall not be obligated to do so) and
Borrower will sign and deliver all instruments requested by Lender to permit
this participation.
(b) Lender's Rights to Proceed. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive
them, to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or award. Borrower
will sign and deliver all instruments requested by Lender to permit these
actions.
(c) Application of Award. Lender shall have the right to apply any Award,
subject to Section 3.08(d), as per Section 3.07 for insurance proceeds held by
Lender, including the waiver of Prepayment Premium. If Borrower receives any
Award, Borrower shall promptly deliver it to Lender. Notwithstanding anything in
this Instrument or at law or in equity to the contrary, none of the Award paid
to Lender shall be deemed trust funds and Lender may dispose of these proceeds
as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty percent (20%) of the gross area of
the Improvements or (B) ten percent (10%) of the parking spaces is affected by
the Taking, (ii) the amount of the loss does not exceed twenty percent (20%) of
the original amount of the Note; (iii) the Taking does not affect access to the
Property from any public right-of-way; (iv) there is no Event of Default at the
time of application; (v) after Restoration, the Property and its use will be in
compliance with all Laws; (vi) in Lender's reasonable judgment, Restoration is
practical and can be completed within one (1) year after the Taking and at least
(6) [one (1) year prior] to the maturity of the Note; and (vii) the Tenants
listed in Exhibit "D" ("MAJOR TENANTS") agree in writing to continue their
Leases without abatement of rent. Any portion of the Award that is (i) for loss
of value or property or (ii) in excess of the cost of any Restoration permitted
above, may, in Lender's sole discretion, be applied against the Obligations or
paid to Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower shall
continue to pay and perform the Obligations as provided in the Documents. Any
reduction in the Obligations due to application of the Award shall take effect
only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 LIENS AND LIABILITIES. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien, security title, or encumbrance on the
Property or the Rents (collectively, "LIENS") and Borrower shall, at its sole
expense, do everything necessary to preserve the lien, security title and
security interest created by this Instrument and its priority. Nothing in the
Documents shall be deemed or construed as constituting the consent or request by
Lender, express or implied, to any contractor, subcontractor, laborer, mechanic
or materialman for the performance of any
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(6) six (6) months
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<PAGE> 15
labor or the furnishing of any material for any improvement, construction,
alteration, or repair of the Property. Borrower further agrees that Lender does
not stand in any fiduciary relationship to Borrower. Any contributions made,
directly or indirectly, to Borrower by or on behalf of any of its partners,
members, principals or any party related to such parties shall be treated as
equity and shall be subordinate and inferior to the rights of Lender under the
Documents.
SECTION 3.10 TAX AND INSURANCE DEPOSITS. [At Lender's option,] Borrower
shall make monthly deposits ("DEPOSITS") with Lender equal to one-twelfth
(1/12) of the annual Assessments (except for income taxes, franchise taxes,
ground rents, maintenance charges and utility charges) and the premiums for
insurance required under Section 3.06 (the "INSURANCE PREMIUMS") together with
amounts sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit any
deficiency. Borrower shall promptly notify Lender of any changes to the
amounts, schedules and instructions for payment of the Impositions. Borrower
authorizes Lender or its agent to obtain the bills for Assessments directly
from the appropriate tax or governmental authority. All Deposits are pledged
to Lender and shall constitute additional security for the Obligations. The
Deposits shall be held by Lender without interest (except to the extent
required under Laws) and may be commingled with other funds. If (i) there is no
Event of Default at the time of payment, (ii) Borrower has delivered bills or
invoices to Lender for the Impositions in sufficient time to pay them when due,
(iii) the Deposits are sufficient to pay the Impositions or Borrower has
deposited the necessary additional amount, then Lender shall pay the
Impositions prior to their due date. Any Deposits remaining after payment of
the Impositions shall, at Lender's option, be credited against the Deposits
required for the following year or paid to Borrower. If an Event of Default
occurs, the Deposits may, at Lender's option, be applied to the Obligations in
any order of priority. Any application to principal shall be deemed a voluntary
prepayment subject to the Prepayment Premium. Borrower shall not claim any
credit against the principal and interest due under the Note for the Deposits.
Upon an assignment or other transfer of this Instrument, Lender may pay over
the Deposits in its possession to the assignee or transferee and then it shall
be completely released from all liability with respect to the Deposits.
Borrower shall look solely to the assignee or transferee with respect thereto.
This provision shall apply to every transfer of the Deposits to a new assignee
or transferee. Subject to Article V, a transfer of title to the Land shall
automatically transfer to the new owner the beneficial interest in the
Deposits. Upon full payment and satisfaction of this Instrument or, at Lender's
option, at any prior time, the balance of the Deposits in Lender's possession
shall be paid over to the record owner of the Land and no other party shall
have any right or claim to the Deposits. Lender may transfer all its duties
under this Section to such service or financial institution as Lender may
periodically designate and Borrower agrees to make the Deposits to such service
or institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a
"governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower
is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; (iii) the assets of the
Borrower do not constitute "plan assets" of one or more plans within the
meaning of 29 C.F.R. Section 2510.3-101; and (iv) one or more of the following
circumstances is true: (1) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) Less
than twenty-five percent (25%) of all equity interests in Borrower are held by
"benefit plan investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or (3) Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e). Borrower shall deliver to Lender such certifications
and/or other evidence periodically requested by Lender, in its sole discretion,
to verify these representations and warranties. Failure to deliver these
certifications or evidence, breach of these representations and warranties, or
consummation of any transaction which would cause this Instrument or any
exercise of Lender's rights under this Instrument to (i) constitute a
non-exempt prohibited transaction under ERISA or (ii) violate ERISA or any
state statute regulating governmental plans (collectively, a "VIOLATION"), shall
be an Event of Default. Notwithstanding anything in the Documents to the
contrary, no sale, assignment, or transfer of any direct or indirect right,
title, or interest in Borrower or the Property (including creation of a junior
lien, security
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(7) Upon the occurrence of an Event of Default,
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title, encumbrance or leasehold interest) shall be permitted which would, in
Lender's opinion, negate Borrower's representations in this Section or cause a
Violation. At least fifteen (15) days before consummation of any of the
foregoing, Borrower shall obtain from the proposed transferee or lienholder (i)
a certification to Lender that the representations and warranties of this
Section will be true after consummation and (ii) an agreement to comply with
this Section.
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS.
(a) Environmental Representations and Warranties. (8) Borrower
represents and warrants, to the best of Borrower's knowledge (after due inquiry
and investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received any written or oral notice or communication from any person relating to
Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statues, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a "hazardous substance," "hazardous material,"
"hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or
"pollutant" within the meaning of any Environmental Law. "RELEASE" of any
Hazardous Material, includes any release, deposit, discharge, emission, leaking,
spilling, seeping, migrating, pumping, pouring, escaping, dumping, disposing or
other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that:
(i) all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning
and janitorial supplies, (B) in compliance with all Environmental Laws, (C) with
all permits, and (D) (1) in any the amounts necessary to operate the Property
or (2) fully disclosed to and approved by Lender in writing; (iv) Borrower
shall keep the Property free and clear of all liens and encumbrances imposed by
any Environmental Laws due to any act or omission by Borrower or any person
(the "ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense, fully and
expeditiously cooperate in all activities in Section 3.12(c) including providing
all relevant information and making knowledgeable persons available for
interviews; (vi) Borrower shall, at its sole expense, (A) perform any
environmental site assessment or other investigation of environmental conditions
a the Property upon Lender's request based on Lender's reasonable belief that
the Property is not in compliance with all Environmental Laws, (B) share with
Lender the results and reports and Lender and the Indemnified Parties (defined
below) shall be entitled to rely on such results and reports, and (C) complete
any remediation of Hazardous Materials affecting the Property or other actions
required by any
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(8) Based solely upon the environmental reports prepared for
Lender,
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Environmental Laws; (vii) Borrower shall not allow any Tenant or other user of
the Property to violate any Environmental Law; and (viii) Borrower shall
immediately notify Lender in writing after it becomes aware of (A) the
presence, Release, or threatened Release of Hazardous Materials affecting the
Property, (B) any non-compliance of the Property with any Environmental Laws,
(C) any actual or potential Environmental Lien, (D) any required or proposed
remediation of environmental conditions relating to the Property, or (E) any
written or oral communication or notice from any person relating to Hazardous
Materials. Any failure of Borrower to perform its obligations under this
Section 3.12 shall constitute bad faith waste of the Property.
(c) Lender's Rights. Lender and any person designated by Lender
may enter the Property to assess the environmental condition of the Property
and its use including (i) conducting any environmental assessment or audit (the
scope of which shall be determined by Lender) and (ii) taking samples of soil,
groundwater or other water, air, or building materials, and conducting other
invasive testing at all reasonable times when (A) a default has occurred under
the Documents, (B) Lender reasonably believes that a Release has occurred or
the Property is not in compliance with all Environmental Laws, or (C) the Loan
is being considered for sale. Borrower shall cooperate with and provide access
to Lender and such person.
[SECTION 3.13 ELECTRONIC PAYMENTS. All payments due under the Documents
shall be made by electronic funds transfer from a bank account established and
maintained by Borrower for this purpose with a depository reasonably
satisfactory to Lender. Borrower shall direct the depository to transmit such
payments on or before their respective due dates to an account designated in
writing by Lender. Lender shall have the right to require Borrower to select a
different depository after thirty (30) days' prior notice. All costs of (i)
establishing and maintaining such account and (ii) the electronic funds
transfers shall be paid by Borrower.](9)
SECTION 3.14 INSPECTION. Borrower shall allow Lender and any person
designated by Lender(10) to enter upon the Property and conduct tests or
inspect the Property at all reasonable times. Borrower shall assist Lender and
such person in effecting said inspection.
SECTION 3.15 RECORDS, REPORTS, AND AUDITS. Borrower shall maintain, in
accordance with generally-accepted accounting principles ("GAAP"), complete and
accurate books and records with respect to all operations of or transactions
involving the Property. Annually, Borrower shall furnish Lender financial
statements for the most current fiscal year (including a schedule of all related
Obligations and contingent liabilities) for (i) Borrower, (ii) any general
partners(s) of Borrower and any general partners of such partners, (11) (iii)
any guarantors or sureties of the Note, [and (iv) and Major Tenants, to the
extent reasonably available]. Annually (or quarterly upon Lender's request),
Borrower shall furnish Lender (i) operating statements for the Property
including income and expenses (before and after Obligations service), major
capital improvements, [and a schedule showing the gross sales of each Tenant
paying percentage rent;] (ii) copies of paid tax receipts for the Property;
(iii) a certified rent roll including security deposits held, the expiration of
the terms of the Leases, and identification and explanation of any Tenants in
default; (iv) (12) a budget showing projected income and expenses (before and
after Obligations service) for the next twelve (12) month budget period; and (v)
upon Lender's request (13), (A) a schedule showing the Borrower's tax basis in
the Property, (B) the distribution of economic interests in the Property, and
(C) copies of any other loan documents affecting the Property.
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(9) [INTENTIONALLY OMITTED]
(10) , upon at least two (2) days advance notice from Lender to
Borrower (except that no such notice shall be required in the
event of an emergency)
(11) and
(12) upon Lender's request (and in no event more often than once every
two (2) years during the term of this Loan),
(13) following the occurrence of an Event of Default
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document is enclosed in brackets "[" and "]" in the electronic
format.
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(b) Delivery of Reports. All of the reports, statements, and
items required under this Section shall be (i) certified as being true, correct,
and accurate by an authorized person, partner, or officer of the delivering
party or, at the deliverer's option, audited by a Certified Public Accountant;
(ii) prepared in accordance with GAAP and satisfactory to Lender in form and
substance; and (iii) delivered within (A) ninety (90) days after the end of
Borrower's fiscal year for annual reports and (B) fifteen (15) days after the
end of each calendar quarter for quarterly reports. If any one report,
statement, or item is not received by Lender on its due date, a late fee of Five
Hundred and No/100 Dollars ($500.00) per month shall be due and payable by
Borrower. If any one report, statement, or item is not received within thirty
(30) days of its due date, Lender may immediately declare [an Event of Default]
(14) under the Documents. Borrower shall (i) provide Lender with such
additional financial, management, or other information regarding Borrower, any
general partner of Borrower, or the Property, as Lender may reasonably request
and (ii) upon Lender's request (15), deliver all items required by Section 3.15
in an electronic format (i.e., on computer disks) or by electronic transmission
acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any
person designated by Lender to examine, audit, and make copies of all such
books and records and all supporting data at the place where these items are
located at all reasonable times after reasonable advance notice; provided that
no notice shall be required after any default under the Documents. Borrower
shall assist Lender in effecting such examination. Upon five (5) days' prior
notice, Lender may inspect and make copies of Borrower's or any general partner
of Borrower's income tax returns with respect to the Property for the purpose
of verifying any items referenced in this Section.
SECTION 3.16 BORROWER'S CERTIFICATES. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors as to (a) the amount of the Obligations outstanding; (b) the interest
rate, terms of payment, and maturity date of the Note; (c) the date to which
payments have been paid under the Note; (d) whether any offsets or defenses
exist against the Obligations and a detailed description of any listed; (e)
whether all Leases are in full force and effect and have not been modified (or
if modified, setting forth all modifications); (f) the date to which the Rents
have been paid; (g) whether, to the best knowledge of Borrower, any defaults
exist under the Leases and a detailed description of any listed; (h) the
security deposit held by Borrower under each Lease and that such amount is the
amount required under such Lease; (i) whether there are any defaults (or events
which with the passage of time and/or notice would constitute a default) under
the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents and a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties and representations of
Borrower.
SECTION 3.18 ADDITIONAL SECURITY. No other security now existing or taken
later to secure the Obligations shall be affected by the execution of the
Documents and all additional security shall be held as cumulative. The taking
of additional security, execution of partial releases, or extension of the time
of payment obligations of Borrower shall not diminish the effect, security
title, and security interest of this Instrument and shall not affect the
liability or obligations of any maker or guarantor. Neither the acceptance of
the Documents nor their enforcement shall
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(14) default
(15) and if readily achievable without significant expenditure by
Borrower
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document is enclosed in brackets "[" and "]" in the electronic
format.
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prejudice or affect Lender's right to realize upon or enforce any other security
now or later held by Lender. Lender may enforce the Documents or any other
security in such order and manner as it may determine in its discretion.
SECTION 3.19 FURTHER ACTS. Borrower shall take all necessary actions to
(i) keep valid and effective the security title, security interest and rights
of Lender under the Documents and (ii) protect the lawful owner of the
Documents. Promptly upon request by Lender and at Borrower's expense, Borrower
shall execute additional instruments and take such actions as Lender reasonably
believes are necessary or desirable to (a) maintain or grant Lender a
first-priority, perfected security title and security interest in the Property,
(b) correct any error or omission in the Documents, and (c) effect the intent
of the Documents, including filing/recording the Documents, additional deeds to
secure debt, financing statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 EXPENSES AND ADVANCES. Borrower shall pay all reasonable
appraisal, recording, filing, registration, brokerage, abstract, title
insurance (including premiums), U.C.C. search, escrow, attorney's (both
in-house staff and retained attorneys), engineers', environmental engineers',
environmental testing, and architects' fees, costs (including travel),
expenses, and disbursements incurred by Borrower or Lender in connection with
the granting, closing, servicing, and enforcement of (a) the Loan and Documents
or (b) attributable to Borrower as owner of the Property. The term "COSTS"
shall mean any of the foregoing incurred in connection with (a) any default by
Borrower under the Documents, (b) the servicing of the Loan, or (c) the
exercise, enforcement, compromise, defense, litigation, or settlement of any of
Lender's rights or remedies under the Documents or relating to the loan or the
Obligations. If Borrower fails to pay any amounts or perform any actions
required under the Documents, Lender may (but shall not be obligated to)
advance sums to pay such amounts or perform such actions. Borrower grants
Lender the right to enter upon and take possession of the Property to prevent
or remedy any such failure and the right to take such actions in Borrower's
name. No advance or performance shall be deemed to have cured a default by
Borrower. All (a) sums advanced by or payable to Lender per this Section or
under applicable Laws, (b) except as expressly provided in the Documents,
payments due under the Documents which are not paid in full when due, and (c)
all Costs, shall: (i) be deemed demand obligations, (ii) bear interest at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, until paid if not paid on demand, (iii) be part of,
together with such interest, the Obligations, and (iv) be secured by the
Documents. Lender, upon making any such advance, shall also be subrogated to
rights of the person receiving such advance.
SECTION 4.02 SUBROGATION. If any proceeds of the Note were used to
extinguish, extend or renew any indebtedness on the Property, then, to the
extent of the funds so used, (a) Lender shall be subrogated to all rights,
claims, liens, titles and interests existing on the Property held by the holder
of such indebtedness and (b) these rights, claims, liens, titles and interests
are not waived but rather shall (i) continue in full force and effect in favor
of Lender and (ii) are merged with the security title and security interest
created by the Documents as cumulative security for the payment and performance
of the Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE. It shall be an Event of Default
and, at the sole option of Lender, Lender may accelerate the Obligations and
the entire Obligations (including any Prepayment Premium) shall become
immediately due and payable, if Borrower, without Lender's prior written consent
(which may be withheld for any or no reason including the possibility of an
ERISA violation or the proposed transferee's failure to agree in writing to
Lender increasing the interest payable on the Obligations to any rate, changing
any other terms (including maturity) of the Obligations or Documents, or
requiring the payment of a transfer fee), (a) shall sell, convey, assign,
transfer, dispose of or be divested of its title to, convey security title to,
mortgage, encumber or cause to be encumbered (except for the imposition of
mechanics' or materialmen's liens) the Property or any interest therein, in any
manner or way, whether voluntary or involuntary, or (b) in the event of (i) any
merger, consolidation (16), sale, transfer, assignment, or dissolution involving
all or substantially all of the assets of Borrower or any general partner of
Borrower, (ii) the transfer, pledge, voluntary or involuntary sale, or
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(16) (unless Borrower or such general partner of Borrower is the
surviving entity in such merger or consolidation)
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encumbrance (or any of the foregoing [at one time or over any period of time]
(17) of (A) [10%] (18) or more of (1) the voting stock of a corporate Borrower,
any corporate general partner of Borrower, or any corporation directly or
indirectly owning [10%] (19) or more of any such corporation, (2) the beneficial
interests in Borrower if a trust or the interest in any owner of fifty percent
(50%) or more of such beneficial interests, or (3) the ownership interests in
Borrower or any general partner of Borrower if either is a limited liability
company; (B) any general partnership interest in Borrower; or (C) any
partnership which is a direct or indirect partner of Borrower or any partner of
Borrower; (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; (iv) any change, removal, or
resignation of any general partner of Borrower; or (v) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner or
Borrower. (20)
SECTION 5.02 ONE-TIME TRANSFER. [Notwithstanding] (21) Section 5.01 and so long
as there is no default under the Documents (or event which with the passage of
time or the giving of notice or both would be a default), Lender agrees, upon
thirty (30) days prior written request, to consent to one transfer of the
entire Property (22) if:
(i) the proposed transferee of the Property is a person which, in the
judgment of Lender, has financial capability and creditworthiness, reputation
and experience in the ownership, operation, management, and leasing of similar
properties, equal to or greater than Borrower;
(ii) at the time of transfer the Loan to Value Ratio (defined below)
does not exceed 65%;
(iii) Borrower pays Lender a non-refundable servicing fee [(as specified
by Lender)] (23) at the time of the request and an additional fee equal to 1.0%
of the outstanding principal balance of the Loan at the time of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to verify
the first priority of the Documents at Borrower's expense;
(v) the Debt Service Coverage Ratio (defined below) is at least 1.60
to 1.00 for the preceding six (6) month period and Lender receives satisfactory
evidence that this Debt Service Coverage Ratio will be maintained for the next
succeeding twelve (12) months;
(vi) the transferee expressly assumes all obligations under the
Documents and executes any documents reasonably required by Lender, and all of
these documents are satisfactory in form and substance to Lender;
(vii) Lender reasonably approves the form and content of all transfer
documents, and Lender is furnished with a certified copy of the recorded
transfer documents;
(viii) the transferee complies with and delivers the ERISA Certification
and Environmental Indemnity Agreement, both of even date herewith; and
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(17) in one transaction
(18) 49%
(19) 49%
(20) Notwithstanding the foregoing, if Borrower or a corporate general
partner of Borrower is a corporation whose shares are traded on a
major stock exchange, the transfer of such shares shall in no
event constitute a default under this Instrument.
(21) Beginning six (6) months from Closing, and notwithstanding
(22) (with all terms and conditions of the Documents remaining the
same)
(23) of $2,500.00
Language indicated as being shown by strike out in the typeset
document is enclosed in brackets "[" and "]" in the electronic
format.
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<PAGE> 21
(ix) Borrower or the transferee pays all reasonable fees, costs, and
expenses incurred by Lender in connection with the proposed transfer,
including, without limitation, all legal (for both outside counsel and Lender's
staff attorneys), accounting, title insurance, documentary stamps taxes,
intangible taxes, mortgage taxes, recording fees, and appraisal fees, whether
or not the transfer is actually consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably
determined by Lender, of (i) the aggregate principal balance of all encumbrances
against the Property to (ii) the fair market value of the Property. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the Property for the applicable twelve (12) month period after
subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the Property is 95% leased and occupied if actual leasing is less than
95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees, reserves for replacements, real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expenses, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not be
anticipated for any greater time period than that approved by generally accepted
accounting principles and ordinary operating expenses shall not be prepaid.
Documentation of NOI and expenses shall be certified by an officer of Borrower
with detail satisfactory to Lender and shall be subject to the approval of
Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the Property.
Lender agrees and acknowledges that a merger or consolidation of
Borrower or a general partner of Borrower in which such Borrower or general
partner of Borrower is the surviving entity shall not constitute the use by
Borrower of Borrower's one-time transfer right provided in this Section 5.02,
and such one-time transfer right shall survive such merger and/or consolidation.
Section 5.03 Permitted Transfers Without Fee. Notwithstanding Section 5.01, the
original Borrower, and any transferee of the original Borrower permitted below,
may engage in the transactions described below after at feast fifteen (15) days'
prior written notice to Lender, provided that all of the following conditions
are met: (i) there is no default under the Documents (or event which with the
passage of time or the giving of notice or both would be a default); (ii) the
proposed transferee complies with and delivers the ERISA certification and
indemnification agreement described herein (or, if the statements required by
the certification are not true with respect to the proposed transferee, Lender
shall have received such evidence as it may require in its sole discretion to
determine that the proposed transfer is not and would not render the Loan a
prohibited transaction under ERISA); (iii) if all of the Property is
transferred, the proposed transferee shall have signed an assumption agreement
acceptable to Lender with respect to the Documents; (iv) the proposed transferee
shall have provided such information about the proposed transferee as requested
by Lender, and Lender shall have approved the proposed transferee, including,
but not limited to, a review of the proposed transferee's creditworthiness, good
character and reputation, and demonstrated ability and experience (by itself or
through its manager) in the ownership, operation, and leasing of property
similar to the Property; and (v) payment by Borrower or the proposed transferee
of (1) all costs and expenses incurred by Lender for the processing of said
transfer including a processing fee, (2) any documentary stamp taxes,
intangibles taxes, recording fees, and other costs and expenses required in
connection with the assumption agreement and any modification of the Documents,
and (3) all other costs and expenses (including attorneys' fees and expenses for
Lender's staff attorneys and outside counsel) of the preparation of the
assumption agreement and any modification of the Documents. Provided all of the
foregoing conditions are fulfilled with respect to each such transfer, Borrower"
may engage in the following transactions:
(a) Borrower may transfer the entire Property (or all the
ownership interests in borrower) to Roberts Realty Investors,
Inc. ("RRII"), a real estate investment trust. Lender shall
not be entitled to accelerate the indebtedness evidenced by
the Note nor change the Loan terms in the event of a
conveyance to RRII;
(b) Any merger or consolidation of Borrower or a general partner
of Borrower when Borrower or such general partner of Borrower
is the surviving entity.
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<PAGE> 22
ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT. The following shall be an "EVENT OF
DEFAULT":
(a) if Borrower fails to make any payment required under the
Documents when due and such failure continues for five (5) days after written
notice; provided, however, that if Lender gives one (1) notice of default
within any twelve (12) month period, Borrower shall have no further right to
any notice of monetary default during that twelve (12) month period;
(b) except for defaults listed in the other subsections of this
Section 6.01, if Borrower fails to perform or comply with any other provision
contained in the Documents and the default is not cured within thirty (30) days
after written notice (the "GRACE PERIOD"); provided, however, that Lender may
extend the Grace Period up to an additional sixty (60) days (for a total of
ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no
security title or security interest created by the Documents will be impaired
prior to completion of such cure, and (3) Lender's immediate exercise of any
remedies provided hereunder or by law is not necessary for the protection or
preservation of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer
in fraud of creditors, (iii) make an assignment for the benefit of its
creditors, (iv) not be able to pay its debts as such debts become due, or (v)
admit in writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency,
or liquidation proceeding, or any other proceedings for the relief of debtors,
is instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
(g) if any of the events in Sections 6.01 (e) or (f) shall occur
with respect to any (i) general partner of Borrower or (ii) guarantor of
payment or performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower;
(i) if any default occurs under the Environmental Indemnity and
such default is not cured within any applicable grace period in that document;
(j) if Borrower shall fail at any time to obtain, maintain,
renew, or keep in force the insurance policies required by Section 3.06 within
ten (10) days after written notice;
(k) if Borrower shall be in default under any other mortgage,
deed of trust, deed to secure debt or security agreement covering any part of
the Property, whether it be superior or junior in lien or security title to this
Instrument;
(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be upheld by
any court of competent jurisdiction or shall be consented to by Borrower; or
(m) (i) the consummation by Borrower of any transaction which
would cause (A) the Loan or any exercise of Lender's rights under the Documents
to constitute a non-exempt prohibited transaction under ERISA or (B) a
violation of a state statute regulating governmental plans; (ii) the failure of
any representation in Section 3.11 to be true and correct in all respects; or
(iii) the failure of Borrower to provide Lender with the written certifications
required by Section 3.11.
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SECTION 6.02 REMEDIES. If an Event of Default occurs, Lender or any
person designated by Lender may (but shall not be obligated to) take any action
(separately, concurrently, cumulatively, and at any time and in any order)
permitted under any Laws, without notice, demand, presentment, or protest (all
of which are hereby waived), to protect and enforce Lender's rights under the
Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations
immediately due and payable, except for defaults under Section 6.01 (f), (g),
or (h) which shall automatically make the Obligations immediately due and
payable;
(b) judicially or otherwise, (i) completely foreclose this
Instrument or (ii) partially foreclose this Instrument for any portion of the
Obligations due and the security title and security interest created by this
Instrument shall continue unimpaired and without loss of priority as to the
remaining Obligations not yet due;
(c) sell for cash or upon credit the Property and all right,
title and interest of Borrower therein and rights of redemption thereof,
pursuant to power of sale;
(d) recover judgment on the Note either before, during or after
any proceedings for the enforcement of the Documents and without any
requirement of any action being taken to (i) realize on the Property or (ii)
otherwise enforce the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
(g) with or without entering upon the Property, (i) exclude
Borrower and any person from the Property without liability for trespass,
damages, or otherwise; (ii) take possession of, and Borrower shall surrender on
demand, all books, records, and accounts relating to the Property; (iii) give
notice to Tenants or any person, make demand for, collect, receive, sue for,
and recover in its own name all Rents and cash collateral derived from the
Property; (iv) use, operate, manage, preserve, control, and otherwise deal with
every aspect of the Property including (A) conducting its business, (B) insuring
it, (C) making all repairs, renewals, replacements, alterations, additions, and
improvements to or on it, (D) completing the construction of any Improvements
in manner and form as Lender deems advisable, and (E) executing, modifying,
enforcing, and terminating new and existing Leases on such terms as Lender
deems advisable and evicting any Tenants in default; (v) apply the receipts
from the Property to payment of the Obligations, in any order or priority
determined by Lender, after first deducting all Costs, expenses, and
liabilities incurred by Lender in connection with the foregoing operations and
all amounts needed to pay the Impositions and other expenses of the Property,
as well as just and reasonable compensation for the services of Lender and its
attorneys, agents, and employees; and/or (vi) in every case in connection with
the foregoing, exercise all rights and powers of Borrower or Lender with
respect to the Property, either in Borrower's name or otherwise;
(h) release any portion of the Property for such consideration,
if any, as Lender may require without, as to the remainder of the Property,
impairing or affecting the security title or priority of this Instrument or
improving the position of any subordinate lien or security title holder with
respect thereto, except to the extent that the Obligations shall have been
actually reduced, and Lender may accept by assignment, pledge, or otherwise any
other property in place thereof as Lender may require without being accountable
for so doing to any other lien or security title holder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property
State including (i) the right to take possession of all tangible and intangible
personal property included within the Property ("PERSONAL PROPERTY") and take
such actions as Lender deems advisable for the care, protection and
preservation of the Personal Property and (ii) request Borrower at its expense
to assemble the Personal Property and make it available to Lender at a
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<PAGE> 24
convenient place acceptable to Lender. Any notice of sale, disposition or other
intended action by Lender with respect to the Personal Property sent to
Borrower at least five (5) days prior to such action shall constitute
commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws. If Lender exercises
any of its rights under Section 6.02(g), Lender shall not (a) be deemed to have
entered upon or taken possession of the Property except upon the exercise of
its option to do so, evidenced by its demand and overt act for such purpose;
(b) be deemed a beneficiary or mortgagee in possession by reason of such entry
or taking possession; nor (c) be liable (i) to account for any action taken
pursuant to such exercise other than for Rents actually received by Lender,
(ii) for any loss sustained by Borrower resulting from any failure to lease the
Property, or (iii) any other act or omission of Lender except for losses caused
by Lender's willful misconduct or gross negligence. Borrower hereby consents
to, ratifies, and confirms the exercise by Lender of its rights under this
Instrument and appoints Lender as its attorney-in-fact, which appointment shall
be deemed to be coupled with an interest and irrevocable, for such purposes.
Section 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred
by Lender in the exercise of its rights under the Documents, together with
interest thereon at the applicable interest rate specified in the Note, which
shall be the Default Rate unless prohibited by Laws, shall be (a) part of the
Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's rights under the Documents.
Section 6.04 Rights Pertaining to Sales. To the extent permitted under (and
in accordance with) any Laws, the following provisions shall, as Lender may
determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender may conduct multiple sales of any part of
the Property in separate tracts or in its entirety and Borrower waives any
right to require otherwise; (b) any sale may be postponed or adjourned by
public announcement at the time and place appointed for such sale or for such
postponed or adjourned sale without further notice; and (c) Lender may acquire
the Property and, in lieu of paying cash, may pay by crediting against the
Obligations the amount of its bid, after deducting therefrom any sums which
Lender is authorized to deduct under the provisions of the Documents.
Section 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender, shall, except as expressly provided to the contrary, be applied in the
order determined by Lender to: (a) payment of all Costs and expenses of any
enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items; (c) payment of the Obligations in
such order as Lender may elect; (d) payment of any other sums secured or
required to be paid by Borrower; and (e) payment of the surplus, if any, to any
person lawfully entitled to receive it. Borrower and Lender intend and agree
that during any period of time between any foreclosure judgment that may be
obtained and the actual foreclosure sale that the foreclosure judgment will not
extinguish the Documents or any rights contained therein including the
obligation of Borrower to pay all Costs and to pay interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws.
Section 6.06 Additional Provisions as to Remedies. No failure, refusal,
waiver, or delay by Lender to exercise any rights under the Documents upon any
default or Event of Default shall impair Lender's rights or be construed as a
waiver of, or acquiescence to, such or any subsequent default or Event of
Default. No recovery of any judgment by Lender and no levy of an execution upon
the Property or any other property of Borrower shall affect the security title
and security interest created by this Instrument and such liens, security
title, rights, powers, and remedies shall continue unimpaired as before. Lender
may resort to any security given by this Instrument or any other security now
given or hereafter existing to secure the Obligations, in whole or in part, in
such portions and in such order as Lender may deem advisable, and no such
action shall be construed as a waiver of any of the liens, security title,
rights, or benefits granted hereunder. Acceptance of any payment after any
Event of Default shall not be deemed a waiver or a cure of such Event of
Default and such acceptance shall be deemed an acceptance on account only. If
Lender has started enforcement of any right by foreclosure, sale, entry, or
otherwise and such proceeding shall be discontinued, abandoned, or determined
adversely for any reason, then Borrower and Lender
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shall be restored to their former positions and rights under the Documents with
respect to the Property, subject to the security title and security interest
hereof.
Section 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower
may do so under Laws, Borrower (a) will not at any time insist on, plead,
claim, or take the benefit of any statute or rule of law or later enacted
providing for any appraisement, valuation, stay, extension, moratorium,
redemption, or any statute of limitations; (b) for itself, its successors and
assigns, and for any person ever claiming an interest in the Property (other
than Lender), waives and releases all rights of redemption, reinstatement,
valuation, appraisement, notice of intention to mature or declare due the whole
of the Obligations, all rights to a marshaling of the assets of Borrower,
including the Property, or to a sale in inverse order of alienation, in the
event of foreclosure of the security title and security interests created under
the Documents; (c) shall not be relieved of its obligation to pay the
Obligations as required in the Documents nor shall the lien, security title or
priority of the Documents be impaired by any agreement renewing, extending, or
modifying the time of payment or the provisions of the Documents (including a
modification of any interest rate), unless expressly released, discharged, or
modified by such agreement. Regardless of consideration and without any notice
to or consent by the holder of any subordinate lien, security title, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the security title, security interest, or the priority of the modified
Documents as security for the Obligations over any such subordinate lien,
security title, security interest, encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
Section 7.01 Security Agreement. This Instrument constitutes both a real
property mortgage and a "SECURITY AGREEMENT" within the meaning of the U.C.C.
The Property includes real and personal property and all tangible and
intangible rights and interest of Borrower in the Property. Borrower grants to
Lender, as security for the Obligations, a security interest in the Personal
Property to the fullest extent that the same may be subject to the U.C.C.
Borrower authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
Section 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
Section 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall mean any claims, suits, liabilities (including strict
liabilities), actions, proceedings, obligations, debts, damages, losses, Costs,
expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid
in settlement of whatever kind including attorneys' fees (both in-house staff
and retained attorneys) and all other costs of defense. The term "INDEMNIFIED
PARTIES" shall mean (a) Lender, (b) any prior owner or holder of the Note, (c)
any existing or prior servicer of the Loan, (d) the officers, directors,
shareholders, partners, employees and trustees of any of the foregoing, and (e)
the heirs, legal representatives, successors and assigns of each of the
foregoing.
Section 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
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SECTION 8.04 ERISA INDEMNITY. Borrower shall, at its sole expense,
indemnify the Indemnified Parties against all Losses imposed upon, incurred by,
or asserted against the Indemnified Parties (a) as a result of a Violation, (b)
in the investigation, defense, and settlement of a Violation, (c) as a result
of a breach of the representations in Section 3.11 or default thereunder, (d)
in correcting any prohibited transaction or the sale of a prohibited loan, and
(e) in obtaining any individual prohibited transaction exemption under ERISA
that may be required, in Lender's sole discretion.
SECTION 8.05 ENVIRONMENTAL INDEMNITY. Borrower and RRII have executed and
delivered the Environmental and ERISA Indemnity Agreement dated the date hereof
to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, the Indemnified Parties
may, in their sole discretion, engage their own attorneys and professionals to
defend or assist them and, at their option, their attorneys shall control the
resolution of any claims or proceedings. Upon demand, Borrower shall pay or, in
the sole discretion of the Indemnified Parties, reimburse and/or indemnify the
Indemnified Parties for all Costs imposed on, incurred by, or asserted against
the Indemnified Parties by reason of any items set forth in this Article VIII
and/or the enforcement or preservation of the Indemnified Parties' rights under
the Documents. Any amount payable to the Indemnified Parties under this Section
shall (a) be deemed a demand obligation, (b) be part of the Obligations, (c)
bear interest at the applicable interest rate specified in the Note, which shall
be the Default Rate unless prohibited by Laws, until paid if not paid on demand,
and (d) be secured by this Instrument.
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL. Notwithstanding anything
to the contrary in the Documents and in addition to the recourse obligations in
the Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, assignment or
foreclosure of this Instrument, (c) the acceptance by Lender (or any nominee)
of a deed in lieu of foreclosure, (d) a plan of reorganization filed under the
Bankruptcy Code, or (e) the exercise by the Lender of any rights in the
Documents. Borrower's obligations under Article VIII shall not be affected by
the absence or unavailability of insurance covering the same or by the failure
or refusal by any insurance carrier to perform any obligation under any
applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 USURY SAVINGS CLAUSE. All agreements in the Documents are
expressly limited so that in no event whatsoever shall the amount paid or
agreed to be paid under the Documents for the use, forbearance, or detention of
money exceed the highest lawful rate permitted by Laws. If, at the time of
performance, fulfillment of any provision of the Documents shall involve
transcending the limit of validity prescribed by Laws, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity. If
Lender shall ever receive as interest an amount which would exceed the highest
lawful rate, the receipt of such excess shall be deemed a mistake and (a) shall
be canceled automatically or (b) if paid, such excess shall be (i) credited
against the principal amount of the Obligations to the extent permitted by Laws
or (ii) rebated to Borrower if it cannot be so credited under Laws.
Furthermore, all sums paid or agreed to be paid under the Documents for the
use, forbearance, or detention of money shall to the extent permitted by Laws
be amortized, prorated, allocated, and spread throughout the full stated term
of the Note until payment in full so that the rate or amount of interest on
account of the Obligations does not exceed the maximum lawful rate of interest
from time to time in effect and applicable to the Obligations for so long as
the Obligations is outstanding.
SECTION 9.02 NOTICES. Any notice, request, demand, consent, approval,
direction, agreement, or other communication (any "NOTICE") required or
permitted under the Documents shall be in writing and shall be validly given if
sent by a nationally-recognized courier that obtains receipts, delivered
personally by a courier that obtains receipts, or mailed by United States
certified mail (with return receipt requested and postage prepaid) addressed to
the applicable person as follows:
21
<PAGE> 27
<TABLE>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
ROBERTS PROPERTIES RESIDENTIAL, L.P. HOLT, NEY, ZATCOFF & WASSERMAN, LLP
c/o Roberts Properties, Inc., 8010 Roswell Rd, 100 Galleria Parkway, Suite 600
Suite 120 Atlanta, Georgia 30339
Atlanta, Georgia 30350 Attention: Sanford H. Zatcoff, Esq.
Attention: Charles R. Elliot
With a copy of notices sent to Lender to:
If to Lender:
THE PRUDENTIAL INSURANCE COMPANY OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AMERICA Prudential Capital Group
Prudential Capital Group One Ravinia Drive, Suite 1400
One Ravinia Drive, Suite 1400 Atlanta, Georgia 30346
Atlanta, Georgia 30346 Attention: Regional Counsel
Attention: Mortgage Loan Customer Service Reference Loan No. 6 102 830
Reference Loan No. 6 102 830
</TABLE>
Each notice shall be effective upon being so sent, delivered, or mailed, but
the time period for response or action shall run from the date of receipt as
shown on the delivery receipt. Refusal to accept delivery or the inability to
deliver because of a changed address for which no notice was given shall be
deemed receipt. Any party may periodically change its address for notice and
specify up to two (2) additional addresses for copies by giving the other party
at least ten (10) days' prior notice.
SECTION 9.03 SOLE DISCRETION OF LENDER. Except as otherwise expressly
stated, whenever Lender's judgment, consent, or approval is required or Lender
shall have an option or election under the Documents, such judgment, the
decision as to whether or not to consent to or approve the same, or the
exercise of such option or election shall be in the sole and absolute
discretion of Lender.
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION. The Documents
shall be governed by and construed in accordance with the laws of the Property
State and the applicable laws of the United States of America. Without
limiting Lender's right to bring any action or proceeding against Borrower or
the Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any
state or federal court in the Property State, (b) agrees that any Action may be
heard and determined in such court, and (c) waives, to the fullest extent
permitted by Laws, the defense of an inconvenient forum to the maintenance of
any Action in such jurisdiction.
SECTION 9.05 CONSTRUCTION OF PROVISIONS. The following rules of
construction shall apply for all purposes of this Instrument unless the context
otherwise requires: (a) all references to numbered Articles or Sections or to
lettered Exhibits are references to the Articles and Sections hereof and the
Exhibits annexed to this Instrument and such Exhibits are incorporated into
this Instrument as if fully set forth in the body of the Instrument; (b) all
Article, Section, and Exhibit captions are used for convenience and reference
only and in no way define, limit, or in any way affect this Instrument; (c)
words of masculine, feminine, or neuter gender shall mean and include the
correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and vice versa; (d) no inference in
favor of or against any party shall be drawn from the fact that such party has
drafted any portion of this Instrument; (e) all obligations of Borrower
hereunder shall be performed and satisfied by or on behalf of Borrower at
Borrower's sole expense; (f) the terms "INCLUDE," "INCLUDING," and similar terms
shall be construed as if followed by the phrase "WITHOUT BEING LIMITED TO;" (g)
the terms "PROPERTY," "LAND," "IMPROVEMENTS," and "PERSONAL PROPERTY" shall be
construed as if followed by the phrase "OR ANY PART THEREOF;" (h) the term
"OBLIGATIONS" shall be construed as if followed by the phrase "OR ANY OTHER
SUMS SECURED HEREBY, OR ANY PART THEREOF;" (i) the term "PERSON" shall include
natural persons, firms, partnerships,
22
<PAGE> 28
corporations, governmental authorities or agencies, and any other public or
private legal entities; (j) the term "PROVISIONS," when used with respect hereto
or to any other document or instrument, shall be construed as if preceded by the
phrase "TERMS, COVENANTS, AGREEMENTS, REQUIREMENTS, AND/OR CONDITIONS"; (k) the
term "LEASE" shall mean "TENANCY, SUBTENANCY, LEASE, SUBLEASE, OR RENTAL
AGREEMENT," the term "LESSOR" shall mean "LANDLORD, SUBLANDLORD, LESSOR, AND
SUBLESSOR," and the term "TENANTS" or "LESSEE" shall mean "TENANT, SUBTENANT,
LESSEE, AND SUBLESSEE"; (l) the term "OWNED" shall mean "NOW OWNED OR LATER
ACQUIRED"; (m) the terms "ANY" and "ALL" shall mean "ANY OR ALL"; and (n) the
term "ON DEMAND" or "UPON DEMAND" shall mean "WITHIN FIVE (5) BUSINESS DAYS
AFTER WRITTEN NOTICE."
SECTION 9.06 TRANSFER OF LOAN. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any guarantor and any
indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section including the delivery of an
estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 MISCELLANEOUS. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provisions shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender may, without notice to
Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the security title and
security interest created hereby shall not be destroyed or terminated by the
application of the doctrine of merger and Lender shall continue to have and
enjoy all its rights and privileges as to each separate estate. Upon foreclosure
of this Instrument, none of the Leases shall be destroyed or terminated as a
result of such foreclosure, by application of the doctrine of merger or as a
matter of law, unless Lender takes all actions required by law to terminate the
Leases as a result of foreclosure. All of Borrower's covenants and agreements
under the Documents shall run with the land and time is of the essence. Borrower
appoints Lender as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in the name of Borrower of
any of the documents listed in Sections 3.04, 3.19, 4.01 and 6.02. The Documents
cannot be amended, terminated, or discharged except in a writing signed by the
party against whom enforcement is sought. No waiver, release, or other
forbearance by Lender will be effective unless it is in a writing signed by
Lender and then only to the extent expressly stated. The provisions of the
Documents shall be binding upon Borrower and its heirs, devisees,
representatives, successors, and assigns including successors in interest to the
Property and inure to the benefit of Lender and its heirs, successors,
substitutes, and assigns. Where two or more persons have executed the Documents,
the obligations of such persons shall be joint and several, except to the extent
the context clearly indicates otherwise. The Documents may be executed in any
number of counterparts with the same effect as if all parties had executed the
same document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be necessary
to produce one such counterpart. Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of any Document which is
not of public record, and, in the case of any mutilation, upon surrender and
cancellation of the Document, Borrower will issue, in lieu thereof, a
replacement Document, dated the date of the lost, stolen, destroyed or mutilated
Document containing the same provisions.
23
<PAGE> 29
SECTION 9.08 ENTIRE AGREEMENT. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower and
Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X - LOCAL LAW PROVISIONS
SECTION 10.01 WAIVER. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE UNDER
THE CONSTITUTION OR THE LAWS OF THE STATE OF GEORGIA OR THE CONSTITUTION OR THE
LAWS OF THE UNITED STATES OF AMERICA TO NOTICE, OTHER THAN EXPRESSLY PROVIDED
FOR IN THIS INSTRUMENT, OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY
RIGHT OR REMEDY PROVIDED BY THIS INSTRUMENT TO LENDER, AND BORROWER WAIVES
BORROWER'S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED
IN ACCORDANCE WITH THE PROVISIONS OF THIS INSTRUMENT ON THE GROUND (IF SUCH BE
THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. ALL
WAIVERS BY BORROWER IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY, AND KNOWINGLY, AFTER BORROWER HAS BY BORROWER'S ATTORNEY BEEN
FIRST APPRISED OF AND COUNSELED WITH RESPECT TO BORROWER'S POSSIBLE ALTERNATIVE
RIGHTS.
---------------
(Initialed and Acknowledged by Borrower)
SECTION 10.02 NATURE OF INSTRUMENT. THIS INSTRUMENT is a deed passing title to
Lender and is made under the laws of the State of Georgia relating to deeds to
secure debt, and is not a mortgage, and is given to secure the performance and
repayment of the Obligations. All references in this Instrument to Borrower as
"mortgagor" shall be deemed to refer to Borrower as "grantor," and all
references in this Instrument to Lender as "mortgagee" shall be deemed to refer
to Lender as "grantee."
SECTION 10.03 NO NOVATION. Lender's acceptance of an assumption of the
obligations of this Instrument and of the Note, and any release of Borrower (if
any) in connection with such assumption, shall not constitute a novation.
SECTION 10.04 GEORGIA REMEDIES. Section 6.02(b) above is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(b) Lender, at its option, may sell the Property, or any part thereof, at
public sale or sales before the door of the courthouse of the county in which
the Property, or any part thereof, is situated, to the highest bidder for cash,
in order to pay the Obligations and insurance premiums, liens, assessments,
taxes and charges, including utility charges, if any, with accrued interest
thereon, and all Costs incurred by Lender in connection with such sale and all
other expenses of the sale and of all proceedings in connection therewith,
including reasonable attorneys' fees, after advertising the time, place and
terms of sale once a week for four (4) weeks immediately preceding such sale
(but without regard to the number of days) in a newspaper in which sheriff's
sales are advertised in said county. The foregoing notwithstanding, Lender may
sell, or cause to be sold, any tangible or intangible personal property,
24
<PAGE> 30
or any part thereof, and which constitutes a part of the security hereunder, in
the foregoing manner, or as may otherwise be provided by law. Lender may bid
and purchase at any such sale and may satisfy Lender's obligation to purchase
pursuant to Lender's bid by canceling an equivalent portion of any Obligations
then outstanding and secured hereby.
At any such sale, Lender may execute and deliver to the purchaser a
conveyance of the Property, or any part thereof, in fee simple (but without
covenants and warranties, express or implied), and, to this end, Borrower hereby
constitutes and appoints Lender the agent and attorney-in-fact of Borrower to
make such sale and conveyance, and thereby to divest Borrower of all right,
title, and equity that Borrower may have in and to the Property and to vest the
same in the purchaser or purchasers at such sale or sales, and all the acts and
doings of said agent and attorney-in-fact are hereby ratified and confirmed,
and any recitals in said conveyance or conveyances as to facts essential to a
valid sale shall be binding on Borrower. The aforesaid power of sale and
agency hereby granted are coupled with an interest and are irrevocable by death
or otherwise, are granted as cumulative of the other remedies provided by law
for collection of the Obligations secured hereby, and shall not be exhausted by
one exercise thereof but may be exercised until full payment of all Obligations
secured hereby."
IN WITNESS WHEREOF, the undersigned have executed this Instrument under seal
as of the day first set forth above.
Signed, sealed, and delivered as to BORROWER:
the foregoing date in the presence
of the following witnesses:
ROBERTS PROPERTIES RESIDENTIAL, L.P.,
/s/ CHARLES R. ELLIOTT a Georgia limited partnership
- -----------------------------------
Witness BY: Roberts Realty Investors, Inc., a
Georgia corporation, its sole
general partner
/s/ LAURIE HEBERLE BY: /s/ CHARLES S. ROBERTS
- ----------------------------------- ------------------------------------
Notary Public Charles S. Roberts, President
Commission Expiration Date: 1/8/99
--------
[NOTARY SEAL] [CORPORATE SEAL]
25
<PAGE> 31
EXHIBIT A
(Legal Description)
All that tract of land in Land Lot 313 of the 6th District, Gwinnett County,
Georgia, described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at the intersection of the
southeast right-of-way line of Spalding Drive (variable right-of-way) with the
southwest right-of-way line of Holcomb Bridge Road (80 foot right-of-way);
running thence southwest along the southeast right-of-way line of Spalding Drive
1,050.04 feet to a 1/2-inch rebar found; thence South 15 degrees 08 minutes 01
second East 10.56 feet along said right-of-way line to a 1/2-inch rebar found
and the TRUE POINT OF BEGINNING, from the TRUE POINT OF BEGINNING as thus
established, thence leaving said right-of-way line, running South 15 degrees 08
minutes 01 second East 285.61 feet to a 1/2-inch rebar found; thence North 76
degrees 01 minute 45 seconds East 184.19 feet to a 1-inch crimp top iron pin
found; thence North 76 degrees 05 minutes 38 seconds East 184.30 feet to a
1-inch open top pin in stump found; thence South 04 degrees 43 minutes 38
seconds East 96.01 feet to a corner in 24-inch red oak found; thence South 21
degrees 41 minutes 14 seconds East 66.06 feet to a corner in 24-inch pine found;
thence North 77 degrees 43 minutes 44 seconds East 94.37 feet to a 1/2-inch
rebar at 1-inch open top pin found; thence South 13 degrees 41 minutes 00
seconds West 26.83 feet to a 1/2-inch rebar found; thence South 74 degrees 00
minutes 12 seconds East 235.94 feet to a 1/2-inch rebar found; thence South 43
degrees 50 minutes 28 seconds West 176.35 feet to a point in a lake; thence
South 59 degrees 55 minutes 35 seconds West 486.00 feet to a point in a lake;
thence South 13 degrees 09 minutes 01 second West 120.79 feet to a point; thence
South 28 degrees 57 minutes 30 seconds East 356.47 feet to a 1/2-inch rebar
found; thence South 50 degrees 10 minutes 32 seconds West 360.00 feet to a
1/2-inch rebar found; thence North 37 degrees 08 minutes 07 seconds West 1255.10
feet to a 1/2-inch rebar found on the southeast right-of-way line of Spalding
Drive, which iron pin found is located 50 feet southeast of and parallel to the
existing centerline of Spalding Drive at this point; thence, continuing along
the southeast right-of-way line of Spalding Drive, along the arc of a curve to
the left (which arc is subtended by a chord having a bearing and distance of
North 55 degrees 46 minutes 33 seconds East 791.69 feet and a radius of
22,086.32 feet) 791.73 feet to the TRUE POINT OF BEGINNING, said tract
containing approximately 20.591 acres as shown on plat of ALTA/ACSM Land Title
Survey for Roberts Properties Residential, L.P., The Prudential Insurance
Company of America and Chicago Title Insurance Company by Rochester &
Associates, Inc., bearing the seal and certification of James C. Jones, Georgia
Registered Land Surveyor No. 2298, dated June 5, 1998, last revised June 17,
1998.
TOGETHER WITH: All right, title and interest in, to and under the easements
over the Association Lake Tract, the Dam Tract and the Peninsula Tract created
by that certain Declaration of Easements and Agreement by and between Deerings
Lake Condominium Association, Inc. and Roberts Properties, Inc., dated October
20, 1992, filed for record October 22, 1992, and recorded in Deed Book 7982,
page 191, Gwinnett County, Georgia records as said Association Lake Tract, the
Dam Tract and the Peninsula Tract are defined in said Declaration of Easements
and Agreement, as amended by First Amendment to Declaration of Easements and
Agreement dated as of March 29, 1994, by and between Deerings Lake Condominium
<PAGE> 32
Association, Inc. and Roberts Properties Rosewood Plantation, L.P., filed for
record May 11, 1994, and recorded in Deed book 10297, page 20, aforesaid
records; as further amended by Second Amendment to Declaration of Easements and
Agreements by and between Deerings Lake Condominium Association, Inc. and
Roberts Properties Rosewood Plantation, L.P., dated as of June 5, 1994, filed
for record August 19, 1994, and recorded in Deed Book 10608, page 250,
aforesaid records; as further amended by Third Amendment to Declaration of
Easements and Agreements by and between Deerings Lake Condominium Association,
Inc. and Roberts Properties Residential, L.P., dated as of October 12, 1994,
filed for record December 3, 1994, and recorded in Deed Book 10907, page 280,
aforesaid records.
<PAGE> 33
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, owned by Borrower, wherever situate, and now or hereafter located on,
attached to, contained in, or used or usable in connection with the real
property described in Exhibit A attached hereto and incorporated herein (the
"LAND"), and all improvements located thereon (the "IMPROVEMENTS") or placed on
any part thereof, though not attached thereto, including all screens, awnings,
shades, blinds, curtains, draperies, carpets, rugs, furniture and furnishings,
heating, electrical, lighting, plumbing, ventilating, air-conditioning,
refrigerating, incinerating and/or compacting plants, systems, fixtures and
equipment, elevators, hoists, stoves, ranges, vacuum and other cleaning
systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers,
furnaces, pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the
personal property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights and
privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses,
architectural, engineering and construction contracts, books of account,
insurance policies, and other documents of whatever kind or character, relating
to the use, construction upon, occupancy, leasing, sale, or operation of the
Land and/or the Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto, which Borrower now has or may hereafter
acquire in the Land, the Improvements, or any of the personal property
described in this Exhibit B, or any portion thereof or interest therein, and
any and all awards made for the taking by eminent domain, or by any proceeding
or purchase in lieu thereof, of the whole or any part of such property,
including without limitation, any award resulting from a change of any streets
(whether as to grade, access, or otherwise) and any award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's
Agreement, or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
1
<PAGE> 34
'A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY
DESCRIBED IN EXHIBIT A.
2
<PAGE> 35
EXHIBIT
PERMITTED EXCEPTIONS
1. Taxes and assessments for the year 1998 and subsequent years, a lien not
yet due and payable.
2. Permit to Cut or Trim Trees from Janice M. Seward, Elizabeth Ann Kloske,
George C. Seward and Jeannette S. Deacon to Georgia Power Company, dated
February 10, 1976, filed for record March 22, 1976, and recorded in Deed
Book 1086, page 49, Gwinnett County Records.
3. Permit for Anchors, Guy Poles and Wires from Janice M. Seward, Elizabeth
Ann Kloske, George C. Seward and Jeannette S. Deacon to Georgia Power
Company, dated February 10, 1976, filed for record March 22, 1976, and
recorded in Deed Book 1086, page 50, aforesaid Records.
4. Permit for Anchors, Guy Poles and Wires from Janice M. Seward to Georgia
Power Company, dated October 23, 1980, filed for record April 13, 1981, and
recorded in Deed Book 2153, page 144, aforesaid Records.
5. Easement from G.E. McGee to Georgia Power Company, dated May 29, 1935,
filed for record June 20, 1935.
6. Rights, if any, of the property owners abutting the lake partially located
on the subject property in and to the waters of said lake and in and to the
bed thereof; also boating and fishing rights of property owners abutting
said lake or the stream or streams of water leading thereto or therefrom.
7. Rights of upper and lower riparian owners in and to the waters of rivers,
creeks or branches crossing or adjoining the subject property, and the
natural flow thereof, free from diminution or pollution.
8. Such items as shown on a survey by James C. Jones, Georgia Registered Land
Surveyor No. 2298, dated June 5, 1998 as follows:
a. 50-foot building line along Spalding Drive except that the building
line at the clubhouse is 44-foot;
b. 20-foot building line along the northern boundary lines of subject
property;
c. Sanitary sewer line and manholes located throughout the subject
property and crossing over eastern boundary line;
d. Corrugated metal pipe crossing over eastern boundary line of subject
property;
e. Chain link fence running along southeastern boundary line of subject
property and onto property adjoining subject property to the south
and southeast;
f. Portion of lake located along southeastern boundary line of subject
property;
g. Dam crossing southeastern boundary line of subject property;
h. Storm water drainage facilities including junction boxes, headwalls
and single-wing catch basins located in the western, eastern and
southern portions of subject property;
i. a portion of subject property is located in Flood Zone "A";
j. Light poles and transformers located throughout subject property;
k. Water valves and fire hydrants located throughout the subject
property;
<PAGE> 36
l. Corrugated metal pipe running from the portion of the lake located on
the adjoining property to the southeast, to the boundary of subject
property;
m. Corner of chain link fence at the eastern corner of subject property
encroaches onto adjoining property by 2.9 feet;
n. Brick signs encroach into the right-of-way of Spalding Drive; and
o. Manhole and sanitary sewer line not in use in the eastern portion of
subject property.
9. Declaration of Easements and Agreement between Deerings Lake Condominium
Association, Inc. and Roberts Properties, Inc., dated October 20, 1992,
filed for record October 22, 1992, and recorded in Deed Book 7982, page
191, aforesaid Records, as amended by First Amendment to Declaration of
Easements and Agreement between Deerings Lake Condominium Association, Inc.
and Roberts Properties Rosewood Plantation, L.P., dated as of March 29,
1994, filed for record May 11, 1994, and recorded in Deed Book 10297, page
20, aforesaid Records, as further amended by Second Amendment to
Declaration of Easements and Agreements between Deerings Lake Condominium
Association, Inc. and Roberts Properties Rosewood Plantation, L.P., dated
as of June 5, 1994, filed for record August 19, 1994, and recorded in Deed
Book 10608, page 250, aforesaid Records; as further amended by Third
Amendment to Declaration of Easements and Agreements between Deerings Lake
Condominium Association, Inc. and Roberts Properties Residential, L.P.,
dated as of October 12, 1994, filed December 3, 1994, and recorded in Deed
Book 10907, page 280, aforesaid Records, which Declaration establishes
easements and provides for a private charge or assessment.
10. Easement from Rosewood Plantation Apts./Roberts Properties to Georgia Power
Company, dated May, 1993, filed for record July 12, 1993, and recorded in
Deed Book 9014, page 221, aforesaid Records.
11. Agreement and Easement between Wometco Cable TV of Georgia, Inc. and
Roberts Properties Rosewood Plantation, L.P., dated August 3, 1993, filed
for record August 17, 1993, and recorded in Deed Book 9197, page 207,
aforesaid Records.
12. Water Metering Device Easement from Roberts Properties Rosewood Plantation,
L.P., to Gwinnett County, dated May 20, 1994, filed for record June 6,
1994, and recorded in Deed Book 10377, page 190, aforesaid Records.
<PAGE> 37
EXHIBIT D
LIST OF MAJOR TENANTS
NONE
1
<PAGE> 1
LIMITED GUARANTY
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, the
undersigned, ROBERTS REALTY INVESTORS, INC. (whether one or more, hereinafter
together called "Guarantor" in the singular) absolutely guarantees and agrees
to pay to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (hereinafter called
"Lender") at the address designated in the Security Instrument (as hereinafter
defined) for payment thereof or as such address may be changed as provided in
the Security Instrument, all limited and full recourse indebtedness of ROBERTS
PROPERTIES RESIDENTIAL, L.P., a limited partnership organized under the laws of
the State of Georgia (hereinafter called "Borrower"), under Paragraphs 8 and 9
of that certain Promissory Note, dated June 23, 1998 in the original principal
amount of Eight Million One Hundred Thousand and NO/100 Dollars
($8,100,000.00), payable to the order of Lender, and all modifications,
renewals and extensions of and substitutions for said promissory note (said
promissory note and all modifications, renewals and extensions thereof and all
substitutions therefor hereinafter called the "Note"), together with all
interest, attorneys' fees and collection costs provided in the Note (all such
indebtedness is hereinafter called the "Indebtedness"), which Note is secured
by the deed to secure debt and security agreement (hereinafter called the
"Security Instrument") of even date herewith from Borrower to Lender and to pay
any and all costs, attorneys' fees and expenses incurred or expended by Lender
in collecting any of the Indebtedness or in enforcing any right granted
hereunder.
Except as otherwise limited as provided herein, in the event Borrower fails
to pay the Indebtedness, Guarantor shall immediately upon written demand of
Lender promptly and with due diligence pay for the benefit of Lender all of the
Indebtedness.
Guarantor expressly waives presentment for payment, demand, notice of
demand and of dishonor and nonpayment of the Indebtedness, notice of intention
to accelerate the maturity of the Indebtedness or any part thereof, notice of
disposition of collateral, notice of acceleration of the maturity of the
Indebtedness or any part thereof, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party. Lender shall be
under no obligation to notify Guarantor of its acceptance hereof or of any
advances made or credit extended on the faith hereof or the failure of Borrower
to pay any of the Indebtedness as it matures or any default in the performance
of any of the Obligations under the Security Instrument, or to use diligence in
preserving the liability of any person on the Indebtedness or the Obligations or
in bringing suit to enforce collection of the Indebtedness or performance of the
Obligations. Guarantor waives all defenses given to sureties or guarantors at
law or in equity other than the actual payment of the Indebtedness and
performance of the Obligations and all defenses based upon questions as to the
validity, legality or enforceability of the Indebtedness and/or the Obligations
and agrees that Guarantor shall be primarily liable hereunder.
Lender, without authorization from or notice to Guarantor and without
impairing, modifying, changing, releasing, limiting or affecting the liability
of Guarantor hereunder, may from time to time at its discretion and with or
without valuable consideration, alter, compromise, accelerate, renew, extend or
change the time or manner for the payment of any or all of the Indebtedness,
increase or reduce the rate of interest thereon, take and surrender security,
exchange security by way of substitution, or in any way it deems necessary take,
accept, withdraw, subordinate, alter, amend, modify or eliminate security, add
or release or discharge endorsers, guarantors or other obligors, make changes of
any sort whatever in the terms of payment
- 1 -
<PAGE> 2
of the Indebtedness, in the Obligations or in the manner of doing business with
Borrower, or settle or compromise with Borrower or any other person or persons
liable on the Indebtedness or the Obligations on such terms as it may see fit,
and may apply all moneys received from the Borrower or others, or from any
security held (whether held under a security instrument or not), in such manner
upon the Indebtedness (whether then due or not) as it may determine to be in its
best interest, without in any way being required to marshal securities or assets
or to apply all or any part of such moneys upon any particular part of the
Indebtedness. It is specifically agreed that Lender is not required to retain,
hold, protect, exercise due care with respect thereto, perfect security
interests in or otherwise assure or safeguard any security for the Indebtedness;
no failure by Lender to do any of the foregoing and no exercise or nonexercise
by Lender of any other right or remedy of Lender shall in any way affect any of
Guarantor's obligations hereunder or any security furnished by Guarantor or give
Guarantor any recourse against Lender.
The liability of Guarantor hereunder shall not be modified, changed,
released, limited or impaired in any manner whatsoever on account of any or all
of the following: (a) the incapacity, death, disability, dissolution or
termination of Guarantor, Borrower, Lender or any other person or entity; (b)
the failure by Lender to file or enforce a claim against the estate (either in
administration, bankruptcy or other proceeding) of Borrower or any other person
or entity; (c) recovery from Borrower or any other person or entity becomes
barred by any statute of limitations or is otherwise prevented; (d) any
defenses, set-offs or counterclaims which may be available to Borrower or any
other person or entity; (e) any transfer or transfers of any of the property
covered by the Security Instrument or any other instrument securing the payment
of the Note; (f) any modifications, extensions, amendments, consents, releases
or waivers with respect to the Note, the deed to secure debt and security
agreement, any other instrument now or hereafter securing the payment of the
Note, or this Guaranty; (g) any failure of Lender to give any notice to
Guarantor of any default under the Note, the deed to secure debt and security
agreement, any other instrument securing the payment of the Note, or this
Guaranty; (h) Guarantor is or becomes liable for any indebtedness owing by
Borrower to Lender other than under this Guaranty; or (i) any impairment,
modification, change, release or limitation of the liability of, or stay of
actions or lien enforcement proceedings against, Borrower, its property, or its
estate in bankruptcy resulting from the operation of any present or future
provision of the Federal Bankruptcy Code or any other present or future, federal
or state insolvency, bankruptcy or similar law (all of the foregoing hereinafter
collectively called "applicable Bankruptcy Law") or from the decision of any
court.
Lender shall not be required to pursue any other remedies before
invoking the benefits of the guaranties contained herein, and specifically it
shall not be required to make demand upon or institute suit or otherwise pursue
or exhaust its remedies against Borrower or any surety other than Guarantor or
to proceed against any security now or hereafter existing for the payment of
any of the Indebtedness. Lender may maintain an action on this Guaranty
without joining Borrower therein and without bringing a separate action against
Borrower.
If for any reason whatsoever (including but not limited to ultra vires,
lack of authority, illegality, force majeure, act of God or impossibility) the
Indebtedness or the Obligations cannot be enforced against Borrower, such
unenforceability shall in no manner affect the liability of Guarantor hereunder
and Guarantor shall be liable hereunder notwithstanding that Borrower may not be
liable for such Indebtedness or such Obligations and to the same extent as
Guarantor would have been liable if such Indebtedness or such Obligations and to
the same extent as Guarantor would have been liable if such Indebtedness or
Obligations had been enforceable against Borrower.
-2-
<PAGE> 3
Guarantor absolutely and unconditionally covenants and agrees that in the
event that Borrower does not or is unable so to pay the Indebtedness or perform
the Obligations for any reason, including, without limitation, liquidation,
dissolution, receivership, conservatorship, insolvency, bankruptcy, assignment
for the benefit of creditors, sale of all or substantially all assets,
reorganization, arrangement, composition, or readjustment of, or other similar
proceedings affecting the status, composition, identity, existence, assets or
obligations of Borrower, or the disaffirmance or termination of any of the
Indebtedness or Obligations in or as a result of any such proceeding, Guarantor
shall pay the Indebtedness and perform the Obligations and no such occurrence
shall in any way affect guarantor's obligations hereunder.
Should the status of Borrower change, this Guaranty shall continue and
also cover the Indebtedness and Obligations of Borrower under the new status
according to the terms hereof. This Guaranty shall remain in full force and
effect notwithstanding any transfer of the property covered by the Security
Instrument.
In the event any payment by Borrower to Lender is held to constitute a
preference under any applicable Bankruptcy Law, or if for any other reason
Lender is required to refund such payment or pay the amount thereof to any
other party, such payment by borrower to Lender shall not constitute a release
of Guarantor from any liability hereunder, but Guarantor agrees to pay such
amount to Lender upon demand and this Guaranty shall continue to be effective
or shall be reinstated, as the case may be, to the extent of any such payment
or payments.
Guarantor agrees that it shall not have (a) the right to the benefit of,
or to direct the application of, any security held by Lender (including the
property covered by the deed to secure debt and security agreement and any
other instrument securing the payment of the Note), any right to enforce any
remedy which Lender now has or hereafter may have against Borrower, or any right
to participate in any security now or hereafter held by Lender, or (b) any
defense arising out of the absence, impairment or loss of any right of
reimbursement or subrogation or other right or remedy of Guarantor against
borrower or against any security resulting from the exercise or election of any
remedies by Lender (including the exercise of the power of sale under the
Security Instrument), or any defense arising by reason of any disability or
other defense of borrower or by reason of the cessation, from any cause, of the
liability of Borrower.
The payment by Guarantor of any amount pursuant to this guaranty shall not
in any way entitle Guarantor to any right, title or interest (whether by way of
subrogation or otherwise) in and to any of the Indebtedness or any proceeds
thereof, or any security therefor, unless and until the full amount owing to
Lender on the Indebtedness has been fully paid, but when the same has been
fully paid Guarantor shall be subrogated as to any payments made by it to the
rights of Lender as against borrower and/or any endorsers, sureties or other
guarantors.
Notwithstanding any payments made by or for the account of guarantor on
account of the Indebtedness, guarantor shall not be subrogated to any rights of
Lender until such time as Lender shall have received payment of the full amount
of all Indebtedness. For the purposes of the preceding sentence only, the
Indebtedness shall not be deemed to have been paid in full by foreclosure of
the Security Instrument or by acceptance of a deed in lieu thereof, and
Guarantor hereby waives and disclaims any interest which it might have in the
property covered by the Security Instrument or other collateral security for
the Indebtedness, by subrogation or otherwise, following foreclosure of the
Security Instrument or Lender's acceptance of a deed in lieu thereof.
-3-
<PAGE> 4
Guarantor expressly subordinates its rights to payment of any indebtedness
owing from Borrower to Guarantor, whether now existing or arising at any time
in the future, to the prior right of Lender to receive or require payment in
full of the Indebtedness and until payment in full of the Indebtedness (and
including interest accruing on the Note after any petition under applicable
Bankruptcy Law, which post-petition interest Guarantor agrees shall remain a
claim that is prior and superior to any claim of Guarantor notwithstanding any
contrary practice, custom or ruling in proceedings under such applicable
Bankruptcy Law generally), Guarantor agrees not to accept any payment or
satisfaction of any kind of indebtedness of Borrower to Guarantor or any
security for such indebtedness. If Guarantor should receive any such payment,
satisfaction or security for any indebtedness of Borrower to Guarantor,
Guarantor agrees forthwith to deliver the same to Lender in the form received,
endorsed or assigned as may be appropriate for application on account of, or as
security for, the Indebtedness and until so delivered, agrees to hold the same
in trust for Lender.
Under no circumstances shall the aggregate amount paid or agreed to be
paid hereunder exceed the highest lawful rate permitted under applicable usury
law (the "Maximum Rate") and the payment obligations of Guarantor hereunder are
hereby limited accordingly. If under any circumstances, whether by reason of
advancement or acceleration of the unpaid principal balance of the Note or
otherwise, the aggregate amounts paid hereunder shall include amounts which by
law are deemed interest and which could exceed the Maximum Rate, Guarantor
stipulates that payment and collection of such excess amounts shall have been
and will be deemed to have been the result of a mistake on the part of both
Guarantor and Lender, and Lender shall promptly credit such excess (to the
extent only of such interest payments in excess of the Maximum Rate) against
the unpaid principal balance of the Note, and any portion of such excess
payments not capable of being so credited shall be refunded to Guarantor. The
term "applicable law" as used in this paragraph shall mean the laws of the
State of Georgia or the laws of the United States, whichever laws allow the
greater rate of interest, as such laws now exist or may be changed or amended
or come into effect in the future.
Guarantor hereby represents, warrants and covenants to and with Lender as
follows: (a) the making of the Loan by Lender to Borrower is and will be of
direct interest, benefit and advantage to Guarantor; (b) Guarantor is solvent,
is not bankrupt and has no outstanding liens, garnishments, bankruptcies or
court actions which could render Guarantor insolvent or bankrupt, and there has
not been filed by or against Guarantor a petition in bankruptcy or a petition
or answer seeking an assignment for the benefit of creditors, the appointment
of a receiver, trustee, custodian or liquidator with respect to Guarantor or
any substantial portion of Guarantor's property, reorganization, arrangement,
rearrangement, composition, extension, liquidation or dissolution or
similar relief under applicable Bankruptcy Law; (c) all reports, financial
statements and other financial and other data which have been or may hereafter
be furnished by Guarantor to Lender in connection with this Guaranty are or
shall be true and correct in all material respects and do not and will not omit
to state any fact or circumstance necessary to make the statements contained
therein not misleading and do or shall fairly represent the financial condition
of Guarantor as of the dates and the results of Guarantor's operations for the
periods for which the same are furnished, and no material adverse change has
occurred since the dates of such reports, statements and other data in the
financial condition of Guarantor; (d) the execution, delivery and performance
of this Guaranty do not contravene, result in the breach of or constitute a
default under any mortgage, deed of trust, lease, promissory note, loan
agreement or other contract or agreement to which Guarantor is a party or by
which Guarantor or any of its properties may be bound or affected and do not
violate or contravene any law, order, decree, rule or regulation to which
Guarantor is subject; (e) there are no judicial or administrative actions,
suits or proceedings pending or, to the best of Guarantor's knowledge,
threatened against or affecting Guarantor or involving the validity,
enforceability or priority of this Guaranty;
-4-
<PAGE> 5
and (f) this Guaranty constitutes the legal, valid and binding obligation of
Guarantor enforceable in accordance with its terms.
Guarantor will deliver to Lender within sixty (60) days after each Note
anniversary date financial statements of Guarantor in scope and detail
satisfactory to Lender. The statements will be sworn and certified as to
accuracy by Guarantor.
Where two or more persons or entities have executed this Guaranty,
unless the context clearly indicates otherwise, all references herein to
"Guarantor" shall mean the guarantor hereunder or either or any of them. All of
the obligations and liability of said guarantors hereunder shall be joint and
several. Suit may be brought against said guarantors, jointly and severally, or
against any one or more of them, less than all, without impairing the rights of
Lender against the other or others of said guarantors; and Lender may compound
with any one or more of said guarantors for such sums or sum as it may see fit
and/or release such of said guarantors from all further liability to Lender for
such indebtedness without impairing the right of Lender to demand and collect
the balance of such indebtedness from the other or others of said guarantors not
so compounded with or released; but it is agreed among said guarantors
themselves, however, that such compounding and release shall in nowise impair
the rights of said guarantors as among themselves.
Except as otherwise provided herein, the rights of Lender are
cumulative and shall not be exhausted by its exercise of any of its rights
hereunder or otherwise against Guarantor or by any number of successive actions
until and unless all Indebtedness has been paid and each of the obligations of
Guarantor hereunder has been performed.
All property of Guarantor now or hereafter in the possession or custody
of or in transit to Lender for any purpose, including safekeeping, collection or
pledge, for the account of Guarantor, or as to which Guarantor may have any
right or power, shall be held by Lender subject to a lien and security interest
in favor of Lender to secure payment and performance of all obligations and
liabilities of Guarantor to lender hereunder. Guarantor hereby transfers and
conveys to Lender any and all balances, credits, deposits, accounts, items and
moneys of Guarantor now or hereafter in the possession or control of or
otherwise with Lender. Lender is hereby granted a first lien upon, and security
interest in, all property of Guarantor of every kind or description now or
hereafter in possession or control of Lender for any purpose, including all
dividends and distributions on or other rights in connection therewith. The
balance of every account of Guarantor with, and each claim of Guarantor against,
Lender existing from time to time shall be subject to a lien and subject to set
off against any and all liabilities of Guarantor to Lender, and Lender may, at
any time and from time to time at its option and without notice, appropriate and
apply toward the payment of any of such liabilities the balance of each such
account or claim of Guarantor against Lender.
Any notice of communication required or permitted hereunder shall be
given in writing, sent by (a) personal delivery, or (b) expedited delivery
service with proof of delivery, or (c) United States mail, postage prepaid,
registered or certified mail, or (d) prepaid telegram, telex or telecopy, sent
to the intended addressee at the address shown below, or to such other address
or to the attention of such other person as hereafter shall be designated in
writing by the applicable party sent in accordance herewith. Any such notice or
communication shall be deemed to have been given and received either at the time
of personal delivery or, in the case of delivery service or mail, as of the date
of first attempted delivery at the address and in the manner provided herein, or
in the case of telegram, telex or telecopy, upon receipt.
-5-
<PAGE> 6
This Guaranty shall be deemed to have been made under and shall be
governed by the laws of the State of Georgia in all respects.
This Guaranty may be executed in any number of counterparts with the
same effect as if all parties hereto had signed the same document. All such
counterparts shall be construed together and shall constitute one instrument,
but in making proof hereof it shall only be necessary to produce one such
counterpart.
This Guaranty may only be modified, waived, altered or amended by a
written instrument or instruments executed by the party against which
enforcement of said action is asserted. Any alleged modification, waiver,
alteration or amendment which is not so documented shall not be effective as to
any party.
The books and records of Lender showing the accounts between Lender and
Borrower shall be admissible in any action or proceeding hereon as prima facie
evidence of the items set forth herein.
Guarantor waives and renounces any and all homestead or exemption
rights Guarantor may have under the Constitution or the laws of any state as
against this Guarantor, and does transfer, convey and assign to Lender a
sufficient amount of such homestead or exemption as may be allowed, including
such homestead or exemption as may be set apart in bankruptcy, to pay and
perform the Indebtedness and Obligations. Guarantor hereby directs any trustee
in bankruptcy having possession of such homestead or exemption to deliver to
Lender a sufficient amount of property or money set apart as exempt to pay and
perform the Indebtedness and Obligations.
The terms, provisions, covenants and conditions hereof shall be binding
upon Guarantor and the heirs, devisees, representatives, successors and assigns
of Guarantor and shall inure to the benefit of Lender and all transferees,
credit participants, successors, assignees and/or endorsees of Lender. Within
this Guaranty, words of any gender shall be held and construed to include any
other gender and words in the singular number shall be held and construed to
include the plural and words in the plural number shall be held and construed to
include the singular, unless the context otherwise requires. A determination
that any provision of this Guaranty is unenforceable or invalid shall not affect
the enforceability or validity of any other provision and any determination that
the application of any provision of this Guaranty to any person or circumstance
is illegal or unenforceable shall not affect the enforceability or validity of
such provision as it may apply to any other persons or circumstances.
-6-
<PAGE> 7
EXECUTED this 23rd June, 1998
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts
-----------------------------------
Name: Charles S. Roberts
-----------------------------
Title: Chairman and President
----------------------------
Attest: /s/ Charles R. Elliott
--------------------------------
Name: Charles R. Elliott
-------------------------
Title: Chief Financial Officer
------------------------
[CORPORATE SEAL]
The address of Guarantor is:
Roberts Realty Investors, Inc.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Attention: President
The address of Lender is:
The Prudential Insurance Company of America
Prudential Capital Group
One Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Regional Counsel
-7-
<PAGE> 1
REAL ESTATE NOTE
$8,400,000.00 Atlanta, Georgia
June 1, 1998
FOR VALUE RECEIVED, THE UNDERSIGNED Roberts Properties Residential,
L.P., a Georgia limited partnership, whose sole general partner is Roberts
Realty Investors, Inc., a Georgia corporation (the "Borrower") promises to pay
to the order of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its
successors and assigns (the "Lender") the principal sum of EIGHT MILLION FOUR
HUNDRED THOUSAND AND NO/100 DOLLARS ($8,400,000.00), together with interest on
the principal balance of this Real Estate Note (the "Note"), from time to time
remaining unpaid, from the date of disbursement by the Lender hereof at the
applicable interest rate hereinafter set forth, together with all other sums due
hereunder or under the terms of the Security Deed (as hereinafter defined) in
lawful money of the United States of America which shall be legal tender in
payment of all debts at the time of payment. Both principal and interest and all
other sums due hereunder shall be payable at the office of the Lender at One
Nationwide Plaza, Columbus, Ohio 43215-2220, Attn: Real Estate Investment
Department, or at such other place either within or without the State of Ohio,
as the Lender hereof may from time to time designate. Said principal and
interest shall be paid over a term, at the times, and in the manner set forth
below, to wit:
Payment Provision:
(i) Interest accrued on the unpaid principal balance of this Note,
from the date of disbursement hereof at the rate of 7.15%
percent per annum, shall be due and payable on June 15, 1998.
(ii) Thereafter, principal and interest on the unpaid principal
balance of this Note at the rate of 7.15% percent per annum
shall be paid in one hundred nineteen (119) consecutive monthly
installments commencing on July 15, 1998 and continuing on the
fifteenth day of each calendar month thereafter, with each such
installment to be in the sum of Fifty-Six Thousand Seven Hundred
Thirty-Four and 17/100 Dollars ($56,734.17).
Maturity:
The unpaid principal balance of this Note and all accrued unpaid
interest thereon, if not sooner paid, shall be due and payable in full on June
15, 2008 (the "Maturity Date").
<PAGE> 2
Application of Payments:
All payments shall be applied first to the payment of accrued unpaid
interest on this Note and the balance, if any, shall be applied to the reduction
of the outstanding principal balance of this Note. Interest due hereunder shall
be calculated on the basis of a 360-day year composed of twelve (12) thirty (30)
day months; provided, in no event shall such calculation cause the interest rate
on this Note to exceed the maximum rate permitted under applicable law.
Late Payment Charge:
The Lender of this Note may collect a late payment charge, prior to the
acceleration of this Note, in an amount equal to five percent (5%) of the
aggregate monthly installment which is not paid on the due date, for the
purposes of covering the extra expenses involved in handling delinquent
installments. Any full payment of principal and/or interest which is postmarked
by the United States Postal Service on or before the due date shall not be
considered delinquent and a late payment charge shall not be assessed.
Prepayment:
(A) Borrower shall have the right to prepay, in full but not in part,
the obligation evidenced by this Note upon giving (i) not less than thirty (30)
days' prior written notice to Lender of Borrower's intention to so prepay the
Note, and (ii) payment to Lender of the Prepayment Premium (as hereinafter
defined), if any, then due to Lender as hereinafter provided. As used herein,
the term "Prepayment Premium" shall mean the greater of (x) one percent (1.0%)
of the outstanding principal balance of this Note, or (y) a sum equal to (a) the
present value of the scheduled monthly payments hereunder from the date of
prepayment to the Maturity Date and (b) the present value of the amount of
principal and interest due on the Maturity Date (assuming all scheduled monthly
payments due hereunder prior to the Maturity Date were made when due), minus (c)
the outstanding principal balance hereof as of the date of prepayment. The
present value described in (a) and (b) of the immediately preceding sentence are
to be computed on a monthly basis as of the date of prepayment, discounted at
the yield to maturity of the U.S. Treasury Note or Bond that is closest in
maturity to the Maturity Date as reported in the Wall Street Journal (or if the
Wall Street Journal is no longer published, as reported in such other daily
financial publication of national circulation which shall be designated by
Lender) on the fifth (5th) business day preceding the date of prepayment.
Borrower shall be obligated to prepay this Note on the date set forth in the
notice to Lender required hereinabove, after such notice has been delivered to
Lender. Notwithstanding the foregoing or any other provision herein to the
contrary, if the Lender elects to apply insurance proceeds, condemnation awards
or any escrowed amounts, if applicable, to the reduction of the principal
balance of this Note in the manner provided in the Security Deed (as hereinafter
defined), no Prepayment Premium shall be due or payable as a result of such
application, and the monthly installments due and payable hereunder shall be
reduced accordingly.
(B) In the event the Maturity Date of the indebtedness evidenced by this
Note is accelerated by Lender hereof at any time due to a default by Borrower in
the terms, covenants or conditions contained in this Note, the Security Deed or
any of the other Loan Document (as hereinafter defined), then a tender of
payment of an amount necessary to satisfy the entire
-2-
<PAGE> 3
outstanding principal balance and all accrued unpaid interest of this Note made
by Borrower, or by anyone on behalf of Borrower, at any time prior to, at, or as
a result of, a foreclosure sale or sale pursuant to power of sale shall
constitute a voluntary prepayment hereunder prior to the contracted Maturity
Date of this Note thus requiring payment to Lender of a Prepayment Premium equal
to the applicable Prepayment Premium as set forth in subparagraph (A) above.
(C) Borrower acknowledges that Lender (a) has advanced the amounts
evidenced by this Note with the expectation that such amounts would be
outstanding until the Maturity Date unless prepaid in accordance with the
foregoing prepayment provisions, (b) would not have been willing to advance such
amounts on the terms set forth in this Note for a shorter period of time, (c) in
making the loan evidenced by this Note, is relying on Borrower's
creditworthiness and its agreement to pay in strict accordance with the terms
set forth in the Note, and (d) would not make the loan without full and complete
assurance by Borrower of its agreement not to prepay all or a part of the
principal of this Note except as expressly permitted herein. Borrower
acknowledges that if this Note were to be prepaid prior to the Maturity Date
other than in accordance with the foregoing prepayment provisions, Borrower
would not receive the benefit of the bargain agreed to by Borrower and Lender.
In addition, Borrower has been advised and acknowledges that Lender is relying
on the receipt of payments under this Note to, among other things, match and
support its obligations under contracts entered into by Lender with third
parties and that in the event of a prepayment, Lender could suffer loss and
additional expenses which are extremely difficult and impractical to ascertain.
The Prepayment Premium is a good faith resolution by Borrower and Lender of the
damages Lender would suffer, and it is not intended as a penalty.
(D) Notwithstanding anything in this "Prepayment" section of this Note
to the contrary, Borrower may prepay in full, but not in part, the obligation
evidenced by this Note at any time during the last ninety (90) days prior to the
Maturity Date without any prepayment premium.
BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES THAT PURSUANT TO
THE PROVISIONS OF THIS NOTE, BORROWER HAS NO RIGHT TO PREPAY THIS NOTE IN WHOLE
OR IN PART WITHOUT PAYMENT OF THE PREPAYMENT PREMIUM EXCEPT AS SET FORTH ABOVE,
AND THAT BORROWER SHALL BE LIABLE FOR THE PAYMENT OF THE PREPAYMENT PREMIUM UPON
ANY PAYMENT OF THE OUTSTANDING PRINCIPAL OF THIS NOTE BEFORE ITS DUE DATE,
WHETHER VOLUNTARY OR INVOLUNTARY OR AFTER ACCELERATION OF THE NOTE WHETHER THE
ACCELERATION OF THE MATURITY HEREOF IS DUE TO BORROWER'S DEFAULT OR OTHERWISE.
FURTHERMORE, BY INITIALING BELOW, BORROWER WAIVES ANY RIGHTS IT MAY HAVE UNDER
ANY APPLICABLE STATE LAWS AS THEY RELATE TO ANY PREPAYMENT RESTRICTIONS
CONTAINED IN THIS PREPAYMENT SECTION OR OTHERWISE IN THIS NOTE AND EXPRESSLY
ACKNOWLEDGES THAT LENDER HAS MADE THE LOAN IN RELIANCE UPON SUCH AGREEMENTS AND
WAIVER OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH
AGREEMENTS AND WAIVER OF BORROWER. BORROWER ACKNOWLEDGES THAT SPECIFIC WEIGHT
HAS BEEN GIVEN TO THE CONSIDERATION GIVEN FOR SUCH AGREEMENTS, WHICH
CONSIDERATION IS THE GRANTING OF THE LOAN.
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<PAGE> 4
/s/ CSR
----------------------
Borrower's initials
Additional Conditions:
This Note is secured by a Deed to Secure Debt and Security Agreement
(herein referred to as the "Security Deed") and by an Assignment of Leases,
Rents and Profits (herein referred to as the "Assignment") of even date herewith
encumbering certain real property located in Gwinnett County, Georgia and other
property as more particularly described in the Security Deed (hereinafter
collectively referred to as the "Property"). The Security Deed and the
Assignment contain terms and provisions which provide grounds for acceleration
of the indebtedness evidenced by this Note, together with additional remedies in
the event of default hereunder or thereunder. Failure on the part of the Lender
hereof to exercise any right granted herein or in the aforesaid Security Deed or
the Assignment shall not constitute a waiver of such right or preclude the
subsequent exercise and enforcement thereof. This Note, the Security Deed, the
Assignment and all other documents and instruments executed as further evidence
of, as additional security for, or executed in connection with the indebtedness
evidenced by this Note are hereinafter collectively referred to as the "Loan
Documents."
Except as otherwise provided, all parties to this Note, including
endorsers, sureties and guarantors, hereby jointly and severally waive
presentment for payment, demand, protest, notice of protest, notice of demand
and of nonpayment or dishonor and of protest, notice of intent to accelerate the
maturity of this Note, notice of acceleration of maturity of this Note, and any
and all other notices and demands whatsoever, and agree to remain bound hereby
until the principal and interest of this Note are paid in full, notwithstanding
any extensions of time for payment which may be granted by Lender, even though
the period of extension be indefinite, and notwithstanding any inaction by, or
failure to assert any legal rights available to the Lender of this Note.
If the obligations evidenced by this Note, or any part thereof, are
placed in the hands of an attorney for collection, whether by suit or otherwise,
at any time, or from time to time, Borrower shall be liable to Lender, in each
instance, for all costs and expenses incurred in connection therewith,
including, without limitation, reasonable attorneys' fees (as hereinafter
defined).
Default:
If default shall be made in the payment of principal and/or interest as
stipulated above or in the payment of any other sums due hereunder or under any
of the other Loan Documents, or should any default be made in the performance of
any of the terms, covenants and conditions contained herein or in any of the
other Loan Documents, then in any or all of such events, at the option of
Lender, the entire outstanding principal balance of this Note, together with all
accrued unpaid interest thereon and all other sums advanced by Lender on behalf
of Borrower shall become and be immediately due and payable then or thereafter
as Lender may elect, regardless of the Maturity Date hereof. All such amounts
shall bear interest after the Maturity Date, by
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<PAGE> 5
acceleration or otherwise, at the lesser of either (i) the highest rate of
interest then allowed by the laws of the State of Georgia, or, if controlling,
the laws of the United States, or (ii) the then applicable interest rate of this
Note plus five-hundred (500) basis points (five per cent per annum).
During the existence of any default, Lender may apply any sums received,
including but not limited to, insurance proceeds or condemnation awards to any
amount then due and owing hereunder or under the terms of any of the other Loan
Documents as Lender may determine. Neither the right nor the exercise of the
right herein granted unto Lender to apply such proceeds as aforesaid shall
preclude Lender from exercising its option to cause the entire indebtedness
evidenced by this Note to become immediately due and payable by reason of
Borrower's default under the terms of this Note, or any of the other Loan
Documents.
Notwithstanding any provisions herein to the contrary, Lender's right,
power and privilege to accelerate the maturity of the indebtedness evidenced
hereby shall be conditioned upon, (a) with respect to any Monetary Default (as
hereafter defined), Lender giving Borrower written notice of such Monetary
Default and a five (5) day period ("Monetary Cure Period") after the date of
such notice within which to cure such Monetary Default; provided, however, that
such Monetary Cure Period shall be limited to once per loan year for the term of
the Loan; and (b) with respect to any Non-Monetary Default (as hereinafter
defined), Lender giving Borrower written notice of such Non-Monetary Default and
a thirty (30) day period after the date of such notice within which to cure such
Non-Monetary Default; provided, however, that if such Non-Monetary Default
cannot reasonably be cured within the 30 day period Borrower shall have a
reasonable period of time in which to cure the Non-Monetary Default provided
that Borrower commences the cure of such default within the 30 day period and
thereafter diligently pursues the cure to completion. Any notice required
hereunder shall be given as provided in the Security Deed. Lender shall have no
obligation to give Borrower notice of any Incurable Default (as hereinafter
defined) prior to exercising its right, power and privilege to accelerate the
maturity of the indebtedness evidenced hereby and to declare same to be
immediately due and payable and exercise all other rights and remedies herein
granted or otherwise available to Lender at law or in equity. As used herein,
the term "Monetary Default" shall mean any default which can be cured by the
payment of money including, but not limited to, the payment of principal and
interest due under this Note and the payment of taxes, assessments and insurance
premiums when due as provided in the Security Deed. As used herein, the term
"Non-Monetary Default" shall mean any default which is not a Monetary Default or
an Incurable Default. As used herein, the term "Incurable Default" shall mean
(i) any voluntary or involuntary sale, assignment, encumbering or transfer in
violation of the covenants of Section 30 of the Security Deed or (ii) if
Borrower or its general partner should make an assignment for the benefit of
creditors, become insolvent, or file a petition in bankruptcy (including but not
limited to, a petition seeking a rearrangement or reorganization).
Savings Clause; Severability:
Notwithstanding any provisions herein or in the Security Deed to the
contrary, the total liability for payments in the nature of interest including
but not limited to Prepayment
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<PAGE> 6
Premiums, default interest and late fees shall not exceed the limits imposed by
the laws of the State of Georgia or the United States of America relating to
maximum lawful rate of interest. Lender shall not be entitled to receive,
collect or apply, as interest on the indebtedness evidenced hereby, any amount
in excess of the maximum lawful rate of interest permitted to be charged by
applicable law or regulations, as amended or enacted from time to time. In the
event Lender ever receives, collects or applies, as interest, any such excess,
such amount which would be excessive interest shall be applied to reduce the
unpaid principal balance of the indebtedness evidenced by this Note. If the
unpaid principal balance of such indebtedness is paid in full, any remaining
excess shall be forthwith paid to Borrower. If any clauses or provisions herein
contained operate or prospectively operate to invalidate this Note, then such
clauses or provisions only shall be held for naught, as though not herein
contained and the remainder of this Note shall remain operative and in full
force and effect.
Exculpation:
The liability of Borrower with respect to the payment of principal and
interest hereunder shall be "non-recourse" and, accordingly, Lender's source of
satisfaction of said indebtedness and Borrower's other obligations hereunder and
under the other Loan Documents shall be limited to the Property and Lender's
receipt of the rents, issues and profits from the Property and any other
security or collateral now or hereafter held by Lender and Lender shall not seek
to procure payment out of any other assets of Borrower, or any person or entity
comprising Borrower, nor to seek judgment (except as hereinafter provided) for
any sums which are or may be payable under this Note or under any of the other
Loan Documents, or for any claim or judgment (except as hereinafter provided)
for any deficiency remaining after foreclosure of the Security Deed.
Notwithstanding the foregoing, nothing herein contained shall be deemed to be a
release or impairment of the indebtedness evidenced by this Note or the security
therefor intended by the other Loan Documents or be deemed to preclude Lender
from exercising its rights to foreclose the Security Deed or to enforce any of
its other rights or remedies under the Loan Documents, including but not limited
to that certain Guaranty (the "Guaranty") of even date herewith from Roberts
Realty Investors, Inc. to Lender.
Notwithstanding the foregoing, it is expressly understood and agreed
that the aforesaid limitation on liability shall in no way affect or apply to
Borrower's and Borrower's general partner's continued personal liability for all
sums due to:
(1) fraud or material misrepresentation made in or in connection
with this Note or any of the other Loan Documents;
(2) failure to pay taxes and assessments prior to delinquency, or
to pay charges for labor, materials or other charges which may
create liens on any portion of the Property;
(3) the misapplication of (i) proceeds of insurance covering any
portion of the Property, or (ii) proceeds of the sale or
condemnation of any portion of the Property or (iii) rentals
received by or on behalf of Borrower subsequent to the
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<PAGE> 7
date on which Lender makes written demand therefor pursuant to
any of the Loan Documents;
(4) causing or permitting waste to occur in, on or about the
Property, and failure to maintain the Property, excepting
ordinary wear and tear;
(5) the return to Lender of all unearned advance rentals and
security deposits that have been paid by tenants of the
Property to the extent that such fees have not been refunded
to or forfeited by such tenants;
(6) the return to Lender of any and all fees paid to Borrower by
any tenant of the Property which fees permit the tenant to
terminate its lease;
(7) loss by fire or any other casualty to the extent not
compensated by insurance proceeds collected by Lender;
(8) the return of, or reimbursement for, all Fixtures and Personal
Property (as defined in the Security Deed) owned by Borrower
taken from the Property by or on behalf of Borrower, out of
the ordinary course of business, and not replaced by items of
equal or greater value than the original value of the Fixtures
and Personal Property so removed;
(9) all court costs and Reasonable Attorneys' Fees (as hereinafter
defined) actually incurred which are provided for in this Note
or in any of the other Loan Documents;
(10) (i) the removal of any chemical, material or substance in
excess of legal limits, to which exposure is prohibited,
limited, or regulated by any federal, state, county, or local
authority which may or could pose a hazard to the health and
safety of the occupants of the Property, regardless of the
source of origination; (ii) the restoration of the Property to
comply with all governmental regulations pertaining to
hazardous waste found in, on or under the Property, regardless
of the source of origination; and (iii) any indemnity or other
agreement to hold Lender harmless from and against any and all
losses, liabilities, damages, injuries, costs and expenses of
any and every kind arising as a result of the existence and/or
removal of Hazardous Materials (as defined in the Security
Deed) and from the violation of Hazardous Waste Laws (as
defined in the Security Deed). Borrower shall not be liable
hereunder if the Property becomes contaminated subsequent to
Lender's acquisition of the Property by foreclosure or
acceptance of a deed in lieu thereof or subsequent to any
transfer of ownership of the Property which was approved or
authorized by Lender pursuant to the Security Deed, provided
that such transferee assumes in writing all obligations of
Borrower under the Loan Documents pertaining to Hazardous
Materials. Liability under this subparagraph (10) shall extend
beyond repayment of this Note and compliance with the terms of
the Security Deed, unless Borrower at such time provides
Lender with an
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<PAGE> 8
environmental assessment report acceptable to Lender, in its
sole discretion, showing the Property to be free of Hazardous
Materials and not in violation of Hazardous Waste Laws. The
burden of proof under this subparagraph with regard to
establishing the date upon which such Hazardous Materials were
placed or appeared in, on or under the Property shall be upon
Borrower;
(11) (i) any and all costs incurred in order to cause the Property
to comply with the Accessibility Laws (as defined in the
Security Deed), and (ii) any indemnity or other agreement to
hold Lender harmless from and against any and all losses,
liabilities, damages, injuries, costs or expenses of any kind
arising as a result of non-compliance with any Accessibility
Laws. Borrower shall not be liable hereunder for compliance
with any Accessibility Laws that first become effective, or
for any violation of any Accessibility Laws resulting from
alterations or improvements to the Property that are performed
subsequent to Lender's acquisition of the Property by
foreclosure or acceptance of a deed in lieu thereof or
subsequent to any transfer of ownership of the Property which
was approved or authorized by Lender pursuant to the Security
Deed; provided that such transferee assumes in writing all
obligations of Borrower pertaining to Accessibility Laws
pursuant to the Loan Documents; and
(12) amounts under any letter of credit and any renewals and/or
replacements thereof supplied by Borrower to Lender in
connection with this Note or the loan evidenced and secured by
the Loan Documents in the event that the bank issuing such
letter of credit becomes insolvent, files or has filed against
it any bankruptcy or similar proceeding or is closed (either
temporarily or permanently), or placed in receivership,
conservatorship or liquidation by the Federal Deposit
Insurance Corporation, Resolution Trust Corporation or any
other local, state or federal government agency or otherwise
fails or refuses to honor such letter of credit; and
The obligations of Borrower in subparagraphs (1) through (12) above,
except as provided in subparagraphs (10) and (11), shall survive the repayment
of this Note, and satisfaction of the Security Deed.
Notwithstanding anything to the contrary contained in this Note or in
the other Loan Documents, as long as the Guaranty referenced above has not been
released by Lender, the "exculpation" and "non-recourse" provisions of this
section shall not be effective and Borrower shall be personally, fully, and
completely liable for the payment of this Note and performance under the Loan
Documents until the Guaranty has been released by Lender.
Full Recourse:
Notwithstanding any provisions in this Note to the contrary including,
without limitation, the provisions set forth in the section captioned
"Exculpation" hereinabove, Borrower and the general partners of Borrower shall
be personally liable, jointly and severally, for the entire
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<PAGE> 9
indebtedness evidenced by this Note (including all principal, interest and other
charges) in the event Borrower (i) violates the covenant governing the placing
of subordinate financing on the Property as set forth in Paragraph 31 of the
Security Deed, or (ii) violates the covenant restricting transfers of interest
in the Property or transfers of ownership interests in Borrower as set forth in
Paragraph 30 of the Security Deed.
Miscellaneous:
As used herein, the phrase "reasonable attorneys' fees" shall mean fees
charged by attorneys selected by Lender based upon such attorneys' then
prevailing hourly rates as opposed to any amount or percentage specified by any
statute then in effect in the State of Georgia.
THE PROVISIONS of this Note shall be governed by the laws of the State
of Georgia and the United States and shall be binding upon the Borrower, its
successors and assigns and shall inure to the benefit of Lender, its successors
and assigns. Time is of the essence of this contract.
IN WITNESS WHEREOF, the undersigned has executed this Note under seal as of the
day and year first above written.
Roberts Properties Residential, L.P.,
a Georgia limited partnership
By: Roberts Realty Investors, Inc.,
its sole General Partner
By: /s/ Charles S. Roberts
-------------------------------------
Name: Charles S. Roberts
Title: President
(CORPORATE SEAL)
-9-
<PAGE> 1
DEED TO SECURE DEBT AND SECURITY AGREEMENT
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (the "Security Deed"),
executed this 1st day of June, 1998, by ROBERTS PROPERTIES RESIDENTIAL, L.P., a
Georgia limited partnership (the "Borrower"), having its principal office at
8010 Roswell Road, Suite 120, Atlanta, Georgia 30350. Said Security Deed is
being given to secure the payment of a note of even date herewith payable to the
order of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, having its
principal office at One Nationwide Plaza, Columbus, Ohio 43215-2220 or at such
other place either within or without the State of Ohio, as Lender may from time
to time designate, and any subsequent holder(s) hereof, (the "Lender").
WITNESSETH
WHEREAS, the Borrower is justly indebted to the Lender in the sum of
EIGHT MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS ($8,400,000.00), with
interest thereon, as set forth in a certain Real Estate Note of even date
herewith payable to Nationwide Life Insurance Company (said Real Estate Note is
hereinafter referred to as the "Note"), which Note shall be due and payable on
or before June 15, 2008; and
WHEREAS, the Lender, as a condition precedent to the extension of credit
and the making of the loan evidenced by the Note, has required that the Borrower
provide Lender with security for the repayment of the indebtedness evidenced by
the Note as well as for the performance, observance and discharge by the
Borrower of the various covenants, conditions and agreements made by the
Borrower to, with, in favor of and for the benefit of Lender with respect to
said indebtedness and such security;
NOW THEREFORE, in consideration of and in order to secure the repayment
of the indebtedness evidenced and represented by the Note, together with
interest on such indebtedness, as well as the payment of all other sums of money
secured hereby, as hereinafter provided; and to secure the observance,
performance and discharge by the Borrower of all covenants, conditions and
agreements set forth in the Note, this Security Deed and in all other documents
and instruments executed and delivered by the Borrower to and in favor of Lender
for the purpose of further securing the repayment of the indebtedness evidenced
and represented by the Note; and in order to charge the properties, interests
and rights hereinafter described with such payment, observance, performance and
discharge; and in consideration of the sum of one dollar paid by Lender to
Borrower and other good and valuable considerations, the receipt and sufficiency
of which are hereby acknowledged, the Borrower does hereby grant, bargain, sell,
alien, remise, release, convey, assign, transfer, pledge, deliver, set over,
hypothecate, warrant and confirm unto Lender, its successors and assigns
forever, all of Borrower's right, title and interest in and to the following
described properties, rights and interests and all replacements of,
substitutions for, and additions thereto (all of which are hereinafter together
referred to as the "Property"), to wit:
ALL THAT certain piece, parcel or tract of land or real property of
which the Borrower is now seized and in actual or constructive possession,
situate in Gwinnett County, Georgia more
<PAGE> 2
particularly described on Exhibit "A" attached hereto and by this reference made
a part hereof (hereinafter referred to as the "Real Property");
TOGETHER WITH all buildings, structures and other improvements of any
kind, nature or description now or hereafter erected, constructed, placed or
located upon said Real Property (which buildings, structures and other
improvements are hereinafter sometimes together referred to as the
"Improvements"), including, without limitation, any and all additions to,
substitutions for or replacements of such Improvements;
TOGETHER WITH all minerals, royalties, gas rights, water, water rights,
water stock, flowers, shrubs, lawn plants, crops, trees, timber and other
emblements now or hereafter located on, under or above all or any part of the
Real Property;
TOGETHER WITH all and singular, the tenements, hereditaments, strips and
gores, rights-of-way, easements, privileges and other appurtenances now or
hereafter belonging or in any way appertaining to the Real Property, including,
without limitation, all right, title and interest of the Borrower in any
after-acquired right, title, interest, remainder or reversion, in and to the
beds of any ways, streets, avenues, roads, alleys, passages and public places,
open or proposed, in front of, running through, adjoining or adjacent to said
Real Property (hereinafter sometimes together referred to as "Appurtenances");
TOGETHER WITH any and all leases, contracts, rents, royalties, issues,
revenues, profits, proceeds, income and other benefits, including accounts
receivable, of, accruing to or derived from said Real Property, Improvements and
Appurtenances and any business or enterprise presently situated or hereafter
operated thereon and therewith (hereinafter sometimes together referred to as
the "Rents");
TOGETHER WITH, any and all awards or payments, including interest
thereon, and the right to receive the same, as a result of (a) the exercise of
the right of eminent domain, (b) the alteration of the grade of any street, or
(c) any other injury to, taking of, or decrease in the value of, the Property to
the extent of all amounts which may be secured by this Security Deed at the date
of any such award or payment including but not limited to Reasonable Attorneys'
Fees (as hereinafter defined), costs and disbursements incurred by the Lender in
connection with the collection of such award or payment;
AS WELL AS all of the right, title and interest of Borrower in and to
all fixtures, goods, chattels, construction materials, furniture, furnishings,
equipment, machinery, apparatus, appliances, and other items of personal
property, whether tangible or intangible, of any kind, nature or description,
whether now owned or hereafter acquired by the Borrower, including, without
limitation, improvements including furnaces, steam boilers, hot-water boilers,
oil burners, pipes, radiators, air-conditioning and sprinkler systems, gas and
electric fixtures, carpets, rugs, shades, awnings, screens, elevators, motors,
dynamos, cabinets, and all other furnishings, tools, equipment and machinery,
appliances, building supplies, materials, general intangibles, contract rights,
accounts receivable, business records, fittings and fixtures of every kind,
which is, are or shall hereafter be located upon, attached, affixed to or used
or useful, either
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<PAGE> 3
directly or indirectly, in connection with the complete and comfortable use,
occupancy and operation of said Real Property and Improvements as an apartment
complex, or any other business, enterprise or operation as may hereafter be
conducted upon or with said Real Property, Improvements and Appurtenances,
including, without limitation, any and all licenses, permits or franchises, used
or required in connection with such use, occupancy or operation, as well as the
proceeds thereof or therefrom regardless of form (hereinafter sometimes together
referred to as "Fixtures and Personal Property," which term expressly excludes
any toxic waste or substances deemed hazardous under federal, state or local
laws). The Borrower hereby expressly grants to Lender a present security
interest in and a lien and encumbrance upon the Fixtures and Personal Property;
TO HAVE AND HOLD the foregoing Property, and the rights hereby granted
for the use and benefit of the Lender and its successors and assigns in fee
simple forever;
AND the Borrower covenants and warrants with and to the Lender that the
Borrower is indefeasibly seized of the Property and has good right, full power,
and lawful authority to convey and encumber all of the same as aforesaid; that
the Borrower hereby fully warrants the title to the Property and will defend the
same and the validity and priority of the lien and encumbrance of this Security
Deed against the lawful claims of all persons whomsoever, subject only to the
Permitted Exceptions; and the Borrower further warrants that the Property is
free and clear of all liens and encumbrances of any kind, nature or description,
save and except only (with respect to said Real Property, Improvements and
Appurtenances and Fixtures and Personal Property) for real property taxes for
years subsequent to 1997 and those matters set forth in Exhibit "B" attached
hereto and by this reference made a part hereof (hereinafter referred to as the
"Permitted Exceptions").
PROVIDED ALWAYS, however, that if the Borrower shall pay unto the Lender
the indebtedness evidenced by the Note, and if the Borrower shall duly, promptly
and fully perform, discharge, execute, effect, complete and comply with and
abide by each and every one of the agreements, conditions and covenants of the
Note, this Security Deed and all other documents and instruments executed as
further evidence of or as security for the indebtedness secured hereby, then
this Security Deed and the estates and interests hereby granted and created
shall cease, terminate and be null and void, and shall be discharged of record
at the expense of Borrower, which expense Borrower agrees to pay.
This conveyance is intended (i) to constitute a security agreement as
required under the Uniform Commercial Code of Georgia and (ii) to operate and is
to be construed as a deed passing the title to the Property to the Lender and is
made under those provisions of the existing laws of the State of Georgia
relating to deeds to secure debt, and not as a mortgage, and is given to secure
(a) the debt evidenced by the Note (which is incorporated herein by reference
and to which reference is made for all purposes, and which Borrower acknowledges
evidences an indebtedness arising from a business loan from Lender to Borrower
for the sole purpose of permitting Borrower to carry on its business) in the
principal face amount of Eight Million Four Hundred Thousand and No/100 Dollars
($8,400,000.00), or so much thereof as may have been advanced and remain
outstanding from time to time, with interest at the rate of 7.15% percent per
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<PAGE> 4
annum; (b) any and all renewals and extensions of the Note; (c) each and every
covenant, obligation and undertaking of the Borrower in this Security Deed or in
that certain Assignment of Leases, Rents and Profits of even date herewith from
Borrower to Lender; and (d) any and all other indebtedness which may hereafter
be owing by the Borrower to the Lender which is incurred or created by advances
made by the Lender to or on behalf of or for the account of the Borrower in
accordance with the provisions of this Security Deed or otherwise permitted by
the provisions of this Security Deed. Principal and interest shall be payable in
installments the last of which shall, unless the maturity thereof is accelerated
by the holder of the Note or the principal amount of the Note is prepaid, be due
and payable on June 15, 2008.
The Borrower, for the benefit of the Lender, and is successors and
assigns, does hereby expressly covenant and agree:
1. PAYMENT OF PRINCIPAL AND INTEREST. To pay the principal of the
indebtedness evidenced by the Note, together with all interest thereon, in
accordance with the terms of the Note, promptly at the times, at the place and
in the manner that said principal and interest shall become due, and to promptly
and punctually pay all other sums required to be paid by the Borrower pursuant
to the terms of the Note, this Security Deed and all other documents and
instruments executed as further evidence of, as additional security for or in
connection with the indebtedness evidenced by the Note and secured by this
Security Deed (hereinafter together referred to as the "Loan Documents").
2. PERFORMANCE OF OTHER OBLIGATIONS. To perform, comply with and
abide by each and every one of the covenants, agreements and conditions
contained and set forth in the Note, this Security Deed and the other Loan
Documents and to comply with all laws, ordinances, rules, regulations and orders
of governmental authorities now or hereafter affecting the Property or requiring
any alterations or improvements to be made thereon, and perform all of its
obligations under any covenant, condition, restriction or agreement of record
affecting the Property and to insure that at all times the Property constitutes
one or more legal lots capable of being conveyed without violation of any
subdivision or platting laws, ordinances, rules or regulations, or other laws
relating to the division or separation of real property.
3. PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY;
HAZARDOUS WASTE. To keep all Improvements now existing or hereafter erected on
the Real Property in good order and repair and not to do or permit any waste,
impairment or deterioration thereof or thereon, nor to alter, remove or demolish
any of the Improvements or any Fixtures or Personal Property attached or
appertaining thereto, without the prior written consent of the Lender, nor to
initiate, join in or consent to any change in any private restrictive covenant,
zoning ordinance or other public or private restrictions limiting or defining
the uses which may be made of the Property or any part thereof, nor to do or
permit any other act whereby the Property shall become less valuable, be used
for purposes contrary to applicable law or be used in any manner which will
increase the premium for or result in a termination or cancellation of the
insurance hereinafter required to be kept and maintained on the Property. In
furtherance of, and not by way of limitation upon the foregoing covenant,
Borrower shall effect such repairs as the Lender may reasonably require, and
from time to time make all needful and proper
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<PAGE> 5
replacements so that said Improvements, Appurtenances, Fixtures and Personal
Property will, at all times, be in good condition, fit and proper for the
respective purposes for which they were originally erected or installed.
Borrower at all times shall maintain the Property in full compliance with all
applicable provisions of all federal, state or municipal laws, ordinances, rules
and regulations currently in existence or hereafter enacted or rendered
governing accessibility for the disabled, including but not limited to The
Architectural Barriers Act of 1988, The Rehabilitation Act of 1973, The Fair
Housing Act of 1988 and The Americans With Disabilities Act of 1990
(hereinafter, collectively the "Accessibility Laws"). Borrower at all times
shall keep the Property and ground water of the Property free of "Hazardous
Materials" (as hereinafter defined). Borrower shall not permit its tenants or
any third party requiring the consent of Borrower to enter the Property, to use,
generate, manufacture, store, release, threaten release, or dispose of Hazardous
Materials in, on or about the Property or the ground water of the Property in
violation of any federal, state or municipal law, decision, statute, rule,
ordinance or regulation currently in evidence or hereinafter enacted or rendered
("Hazardous Waste Laws"). Borrower shall give Lender prompt written notice of
any claim by any person, entity, or governmental agency that a significant
release or disposal of Hazardous Materials has occurred on the Property. The
Borrower, through its professional engineers and at its cost, shall promptly and
thoroughly investigate suspected Hazardous Materials contamination of the
Property. Borrower shall forthwith remove, repair, clean up, and/or detoxify any
Hazardous Materials from the Property or the ground water of the Property
whether or not such actions are required by law, and whether or not Borrower was
responsible for the existence of the Hazardous Materials in, on or about the
Property or the ground water of the Property. "Hazardous Materials" shall
include but not be limited to substances defined as "hazardous substances,"
"hazardous materials," or "toxic substances," in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec.
9601, et. seq.; the Hazardous Materials Transportation Act, 49 U.S.C. 1801 et.
seq.; the Resources Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et. seq.;
the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et. seq.; the Clean Air
Act, 42 U.S.C. Sec. 7401 et. seq.; and the Clean Water Act, 33 U.S.C. Sec. 1251
et. seq.
Borrower hereby agrees to indemnify Lender and hold Lender harmless from
and against any and all losses, liabilities, damages, injuries, costs, expenses
and claims of any and every kind whatsoever paid, incurred or suffered by or
asserted against Lender for, with respect to, or as a direct or indirect result
of the non-compliance of the Property with the Accessibility Laws and/or the
presence on, under or about the Property, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or release from, the Property of any
Hazardous Materials (including, without limitation, any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under any
Hazardous Waste Laws, regardless of whether or not caused by, or within the
control of, Borrower).
Lender, and/or its agents, shall have the right and shall be permitted,
but shall not be required, at all reasonable times, to enter upon and inspect
the Property to insure compliance with the foregoing covenants and any and all
other covenants, agreements and conditions set forth in this Security Deed.
Liability under this Paragraph of this Security Deed shall extend beyond
repayment of the Note and compliance with the terms of this Security Deed;
provided, however, Borrower shall have no liability under this Paragraph 3 as to
Hazardous Materials: (a)
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<PAGE> 6
if the Property becomes contaminated subsequent to Lender's acquisition of the
Property by foreclosure, acceptance by Lender of a deed in lieu thereof, or
subsequent to any transfer of ownership of the Property which was approved or
authorized by Lender in writing, provided that such transferee assumes all
obligations of Borrower with respect to Hazardous Materials pursuant to this
Security Deed; or (b) at such time Borrower provides Lender an environmental
assessment report acceptable to Lender showing the Property to be free of
Hazardous Materials and not in violation of Hazardous Waste Laws. The burden of
proof under this Paragraph with regard to establishing the date upon which
Hazardous Material was placed or appeared in, on or under the Property shall be
upon Borrower.
4. PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. To pay all
and singular such taxes, assessments and public charges as are already levied or
assessed or that may be hereafter levied or assessed upon or against the
Property, when the same shall become due and payable according to law, before
the same become delinquent, and before any interest or penalty shall attach
thereto, and to deliver official receipts evidencing the payment of the same to
the Lender not later than thirty (30) days following the payment of the same.
Borrower shall have the right to contest, in good faith, the proposed assessment
of ad valorem taxes or special assessments by governmental authorities having
jurisdiction of the Property; provided, however, the Borrower shall give written
notice thereof to Lender and Lender may, in its sole discretion, require
Borrower to post a bond or other collateral satisfactory to Lender in connection
with any such action by Borrower; provided further, however, that so long as
there is no default hereunder (which is not cured within any applicable cure
period, if any) Lender agrees not to require Borrower to post a bond or other
collateral if (i) Borrower is appealing ad valorem taxes in the normal course of
Borrower's business and (ii) no action is taken to commence foreclosure
procedures on the Property or any portion thereof and (iii) the collateral
pledged to Lender to secure the loan evidenced by the Note and this Security
Deed is not otherwise jeopardized in Lender's sole opinion.
5. PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. To immediately pay
and discharge from time to time when the same shall become due all lawful claims
and demands of mechanics, materialmen, laborers and others which, if unpaid,
might result in, or permit the creation of, a lien, charge or encumbrance upon
the Property or any part thereof, or on the rents, issues, income, revenues,
profits and proceeds arising therefrom and, in general, to do or cause to be
done everything necessary so that the lien of this Security Deed shall be fully
preserved at the cost of the Borrower, without expense to the Lender. Borrower
shall have the right to contest, in good faith and in accordance with applicable
laws and procedures, mechanic's and materialmen's liens filed against the
Property; provided, however, that Borrower shall give written notice thereof to
Lender, and Lender may at its sole option require Borrower to post a bond or
other collateral satisfactory to Lender (and acceptable to the title company
insuring the Security Deed) in connection with any such action by Borrower.
6. PAYMENT OF JUNIOR ENCUMBRANCES. To permit no default or
delinquency under any other lien, imposition, charge or encumbrance against the
Property, even
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<PAGE> 7
though junior and inferior to the lien of this Security Deed; provided, however,
the foregoing shall not be construed to permit any other lien or encumbrance
against the Property.
7. PAYMENT OF MORTGAGE TAXES. To pay any and all taxes which may
be levied or assessed directly or indirectly upon the Note and this Security
Deed (except for income taxes payable by the Lender) or the debt secured hereby,
without regard to any law which may be hereafter enacted imposing payment of the
whole or any part thereof upon the Lender, its successors or assigns. Upon
violation of this agreement to pay such taxes levied or assessed upon the Note
and this Security Deed, or upon the rendering by any court of competent
jurisdiction of a decision that such an agreement by the Borrower is legally
inoperative, or if any court of competent jurisdiction shall render a decision
that the rate of said tax when added to the rate of interest provided for in the
Note exceeds the then maximum rate of interest allowed by law, then, and in any
such event, the debt hereby secured shall, at the option of the Lender, its
successors or assigns, become immediately due and payable, anything contained in
this Security Deed or in the Note secured hereby notwithstanding, without the
imposition of a Prepayment Premium (as defined in the Note). The additional
amounts which may become due and payable hereunder shall be part of the debt
secured by this Security Deed.
8. HAZARD INSURANCE. To continuously, during the term hereof,
keep the Improvements and the Fixtures and Personal Property now or hereafter
existing, erected, installed and located in or upon the Real Property insured
with extended coverage insurance against loss or damage resulting from fire,
windstorm, flood (but only if any of the Improvements are located in a flood
plain), sinkhole and such other hazards, casualties, contingencies and perils,
including, without limitation, other risks insured against by persons operating
like properties in the locality of the Property, on such forms as may be
required by Lender, covering the Property in the amount of the full replacement
cost thereof (provided that Borrower provides a replacement cost endorsement
satisfactory to Lender; otherwise, the amount of such insurance shall not be
less than the difference between the outstanding balance of the Note and eighty
(80%) percent of the then appraised value of the Land and Improvements as
determined by Lender in its sole discretion), and covering all loss or abatement
of rental or other income without provision for co-insurance in an amount equal
to the scheduled rental income of the Property for a period of twelve (12)
months, or if applicable, business interruption insurance in an amount
sufficient to pay debt service, operating expenses, taxes and insurance for the
Property for twelve (12) months, and covering loss by flood (if the Property
lies in a specified Flood Hazard Area as designated on the Department of Housing
and Urban Development Maps, or other flood prone designation) in an amount equal
to the outstanding principal balance of the indebtedness secured hereby or such
other amount of coverage as approved by Lender. All such insurance shall be
carried with such company or companies as may be acceptable to the Lender, which
company or companies shall have a current rating equivalent to at least A:VIII
as shown in Best's Key Rating Guide, and the original policy or policies and
renewals thereof (or duplicate originals or certified copies thereof), together
with receipts evidencing payment of the premium therefor, shall be deposited
with, held by and are hereby assigned to Lender as additional security for the
indebtedness secured hereby. Each such policy of insurance shall contain a
non-contributing loss payable clause in favor of and in form acceptable to
Lender and shall provide for not less than thirty (30) days' prior written
notice to Lender of intent to modify, cancel or
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<PAGE> 8
terminate or the expiration of such policies of insurance. Not less than fifteen
(15) days prior to the expiration dates of each policy required of the Borrower
hereunder, Borrower will deliver to Lender a renewal policy or policies or a
certified copy thereof marked "premium paid" or accompanied by other evidence of
payment and renewal satisfactory to Lender (Lender agrees that a binder for a
renewal policy accompanied by a copy of an invoice for the premium associated
therewith (which may show that the premium can be paid in quarterly
installments) shall be satisfactory evidence of payment and renewal provided
that Borrower delivers to Lender evidence of the payment of such premium on or
before the date the premium (or installments thereof, if applicable) is due);
and in the event of foreclosure of or exercise of the power of sale in this
Security Deed, any purchaser or purchasers of the Property shall succeed to all
rights of the Borrower, including any rights to unearned premiums, in and to all
insurance policies assigned and delivered to Lender pursuant to the provisions
of this Paragraph 8.
In the event of loss by reason of hazards, casualties, contingencies or
perils for which insurance has been required by the Lender hereunder, the
Borrower shall give immediate notice thereof to the Lender, and the Lender is
hereby irrevocably appointed attorney-in-fact coupled with an interest, for the
Borrower to, at Lender's option, make proof of loss if not made promptly by the
Borrower, and each insurance company concerned is hereby notified, authorized
and directed to make payment for such loss directly to the Lender, instead of to
the Borrower and Lender jointly, and Borrower hereby authorizes Lender to adjust
and compromise any losses for which insurance proceeds are payable under any of
the aforesaid insurance policies and, after deducting the costs of collection,
to apply the proceeds of such insurance, at its option, as follows: (a) to the
restoration or repair of the insured Improvements, Fixtures and Personal
Property, provided that, in the opinion and sole discretion of the Lender, such
restoration or repair is reasonably practical and, provided further, that, in
the opinion and sole discretion of the Lender, either: (i) the insurance
proceeds so collected are sufficient to cover the cost of such restoration or
repair of the damage or destruction with respect to which such proceeds were
paid, or (ii) the insurance proceeds so collected are not sufficient alone to
cover the cost of such restoration or repair, but are sufficient therefor when
taken together with funds provided and made available by the Borrower from other
sources; in which event the Lender shall make such insurance proceeds available
to the Borrower for the purpose of effecting such restoration or repair; but
Lender shall not be obligated to see to the proper application of such insurance
proceeds nor shall the amount of funds so released or used be deemed to be
payment of or on account of the indebtedness secured hereby, or (b) to the
reduction of the outstanding principal indebtedness secured hereby,
notwithstanding the fact that the amount owing thereon may not then be due and
payable or that said indebtedness is otherwise adequately secured, in which
event such proceeds shall be applied at par against the indebtedness secured
hereby and the monthly payment due on account of such indebtedness shall be
adjusted accordingly. None of such actions taken by the Lender shall be deemed
to be or result in a waiver or impairment of any equity, lien or right of the
Lender under and by virtue of this Security Deed, nor will the application of
such insurance proceeds to the reduction of the indebtedness serve to cure any
default in the payment thereof. In the event of foreclosure of this Security
Deed or other transfer of title to the Property in extinguishment of the
indebtedness secured hereby, all right, title and interest of the Borrower in
and to any insurance policies then in force and insurance proceeds then payable
shall pass to the purchaser or grantee.
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<PAGE> 9
In case of Borrower's failure to keep the Property so insured, Lender or
its assigns, may, at its option (but shall not be required to) effect such
insurance at Borrower's expense.
Notwithstanding anything set forth in this Paragraph 8 to the contrary,
in the event of loss or damage to the Property by fire or other casualty for
which insurance has been required by Lender and provided by Borrower, and the
amount of such loss or damage does not exceed fifty percent (50%) of the
outstanding principal balance of the Note, the Lender hereby agrees to allow the
proceeds of insurance to be used for restoration of the Property and to release
such insurance proceeds to Borrower as such restoration progresses, provided:
(a) Borrower is not in default under any of the terms,
covenants and conditions of this Security Deed, the
Note or any of the Loan Documents evidencing or
securing the Note;
(b) [intentionally omitted]
(c) The plans and specifications for restoration of the
Property are approved in writing by the Lender;
(d) At all times during such restoration, Borrower has
deposited with Lender funds which, when added to such
insurance proceeds, are sufficient to complete the
restoration of the Property as certified by an
architect approved by Lender in accordance with the
approved plans and specifications and all applicable
building codes and zoning ordinances and regulations,
and further, that the sufficiency of such funds is
certified to Lender by Lender's inspecting
architect/engineer;
(e) Borrower provides payment and performance bonds and
builder's all risk insurance for such restoration in
form and amount acceptable to Lender;
(f) The insurer under such policies of fire or other
casualty insurance does not assert any defense to
payment under such policies against Lender, Borrower
or any tenant of the Property;
(g) The insurance proceeds held by Lender shall be
disbursed no more often than once per month and in
not more than five (5) increments of amounts of not
less than FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) each (except the final disbursement of
such proceeds which may be in an amount less than
FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00).
Lender's obligation to make any such disbursement
shall be conditioned upon Lender's receipt of a
written certification from the Lender's inspecting
architect/engineer that all construction and work for
which such disbursement is requested has been
completed in accordance with the approved plans and
specifications and all applicable building
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<PAGE> 10
codes, zoning ordinances and all other local or
federal governmental regulations and, further, that
Borrower has deposited with Lender sufficient funds
to complete such restoration in accordance with
subparagraph (d) above;
(h) Lender shall have the option, upon the completion of
such restoration of the Property, to apply any
surplus insurance proceeds remaining after the
completion of such restoration, at par, to the
reduction of the indebtedness secured by this
Security Deed; notwithstanding the fact that the
amount owing thereon may not then be due and payable
or that said indebtedness is otherwise adequately
secured; and
(i) Lender shall be entitled to require and to impose
such other conditions to the release of such
insurance proceeds for restoration of the Property as
would be customarily or reasonably required and
imposed by a construction lender for a project of
similar nature and cost.
9. LIABILITY INSURANCE. To carry and maintain such comprehensive
general liability insurance as may from time to time be required by Lender,
taking into consideration the type of property insured and the corresponding
liability exposure, on forms, in amounts and with such company or companies as
may be acceptable to Lender. All such comprehensive general liability insurance
shall be carried with a company or companies as may be acceptable to Lender,
which company or companies shall have a current rating equivalent to at least
A:VIII as shown in Best's Key Rating Guide. Such policy or policies of insurance
shall name Lender as an additional insured and shall provide for not less than
thirty (30) days' prior written notice to Lender of modification, cancellation,
termination or expiration of such policy or policies of insurance. Not less than
fifteen (15) days prior to the expiration dates of such policy or policies,
Borrower will deliver to Lender a renewal policy or policies or a certified copy
thereof marked "premium paid" or accompanied by other evidence of payment and
renewal satisfactory to Lender (Lender agrees that a binder for a renewal policy
accompanied by a copy of an invoice for the premium associated therewith (which
may show that the premium can be paid in quarterly installments) shall be
satisfactory evidence of payment and renewal provided that Borrower delivers to
Lender evidence of the payment of such premium on or before the date the premium
(or installments thereof, if applicable) is due). The original policy or
policies and all renewals thereof (or duplicate originals or certified copies
thereof), together with receipts evidencing payment of the premium therefor,
shall be deposited with, held by and are hereby assigned to Lender as additional
security for the indebtedness secured hereby.
10. COMPLIANCE WITH LAWS. To observe, abide by and comply with all
statutes ordinances, laws, orders, requirements or decrees relating to the
Property enacted, promulgated or issued by any federal, state, county or
municipal authority or any agency or subdivision thereof having jurisdiction
over the Borrower or the Property, and to observe and comply with all conditions
and requirements necessary to preserve and extend any and all rights, licenses,
permits (including, but not limited to, zoning variances, special exceptions and
nonconforming uses), privileges, franchises and concessions which are applicable
to the Property or which have
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<PAGE> 11
been granted to or contracted for by Borrower in connection with any existing,
presently contemplated or future use of the Property.
11. MAINTENANCE OF PERMITS. To obtain, keep and constantly
maintain in full force and effect during the entire term of this Security Deed,
all certificates, licenses and permits necessary to keep the Property operating
as an apartment complex project, and, except as specifically provided for in
this mortgage, not to assign, transfer or in any manner change such
certificates, licenses or permits without first receiving the written consent of
the Lender.
12. OBLIGATIONS OF BORROWER AS LESSOR. To perform every obligation
of the Borrower (as the lessor) and enforce every obligation of the lessee in
any and every lease or other occupancy agreement affecting the Property or any
part thereof (hereinafter referred to as the "Occupancy Leases"), and not to
modify, alter, waive or cancel any such Occupancy Leases or any part thereof,
nor collect for more than thirty (30) days in advance any rents that may be
collectible under any such Occupancy Leases and, except as provided for in this
Security Deed, not to assign any such Occupancy Lease or any such rents to any
party other than Lender, without the prior written consent of the Lender. In the
event of default under any such Occupancy Lease by reason of failure of the
Borrower to keep or perform one or more of the covenants, agreements or
conditions thereof, the Lender is hereby authorized and empowered, and may, at
its sole option, remedy, remove or cure any such default, and further, Lender
may, at its sole option and in its sole discretion, but without obligation to do
so, pay any sum of money deemed necessary by it for the performance of said
covenants, agreements and conditions, or for the curing or removal of any such
default, and incur all expenses and obligations which it may consider necessary
or reasonable in connection therewith, and Borrower shall repay on demand all
such sums so paid or advanced by Lender together with interest thereon until
paid at the lesser of either (i) the highest rate then allowed by the laws of
the State of Georgia, or, if controlling, the laws of the United States, or (ii)
the then-applicable interest rate of the Note plus five hundred (500) basis
points; all of such sums, if unpaid, shall be added to and become part of the
indebtedness secured hereby. All such Occupancy Leases hereafter made shall be
subject to the approval of Lender and (a) shall be at competitive market rental
rates then prevailing in the geographic area for apartment complexes comparable
to the Property and (b) at Lender's option shall be superior or subordinate in
all respects to the lien of this Security Deed. Provided, however, that the
Lender shall not require approval in advance of any Occupancy Leases which
conform to the Borrower's Form Lease (as hereinafter defined) as previously
approved by Lender, except as set forth below. Neither the right nor the
exercise of the right herein granted unto Lender to keep or perform any such
covenants, agreements, or conditions as aforesaid shall preclude Lender from
exercising its option to cause the whole indebtedness secured hereby to become
immediately, but subject to the notice and cure period in Paragraph 23, due and
payable by reason of Borrower's default in keeping or performing any such
covenants, agreements or conditions as hereinabove required.
Lender has heretofore approved a form of Occupancy Lease to be used by
Borrower in connection with the Property (hereinafter referred to as the "Form
Lease"). Borrower shall not, without the prior written consent of the Lender,
modify or alter the Form Lease in any material respect. In addition Borrower
shall not, without the prior written consent of Lender, surrender or
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<PAGE> 12
terminate (except in the ordinary course of business), either orally or in
writing, any Occupancy Lease now existing or hereafter made for all or part of
the Property, permit an assignment or sublease of any such Occupancy Lease, or
request or consent to the subordination of any Occupancy Lease to any lien
subordinate to this Security Deed. Upon request, the Borrower shall furnish the
Lender with copies of all executed Occupancy Leases of all or any part of the
Property now existing or hereafter made, and Borrower shall assign to the Lender
(which assignment shall be in form and content acceptable to Lender), as
additional security for the Note, all Occupancy Leases now existing or hereafter
made of all or any part of the Property.
13. MAINTENANCE OF PARKING AND ACCESS; PROHIBITION AGAINST
ALTERATION. To construct, keep and constantly maintain, as the case may be, all
curbs, drives, parking areas and the number of parking spaces heretofore
approved by the Lender or heretofore or hereafter required by any governmental
body, agency or authority having jurisdiction over the Borrower or the Property,
and not to alter, erect, build or construct upon any portion of the Property,
any building or structure of any kind whatsoever, the erection, building or
construction of which has not been previously approved by Lender in writing,
which approval shall be at the sole discretion of Lender. To the extent any
alterations or improvements are required to be approved by any tenants of the
Property, no such alterations or improvements shall be made unless and until
such consent has been obtained in writing and a copy thereof furnished to
Lender.
14. EXECUTION OF ADDITIONAL DOCUMENTS. To do, execute, acknowledge
and deliver all and every such further acts, deeds, conveyances, mortgages,
deeds to secure debt, assignments, notices of assignments, transfers, assurances
and other instruments, including security agreements and financing statements,
as the Lender shall from time to time require for the purpose of better
assuring, conveying, assigning, transferring and confirming unto the Lender the
Property and rights hereby encumbered, created, conveyed, assigned or intended
now or hereafter so to be encumbered, created, conveyed or assigned or which the
Borrower may now be or may hereafter become bound to encumber, create, convey,
or assign to the Lender, or for the purpose of carrying out the intention or
facilitating the performance of the terms of this Security Deed, or for filing,
registering or recording this Security Deed, and to pay all filing, registration
or recording fees and all taxes, costs and other expenses, including Reasonable
Attorneys' Fees (as defined in Paragraph 47), incident to the preparation,
execution, acknowledgment, delivery, and recordation of any of the same.
15. AFTER-ACQUIRED PROPERTY SECURED. It is understood and agreed
that all right, title and interest of the Borrower in and to all extensions,
improvements, betterments, renewals, substitutions and replacements of, and all
additions and appurtenances to, the Property hereinabove described, hereafter
acquired by or released to the Borrower, or constructed, assembled or placed by
the Borrower on the Real Property, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, encumbrance, conveyance, assignment or other act
by the Borrower, shall become subject to the lien and security title of this
Security Deed as fully and completely and with the same effect as though now
owned by the Borrower and specifically described herein, but at any
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<PAGE> 13
and all times the Borrower will execute and deliver to the Lender any and all
such further assurances, mortgages, deeds to secure debt, conveyances, or
assignments thereof or security interests therein as the Lender may reasonably
require for the purpose of expressly and specifically subjecting the same to the
lien of this Security Deed.
16. PAYMENTS BY LENDER ON BEHALF OF BORROWER. Should the Borrower
fail to make payment of any taxes, assessments or public charges on or with
respect to the Property before the same shall become delinquent, or shall fail
to make payment of any insurance premiums or other charges, impositions or liens
herein or elsewhere required to be paid by the Borrower, then the Lender, at its
sole option, but without obligation to do so, may make payment or payments of
the same and also may redeem the Property from tax sale without any obligation
to inquire into the validity of such taxes, assessments and tax sales. In the
case of any such payment by the Lender, the Borrower agrees to reimburse the
Lender, upon demand therefor, the amount of such payment and of any fees and
expenses attendant in making the same, together with interest thereon at the
lesser of either (i) the highest rate then allowed by the laws of the State of
Georgia, or if controlling, the laws of the United States, or (ii) the then
applicable interest rate of the Note plus five hundred (500) basis points; and
until paid, such amounts and interest shall be added to and become part of the
debt secured hereby to the same extent that this Security Deed secures the
repayment of the indebtedness evidenced by the Note. In making payments hereby
authorized by the provisions of this Paragraph 16; the Lender may do so
whenever, in its sole judgment and discretion, such advance or advances are
necessary or desirable to protect the full security intended to be afforded by
this instrument. Neither the right nor the exercise of the right herein granted
unto the Lender to make any such payments as aforesaid shall preclude the Lender
from exercising its option to cause the whole indebtedness secured hereby to
become immediately due and payable by reason of the Borrower's default in making
such payments as hereinabove required.
17. FUNDS HELD BY LENDER FOR TAXES, INSURANCE PREMIUMS,
ASSESSMENTS AND OTHER CHARGES. In order to more fully protect the security of
this Security Deed, Borrower shall deposit with the Lender, together with and in
addition to each monthly payment due on account of the indebtedness evidenced by
the Note, an amount equal to one-twelfth (1/12) of the annual total of such
taxes, insurance premiums, assessments and charges (all as estimated by the
Lender in its sole discretion) so that, at least thirty (30) days prior to the
due date thereof, Lender shall be able to pay in full all such taxes, insurance
premiums, assessments and other charges as the same shall become due, and the
Lender may hold without paying interest and commingle with its general funds the
sums so deposited and apply the same to the payment of said taxes, insurance
premiums, assessments or other charges as they become due and payable. If at any
time the funds so held by Lender are insufficient to pay such taxes, insurance
premiums, assessments or other charges as they become due and payable the
Borrower shall immediately, upon notice and demand by Lender, deposit with
Lender the amount of such deficiency, and the failure on the part of the
Borrower to do so shall entitle the Lender, at its sole option, to make such
payments in accordance with its rights and pursuant to the conditions elsewhere
provided in this Security Deed. Notwithstanding any default under this Security
Deed, Lender agrees to apply any funds deposited by Borrower and being held by
Lender pursuant to this paragraph for the payment of taxes toward the payment of
taxes which are then a lien on the
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<PAGE> 14
Property. Thereafter, at its sole option, Lender may apply any funds so held by
it pursuant to this Paragraph 17 toward the payment of the indebtedness secured
hereby, notwithstanding the fact that the amount owing thereon may not then be
due and payable or that said indebtedness is otherwise adequately secured in
such order and manner of application as Lender may elect.
18. CONDEMNATION; EMINENT DOMAIN. All awards and other
compensation heretofore or hereafter made to Borrower and all subsequent owners
of the Property in any taking by eminent domain or recovery for inverse
condemnation, either permanent or temporary, of all or any part of the Property
or any easement or any appurtenance thereto, including severance and
consequential damages and change in grade of any street, are hereby assigned to
Lender, and Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, and authorizes, directs and empowers such attorney, at
the option of said attorney, on behalf of Borrower, its successors and assigns,
to adjust or compromise the claim for any such award and alone to collect and
receive the proceeds thereof, to give proper receipts and acquittances therefor
and, after deducting any expenses of collection, at its sole option:
(i) to apply the net proceeds as a credit upon the outstanding
principal balance of the indebtedness secured hereby, as
selected by Lender, notwithstanding the fact that the amount
owing thereon may not then be due and payable or that the
indebtedness is otherwise adequately secured. In the event
Lender applies such awards to the reduction of the outstanding
indebtedness evidenced by the Note, such proceeds shall be
applied at par and the monthly installments due and payable
under the Note shall be adjusted accordingly; however no such
application shall serve to cure an existing default in the
payment of the Note; or
(ii) to hold said proceeds without any allowance of interest and
make the same available for restoration or rebuilding the
Property. In the event that Lender elects to make said
proceeds available to reimburse Borrower for the cost of the
restoration or rebuilding of the buildings or improvements on
the Property, such proceeds shall be made available in the
manner and under the conditions that Lender may require as
provided under Paragraph 8 hereof. If the proceeds are made
available by Lender to reimburse Borrower for the cost of said
restoration or rebuilding, any surplus which may remain out of
said award after payment of such cost of restoration or
rebuilding shall be applied on account of the indebtedness
secured hereby at par notwithstanding the fact that the amount
owing thereon may not then be due and payable or that said
indebtedness is otherwise adequately secured.
Borrower further covenants and agrees to give Lender immediate notice of
the actual or threatened commencement of any proceedings under eminent domain
and to deliver to Lender copies of any and all papers served in connection with
any proceedings. Borrower further covenants and agrees to make, execute and
deliver to Lender, at any time or times, upon request, free, clear and
discharged of any encumbrance of any kind whatsoever, any and all further
assignments and/or other instruments deemed necessary by Lender for the purpose
of validly and sufficiently assigning all such awards and other compensation
heretofore or hereafter made to
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<PAGE> 15
Lender (including the assignment of any award from the United States government
at any time after the allowance of the claim therefor, the ascertainment of the
amount thereof and the issuance of the warrant for payment thereof).
It shall be a default hereunder if any part of any of the Improvements
situated on the Property shall be condemned by any governmental authority having
jurisdiction, or if lands constituting a portion of the Property shall be
condemned by any governmental authority having jurisdiction, such that the
Property is in violation of applicable parking, zoning or other ordinances, or
fails to comply with the terms of the Occupancy Leases, and in either of said
events, Lender shall be entitled to exercise any or all remedies provided or
referenced in this Security Deed.
19. COSTS OF COLLECTION. In the event that the Note secured hereby
is placed in the hands of an attorney for collection, or in the event that the
Lender shall become a party either as plaintiff or as defendant, in any action,
suit, appeal or legal proceeding (including, without limitation, foreclosure,
condemnation, bankruptcy, administrative proceedings or any proceeding wherein
proof of claim is by law required to be filed), hearing, motion or application
before any court or administrative body in relation to the Property or the lien
and security interest granted or created hereby or herein, or for the recovery
or protection of said indebtedness or the Property, or for the foreclosure of
this Security Deed, the Borrower shall save and hold the Lender harmless from
and against any and all costs and expenses incurred by the Lender on account
thereof, including, but not limited to, Reasonable Attorneys' Fees, title
searches and abstract and survey charges, at all trial and appellate levels, and
the Borrower shall repay, on demand, all such costs and expenses, together with
interest thereon until paid at the lesser of either (i) the highest rate then
allowed by the laws of the State of Georgia, or, if controlling, the laws of the
United States, or (ii) the applicable rate of interest of the Note plus five
hundred (500) basis point; all of which sums, if unpaid, shall be added to and
become a part of the indebtedness secured hereby.
20. DEFAULT RATE. If the entire outstanding balance of the Note is
due, whether at maturity, by acceleration or otherwise, the total amount due,
whether principal, interest or money owing for advancements pursuant to the
terms of this Security Deed or any other Loan Document, shall bear interest
until paid at the lesser of (i) the highest rate then allowed by the laws of the
State of Georgia, or, if controlling, the laws of the United States, or (ii) the
then applicable rate of interest of the Note plus five hundred (500) basis
points (five percent per annum); all of which sums shall be added to and become
a part of the indebtedness secured hereby.
21. SAVINGS CLAUSE; SEVERABILITY. Notwithstanding any provisions
in the Note or in this Security Deed to the contrary, the total liability for
payments in the nature of interest including but not limited to Prepayment
Premiums, default interest and late fees shall not exceed the limits imposed by
laws of the State of Georgia or the United States of America relating to maximum
allowable charges of interest. Lender shall not be entitled to receive, collect
or apply, as interest on the indebtedness evidenced by the Note, any amount in
excess of the maximum lawful rate of interest permitted to be charged by
applicable law. In the event Lender ever receives, collects or applies as
interest any such excess, such amount which would
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<PAGE> 16
be excessive interest shall be applied to reduce the unpaid principal balance of
the indebtedness evidenced by the note. If the unpaid principal balance of such
indebtedness is paid in full any remaining excess shall be paid forthwith to the
Borrower. If any clauses or provisions herein contained operate or would
prospectively operate to invalidate this Security Deed, then such clauses or
provisions only shall be held for naught, as though not herein contained, and
the remainder of this Security Deed shall remain operative and in full force and
effect.
22. BANKRUPTCY, REORGANIZATION OR ASSIGNMENT. It shall be a
default hereunder if the Borrower or any general partner of Borrower shall: (a)
consent to the appointment of a receiver, trustee or liquidator of all or a
substantial part of Borrower's assets, or (b) be adjudicated a bankrupt or
insolvent, or file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, or (c) make a general assignment
for the benefit of creditors, or (d) file a petition under or take advantage of
any insolvency law, or (e) file an answer admitting the material allegations of
a petition filed against the Borrower or any general partner of Borrower in any
bankruptcy, reorganization or insolvency proceeding or fail to cause the
dismissal of such petition within sixty (60) days after the filing of said
petition, or (f) take action for the purpose of effecting any of the foregoing,
or (g) if any order, judgment or decree shall be entered upon an application of
a creditor of Borrower or any general partner of Borrower by a court of
competent jurisdiction approving a petition seeking appointment of a receiver or
trustee of all or a substantial part of the Borrower's assets or any of
Borrower's general partner's assets and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days.
23. TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It
is understood by Borrower that time is of the essence hereof in connection with
all obligations of Borrower herein, in the Note, the Assignment (as defined in
Paragraph 34) and any of the other Loan Documents.
If default be made in the payment of any installment of the Note,
whether of principal or interest, or in the payment of any other sums of money
referred to herein or in the Note, promptly and fully when the same shall be due
and such Monetary Default (as hereinafter defined) remains uncured after the
Monetary Cure Period (as hereinafter defined), if applicable (if the Monetary
Cure Period is not applicable, no notice or demand from Lender to Borrower shall
be required), or in the event a breach or default be made by the Borrower in any
one of the agreements, conditions and covenants of said Note, this Security
Deed, the Assignment or any Loan Documents evidencing or securing the Note, or
in the event that each and every one of said agreements, conditions and
covenants are not otherwise duly, promptly and fully discharged or performed,
and any such Non-Monetary Default (as hereinafter defined) remains uncured for a
period of thirty (30) days after written notice thereof from the Lender to the
Borrower has been delivered in the manner prescribed in Paragraph 41 hereof
(except that if such Non-Monetary Default cannot reasonably be cured within the
30 day period Borrower shall have a reasonable period of time to cure such
default provided that Borrower commences the cure of such default within the 30
day period and thereafter diligently pursues the cure to completion), Lender at
its sole option may thereupon or thereafter declare the indebtedness evidenced
by the Note, as well as all other monies secured hereby, including, without
limitation, all Prepayment Premiums and
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<PAGE> 17
late payment charges, to be forthwith due and payable, whereupon the principal
of and the interest accrued on the indebtedness evidenced by the Note and all
other sums secured by this Security Deed at the option of Lender shall
immediately become due and payable as if all of said sums of money were
originally stipulated to be paid on such day, and thereupon, the Lender may
avail itself of all rights and remedies provided by law and may prosecute a suit
at law or in equity as if all monies secured hereby had matured prior to its
institution, anything in this Security Deed or in the Note to the contrary
notwithstanding. Lender shall give Borrower notice in the manner described in
Paragraph 41 hereof of, and a 5 day right-to-cure period ("Monetary Cure
Period") to cure, any Monetary Default (as hereinafter defined); provided,
however such Monetary Cure Period shall be limited to once per loan year for the
term of the Note. Lender shall have no obligation to give Borrower notice of any
Incurable Default (as hereinafter defined) prior to exercising its right, power
and privilege to accelerate the maturity of the indebtedness secured hereby.
As used herein, the term "Monetary Default" shall mean any default which
can be cured by the payment of money such as, but not limited to, the payment of
principal and interest due under the Note, the payment of taxes, assessments and
insurance premiums when due as provided in this Security Deed. As used herein,
the term "Non-Monetary Default" shall mean any default which is not a Monetary
Default or an Incurable Default. As used herein, the term "Incurable Default"
shall mean (i) any voluntary or involuntary sale, assignment, mortgaging,
encumbering or transfer in violation of the covenants contained in Paragraph 30
hereof; or (ii) if Borrower, or its general partner, should make an assignment
for the benefit of creditors, become insolvent, or file a petition in bankruptcy
(including but not limited to, a petition seeking a rearrangement or
reorganization).
If a default shall occur hereunder and is not timely cured as herein
provided, and, as a result thereof, the indebtedness secured hereby is
accelerated and is due and payable in full, the Lender, at its option, may sell
the Property or any part of the Property at public sale or sales before the door
of the courthouse of the County in which the Property or any part of the
Property is situated, to the highest bidder for cash, in order to pay the
indebtedness secured hereby and accrued interest thereon and insurance premiums,
liens, assessments, taxes and charges, including utility charges, if any, with
accrued interest thereon, and all expenses of the sale and of all proceedings in
connection therewith, including Reasonable Attorney's Fees after advertising the
time, place and terms of sale once a week for four (4) weeks immediately
preceding such sale (but without regard to the number of days) in a newspaper in
which Sheriff's sales are advertised in said County. The foregoing
notwithstanding, the Lender may sell, or cause to be sold, any tangible or
intangible personal property, or any part thereof, and which constitute a part
of the security hereunder, in the foregoing manner, or as may otherwise be
provided by law. The Lender may bid and purchase at any such sale and, if Lender
should be the successful bidder at such sale, may satisfy the Lender's
obligation to purchase pursuant to the Lender's bid by canceling an equivalent
portion of any indebtedness then outstanding and secured hereby. At any such
sale, the Lender may execute and deliver to the purchaser a conveyance of the
Property or any part of the Property in fee simple with full warranties of title
and to this end, the Borrower hereby constitutes and appoints the Lender the
agent and attorney in fact of the Borrower to make such sale and conveyance, and
thereby to divest the Borrower of all right, title and equity
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<PAGE> 18
that the Borrower may have in and to the Property and to vest the same in the
purchaser or purchasers at such sale or sales, and all the acts and doings of
said agent and attorney in fact are hereby ratified and confirmed and any
recitals in said conveyance or conveyances as to facts essential to a valid sale
shall be binding on the Borrower. The aforesaid power of sale and agency hereby
granted are coupled with an interest and are irrevocable by death or otherwise,
are granted as cumulative of the other remedies provided by law for collection
of the indebtedness secured hereby and shall not be exhausted by one exercise
thereof but may be exercised until full payment of all sums secured hereby. Upon
any such sale pursuant to the aforementioned power of sale and agency, the
proceeds of said sale shall be applied first to payment of the indebtedness
secured hereby and accrued interest and late charges thereon, then to said
insurance premiums, liens, assessments, taxes and charges including utility
charges with accrued interest thereon and then to the reasonable expenses of
such sale and of all proceedings in connection therewith, including reasonable
attorney's fees, and finally, the remainder, if any, shall be paid to the party
legally entitled to same.
In the event of any such public sale pursuant to the aforesaid power of
sale and agency, the Borrower shall be deemed a tenant holding over and shall
forthwith deliver possession of the Property to the purchaser or purchasers at
such sale or be summarily dispossessed according to provisions of law applicable
to tenants holding over.
The failure or omission on the part of the Lender to exercise the option
for acceleration of maturity and to foreclose or exercise the power of sale in
this Security Deed following any default as aforesaid or to exercise any other
option or remedy granted hereunder to Lender when entitled to do so in any one
or more instances, or the acceptance by Lender of partial payment of the
indebtedness secured hereby, whether before or subsequent to Borrower's defaults
hereunder, shall not constitute a waiver of any such default or the right to
exercise any such option or remedy, but such option or remedy shall remain
continuously in force. Acceleration of maturity, once claimed hereunder by
Lender, at the option of Lender, may be rescinded by written acknowledgment to
that effect by Lender, but the tender and acceptance of partial payments alone
shall not in any way affect or rescind such acceleration of maturity.
In case Lender shall have proceeded to enforce any right, power
or remedy under this Security Deed by foreclosure, entry or otherwise, or in the
event Lender commences advertising of the intended exercise of the sale under
power provided hereunder and such proceeding or advertisement shall have been
withdrawn, discontinued or abandoned for any reason, or shall have been
determined adversely to Lender, then in every such case (i) Borrower and Lender
shall be restored to their former positions and rights, (ii) all rights, powers
and remedies of Lender 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 be and shall be deemed to be a
continuing Default, and (iv) neither this Security Deed, nor the Note, 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 Borrower 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.
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<PAGE> 19
24. PROTECTION OF LENDER'S SECURITY. At any time after default
hereunder, the Lender is authorized, without notice and in its sole discretion,
to enter upon and take possession of the Property or any part thereof and to
perform any acts which the Lender deems necessary or proper to conserve the
security herein intended to be provided by the Property, to operate any business
or businesses conducted thereon and to collect and receive all rents, issues and
profits thereof and therefrom, including those past due as well as those
accruing thereafter.
25. APPOINTMENT OF RECEIVER. If, at any time after a default
hereunder, in the sole discretion of the Lender, a receivership may be necessary
to protect the Property or its rents, issues, revenue, profits or proceeds,
whether before or after maturity of the indebtedness secured hereby and whether
before or at the time of or after the institution of suit to collect such
indebtedness, or to enforce this Security Deed, the Lender, as a matter of
strict right and regardless of the value of the Property or the amounts due
hereunder or secured hereby, or of the solvency of any party bound for the
payment of such indebtedness, shall have the right, upon ex parte application
and without notice to anyone, and by any court having jurisdiction, to the
appointment of a receiver to take charge of, manage, preserve, protect and
operate the Property, to collect the rents, issues, revenues, profits, proceeds
and income thereof, to make all necessary and needful repairs, and to pay all
taxes, assessments and charges against the Property and all premiums for
insurance thereon, and to do such other acts as may by such court be authorized
and directed, and after payment of the expenses of the receivership and the
management of the Property, to apply the net proceeds of such receivership in
reduction of the indebtedness secured hereby or in such other manner as the said
court shall direct, notwithstanding the fact that the amount owing thereon may
not then be due and payable or the said indebtedness is otherwise adequately
secured. Such receivership shall, at the option of Lender, continue until full
payment of all sums hereby secured or until title to the Property shall have
passed by sale under this Security Deed. Borrower hereby specifically waives its
right to object to the appointment of a receiver as aforesaid and hereby
expressly agrees that such appointment shall be made as an admitted equity and
as a matter of absolute right to the Lender.
26. RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The
rights and remedies herein provided are cumulative and Lender, as the holder of
the Note and of every other obligation secured hereby, may recover judgment
thereon, issue execution therefor and resort to every other right or remedy
available at law or in equity, without first exhausting any right or remedy
available to Lender and without affecting or impairing the security of any right
or remedy afforded hereby, and no enumeration of special rights or powers by any
provisions hereof shall be construed to limit any grant of general rights or
powers, or to take away or limit any and all rights granted to or vested in
Lender by law, and Borrower further agrees that no delay or omission on the part
of the Lender to exercise any rights or powers accruing to it hereunder shall
impair any such right or power or shall be construed to be a waiver of any such
event of default hereunder or any acquiescence therein; and every right, power
and remedy granted herein or by law to the Lender may be exercised from time to
time as often as may be deemed expedient by the Lender.
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<PAGE> 20
27. MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without
notice and without regard to the consideration, if any, paid therefor, and
notwithstanding the existence at the time of any inferior mortgages, deeds to
secure debt, or other liens thereon, may release any part of the security
described herein or may release any person or entity liable for any indebtedness
secured hereby without in any way affecting the priority of this Security Deed,
to the full extent of the indebtedness remaining unpaid hereunder, upon any part
of the security not expressly released. Lender may, at its option and within its
sole discretion, also agree with any party obligated on said indebtedness, or
having any interest in the security described herein, to extend the time for
payment of any part or all of the indebtedness secured hereby, and such
agreement shall not, in any way, release or impair this Security Deed, but shall
extend the same as against the title of all parties having any interest in said
security, which interest is subject to this Security Deed.
28. PROPERTY MANAGER. The exclusive manager of the Property shall
be the Borrower or such other manager as may be first approved in writing by
Lender. The exclusive leasing agent of the Property, if other than the foregoing
party, shall be first approved in writing by the Lender. The governing
management and leasing contracts shall be subordinate to this Security Deed and
satisfactory to and subject to the written approval of Lender throughout the
term of the indebtedness secured hereby. Upon default in either of these
requirements, then the whole of the indebtedness hereby secured shall, at the
election of the Lender, become immediately (subject to the cure period for a
Non-Monetary Default) due and payable, together with any default premium and
late payment charges required by the Note, and the Lender shall be entitled to
exercise any or all remedies provided or referenced in this Security Deed.
29. MODIFICATION NOT A WAIVER. In the event Lender: (a) releases,
as aforesaid any part of the security described herein or any person or entity
liable for any indebtedness secured hereby, or (b) grants an extension of time
for the payment of the Note, or (c) takes other or additional security for the
payment of the Note, or (d) waives or fails to exercise any rights granted
herein, in the Note, or any of the other Loan Documents, any said act or
omission shall not release Borrower, subsequent purchasers of the Property or
any part thereof, or makers, sureties, endorsers or guarantors of the Note, if
any, from any obligation or any covenant of this Security Deed, the Note, or any
of the other Loan Documents, nor preclude Lender from exercising any right,
power or privilege herein granted or intended to be granted in the event of any
other default then made, or any subsequent default.
30. TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER;
ASSUMPTION. Except as hereafter provided, without the prior written consent of
the Lender, the sale, transfer, assignment, or conveyance of all or any portion
of the Property, or a transfer, assignment, or conveyance of a "controlling
interest" in Borrower whether voluntarily or by operation of law, without the
prior written consent of Lender, shall constitute a default under the terms of
this Security Deed and entitle the Lender, at its sole option, to accelerate all
sums due on the Note together with any Prepayment Premiums, late payment
charges, or any other amounts secured hereby. As used herein the term
"controlling interest" means, in the case of a partnership, greater than a 50%
interest in the partnership or votes greater than 50% of the votes required to
approve any major decisions (as opposed to day-to-day or ministerial decisions)
of
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<PAGE> 21
the partnership, and in the case of a corporation, greater than 50% of the
outstanding voting shares of stock of the corporation. (Notwithstanding the
foregoing sentence, a transfer of partnership interests or partnership units in
the ordinary course of business of Borrower as an "up-REIT" real estate
investment trust structure shall be permitted and shall not constitute a
conveyance of a "controlling interest" in Borrower.) Lender, may, however, elect
to waive the option to accelerate granted hereunder if, prior to any such sale,
transfer, assignment or conveyance of the Property, the following conditions
shall be fully satisfied: (a) the Lender acknowledges in writing that, in its
sole discretion, the creditworthiness of the proposed transferee and the ability
and experience of the proposed transferee to operate the Property are
satisfactory to Lender, and (b) Lender and the proposed transferee shall enter
into an agreement in writing that (i) the interest payable on the indebtedness
secured hereby shall be at such rate as Lender shall determine, (ii) the
repayment schedule as set forth in the Note shall be modified by the Lender in
its sole discretion to amortize the then unpaid principal balance secured hereby
over a period determined by Lender in its sole discretion without a change in
the maturity date of the Note, (iii) an assumption fee to be determined by
Lender may be charged by the Lender in its sole discretion, and (iv) the
proposed transferee shall assume in writing all obligations of Borrower under
the Note, this Security Deed and the other Loan Documents. In the event the
ownership of the Property, or any part thereof, shall become vested in a person
or entity other than the Borrower, whether with or without the prior written
consent of the Lender, the Lender may, without notice to the Borrower, deal with
such successor or successors in interest with reference to the Property, this
Security Deed and the Note in the same manner and to the same extent as with the
Borrower without in any way vitiating or discharging the Borrower's liability
hereunder or under the Note. No sale, transfer or conveyance of the Property, no
forbearance on the part of the Lender and no extension of time for the payment
of the debt hereby secured given by the Lender shall operate to release,
discharge, modify, change or affect the original liability of the Borrower,
either in whole or in part, unless expressly set forth in writing executed by
the Lender. Notwithstanding anything contained herein to the contrary, Borrower
hereby waives any right it now has or may hereafter have to require Lender to
prove an impairment of its security as a condition to exercise the Lender's
rights under this Paragraph 30. If a transfer of the Property, or a portion
thereof, or a transfer of a "controlling interest" in Borrower is approved by
Lender: (a) Lender must receive for its review and approval copies of all
transfer documents, (b) the approved transferee must assume in writing all
obligations under the Note, this Security Deed and any other Loan Documents, and
(c) Borrower or the approved transferee must pay all costs and expenses in
connection with such transfer and assumption, including without limitation, all
fees and expenses incurred by Lender.
Lender acknowledges that Borrower's general partner, Roberts Realty
Investors, Inc. ("RRII"), is a real estate investment trust and that it is
contemplated that Borrower may convey its interest in the Property to RRII.
Therefore, notwithstanding anything contained in this Paragraph 30 to the
contrary, the prior written consent of the Lender shall not be required and
Lender shall not be entitled to accelerate the indebtedness evidenced by the
Note or change the Loan terms upon a transfer so long as (i) the transfer is
made to RRII; (ii) there is no change in the ownership interest of RRII except
for transfers of shares of the real estate investment trust in the ordinary
course of business; (iii) Lender shall be given prompt notice and documentation
of such transfer, and Borrower shall pay all of Lender's out-of-pocket expenses
associated with such
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<PAGE> 22
transfer; provided, however, that Borrower shall notify Lender in writing of any
such transfer not less than thirty (30) days prior to the effective date of such
transfer; and (iv) RRII shall assume in writing all obligations of Borrower
under the Note, this Security Deed and the other Loan Documents. In addition to
the foregoing, Lender shall permit one (1) bona fide, arm's length transfer of
the Property to any transferee without change in the loan terms; provided,
however, that no such transfer shall be valid or permitted hereunder unless: (i)
Lender receives prior written notice of such proposed transfer, (ii) such
proposed transferee has been approved in writing by the Lender (taking into
account such factors as transferee's creditworthiness, business experience and
managerial capabilities) such approval not to be unreasonably withheld, (iii)
Lender is paid a transfer fee in the amount of one percent (1%) of the then
outstanding principal balance of the Note, (iv) Borrower or the approved
transferee pays all fees and expenses incurred by Lender in connection with such
transfer and assumption, including, without limitation, inspection and
investigation fees and Reasonable Attorneys' Fees (as hereinafter defined), (v)
there is no existing default hereunder or event which with the passage of time
would constitute a default hereunder, and (vi) the transferee shall assume in
writing all obligations of Borrower under the Note, this Security Deed and the
other Loan Documents. Any transfer of all or any portion of the Property which
does not strictly comply with the terms and conditions of the foregoing shall be
a default hereunder and shall entitle the Lender to exercise all rights and
remedies provided in this Security Deed.
31. FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the
Note secured hereby remains unpaid, the Borrower shall neither voluntarily nor
involuntarily permit the Property or any part thereof to become subject to any
secondary or other junior lien, mortgage, security interest or encumbrance of
any kind whatsoever other than taxes for the current year and the Permitted
Exceptions, without the prior written consent of the Lender, and the imposition
of any such secondary lien, mortgage, security interest or encumbrance shall
constitute an event of default hereunder and entitle the Lender, at its sole
option, to declare all sums due on account of the Note to be and become
immediately due and payable. In the event that Lender shall hereafter give its
written consent to the imposition of any such secondary lien, mortgage, security
interest or other encumbrance upon the Property, the Lender, at its sole option,
shall be entitled to accelerate the maturity of the Note and exercise any and
all remedies provided and available to Lender hereunder in the event that the
holder of any such secondary lien or encumbrance shall institute foreclosure or
other proceedings to enforce the same; it being understood and agreed that a
default under any instrument or document evidencing, securing or secured by any
such secondary lien or encumbrance shall be and constitute an event of default
hereunder. In the event all or any portion of the proceeds of the loan secured
hereby are used for the purpose of retiring debt or debts secured by prior liens
on the Property, the Lender shall be subrogated to the rights and lien priority
of the holder of the lien so discharged.
32. CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Borrower agrees that
the making of any oil, gas or mineral lease or the sale or conveyance of any
mineral interest or right to explore for minerals under, through or upon the
Property would impair the value of the Property securing the Note, and that the
Borrower shall have no right, power or authority to lease the Property, or any
part thereof, for oil, gas or other mineral purposes, or to grant, assign or
convey any mineral interest of any nature, or the right to explore for oil, gas
and other minerals,
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<PAGE> 23
without first obtaining from the Lender express written permission therefor,
which permission shall not be valid until recorded among the Public Records of
Gwinnett County, Georgia. The Borrower further agrees that if the Borrower shall
make, execute or enter into any such lease or attempt to grant any such mineral
rights without such prior written permission of the Lender, then the Lender
shall have the option, without notice, to declare the same to be a default
hereunder and to declare the indebtedness hereby secured immediately due and
payable. Whether or not the Lender shall consent to such lease or grant of
mineral rights, the Lender shall receive the entire consideration to be paid for
such lease or grant of mineral rights, with the same to be applied to the
indebtedness hereby secured notwithstanding the fact that the amount owing
thereon may not then be due and payable or the said indebtedness is otherwise
adequately secured; provided, however, that the acceptance of such consideration
shall in no way impair the lien of this Security Deed on the Property.
33. ESTOPPEL CERTIFICATION BY BORROWER. Borrower, upon request
therefor made either personally or by mail, shall certify in writing to Lender
(or any party designated by Lender) in form satisfactory to Lender the amount of
principal and interest then outstanding under the terms of the Note and any
other sums due and owing under this Security Deed or any of the other Loan
Documents and whether any offsets or defenses exist against the mortgage debt.
Such certification shall be made by Borrower within ten (10) days if the request
is made personally, or within twenty (20) days if the request is made by mail.
34. CROSS-DEFAULT. The Note is also secured by the terms,
conditions and provisions of an Assignment of Leases, Rents and Profits
(hereinafter referred to as the "Assignment") recorded among the Public Records
of Gwinnett County, Georgia and, additionally, may be secured by contracts or
agreements of guaranty or other security instruments. The terms, conditions and
provisions of each security instrument shall be considered a part hereof as
fully as if set forth herein verbatim. Any default under this Security Deed or
the Note secured hereby shall constitute an event of default under the
Assignment or any of the other Loan Documents, and any default under the
Assignment or other Loan Documents shall likewise constitute a default hereunder
and under the Note. Notwithstanding the foregoing, the enforcement or attempted
enforcement of this Security Deed or any of the other Loan Documents now or
hereafter held by Lender shall not prejudice or in any manner affect the right
of Lender to enforce any other Loan Document; it being understood and agreed
that the Lender shall be entitled to enforce this Security Deed and any of the
other Loan Documents now or hereafter held by it in such order and manner as
Lender, in its sole discretion, shall determine.
35. EXAMINATION OF BORROWER'S RECORDS. Borrower will maintain
complete and accurate books and records showing in detail the income and
expenses of the Property, and will permit upon no less than two (2) days notice
the Lender and its representatives to examine said books and records and all
supporting vouchers and data during normal business hours and from time to time
upon request by the Lender, in such place as such books and records are
customarily kept, and will furnish to the Lender, within one hundred twenty
(120) days after the close of each calendar year, audited financial statements
of each general partner of Borrower and statements of operations of the Property
certified by the general partner of the Borrower to be true and correct and
showing in detail all income derived from and expenses incurred in
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<PAGE> 24
connection with the ownership of the Property. All such statements shall be in
form acceptable to Lender and shall be prepared in accordance with generally
accepted accounting principles and shall include an annual rent schedule. In the
event the Borrower fails to provide such statements to the Lender within the
time prescribed above, the Borrower shall pay the Lender the sum of TWO HUNDRED
AND NO/100 DOLLARS ($200.00) for each successive month for which statements are
delinquent. In the event of default hereunder, Lender shall have the right to
require that said financial statements of the Property be audited and certified
by a certified public accountant acceptable to the Lender, all at the sole cost
and expense of the Borrower.
36. ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED.
Borrower covenants and agrees to permit or suffer none of the following without
the prior written consent of the Lender:
(a) Any structural alteration of, or addition to, the
Improvements now or hereafter situated upon the Real Property or the
addition of any new buildings or other structure(s) thereto other than
erection or removal of non-load bearing interior walls; or
(b) The removal, transfer, sale or lease of the Property,
except that the renewal, replacement or substitution of fixtures,
equipment, machinery, apparatus and articles of personal property
(replacement or substituted items must be of like or better quality
than the removed items in their original condition) encumbered hereby
may be made in the normal course of business; or
(c) The use of any of the Improvements now or hereafter
situated on the Real Property for any purpose other than as an
apartment complex project and related facilities.
37. FUTURE ADVANCES SECURED. This Security Deed shall secure not
only existing indebtedness, but also such future advances, whether such advances
are obligatory or to be made at the option of the Lender. Upon request of
Borrower, and at Lender's option prior to release of this Security Deed, Lender
may make future advances to Borrower. All future advances with interest thereon
shall be secured by this Security Deed to the same extent as if such future
advances were made on the date of the execution of this Security Deed unless the
parties shall agree otherwise in writing, but the total secured indebtedness
shall not exceed at any one time a maximum principal amount equal to double the
face amount of the Note plus interest, and costs of collection including court
costs and Reasonable Attorneys' Fees. Any advances or disbursements made for the
benefit or protection of or the payment of taxes, assessments, levies or
insurance upon the Property, with interest on such disbursements as provided
herein, shall be added to the principal balance of the Note and collected as a
part thereof. To the extent that this Security Deed may secure more than one
note, a default in the payment of any note shall constitute a default in the
payment of all such notes.
38. EFFECT OF SECURITY AGREEMENT. Borrower does hereby grant and
this Security Deed is and shall be deemed to create, grant, give and convey a
mortgage of, a lien and encumbrance upon, and a present security interest in
both real and personal property, including all improvements, goods, chattels,
furniture, furnishings, fixtures, equipment, apparatus,
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<PAGE> 25
appliances and other items of tangible or intangible personal property,
hereinabove particularly or generally described and conveyed, whether now or
hereafter affixed to, located upon, necessary for or used or useful, either
directly or indirectly, in connection with the operation of the Property as an
apartment complex project, and this Security Deed shall also serve as a
"security agreement" within the meaning of that term as used in the Uniform
Commercial Code as adopted and in force from time to time in the State of
Georgia, and shall be operative and effective as a security agreement in
addition to, and not in substitution for, any other security agreement executed
by the Borrower in connection with the extension of credit or loan transaction
secured hereby. Upon the occurrence of a default hereunder or Borrower's breach
of any other covenants or agreements between the parties entered into in
conjunction herewith, Lender shall have the remedies (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 Lender's sole election. Borrower and Lender 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
Borrower and Lender that everything used in connection with the production of
income from the Property or adapted for use therein or which is described or
reflected in this Security Deed, is, and at all times and for all purposes and
in all proceedings, both legal or equitable, shall be, regarded as part of the
real estate conveyed hereby regardless of whether (i) any such item is
physically attached to the improvements, (ii) serial numbers are used for the
better identification of certain items capable of being thus identified in an
exhibit to this Security Deed or elsewhere, or (iii) 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 (i) the proceeds of any fire and hazard insurance policy,
or (ii) any award in eminent domain proceedings for a taking or for loss of
value, or (iii) Borrower's interest as lessor or landlord in any present or
future lease or rights to income growing out of the use and occupancy of the
Property, whether pursuant to lease or otherwise, shall not in any way alter any
of the rights of Lender as determined by this Security Deed or affect the
priority of Lender'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 Lender in the event any
court shall at any time hold, with respect to the foregoing clauses (i), (ii) or
(iii) of this sentence, that notice of Lender's priority of interest, to be
effective against a particular class of persons, must be filed in the Uniform
Commercial Code records. Borrower warrants that (i) Borrower's (that is,
"Debtor's") name, identity and residence or principal place of business are as
set forth in Exhibit C attached hereto and made a part hereof; (ii) Borrower
(that is, "Debtor") has been using or operating under said name and identity
without change for the time period set forth in Exhibit C; and (iii) the
location of the collateral is upon the Property. Borrower covenants and agrees
that Borrower will furnish Lender with notice of any change in the matters
addressed by clauses (i) or (iii) of this paragraph within thirty (30) days of
the effective date of any such change and Borrower will promptly execute any
financing statements or other instruments deemed necessary by Lender to prevent
any filed financing statement from becoming misleading or losing its perfected
status. If Borrower fails to promptly execute any such financing statements or
other instruments, Lender may make, execute, record, file, re-record, and
re-file any and all such financing statements or other instruments for and in
the name of Borrower, and Borrower hereby irrevocably appoints Lender the agent
and attorney-in-fact of
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<PAGE> 26
Borrower so to do. This appointment of Lender as Borrower's attorney-in-fact is
coupled with an interest and is irrevocable by death or otherwise. The
information contained in this paragraph is provided in order that this Security
Deed shall comply with the requirements of the Uniform Commercial Code, as
enacted in the State of Georgia, for instruments to be filed as financing
statements. The names of the "Debtor" and the "Secured Party," the identity and
residence or principal place of business of "Debtor," the time period for which
"Debtor" has been using or operating under said name and identity without change
are as set forth in Schedule 1 of Exhibit C; the mailing address of the "Secured
Party" from which information concerning the security interest may be obtained,
and the mailing address of "Debtor," are as set forth in Schedule 2 of said
Exhibit C; and a statement indicating the types, or describing the items, of
collateral is set forth hereinabove.
The Borrower agrees to and shall, upon the request of Lender, execute
and deliver to Lender, in form and content satisfactory to Lender, such
financing statements, descriptions of property and such further assurances as
Lender, in its sole discretion, may from time to time consider necessary to
create, perfect, continue and preserve the lien and encumbrances hereof and the
security interest granted herein upon and in such real and personal property and
fixtures described herein, including all buildings, improvements, goods,
chattels, furniture, furnishings, fixtures, equipment, apparatus, appliances and
other items of tangible and intangible personal property herein specifically or
generally described and intended to be the subject of the security interest,
lien and encumbrance hereby created, granted and conveyed. Without the prior
written consent of Lender, Borrower shall not create or suffer to be created,
pursuant to the Uniform Commercial Code, any other security interest in such
real and personal property and fixtures described herein. The Lender, at the
expense of the Borrower, may or shall cause such statements, descriptions and
assurances, as herein provided in this Paragraph 38, and this Security Deed to
be recorded and re-recorded, filed and refiled, at such times and in such places
as may be required or permitted by law to so create, perfect and preserve the
lien and encumbrance hereof upon all of the Property.
39. TERMS OF CONTRACT SURVIVE CLOSING. The terms and provisions of
the application/contract between Lender and Borrower are incorporated herein by
reference, said application/contract being dated December 19, 1997, and any
subsequent amendment thereto (hereinafter referred to as the "Contract"). All
terms and conditions of the Contract not expressly set forth in this Security
Deed, the Note and any other Loan Documents shall survive the closing hereof and
remain in full force and effect. In the event any conflict exists between the
terms, conditions and provisions of the Contract and the Loan Documents, the
terms, conditions and provisions of the Loan Documents shall prevail.
40. SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof
shall be binding upon the Borrower and the successors and assigns of the
Borrower, and inure to the benefit of Lender and its successors and assigns.
Where more than one Borrower is named herein, the obligations and liabilities of
said Borrower shall be joint and several. Wherever used in this Security Deed,
unless the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, the word "Borrower" shall mean Borrower and/or any
subsequent owner or owners of the Property, the word "Lender" shall mean Lender
or any subsequent holder
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<PAGE> 27
or holders of this Security Deed, the word "Note" shall mean Note(s) secured by
this Security Deed, and the word "person" shall mean an individual, trustee,
trust, corporation, partnership or unincorporated association.
41. NOTICES. All notices hereunder shall be deemed to have been
duly given if mailed by United States registered or certified mail, with return
receipt requested, postage prepaid, or if deposited with a nationally recognized
overnight courier such as Federal Express, to the parties at the following
addresses (or at such other addresses as shall be given in writing by any party
to the others), and shall be deemed complete upon receipt (which, in the case of
delivery by certified mail, shall be as evidenced by the return receipt, and, in
the case of delivery by a nationally recognized overnight courier, shall be as
evidenced by the confirmation of delivery received by the courier) or refusal to
accept receipt:
To Borrower: Roberts Properties Residential, L.P.
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Attn: Charles S. Roberts
To Lender: Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215-2220
Attn: Real Estate Investments
42. GOVERNING LAW. This Security Deed is to be governed by and
construed in accordance with the laws of the State of Georgia, and, if
controlling, by the laws of the United States.
43. RIGHTS OF LENDER CUMULATIVE. The rights of the Lender arising
under the clauses and covenants contained in this Security Deed shall be
separate, distinct and cumulative and none of them shall be in exclusion of the
others; and no act of the Lender shall be construed as an election to proceed
under any one provision herein to the exclusion of any other provisions,
anything herein or otherwise to the contrary notwithstanding.
44. MODIFICATIONS. This Security Deed cannot be changed, altered,
amended or modified except by an agreement in writing and in recordable form,
executed by both Borrower and Lender.
45. EXCULPATION. Notwithstanding anything contained herein to the
contrary, the liability of Borrower is subject to the limited recoures
provisions contained in the Exculpation section of the Note, which are
incorporated herein and made a part hereof by reference as if fully set forth
herein.
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<PAGE> 28
46. FULL RECOURSE. Notwithstanding any provisions in this Security
Deed to the contrary including without limitation the provisions set forth in
the section captioned "Exculpation" hereinabove, Borrower and the general
partners of Borrower shall be personally liable, jointly and severally, for the
entire amount due under the Note (including all principal, interest and other
charges) in the event that Borrower (i) violates the covenants governing the
placing of subordinate financing on the Property as set forth in paragraph 31 of
this Security Deed or (ii) violates the covenants restricting transfers of
interest in the Property or transfers of ownership interests in Borrower as set
forth in paragraph 30 of this Security Deed.
47. CAPTIONS. The captions set forth at the beginning of the
various paragraphs of this Security Deed are for convenience only and shall not
be used to interpret or construe the provisions of this Security Deed.
48. REASONABLE ATTORNEYS' FEES. As used herein, the phrase
"Reasonable Attorney's Fees" shall mean fees charged by attorneys selected by
Lender based upon such attorney's then prevailing hourly rates, as opposed to
any amount or percentage specified by any statute then in effect in the State of
Georgia.
IN WITNESS WHEREOF, the said Borrower has caused these presents to be
executed under seal by persons duly authorized thereunto as of the day and year
first above written.
Signed, sealed and delivered Roberts Properties Residential, L.P., a
in the presence of: Georgia limited partnership
/s/ Charles R. Elliott By: Roberts Realty Investors, Inc.,
- ---------------------- its sole General Partner
Unofficial Witness
By: /s/ Charles S. Roberts
/s/ Sarah D. Bazarian -------------------------
- ---------------------- Name: Charles S. Roberts
Notary Public Title: President
My Commission Expires: (CORPORATE SEAL)
(NOTARY SEAL)
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<PAGE> 29
Exhibit "A"
ALL THAT TRACT of land in Land Lot 296 of the 6th District, Gwinnett County,
Georgia, described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at a point on the south
right-of-way line of Howell Ferry Road (100 foot right-of-way) at the mitered
intersection of the south right-of-way line of Howell Ferry Road with the east
right-of-way line of Peachtree Industrial Boulevard (right-of-way varies);
running thence along the south right-of-way line of Howell Ferry Road North 69
degrees 49 minutes 18 seconds East 264.28 feet to a 1/2-inch rebar set at the
TRUE POINT OF BEGINNING; from the TRUE POINT OF BEGINNING as thus established,
continuing thence along the south right-of-way line of Howell Ferry Road North
69 degrees 49 minutes 18 seconds East 139.03 feet to a 1/2-inch rebar found;
thence, leaving said right-of-way line, South 20 degrees 08 minutes 58 seconds
East 481.69 feet to a 1/2-inch rebar found; thence South 20 degrees 08 minutes
58 seconds East 38.72 feet to a point in the centerline of a creek; thence,
along said centerline (the property line being the centerline of said creek),
the following courses and distances: (1) South 88 degrees 21 minutes 40 seconds
West 33.50 feet to a point, (2) North 73 degrees 33 minutes 01 second West 68.10
feet to a point, (3) North 37 degrees 09 minutes 32 seconds West 15.73 feet to a
point, (4) North 51 degrees 19 minutes 49 seconds West 44.78 feet to a point,
(5) North 66 degrees 46 minutes 31 seconds West 47.83 feet to a point, (6) North
88 degrees 27 minutes 29 seconds West 47.03 feet to a point, and (7) South 77
degrees 13 minutes 50 seconds West 31.39 feet to a point; thence leaving said
centerline and running along the original centerline of the creek, as currently
identifiable, prior to the new channel taken by the creek as a result of the
installation of the 132 inch corregated metal pipe shown on the survey
hereinafter referred to, the following courses and distances: (1) South 23
degrees 42 minutes 08 seconds East 42.45 feet to a point, (2) North 88 degrees
26 minutes 54 seconds East 30.35 feet to a point, (3) South 15 degrees 06
minutes 32 seconds East 33.53 feet to a point, and (4) South 26 degrees 44
minutes 05 seconds West 61.60 feet to a point in the centerline of a creek;
thence along said centerline (the property line being the centerline of said
creek) the following courses and distances: (1) South 31 degrees 28 minutes 13
seconds East 26.41 feet to a point, (2) South 78 degrees 24 minutes 14 seconds
East 80.25 feet to a point, (3) South 01 degree 11 minutes 32 seconds West 52.57
feet to a point, (4) South 67 degrees 15 minutes 21 seconds East 64.79 feet to a
point, (5) South 42 degrees 02 minutes 18 seconds East 85.35 feet to a point,
(6) North 60 degrees 00 minutes 52 seconds East 34.18 feet to a point, (7) South
34 degrees 52 minutes 46 seconds East 45.08 feet to a point, (8) South 38
degrees 45 minutes 21 seconds West 42.79 feet to a point, (9) South 00 degrees
49 minutes 33 seconds West 16.81 feet to a point, (10) North 77 degrees 37
minutes 26 seconds East 30.94 feet to a point, (11) North 86 degrees 44 minutes
50 seconds East 69.12 feet to a point, (12) South 51 degrees 25 minutes 34
seconds East 35.82 feet to a point, (13) South 28 degrees 43 minutes 27 seconds
West 35.61 feet to a point, (14) South 06 degrees 48 minutes 23 seconds East
15.85 feet to a point, (15) South 38 degrees 44 minutes 37 seconds East 31.48
feet to a point, (16) North
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<PAGE> 30
64 degrees 56 minutes 13 seconds East 52.84 feet to a point, (17) South 28
degrees 49 minutes 50 seconds East 26.19 feet to a point, (18) North 63 degrees
43 minutes 54 seconds East 21.50 feet to a point, (19) South 02 degrees 50
minutes 39 seconds East 86.92 feet to a point, (20) South 04 degrees 21 minutes
36 seconds West 30.31 feet to a point, (21) South 10 degrees 14 minutes 54
seconds East 58.28 feet to a point, (22) South 00 degrees 03 minutes 47 seconds
West 95.91 feet to a point, (23) South 00 degrees 09 minutes 35 seconds East
218.72 feet to a point, (24) South 09 degrees 34 minutes 46 seconds West 122.27
feet to a point, (25) South 29 degrees 19 minutes 11 seconds East 101.50 feet to
a point, (26) South 64 degrees 25 minutes 39 seconds East 37.01 feet to a point,
and (27) South 40 degrees 10 minutes 19 seconds East 52.97 feet to a point on
the land lot line common to Land Lots 291 and 296 of the 6th District, Gwinnett
County, Georgia; thence, leaving the centerline of said creek and running along
said common land lot line, the following courses and distances: (1) South 59
degrees 08 minutes 30 seconds West 59.00 feet to a 1/2-inch rebar set, and (2)
South 59 degrees 08 minutes 30 seconds West 1,112.19 feet to a 1/2-inch rebar
found on the southeast right-of-way line of said Peachtree Industrial Boulevard;
thence, along said right-of-way line, the following courses and distances: (1)
North 18 degrees 00 minutes 14 seconds East 267.00 feet to a point, (2) along
the arc of a curve to the left (which arc is subtended by a chord having a
bearing and distance of North 17 degrees 44 minutes 35 seconds East 34.60 feet
and a radius of 2,939.30 feet) 34.60 feet to a concrete monument found, (3)
South 72 degrees 35 minutes 39 seconds East 84.88 feet to a point, (4) North 18
degrees 04 minutes 49 seconds East 63.23 feet to a concrete monument found, (5)
North 73 degrees 47 minutes 30 seconds West 86.29 feet to a concrete monument
found, and (6) along the arc of a curve to the left (which arc is subtended by a
chord having a bearing and distance of North 04 degrees 14 minutes 37 seconds
East 1,218.70 feet and a radius of 2,939.30 feet) 1,227.60 feet to a 1/2-inch
rebar set; thence, leaving said right-of-way line, North 82 degrees 12 minutes
40 seconds East 199.79 feet to a 1/2-inch rebar set; thence North 13 degrees 42
minutes 16 seconds West 286.75 feet to a 1/2-inch rebar set; thence North 65
degrees 03 minutes 28 seconds East 78.49 feet to a 1/2-inch rebar set; thence,
along the arc of a curve to the left (which arc is subtended by a chord having a
bearing and distance of North 20 degrees 03 minutes 28 seconds East 127.28 feet
and a radius of 90.00 feet) 141.37 feet to a 1/2-inch rebar set; thence North 30
degrees 17 minutes 08 seconds West 80.48 feet to a 1/2-inch rebar set; thence
North 20 degrees 10 minutes 42 seconds West 90.00 feet to the TRUE POINT OF
BEGINNING, said tract containing approximately 22.500 acres as shown on plat of
ALTA/ACSM Land Title Survey for Nationwide Life Insurance Company, Roberts
Properties Residential, L.P. and Commonwealth Land Title Insurance Company
prepared by Rochester & Associates, Inc., bearing the seal and certification of
James C. Jones, Georgia Registered Land Surveyor No. 2298, dated May 8, 1998,
last revised May 26, 1998.
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<PAGE> 31
EXHIBIT B
1. General and special taxes and assessments for the year 1998 and
subsequent years, not yet due and payable.
2. The following matters disclosed by that certain ALTA/ACSM Land Title
Survey for Nationwide Life Insurance Company, Roberts Properties
Residential, L.P., and Commonwealth Land Title Insurance Company,
prepared by Rochester & Associates, Inc. bearing the seal of James C.
Jones, Georgia Registered Land Surveyor No. 2298, dated May 8, 1998,
last revised May 26, 1998:
(a) 55 foot building line located along the westerly and northerly
boundary of the subject property;
(b) 10 foot landscape and general utility easement located along
the westerly and northerly boundary of the subject property;
(c) 15 foot landscape buffer located along the easterly boundary
of subject property;
(d) 20-foot sanitary sewer easement, sanitary sewer lines and
manholes traversing the northern, southern and eastern
portions of subject property;
(e) 30 foot drainage easement and 132-inch corrugated metal pipe
traversing the northwesterly boundary of the subject property;
(f) 20 foot drainage easement located along the easterly boundary
of the subject property;
(g) 30 foot slope easement located along the northwesterly
boundary of the subject property;
(h) 30 foot drainage easements traversing the northerly portion of
the subject property;
(i) concrete monument encroachment in southwesterly portion of
subject property;
(j) 40 foot temporary construction easement located in the
northwesterly portion of the subject property;
(k) 20 foot sanitary sewer easement located in the northwesterly
portion of the subject property;
(l) 20 foot drainage easement located in the easterly portion of
subject property;
(m) 15 foot drainage easement, drainage pipe, weir inlets and
junction boxes traversing the easterly and westerly portions
of subject property;
(n) 20 foot sanitary sewer easement, sanitary sewer line and
manhole traversing the southerly portion of the subject
property;
(o) concrete wall encroachment over the building line located in
the westerly portion of subject property;
(p) light poles, power poles, guy wires, yard inlets, power boxes,
telephone boxes and cable television boxes and fire hydrants
located throughout the subject property;
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<PAGE> 32
(q) water vaults, water valves and water meters located throughout
the subject property.
3. Rights of upper and lower riparian owners in and to the waters of
rivers, creeks or branches crossing or adjoining the subject property,
and the natural flow thereof, free from diminution or pollution.
4. Any adverse claim based upon the assertion that (a) some portion of the
subject property has been created by artificial means, or has accreted
to such portion so created; or (b) some portion of the subject property
has been brought within the boundaries thereof by an avulsive movement
of the creek adjacent to the subject property, or has been formed by
accretion to any such portion.
5. Easement from Mrs. C.W. Summerour to Georgia Power Company, dated
September 9, 1940, filed for record September 19, 1940, and recorded in
Deed Book 69, page 125, aforesaid records.
6. Easement from Mrs. C.W. Summerour to Georgia Power Company, dated
October 28, 1948, filed for record November 3, 1948, and recorded in
Deed Book 90, page 249, aforesaid records.
7. Sanitary Sewer Easement from Partridge Greene, Inc. to Tempo Station
Associates, a limited partnership, dated June 11, 1984, filed for
record June 18, 1984, and recorded in Deed Book 2808, page 597,
aforesaid records.
8. Easement from Partridge Greene, Inc. to Howell Station Associates, a
Georgia general partnership, dated October 16, 1984, filed for record
November 9, 1984, and recorded in Deed Book 2913, page 413, aforesaid
records.
9. Easement No. 1 as contained in that certain Easement Agreement from
Partridge Greene, Inc. to Tempo Station Associates, dated October 31,
1984, filed for record April 22, 1985, and recorded in Deed Book 3026,
page 399, aforesaid records.
10. Use covenant contained in Limited Warranty Deed from Dallas
Development, Inc. to Roberts Properties, Inc., dated December 15, 1994,
filed for record December 21, 1994, and recorded in Deed Book 10943,
page 224, aforesaid records.
11. Water Metering Device Easement from Roberts Properties Residential,
L.P. to Gwinnett County, dated March 24, 1997, filed for record July
24, 1997 and recorded in Deed Book 14493, page 19, aforesaid records.
12. Easement from Roberts Properties Residential, L.P. to Georgia Power
Company, dated June 16, 1997, filed for record September 2, 1997 and
recorded in Deed Book 14668, page 125, aforesaid records.
13. Rights of tenants in possession of individual apartment units, as
tenants only.
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<PAGE> 33
EXHIBIT C
Schedule 1
(Description of "Debtor" and "Secured Party")
A. Debtor:
1. Name and Identity or Corporate Structure: Roberts Properties
Residential, L.P., a Georgia limited partnership.
2. The principal place of business of Debtor in the State of
Georgia is located at 8010 Roswell Road, Suite 120, Atlanta,
Georgia 30350.
3. Debtor has been using or operating without change under the
name and identity indicated in item 1 above for the following
time period: Since July 22, 1994.
B. Secured Party:
Nationwide Life Insurance Company
Schedule 2
(Notice Mailing Address of "Debtor" and "Secured Party")
A. The mailing address of Debtor is:
Roberts Properties Residential, L.P.
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
B. The mailing address of Secured Party is:
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215-2220
Attn: Real Estate Investments
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<PAGE> 1
GUARANTY
THIS GUARANTY is made as of the 1st day of June, 1998 by ROBERTS REALTY
INVESTORS, INC., a Georgia corporation ("Guarantor") in favor of NATIONWIDE LIFE
INSURANCE COMPANY ("Lender").
ARTICLE I - BACKGROUND AND AGREEMENT
1.01 Background. Lender has agreed to make a loan (the "Loan") in the
principal amount of $8,400,000.00 to Roberts Properties Residential, L.P., a
Georgia limited partnership ("Borrower") evidenced by that certain Real Estate
Note of even date herewith in favor of Lende in the principal amount of
$8,400,000.00 (the "Note") secured by, among other things, that certain deed to
secure debt and security agreement (the "Security Instrument") from Borrower to
Lender, dated of even date herewith and to be recorded in the Gwinnett County,
Georgia records (the Note, the Security Instrument, and any and all other
documents or instruments evidencing, securing or otherwise relating to the
indebtedness evidenced by the Note are hereinafter collectively referred to as
the "Loan Documents"). Since Guarantor is the sole general partner of Borrower,
the Loan will be of direct interest and advantage to Guarantor; and a condition
to the making of the Loan is the delivery of this Guaranty to Lender.
1.02 Statement of Agreement. For and in consideration of the sum of
$10.00 and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by Guarantor, and for the purpose of seeking to induce
Lender to extend credit to Borrower, Guarantor does hereby make the following
guarantees to and agreements with Lender.
ARTICLE II - GUARANTEES
2.01 Guaranty of Payment. Guarantor does hereby unconditionally
guarantee to Lender the full and prompt payment of the Note when due, whether by
acceleration or otherwise, with such interest as may accrue thereon and such
prepayment premiums and other charges as may be due in connection therewith,
either before or after maturity thereof.
2.02 Guaranty of Performance. Guarantor does hereby unconditionally
guarantee to Lender the full and prompt payment and performance of any and all
obligations whatsoever of Borrower and all other parties to Lender under the
terms of the Loan Documents, whether such obligations now exist or arise
hereafter.
2.03 Guarantor Obligations. Guarantor does hereby agree that if the
Note is not paid by Borrower in accordance with its terms for any reason
whatsoever, or if any and
<PAGE> 2
all sums which are now or may hereafter become due from Borrower to Lender under
the Loan Documents are not paid by Borrower in accordance with their terms for
any reason whatsoever, Guarantor will immediately make such payments. Guarantor
further agrees to pay Lender all expenses (including, without limitation,
reasonable attorneys' fees) paid or incurred by Lender in endeavoring to collect
all or any portion of the indebtedness evidenced by the Note, to enforce any
other obligations guaranteed hereby, or to enforce this Guaranty.
2.04 Loan Documents. The provisions of this Guaranty shall extend and
be applicable to all renewals, replacements, amendments, extensions,
consolidations and modifications of the Loan Documents, and any and all
references herein to the Loan Documents or any of them shall be deemed to
include any such renewals, replacements, amendments, extensions, consolidations
or modifications thereof.
ARTICLE III - AGREEMENTS AND WARRANTIES
3.01 Consents. Guarantor hereby consents and agrees that Lender may at
any time, and from time to time, without notice to or further consent from
Guarantor, either with or without consideration: release and surrender any
property or other security of any kind or nature whatsoever now or hereafter
held by it or by any person or entity on its behalf or for its account, securing
any indebtedness or liability hereby guaranteed (the "Collateral"); substitute
for any Collateral held by or on behalf of Lender other collateral of like kind,
or of any kind; make overadvances or increase the amount of the Loan; agree to
modify the terms of any one or more of the Loan Documents; extend or renew the
Note for any period; grant releases, compromises and indulgences with respect to
any one or more of the Loan Documents and to any persons or entities now or
hereafter liable thereunder or hereunder; release any other guarantor or
endorser of or other person or entity liable upon the Note or any other of the
Loan Documents; or take or fail to take any action of any type whatsoever. No
such action which Lender shall take or fail to take in connection with the Loan
Documents or any Collateral, nor any course of dealing with Borrower or any
other person, shall limit, impair or release Guarantor's obligations hereunder,
affect this Guaranty in any way or afford Guarantor any recourse against Lender.
Nothing contained in this section shall be construed to require Lender to take
or refrain from taking any action referred to herein.
3.02 Subordination. Guarantor hereby subordinates any and all
indebtedness of Borrower now or hereafter owed to Guarantor to all indebtedness
of Borrower to Lender, and agrees with Lender that Guarantor shall not demand or
accept any payment of principal or interest from Borrower, shall not claim any
offset or other reduction of Guarantor's obligations hereunder because of any
such indebtedness and shall not take any action to obtain any of the Collateral.
3.03 Waiver of Defenses. Guarantor hereby waives and agrees not to
assert or take advantage of any defense based upon: (a) any incapacity, lack of
authority, death or
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<PAGE> 3
disability of Guarantor or any other person or entity; (b) any failure of Lender
to commence an action against Borrower or any other person or entity (including,
without limitation, other guarantors, if any) , or to file or enforce a claim
against the estate (either in administration, bankruptcy, or any other
proceeding) of Borrower or any other person or entity, whether or not demand is
made upon Lender to file or enforce such claim; (c) any failure of Lender to
give notice of the existence, creation or incurring of any new or additional
indebtedness or other obligation or of any action or nonaction on the part of
any other person or entity, in connection with the Loan Documents or any
obligation hereby guaranteed; (d) any failure on the part of Lender to ascertain
the extent or nature of the Collateral or any insurance or other rights with
respect thereto, or the liability of any party liable for the Loan Documents or
the obligations evidenced or secured thereby, or any failure on the part of
Lender to disclose to Guarantor any facts it may now or hereafter know regarding
Borrower, the Collateral, or such other parties; (e) any lack of acceptance or
notice of acceptance of this Guaranty by Lender; (f) any lack of presentment,
demand, protest, or notice of demand, protest or nonpayment with respect to any
indebtedness or obligations under any of the Loan Documents; (g) any lack of
notice of disposition or of manner of disposition of any Collateral; (h) any
lack of other notices to which Guarantor might otherwise be entitled; (i)
failure to properly record any document or any other lack of due diligence by
Lender in creating or perfecting a security interest in or collection,
protection or realization upon any Collateral or in obtaining reimbursement or
performance from any person or entity now or hereafter liable for the Loan
Documents or any obligation secured thereby; (j) any invalidity, irregularity or
unenforceability, in whole or in part, of any one or more of the Loan Documents;
(k) the inaccuracy of any representation or other provision contained in any
Loan Document; (1) any sale or assignment of the Loan Documents, in whole or in
part; (m) any sale or assignment by Borrower of the Collateral, or any portion
thereof , whether or not consented to by Lender; (n) any lack of commercial
reasonableness in dealing with Collateral; (o) any deficiencies in the
Collateral or any deficiency in the ability of Lender to collect or obtain
performance from any persons or entities now or hereafter liable for the payment
or performance of any obligation hereby guaranteed; (p) an assertion or claim
that the automatic stay provided by 11 U.S.C. ss.362 (arising upon the voluntary
or involuntary bankruptcy proceeding of Borrower), or any other stay provided
under any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may
be or become applicable, shall operate or be interpreted to stay, interdict,
condition, reduce or inhibit the ability of Lender to enforce any of its rights,
whether now or hereafter acquired, which Lender may have against Guarantor or
the Collateral; (q) any modifications of the Loan Documents or any obligation of
Borrower relating to the Loan by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise; and (r) any
action, occurrence, event or matter consented to by Guarantor under Section 3.01
hereof, under any other provision hereof, or otherwise.
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<PAGE> 4
3.04 Liability of Guarantor. This is a guaranty of payment and
performance and not of collection. The liability of Guarantor under this
Guaranty shall be direct and immediate and not conditional or contingent upon
the pursuit of any remedies against Borrower or any other person (including,
without limitation, other guarantors, if any), nor against the Collateral.
Guarantor waives any right to require that an action be brought against Borrower
or any other person or to require that resort be had to any Collateral or to any
balance of any deposit account or credit on the books of Lender in favor of
Borrower or any other person. In the event that, on account of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor relief law (whether
statutory, common law, case law or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, Borrower shall be
relieved of or fail to incur any debt, obligation or liability as provided in
the Loan Documents, Guarantor shall nevertheless be fully liable therefor. In
the event of a default under the Loan Documents, Lender shall have the right to
enforce its rights, powers and remedies (including, without limitation,
foreclosure of all or any portion of the Collateral) thereunder or hereunder, in
any order, and all rights, powers and remedies available to Lender in such event
shall be nonexclusive and cumulative of all other rights, powers and remedies
provided thereunder or hereunder or by law or in equity. If the indebtedness
guaranteed hereby is partially paid by reason of the election of Lender to
pursue any of the remedies available to Lender, or is otherwise partially paid,
this Guaranty shall nevertheless remain in full force and effect, and Guarantor
shall remain liable for the entire remaining unpaid balance of the indebtedness
guaranteed hereby, even though any rights which Guarantor may have against
Borrower may be destroyed or diminished by the exercise of any such remedy.
Guarantor covenants and agrees that, upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against Borrower, Guarantor shall not
seek or cause Borrower or any other person or entity to seek a supplemental stay
or other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. ss.105
or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any
other debtor relief law (whether statutory, common law, case law or otherwise)
of any jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, to stay, interdict, condition, reduce or inhibit the ability
of Lender to enforce any rights of Lender against Guarantor or the Collateral by
virtue of this Guaranty or otherwise. No exculpatory or similar provision of the
Loan Documents which limits, or relieves Borrower from, any personal or direct
liability of Borrower under the Loan Documents shall limit or relieve Guarantor
from any such liability, it being the intention of the parties hereto that
Guarantor be liable for all obligations of the Borrower under any provision of
the Loan Documents notwithstanding any such exculpatory or similar provision.
The obligations of Guarantor and the rights of Lender hereunder are in addition
to the obligations of Guarantor and the rights of Lender under any other
guaranty, indemnity or other agreement given by Guarantor to Lender in
connection with the Loan, and payments made hereunder shall not reduce the
liabilities and obligations of Guarantor under any other such guaranty,
indemnity or other agreement.
3.05 [RESERVED].
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<PAGE> 5
3.06 Application of Payments. Guarantor hereby authorizes Lender,
without notice to Guarantor, to apply all payments and credits received from
Borrower or from Guarantor for the Loan or realized from any security to the
indebtedness, obligations and undertakings of Borrower in connection with the
Loan (whether or not the same are the subject of this Guaranty) in the manner
set forth in the Loan Documents.
3.07 Financial Statements. Guarantor acknowledges that the Loan
Documents require that Borrower provide or cause to be provided to Lender
certain financial statements of Guarantor. Guarantor hereby agrees to provide to
Lender all such financial statements in such form and at such times as is
required under the provisions of the Loan Documents.
3.08 Warranties. Guarantor warrants and represents (a) that the
execution and delivery of this Guaranty do not violate or constitute a breach of
any agreement to which Guarantor is a party or any applicable laws, and (b) that
there is no litigation, claim, action or proceeding, pending or threatened
against Guarantor which would adversely affect the financial condition of
Guarantor or the ability of Guarantor to fulfill all obligations of Guarantor
hereunder, and (c) that all financial statements heretofore delivered by
Guarantor to Lender are true and correct in all respects as of the date thereof,
and no material change has occurred in the financial condition of Guarantor
since the date thereof.
3.09 Condition of Borrower. Guarantor warrants and represents that
Guarantor is fully aware of the financial condition of Borrower and is executing
and delivering this Guaranty based solely upon Guarantor's own independent
investigation of all matters pertinent hereto, and that Guarantor is not relying
in any manner upon any representation or statement of Lender. Guarantor
warrants, represents and agrees that Guarantor is in a position to obtain, and
Guarantor hereby assumes full responsibility for obtaining, any additional
information concerning the financial condition of Borrower and any other matter
pertinent hereto, and that Guarantor is not relying upon Lender to furnish, and
shall have no right to require Lender to obtain or disclose, any information
with respect to the indebtedness or obligations guaranteed hereby, the financial
condition or character of Borrower or the ability of Borrower to pay the
indebtedness or perform the obligations guaranteed hereby, the existence of any
collateral or security for any or all of such indebtedness or obligations, the
existence or nonexistence of any other guaranties of all or any part of such
indebtedness or obligations, any actions or non-action on the part of Lender,
Borrower or any other person or entity, or any other matter, fact or occurrence
whatsoever. By executing this Guaranty, Guarantor acknowledges and knowingly
accepts the full range of risks encompassed within a contract of guaranty.
ARTICLE IV - GENERAL CONDITIONS
4.01 Service of Process. Guarantor hereby (a) submits to personal
jurisdiction in the State of Georgia for the enforcement of this Guaranty, and
(b) waives any and all
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<PAGE> 6
rights under the law of any state to object to jurisdiction within the State of
Georgia for the purposes of litigation to enforce this Guaranty. Nothing
contained herein, however, shall prevent Lender from bringing any action or
exercising any rights against any security or against Guarantor personally, or
against any property of Guarantor, within any other state. Initiating such
proceeding or taking such action in any other state shall in no event constitute
a waiver of the agreement contained herein that the law of the State of Georgia
shall govern the rights and obligations of Guarantor and Lender hereunder or of
the submission herein made by Guarantor to personal jurisdiction within the
State of Georgia.
4.02 Waiver of Rights. Guarantor hereby waives and renounces, to the
fullest extent permitted by law, all rights to the benefits of any statute of
limitations and any moratorium, reinstatement, marshalling, forbearance,
valuation, stay, extension, redemption, appraisement, exemption and homestead
now or hereafter provided by the Constitution and laws of the United States of
America and of each 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 Guaranty.
4.03 Communications. Unless and except as otherwise specifically
provided herein, any and all notices, elections, approvals, consents, demands,
requests and responses thereto ("Communications") permitted or required to be
given under this Guaranty shall be in writing, signed by or on behalf of the
party giving the same, and shall be deemed to have been properly given and shall
be effective upon the earlier of receipt thereof or deposit thereof in the
United States mail, postage prepaid, certified with return receipt requested, to
the other party at the address of such other party set forth hereinbelow 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 communication must be given shall commence on the date of
receipt thereof; and provided further that no notice of change of address shall
be effective with respect to Communications sent prior to the time of receipt
thereof. Receipt of Communications under this Guaranty shall occur upon actual
delivery (whether by mail, telecopy transmission, messenger, courier service, or
otherwise) to any person who is Guarantor or an officer or general partner of
Guarantor at any location where such person may be found, or to an officer,
partner, agent or employee of Guarantor or Lender, at the address of such party
set forth hereinbelow, subject to change as provided hereinabove. An attempted
delivery in accordance with the foregoing, acceptance of which is refused or
rejected, shall be deemed to be and shall constitute receipt; and an attempted
delivery in accordance with the foregoing by mail, messenger, or courier service
(whichever is chosen by the sender) which is not completed because of changed
address of which no notice was received by the sender in accordance with this
provision prior to the sending of the communication shall also be deemed to be
and constitute receipt. Any Communication, if given to Lender, must be addressed
as follows, subject to change as provided hereinabove:
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<PAGE> 7
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215-2220
Attn: Real Estate Investments
and, if given to Guarantor, must be addressed as follows, subject to change as
provided hereinabove:
Roberts Realty Investors, Inc.
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Attn: Charles S. Roberts
4.04 Irrevocability and Revival. This Guaranty shall be irrevocable by
Guarantor and, subject to paragraph 4.08 below, shall remain in effect until all
indebtedness guaranteed hereby has been completely repaid, until Lender has no
further obligation to make future advances under any of the Loan Documents, and
until all obligations and undertakings of Borrower under, by reason of, or
pursuant to the Loan Documents have been completely performed, including
obligations which survive repayment of the Loan or realization upon the
Collateral. Unless this Guaranty has terminated in accordance with paragraph
4.08 below, this Guaranty shall continue to be effective or be revived and
reinstated, as the case may be, in the event that any payment received by Lender
of any of the indebtedness guaranteed hereby is returned or rescinded by reason
of any present or future federal, state or other law or regulation relating to
bankruptcy, insolvency or other relief of debtors or for any other reason.
4.05 Limit of Validity. If from any circumstances whatsoever
fulfillment of any provisions of this Guaranty, 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 Guaranty 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 shall
control every other provision of this Guaranty.
4.06 Applicable Law. This Guaranty shall be interpreted, construed and
enforced according to the laws of the State of Georgia.
4.07 Miscellaneous. This Guaranty may not be changed orally, and no
obligation of Guarantor can be released or waived by Lender or any officer or
agent of Lender, except by a writing signed by a duly authorized officer of
Lender. The provisions of this Guaranty shall be binding upon Guarantor and the
heirs, executors,
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<PAGE> 8
legal representatives, successors, successors-in-title and assigns of Guarantor
and shall inure to the benefit of Lender, the heirs, executors, legal
representatives, successors, successors-in-title and assigns of Lender. This
Guaranty shall in no event be impaired by any change which may arise by reason
of the death of Borrower or Guarantor, if individuals, or by reason of the
dissolution of Borrower or Guarantor, if Borrower or Guarantor is a corporation
or partnership. Guarantor has executed this Guaranty individually and not as a
partner of Borrower or any other guarantor. The Guaranty is assignable by
Lender, and any full or partial assignment hereof by Lender shall operate to
vest in the assignee all rights and powers herein conferred upon and granted to
Lender and so assigned by Lender. Guarantor expressly waives notice of transfer
or assignment of this Guaranty and acknowledges that the failure by Lender to
give any such notice shall not affect the liabilities of Guarantor hereunder.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall include all other genders; and the singular shall include
the plural and vice versa. Titles of articles and sections are for convenience
only and in no way define, limit, amplify or describe the scope or intent of any
provisions hereof. If Guarantor is a partnership, all of the provisions hereof
referring to Guarantor shall be construed to apply to each of the general
partners of Guarantor and of any and all further tiers of general partners in
the structure of Guarantor. This Guaranty contains the entire agreement between
Guarantor and Lender relating to the guarantying of the Loan by Guarantor and
supersedes entirely any and all prior written or oral agreements with respect
thereto; and Guarantor and Lender acknowledge that there are no contemporaneous
oral agreements with respect to the subject matter hereof. The phrase
"reasonable attorneys' fees" as used in this Guaranty shall have the same
meaning as ascribed thereto in the section of the Note entitled "Miscellaneous."
4.08 Termination of Guaranty. Provided there is then no default or
event of default under any of the Loan Documents, or event or circumstance which
with the giving of notice, passage of time, or both, would constitute a default
or event of default under any of the Loan Documents, upon written request Lender
will release this Guaranty and this Guaranty shall terminate if at such time the
"Net Operating Income" (as hereafter defined) generated by the "Property" (as
hereafter defined) is at least equal to one hundred and twenty-five percent
(125%) of the annual debt service payments due under the terms of the Loan
Documents for a period of at least three (3) consecutive calendar months. For
purposes of this paragraph 4.08, "Net Operating Income" shall mean the "Rents"
(as hereafter defined) minus the "Operating Expenses" (as hereafter defined).
For purposes of this paragraph 4.08, the following terms shall have the
following meanings:
A. "Rents" means the annualized rents and expense reimbursements (if
any) to be received from tenants of the Property pursuant to leases approved by
Lender (unless Lender's approval of any of such leases is not required in
accordance with paragraph 12 of the Security Instrument) where the tenants are
actually paying rent (i.e., any free rent periods must have expired) and such
tenants are actually in occupancy.
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<PAGE> 9
B. "Operating Expenses" means the greater of (i) the annualized
expenses of operating and maintaining the Property which shall include, without
limitation, a management fee equal to four percent (4%) of the annualized Rents
and also including other operating expenses of $3,259.00 per apartment unit, or
(ii) $659,227.00. For purposes of calculating Operating Expenses, property tax
expenses shall be calculated assuming that all improvements to be built pursuant
to plans and specifications delivered to Lender in connection with the Loan have
been completed and fully assessed and using the most recent tax rate available
(whether certified or not).
C. "Property" means the land described on Exhibit A to the Security
Instrument together with all buildings and improvements constructed thereon or
to be constructed thereon pursuant to plans and specifications delivered to
Lender in connection with the Loan and together with all appurtenances thereto.
Items to be included in the calculation of Rents and Operating Expenses shall be
as reasonably determined by Lender. At any time that request is made for a
release of this Guaranty, Guarantor shall deliver, or cause to be delivered, to
Lender such information as Lender may request with respect thereto including,
without limitation, (i) a current rent roll certified to be true and correct by
Borrower, (ii) if requested by Lender, true and complete copies of all fully
executed leases which are being used to satisfy the criteria for release, (iii)
unconditional certificates of occupancy for any completed buildings if not
previously delivered, (iv) actual operating statements for the Property
identifying all expenses of operating and maintaining the Property.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal as
of the date first above written.
Signed, sealed and delivered GUARANTOR
in the presence of:
ROBERTS REALTY INVESTORS, INC.,
/s/ Charles R. Elliott a Georgia corporation
- -----------------------------
Witness
By: /s/ Charles S. Roberts
---------------------------------
/s/ Sarah D. Bazarian Charles S. Roberts, President
- -----------------------------
Notary Public
[CORPORATE SEAL]
My Commission Expires:
- ----------------------------
(Notary Seal)
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 4,192,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,192,000
<PP&E> 132,200,000
<DEPRECIATION> 14,363,000
<TOTAL-ASSETS> 123,176,000
<CURRENT-LIABILITIES> 4,581,000
<BONDS> 73,680,000
0
0
<COMMON> 47,000
<OTHER-SE> 27,845,000
<TOTAL-LIABILITY-AND-EQUITY> 123,176,000
<SALES> 8,047,000
<TOTAL-REVENUES> 8,047,000
<CGS> 0
<TOTAL-COSTS> 5,931,000
<OTHER-EXPENSES> (1,666,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,057,000<F1>
<INCOME-PRETAX> 1,018,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,018,000
<DISCONTINUED> 0
<EXTRAORDINARY> (93,000)
<CHANGES> 0
<NET-INCOME> 925,000
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
<FN>
<F1> MINORITY INTEREST OF UNIT HOLDERS IN THE OPERATING PARTNERSHIP EQUALS
17,023,000
<F/>
</TABLE>
