<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 September 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. 001-13183)
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 October
30, 1998 was 4,741,797.
<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
ITEM 3. QUANTATITIVE AND QUALATATIVE DISCLOSURES
ABOUT MARKET RISK.............................................................. 22
PART II OTHER INFORMATION........................................................................... 24
ITEM 1. LEGAL PROCEEDINGS.............................................................. 24
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...................................... 24
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................................................... 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................... 25
</TABLE>
-------------------
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>
- -----------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
ASSETS 1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
REAL ESTATE ASSETS - At cost:
Land $ 19,646 $ 20,151
Buildings and improvements 87,820 81,485
Furniture, fixtures and equipment 9,519 10,150
--------- ---------
116,985 111,786
Less accumulated depreciation (15,424) (13,405)
--------- ---------
Operating real estate assets 101,561 98,381
Land held for future development 6,065 0
Construction-in-progress and real estate under development 10,913 11,320
--------- ---------
Net real estate assets 118,539 109,701
CASH AND CASH EQUIVALENTS 5,271 7,117
RESTRICTED CASH AND CASH EQUIVALENTS 2,244 468
DEFERRED FINANCING COSTS - Net of accumulated amortization of
$208 and $221 at September 30, 1998 and December 31, 1997, respectively 1,102 708
OTHER ASSETS - Net 281 356
--------- ---------
$ 127,437 $ 118,350
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 80,180 $ 67,951
Accounts payable and accrued expenses 1,231 959
Dividends and distributions payable 1,094 1,057
Due to affiliates (including retainage payable of $0 and $226 at
September 30, 1998 and December 31, 1997, respectively) 1,124 2,411
Security deposits and prepaid rents 364 414
--------- ---------
Total liabilities 83,993 72,792
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP 16,161 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, 4,738,174 and
4,420,508 shares issued and outstanding at September 30, 1998 and 47 44
December 31, 1997, respectively
Additional paid-in-capital 29,934 29,980
Accumulated deficit (2,603) (3,327)
Unamortized restricted stock compensation (95) 0
--------- ---------
Total shareholders' equity 27,283 26,697
--------- ---------
$ 127,437 $ 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 SEPTEMBER 30,
1998 1997
-------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 4,270 $ 4,285
Other operating income 195 195
----------- -----------
Total operating revenues 4,465 4,480
----------- -----------
OPERATING EXPENSES:
Personnel 520 431
Utilities 294 315
Repairs, maintenance and landscaping 288 305
Real estate taxes 365 360
Marketing, insurance and other 183 195
General and administrative expenses 469 490
Depreciation of real estate assets 1,246 1,432
----------- -----------
Total operating expenses 3,365 3,528
----------- -----------
INCOME FROM OPERATIONS 1,100 952
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 55 117
Interest expense (1,224) (1,212)
Amortization of deferred financing costs (36) (34)
Loss on disposal of assets (28) (79)
Other amortization expense (39) (10)
----------- -----------
Total other income (expense) (1,272) (1,218)
----------- -----------
LOSS BEFORE GAIN ON SALE OF REAL ESTATE ASSETS, MINORITY
INTEREST AND EXTRAORDINARY ITEMS (172) (266)
GAIN ON SALE OF REAL ESTATE ASSETS 501 1,792
----------- -----------
INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEMS 329 1,526
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP (124) (681)
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS 205 845
EXTRAORDINARY ITEMS - Loss on early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (404) (180)
----------- -----------
NET INCOME (LOSS) $ (199) $ 665
=========== ===========
INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income before extraordinary items $ 0.04 $ 0.20
Extraordinary items (0.08) (0.04)
----------- -----------
Net income (loss) $ (0.04) $ 0.16
=========== ===========
Weighted average common shares - basic 4,711,325 4,186,331
Weighted average common shares - diluted 7,550,607 7,549,761
</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>
- -----------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
-------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 12,007 $ 12,651
Other operating income 505 520
----------- -----------
Total operating revenues 12,512 13,171
----------- -----------
OPERATING EXPENSES:
Personnel 1,304 1,281
Utilities 792 872
Repairs, maintenance and landscaping 824 799
Real estate taxes 1,045 1,093
Management fees to related party 0 211
Marketing, insurance and other 567 605
General and administrative expenses 1,280 1,149
Depreciation of real estate assets 3,484 4,344
----------- -----------
Total operating expenses 9,296 10,354
----------- -----------
INCOME FROM OPERATIONS 3,216 2,817
----------- -----------
OTHER INCOME (EXPENSE):
Acquisition of Roberts Properties Management, L.L.C 0 (5,900)
Interest income 305 263
Interest expense (3,281) (3,570)
Amortization of deferred financing costs (102) (90)
Loss on disposal of assets (79) (124)
Other amortization expense (50) (26)
----------- -----------
Total other income (expense) (3,207) (9,447)
----------- -----------
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE ASSETS, MINORITY
INTEREST AND EXTRAORDINARY ITEMS 9 (6,630)
GAIN ON SALE OF REAL ESTATE ASSETS 2,045 1,792
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEMS 2,054 (4,838)
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP (831) 2,085
----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 1,223 (2,753)
EXTRAORDINARY ITEMS - Loss on early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (497) (185)
----------- -----------
NET INCOME (LOSS) $ 726 $ (2,938)
=========== ===========
INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income (loss) before extraordinary items $ 0.26 $ (0.66)
Extraordinary items (0.10) (0.04)
----------- -----------
Net income (loss) $ 0.16 $ (0.70)
=========== ===========
Weighted average common shares - basic 4,603,281 4,186,330
Weighted average common shares - diluted 7,550,384 7,355,254
</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>
- -----------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
-------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 726 $ (2,938)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Minority interest of unitholders in the Operating Partnership 831 (2,085)
Acquisition of Roberts Properties Management, L.L.C 0 5,900
Gain on sale of real estate assets (2,045) (1,792)
Loss on disposal of assets 79 124
Depreciation and amortization 3,636 4,417
Extraordinary items, net of minority interest of unitholders in the Operating Partnership 497 185
Change in assets and liabilities:
Increase in restricted cash and cash equivalents (62) (135)
(Increase) decrease in other assets 75 (12)
Increase in accounts payable and accrued expenses relating to operations 153 788
Increase (decrease) in due to affiliates relating to operations 3 (278)
Decrease in security deposits and prepaid rent (50) (42)
-------- --------
Net cash provided by operating activities 3,843 4,132
-------- --------
INVESTING ACTIVITIES:
Proceeds from sale of real estate assets 11,509 10,083
Acquisition and construction of real estate assets (23,076) (8,248)
-------- --------
Net cash provided by (used in) investing activities (11,567) 1,835
-------- --------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 44,400 10,420
Proceeds from mortgage notes payable held in escrow (1,713) 0
Payoff of mortgage notes, including prepayment penalty (32,250) (4,899)
Principal repayments on mortgage notes payable (581) (643)
Payment of loan costs (628) (245)
Proceeds from short term loan 350 0
Payoff of short term loan (350) 0
Repurchase of Units (122) 0
Payment of dividends and distributions (3,228) (2,721)
-------- --------
Net cash provided by financing activities 5,878 1,912
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,846) 7,879
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,117 3,162
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,271 $ 11,041
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 3,615 $ 3,807
</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 62.8% and 58.6% ownership interest at
September 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 September 30, 1998, the Company owned nine completed multifamily
apartment communities totaling 1,778 apartment homes and an additional
118 rental townhomes were under construction. On January 9, 1998, the
Company sold a 232-unit apartment community located on St. Simons
Island, Georgia. On July 17, 1998, the Company sold its two retail
centers totaling 15,698 square feet located at the entrance to two of
its multifamily apartment communities (see note 7).
The Company elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended, 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 Internal Revenue Code, to its shareholders and
satisfies certain other requirements. Accordingly, the accompanying
consolidated financial statements include no provision for federal and
state income taxes.
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 39.0% and 43.1% for the nine
months ended September 30, 1998 and 1997, respectively, and 37.6% and
44.6% for the three months ended September 30, 1998 and 1997,
respectively. The minority interest of the unitholders in the
Operating Partnership was $16,161,000 and $18,861,000 at September 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 Company's management has prepared the accompanying interim
unaudited financial statements 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 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 do not
necessarily indicate the results that may be expected for the year
ending December 31, 1998. Certain prior period amounts have been
reclassified to conform to 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 $1,000,000 revolving unsecured
line of credit (the "Line") in April 1998 to provide funds for
short-term working capital purposes. The Line has a one year term and
bears an interest rate of LIBOR + 150 basis points. At September 30,
1998, no amount was drawn on the Line.
MORTGAGE NOTES. Mortgage notes payable were secured by the following
Communities at September 30, 1998 and December 31, 1997, as follows:
<TABLE>
<CAPTION>
FIXED INTEREST PRINCIPAL OUTSTANDING
RATE AS OF
MATURITY 09/30/98 09/30/98 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bentley Place 08/15/06 7.10% $ 4,012,000 $ 4,045,000
Bradford Creek 06/15/08 7.15 8,380,000 0
Crestmark - phase I (old) 05/01/01 7.50 0 9,652,000
Crestmark - phase II (old) 05/01/01 7.65 0 3,985,000
Crestmark (new, both phases) 10/01/08 6.57 16,000,000 0
Highland Park 02/15/03 7.30 7,963,000 8,030,000
Ivey Brook 02/15/07 7.14 6,317,000 6,367,000
Plantation Trace (old) 09/15/00 7.75 0 7,775,000
Plantation Trace (new) 10/15/08 7.09 11,900,000 0
Preston Oaks 10/15/02 7.21 8,445,000 8,519,000
River Oaks 11/15/03 7.15 9,077,000 9,151,000
Rosewood Plantation (old) 06/01/01 7.38 0 6,357,000
Rosewood Plantation (new) 07/15/08 6.62 8,086,000 0
Windsong 02/01/00 9.00% 0 4,070,000
----------- -----------
$80,180,000 $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. (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 September 30, 1998, there was no balance outstanding
under the Guidance Line.
On December 19, 1997, the Company received a commitment for a
$8,400,000 loan 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. The loan was closed on June 1, 1998. A loan
origination fee of $63,000 was paid to L.J. Melody and Company, a
commercial mortgage banking firm of which a director of the Company is
Executive Vice President. The lender escrowed $1,200,000 of the
proceeds pending achievement of certain operating targets, which is
estimated to occur in the fourth quarter of 1998.
On February 12, 1998, the Company received a commitment for a
$11,900,000 loan secured by the Plantation Trace Community. The loan
commitment included 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 was closed on September 29, 1998, and
the existing mortgage note was repaid. The lender escrowed $150,000 of
the proceeds pending completion of construction of the 50-unit second
phase of Plantation Trace, which is estimated to occur in the fourth
quarter of 1998.
On May 21, 1998, the Company received a commitment for a $8,100,000
loan secured by 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. The loan was closed on June 23, 1998, and the existing
mortgage note was repaid.
On July 21, 1998, the Company received a commitment for a $16,000,000
loan secured by the Crestmark Community. The loan commitment included
a 10-year term with a fixed interest rate of 6.57% payable in monthly
installments of $101,869 based on a 30-year amortization schedule. The
loan was closed on September 30, 1998, and the existing two mortgage
notes were repaid. The lender escrowed $363,000 of the proceeds for 30
days in accordance with Freddie Mac's normal loan disbursement
procedures.
Interest capitalized was $111,000 and $87,000 for the three months
ended September 30, 1998 and 1997, respectively, and $454,000 and
$237,000 for the nine months ended September 30, 1998 and 1997,
respectively.
Real estate assets having a combined depreciated cost of approximately
$106,478,000 serve as collateral for the outstanding debt at September
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, (2) the write-off of unamortized loan costs and
prepayment fee to the lender for the refinancing of the mortgage note
secured by the Rosewood Plantation Community on June 23, 1998, and (3)
the write-off of unamortized loan costs and prepayment fee to the
lender for the refinancing of the mortgage notes secured by the
Crestmark Community on September 30, 1998. For the three and nine
month periods ended September 30, 1998, the extraordinary items are
net of $242,000 and $295,000,
7
<PAGE> 10
respectively, 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 during the periods
presented.
The 1997 extraordinary item resulted from the write-off of unamortized
deferred financing costs and debt repayment associated with the August
26, 1997 repayment of the mortgage note secured by the Autumn Ridge
Community upon sale of the property. The extraordinary item is net of
$140,000 which was allocated to the minority interest of the
unitholders in the Operating Partnership, calculated on the weighted
average number of Units outstanding during the nine months ended
September 30, 1997.
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 construction of real estate assets with
Roberts Properties Construction, Inc., a non-owned affiliate, and
other general contractors. Roberts Properties Construction, Inc. is
currently constructing the 50-unit second phase of Plantation Trace
pursuant to a cost plus 10% contract and the first phase of Abbotts
Bridge, whose contract is currently being negotiated. Roberts
Properties Construction, Inc. also served as construction
administrator and was paid $65,000 for its services in connection with
the construction of the second phase of Preston Oaks. At September 30,
1998, the remaining commitments totaled $1,025,000 as summarized in
the following table:
<TABLE>
<CAPTION>
TOTAL REMAINING
CONTRACT AMOUNT CONTRACTUAL
AMOUNT INCURRED COMMITMENT
------ -------- ----------
<S> <C> <C> <C>
Plantation Trace - phase II $ 4,726,000 $ 3,809,000 $ 817,000
Preston Oaks - phase II 1,300,000 1,092,000 208,000
-------------- -------------- ------------
Total $ 6,026,000 $ 4,901,000 $ 1,025,000
============== ============== ============
</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 and nine month periods
ended September 30, 1998, a total of 44,521 and 305,311 Units,
respectively, were exchanged for the same number of Shares. Each
conversion was reflected in the accompanying consolidated financial
statements at book value. No Units were exchanged during the three
months ended September 30, 1997.
REDEMPTIONS OF UNITS FOR CASH. During the three and nine month periods
ended September 30, 1998, a total of 8,286 and 14,341 Units,
respectively, were redeemed for cash of $70,000 and $122,000,
respectively. No Units were redeemed for cash in 1997.
8
<PAGE> 11
RESTRICTED STOCK AWARDS. During the three and nine month periods ended
September 30, 1998, the Company granted 1,765 and 12,355 shares,
respectively, of restricted stock to certain employees. The
market value of these restricted stock grants totaled $15,000 and
$105,000, respectively, 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 September 15, 1998, the Company's Board of Directors
declared a quarterly distribution in the amount of $0.145 per common
Share and Unit payable on October 15, 1998 to shareholders and
unitholders of record on September 30, 1998. The second quarter 1997
dividend was $0.13 and was paid to shareholders and unitholders of
record as of September 30, 1997.
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 NINE MONTHS ENDED
------------------ -----------------
<S> <C> <C> <C> <C>
9/30/98 9/30/97 9/30/98 9/30/97
------- ------- ------- -------
Income (loss) before extraordinary item $ 205 $ 845 $ 1,223 $ (2,753)
Minority interest in income (loss) before
extraordinary item of the
Operating Partnership 124 681 831 (2,085)
---------- ---------- ---------- -----------
Income (loss) before extraordinary item - diluted $ 329 $ 1526 $ 2,054 $ (4,838)
========== ========== ========== ===========
Net income (loss) - basic $ (199) $ 665 $ 726 $ (2,938)
Minority interest in net income (loss) of the
Operating Partnership (117) 536 536 (2,225)
---------- ---------- ---------- -----------
Net income (loss) - diluted $ (316) $ 1,201 $ 1,262 $ (5,163)
========== ========== ========== ===========
Weighted average Shares - basic 4,711,325 4,186,331 4,603,281 4,186,330
Dilutive securities - weighted average Units 2,839,282 3,363,430 2,947,103 3,168,924
---------- ---------- ---------- -----------
Weighted average Shares - diluted 7,550,607 7,549,761 7,550,384 7,355,254
========== ========== ========== ===========
</TABLE>
The adoption of SFAS No. 128 had no impact on 1997 earnings per share
data.
9
<PAGE> 12
7. ACQUISITIONS AND DISPOSITIONS
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
Company reinvested the net sales proceeds in a replacement property in
connection with a Section 1031 tax-deferred exchange. The purchaser is
unaffiliated with the Company and the transaction was negotiated at
arms-length. The net book value of the property at December 31, 1997
was approximately $7,749,000.
On June 22, 1998, the Company purchased approximately 23.8 acres of
undeveloped land in the Ballantyne area of 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 $1,660,000,
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.
On June 24, 1998, the Company purchased approximately 49.1 acres of
undeveloped land located in north Fulton County, Georgia 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 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.
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 $501,000. 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 arms-length. The net book value
of the property was $1,715,000 at June 30, 1998. Roberts Properties,
Inc., a non-owned affiliate, was paid $93,000 for consulting fees in
connection with the sale.
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 Company owns multifamily residential properties as a
self-administered and self-managed equity real estate investment trust. At
September 30, 1998, the Company owned nine multifamily apartment communities
consisting of 1,778 apartment homes. As part of its business plan and growth
strategy, the Company sold its 207-unit Autumn Ridge community in August 1997
and its 232-unit Windsong community in January 1998. The Company's decision to
sell these two communities was based on their age and locations in markets that
are not included in the Company's long-term growth strategy. In July 1998, the
Company sold its two small retail centers, which was based on the Company's
decision to exit all businesses not related to the long-term ownership of high
quality apartment homes. In June 1998, the Company used the equity from its
property sales to purchase three separate parcels of land for $11.3 million on
which it intends to develop and build three new multifamily communities
totaling 986 apartment homes. This development pipeline will increase the size
of the Company's portfolio 55% from 1,778 to 2,764 apartment homes. One of the
three new communities under development is located in Charlotte and is the
first step in the Company's diversification strategy. The other two communities
are located in north Atlanta. Of the Company's 986 new apartment homes to be
built, 118 are rental townhomes that are under construction, and the remaining
868 apartment homes are expected to be under construction beginning in the
first quarter of 1999.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1998 to Three Months
Ended September 30, 1997. For the three months ended September 30, 1998, the
Company recorded income before extraordinary items of $205,000 or $0.04 per
share, compared to income before extraordinary items of $845,000 or $0.20 per
share for the three months ended September 30, 1997. The change in operating
results is due to the following:
1) The sales of Autumn Ridge, Windsong, and two retail centers;
2) The completion of the initial lease-up phases at Ivey Brook,
Bradford Creek, and the second phases of Crestmark, Preston
Oaks, and Plantation Trace (the "Lease-Up Communities")
beginning August 1, 1997; and
3) An increase in average stabilized occupancy from 94.3% to
97.0%.
11
<PAGE> 14
The Company's operating performance for all Communities is summarized in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM THREE MONTHS ENDED SEPTEMBER 30,
1997 TO 1998 --------------------------------
------------ 1998 1997
---- ----
<S> <C> <C> <C>
Total operating revenues (0.3%) $ 4,465,000 $ 4,480,000
Property operating expenses (1) 2.7% $ 1,650,000 $ 1,606,000
Net operating income (2) (2.1%) $ 2,815,000 $ 2,874,000
General and administrative expenses (4.3%) $ 469,000 $ 490,000
Depreciation of real estate assets (13.0%) $ 1,246,000 $ 1,432,000
Average stabilized occupancy (3) 2.7% 97.0% 94.3%
Operating expense ratio (4) 1.2% 37.0% 35.8%
</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 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, the second
phase of Crestmark beginning September 1, 1997, the second phase of
Preston Oaks beginning August 1, 1998, and Bradford Creek beginning
September 1, 1998, 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.
The Company's same-property operating performance was highlighted by
an 8.2% increase in operating revenues, a 4.4% increase in net operating income
and a 4.6% increase in average occupancy to 97.6%. The Company's property
management team focused on implementing rent increases, achieving high
occupancy levels, and providing quality customer service to residents, which
contributed to the Company's lease renewal rate of 65.4% during the third
quarter of 1998. Same-property operating results for the seven Communities that
were fully stabilized during both the three-month periods ended September 30,
1998 and 1997 (Bentley Place, Highland Park, River Oaks, Rosewood Plantation,
and the first phases of Crestmark, Plantation Trace, and Preston Oaks) are
summarized in the following table:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM THREE MONTHS ENDED SEPTEMBER 30,
1997 TO 1998 --------------------------------
------------ 1998 1997
---- ----
<S> <C> <C> <C>
Rental income 8.4% $ 3,255,000 $ 3,002,000
Total operating revenues 8.2% $ 3,387,000 $ 3,130,000
Property operating expenses (1) 15.0% $ 1,288,000 $ 1,120,000
Net operating income (2) 4.4% $ 2,099,000 $ 2,010,000
Average stabilized occupancy (3) 4.6% 97.6% 93.0%
Operating expense ratio (4) 2.2% 38.0% 35.8%
Average monthly rent per apartment home 2.3% $ 882 $ 862
Lease renewal percentage (5) 8.0% 65.4% 57.4%
</TABLE>
- -----------------------------------
(footnotes begin on following page)
12
<PAGE> 15
(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.
(5) Represents the number of leases renewed divided by the number of leases
expired during the period presented, expressed as a percentage.
The following discussion compares the Company's statements of
operations for the three-month periods ended September 30, 1998 and 1997.
Property operating revenue decreased $15,000 or 0.3% from $4,480,000
for the three months ended September 30, 1997 to $4,465,000 for the three
months ended September 30, 1998. The decrease in operating revenue is due to
the following:
1) A decrease in revenue of approximately $760,000 due to the
sales of Autumn Ridge, Windsong, and two retail centers;
offset by
2) A $257,000 increase in same-property revenue, which is due to
an increase in occupancy from 93.0% to 97.6% along with a
2.3% increase in the average monthly rent per apartment home
from $862 to $882 per month; and
3) A $488,000 increase in revenue from the Lease-Up Communities.
Since the sale of Windsong in January 1998, operating revenues have
steadily increased each quarter from $3,920,000 for the three months ended
March 31, 1998 to $4,465,000 for the three months ended September 30, 1998.
This is equal to an increase of $545,000 or 13.9% during the last six months.
The Company expects continued growth in operating revenues for the three months
ended December 31, 1998 based on the following:
1) Higher rental income from existing communities as leases are
brought to current market rent upon renewal; and
2) A full quarter of operating revenue from Bradford Creek and
the second phases of Preston Oaks and Plantation Trace, all
three of which were completing their lease-up during the
third quarter.
The Company is implementing a program to bill residents for their
individual water consumption. The Company expects to complete the installation
of water-metering equipment in each of its 1,778 existing apartment homes by
December 31, 1998. Currently, six of its nine communities are metered for water
consumption. Billing residents for their water usage is expected to increase
the Company's operating revenues by approximately $425,000 per year. Based on a
total estimated cost of $350,000 to install the equipment, the payback period
will be less than one year. All new apartment communities to be developed by
the Company are expected to have water-metering equipment installed in each
apartment home during construction.
13
<PAGE> 16
Property operating expenses (excluding depreciation, and general and
administrative expenses) increased $44,000 or 2.7% from $1,606,000 for the
three months ended September 30, 1997 to $1,650,000 for the three months ended
September 30, 1998. The increase in operating expenses is due to the following:
1) A $186,000 increase in expenses from the Lease-Up Communities;
and
2) A $168,000 increase in same-property expenses due to higher
personnel, maintenance and landscaping costs. Personnel costs
represent $111,000 of the $168,000 increase in expenses and
are due to the hiring of additional staff for the Company's
property management team; offset by
3) A decrease of $310,000 in expenses due to the sales of Autumn
Ridge, Windsong, and two retail centers.
General and administrative expenses decreased $21,000 or 4.3% from
$490,000 for the three months ended September 30, 1997 to $469,000 for the
three months ended September 30, 1998 and include legal, accounting and tax
fees, marketing and printing fees, salaries, director fees and other costs. The
decrease is due primarily to reductions in legal fees ($30,000), and the
initial fee paid to the American Stock Exchange in connection with listing the
Company's common stock in December 1997 ($32,000), offset by increased
marketing and printing costs ($36,000) and personnel and associated costs
($10,000). General and administrative expenses as a percentage of operating
revenues decreased from 10.9% for the three months ended September 30, 1997 to
10.5% for the three months ended September 30, 1998. The Company expects that
as it continues to grow, such expenses will begin to decline as a percentage of
operating revenues, even though general and administrative expenses will
increase in absolute terms.
Depreciation expense decreased $186,000 or 13.0% from $1,432,000 for
the three months ended September 30, 1997 to $1,246,000 for the three months
ended September 30, 1998. The decrease is due primarily to the sales of Autumn
Ridge and Windsong offset by depreciation expense from the Lease-Up
Communities. Depreciation expense is recorded as apartment homes are completed
and available for occupancy.
Interest expense increased $12,000 or 1.0% from $1,212,000 for the
three months ended September 30, 1997 to $1,224,000 for the three months ended
September 30, 1998. The increase is due primarily to the financing of Bradford
Creek in June 1998 and the refinancing of the mortgage loan secured by Rosewood
Plantation in June 1998 for a higher loan amount, offset by the mortgage notes
that were repaid due to the sales of Autumn Ridge and Windsong.
Gain on the sale of real estate decreased $1,291,000 or 72% from
$1,792,000 for the three months ended September 30, 1997 to $501,000 for the
three months ended September 30, 1998. The 1998 gain of $1,792,000 is due to
the sale of Autumn Ridge, and the 1998 gain of $501,000 is due to the sale of
two retail centers.
Comparison of Nine Months Ended September 30, 1998 to Nine Months
Ended September 30, 1997. For the nine months ended September 30, 1998, the
Company recorded income before extraordinary items of $1,223,000 or $0.26
per share, compared to a loss before extraordinary items of $2,753,000 or
$0.66 per share for the nine months ended September 30, 1997. The change in
operating results is due primarily to the following:
1) The April 1, 1997 acquisition of Roberts Properties
Management, LLC ("Roberts Management"), an affiliate owned by
Mr. Charles S. Roberts, the President and Chairman of the
Board, offset by
14
<PAGE> 17
2) The sales of Autumn Ridge, Windsong, and two retail centers;
and
3) The completion of the initial lease-up phase at the Lease-Up
Communities.
The Company's operating performance for all Communities is summarized in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE NINE MONTHS ENDED SEPTEMBER 30,
CHANGE FROM ---------------------------------
1997 TO 1998 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues (5.0%) $ 12,512,000 $ 13,171,000
Property operating expenses (1) (2.5%) $ 4,532,000 $ 4,650,000
Management fees paid to related party (2) (100.0%) $ 0 $ 211,000
General and administrative expenses 11.4% $ 1,280,000 $ 1,149,000
Net operating income (3) (6.3%) $ 7,980,000 $ 8,521,000
Depreciation of real estate assets (19.8%) $ 3,484,000 $ 4,344,000
Average stabilized occupancy (4) 0.2% 95.4% 95.2%
Operating expense ratio (5) 0.9% 36.2% 35.3%
</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,
the Company paid no management fees to a related party subsequent to
April 1, 1997; however, the Company incurred 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 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, the second
phase of Crestmark beginning September 1, 1997, the second phase of
Preston Oaks beginning August 1, 1998, and Bradford Creek beginning
September 1, 1998, 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.
(5) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
The Company's same-property operating performance was highlighted by a
4.0% increase in operating revenues and a 1.9% increase in average occupancy to
97.6%. Same-property results for the seven Communities that were fully
stabilized during both the nine month periods ended September 30, 1998 and 1997
(Bentley Place, Highland Park, River Oaks, Rosewood Plantation, and the first
phases of Crestmark, Plantation Trace, and Preston Oaks) are summarized in the
following table:
15
<PAGE> 18
<TABLE>
<CAPTION>
PERCENTAGE NINE MONTHS ENDED SEPTEMBER 30,
CHANGE FROM -------------------------------
1997 TO 1998 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Rental income 4.4% $ 9,531,000 $ 9,130,000
Total operating revenues 4.0% $ 9,849,000 $ 9,470,000
Property operating expenses (1) 12.2% $ 3,597,000 $ 3,206,000
Management fees paid to related party (2) (100.0%) $ 0 $ 160,000
Net operating income (3) (0.2%) $ 6,252,000 $ 6,264,000
Average stabilized occupancy (4) 1.9% 97.6% 95.7%
Operating expense ratio (5) 2.6% 36.5% 33.9%
Average monthly rent per apartment home 2.0% $ 869 $ 852
Lease Renewal Percentage (6) 6.4% 64.8% 58.4%
</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,
the Company paid no management fees to a related party subsequent to
April 1, 1997; however, the Company incurred 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.
(6) Represents the number of leases renewed divided by the number of leases
expired during the period presented, expressed as a percentage.
The following discussion compares the Company's statements of
operations for the nine-month periods ended September 30, 1998 and 1997.
Property operating revenue decreased $659,000 or 5.0% from $13,171,000
for the nine months ended September 30, 1997 to $12,512,000 for the nine months
ended September 30, 1998. The decrease in operating revenue is due to the
following:
1) A decrease in revenue of approximately $2,381,000 due to the
sales of Autumn Ridge, Windsong and two retail centers, offset
by
2) A $379,000 increase in same-property revenue, which is due to
an increase in occupancy from 95.7% to 97.6% along with a
2.0% increase in the average monthly rent per apartment home
from $852 to $869 per month; and
3) A $1,343,000 increase in revenue from the Lease-Up
Communities.
16
<PAGE> 19
Property operating expenses (excluding depreciation, general and
administrative expenses and management fees) decreased $118,000 or 2.5% from
$4,650,000 for the nine months ended September 30, 1997 to $4,532,000 for the
nine months ended September 30, 1998. The decrease is due to the following:
1) A decrease of $913,000 in expenses due to the sales of Autumn
Ridge, Windsong and two retail centers; offset by
2) A $404,000 increase in expenses from the Lease-Up communities;
and
3) A $391,000 increase in same-property expenses due to higher
personnel and maintenance costs.
General and administrative expenses increased $131,000 or 11.4% from
$1,149,000 for the nine months ended September 30, 1997 to $1,280,000 for the
nine months ended September 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 personnel ($132,000), marketing
($38,000), and recruiting costs ($16,000) due to the acquisition of Roberts
Management, offset by a reduction in legal fees ($40,000), and the initial fee
paid to list the Company's common stock on the American Stock Exchange
($32,000). General and administrative expenses as a percentage of operating
revenues increased from 8.7% for the nine months ended September 30, 1997 to
10.2% for the nine months ended September 30, 1998. The Company expects that as
it continues to grow, such expenses will begin to decline as a percentage of
operating revenues, even though general and administrative expenses will
increase in absolute terms.
Depreciation expense decreased $860,000 or 19.8% from $4,344,000 for
the nine months ended September 30, 1997 to $3,484,000 for the nine months
ended September 30, 1998. The decrease is due primarily to the sales of Autumn
Ridge and Windsong, offset by depreciation from the Lease-Up Communities.
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.
Interest expense decreased $289,000 or 8.1% from $3,570,000 for the
nine months ended September 30, 1997 to $3,281,000 for the nine months ended
September 30, 1998. The decrease is due primarily to the mortgage notes that
were repaid due to the sales of Autumn Ridge and Windsong, offset by (1) the
financing of Ivey Brook, the second phase of Crestmark, and Bradford Creek in
January 1997, July 1997, and June 1998, respectively, and (2) the refinancing of
the mortgage loan secured by the Rosewood Plantation Community in June 1998 for
a higher loan amount.
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, closing costs of $458,000, and
prorations of $139,000. The net cash proceeds from the sale of Windsong were
reinvested in undeveloped land in June 1998 as part of a Section 1031
tax-deferred exchange.
17
<PAGE> 20
On July 17, 1998, the Company completed the sale of two retail centers
for $2,400,000 in cash resulting in a gain of $501,000. Net sales proceeds were
$2,182,000, after deducting for closing costs of $183,000 and prorations of
$35,000.
LIQUIDITY AND CAPITAL RESOURCES
Comparison of Nine Months Ended September 30, 1998 to Nine Months Ended
September 30, 1997. Cash and cash equivalents decreased $1,846,000 during the
nine months ended September 30, 1998 compared to an increase of $7,879,000
during the nine months ended September 30, 1997. The decrease is due to an
increase in cash provided by financing activities offset by a decrease in cash
provided by operating activities and an increase in cash used in investing
activities.
A primary source of liquidity to the Company is cash flow from
operations. Operating cash flows have historically been determined by the number
of apartment homes, rental rates and operating expenses with respect to such
apartment homes. Net cash provided by operating activities decreased $289,000
from $4,132,000 during the nine months ended September 30, 1997 to $3,843,000
during the nine months ended September 30, 1998. The decrease in cash flow from
operations is due primarily to the sales of Autumn Ridge and Windsong, offset by
additional cash flow from the Lease-Up Communities. 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 $13,402,000 from net
cash provided of $1,835,000 during the nine months ended September 30, 1997
compared to net cash used of $11,567,000 during the nine months ended September
30, 1998. This increase is due primarily to the following:
(1) The purchase of three separate parcels of land for
$11,355,000, on which the Company intends to build three new
communities totaling 986 apartment homes,
(2) Construction costs at Bradford Creek, and the second phases of
Preston Oaks and Plantation Trace of $11,721,000 in 1998
compared to construction costs at Ivey Brook, the second phase
of Crestmark, and the start of construction at Bradford Creek
totaling $8,248,000 in 1997, offset by
(3) Proceeds from the sales of Windsong and two retail centers
totaled $11,509,000 compared to $10,083,000 in sales proceeds
from the sale of Autumn Ridge.
The Company made no acquisitions of existing apartment communities
during these periods.
Net cash provided by financing activities increased $3,966,000 from
$1,912,000 during the nine months ended September 30, 1997 to $5,878,000 during
the nine months ended September 30, 1998. This increase is due primarily to the
following:
(1) the payoff of a $3,959,000 mortgage note due to the sale of
Windsong in January 1998;
(2) the closing of an $8,400,000 loan in June 1998 with Nationwide
Insurance at a fixed interest rate of 7.15% per annum and a
term of ten years; based on projected first year stabilized
net operating income, the Company expects to earn a 13%
leveraged return on its investment in Bradford Creek; the
financing resulted in net cash proceeds of $7,082,000 to the
Company in addition to $1,200,000 escrowed by the lender until
specific debt coverage ratios are achieved, which is expected
to occur in the fourth quarter of 1998;
18
<PAGE> 21
(3) the refinancing of an existing $6,317,000 loan on Rosewood
Plantation in June 1998 for $8,100,000 with Prudential
Insurance at a fixed interest rate of 6.62% per annum and a
term of ten years; the refinancing reduced the interest rate
from 7.37% per annum on the old loan to 6.62% per annum on the
new loan; the loan amount was increased resulting in net cash
proceeds of $1,475,000 to the Company;
(4) the refinancing of an existing $7,686,000 loan on Plantation
Trace in September 1998 for $11,900,000 with Prudential
Insurance at a fixed interest rate of 7.09% per annum and a
term of ten years; the refinancing reduced the interest rate
from 7.75% per annum to 7.09% per annum; the loan amount was
increased from $7,686,000 to $11,900,000 due to the
construction of a 50-unit second phase at Plantation Trace;
the refinancing resulted in net cash proceeds of $3,902,000 to
the Company in addition to $150,000 escrowed by lender until
completion of construction, which is expected to occur in the
fourth quarter of 1998;
(5) the refinancing of two existing loans totaling $13,520,000 on
Crestmark in September 1998 with Freddie Mac; the new loan
amount is $16,000,000 at a fixed interest rate of 6.57% per
annum and a term of ten years; the refinancing reduced the
interest rate from 7.54% per annum on the two old loans to
6.57% per annum on the new loan; the refinancing resulted in
net cash proceeds of $1,680,000 to the Company; and
(6) an increase of $507,000 in quarterly distributions paid, from
$2,721,000 for the nine months ended September 30, 1997 to
$3,228,000 for the nine months ended September 30, 1998,
offset by
(7) the permanent financing of Ivey Brook in January 1997 that
resulted in net cash of $6,270,000 to the Company;
(8) the permanent financing of the second phase of Crestmark in
July 1997 that resulted in net cash of $3,905,000 to the
Company; and
(9) the repayment of a $4,899,000 mortgage loan in August 1997 due
to the sale of Autumn Ridge.
The following facts highlight the Company's existing debt structure:
- Each of the Company's nine Communities is financed with
fixed-rate debt;
- The average interest rate for all nine Communities is
6.99% per annum;
- No debt is scheduled to mature prior to October 2002;
- The average term to maturity is eight years; and
- Debt principal will amortize at a rate of approximately
$880,000 per year.
19
<PAGE> 22
The following table summarizes the debt for each of the Company's nine
Communities:
<TABLE>
<CAPTION>
Fixed Interest Principal
Rate as of Outstanding
9/30/98 Maturity 09/30/98
-------------- -------- -----------
<S> <C> <C> <C>
Bentley Place 7.10% 08/15/06 $ 4,012,000
Bradford Creek 7.15% 06/15/08 8,380,000
Crestmark 6.57% 10/01/08 16,000,000
Highland Park 7.30% 02/15/03 7,963,000
Ivey Brook 7.14% 02/15/07 6,317,000
Plantation Trace 7.09% 10/15/08 11,900,000
Preston Oaks 7.21% 10/15/02 8,445,000
River Oaks 7.15% 11/15/03 9,077,000
Rosewood Plantation 6.62% 07/15/08 8,086,000
-----------
$80,180,000
===========
</TABLE>
Each of the Company's existing mortgage loans will require balloon
payments (in addition to monthly principal amortization) coming due over the
years 2002 to 2008 as summarized below:
<TABLE>
<CAPTION>
<S> <C>
2002 $ 8,025,000
2003 16,057,000
2006 3,554,000
2007 5,570,000
2008 38,233,000
-----------
Total $71,439,000
===========
</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 will
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) equity
offerings.
During the quarter ended September 30, 1998, the Company started
construction on the first phase of Abbotts Bridge, located in north Atlanta.
Abbotts Bridge will consist of 118 rental townhomes with occupancies expected
to begin in the second quarter of 1999. The Company is funding this first phase
with the proceeds from recent mortgage loan financings and operating cash. The
Company expects to begin construction on an additional 868 apartment homes
during the first quarter of 1999, which will include a 287-unit second phase of
Abbotts Bridge, a 332-unit community in Charlotte and a 249-unit community also
located in north Atlanta. The Company paid cash for the land for these three
new communities, and it expects to fund the cost of construction with
construction loans and cash flow from operations.
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, including redemptions of Units from out-of-state unitholders,
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
20
<PAGE> 23
its long-term liquidity requirements, including future developments and debt
maturities, through the issuance of additional equity securities and the
proceeds from construction loans and future mortgage financings.
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.
(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.
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 development activities to be provided by a
combination of secured long-term borrowing and issuance of equity securities.
STOCK REPURCHASE PLAN
On September 3, 1998, the Company issued a press release announcing
that its board of directors had authorized the repurchase of up to 300,000
shares of the Company's outstanding common stock. The Company intends to
repurchase its shares from time to time by means of open market purchases
depending on availability, its cash position and price per share. No shares were
purchased during the quarter ended September 30, 1998; however, the Company did
repurchase 3,000 shares in October 1998.
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.
21
<PAGE> 24
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (199) $ 665 $ 726 $ (2,938)
Minority interest of Unitholders 124 681 831 (2,085)
Extraordinary item 404 180 497 185
Expense of acquiring management company 0 0 0 5,900
Amortization (real estate related) 39 10 50 26
Loss on disposal of assets 28 79 79 124
Gain on sale of real estate asset (501) (1,792) (2,045) (1,792)
Depreciation expense 1,246 1,432 3,484 4,344
--------- --------- -------- --------
Funds From Operations $ 1,141 $ 1,255 $ 3,622 $ 3,764
========= ========= ======== ========
Weighted average Shares and Units
outstanding during the period 7,550,607 7,549,761 7,550,384 7,355,254
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective beginning with 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. The short-term nature of these leases serves to
reduce the risk to the Company of the adverse effects of inflation.
YEAR 2000 COMPUTER ISSUES
The "year 2000 problem" is a general term used to identify those
computer programs or applications that are programmed to use a two-digit field,
instead of a four-digit field, for the year component of a date. Those programs
or applications which are programmed in this manner may recognize the year 2000
as the year 1900, thereby causing potential system failures or miscalculations,
which could result in disruptions of normal business operations. The Company
has evaluated its state of readiness, the costs involved to become compliant,
the risks involved, and its contingency plans. The Company's primary uses of
software systems are its corporate accounting and property management software.
The Company has completed an initial assessment of its core computer
information systems and is now undertaking the necessary steps to make its
systems Year 2000 compliant. The Company's property management software is Year
2000 compliant, and it expects to upgrade its accounting software in the second
quarter of 1999 to make it Year 2000 compliant. The cost to upgrade its
accounting software is not expected to be material. The
22
<PAGE> 25
Company is currently evaluating and assessing those computer systems that do not
relate to information systems, such as telecommunications, HVAC, and fire and
safety systems, which typically include embedded technology such as
microcontrollers that may be harder to test, and may require repairs or complete
replacement. The Company expects to complete this assessment during the second
quarter of 1999.
The Company has contacted all significant vendors, including banks,
mortgage loan service companies, and its third party payroll vendor to verify
that those vendors are also addressing the problem. The Company has developed
contingency plans where necessary. There are certain Year 2000 issues that are
beyond the Company's control, such as the failure of a utility company to
provide power to residents, that may adversely affect the Company's operations.
At this time, no estimates can be made as to any potential adverse impact that
may result from the failure of any of the Company's vendors to become Year 2000
compliant, although the Company continues to believe that there will be no
direct material effect on its operating performance or results of operations.
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 development
and construction 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:
- competition and overbuilding in the Company's markets (Atlanta
and Charlotte);
- increasing operating costs that cannot be passed along to
residents through rental rate increases;
- construction risks for the Company's development pipeline due
to factors that include unexpected weather problems, shortages
in materials and supplies, and labor strikes;
- risks related to the national and local economic climate;
- the Company's dependence upon the Atlanta market;
- risks of entering new markets outside the Atlanta area;
- financing risks including risks of substantial indebtedness,
not being able to obtain debt or equity financing to fund
the Company's growth strategy, or not being able to refinance
its existing mortgage debt beginning in 2002;
- tax risks including the possible effects of changes in tax law
and regulation;
- possible environmental liability; and
- costs of compliance with the Americans with Disabilities Act
and similar laws.
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.
23
<PAGE> 26
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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 September 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.
During the three months ended September 30, 1998, the Company issued a
total of 44,521 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.
As previously reported in the Company's Form 10-Q for the quarter
ended June, 30, 1998, the Company held its annual meeting 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.
24
<PAGE> 27
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>
10.07.04 Promissory Note executed by Roberts Properties Residential,
L.P. in favor of The Prudential Insurance Company of America,
dated September 29, 1998, in the original principal amount of
$11,900,000 (Plantation Trace).
10.07.05 Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of The Prudential
Insurance Company of America, dated September 29, 1998, and
related collateral documents (Plantation Trace).
10.07.06 Limited Guaranty executed by Roberts Realty Investors, Inc. in
favor of The Prudential Insurance Company of America, dated
September 29, 1998 (Plantation Trace).
10.10.06 Real Estate Note executed by Roberts Properties Residential,
L.P. in favor of Freddie Mac, dated September 30, 1998, in the
original principal amount of $16,000,000 (Crestmark).
10.10.07 Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of Freddie Mac, dated
September 30, 1998, and related collateral documents
(Crestmark).
10.10.08 Guaranty executed by Roberts Realty Investors, Inc. in favor
of Freddie Mac, dated September 30, 1998 (Crestmark).
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) The Company filed no reports on Form 8-K during the quarter ended
September 30, 1998.
25
<PAGE> 28
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: November 13, 1998
26
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.07.04 Promissory Note executed by Roberts Properties Residential,
L.P. in favor of The Prudential Insurance Company of
America, dated September 29, 1998, in the original
principal amount of $11,900,000 (Plantation Trace).
10.07.05 Deed to Secure Debt and Security Agreement executed by
Roberts Properties Residential, L.P. in favor of The
Prudential Insurance Company of America, dated September
29, 1998, and related collateral documents (Plantation
Trace).
10.07.06 Limited Guaranty executed by Roberts Realty Investors,
Inc. in favor of The Prudential Insurance Company of
America, dated September 29, 1998 (Plantation Trace).
10.10.06 Real Estate Note executed by Roberts Properties
Residential, L.P. in favor of Freddie Mac, dated September
30, 1998, in the original principal amount of $16,000,000
(Crestmark).
10.10.07 Deed to Secure Debt and Security Agreement executed by
Roberts Properties Residential, L.P. in favor of Freddie
Mac, dated September 30, 1998, and related collateral
documents (Crestmark).
10.10.08 Guaranty executed by Roberts Realty Investors, Inc. in
favor of Freddie Mac, dated September 30, 1998 (Crestmark).
27 Financial Data Schedule (for SEC use only).
</TABLE>
26
<PAGE> 1
EXHIBIT 10.7.4
PROMISSORY NOTE
$11,900,000.00 September 29, 1998
Loan No. 6 102 639
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 Two
Ravinia Drive, Suite 1400, Atlanta, Georgia 30346-2110, the principal sum of
Eleven Million Nine Hundred Thousand and No/100 U.S. Dollars ($11,900,000.00),
with interest on the unpaid balance ("BALANCE") at the rate of seven and nine
hundredths percent (7.09%) 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 October 15, 1998 shall be due
and payable on November 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 Seventy-Nine Thousand Eight Hundred Ninety-One and
58/100 Dollars ($79,891.58) each commencing on November 15, 1998 and continuing
on the fifteenth (15th) day of each succeeding month to and including October
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 October 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 any 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 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
Prudential Loan No.: 6 102 639
Roberts Residential\promissory note
BORROWER'S INITIALS: /s/ CSR
--------
433047.2/2555.181 1
<PAGE> 2
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. Lender 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).
The "DISCOUNT RATE" is the rate which, when compounded monthly, is
Prudential Loan No.: 6 102 639
Roberts Residential\promissory note
BORROWER'S INITIALS: /s/ CSR
---------
433047.2/2555.181
2
<PAGE> 3
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);
Prudential Loan No.: 6 102 639
Roberts Residential\promissory note
BORROWER'S INITIALS: /s/ CSR
-------
433047.2/2555.181
3
<PAGE> 4
(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;
(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.
Prudential Loan No.: 6 102 639
Roberts Residential\promissory note
BORROWER'S INITIALS: /s/ CSR
--------
433047.2/2555.181
4
<PAGE> 5
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.
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]
Prudential Loan No.: 6 102 639
Roberts Residential\promissory note
BORROWER'S INITIALS: /s/ CSR
--------
433047.2/2555.181
5
<PAGE> 1
EXHIBIT 10.7.5
================================================================================
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 September 29, 1998
Location: 4130 Plantation Trace, Duluth, Georgia
County: Gwinnett
Loan Number: 6 102 639
================================================================================
433056.1/2555.181
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I - OBLIGATIONS...........................................................................................2
Section 1.01 Obligations...................................................................2
Section 1.02 Documents.....................................................................3
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 Payment of Obligations........................................................4
Section 3.02 Continuation of Existence.....................................................4
Section 3.03 Taxes and Other Charges.......................................................5
Section 3.04 Defense of Title, Litigation, and Rights under Documents......................5
Section 3.05 Operation and Maintenance of Property.........................................6
Section 3.06 Insurance.....................................................................7
Section 3.07 Damage and Destruction of Property............................................8
Section 3.08 Condemnation..................................................................9
Section 3.09 Liens and Liabilities........................................................10
Section 3.10 Tax and Insurance Deposits...................................................11
Section 3.11 ERISA........................................................................11
Section 3.12 Environmental Representations, Warranties, and Covenants.....................12
Section 3.13 .............................................................................13
Section 3.14 Inspection...................................................................13
Section 3.15 Records, Reports, and Audits.................................................13
Section 3.16 Borrower's Certificates......................................................14
Section 3.17 Full Performance Required; Survival of Warranties............................15
Section 3.18 Additional Security..........................................................15
Section 3.19 Further Acts.................................................................15
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION..........................................................15
Section 4.01 Expenses and Advances........................................................15
Section 4.02 Subrogation..................................................................15
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY.......................................................16
Section 5.01 Due-on-Sale or Encumbrance...................................................16
Section 5.02 One-time Transfer............................................................16
Section 5.03 Permitted Transfers Without Fee..............................................17
</TABLE>
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE VI - DEFAULTS AND REMEDIES...............................................................................18
Section 6.01 Events of Default............................................................18
Section 6.02 Remedies.....................................................................19
Section 6.03 Expenses.....................................................................20
Section 6.04 Rights Pertaining to Sales...................................................21
Section 6.05 Application of Proceeds......................................................21
Section 6.06 Additional Provisions as to Remedies.........................................21
Section 6.07 Waiver of Rights and Defenses................................................21
ARTICLE VII - SECURITY AGREEMENT.................................................................................22
Section 7.01 Security Agreement...........................................................22
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES..................................................22
Section 8.01 Limited Recourse Liability...................................................22
Section 8.02 General Indemnity............................................................22
Section 8.03 Transaction Taxes Indemnity..................................................22
Section 8.04 ERISA Indemnity..............................................................22
Section 8.05 Environmental Indemnity......................................................22
Section 8.06 Duty to Defend, Costs and Expenses...........................................22
Section 8.07 Recourse Obligation and Survival.............................................23
ARTICLE IX - ADDITIONAL PROVISIONS...............................................................................23
Section 9.01 Usury Savings Clause.........................................................23
Section 9.02 Notices......................................................................23
Section 9.03 Sole Discretion of Lender....................................................24
Section 9.04 Applicable Law and Submission to Jurisdiction................................24
Section 9.05 Construction of Provisions...................................................24
Section 9.06 Transfer of Loan.............................................................25
Section 9.07 Miscellaneous................................................................25
Section 9.08 Entire Agreement.............................................................25
Section 9.09 WAIVER OF TRIAL BY JURY......................................................26
ARTICLE X - LOCAL LAW PROVISIONS.................................................................................26
Section 10.01 WAIVER.......................................................................26
Section 10.02 Nature of Instrument.........................................................26
Section 10.03 No Novation..................................................................26
Section 10.04 Georgia Remedies.............................................................26
</TABLE>
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
ii
<PAGE> 4
DEFINITIONS
The terms set forth below are defined in the following sections of this Mortgage
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
Loan Recitals, Section 1
Losses Section 8.02
</TABLE>
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
i
<PAGE> 5
<TABLE>
<S> <C>
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>
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
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 29th day of September, 1998, by ROBERTS PROPERTIES RESIDENTIAL, L.P., a
Georgia limited partnership, having its principal office and place of business
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 Two 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 ELEVEN MILLION NINE
HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($11,900,000.00).
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 OCTOBER 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;
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
<PAGE> 7
(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;
(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.
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
2
<PAGE> 8
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.
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.
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
3
<PAGE> 9
(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) (1) 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.
(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 are 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
Borrower covenants and agrees with Lender as follows:
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 (2) ; (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.
- ----------------------------
(1) Except as provided in that certain Reserve Agreement, dated of
even date herewith, between Borrower and Lender, all
(2) (which consent shall not be unreasonably withheld)
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
4
<PAGE> 10
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.
(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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
5
<PAGE> 11
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 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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
6
<PAGE> 12
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 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 (3) and other natural phenomenon in the amounts
reasonably required by Lender.
(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 (4).
(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
- -------------------
(3) (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).
(4) (provided that Lender is generally requiring such insurance of
other borrowers of commercial mortgage loans in the
metropolitan Atlanta, Georgia area)
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
7
<PAGE> 13
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.
(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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
8
<PAGE> 14
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 (5) 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 (6) 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 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
- --------------
(5) six (6) months
(6) twenty percent (20%)
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
9
<PAGE> 15
(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 Proceeds. 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 (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 (7) 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 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.
- --------------------
(7) six (6) months
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
10
<PAGE> 16
SECTION 3.10 TAX AND INSURANCE DEPOSITS. (8) , 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 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)
- ---------------
(8) Upon the occurrence of an Event of Default
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
11
<PAGE> 17
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. (9) 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,
statutes, 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 Materials 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 required
permits, and (D) (1) in only 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
at 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
- ----------------
(9) Based solely upon the environmental reports prepared for Lender,
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
12
<PAGE> 18
results and reports, and (c) complete any remediation of Hazardous Materials
affecting the Property or other actions required by any 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 (10)
SECTION 3.14 INSPECTION. Borrower shall allow Lender and any person designated
by Lender (11) 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.
(a) Records and Reports. 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 partner(s) of
Borrower and any general partners of such partners, (12) (iii) any guarantors or
sureties of the Note. 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;
(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) (13) a budget
showing projected income and expenses (before and after Obligations
- --------
(10) [Intentionally Omitted]
(11) , 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),
(12) and
(13) upon Lender's request (and in no event more often than once every two
(2) years during the term of this Loan),
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
13
<PAGE> 19
service) for the next twelve (12) month budget period; and (v) upon Lender's
request (14) , (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.
(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 (15) 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 (16) , 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.
- --------------------
(14) following the occurrence of an Event of Default
(15) a default
(16) and if readily achievable without significant expenditure by
Borrower
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
14
<PAGE> 20
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 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, attorneys' (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.
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
15
<PAGE> 21
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
(17), 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 encumbrance (or any of the
foregoing (18) of (A) (19) or more of (1) the voting stock of a corporate
Borrower, any corporate general partner of Borrower, or any corporation directly
or indirectly owning (20) 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 general partner of Borrower or any
general 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 general partner of Borrower, or (iii) any partner of a
general partner of Borrower (21).
SECTION 5.02 ONE-TIME TRANSFER. (22) 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
(23) 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 63%;
- -----------------------
(17) (unless Borrower or such general partner of Borrower is the
surviving entity in such merger or consolidation)
(18) in one transaction
(19) 49%
(20) 49%
(21) 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.
(22) Beginning six (6) months from Closing, and notwithstanding
(23) (with all terms and conditions of the Loan Documents remaining
the same)
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
16
<PAGE> 22
(iii) Borrower pays Lender a non-refundable servicing fee (24) 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
1.65 to 1.00 for the preceding (25) 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
(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 Obligations 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 Obligations 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 (26).
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 least 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
- -----------------------------
(24) of $2,500.00
(25) six (6)
(26) Property
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
17
<PAGE> 23
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 transaction:
(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; and
(b) Any merger or consolidation of Borrower or a general partner of
Borrower when borrower or such general partner is the surviving
entity.
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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
18
<PAGE> 24
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 and ERISA Indemnity
Agreement 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.
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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
19
<PAGE> 25
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 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.
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
20
<PAGE> 26
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 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 now 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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
21
<PAGE> 27
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.
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 other persons, if any, 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
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
22
<PAGE> 28
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 in 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:
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. 100 Galleria Parkway, Suite 600
8010 Roswell Road, Suite 120 Atlanta, Georgia 30339
Atlanta, Georgia 30350 Attention: Gregory A. Randall, Esq.
Attention: Charles R. Elliott
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
23
<PAGE> 29
If to Lender: With a copy of notices sent to
Lender to:
THE PRUDENTIAL INSURANCE COMPANY THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA OF AMERICA
Prudential Capital Group Prudential Capital Group
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service Attention: Regional Counsel
Reference Loan No. 6 102 639 Reference Loan No. 6 102 639
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, 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."
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
24
<PAGE> 30
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 provision 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.
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.
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
25
<PAGE> 31
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER WAIVES, 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.
/s/ CSR
-------
(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, 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.
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
26
<PAGE> 32
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 the
foregoing date in the presence of the BORROWER:
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/ Joanne Roberts
- ------------------------- By: /s/ Charles S. Roberts
Notary Public ---------------------------------
Charles S. Roberts, President
Commission Expiration Date:
[CORPORATE SEAL]
[NOTARY SEAL]
Loan No. 6 102 639
roberts residential\deed to secure debt
433056.1/2555.181
27
<PAGE> 33
EXHIBIT A
(PROPERTY DESCRIPTION)
PLANTATION TRACE - PHASE I
All that tract of land in Land Lot 321 of the 6th District, City of Duluth,
Gwinnett County, Georgia, described as follows:
BEGINNING at a 1/2-inch rebar found on the northeast right-of-way line of
Pleasant Hill Road (150 foot right-of-way), which 1/2-inch rebar found is
located 1,619.00 feet northwest along the northeast right-of-way line of
Pleasant Hill Road from the intersection of the northeast right-of-way line of
Pleasant Hill Road with the mitered west right-of-way line of Peachtree
Industrial Boulevard; thence continuing along said northeast right-of-way line,
along the arc of a curve to the left (which arc is subtended by a chord having
a bearing and distance of North 51 degrees 43 minutes 16 seconds West 304.86
feet and a radius of 1,549.13 feet) 305.35 feet to a 1/2-inch rebar found;
thence, leaving said right-of-way line, North 28 degrees 10 minutes 45 seconds
East 370.22 feet to a 1/2-inch rebar found; thence North 32 degrees 24 minutes
33 seconds East 216.70 feet to a 1/2-inch rebar found; thence North 18 degrees
32 minutes 43 seconds East 348.93 feet to a 1/2-inch rebar found; thence North
00 degrees 12 minutes 00 seconds East 129.65 feet to a 1/2-inch rebar found;
thence North 22 degrees 27 minutes 59 seconds East 137.24 feet to a 1/2-inch
rebar found; thence North 18 degrees 35 minutes 26 seconds West 189.78 feet to
a 1/2-inch rebar found; thence South 62 degrees 14 minutes 03 seconds East
1249.98 feet to a 1/2-inch rebar found; thence South 65 degrees 55 minutes 04
seconds West 224.58 feet to a 1/2-inch rebar found; thence South 84 degrees 42
minutes 13 seconds West 646.31 feet to a 1/2-inch rebar found; thence South 05
degrees 20 minutes 34 seconds West 141.26 feet to a 1/2-inch rebar found;
thence South 16 degrees 04 minutes 58 seconds West 479.19 feet to a 1/2-inch
rebar found; thence North 66 degrees 34 minutes 05 seconds West 99.10 feet to a
1/2-inch rebar found; thence South 78 degrees 20 minutes 37 seconds West 29.20
feet to a 1/2-inch rebar found; thence South 42 degrees 10 minutes 06 seconds
West a distance of 217.12 feet to the POINT OF BEGINNING, said tract containing
approximately 16.880 acres.
TOGETHER WITH a non-exclusive right, title and interest in and to the easements
appurtenant to the above-described tract created by and described in:
(i) that certain Reciprocal Drainage Easement Agreement dated November 21,
1988, between David Berkman and Gerald A. Blonder and Partridge Greene, Inc.,
recorded in Deed Book 5215, page 141, Gwinnett County, Georgia records;
(ii) that certain Slope Easement Agreement dated June 29, 1989 between
Lincoln-NPC, Ltd., and Roberts Properties Plantation Trace, L.P., recorded in
Deed Book 5571, page 18, aforesaid records, and consented to by NCNB National
Bank of North Carolina and Partridge Greene, Inc.;
(iii) that certain Berm Easement Agreement dated June 29, 1989, between
Lincoln-NPC, Ltd. and Roberts Properties Plantation Trace, L.P., recorded in
Deed Book 5571, page 10,
54682.1
<PAGE> 34
aforesaid records, and consented to by NCNB National Bank of North Carolina and
Partridge Greene, Inc.; and
(iv) that certain Berm Easement Agreement dated August 5, 1989 between K
Mart Corporation and Roberts Properties Plantation Trace, L.P., recorded in
Deed Book 5648, Page 28, aforesaid records, and consented to by Partridge
Greene, Inc., but only as to the land described as TRACT A-1.
TRACT A-1:
All that tract of land in Land Lot 321 of the 6th District, Gwinnett County,
Georgia, described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at a 1/2-inch rebar found on the
northeast right-of-way line of Pleasant Hill Road (150 foot right-of-way),
which 1/2-inch rebar found is located 1,619.00 feet northwest along the
northeast right-of-way line of Pleasant Hill Road from the intersection of the
northeast right-of-way line of Pleasant Hill Road with the mitered west
right-of-way line of Peachtree Industrial Boulevard; thence, leaving said
right-of-way line, running North 42 degrees 10 minutes 06 seconds East 217.12
feet to a 1/2-inch rebar found; thence North 78 degrees 20 minutes 37 seconds
East 29.20 feet to a 1/2-inch rebar found; thence South 66 degrees 34 minutes
05 seconds East 99.10 feet to a 1/2-inch rebar found; thence North 16 degrees
04 minutes 58 seconds East 479.19 feet to a 1/2-inch rebar found; thence North
05 degrees 20 minutes 34 seconds East 141.26 feet to an iron pin found; thence
North 84 degrees 42 minutes 13 seconds East 284.00 feet to the TRUE POINT OF
BEGINNING, from the TRUE POINT OF BEGINNING as thus established, continuing
thence North 84 degrees 42 minutes 13 seconds East 362.31 feet to a 1/2-inch
rebar found; thence North 65 degrees 55 minutes 04 seconds East 224.58 feet to
a 1/2-inch rebar found; thence South 24 degrees 04 minutes 56 seconds East
25.00 feet to a point; thence South 65 degrees 55 minutes 04 seconds West
228.72 feet to a point; thence South 84 degrees 42 minutes 13 seconds West
371.14 feet to a point; thence North 05 degrees 20 minutes 34 seconds East
25.44 feet to the TRUE POINT OF BEGINNING.
The parcels of land and appurtenant easements described above are more
particularly shown on that certain Survey for Roberts Properties Residential,
L.P., The Prudential Insurance Company of America, and Chicago Title Insurance
Company prepared by Rochester & Associates, Inc., bearing the seal and
certification of James C. Jones, Georgia Registered Land Surveyor No. 2298,
dated August 9, 1993, last revised September 25, 1998.
54682.1
<PAGE> 35
PHASE II - PLANTATION TRACE
ALL THAT TRACT of land in Land Lots 321, 322 and 326 of the 6th District, City
of Duluth, Gwinnett County, Georgia, described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at the intersection of the north
right-of-way line of Pleasant Hill Road (150 foot right-of-way) with the west
right-of-way line of Peachtree Industrial Boulevard (right-of-way varies);
running thence along the west right-of-way line of Peachtree Industrial
Boulevard the following courses and distances: (1) North 38 degrees 50 minutes
22 seconds East 71.06 feet to a point, (2) along the arc of a curve to the
right (which arc is subtended by a chord having a bearing and distance of North
03 degrees 50 minutes 13 seconds East 990.95 feet and a radius of 2944.08 feet)
995.70 feet to a point, (3) North 13 degrees 30 minutes 51 seconds East 374.63
feet to a concrete monument found, (4) North 76 degrees 41 minutes 17 seconds
West 44.56 feet to a concrete monument found, and (5) North 13 degrees 25
minutes 16 seconds East 44.77 feet to an iron pin set and the TRUE POINT OF
BEGINNING, from the TRUE POINT OF BEGINNING as thus established, leaving said
right-of-way line, running thence North 74 degrees 58 minutes 08 seconds West
287.36 feet to an iron pin set; thence North 62 degrees 14 minutes 03 seconds
West 1494.02 feet to an iron pin set, thence North 87 degrees 59 minutes 18
seconds West 902.71 feet to an iron pin set on the top bank of the
Chattahoochee River; thence along the top bank of the Chattahoochee River North
0.7 degrees 32 minutes 51 seconds East 102.90 feet to an iron pin set; thence
South 89 degrees 18 minutes 43 seconds East 966.77 feet to a nail found in
root; thence South 53 degrees 45 minutes 14 seconds East 412.84 feet to a 1/2
inch rebar found; thence North 75 degrees 52 minutes 37 seconds East 694.79
feet to an iron pin found; thence South 12 degrees 27 minutes 36 seconds East
80.53 feet to an iron pin set; thence South 77 degrees 32 minutes 34 seconds
West 51.99 feet to a 1/2 inch rebar found; thence South 12 degrees 26 minutes
17 seconds East 211.09 feet to an iron pin set; thence North 74 degrees 18
minutes 17 seconds East 115.94 feet to an iron pin set; thence South 82 degrees
05 minutes 38 seconds East 34.02 feet to a 1/2 inch rebar found; thence South
07 degrees 58 minutes 22 seconds West 212.14 feet to a 1/2 inch rebar found;
thence South 82 degrees 15 minutes 50 seconds East 174.74 feet to an iron pin
set; thence South 07 degrees 39 minutes 48 seconds West 62.13 feet to a 1/2
inch rebar found; thence South 73 degrees 25 minutes 09 seconds East 323.43
feet to an iron pin set on the northwest right-of-way line of Peachtree
Industrial Boulevard; thence along said northwest right-of-way line, the
following courses and distances: (1) along the arc of a curve to the left
(which arc is subtended by a chord having a bearing and distance of South 14
degrees 53 minutes 58 seconds West 132.64 feet and a radius of 2945.91 feet)
132.65 feet to a point, (2) South 13 degrees 36 minutes 34 seconds West 29.56
feet to a concrete monument found, (3) North 76 degrees 26 minutes 25 seconds
West 44.72 feet to a concrete monument found, and (4) South 13 degrees 25
minutes 16 seconds West 15.27 feet to the TRUE POINT OF BEGINNING, said tract
containing approximately 12.331 acres as shown on plat of Survey for Roberts
Properties Residential, L.P., The Prudential Insurance Company of America and
Chicago Title Insurance Company prepared by Rochester & Associates, Inc.,
bearing the seal and certification of James C. Jones, Georgia Registered
Professional Land Surveyor No. 2298, dated September 21, 1998, last revised
September 25, 1998.
54682.1
<PAGE> 36
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.
Loan No. 6 102 639
roberts residential/deed to secure debt
433056.1/2555.181 1
<PAGE> 37
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED
IN THIS EXHIBIT B.
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.
Loan No. 6 102 639
roberts residential/deed to secure debt
2
433056.1/2555.181
<PAGE> 38
EXHIBIT C
(PERMITTED EXCEPTIONS)
1. General and special State and County taxes and assessments for the year
1999 and subsequent years. General and special City taxes and assessments
for the year 1998 and subsequent years that constitute a lien but are not
yet due and payable.
2. 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.
3. Rights of tenants under written leases in possession of individual
apartment units located on the subject property, as tenants only (Affects
Phases I and II).
4. 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, Gwinnett County, Georgia records (Affects Phase
I).
5. 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 (Affects Phase I).
6. Easement from Miss Nelle Summerour to Georgia Power Company, dated
March 16, 1956, filed for record March 24, 1956, and recorded in Deed Book
128, page 165, aforesaid records (Affects Phase I).
7. Easement from John H. Summerour to Georgia Power Company, dated July 16,
1958, filed for record July 18, 1958, and recorded in Deed Book 142, page
443, aforesaid records (Affects Phase I).
8. Easement for Right-of-Way from Partridge Greene, Inc. to Georgia Power
Company, dated March 1, 1984, filed for record March 29, 1984, and
recorded in Deed Book 2750, page 275, aforesaid records (Affects Phase I).
9. Easement from Partridge Greene, Inc. to S. Donald Norton Properties, Inc.,
dated June 12, 1984, filed for record June 18, 1984, and recorded in Deed
Book 2809, page 434, aforesaid records; as assigned by Easement from S.
Donald Norton Properties, Inc. to Gwinnett County, dated November 4, 1985,
filed for record November 7, 1985, and recorded in Deed Book 3230, page
53, aforesaid records (Affects Phase I).
10. Reciprocal Drainage Easement Agreement among David Berkman, Gerald A.
Blonder and Partridge Greene, Inc., dated November 21, 1988, filed for
record November 28, 1988, and recorded in Deed Book 5215, page 141,
aforesaid records (Affects Phase I).
54682.1
<PAGE> 39
11. Easement from Lincoln-NPC, Ltd. to Gwinnett County, dated October 22,
1986, filed for record February 17, 1987, and recorded in Deed Book 4115,
page 227, aforesaid records (Affects Phase I).
12. Rights, if any, in and to the waters of the lake located in the northern
portion of Phase I and the southern part of Phase II of the subject
property and in and to the bed thereof; also boating and fishing rights of
property owners abutting said lake or the creek leading thereto or
therefrom (Affects Phases I and II).
13. Easement from David Berkman and Gerald A. Blonder to Gwinnett County,
dated October 16, 1986, filed for record April 13, 1987, and recorded in
Deed Book 4226, page 296, aforesaid records (Affects Phase I).
14. The following matters as disclosed by that certain ALTA/ACSM Land Title
Survey for Roberts Properties Residential, L.P., The Prudential Insurance
Company of America and Chicago Title Insurance Company prepared by
Rochester & Associates, Inc., bearing the seal and certification of James
C. Jones, Georgia Registered Land Surveyor No. 2298, dated August 9, 1993,
last revised July 6, 1998 (Affects Phase I):
(a) 50-foot building line along the southwesterly boundary of subject
property;
(b) 20-foot building line along the southeasterly, easterly, southerly and
northwesterly boundary of subject property;
(c) 40-foot building line along the northeasterly boundary line of
subject property;
(d) rock wall traversing the southeasterly boundary line of subject
property;
(e) 20-foot sanitary sewer line and easement running alone the
southwestern boundary line of subject property pursuant to that
certain Easement recorded in Deed Book 4115, page 220 and that certain
Easement recorded in Deed Book 4115, page 227 and that certain
Easement recorded in Deed Book 4226, page 296, aforesaid records;
(f) Georgia Power Company right-of-way located along the southwesterly
boundary line of subject property;
(g) light poles, power boxes, telephone boxes, underground power and
telephone lines, rock walls, cross-tie walls, guy wires, concrete
retaining walls and cable television pedestal located throughout the
subject property;
(h) clean-out, headwalls, single wing catch basins, double wing catch
basins, weir inlets, junction boxes, manholes, water meters, water
vaults and fire hydrants located throughout the subject property;
(i) 18-inch and 24-inch reinforced concrete pipes located in the
southwestern portion of subject property;
(j) 10-foot chain link fence located in the southeastern portion of
subject property;
(k) 24-inch reinforced concrete pipe traverses the southwesterly boundary
line of subject property;
(l) gas line running along the southeasterly boundary line of subject
property;
54682.1
<PAGE> 40
(m) 10-foot drainage easement running along the northwesterly and westerly
boundary line of subject property as shown on that certain plat
recorded at Plat Book 40, page 4, aforesaid records;
(n) 20-foot sanitary sewer line and easement located in the southwesterly
portion of subject property as shown on that certain plat recorded at
Plat Book 1, page 298, aforesaid records;
(o) 8-inch water line running throughout subject property;
(p) 24-inch reinforced concrete pipe located in the southwestern portion
of the subject property and running across the subject property in an
easterly and/or westerly direction;
(q) 18-inch reinforced concrete pipe located in the southwestern portion
of subject property and running across the subject property in a
northerly and/or southerly direction;
(r) 18-inch and 24-inch reinforced concrete pipes located in the
northeastern portion of subject property;
(s) 20-foot sanitary sewer line located in the northerly portion of
subject property and traversing the northwesterly boundary line of
subject property as shown on that certain plat recorded at Plat Book
1, page 300, aforesaid records;
(t) reciprocal drainage easement running along the northwesterly boundary
line of subject property pursuant to that certain Reciprocal Drainage
Easement Agreement recorded in Deed Book 5215, page 141, aforesaid
records;
(u) 20-foot sanitary sewer line and easement located in the northwesterly
portion of the subject property and traversing the northwesterly and
northeasterly boundary lines of subject property pursuant to that
certain Easement recorded in Deed Book 2809, page 434 and that certain
Easement recorded in Deed Book 3230, page 53, aforesaid records;
(v) 20-foot drainage easement located in the northern portion of subject
property and traversing the northeasterly boundary line of subject
property pursuant to that certain Joint and Mutual Storm Drainage
Easement Agreement recorded in Deed Book 3645, page 26, aforesaid
records;
(w) branch, dam and lake traversing the northeasterly boundary line of
subject property;
(x) Lake Easement located in the northerly and northeasterly portion of
subject property pursuant to that certain Joint and Mutual Storm
Drainage Easement Agreement recorded in Deed Book 3645, page 26,
aforesaid records;
(y) Concrete spillway located along the northeasterly boundary line of
subject property;
(z) 24-inch reinforced concrete pipe located in the northerly portion of
subject property;
(aa)20-foot sanitary sewer easement located along the northeasterly
boundary line of subject property pursuant to that certain Easement
recorded in Deed Book 2825, page 270 and that certain Non-Exclusive
Private Non-Dedicated Sanitary Sewer Easement recorded in Deed Book
3645, page 1, aforesaid records;
54682.1
<PAGE> 41
(bb)20-foot drainage easement traversing the northeasterly boundary line
of subject property pursuant to that certain Declaration of Granted
and Reserved Easements recorded in Deed Book 3645, page 51, aforesaid
records;
(cc)20-foot drainage easement located along the northeasterly boundary
line of subject property including 54-inch ACCMPx2;
(dd)25-foot berm easement located along the southeasterly boundary line of
subject property pursuant to that certain Berm Easement Agreement
recorded in Deed Book 5648, page 28, aforesaid records;
(ee)20-foot slope easement located along the easterly boundary of subject
property pursuant to that certain Slope Easement Agreement recorded in
Deed Book 5571, page 18, aforesaid records;
(ff)20-foot berm easement located along the easterly boundary line of
subject property pursuant to that certain Berm Easement Agreement
recorded in Deed Book 5571, page 10, aforesaid records;
(gg)40-foot undisturbed buffer along the southeasterly and easterly
boundary lines of subject property pursuant to restrictions contained
in that certain Warranty Deed recorded in Deed Book 2951, page 402,
aforesaid records;
(hh)cross-tie wall located along the southeasterly boundary line of
subject property;
(ii)2000--foot Atlanta Regional Commission setback line traverses the
eastern portion of the subject property.
15. Easement from The Village Group, Inc. to Gwinnett County, dated January
23, 1987, filed for record February 17, 1987, and recorded in Deed Book
4115, page 220, aforesaid records (Affects Phase I easement rights
described in clause (I) of Exhibit A).
16. All matters disclosed by plat of survey prepared by Rochester &
Associates, Inc., dated January 13, 1987, revised January 20, 1987,
bearing the seal and certification of B. Keith Rochester, Jr., Georgia
Registered Land Surveyor No. 1534, recorded in Plat Book 40, page 4,
aforesaid records (Affects Phase I Fee Parcel and Phase I Easement Rights
described in clause (i) of Exhibit A).
17. Agreement for Grant of Easement and Cable Television Service between Cable
Equities of Colorado, Ltd. d/b/a Roswell/N.E. Gwinnett Cablevision and
Roberts Properties Plantation Trace, L.P., a Georgia limited partnership,
dated August 31, 1989, filed for record October 12, 1989, and recorded in
Deed Book 5705, page 217, aforesaid records (Affects Phase I).
18. Declaration of Reciprocal Easements by and between Roberts Properties
Residential, L.P., a Georgia limited partnership, and J. Douglas Parks, an
individual residing in Georgia, filed for record July 20, 1998, and
recorded in Deed Book 16406, page 49, aforesaid records (Affects Phase I).
19. 40-foot wide undisturbed natural buffer area referenced in and
restrictions contained in Warranty Deed from Partridge Greene, Inc. to
Lincoln-NPC, Ltd., a Georgia limited partnership, dated January 3, 1985,
filed for record January 8, 1985, and recorded in Deed
54682.1
<PAGE> 42
Book 2951, page 402, aforesaid records (Affects Phase I Easement Rights
described in clauses (ii), (iii) and (iv) of Exhibit A).
20. Declaration of Easements, Restrictions, Development and Operating
Agreements between Lincoln-NPC, Ltd., a Georgia limited partnership, and K
Mart Corporation, dated December 10, 1987, filed for record February 29,
1988, and recorded in Deed Book 4774, page 1, aforesaid records (Affects
Phase I Easement Rights described in clauses (ii), (iii) and (iv) of
Exhibit A).
21. Lease between Lincoln-NPC, Ltd. and The Kroger Co., undated, filed for
record February 29, 1988, and recorded in Deed Book 4774, page 61,
aforesaid records; as amended by Amendment to Lease between the aforesaid
parties, dated as of March 18, 1988, filed for record June 6, 1988, and
recorded in Deed Book 4930, page 141, aforesaid records (Affects Phase I
Easement Rights described in clauses (ii) and (iii) of Exhibit A).
22. Declaration of Covenants, Conditions and Restrictions by Lincoln-NPC,
Ltd., a Georgia limited partnership, dated March 22, 1988, filed for
record April 5, 1988, and recorded in Deed Book 4827, page 275, aforesaid
records (Affects Phase I Easement Rights described in clauses (ii) and
(iii) of Exhibit A).
23. Easement from Lincoln Property Company to Georgia Power Company, dated
April 19, 1988, filed for record May 24, 1988, and recorded in Deed Book
4909, page 153, aforesaid records (Affects Phase I Easement Rights
described in clauses (ii), (iii) and (v) of Exhibit A).
24. Storm Drainage Easement Agreement between Lincoln-NPC, Ltd., a Georgia
limited partnership, and McDonald's Corporation, dated July, 1988, filed
for record September 6, 1988, and recorded in Deed Book 5087, page 6,
aforesaid records (Affects Phase I Easement Rights described in clauses
(ii) and (iii) of Exhibit A).
25. Easement from K Mart Corporation to Georgia Power Company, dated July 28,
1988, filed for record September 9, 1988, and recorded in Deed Book 5095,
page 293, aforesaid records (Affects Phase I Easement Rights described in
clause (iv) of Exhibit A).
26. Easement among Lincoln-NPC, Ltd., K Mart Corporation and Gwinnett County,
dated October 20, 1987, filed for record November 1, 1988, and recorded in
Deed Book 5181, page 278, aforesaid records (Affects Phase I Easement
Rights described in clause (iv) of Exhibit A).
27. Covenants and obligations contained in that certain Berm Easement
Agreement between Lincoln-NPC, Ltd., a Georgia limited partnership, and
Roberts Properties Plantation Trace, L.P., a Georgia limited partnership,
dated June 29, 1989, filed for record July 19, 1989 and recorded in Deed
Book 5571, pane 10, aforesaid records (Affects Phase I).
54682.1
<PAGE> 43
28. Covenant and obligations contained in that certain Slope Easement
Agreement between Lincoln-NPC, Ltd., a Georgia limited partnership, and
Roberts Properties Plantation Trace, L.P., a Georgia limited partnership,
dated June 29, 1989, filed for record July 19, 1989, and recorded in Deed
Book 5571, page 18, aforesaid records (Affects Phase I).
29. Covenants and obligations contained in that certain Berm Easement
Agreement between K Mart Corporation and Roberts Properties Plantation
Trace, L.P., a Georgia limited partnership, dated August 5, 1989, filed
for record September 7, 1989, and recorded in Deed Book 5648, page 28,
aforesaid records (Affects Phase I).
30. Joint and Mutual Storm Drainage Easement Agreement among Michael L.
Crifasi, Kelly Goff, Thomas R. McDonald and Joseph Provissiero, Jr. d/b/a
Brittany Associates, a Georgia general partnership, David Berkman and
Gerald A. Blonder, dated July 2, 1986, filed for record July 8, 1986, and
recorded in Deed Book 3645, page 26, aforesaid records (Affects Phases I
and II).
31. Non-Exclusive Private Non-Dedicated Sanitary Sewer Easement among Michael
L. Crifasi, Kelly Goff, Thomas R. McDonald and Joseph Provissiero, Jr.
d/b/a Brittany Associates, a Georgia general partnership, and Partridge
Greene, Inc., dated May 27, 1986, filed for record July 8, 1986, and
recorded in Deed Book 3645, page 1, aforesaid records (Affects Phase II).
32. Declaration and Agreement of Covenants among NCMP Properties I, a Georgia
general partnership, S. Donald Norton and Partridge Greene, Inc., dated
September 7, 1984, filed for record September 10, 1984, and recorded in
Deed Book 2870, page 262, aforesaid records (Affects Phase II).
33. Easement from Norton Properties to Georgia Power Company, dated November
5, 1984, filed for record November 9, 1984, and recorded in Deed Book
2913, page 297, aforesaid records (Affects Phase II).
34. All matters disclosed by plat of Boundary and Drainage Easement survey for
Brittany Associates, dated February 17, 1986, revised April 22, 1986, and
recorded in Condominium Plat Book 1, page 218, aforesaid records (Affects
Phase II).
35. All matters which would be disclosed by a current, accurate survey and
inspection of the property encumbered by the easement rights of Phase I as
described in Exhibit A (Affects Phase I Easement Rights).
36. A portion of the subject property is located within the Chattahoochee
River Corridor and is subject to regulation by the Atlanta Regional
Commission and is subject to the Metropolitan River Protection Act
(Affects Phase 11).
37. Declaration of Granted and Reserved Easements by Brittany Associates, a
Georgia general partnership, dated July 2, 1986, filed for record July 8,
1986, and recorded in
54682.1
<PAGE> 44
Deed Book 3645, page 51, aforesaid records; as amended by First Amendment
to Declaration of Granted and Reserved Easements between Brittany
Associates, a Georgia general partnership, and American Realty Capital,
Inc., dated as of August 31, 1987, filed for record September 8, 1987, and
recorded in Deed Book 4524, page 58, aforesaid records; as further amended
by Second Amendment to Declaration of Granted and Reserved Easements
between Brittany Holdings, Inc., a Delaware corporation, and Roberts
Properties Residential, L.P., a Georgia limited partnership, dated
December X, 1995, filed for record December 29, 1995, and recorded in Deed
Book 12137, page 157, aforesaid records (Affects Phase II).
38. Easement from Roberts Properties Residential, L.P. to Gwinnett County
Department of Public Utilities, dated October 16, 1997, recorded in Deed
Book 14897, page 253, aforesaid records (Affects Phase II).
39. The following matters as disclosed by that certain ALTA/ACSM Land Title
Survey for Roberts Properties Residential, L.P., The Prudential Insurance
Company of America and Chicago Title Insurance Company prepared by
Rochester & Associates, Inc., bearing the seal and certification of James
C. Jones, Georgia Registered Land Surveyor No. 2298, dated September 21,
1998 (Affects Phase II):
(a) 20-foot building line along the southwesterly, southeasterly,
easterly, northerly, northwesterly and northeasterly boundary lines
of subject property;
(b) 50-foot building line along the southeasterly boundary line of
subject property;
(c) 20-foot drainage easement located along the southwesterly boundary
line of subject property;
(d) 25-foot buffer located along both sides of the southwesterly boundary
line of subject property and running along the northeasterly and
southwesterly boundary of the lake;
(e) 20-foot sanitary sewer easement running along the southwesterly
boundary line of subject property and traversing the subject property
in a northerly direction;
(f) 20-foot drainage easement traversing the northwesterly boundary line
of subject property and running into the lake;
(g) 20-foot drainage easement located in the southwesterly portion of
subject property and traversing the northerly boundary line of
subject property;
(h) 20-foot sanitary sewer easement running throughout the southwestern
portion of subject property;
(i) 20-foot water line easement along the easterly boundary line of
subject property;
(j) chain link fence running along the northeasterly boundary line of
subject property;
(k) power and utility easement located along the northerly boundary line
of subject property;
(l) drop inlets, headwalls, junction boxes, manholes, light poles, fire
hydrants and power boxes running throughout the subject property;
(m) storm drainage lines and facilities running throughout the subject
property;
(n) two (2) headwalls traverse the southwesterly boundary line of subject
property;
54682.1
<PAGE> 45
(o) 20-foot sanitary sewer easement running along the northwesterly
boundary line of subject property, across the subject property and
traversing the southwesterly boundary line of subject property;
(p) 20-foot drainage easement, and branch located therein, located in the
westerly portion of subject property and 6-inch ductile pipe running
into the lake from said easement;
(q) 20-foot drainage easement, and branch located therein, located in the
western portion of the subject property and traversing the
southwesterly boundary line of subject property;
(r) 20-foot sanitary sewer easement traversing the western portion of
subject property;
(s) 30-inch corrugated metal pipe traversing the northwesterly boundary
line of subject property;
(t) lake easement located in the southwesterly portion of subject
property and dam traversing the southwesterly boundary line of
subject property;
(u) 500-foot Atlanta Regional Commission setback line located in the
westerly portion of subject property;
(v) 2000-foot Atlanta Regional Commission setback line traversing the
subject property;
(w) Chattahoochee River is located along the westerly boundary line of
subject property.
40. Easement from Roberts Properties Residential, L.P. to Georgia Power
Company, dated April 15, 1998, filed for record on May 13, 1998, and recorded
at Deed Book 16011, page 215, aforesaid records.
54682.1
<PAGE> 46
Exhibit D
LIST OF MAJOR TENANTS
NONE
Loan No. 6 102 639
roberts residential/deed to secure debt
1
433056.1/2555.181
<PAGE> 1
EXHIBIT 10.7.6
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 Instrument (as hereinafter
defined) for payment thereof or as such address may be changed as provided in
the 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 September 29, 1998 in the original principal
amount of Eleven Million Nine Hundred Thousand and 00/100 Dollars
($11,900,000.00), 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
"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 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 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),
- 1 -
Prudential Loan No. 6 102 639
Roberts Residential:Guaranty
433360.2/2555.181
<PAGE> 2
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 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 Obligations had been
enforceable against Borrower.
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
- 2 -
Prudential Loan No. 6 102 639
Roberts Residential:Guaranty
433360.2/2555.181
<PAGE> 3
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 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 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
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 Instrument or other collateral security for the Indebtedness, by subrogation
or otherwise, following foreclosure of the Instrument or Lender's acceptance of
a deed in lieu thereof.
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
- 3 -
Prudential Loan No. 6 102 639
Roberts Residential:Guaranty
433360.2/2555.181
<PAGE> 4
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; 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 shall 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 guarantors 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
- 4 -
Prudential Loan No. 6 102 639
Roberts Residential:Guaranty
433360.2/2555.181
<PAGE> 5
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 or 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.
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.
- 5 -
Prudential Loan No. 6 102 639
Roberts Residential:Guaranty
433360.2/2555.181
<PAGE> 6
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.
EXECUTED this 29th day of September, 1998.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts
---------------------------------------
Name: Charles S. Roberts
Title: 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
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Regional Counsel
- 6 -
Prudential Loan No. 6 102 639
Roberts Residential:Guaranty
433360.2/2555.181
<PAGE> 1
FHLMC LOAN NO.: 981194184
MULTIFAMILY NOTE
(MULTISTATE)
US $16,000,000.00 September 30, 1998
FOR VALUE RECEIVED, the undersigned ("BORROWER") jointly and severally
(if more than one) promises to pay to the order of PRIMARY CAPITAL ADVISORS LC,
a Georgia limited liability company, the principal sum of SIXTEEN MILLION AND
NO/100 DOLLARS ($16,000,000.00), with interest on the unpaid principal balance
at the annual rate of six and fifty-seven one-hundredths percent (6.57%).
1. DEFINED TERMS. As used in this Note, (i) the term "LENDER" means the
holder of this Note, and (ii) the term "INDEBTEDNESS" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. ADDRESS FOR PAYMENT. All payments due under this Note shall be
payable at 2060 Mount Paran Road, Suite 101, Atlanta, Georgia 30327, or such
other place as may be designated by written notice to Borrower from or on behalf
of Lender.
3. PAYMENT OF PRINCIPAL AND INTEREST. Principal and interest shall be
paid as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on
the first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of One Hundred One Thousand Eight Hundred Sixty-Eight and 57/100
Dollars (US $101,868.57), shall be payable on the first day of each month
beginning on November 1, 1998, until the entire unpaid principal balance
evidenced by this Note is fully paid. Any accrued interest remaining past due
for 30 days or more shall be added to and become part of the unpaid principal
balance and shall bear interest at the rate or rates specified in this Note, and
any reference below to "accrued interest" shall refer to accrued interest which
has not become part of the unpaid
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 1
NTMUFR02.DOC
<PAGE> 2
principal balance. Any remaining principal and interest shall be due and payable
on October 1, 2008 or on any earlier date on which the unpaid principal balance
of this Note becomes due and payable, by acceleration or otherwise (the
"MATURITY DATE"). The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and
interest that is received by Lender before the date it is due shall be deemed to
have been received on the due date solely for the purpose of calculating
interest due.
4. APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, Lender may apply that payment to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion. Borrower agrees that neither Lender's acceptance
of a payment from Borrower in an amount that is less than all amounts then due
and payable nor Lender's application of such payment shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. SECURITY. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "SECURITY INSTRUMENT"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
6. ACCELERATION. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. LATE CHARGE. If any monthly amount payable under this Note or under
the Security Instrument or any other Loan Document is not received by Lender
within ten (10) days after the amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to five percent
(5%) of such amount. Borrower acknowledges that its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the loan evidenced by this Note (the "LOAN"), and that it is
extremely difficult and impractical to determine those additional expenses.
Borrower agrees that the late charge payable pursuant to this Paragraph
represents a fair and reasonable estimate, taking into account all circumstances
existing on the date of this Note, of the additional expenses Lender will incur
by reason of such late payment. The late charge is payable in addition to, and
not in lieu of, any interest payable at the Default Rate pursuant to Paragraph
8.
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 2
NTMUFR02.DOC
<PAGE> 3
8. DEFAULT RATE. So long as (a) any monthly installment under this Note
remains past due for 30 days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "DEFAULT RATE") equal to the lesser of 4 percentage points above the
rate stated in the first paragraph of this Note or the maximum interest rate
which may be collected from Borrower under applicable law. If the unpaid
principal balance and all accrued interest are not paid in full on the Maturity
Date, the unpaid principal balance and all accrued interest shall bear interest
from the Maturity Date at the Default Rate. Borrower also acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Loan, that, during the time that any monthly
installment under this Note is delinquent for more than 30 days, Lender will
incur additional costs and expenses arising from its loss of the use of the
money due and from the adverse impact on Lender's ability to meet its other
obligations and to take advantage of other investment opportunities, and that it
is extremely difficult and impractical to determine those additional costs and
expenses. Borrower also acknowledges that, during the time that any monthly
installment under this Note is delinquent for more than 30 days or any other
Event of Default has occurred and is continuing, Lender's risk of nonpayment of
this Note will be materially increased and Lender is entitled to be compensated
for such increased risk. Borrower agrees that the increase in the rate of
interest payable under this Note to the Default Rate represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
of this Note, of the additional costs and expenses Lender will incur by reason
of the Borrower's delinquent payment and the additional compensation Lender is
entitled to receive for the increased risks of nonpayment associated with a
delinquent loan.
9. LIMITS ON PERSONAL LIABILITY.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall
have no personal liability under this Note, the Security Instrument or any other
Loan Document for the repayment of the Indebtedness or for the performance of
any other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of
a portion of the Indebtedness equal to zero percent (0%) of the unpaid principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 3
NTMUFR02.DOC
<PAGE> 4
any loss or damage suffered by Lender as a result of (1) failure of Borrower to
pay to Lender upon demand after an Event of Default all Rents to which Lender is
entitled under Section 3(a) of the Security Instrument and the amount of all
security deposits collected by Borrower from tenants then in residence; (2)
failure of Borrower to apply all insurance proceeds and condemnation proceeds as
required by the Security Instrument; or (3) failure of Borrower to comply with
Section 14(d) or (e) of the Security Instrument relating to the delivery of
books and records, statements, schedules and reports.
(d) For purposes of determining Borrower's personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally liable to Lender for the repayment
of all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness,
Borrower shall be personally liable to Lender for (1) the performance of all of
Borrower's obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "MORTGAGED PROPERTY" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 4
NTMUFR02.DOC
<PAGE> 5
of Default or (2) Borrower was unable to apply as required or permitted by the
Security Instrument because of a bankruptcy, receivership, or similar judicial
proceeding.
10. VOLUNTARY AND INVOLUNTARY PREPAYMENTS.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid
principal balance of this Note on the last Business Day of a calendar month if
Borrower has given Lender at least 30 days prior notice of its intention to make
such prepayment. Such prepayment shall be made by paying (A) the amount of
principal being prepaid, (B) all accrued interest, (C) all other sums due Lender
at the time of such prepayment, and (D) the prepayment premium calculated
pursuant to Schedule A. For all purposes including the accrual of interest, any
prepayment received by Lender on any day other than the last calendar day of the
month shall be deemed to have been received on the last calendar day of such
month. For purposes of this Note, a "BUSINESS DAY" means any day other than a
Saturday, Sunday or any other day on which Lender is not open for business.
Borrower shall not have the option to voluntarily prepay less than all of the
unpaid principal balance.
(2) Upon Lender's exercise of any right of acceleration under
this Note, Borrower shall pay to Lender, in addition to the entire unpaid
principal balance of this Note outstanding at the time of the acceleration, (A)
all accrued interest and all other sums due Lender, and (B) the prepayment
premium calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other
security to the repayment of any portion of the unpaid principal balance of this
Note prior to the Maturity Date and in the absence of acceleration shall be
deemed to be a partial prepayment by Borrower, requiring the payment to Lender
by Borrower of a prepayment premium. The amount of any such partial prepayment
shall be computed so as to provide to Lender a prepayment premium computed
pursuant to Schedule A without Borrower having to pay out-of-pocket any
additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
ninety (90) days before the Maturity Date, or (B) any prepayment occurring as a
result of the application of any insurance proceeds or condemnation award under
the Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 5
NTMUFR02.DOC
<PAGE> 6
(d) Any permitted or required prepayment of less than the unpaid
principal balance of this Note shall not extend or postpone the due date of any
subsequent monthly installments or change the amount of such installments,
unless Lender agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this Note, whether voluntary or involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable
estimate of the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium
provisions of this Note are a material part of the consideration for the Loan,
and acknowledges that the terms of this Note are in other respects more
favorable to Borrower as a result of the Borrower's voluntary agreement to the
prepayment premium provisions.
11. COSTS AND EXPENSES. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. FORBEARANCE. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. WAIVERS. Presentment, demand, notice of dishonor, protest, notice
of acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 6
NTMUFR02.DOC
<PAGE> 7
14. LOAN CHARGES. If any applicable law limiting the amount of interest
or other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation. The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over the stated term of the Note. Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.
15. COMMERCIAL PURPOSE. Borrower represents that the Indebtedness is
being incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. COUNTING OF DAYS. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. GOVERNING LAW. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
18. CAPTIONS. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. NOTICES. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
20. CONSENT TO JURISDICTION AND VENUE. Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "PROPERTY
JURISDICTION"). The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction shall have exclusive jurisdiction over all
controversies which shall arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 7
NTMUFR02.DOC
<PAGE> 8
ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND
BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR
IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH
PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. THE FOLLOWING SCHEDULES ARE ATTACHED TO THIS NOTE:
[X] SCHEDULE A PREPAYMENT PREMIUM (REQUIRED)
[ ] SCHEDULE B MODIFICATIONS TO MULTIFAMILY NOTE
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 8
NTMUFR02.DOC
<PAGE> 9
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
ROBERTS PROPERTIES RESIDENTIAL,
L.P., a Georgia limited partnership
By: ROBERTS REALTY INVESTORS,
INC., a Georgia corporation, General
Partner
By:/s/ Charles S. Roberts
------------------------------
Title:
Attest: /s/ Charles R. Elliott
--------------------------
Title: CFO
[CORPORATE SEAL]
58-2122875
-----------------------------------------------
Borrower's Social Security/Employer ID Number
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE 9
NTMUFR02.DOC
<PAGE> 10
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the
date that is 114 months after the first day of the first calendar month
following the date of this Note (the "YIELD MAINTENANCE PERIOD"), the prepayment
premium shall be the greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the
Assumed Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions
shall apply:
MONTHLY NOTE RATE: one-twelfth (1/12) of the annual interest
rate of the Note, expressed as a decimal calculated to five
digits.
PREPAYMENT DATE: in the case of a voluntary prepayment, the
date on which the prepayment is made; in any other case, the
date on which Lender accelerates the unpaid principal balance
of the Note.
ASSUMED REINVESTMENT RATE: one-twelfth (1/12) of the yield
rate as of the date 5 Business Days before the Prepayment
Date, on the 5.625% U.S. Treasury Security due May 1, 2008, as
reported in The Wall Street Journal, expressed as a decimal
calculated to five digits. In the event that no yield is
published on the
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE A-1
NTMUFR02.DOC
<PAGE> 11
applicable date for the Treasury Security used to determine
the Assumed Reinvestment Rate, Lender, in its discretion,
shall select the non-callable Treasury Security maturing in
the same year as the Treasury Security specified above with
the lowest yield published in The Wall Street Journal as of
the applicable date. If the publication of such yield rates in
The Wall Street Journal is discontinued for any reason, Lender
shall select a security with a comparable rate and term to the
Treasury Security used to determine the Assumed Reinvestment
Rate. The selection of an alternate security pursuant to this
Paragraph shall be made in Lender's discretion.
PRESENT VALUE FACTOR: the factor that discounts to present
value the costs resulting to Lender from the difference in
interest rates during the months remaining in the Yield
Maintenance Period, using the Assumed Reinvestment Rate as the
discount rate, with monthly compounding, expressed numerically
as follows:
[OBJECT OMITTED]
N = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more than ninety (90) days before the Maturity Date, the
prepayment premium shall be 1.0% of the unpaid principal balance of this Note.
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE A-2
NTMUFR02.DOC
<PAGE> 12
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
0381557.02
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC)--MULTISTATE PAGE B-1
NTMUFR02.DOC
<PAGE> 1
FHLMC Loan No.: 981194184
Prepared by, and after recording
return to:
Robert W. Reardon, Esq.
Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
MULTIFAMILY DEED TO SECURE DEBT,
--------------------------------
ASSIGNMENT OF RENTS
-------------------
AND SECURITY AGREEMENT
----------------------
(GEORGIA)
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA
SIGAFR02.DOC
<PAGE> 2
MULTIFAMILY DEED TO SECURE DEBT,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
THIS MULTIFAMILY DEED TO SECURE DEBT, ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT (the "INSTRUMENT") is made as of the 30th day of September, 1998,
between ROBERTS PROPERTIES RESIDENTIAL, L.P., a limited partnership organized
and existing under the laws of Georgia, whose address is 8010 Roswell Road,
Suite 120, Atlanta, Georgia 30350, as grantor ("BORROWER"), and PRIMARY CAPITAL
ADVISORS LC, a limited liability company organized and existing under the laws
of Georgia, whose address is 2060 Mount Paran Road, Suite 101, Atlanta, Georgia
30327, as grantee ("LENDER").
Borrower is indebted to Lender in the principal amount of SIXTEEN
MILLION AND NO/100 DOLLARS ($16,000,000.00), as evidenced by Borrower's
Multifamily Note payable to Lender, dated as of the date of this Instrument, and
maturing on October 1, 2008.
TO SECURE TO LENDER the repayment of the Indebtedness, and all
renewals, extensions and modifications of the Indebtedness, and the performance
of the covenants and agreements of Borrower contained in the Loan Documents,
Borrower grants, conveys and assigns to Lender and Lender's successors and
assigns, with power of sale, the Mortgaged Property, including the Land located
in Douglas County, State of Georgia and described in Exhibit A attached to this
Instrument. To have and to hold the Mortgaged Property unto Lender and Lender's
successors and assigns forever. As used in this Instrument, the term "Mortgaged
Property" is synonymous with the term "Secured Property," and the term "lien" is
synonymous with the term "security interest and title."
Borrower covenants that Borrower is lawfully seized of the Mortgaged
Property and has the right, power and authority to grant, convey and assign the
Mortgaged Property, that the Mortgaged Property is unencumbered, and that
Borrower will warrant and defend generally the title to the Mortgaged Property
against all claims and demands, subject to any easements and restrictions listed
in a schedule of exceptions to coverage in any title insurance policy issued to
Lender contemporaneously with the execution and recordation of this Instrument
and insuring Lender's interest in the Mortgaged Property.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 1
SIGAFR02.DOC
<PAGE> 3
COVENANTS. Borrower and Lender covenant and agree as follows:
1. DEFINITIONS. The following terms, when used in this Instrument
(including when used in the above recitals), shall have the following meanings:
(a) "BORROWER" means all persons or entities identified as
"Borrower" in the first paragraph of this Instrument, together with their
successors and assigns.
(b) "COLLATERAL AGREEMENT" means any separate agreement between
Borrower and Lender for the purpose of establishing replacement reserves for the
Mortgaged Property, establishing a fund to assure the completion of repairs or
improvements specified in that agreement, or assuring reduction of the
outstanding principal balance of the Indebtedness if the occupancy of or income
from the Mortgaged Property does not increase to a level specified in that
agreement, or any other agreement or agreements between Borrower and Lender
which provide for the establishment of any other fund, reserve or account.
(c) "CONTROLLING ENTITY" means an entity which owns, directly or
indirectly through one or more intermediaries, (A) a general partnership
interest or more than 50% of the limited partnership interests in Borrower (if
Borrower is a partnership or joint venture), (B) a manager's interest in
Borrower or more than 50% of the ownership or membership interests in Borrower
(if Borrower is a limited liability company), or (C) more than 50% of any class
of voting stock of Borrower (if Borrower is a corporation).
(d) "ENVIRONMENTAL PERMIT" means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.
(e) "EVENT OF DEFAULT" means the occurrence of any event listed in
Section 22.
(f) "FIXTURES" means all property which is so attached to the Land
or the Improvements as to constitute a fixture under applicable law, including:
machinery, equipment, engines, boilers, incinerators, installed building
materials; systems and equipment for the purpose of supplying or distributing
heating, cooling, electricity, gas, water, air, or light; antennas, cable,
wiring and conduits used in connection with radio, television, security, fire
prevention, or fire detection or otherwise used to carry electronic signals;
telephone systems and equipment; elevators and related machinery and equipment;
fire detection, prevention and extinguishing systems and apparatus; security and
access control systems and apparatus; plumbing systems; water heaters, ranges,
stoves, microwave ovens, refrigerators, dishwashers,
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 2
SIGAFR02.DOC
<PAGE> 4
garbage disposers, washers, dryers and other appliances; light fixtures,
awnings, storm windows and storm doors; pictures, screens, blinds, shades,
curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall
coverings; fences, trees and plants; swimming pools; and exercise equipment.
(g) "GOVERNMENTAL AUTHORITY" means any board, commission,
department or body of any municipal, county, state or federal governmental unit,
or any subdivision of any of them, that has or acquires jurisdiction over the
Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.
(h) "HAZARDOUS MATERIALS" means 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 Mortgaged 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 Hazardous Materials Law.
(i) "HAZARDOUS MATERIALS LAWS" means all federal, state, and local
laws, ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future and including all amendments, that relate
to Hazardous Materials and apply to Borrower or to the Mortgaged Property.
Hazardous Materials Laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the
Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 5101, and their state analogs.
(j) "IMPOSITIONS" and "IMPOSITION DEPOSITS" are defined in Section
7(a).
(k) "IMPROVEMENTS" means the buildings, structures, improvements,
and alterations now constructed or at any time in the future constructed or
placed upon the Land, including any future replacements and additions.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 3
SIGAFR02.DOC
<PAGE> 5
(l) "INDEBTEDNESS" means the principal of, interest on, and all
other amounts due at any time under, the Note, this Instrument or any other Loan
Document, including prepayment premiums, late charges, default interest, and
advances as provided in Section 12 to protect the security of this Instrument.
(m) "INITIAL OWNERS" means, with respect to Borrower or any other
entity, the persons or entities who on the date of the Note own in the aggregate
100% of the ownership interests in Borrower or that entity.
(n) "LAND" means the land described in Exhibit A.
(o) "LEASES" means all present and future leases, subleases,
licenses, concessions or grants or other possessory interests now or hereafter
in force, whether oral or written, covering or affecting the Mortgaged Property,
or any portion of the Mortgaged Property (including proprietary leases or
occupancy agreements if Borrower is a cooperative housing corporation), and all
modifications, extensions or renewals.
(p) "LENDER" means the entity identified as "Lender" in the first
paragraph of this Instrument, or any subsequent holder of the Note.
(q) "LOAN DOCUMENTS" means the Note, this Instrument, all
guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs,
and any other documents now or in the future executed by Borrower, any guarantor
or any other person in connection with the loan evidenced by the Note, as such
documents may be amended from time to time.
(r) "LOAN SERVICER" means the entity that from time to time is
designated by Lender to collect payments and deposits and receive notices under
the Note, this Instrument and any other Loan Document, and otherwise to service
the loan evidenced by the Note for the benefit of Lender. Unless Borrower
receives notice to the contrary, the Loan Servicer is the entity identified as
"Lender" in the first paragraph of this Instrument.
(s) "MORTGAGED PROPERTY" means all of Borrower's present and
future right, title and interest in and to all of the following:
(1) the Land;
(2) the Improvements;
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 4
SIGAFR02.DOC
<PAGE> 6
(3) the Fixtures;
(4) the Personalty;
(5) all current and future rights, including air rights,
development rights, zoning rights and other similar
rights or interests, easements, tenements,
rights-of-way, strips and gores of land, streets,
alleys, roads, sewer rights, waters, watercourses,
and appurtenances related to or benefitting the Land
or the Improvements, or both, and all rights-of-way,
streets, alleys and roads which may have been or may
in the future be vacated;
(6) all proceeds paid or to be paid by any insurer of the
Land, the Improvements, the Fixtures, the Personalty
or any other part of the Mortgaged Property, whether
or not Borrower obtained the insurance pursuant to
Lender's requirement;
(7) all awards, payments and other compensation made or
to be made by any municipal, state or federal
authority with respect to the Land, the Improvements,
the Fixtures, the Personalty or any other part of the
Mortgaged Property, including any awards or
settlements resulting from condemnation proceedings
or the total or partial taking of the Land, the
Improvements, the Fixtures, the Personalty or any
other part of the Mortgaged Property under the power
of eminent domain or otherwise and including any
conveyance in lieu thereof;
(8) all contracts, options and other agreements for the
sale of the Land, the Improvements, the Fixtures,
the Personalty or any other part of the Mortgaged
Property entered into by Borrower now or in the
future, including cash or securities deposited to
secure performance by parties of their obligations;
(9) all proceeds from the conversion, voluntary or
involuntary, of any of the above into cash or
liquidated claims, and the right to collect such
proceeds;
(10) all Rents and Leases;
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 5
SIGAFR02.DOC
<PAGE> 7
(11) all earnings, royalties, accounts receivable, issues
and profits from the Land, the Improvements or any
other part of the Mortgaged Property, and all
undisbursed proceeds of the loan secured by this
Instrument and, if Borrower is a cooperative housing
corporation, maintenance charges or assessments
payable by shareholders or residents;
(12) all Imposition Deposits;
(13) all refunds or rebates of Impositions by any
municipal, state or federal authority or insurance
company (other than refunds applicable to periods
before the real property tax year in which this
Instrument is dated);
(14) all tenant security deposits which have not been
forfeited by any tenant under any Lease; and
(15) all names under or by which any of the above
Mortgaged Property may be operated or known, and all
trademarks, trade names, and goodwill relating to any
of the Mortgaged Property.
(t) "NOTE" means the Multifamily Note described on page 1 of this
Instrument, including all schedules, riders, allonges and addenda, as such
Multifamily Note may be amended from time to time.
(u) "O&M PROGRAM" is defined in Section 18(a).
(v) "PERSONALTY" means all furniture, furnishings, equipment,
machinery, building materials, appliances, goods, supplies, tools, books,
records (whether in written or electronic form), computer equipment (hardware
and software) and other tangible personal property (other than Fixtures) which
are used now or in the future in connection with the ownership, management or
operation of the Land or the Improvements or are located on the Land or in the
Improvements, and any operating agreements relating to the Land or the
Improvements, and any surveys, plans and specifications and contracts for
architectural, engineering and construction services relating to the Land or the
Improvements and all other intangible property and rights relating to the
operation of, or used in connection with, the Land or the Improvements,
including all governmental permits relating to any activities on the Land.
(w) "PROPERTY JURISDICTION" is defined in Section 30(a).
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 6
SIGAFR02.DOC
<PAGE> 8
(x) "RENTS" means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, including parking fees, laundry and vending machine income and
fees and charges for food, health care and other services provided at the
Mortgaged Property, whether now due, past due, or to become due, and deposits
forfeited by tenants.
(y) "TAXES" means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are levied,
assessed or imposed by any public authority or quasi-public authority, and
which, if not paid, will become a lien, on the Land or the Improvements.
(z) "TRANSFER" means (A) a sale, assignment, transfer or other
disposition (whether voluntary, involuntary or by operation of law); (B) the
granting, creating or attachment of a lien, encumbrance or security interest
(whether voluntary, involuntary or by operation of law); (C) the issuance or
other creation of an ownership interest in a legal entity, including a
partnership interest, interest in a limited liability company or corporate
stock; (D) the withdrawal, retirement, removal or involuntary resignation of a
partner in a partnership or a member or manager in a limited liability company;
or (E) the merger, dissolution, liquidation, or consolidation of a legal entity
or the reconstitution of one type of legal entity into another type of legal
entity. "Transfer" does not include (i) a conveyance of the Mortgaged Property
at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the
Mortgaged Property becoming part of a bankruptcy estate by operation of law
under the United States Bankruptcy Code. For purposes of defining the term
"Transfer," the term "partnership" shall mean a general partnership, a limited
partnership, a joint venture and a limited liability partnership, and the term
"partner" shall mean a general partner, a limited partner and a joint venturer.
2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is
also a security agreement under the Uniform Commercial Code for any of the
Mortgaged Property which, under applicable law, may be subject to a security
interest under the Uniform Commercial Code, whether acquired now or in the
future, and all products and cash and non-cash proceeds thereof (collectively,
"UCC COLLATERAL"), and Borrower hereby grants to Lender a security interest in
the UCC Collateral. Borrower shall execute and deliver to Lender, upon Lender's
request, financing statements, continuation statements and amendments, in such
form as Lender may require to perfect or continue the perfection of this
security interest. Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Lender may
require. Without the prior written consent of Lender, Borrower shall not create
or permit to exist any other lien or security interest in any of the UCC
Collateral. If an
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 7
SIGAFR02.DOC
<PAGE> 9
Event of Default has occurred and is continuing, Lender shall have the remedies
of a secured party under the Uniform Commercial Code, in addition to all
remedies provided by this Instrument or existing under applicable law. In
exercising any remedies, Lender may exercise its remedies against the UCC
Collateral separately or together, and in any order, without in any way
affecting the availability of Lender's other remedies. This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.
3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER
IN POSSESSION.
(a) As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all Rents. It is
the intention of Borrower to establish a present, absolute and irrevocable
transfer and assignment to Lender of all Rents and to authorize and empower
Lender to collect and receive all Rents without the necessity of further action
on the part of Borrower. Promptly upon request by Lender, Borrower agrees to
execute and deliver such further assignments as Lender may from time to time
require. Borrower and Lender intend this assignment of Rents to be immediately
effective and to constitute an absolute present assignment and not an assignment
for additional security only. For purposes of giving effect to this absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the "Mortgaged Property" as that term is defined in Section 1(s).
However, if this present, absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property Jurisdiction, then the
Rents shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and
perfect a lien on Rents in favor of Lender, which lien shall be effective as of
the date of this Instrument.
(b) After the occurrence of an Event of Default, Borrower
authorizes Lender to collect, sue for and compromise Rents and directs each
tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender.
However, until the occurrence of an Event of Default, Lender hereby grants to
Borrower a revocable license to collect and receive all Rents, to hold all Rents
in trust for the benefit of Lender and to apply all Rents to pay the
installments of interest and principal then due and payable under the Note and
the other amounts then due and payable under the other Loan Documents, including
Imposition Deposits, and to pay the current costs and expenses of managing,
operating and maintaining the Mortgaged Property, including utilities, Taxes and
insurance premiums (to the extent not included in Imposition Deposits), tenant
improvements and other capital expenditures. So long as no Event of Default has
occurred and is continuing, the Rents remaining after application pursuant to
the preceding sentence may be retained by Borrower free and clear of, and
released from, Lender's rights with respect to Rents
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 8
SIGAFR02.DOC
<PAGE> 10
under this Instrument. From and after the occurrence of an Event of Default, and
without the necessity of Lender entering upon and taking and maintaining control
of the Mortgaged Property directly, or by a receiver, Borrower's license to
collect Rents shall automatically terminate and Lender shall without notice be
entitled to all Rents as they become due and payable, including Rents then due
and unpaid. Borrower shall pay to Lender upon demand all Rents to which Lender
is entitled. At any time on or after the date of Lender's demand for Rents,
Lender may give, and Borrower hereby irrevocably authorizes Lender to give,
notice to all tenants of the Mortgaged Property instructing them to pay all
Rents to Lender, no tenant shall be obligated to inquire further as to the
occurrence or continuance of an Event of Default, and no tenant shall be
obligated to pay to Borrower any amounts which are actually paid to Lender in
response to such a notice. Any such notice by Lender shall be delivered to each
tenant personally, by mail or by delivering such demand to each rental unit.
Borrower shall not interfere with and shall cooperate with Lender's collection
of such Rents.
(c) Borrower represents and warrants to Lender that Borrower has
not executed any prior assignment of Rents (other than an assignment of Rents
securing indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note), that Borrower has not performed, and Borrower
covenants and agrees that it will not perform, any acts and has not executed,
and shall not execute, any instrument which would prevent Lender from exercising
its rights under this Section 3, and that at the time of execution of this
Instrument there has been no anticipation or prepayment of any Rents for more
than two months prior to the due dates of such Rents. Borrower shall not collect
or accept payment of any Rents more than two months prior to the due dates of
such Rents.
(d) If an Event of Default has occurred and is continuing, Lender
may, regardless of the adequacy of Lender's security or the solvency of Borrower
and even in the absence of waste, enter upon and take and maintain full control
of the Mortgaged Property in order to perform all acts that Lender in its
discretion determines to be necessary or desirable for the operation and
maintenance of the Mortgaged Property, including the execution, cancellation or
modification of Leases, the collection of all Rents, the making of repairs to
the Mortgaged Property and the execution or termination of contracts providing
for the management, operation or maintenance of the Mortgaged Property, for the
purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Instrument, or for
such other purposes as Lender in its discretion may deem necessary or desirable.
Alternatively, if an Event of Default has occurred and is continuing, regardless
of the adequacy of Lender's security, without regard to Borrower's solvency and
without the necessity of giving prior notice (oral or written) to Borrower,
Lender may apply to any court having jurisdiction for the appointment of a
receiver for the Mortgaged Property to take any or all of the actions set forth
in the preceding
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 9
SIGAFR02.DOC
<PAGE> 11
sentence. If Lender elects to seek the appointment of a receiver for the
Mortgaged Property at any time after an Event of Default has occurred and is
continuing, Borrower, by its execution of this Instrument, expressly consents to
the appointment of such receiver, including the appointment of a receiver ex
parte if permitted by applicable law. Lender or the receiver, as the case may
be, shall be entitled to receive a reasonable fee for managing the Mortgaged
Property. Immediately upon appointment of a receiver or immediately upon the
Lender's entering upon and taking possession and control of the Mortgaged
Property, Borrower shall surrender possession of the Mortgaged Property to
Lender or the receiver, as the case may be, and shall deliver to Lender or the
receiver, as the case may be, all documents, records (including records on
electronic or magnetic media), accounts, surveys, plans, and specifications
relating to the Mortgaged Property and all security deposits and prepaid Rents.
In the event Lender takes possession and control of the Mortgaged Property,
Lender may exclude Borrower and its representatives from the Mortgaged Property.
Borrower acknowledges and agrees that the exercise by Lender of any of the
rights conferred under this Section 3 shall not be construed to make Lender a
mortgagee-in-possession of the Mortgaged Property so long as Lender has not
itself entered into actual possession of the Land and Improvements.
(e) If Lender enters the Mortgaged Property, Lender shall be
liable to account only to Borrower and only for those Rents actually received.
Lender shall not be liable to Borrower, anyone claiming under or through
Borrower or anyone having an interest in the Mortgaged Property, by reason of
any act or omission of Lender under this Section 3, and Borrower hereby releases
and discharges Lender from any such liability to the fullest extent permitted by
law.
(f) If the Rents are not sufficient to meet the costs of taking
control of and managing the Mortgaged Property and collecting the Rents, any
funds expended by Lender for such purposes shall become an additional part of
the Indebtedness as provided in Section 12.
(g) Any entering upon and taking of control of the Mortgaged
Property by Lender or the receiver, as the case may be, and any application of
Rents as provided in this Instrument shall not cure or waive any Event of
Default or invalidate any other right or remedy of Lender under applicable law
or provided for in this Instrument.
4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.
(a) As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all of Borrower's
right, title and interest in, to and under the Leases, including Borrower's
right, power and authority to modify the terms of any
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 10
SIGAFR02.DOC
<PAGE> 12
such Lease, or extend or terminate any such Lease. It is the intention of
Borrower to establish a present, absolute and irrevocable transfer and
assignment to Lender of all of Borrower's right, title and interest in, to and
under the Leases. Borrower and Lender intend this assignment of the Leases to be
immediately effective and to constitute an absolute present assignment and not
an assignment for additional security only. For purposes of giving effect to
this absolute assignment of the Leases, and for no other purpose, the Leases
shall not be deemed to be a part of the "Mortgaged Property" as that term is
defined in Section 1(s). However, if this present, absolute and unconditional
assignment of the Leases is not enforceable by its terms under the laws of the
Property Jurisdiction, then the Leases shall be included as a part of the
Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on the Leases in favor of
Lender, which lien shall be effective as of the date of this Instrument.
(b) Until Lender gives notice to Borrower of Lender's exercise of
its rights under this Section 4, Borrower shall have all rights, power and
authority granted to Borrower under any Lease (except as otherwise limited by
this Section or any other provision of this Instrument), including the right,
power and authority to modify the terms of any Lease or extend or terminate any
Lease. Upon the occurrence of an Event of Default, the permission given to
Borrower pursuant to the preceding sentence to exercise all rights, power and
authority under Leases shall automatically terminate. Borrower shall comply with
and observe Borrower's obligations under all Leases, including Borrower's
obligations pertaining to the maintenance and disposition of tenant security
deposits.
(c) Borrower acknowledges and agrees that the exercise by Lender,
either directly or by a receiver, of any of the rights conferred under this
Section 4 shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and the Improvements. The acceptance by Lender of the
assignment of the Leases pursuant to Section 4(a) shall not at any time or in
any event obligate Lender to take any action under this Instrument or to expend
any money or to incur any expenses. Lender shall not be liable in any way for
any injury or damage to person or property sustained by any person or persons,
firm or corporation in or about the Mortgaged Property. Prior to Lender's actual
entry into and taking possession of the Mortgaged Property, Lender shall not (i)
be obligated to perform any of the terms, covenants and conditions contained in
any Lease (or otherwise have any obligation with respect to any Lease); (ii) be
obligated to appear in or defend any action or proceeding relating to the Lease
or the Mortgaged Property; or (iii) be responsible for the operation, control,
care, management or repair of the Mortgaged Property or any portion of the
Mortgaged Property. The execution of this Instrument by Borrower shall
constitute conclusive evidence that all responsibility for the operation,
control, care, management
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 11
SIGAFR02.DOC
<PAGE> 13
and repair of the Mortgaged Property is and shall be that of Borrower, prior to
such actual entry and taking of possession.
(d) Upon delivery of notice by Lender to Borrower of Lender's
exercise of Lender's rights under this Section 4 at any time after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, by a
receiver, or by any other manner or proceeding permitted by the laws of the
Property Jurisdiction, Lender immediately shall have all rights, powers and
authority granted to Borrower under any Lease, including the right, power and
authority to modify the terms of any such Lease, or extend or terminate any such
Lease.
(e) Borrower shall, promptly upon Lender's request, deliver to
Lender an executed copy of each residential Lease then in effect. All Leases for
residential dwelling units shall be on forms approved by Lender, shall be for
initial terms of at least six months and not more than two years, and shall not
include options to purchase.
(f) Borrower shall not lease any portion of the Mortgaged Property
for non-residential use except with the prior written consent of Lender and
Lender's prior written approval of the Lease agreement. Borrower shall not
modify the terms of, or extend or terminate, any Lease for non-residential use
(including any Lease in existence on the date of this Instrument) without the
prior written consent of Lender. Borrower shall, without request by Lender,
deliver an executed copy of each non-residential Lease to Lender promptly after
such Lease is signed. All non-residential Leases, including renewals or
extensions of existing Leases, shall specifically provide that (1) such Leases
are subordinate to the lien of this Instrument; (2) the tenant shall attorn to
Lender and any purchaser at a foreclosure sale, such attornment to be
self-executing and effective upon acquisition of title to the Mortgaged Property
by any purchaser at a foreclosure sale or by Lender in any manner; (3) the
tenant agrees to execute such further evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time to time request; (4) the Lease
shall not be terminated by foreclosure or any other transfer of the Mortgaged
Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any
other purchaser at such foreclosure sale may, at Lender's or such purchaser's
option, accept or terminate such Lease; and (6) the tenant shall, upon receipt
after the occurrence of an Event of Default of a written request from Lender,
pay all Rents payable under the Lease to Lender.
(g) Borrower shall not receive or accept Rent under any Lease
(whether residential or non-residential) for more than two months in advance.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 12
SIGAFR02.DOC
<PAGE> 14
5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS;
PREPAYMENT PREMIUM. Borrower shall pay the Indebtedness when due in accordance
with the terms of the Note and the other Loan Documents and shall perform,
observe and comply with all other provisions of the Note and the other Loan
Documents. Borrower shall pay a prepayment premium in connection with certain
prepayments of the Indebtedness, including a payment made after Lender's
exercise of any right of acceleration of the Indebtedness, as provided in the
Note.
6. EXCULPATION. Borrower's personal liability for payment of the
Indebtedness and for performance of the other obligations to be performed by it
under this Instrument is limited in the manner, and to the extent, provided in
the Note.
7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.
(a) Borrower shall deposit with Lender on the day monthly
installments of principal or interest, or both, are due under the Note (or on
another day designated in writing by Lender), until the Indebtedness is paid in
full, an additional amount sufficient to accumulate with Lender the entire sum
required to pay, when due (1) any water and sewer charges which, if not paid,
may result in a lien on all or any part of the Mortgaged Property, (2) the
premiums for fire and other hazard insurance, rent loss insurance and such other
insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for
other charges and expenses which Lender at any time reasonably deems necessary
to protect the Mortgaged Property, to prevent the imposition of liens on the
Mortgaged Property, or otherwise to protect Lender's interests, all as
reasonably estimated from time to time by Lender, plus one-sixth of such
estimate. The amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the "IMPOSITION DEPOSITS". The obligations of
Borrower for which the Imposition Deposits are required are collectively
referred to in this Instrument as "IMPOSITIONS". The amount of the Imposition
Deposits shall be sufficient to enable Lender to pay each Imposition before the
last date upon which such payment may be made without any penalty or interest
charge being added. Lender shall maintain records indicating how much of the
monthly Imposition Deposits and how much of the aggregate Imposition Deposits
held by Lender are held for the purpose of paying Taxes, insurance premiums and
each other obligation of Borrower for which Imposition Deposits are required.
Any waiver by Lender of the requirement that Borrower remit Imposition Deposits
to Lender may be revoked by Lender, in Lender's discretion, at any time upon
notice to Borrower.
(b) Imposition Deposits shall be held in an institution (which may
be Lender, if Lender is such an institution) whose deposits or accounts are
insured or guaranteed by a federal agency. Lender shall not be obligated to open
additional accounts or deposit Imposition Deposits
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 13
SIGAFR02.DOC
<PAGE> 15
in additional institutions when the amount of the Imposition Deposits exceeds
the maximum amount of the federal deposit insurance or guaranty. Lender shall
apply the Imposition Deposits to pay Impositions so long as no Event of Default
has occurred and is continuing. Unless applicable law requires, Lender shall not
be required to pay Borrower any interest, earnings or profits on the Imposition
Deposits. Borrower hereby pledges and grants to Lender a security interest in
the Imposition Deposits as additional security for all of Borrower's obligations
under this Instrument and the other Loan Documents. Any amounts deposited with
Lender under this Section 7 shall not be trust funds, nor shall they operate to
reduce the Indebtedness, unless applied by Lender for that purpose under Section
7(e).
(c) If Lender receives a bill or invoice for an Imposition, Lender
shall pay the Imposition from the Imposition Deposits held by Lender. Lender
shall have no obligation to pay any Imposition to the extent it exceeds
Imposition Deposits then held by Lender. Lender may pay an Imposition according
to any bill, statement or estimate from the appropriate public office or
insurance company without inquiring into the accuracy of the bill, statement or
estimate or into the validity of the Imposition.
(d) If at any time the amount of the Imposition Deposits held by
Lender for payment of a specific Imposition exceeds the amount reasonably deemed
necessary by Lender plus one-sixth of such estimate, the excess shall be
credited against future installments of Imposition Deposits. If at any time the
amount of the Imposition Deposits held by Lender for payment of a specific
Imposition is less than the amount reasonably estimated by Lender to be
necessary plus one-sixth of such estimate, Borrower shall pay to Lender the
amount of the deficiency within 15 days after notice from Lender.
(e) If an Event of Default has occurred and is continuing, Lender
may apply any Imposition Deposits, in any amounts and in any order as Lender
determines, in Lender's discretion, to pay any Impositions or as a credit
against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall
refund to Borrower any Imposition Deposits held by Lender.
8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such
amounts as may be required by any Collateral Agreement and shall perform all
other obligations of Borrower under each Collateral Agreement.
9. APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, then Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender's discretion. Neither
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 14
SIGAFR02.DOC
<PAGE> 16
Lender's acceptance of an amount which is less than all amounts then due and
payable nor Lender's application of such payment in the manner authorized shall
constitute or be deemed to constitute either a waiver of the unpaid amounts or
an accord and satisfaction. Notwithstanding the application of any such amount
to the Indebtedness, Borrower's obligations under this Instrument and the Note
shall remain unchanged.
10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower also
shall comply with all applicable laws that pertain to the maintenance and
disposition of tenant security deposits. Borrower shall at all times maintain
records sufficient to demonstrate compliance with the provisions of this Section
10. Borrower shall take appropriate measures to prevent, and shall not engage in
or knowingly permit, any illegal activities at the Mortgaged Property that could
endanger tenants or visitors, result in damage to the Mortgaged Property, result
in forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this Instrument or Lender's interest in the Mortgaged Property.
Borrower represents and warrants to Lender that no portion of the Mortgaged
Property has been or will be purchased with the proceeds of any illegal
activity.
11. USE OF PROPERTY. Unless required by applicable law, Borrower
shall not (a) except for any change in use approved by Lender, allow changes in
the use for which all or any part of the Mortgaged Property is being used at the
time this Instrument was executed, (b) convert any individual dwelling units or
common areas to commercial use, (c) initiate or acquiesce in a change in the
zoning classification of the Mortgaged Property, or (d) establish any
condominium or cooperative regime with respect to the Mortgaged Property.
12. PROTECTION OF LENDER'S SECURITY.
(a) If Borrower fails to perform any of its obligations under this
Instrument or any other Loan Document, or if any action or proceeding is
commenced which purports to affect the Mortgaged Property, Lender's security or
Lender's rights under this Instrument, including eminent domain, insolvency,
code enforcement, civil or criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender's option may make such
appearances, disburse such sums and take such actions as Lender reasonably deems
necessary to perform such obligations of Borrower and to protect Lender's
interest, including (1) payment of fees and out of pocket
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 15
SIGAFR02.DOC
<PAGE> 17
expenses of attorneys, accountants, inspectors and consultants, (2) entry upon
the Mortgaged Property to make repairs or secure the Mortgaged Property, (3)
procurement of the insurance required by Section 19, and (4) payment of amounts
which Borrower has failed to pa under Sections 15 and 17.
(b) Any amounts disbursed by Lender under this Section 12, or
under any other provision of this Instrument that treats such disbursement as
being made under this Section 12, shall be added to, and become part of, the
principal component of the Indebtedness, shall be immediately due and payable
and shall bear interest from the date of disbursement until paid at the "DEFAULT
RATE", as defined in the Note.
(c) Nothing in this Section 12 shall require Lender to incur any
expense or take any action.
13. INSPECTION. Lender, its agents, representatives, and designees
may make or cause to be made entries upon and inspections of the Mortgaged
Property (including environmental inspections and tests) during normal business
hours, or at any other reasonable time.
14. BOOKS AND RECORDS; FINANCIAL REPORTING.
(a) Borrower shall keep and maintain at all times at the Mortgaged
Property or the management agent's offices, and upon Lender's request shall make
available at the Mortgaged Property, complete and accurate books of account and
records (including copies of supporting bills and invoices) adequate to reflect
correctly the operation of the Mortgaged Property, and copies of all written
contracts, Leases, and other instruments which affect the Mortgaged Property.
The books, records, contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.
(b) Borrower shall furnish to Lender all of the following:
(1) within 120 days after the end of each fiscal year of
Borrower, a statement of income and expenses for
Borrower's operation of the Mortgaged Property for
that fiscal year, a statement of changes in financial
position of Borrower relating to the Mortgaged
Property for that fiscal year and, when requested by
Lender, a balance sheet showing all assets and
liabilities of Borrower relating to the Mortgaged
Property as of the end of that fiscal year;
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 16
SIGAFR02.DOC
<PAGE> 18
(2) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, a rent schedule for the Mortgaged Property
showing the name of each tenant, and for each tenant,
the space occupied, the lease expiration date, the
rent payable for the current month, the date through
which rent has been paid, and any related information
requested by Lender;
(3) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, an accounting of all security deposits held
pursuant to all Leases, including the name of the
institution (if any) and the names and identification
numbers of the accounts (if any) in which such
security deposits are held and the name of the person
to contact at such financial institution, along with
any authority or release necessary for Lender t
access information regarding such accounts;
(4) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, a statement that identifies all owners of
any interest in Borrower and any Controlling Entity
and the interest held by each, if Borrower or a
Controlling Entity is a corporation, all officers and
directors of Borrower and the Controlling Entity, and
if Borrower or a Controlling Entity is a limited
liability company, all managers who are not members;
(5) upon Lender's request, quarterly income and expense
statements for the Mortgaged Property;
(6) upon Lender's request at any time when an Event of
Default has occurred and is continuing, monthly
income and expense statements for the Mortgaged
Property;
(7) upon Lender's request, a monthly property management
report for the Mortgaged Property, showing the number
of inquiries made and rental applications received
from tenants or prospective tenants and deposits
received from tenants and any other information
requested by Lender; and
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 17
SIGAFR02.DOC
<PAGE> 19
(8) upon Lender's request, a balance sheet, a statement
of income and expenses for Borrower and a statement
of changes in financial position of Borrower for
Borrower's most recent fiscal year.
(c) Each of the statements, schedules and reports required by
Section 14(b) shall be certified to be complete and accurate by an individual
having authority to bind Borrower, and shall be in such form and contain such
detail as Lender may reasonably require. Lender also may require that any
statements, schedules or reports be audited at Borrower's expense by independent
certified public accountants acceptable to Lender.
(d) If Borrower fails to provide in a timely manner the
statements, schedules and reports required by Section 14(b), Lender shall have
the right to have Borrower's books and records audited, at Borrower's expense,
by independent certified public accountants selected by Lender in order to
obtain such statements, schedules and reports, and all related costs and
expenses of Lender shall become immediately due and payable and shall become an
additional part of the Indebtedness as provided in Section 12.
(e) If an Event of Default has occurred and is continuing,
Borrower shall deliver to Lender upon written demand all books and records
relating to the Mortgaged Property or its operation.
(f) Borrower authorizes Lender to obtain a credit report on
Borrower at any time.
15. TAXES; OPERATING EXPENSES.
(a) Subject to the provisions of Section 15(c) and Section 15(d),
Borrower shall pay, or cause to be paid, all Taxes when due and before the
addition of any interest, fine, penalty or cost for nonpayment.
(b) Subject to the provisions of Section 15(c), Borrower shall pay
the expenses of operating, managing, maintaining and repairing the Mortgaged
Property (including insurance premiums, utilities, repairs and replacements)
before the last date upon which each such payment may be made without any
penalty or interest charge being added.
(c) As long as no Event of Default exists and Borrower has timely
delivered to Lender any bills or premium notices that it has received, Borrower
shall not be obligated to pay Taxes, insurance premiums or any other individual
Imposition to the extent that sufficient Imposition Deposits are held by Lender
for the purpose of paying that specific Imposition. If an
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 18
SIGAFR02.DOC
<PAGE> 20
Event of Default exists, Lender may exercise any rights Lender may have with
respect to Imposition Deposits without regard to whether Impositions are then
due and payable. Lender shall have no liability to Borrower for failing to pay
any Impositions to the extent that any Event of Default has occurred and is
continuing, insufficient Imposition Deposits are held by Lender at the time an
Imposition becomes due and payable or Borrower has failed to provide Lender with
bills and premium notices as provided above.
(d) Borrower, at its own expense, may contest by appropriate legal
proceedings, conducted diligently and in good faith, the amount or validity of
any Imposition other than insurance premiums, if (1) Borrower notifies Lender of
the commencement or expected commencement of such proceedings, (2) the Mortgaged
Property is not in danger of being sold or forfeited, (3) Borrower deposits with
Lender reserves sufficient to pay the contested Imposition, if requested by
Lender, and (4) Borrower furnishes whatever additional security is required in
the proceedings or is reasonably requested by Lender, which may include the
delivery to Lender of the reserves established by Borrower to pay the contested
Imposition.
(e) Borrower shall promptly deliver to Lender a copy of all
notices of, and invoices for, Impositions, and if Borrower pays any Imposition
directly, Borrower shall promptly furnish to Lender receipts evidencing such
payments.
16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent
provided in Section 21, the grant, creation or existence of any mortgage, deed
of trust, deed to secure debt, security interest or other lien or encumbrance (a
"LIEN") on the Mortgaged Property (other than the lien of this Instrument) or on
certain ownership interests in Borrower, whether voluntary, involuntary or by
operation of law, and whether or not such Lien has priority over the lien of
this Instrument, is a "TRANSFER" which constitutes an Event of Default and
subjects Borrower to personal liability under the Note.
17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.
Borrower (a) shall not commit waste or permit impairment or deterioration of the
Mortgaged Property, (b) shall not abandon the Mortgaged Property, (c) shall
restore or repair promptly, in a good and workmanlike manner, any damaged part
of the Mortgaged Property to the equivalent of its original condition, or such
other condition as Lender may approve in writing, whether or not insurance
proceeds or condemnation awards are available to cover any costs of such
restoration or repair, (d) shall keep the Mortgaged Property in good repair,
including the replacement of Personalty and Fixtures with items of equal or
better function and quality, (e) shall provide for professional management of
the Mortgaged Property by a residential rental property manager satisfactory to
Lender under a contract approved by
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 19
SIGAFR02.DOC
<PAGE> 21
Lender in writing, and (f) shall give notice to Lender of and, unless otherwise
directed in writing by Lender, shall appear in and defend any action or
proceeding purporting to affect the Mortgaged Property, Lender's security or
Lender's rights under this Instrument. Borrower shall not (and shall not permit
any tenant or other person to) remove, demolish or alter the Mortgaged Property
or any part of the Mortgaged Property except in connection with the replacement
of tangible Personalty.
18. ENVIRONMENTAL HAZARDS.
(a) Except for matters covered by a written program of operations
and maintenance approved in writing by Lender (an "O&M PROGRAM") or matters
described in Section 18(b), Borrower shall not cause or permit any of the
following:
(1) the presence, use, generation, release, treatment,
processing, storage (including storage in above
ground and underground storage tanks), handling, or
disposal of any Hazardous Materials on or under the
Mortgaged Property or any other property of Borrower
that is adjacent to the Mortgaged Property;
(2) the transportation of any Hazardous Materials to,
from, or across the Mortgaged Property;
(3) any occurrence or condition on the Mortgaged Property
or any other property of Borrower that is adjacent to
the Mortgaged Property, which occurrence or condition
is or may be in violation of Hazardous Materials
Laws; or
(4) any violation of or noncompliance with the terms of
any Environmental Permit with respect to the
Mortgaged Property or any property of Borrower that
is adjacent to the Mortgaged Property.
The matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as "PROHIBITED ACTIVITIES OR CONDITIONS".
(b) Prohibited Activities and Conditions shall not include the
safe and lawful use and storage of quantities of (1) pre-packaged supplies,
cleaning materials and petroleum products customarily used in the operation and
maintenance of comparable multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 20
SIGAFR02.DOC
<PAGE> 22
consumer use and used by tenants and occupants of residential dwelling units in
the Mortgaged Property; and (3) petroleum products used in the operation and
maintenance of motor vehicles from time to time located on the Mortgaged
Property's parking areas, so long as all of the foregoing are used, stored,
handled, transported and disposed of in compliance with Hazardous Materials
Laws.
(c) Borrower shall take all commercially reasonable actions
(including the inclusion of appropriate provisions in any Leases executed after
the date of this Instrument) to prevent its employees, agents, and contractors,
and all tenants and other occupants from causing or permitting any Prohibited
Activities or Conditions. Borrower shall not lease or allow the sublease or use
of all or any portion of the Mortgaged Property to any tenant or subtenant for
nonresidential use by any user that, i the ordinary course of its business,
would cause or permit any Prohibited Activity or Condition.
(d) If an O&M Program has been established with respect to
Hazardous Materials, Borrower shall comply in a timely manner with, and cause
all employees, agents, and contractors of Borrower and any other persons present
on the Mortgaged Property to comply with the O&M Program. All costs of
performance of Borrower's obligations under any O&M Program shall be paid by
Borrower, and Lender's out-of-pocket costs incurred in connection with the
monitoring and review of the O&M Program and Borrower' performance shall be paid
by Borrower upon demand by Lender. Any such out-of-pocket costs of Lender which
Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.
(e) Borrower represents and warrants to Lender that, except as
previously disclosed by Borrower to Lender in writing:
(1) Borrower has not at any time engaged in, caused or
permitted any Prohibited Activities or Conditions;
(2) to the best of Borrower's knowledge after reasonable
and diligent inquiry, no Prohibited Activities or
Conditions exist or have existed;
(3) except to the extent previously disclosed by Borrower
to Lender in writing, the Mortgaged Property does not
now contain any underground storage tanks, and, to
the best of Borrower's knowledge after reasonable and
diligent inquiry, the Mortgaged Property has not
contained any underground storage tanks in the past.
If there is an underground storage tank located on
the Property which has been previously disclosed by
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 21
SIGAFR02.DOC
<PAGE> 23
Borrower to Lender in writing, that tank complies
with all requirements of Hazardous Materials Laws;
(4) Borrower has complied with all Hazardous Materials
Laws, including all requirements for notification
regarding releases of Hazardous Materials. Without
limiting the generality of the foregoing, Borrower
has obtained all Environmental Permits required for
the operation of the Mortgaged Property in accordance
with Hazardous Materials Laws now in effect and all
such Environmental Permits are in full force and
effect;
(5) no event has occurred with respect to the Mortgaged
Property that constitutes, or with the passing of
time or the giving of notice would constitute,
noncompliance with the terms of any Environmental
Permit;
(6) there are no actions, suits, claims or proceedings
pending or, to the best of Borrower's knowledge after
reasonable and diligent inquiry, threatened that
involve the Mortgaged Property and allege, arise out
of, or relate to any Prohibited Activity or
Condition; and
(7) Borrower has not received any complaint, order,
notice of violation or other communication from any
Governmental Authority with regard to air emissions,
water discharges, noise emissions or Hazardous
Materials, or any other environmental, health or
safety matters affecting the Mortgaged Property or
any other property of Borrower that is adjacent to
the Mortgaged Property.
The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.
(f) Borrower shall promptly notify Lender in writing upon the
occurrence of any of the following events:
(1) Borrower's discovery of any Prohibited Activity or
Condition;
(2) Borrower's receipt of or knowledge of any complaint,
order, notice of violation or other communication
from any Governmental Authority or other person with
regard to present or future alleged Prohibited
Activities
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 22
SIGAFR02.DOC
<PAGE> 24
or Conditions or any other environmental, health or
safety matters affecting the Mortgaged Property or
any other property of Borrower that is adjacent to
the Mortgaged Property; and
(3) any representation or warranty in this Section 18
becomes untrue after the date of this Agreement.
Any such notice given by Borrower shall not relieve Borrower of, or result in a
waiver of, any obligation under this Instrument, the Note, or any other Loan
Document.
(g) Borrower shall pay promptly the costs of any environmental
inspections, tests or audits ("ENVIRONMENTAL INSPECTIONS") required by Lender in
connection with any foreclosure or deed in lieu of foreclosure, or as a
condition of Lender's consent to any Transfer under Section 21, or required by
Lender following a reasonable determination by Lender that Prohibited Activities
or Conditions may exist. Any such costs incurred by Lender (including the fees
and out-of-pocket costs of attorneys and technical consultants whether incurred
in connection with any judicial or administrative process or otherwise) which
Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12. The results of all Environmental
Inspections made by Lender shall at all times remain the property of Lender and
Lender shall have no obligation to disclose or otherwise make available to
Borrower or any other party such results or any other information obtained by
Lender in connection with its Environmental Inspections. Lender hereby reserves
the right, and Borrower hereby expressly authorizes Lender, to make available to
any party, including any prospective bidder at a foreclosure sale of the
Mortgaged Property, the results of any Environmental Inspections made by Lender
with respect to the Mortgaged Property. Borrower consents to Lender notifying
any party (either as part of a notice of sale or otherwise) of the results of
any of Lender's Environmental Inspections. Borrower acknowledges that Lender
cannot control or otherwise assure the truthfulness or accuracy of the results
of any of its Environmental Inspections and that the release of such results to
prospective bidders at a foreclosure sale of the Mortgaged Property may have a
material and adverse effect upon the amount which a party may bid at such sale.
Borrower agrees that Lender shall have no liability whatsoever as a result of
delivering the results of any of its Environmental Inspections to any third
party, and Borrower hereby releases and forever discharges Lender from any and
all claims, damages, or causes of action, arising out of, connected with or
incidental to the results of, the delivery of any of Lender's Environmental
Inspections.
(h) If any investigation, site monitoring, containment, clean-up,
restoration or other remedial work ("REMEDIAL WORK") is necessary to comply with
any Hazardous Materials Law or
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 23
SIGAFR02.DOC
<PAGE> 25
order of any Governmental Authority that has or acquires jurisdiction over the
Mortgaged Property or the use, operation or improvement of the Mortgaged
Property under any Hazardous Materials Law, Borrower shall, by the earlier of
(1) the applicable deadline required by Hazardous Materials Law or (2) 30 days
after notice from Lender demanding such action, begin performing the Remedial
Work, and thereafter diligently prosecute it to completion, and shall in any
event complete the work by the time required by applicable Hazardous Materials
Law. If Borrower fails to begin on a timely basis or diligently prosecute any
required Remedial Work, Lender may, at its option, cause the Remedial Work to be
completed, in which case Borrower shall reimburse Lender on demand for the cost
of doing so. Any reimbursement due from Borrower to Lender shall become part of
the Indebtedness as provided in Section 12.
(i) Borrower shall cooperate with any inquiry by any Governmental
Authority and shall comply with any governmental or judicial order which arises
from any alleged Prohibited Activity or Condition.
(j) Borrower shall indemnify, hold harmless and defend (i) Lender,
(ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any
prior Loan Servicer, (v) the officers, directors, shareholders, partners,
employees and trustees of any of the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of each of the foregoing (collectively,
the "INDEMNITEES") from and against all proceedings, claims, damages, penalties
and costs (whether initiated or sought by Governmental Authorities or private
parties), including fees and out of pocket expenses of attorneys and expert
witnesses, investigatory fees, and remediation costs, whether incurred in
connection with any judicial or administrative process or otherwise, arising
directly or indirectly from any of the following:
(1) any breach of any representation or warranty of
Borrower in this Section 18;
(2) any failure by Borrower to perform any of its
obligations under this Section 18;
(3) the existence or alleged existence of any Prohibited
Activity or Condition;
(4) the presence or alleged presence of Hazardous
Materials on or under the Mortgaged Property or any
property of Borrower that is adjacent to the
Mortgaged Property; and
(5) the actual or alleged violation of any Hazardous
Materials Law.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 24
SIGAFR02.DOC
<PAGE> 26
(k) Counsel selected by Borrower to defend Indemnitees shall be
subject to the approval of those Indemnitees. However, any Indemnitee may elect
to defend any claim or legal or administrative proceeding at the Borrower's
expense.
(l) Borrower shall not, without the prior written consent of those
Indemnitees who are named as parties to a claim or legal or administrative
proceeding (a "CLAIM"), settle or compromise the Claim if the settlement (1)
results in the entry of any judgment that does not include as an unconditional
term the delivery by the claimant or plaintiff to Lender of a written release of
those Indemnitees, satisfactory in form and substance to Lender; or (2) may
materially and adversely affect Lender, a determined by Lender in its
discretion.
(m) Borrower's obligation to indemnify the Indemnitees shall not
be limited or impaired by any of the following, or by any failure of Borrower or
any guarantor to receive notice of or consideration for any of the following:
(1) any amendment or modification of any Loan Document;
(2) any extensions of time for performance required by
any Loan Document;
(3) any provision in any of the Loan Documents limiting
Lender's recourse to property securing the
Indebtedness, or limiting the personal liability of
Borrower or any other party for payment of all or any
part of the Indebtedness;
(4) the accuracy or inaccuracy of any representations and
warranties made by Borrower under this Instrument or
any other Loan Document;
(5) the release of Borrower or any other person, by
Lender or by operation of law, from performance of
any obligation under any Loan Document;
(6) the release or substitution in whole or in part of
any security for the Indebtedness; and
(7) Lender's failure to properly perfect any lien or
security interest given as security for the
Indebtedness.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 25
SIGAFR02.DOC
<PAGE> 27
(n) Borrower shall, at its own cost and expense, do all of the
following:
(1) pay or satisfy any judgment or decree that may be
entered against any Indemnitee or Indemnitees in any
legal or administrative proceeding incident to any
matters against which Indemnitees are entitled to be
indemnified under this Section 18;
(2) reimburse Indemnitees for any expenses paid or
incurred in connection with any matters against which
Indemnitees are entitled to be indemnified under this
Section 18; and
(3) reimburse Indemnitees for any and all expenses,
including fees and out of pocket expenses of
attorneys and expert witnesses, paid or incurred in
connection with the enforcement by Indemnitees of
their rights under this Section 18, or in monitoring
and participating in any legal or administrative
proceeding.
(o) In any circumstances in which the indemnity under this Section
18 applies, Lender may employ its own legal counsel and consultants to
prosecute, defend or negotiate any claim or legal or administrative proceeding
and Lender, with the prior written consent of Borrower (which shall not be
unreasonably withheld, delayed or conditioned) may settle or compromise any
action or legal or administrative proceeding. Borrower shall reimburse Lender
upon demand for all costs and expenses incurred b Lender, including all costs of
settlements entered into in good faith, and the fees and out of pocket expenses
of such attorneys and consultants.
(p) The provisions of this Section 18 shall be in addition to any
and all other obligations and liabilities that Borrower may have under
applicable law or under other Loan Documents, and each Indemnitee shall be
entitled to indemnification under this Section 18 without regard to whether
Lender or that Indemnitee has exercised any rights against the Mortgaged
Property or any other security, pursued any rights against any guarantor, or
pursued any other rights available under the Loan Documents or applicable law.
If Borrower consists of more than one person or entity, the obligation of those
persons or entities to indemnify the Indemnitees under this Section 18 shall be
joint and several. The obligation of Borrower to indemnify the Indemnitees under
this Section 18 shall survive any repayment or discharge of the Indebtedness,
any foreclosure proceeding, any foreclosure sale, any delivery of any deed in
lieu of foreclosure, and any release of record of the lien of this Instrument.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 26
SIGAFR02.DOC
<PAGE> 28
19. PROPERTY AND LIABILITY INSURANCE.
(a) Borrower shall keep the Improvements insured at all times
against such hazards as Lender may from time to time require, which insurance
shall include but not be limited to coverage against loss by fire and allied
perils, general boiler and machinery coverage, and business income coverage.
Lender's insurance requirements may change from time to time throughout the term
of the Indebtedness. If Lender so requires, such insurance shall also include
sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the
Mortgaged Property does not conform to applicable zoning or land use laws,
building ordinance or law coverage. If any of the Improvements is located in an
area identified by the Federal Emergency Management Agency (or any successor to
that agency) as an area having special flood hazards, and if flood insurance is
available in that area, Borrower shall insure such Improvements against loss by
flood.
(b) All premiums on insurance policies required under Section
19(a) shall be paid in the manner provided in Section 7, unless Lender has
designated in writing another method of payment. All such policies shall also be
in a form approved by Lender. All policies of property damage insurance shall
include a non-contributing, non-reporting mortgage clause in favor of, and in a
form approved by, Lender. Lender shall have the right to hold the original
policies or duplicate original policies of all insurance required by Section
19(a). Borrower shall promptly deliver to Lender a copy of all renewal and other
notices received by Borrower with respect to the policies and all receipts for
paid premiums. At least 30 days prior to the expiration date of a policy,
Borrower shall deliver to Lender the original (or a duplicate original) of a
renewal policy in form satisfactory to Lender.
(c) Borrower shall maintain at all times commercial general
liability insurance, workers' compensation insurance and such other liability,
errors and omissions and fidelity insurance coverages as Lender may from time to
time require.
(d) All insurance policies and renewals of insurance policies
required by this Section 19 shall be in such amounts and for such periods as
Lender may from time to time require, and shall be issued by insurance companies
satisfactory to Lender.
(e) Borrower shall comply with all insurance requirements and
shall not permit any condition to exist on the Mortgaged Property that would
invalidate any part of any insurance coverage that this Instrument requires
Borrower to maintain.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 27
SIGAFR02.DOC
<PAGE> 29
(f) In the event of loss, Borrower shall give immediate written
notice to the insurance carrier and to Lender. Borrower hereby authorizes and
appoints Lender as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claims under policies of property damage insurance, to
appear in and prosecute any action arising from such property damage insurance
policies, to collect and receive the proceeds of property damage insurance, and
to deduct from such proceeds Lender's expenses incurred in the collection of
such proceeds. This power of attorney is coupled with an interest and therefore
is irrevocable. However, nothing contained in this Section 19 shall require
Lender to incur any expense or take any action. Lender may, at Lender's option,
(1) hold the balance of such proceeds to be used to reimburse Borrower for the
cost of restoring and repairing the Mortgaged Property to the equivalent of its
original condition or to a condition approved by Lender (the "RESTORATION"), or
(2) apply the balance of such proceeds to the payment of the Indebtedness,
whether or not then due. To the extent Lender determines to apply insurance
proceeds to Restoration, Lender shall do so in accordance with Lender's
then-current policies relating to the restoration of casualty damage on similar
multifamily properties.
(g) Lender shall not exercise its option to apply insurance
proceeds to the payment of the Indebtedness if all of the following conditions
are met: (1) no Event of Default (or any event which, with the giving of notice
or the passage of time, or both, would constitute an Event of Default) has
occurred and is continuing; (2) Lender determines, in its discretion, that there
will be sufficient funds to complete the Restoration; (3) Lender determines, in
its discretion, that the rental income from the Mortgaged Property after
completion of the Restoration will be sufficient to meet all operating costs and
other expenses, Imposition Deposits, deposits to reserves and loan repayment
obligations relating to the Mortgaged Property; and (4) Lender determines, in
its discretion, that the Restoration will be completed before the earlier of (A)
one year before the maturity date of the Note or (B) one year after the date of
the loss or casualty.
(h) If the Mortgaged Property is sold at a foreclosure sale or
Lender acquires title to the Mortgaged Property, Lender shall automatically
succeed to all rights of Borrower in and to any insurance policies and unearned
insurance premiums and in and to the proceeds resulting from any damage to the
Mortgaged Property prior to such sale or acquisition.
20. CONDEMNATION.
(a) Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, or conveyance in lieu
thereof, of all or any part of the Mortgaged Property, whether direct or
indirect (a "CONDEMNATION"). Borrower shall appear in and prosecute or defend
any action or proceeding relating to any Condemnation unless otherwise
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 28
SIGAFR02.DOC
<PAGE> 30
directed by Lender in writing. Borrower authorizes and appoints Lender as
attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender's
or Borrower's name, any action or proceeding relating to any Condemnation and to
settle or compromise any claim in connection with any Condemnation. This power
of attorney is coupled with an interest and therefore is irrevocable. However,
nothing contained in this Section 20 shall require Lender to incur any expense
or take any action. Borrower hereby transfers and assigns to Lender all right,
title and interest of Borrower in and to any award or payment with respect to
(i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any
damage to the Mortgaged Property caused by governmental action that does not
result in a Condemnation.
(b) Lender may apply such awards or proceeds, after the deduction
of Lender's expenses incurred in the collection of such amounts, at Lender's
option, to the restoration or repair of the Mortgaged Property or to the payment
of the Indebtedness, with the balance, if any, to Borrower. Unless Lender
otherwise agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 o this Instrument or any
Collateral Agreement, or change the amount of such installments. Borrower agrees
to execute such further evidence of assignment of any awards or proceeds as
Lender may require.
21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
(a) The occurrence of any of the following events shall constitute
an Event of Default under this Instrument:
(1) a Transfer of all or any part of the Mortgaged
Property or any interest in the Mortgaged Property;
(2) if Borrower is a limited partnership, a Transfer of
(A) any general partnership interest, or (B) limited
partnership interests in Borrower that would cause
the Initial Owners of Borrower to own less than 51%
of all limited partnership interests in Borrower;
(3) if Borrower is a general partnership or a joint
venture, a Transfer of any general partnership or
joint venture interest in Borrower;
(4) if Borrower is a limited liability company, a
Transfer of (A) any membership interest in Borrower
which would cause the Initial Owners to
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 29
SIGAFR02.DOC
<PAGE> 31
own less than 51% of all the membership interests in
Borrower, or (B) any membership or other interest of
a manager in Borrower;
(5) if Borrower is a corporation, (A) the Transfer of any
voting stock in Borrower which would cause the
Initial Owners to own less than 51% of any class of
voting stock in Borrower or (B) if the outstanding
voting stock in Borrower is held by 100 or more
shareholders, one or more transfers by a single
transferor within a 12-month period affecting an
aggregate of 5% or more of that stock;
(6) if Borrower is a trust, (A) a Transfer of any
beneficial interest in Borrower which would cause the
Initial Owners to own less than 51% of all the
beneficial interests in Borrower, or (B) the
termination or revocation of the trust, or (C) the
removal, appointment or substitution of a trustee of
Borrower; and
(7) a Transfer of any interest in a Controlling Entity
which, if such Controlling Entity were Borrower,
would result in an Event of Default under any of
Sections 21(a)(1) through (6) above.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.
(b) The occurrence of any of the following events shall not
constitute an Event of Default under this Instrument, notwithstanding any
provision of Section 21(a) to the contrary:
(1) a Transfer to which Lender has consented;
(2) a Transfer that occurs by devise, descent, or by operation
of law upon the death of a natural person;
(3) the grant of a leasehold interest in an individual
dwelling unit for a term of two years or less not
containing an option to purchase;
(4) a Transfer of obsolete or worn out Personalty or Fixtures
that are contemporaneously replaced by items of equal or
better function and
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 30
SIGAFR02.DOC
<PAGE> 32
quality, which are free of liens, encumbrances and
security interests other than those created by the
Loan Documents or consented to by Lender;
(5) the grant of an easement, if before the grant Lender
determines that the easement will not materially
affect the operation or value of the Mortgaged
Property or Lender's interest in the Mortgaged
Property, and Borrower pays to Lender, upon demand,
all costs and expenses incurred by Lender in
connection with reviewing Borrower's request; and
(6) the creation of a mechanic's, materialman's, or
judgment lien against the Mortgaged Property which is
released of record or otherwise remedied to Lender's
satisfaction within 30 days of the date of creation.
(c) Lender shall consent, without any adjustment to the rate at
which the Indebtedness secured by this Instrument bears interest or to any other
economic terms of the Indebtedness, to a Transfer that would otherwise violate
this Section 21 if, prior to the Transfer, Borrower has satisfied each of the
following requirements:
(1) the submission to Lender of all information required
by Lender to make the determination required by this
Section 21(c);
(2) the absence of any Event of Default;
(3) the transferee meets all of the eligibility, credit,
management and other standards (including but not
limited to any standards with respect to previous
relationships between Lender and the transferee and
the organization of the transferee) customarily
applied by Lender at the time of the proposed
Transfer to the approval of borrowers in connection
with the origination or purchase of similar mortgages
on multifamily properties;
(4) the Mortgaged Property, at the time of the proposed
Transfer, meets all standards as to its physical
condition that are customarily applied by Lender at
the time of the proposed Transfer to the approval of
properties in connection with the origination or
purchase of similar mortgages on multifamily
properties;
(5) in the case of a Transfer of all or any part of the
Mortgaged Property, (A) the execution by the
transferee of an assumption agreement that is
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 31
SIGAFR02.DOC
<PAGE> 33
acceptable to Lender and that, among other things,
requires the transferee to perform all obligations of
Borrower set forth in the Note, this Instrument and
any other Loan Documents, and may require that the
transferee comply with any provisions of this
Instrument or any other Loan Document which
previously may have been waived b Lender, and (B) if
a guaranty has been executed and delivered in
connection with the Note, this Instrument or any of
the other Loan Documents, the transferee causes one
or more individuals or entities acceptable to Lender
to execute and deliver to Lender a guaranty in a form
acceptable to Lender;
(6) in the case of a Transfer of any interest in a
Controlling Entity, if a guaranty has been executed
and delivered in connection with the Note, this
Instrument or any of the other Loan Documents, the
Borrower causes one or more individuals or entities
acceptable to Lender to execute and deliver to Lender
a guaranty in a form acceptable to Lender; and
(7) Lender's receipt of all of the following:
(A) a review fee in the amount of $2,000.00;
(B) a transfer fee in an amount equal to 1.00%
of the unpaid principal balance of the
Indebtedness immediately before the
applicable Transfer; and
(C) the amount of Lender's out-of-pocket costs
(including reasonable attorneys' fees)
incurred in reviewing the Transfer request.
22. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an Event of Default under this Instrument:
(a) any failure by Borrower to pay or deposit when due any amount
required by the Note, this Instrument or any other Loan Document;
(b) any failure by Borrower to maintain the insurance coverage
required by Section 19;
(c) any failure by Borrower to comply with the provisions of
Section 33;
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 32
SIGAFR02.DOC
<PAGE> 34
(d) fraud or material misrepresentation or material omission by
Borrower, any of its officers, directors, trustees, general partners or managers
or any guarantor in connection with (A) the application for or creation of the
Indebtedness, (B) any financial statement, rent roll, or other report or
information provided to Lender during the term of the Indebtedness, or (C) any
request for Lender's consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;
(e) any Event of Default under Section 21;
(f) the commencement of a forfeiture action or proceeding, whether
civil or criminal, which, in Lender's reasonable judgment, could result in a
forfeiture of the Mortgaged Property or otherwise materially impair the lien
created by this Instrument or Lender's interest in the Mortgaged Property;
(g) any failure by Borrower to perform any of its obligations
under this Instrument (other than those specified in Sections 22(a) through
(f)), as and when required, which continues for a period of 30 days after notice
of such failure by Lender to Borrower. However, no such notice or grace period
shall apply in the case of any such failure which could, in Lender's judgment,
absent immediate exercise by Lender of a right or remedy under this Instrument,
result in harm to Lender, impairment of the Note or this Instrument or any other
security given under any other Loan Document;
(h) any failure by Borrower to perform any of its obligations as
and when required under any Loan Document other than this Instrument which
continues beyond the applicable cure period, if any, specified in that Loan
Document;
(i) any exercise by the holder of any debt instrument secured by
a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a
right to declare all amounts due under that debt instrument immediately due and
payable; and
(j) Borrower voluntarily files for bankruptcy protection under the
United States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency proceeding or other similar proceeding
pursuant to any other federal or state law affecting debtor and creditor rights,
or an involuntary case is commenced against Borrower by any creditor (other than
Lender) of Borrower pursuant to the United States Bankruptcy Code or other
federal or state law affecting debtor and creditor rights and is not dismissed
or discharged within 60 days after filing.
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 33
SIGAFR02.DOC
<PAGE> 35
23. REMEDIES CUMULATIVE. Each right and remedy provided in this
Instrument is distinct from all other rights or remedies under this Instrument
or any other Loan Document or afforded by applicable law, and each shall be
cumulative and may be exercised concurrently, independently, or successively, in
any order.
24. FORBEARANCE.
(a) Lender may (but shall not be obligated to) agree with
Borrower, from time to time, and without giving notice to, or obtaining the
consent of, or having any effect upon the obligations of, any guarantor or other
third party obligor, to take any of the following actions: extend the time for
payment of all or any part of the Indebtedness; reduce the payments due under
this Instrument, the Note, or any other Loan Document; release anyone liable for
the payment of any amounts under this Instrument, the Note, or any other Loan
Document; accept a renewal of the Note; modify the terms and time of payment of
the Indebtedness; join in any extension or subordination agreement; release any
Mortgaged Property; take or release other or additional security; modify the
rate of interest or period of amortization of the Note or change the amount of
the monthly installments payable under the Note; and otherwise modify this
Instrument, the Note, or any other Loan Document.
(b) Any forbearance by Lender in exercising any right or remedy
under the Note, this Instrument, or any other Loan Document or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise of
any right or remedy. The acceptance by Lender of payment of all or any part of
the Indebtedness after the due date of such payment, or in an amount which is
less than the required payment, shall not be a waiver of Lender's right to
require prompt payment when due of all other payments on account of the
Indebtedness or to exercise any remedies for any failure to make prompt payment.
Enforcement by Lender of any security for the Indebtedness shall not constitute
an election by Lender of remedies so as to preclude the exercise of any other
right available to Lender. Lender's receipt of any awards or proceeds under
Sections 19 and 20 shall not operate to cure or waive any Event of Default.
25. LOAN CHARGES. If any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower is interpreted
so that any charge provided for in any Loan Document, whether considered
separately or together with other charges levied in connection with any other
Loan Document, violates that law, and Borrower is entitled to the benefit of
that law, that charge is hereby reduced to the extent necessary to eliminate
that violation. The amounts, if any, previously paid to Lender in excess of the
permitted amounts shall be applied by Lender to reduce the principal of the
Indebtedness. For the purpose of determining whether any applicable law limiting
the amount of interest or other charges
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 34
SIGAFR02.DOC
<PAGE> 36
permitted to be collected from Borrower has been violated, all Indebtedness
which constitutes interest, as well as all other charges levied in connection
with the Indebtedness which constitute interest, shall be deemed to be allocated
and spread over the stated term of the Note. Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a manner
that the rate of interest so computed is uniform throughout the stated term of
the Note.
26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce any Loan Document.
27. WAIVER OF MARSHALLING. Notwithstanding the existence of any
other security interests in the Mortgaged Property held by Lender or by any
other party, Lender shall have the right to determine the order in which any or
all of the Mortgaged Property shall be subjected to the remedies provided in
this Instrument, the Note, any other Loan Document or applicable law. Lender
shall have the right to determine the order in which any or all portions of the
Indebtedness are satisfied from the proceeds realized upon the exercise of such
remedies. Borrower and any party who now or in the future acquires a security
interest in the Mortgaged Property and who has actual or constructive notice of
this Instrument waives any and all right to require the marshalling of assets or
to require that any of the Mortgaged Property be sold in the inverse order of
alienation or that any of the Mortgaged Property be sold in parcels or as an
entirety in connection with the exercise of any of the remedies permitted by
applicable law or provided in this Instrument.
28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and
deliver, at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.
29. ESTOPPEL CERTIFICATE. Within 10 days after a request from
Lender, Borrower shall deliver to Lender a written statement, signed and
acknowledged by Borrower, certifying to Lender or any person designated by
Lender, as of the date of such statement, (i) that the Loan Documents are
unmodified and in full force and effect (or, if there have been modifications,
that the Loan Documents are in full force and effect as modified and setting
forth such modifications); (ii) the unpaid principal balance of the Note; (iii)
the date to which interest under the Note has been paid; (iv) that Borrower is
not in default in paying the Indebtedness or in performing or observing any of
the covenants or agreements contained in this Instrument or any of the other
Loan Documents (or, if the Borrower is in default, describing such default in
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 35
SIGAFR02.DOC
<PAGE> 37
reasonable detail); (v) whether or not there are then existing any setoffs or
defenses known to Borrower against the enforcement of any right or remedy of
Lender under the Loan Documents; and (vi) any additional facts requested by
Lender.
30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
(a) This Instrument, and any Loan Document which does not itself
expressly identify the law that is to apply to it, shall be governed by the laws
of the jurisdiction in which the Land is located (the "PROPERTY JURISDICTION").
(b) Borrower agrees that any controversy arising under or in
relation to the Note, this Instrument, or any other Loan Document shall be
litigated exclusively in the Property Jurisdiction. The state and federal courts
and authorities with jurisdiction in the Property Jurisdiction shall have
exclusive jurisdiction over all controversies which shall arise under or in
relation to the Note, any security for the Indebtedness, or any other Loan
Document. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any such litigation and waives any other venue to which it might
be entitled by virtue of domicile, habitual residence or otherwise.
31. NOTICE.
(a) All notices, demands and other communications ("NOTICE") under
or concerning this Instrument shall be in writing. Each notice shall be
addressed to the intended recipient at its address set forth in this Instrument,
and shall be deemed given on the earliest to occur of (1) the date when the
notice is received by the addressee; (2) the first Business Day after the notice
is delivered to a recognized overnight courier service, with arrangements made
for payment of charges for next Business Day delivery; or (3) the third Business
Day after the notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested. As used in this Section 31,
the term "Business Day" means any day other than a Saturday, a Sunday or any
other day on which Lender is not open for business.
(b) Any party to this Instrument may change the address to which
notices intended for it are to be directed by means of notice given to the other
party in accordance with this Section 31. Each party agrees that it will not
refuse or reject delivery of any notice given in accordance with this Section
31, that it will acknowledge, in writing, the receipt of any notice upon request
by the other party and that any notice rejected or refused by it shall be deemed
for purposes of this Section 31 to have been received by the rejecting party on
the date so refused or
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 36
SIGAFR02.DOC
<PAGE> 38
rejected, as conclusively established by the records of the U.S. Postal Service
or the courier service.
(c) Any notice under the Note and any other Loan Document which
does not specify how notices are to be given shall be given in accordance with
this Section 31.
32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial
interest in the Note (together with this Instrument and the other Loan
Documents) may be sold one or more times without prior notice to Borrower. A
sale may result in a change of the Loan Servicer. There also may be one or more
changes of the Loan Servicer unrelated to a sale of the Note. If there is a
change of the Loan Servicer, Borrower will be given notice of the change.
33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in
full, Borrower (a) shall not acquire any real or personal property other than
the Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business other
than the management and operation of the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to segregate and identify.
34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and
the rights granted by this Instrument shall inure to, the respective successors
and assigns of Lender and Borrower. However, a Transfer not permitted by Section
21 shall be an Event of Default.
35. JOINT AND SEVERAL LIABILITY. If more than one person or entity
signs this Instrument as Borrower, the obligations of such persons and entities
shall be joint and several.
36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.
(a) The relationship between Lender and Borrower shall be solely
that of creditor and debtor, respectively, and nothing contained in this
Instrument shall create any other relationship between Lender and Borrower.
(b) No creditor of any party to this Instrument and no other
person shall be a third party beneficiary of this Instrument or any other Loan
Document. Without limiting the generality of the preceding sentence, (1) any
arrangement (a "SERVICING ARRANGEMENT") between the Lender and any Loan Servicer
for loss sharing or interim advancement of funds shall constitute a contractual
obligation of such Loan Servicer that is independent of the obligation of
Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third
party beneficiary
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 37
SIGAFR02.DOC
<PAGE> 39
of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any
Servicing Arrangement will reduce the amount of the Indebtedness.
37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability
of any provision of this Instrument shall not affect the validity or
enforceability of any other provision, and all other provisions shall remain in
full force and effect. This Instrument contains the entire agreement among the
parties as to the rights granted and the obligations assumed in this Instrument.
This Instrument may not be amended or modified except by a writing signed by the
party against whom enforcement is sought.
38. CONSTRUCTION. The captions and headings of the sections of
this Instrument are for convenience only and shall be disregarded in construing
this Instrument. Any reference in this Instrument to an "Exhibit" or a "Section"
shall, unless otherwise explicitly provided, be construed as referring,
respectively, to an Exhibit attached to this Instrument or to a Section of this
Instrument. All Exhibits attached to or referred to in this Instrument are
incorporated by reference into this Instrument. Any reference in this Instrument
to a statute or regulation shall be construed as referring to that statute or
regulation as amended from time to time. Use of the singular in this Agreement
includes the plural and use of the plural includes the singular. As used in this
Instrument, the term "including" means "including, but not limited to."
39. LOAN SERVICING. All actions regarding the servicing of the
loan evidenced by the Note, including the collection of payments, the giving and
receipt of notice, inspections of the Property, inspections of books and
records, and the granting of consents and approvals, may be taken by the Loan
Servicer unless Borrower receives notice to the contrary. If Borrower receives
conflicting notices regarding the identity of the Loan Servicer or any other
subject, any such notice from Lender shall govern.
40. DISCLOSURE OF INFORMATION. Lender may furnish information
regarding Borrower or the Mortgaged Property to third parties with an existing
or prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including but not limited to
trustees, master servicers, special servicers, rating agencies, and
organizations maintaining databases on the underwriting and performance of
multifamily mortgage loans. Borrower irrevocably waives any and all rights it
may have under applicable law to prohibit such disclosure, including but not
limited to any right of privacy.
41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the
application for the loan submitted to Lender (the "LOAN APPLICATION") and in all
financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 38
SIGAFR02.DOC
<PAGE> 40
Loan Application are complete and accurate in all material respects. There has
been no material adverse change in any fact or circumstance that would make any
such information incomplete or inaccurate.
42. SUBROGATION. If, and to the extent that, the proceeds of the
loan evidenced by the Note are used to pay, satisfy or discharge any obligation
of Borrower for the payment of money that is secured by a pre-existing mortgage,
deed of trust or other lien encumbering the Mortgaged Property (a "PRIOR LIEN"),
such loan proceeds shall be deemed to have been advanced by Lender at Borrower's
request, and Lender shall automatically, and without further action on its part,
be subrogated to the rights, including lien priority, of the owner or holder of
the obligation secured by the Prior Lien, whether or not the Prior Lien is
released.
43. ACCELERATION; REMEDIES. At any time during the existence of
an Event of Default, Lender, at Lender's option, may declare the Indebtedness to
be immediately due and payable without further demand, and may invoke the power
of sale granted in this Instrument (and Borrower appoints Lender as Borrower's
agent and attorney-in-fact to exercise such power of sale in the name and on
behalf of Borrower) and any other remedies permitted by Georgia law or provided
in this Instrument or in any other Loan Document. Borrower acknowledges that the
power of sale granted in this Instrument may be exercised by Lender without
prior judicial hearing. Lender shall be entitled to collect all costs and
expenses incurred in pursuing such remedies, including reasonable attorneys'
fees, costs of documentary evidence, abstracts and title reports.
Lender may sell and dispose of the Mortgaged Property at public
auction, at the usual place for conducting sales at the courthouse in the county
where all or any part of the Mortgaged Property is located, to the highest
bidder for cash, first advertising the time, terms and place of such sale by
publishing a notice of sale once a week for four consecutive weeks (without
regard to the actual number of days) in a newspaper in which sheriff's
advertisements are published in such county, all other notice being waived by
Borrower; and Lender may thereupon execute and deliver to the purchaser a
sufficient instrument of conveyance of the Mortgaged Property in fee simple,
which may contain recitals as to the happening of the default upon which the
execution of the power of sale granted by this Section depends. The recitals in
the instrument of conveyance shall be presumptive evidence that Lender duly
complied with all preliminary acts prerequisite to the sale and instrument of
conveyance. Borrower constitutes and appoints Lender as Borrower's agent and
attorney-in-fact to make such recitals, sale and conveyance. Borrower ratifies
all of Lender's acts, as such attorney-in-fact, and Borrower agrees that such
recitals shall be binding and conclusive upon Borrower and that the conveyance
to be made by Lender (and in the event of a deed in lieu of foreclosure, then as
to such conveyance) shall be effectual to bar all
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 39
SIGAFR02.DOC
<PAGE> 41
right, title and interest, equity of redemption, including all statutory
redemption, homestead, dower, curtsey and all other exemptions of Borrower, or
its successors in interest, in and to the Mortgaged Property.
The Mortgaged Property may be sold in one parcel and as an entirety, or
in such parcels, manner or order as Lender, in its discretion, may elect, and
one or more exercises of the powers granted in this Section shall not extinguish
or exhaust the power unless the entire Mortgaged Property is sold or the
Indebtedness is paid in full, and Lender shall collect the proceeds of such
sale, applying such proceeds as provided in this Section. In the event of a
deficiency, Borrower shall immediately on demand from Lender pay such deficiency
to Lender, subject to the provisions of the Note limiting Borrower's personal
liability for payment of the Indebtedness. Borrower acknowledges that Lender may
bid for and purchase the Mortgaged Property at any foreclosure sale and shall be
entitled to apply all or any part of the Indebtedness as a credit to the
purchase price. Borrower covenants and agrees that Lender shall apply the
proceeds of the sale in the following order: (a) to all reasonable costs and
expenses of the sale, including reasonable attorneys' fees and costs of title
evidence; (b) to the Indebtedness in such order as Lender, in Lender's
discretion, directs; and (c) the excess, if any, to the person or persons
legally entitled to the excess. The power and agency granted in this Section 43
are coupled with an interest, are irrevocable by death or otherwise and are in
addition to the remedies for collection of the Indebtedness as provided by law.
If the Mortgaged Property is sold pursuant to this Section 43,
Borrower, or any person holding possession of the Mortgaged Property through
Borrower, shall surrender possession of the Mortgaged Property to the purchaser
at such sale on demand. If possession is not surrendered on demand, Borrower or
such person shall be a tenant holding over and may be dispossessed in accordance
with Georgia law.
44. RELEASE. Upon payment of the Indebtedness, Lender shall cancel
this Instrument. Borrower shall pay Lender's reasonable costs incurred in
canceling this Instrument.
45. BORROWER'S WAIVER OF CERTAIN RIGHTS. To the fullest extent
permitted by law, Borrower agrees that Borrower will not at any time insist
upon, plead, claim or take the benefit or advantage of any present or future law
providing for any appraisement, valuation, stay, extension or redemption,
homestead, moratorium, reinstatement, marshalling or forbearance, and Borrower,
for Borrower, Borrower's heirs, devisees, representatives, successors and
assigns, and for any and all persons ever claiming any interest in the Mortgaged
Property, to the fullest extent permitted by law, waives and releases all rights
of redemption, valuation, appraisement, stay of execution, reinstatement
(including all rights under O.C.G.A. Section 44-
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 40
SIGAFR02.DOC
<PAGE> 42
14-85), notice of intention to mature or declare due the whole of the
Indebtedness, and all rights to a marshaling of assets of Borrower, including
the Mortgaged Property.
46. DEED TO SECURE DEBT. This conveyance is to be construed under
the existing laws of the State of Georgia as a deed passing title, and not as a
mortgage, and is intended to secure the payment of the Indebtedness.
47. ASSUMPTION NOT A NOVATION. Lender's acceptance of an
assumption of the obligations of this Instrument and the Note, and the release
of Borrower pursuant to Section 21, shall not constitute a novation and shall
not affect the priority of the lien created by this Instrument.
48. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS
BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT
EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT
LEGAL COUNSEL.
ATTACHED EXHIBITS. The following Exhibits are attached to this
Instrument:
|X| Exhibit A Description of the Land (required).
-
|X| Exhibit B Modifications to Instrument
-
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 41
SIGAFR02.DOC
<PAGE> 43
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument
or has caused this Instrument to be signed and delivered by its duly authorized
representative.
<TABLE>
<S> <C>
Signed, sealed and delivered ROBERTS PROPERTIES RESIDENTIAL,
in the presence of: L.P., a Georgia limited partnership
By: ROBERTS REALTY INVESTORS,
/s/ Jacob F. Crowe INC., a Georgia corporation, General
- ------------------------------------ Partner
Witness
By: /s/ Charles S. Roberts
/s/ Laurie Heberle ---------------------------------
- ------------------------------------ Title:
Notary Public
Attest: /s/ Charles R. Elliott
-----------------------------
My Commission expires: 1/8/99 Title: CFO
--------------
[CORPORATE SEAL]
[NOTARIAL SEAL]
</TABLE>
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE 42
SIGAFR02.DOC
<PAGE> 44
EXHIBIT A
(PROPERTY DESCRIPTION)
PHASE I - TRACT 1:
ALL THAT TRACT of land in Land Lot 521 of the 18th District, 2nd Section,
Douglas County, Georgia, described as follows:
BEGINNING at an iron pin placed at the intersection of the west right-of-way
line of Crestmark Boulevard (formerly named Blairs Way) ( right of way varies)
with the land lot line common to Land Lots 521 and 580 of the 18th District, 2nd
Section, Douglas County, Georgia; thence, running along said common land lot
line, North 89 degrees 04 minutes 34 seconds West 1257.14 feet to an iron pin
set at the land lot corner common to Land Lots 521, 522, 579 and 580, 18th
District, 2nd Section, Douglas County, Georgia; thence, along the land lot line
common to said Land Lots 521 and 522, North 01 degree 17 minutes 11 seconds East
711.87 feet to a 1-inch open top iron pin found; thence, leaving said common
land lot line, South 88 degrees 59 minutes 11 seconds East 919.87 feet to an
iron pin set on the southwest right-of-way line of said Crestmark Boulevard;
thence, along the southwest and west right-of-way line of Crestmark Boulevard,
the following courses and distances: (1) South 50 degrees 14 minutes 22 seconds
East 371.38 feet to a point, (2) along the arc of a curve to the right (which
arc is subtended by a chord having a bearing and distance of South 24 degrees 09
minutes 37 seconds East 117.81 feet and a radius of 134.00 feet) 121.98 feet to
a point, and (3) South 01 degree 55 minutes 20 seconds West 370.87 feet to the
POINT OF BEGINNING, said tract containing approximately 19.482 acres and
designated "Phase I, Tract 1 " on that certain plat of ALTA/ACSM Survey for
Roberts Properties Residential, L.P., Chicago Title Insurance Company, Federal
Home Loan Mortgage Corporation and Primary Capital Advisors LC, prepared by
Rochester & Associates, Inc., bearing the seal and certification of James C.
Jones, Georgia Registered Professional Land Surveyor No. 2298, dated September
14, 1998.
PHASE I - TRACT 2
ALL THAT TRACT of land in Land Lots 520 and 521 of the 18th District, 2nd
Section, Douglas County, Georgia, described as follows:
BEGINNING at a point on the land lot line common to Land Lots 520 and 521 of the
18th District, 2nd Section, Douglas County, Georgia, which point is located
South 01 degree 31 minutes 17 seconds West 267.36 feet along said common land
lot line from an iron pin set at the intersection of said common land lot line
with the south right-of-way line of Skyview Road (110 foot right-of-way);
thence, continuing along said common land lot line, South 01 degree 31 minutes
17 seconds West 299.99 feet to a 1/2-inch rebar found; thence leaving said
common land lot line, South 42 degrees 30 minutes 56 seconds East 136.20 feet to
a 1/2-inch rebar found;
54733
<PAGE> 45
EXHIBIT A
(page 2 of 5)
thence South 52 degrees 15 minutes 24 seconds West 201.32 feet to an iron pin
set on the northeast right-of-way line of Crestmark Boulevard (formerly named
Blairs Way) ( right of way varies ); thence, along the northeast right-of-way
line of Crestmark Boulevard, the following courses and distances: (1) along the
arc of a curve to the left (which arc is subtended by a chord having a bearing
and distance of North 42 degrees 16 minutes 25 seconds West 53.76 feet and a
radius of 194.00 feet) 53.93 feet to a point, and (2) North 50 degrees 14
minutes 22 seconds West 296.61 feet to an iron pin set; thence North 88 degrees
59 minutes 11 seconds West 7.96 feet to an iron pin set on the northeast
right-of-way line of said Crestmark Boulevard (right of way varies ); thence,
along the northeast, east and southeast right-of-way line of Crestmark
Boulevard, the following courses and distances: (1) North 49 degrees 23 minutes
14 seconds West 49.00 feet to a point, (2) along the arc of a curve to the right
(which arc is subtended by a chord having a bearing and distance of North 27
degrees 07 minutes 28 seconds West 84.29 feet and a radius of 110.98 feet) 86.46
feet to a point, (3) along the arc of a curve to the right (which arc is
subtended by a chord having a bearing and distance of North 06 degrees 07
minutes 45 seconds East 108.15 feet and a radius of 285.07 feet) 108.81 feet to
a point, and (4) North 17 degrees 03 minutes 51 seconds East 93.75 feet to an
iron pin set; thence, leaving said right-of-way line, South 88 degrees 28
minutes 43 seconds East 383.96 feet to the POINT OF BEGINNING, said tract
containing approximately 3.924 acres and designated "Phase I, Tract 2" as shown
on that certain plat of ALTA/ACSM Survey for Roberts Properties Residential,
L.P., Chicago Title Insurance Company, Federal Home Loan Mortgage Corporation,
Primary Capital Advisors LC prepared by Rochester & Associates, Inc., bearing
the seal and certification of James C. Jones, Georgia Registered Professional
Land Surveyor No. 2298, dated September 14, 1998.
PHASE II - TRACT 1:
ALL THAT TRACT of land in Land Lot 520 of the 18th District, 2nd Section,
Douglas County, Georgia, described as follows:
BEGINNING at the intersection of the south right-of-way line of Skyview Road
(110 foot right-of-way) with the southwest right-of-way line of Crestmark Drive
(60 foot right-of-way); running thence along the southwest, west and northwest
right-of-way line of Crestmark Drive, the following courses and distances: (1)
South 28 degrees 12 minutes 53 seconds East 344.72 feet to a point, (2) along
the arc of a curve to the right (which arc is subtended by a chord having a
bearing and distance of South 06 degrees 07 minutes 56 seconds East 216.77 feet
and a radius of 288.31 feet) 222.24 feet to a point, (3) South 15 degrees 57
minutes 01 second West 88.91 feet to a point, (4) along the arc of a curve to
the right (which arc is subtended by a chord having a bearing and distance of
South 38 degrees 34 minutes 37 seconds West 207.67 feet and a radius of 269.90
feet) 213.17 feet to a point, and (5) South 61 degrees 12 minutes 13 seconds
West 204.41
54733
<PAGE> 46
EXHIBIT A
(page 3 of 5)
feet to a 1/2-inch rebar set; thence, leaving the northwest right-of-way line of
Crestmark Drive, North 26 degrees 56 minutes 20 seconds West 217.24 feet to a
112-inch rebar found; thence North 42 degrees 30 minutes 56 seconds West 136.20
feet to a 1/2-inch rebar found on the land lot line common to sa dsaid Land Lot
520 and Land Lot 521 of the 18th District, 2nd Section, Douglas County, Georgia;
running thence along said common land lot line, North 01 degree 31 minutes 17
seconds East 567.35 feet to an iron pin set on the south right-of-way line of
Skyview Road; thence along the south right-of-way line of Skyview Road the
following courses and distances: (1) along the arc of a curve to the left (which
arc is subtended by a chord having a bearing and distance of South 87 degrees 58
minutes 02 seconds East 204.63 feet and a radius of 766.20 feet) 205.24 feet to
a point, and (2) North 84 degrees 21 minutes 31 seconds East 118.40 feet to the
POINT OF BEGINNING, said tract containing approximately 7.938 acres and
designated "Phase II, Tract 1 " as shown on plat of ALTA/ACSM Land Title Survey
for Roberts Properties Residential, L.P., Chicago Title Insurance Company,
Federal Home Loan Mortgage Corporation and Primary Capital Advisors LC prepared
by Rochester & Associates, Inc., bearing the seal and certification of James C.
Jones, Georgia Registered Land Surveyor No. 2298, dated September 14, 1998.
PHASE II - TRACT 2
All that tract or parcel of land lying and being in Land Lots 520 and 521 of the
18th District, 2nd Section, Douglas County, Georgia, described as follows:
BEGINNING at a 1/2-inch rebar set at the intersection of the east right-of-way
line of Crestmark Boulevard (formerly named Blairs Way) (right of way varies)
with the land lot line common to Land Lots 521 and 580 of the 18th District, 2nd
Section, Douglas County, Georgia; running thence along the east right of way
line of Crestmark Boulevard north 01 degree 55 minutes 20 seconds east a
distance of 294.84 feet to a point; running thence south 88 degrees 04 minutes
41 seconds east a distance of 26.97 feet to a point; running thence along the
arc of a curve to the left (which arc is subtended by a chord having a bearing
and distance of north 89 degrees 21 minutes 53 seconds east 31.68 feet and a
radius of 355.00 feet) 31.69 feet to a point; running thence south 28 degrees 58
minutes 53 seconds east a distance of 288.88 feet to a 1/4-inch rebar found;
running thence south 61 degrees 01 minutes 07 seconds west a distance of 90.00
feet to a 1/2inch rebar found on the land lot line common to Land Lots 520 and
581; running thence along the land lot line common to Land Lots 520 and 581
north 89 degrees 01 minutes 47 seconds west a distance of 129.78 feet to the
POINT OF BEGINNING, said tract containing approximately 0.936 acres and being
designated as "Phase II, Tract 2" as shown on plat of ALTA/ACSM Land Title
Survey for Roberts Properties Residential, L.P., Chicago Title Insurance
Company, Federal Home Loan Mortgage Corporation and Primary Capital Advisors LC
prepared by Rochester & Associates, Inc., bearing the seal and certification of
James C. Jones, Georgia Registered Land Surveyor No. 2298, dated September 14,
1998.
54733
<PAGE> 47
EXHIBIT A
(page 4 of 5)
TOGETHER WITH a non-exclusive right, title and interest in and to the easements
appurtenant to all or portions of the above described tracts, described in and
created by:
(i) Agreement Regarding Easements, Covenants and Restrictions dated
December 29, 1986, between Wallace Enterprises, Inc. and Roberts
Properties-Thornton Road, Ltd., recorded in DEED BOOK 542, PAGE 83, Douglas
County, Georgia records, rerecorded in DEED BOOK 548, PAGE 508, aforesaid
records.
(ii) Reciprocal Easement Agreement dated May 23, 1988 among Roberts
Properties-Thornton Road, Ltd., McDonald's Corporation and Westpark Owners
Association, Inc., recorded in DEED BOOK 604, PAGE 783, aforesaid records; as
amended by that certain First Amendment to Reciprocal Easement Agreement dated
May 25, 1994 among The Crestmark Club, L.P., McDonald's Corporation and Westpark
Owners Association, Inc., recorded in DEED BOOK 888, PAGE 733,
aforesaid records.
(iii) Reciprocal Easement Agreement dated February 9, 1989, between Roberts
Properties Thornton Road, Ltd. and Chick-Fil-A, Inc. L.P., recorded in DEED BOOK
635, PAGE 808, aforesaid records.
(iv) Sign Easement Agreement dated June 1, 1989, among Roberts Properties
Thornton Road, L.P., Chick-Fil-A, Inc. and Westpark Owners Association, Inc.,
recorded in DEED BOOK 646, PAGE 788, aforesaid records, as amended by that
certain First Amendment to Sign Easement Agreement dated December 30, 1992 among
The Crestmark Club, L.P., Chick-Fil-A, Inc. and Westpark Owners Association,
Inc., recorded in DEED BOOK 802, PAGE 479, aforesaid records; and as further
amended by Second Amendment to Sign Easement Agreement among The Crestmark Club,
L.P., a Georgia limited partnership, Chick-Fil-A, Inc. and Westpark Owners
Association, Inc., dated May 25, 1994, filed for record June 28, 1994, and
recorded in Deed Book 888, page 736, aforesaid records.
(v) that certain Grant of Easement by Westpark Partners, L.P. to The
Crestmark Club, L.P., dated July 7, 1994, recorded in DEED BOOK 890, PAGE 479,
Douglas County, Georgia records.
(vi) that certain Reciprocal Easement and Covenant Agreement by The
Crestmark Club, L.P., Roberts Properties Residential, L.P. and Mobat, Inc. dated
June 14, 1995, filed June 26, 1995, recorded in DEED BOOK 944, PAGE 346,
aforesaid records.
(vii) that certain Reciprocal Easement Agreement between The Crestmark Club,
L.P., a Georgia limited partnership, Crestmark Owners Association, Inc., a
Georgia corporation, and Goodrich Enterprises, Inc., a Georgia corporation,
dated May 28, 1993, filed June 3, 1993, recorded in DEED BOOK 816, PAGE 399,
aforesaid records; as amended by First Amendment to Reciprocal Easement
Agreement among The Crestmark Club, L.P., a Georgia limited
54733
<PAGE> 48
EXHIBIT A
(page 5 of 5)
partnership, Crestmark Owners Association, Inc. and Roberts Properties
Residential, L.P., a Georgia limited partnership, dated June 14, 1995, filed
June 26, 1995, recorded in Deed Book 944, page 327, aforesaid records.
54733
<PAGE> 49
EXHIBIT B
MODIFICATIONS TO INSTRUMENT
The following modifications are made to the text of the Instrument that precedes
this Exhibit:
1. Section 33 (Single Asset Borrower) is deleted in its entirety.
2. Section 21(b) is modified and amended to add thereto an additional
subparagraph (7), as follows:
(7) The Transfer of Borrower's ownership interest in the
Mortgaged Property to Roberts Realty Investors, Inc.,
a Georgia corporation (the "REIT"), subject to the
following conditions:
(A) No Event of Default under the Loan Documents
has occurred and is continuing;
(B) Borrower provides Lender with notice of such
Transfer within thirty (30) days after it
occurs;
(C) the document evidencing the transfer of the
Mortgaged Property to the REIT is recorded
in the Deed Records of Douglas County,
Georgia;
(D) Lender shall have received, within thirty
(30) days after such Transfer, an
endorsement to its title insurance policy
updating the date of coverage to the date of
transfer of title to the Mortgaged Property
to the REIT, showing the REIT as the fee
owner of the Mortgaged Property and
containing no additional exceptions to title
not shown in Lender's title insurance
policy;
(E) Borrower pays to Lender upon demand by
Lender, the cost of all title searches,
title insurance and recording costs, and all
fees and out of pocket costs of Lender's
legal counsel related to the Transfer; and
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE B-1
SIGAFR02.DOC
<PAGE> 50
(F) No transfer fee shall be due in connection
with the Transfer described above.
3. Notwithstanding anything to the contrary in Paragraph 7
hereof, on an annual basis, Borrower shall provide Lender with
a copy of the paid real estate tax bill for the Mortgaged
Property as well as a copy of the property insurance binder
(with evidence that the premium for same has been fully paid
for one year) for the Mortgaged Property promptly after same
are due and paid.
4. Notwithstanding anything to the contrary in Paragraph 7
hereof, the payment of Imposition Deposits shall not be
required initially hereunder. However, Lender may require the
payment of Imposition Deposits for any or all of the
Impositions at any time (a) after the occurrence of a default,
or (b) if Borrower shall fail to pay such Impositions when due
or fail to provide evidence of payment of same to Lender as
required hereunder.
5. Whenever reference is made in this Instrument or any of the
Loan Documents to the payment of "reasonable attorney's fees"
or words of similar import, the same shall mean and refer to
the payment of actual attorney's fees incurred based upon the
attorney's normal hourly rates and the number of hours worked,
and not the attorney's fees statutorily defined in O.C.G.A.ss.
13-1-11.
6. The following words appearing in Section 14(b)(4) are hereby
deleted: "within 120 days after the end of each fiscal year of
Borrower, and at any other"; and the following words are
hereby inserted and substituted therefor: "at any".
7. The following words are hereby inserted in Section 14(e),
after "demand": "true and correct copies, certified by
Borrower's general partner's or Borrower's chief financial
officer, of".
8. The following words are hereby inserted in Section 14(b)(7),
after the beginning words to that Section ("upon Lender's
request"): "at any time when an Event of Default exists".
9. Section 21(b) is hereby modified and amended by adding thereto
the following subparagraph (8):
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE B-2
SIGAFR02.DOC
<PAGE> 51
(8) Transfers of publicly traded shares or other units of
ownership in the REIT or a Controlling Entity; and
Transfers of limited partnership interests in
Borrower.
10. Section 21(b) is hereby modified and amended by adding thereto
the following subparagraph (9):
(9) An exchange of limited partnership interests in
Borrower for shares or other units of ownership in
the REIT.
11. Lender hereby agrees that the Transfers described in Sections
21(b)(8) and 21(b)(9) shall not be subject to the conditions
and requirements of Section 21(c).
0381560.06
- --------------------------------------------------------------------------------
SECURITY INSTRUMENT (FREDDIE MAC) -- GEORGIA PAGE B-3
SIGAFR02.DOC
<PAGE> 1
FHLMC LOAN No. 981194184
EXCEPTIONS TO NON-RECOURSE GUARANTY
(GEORGIA)
This Exceptions to Non-Recourse Guaranty ("GUARANTY") is entered into
as of September 30, 1998, by the undersigned person(s) (the "GUARANTOR"
whether one or more), for the benefit of PRIMARY CAPITAL ADVISORS LC, and/or any
subsequent holder of the Note (the "LENDER").
RECITALS
A. ROBERTS PROPERTIES RESIDENTIAL, L.P., a Georgia limited
partnership (the "BORROWER") has requested that Lender make a loan to Borrower
in the amount of $16,000,000.00 (the "LOAN"). The Loan will be evidenced by a
Multifamily Note from Borrower to Lender dated as of the date of this Guaranty
(the "NOTE"). The Note will be secured by a Multifamily Mortgage, Deed of Trust,
or Deed to Secure Debt dated the same date as the Note (the "SECURITY
INSTRUMENT"), encumbering the real property described in the Security Instrument
(the "PROPERTY").
B. As a condition to making the Loan to Borrower, Lender requires
that the Guarantor execute this Guaranty.
NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower,
and in consideration thereof, Guarantor agrees as follows:
1. "Indebtedness" and other capitalized terms used but not
defined in this Guaranty shall have the meanings assigned to them in the
Security Instrument.
2. Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to Lender the full and prompt payment when due, whether at maturity
or earlier, by reason of acceleration or otherwise, and at all times thereafter,
and the full and prompt performance when due, of all of the following:
(a) All amounts for which Borrower is personally liable under
Paragraphs 9(c) through 9(f) of the Note.
(b) The payment and performance of all of Borrower's obligations
under Section 18 of the Security Instrument.
(c) The entire Indebtedness, in the event that (i) Borrower
voluntarily files for bankruptcy protection under the United
States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency proceeding or
<PAGE> 2
other similar proceeding pursuant to any other federal or
state law affecting debtor and creditor rights, or (ii) an
order for relief is entered against Borrower in any
involuntary bankruptcy filing by any creditor of Borrower
(other than Lender) pursuant to the United States Bankruptcy
Code or other federal or state law affecting debtor and
creditor rights.
(d) All costs and expenses, including reasonable fees and out of
pocket expenses of attorneys and expert witnesses, incurred by
Lender in enforcing its rights under this Guaranty.
For purposes of determining Guarantor's liability under this Guaranty, all
payments made by Borrower with respect to the Indebtedness and all amounts
received by Lender from the enforcement of its rights under the Security
Instrument shall be applied first to the portion of the Indebtedness for which
neither Borrower nor Guarantor has personal liability.
3. The obligations of Guarantor under this Guaranty shall survive
any foreclosure proceeding, any foreclosure sale, any delivery of any deed in
lieu of foreclosure, and any release of record of the Security Instrument, and,
in addition, the obligations of Guarantor relating to Borrower's obligations
under Section 18 of the Security Instrument shall survive any repayment or
discharge of the Indebtedness.
4. Guarantor's obligations under this Guaranty constitute an
unconditional guaranty of payment and not merely a guaranty of collection.
5. The obligations of Guarantor under this Guaranty shall be
performed without demand by Lender and shall be unconditional irrespective of
the genuineness, validity, regularity or enforceability of the Note, the
Security Instrument, or any other Loan Document, and without regard to any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or a guarantor. Guarantor hereby waives the benefit of all principles
or provisions of law, statutory or otherwise, which are or might be in conflict
with the terms of this Guaranty and agrees that Guarantor's obligations shall
not be affected by any circumstances, whether or not referred to in this
Guaranty, which might otherwise constitute a legal or equitable discharge of a
surety or a guarantor. Guarantor hereby waives the benefits of any right of
discharge under any and all statutes or other laws relating to guarantors or
sureties and any other rights of sureties and guarantors thereunder. Without
limiting the generality of the foregoing, Guarantor hereby waives, to the
fullest extent permitted by law, diligence in collecting the Indebtedness,
presentment, demand for payment, protest, all notices with respect to the Note
and this Guaranty which may be required by statute, rule of law or otherwise to
preserve Lender's rights against Guarantor under this Guaranty, including, but
not limited to, notice of acceptance, notice of any amendment of the Loan
Documents, notice of the occurrence of any default or Event of Default,
0381556.02
- --------------------------------------------------------------------------------
EXCEPTIONS TO NON-RECOURSE GUARANTY PAGE 2
(FREDDIE MAC) -- GEORGIA
G3GAFR02.DOC
<PAGE> 3
notice of intent to accelerate, notice of acceleration, notice of dishonor,
notice of foreclosure, notice of protest, and notice of the incurring by
Borrower of any obligation or indebtedness. Guarantor also waives, to the
fullest extent permitted by law, all rights to require Lender to (a) proceed
against Borrower or any other guarantor of Borrower's payment or performance
with respect to the Indebtedness (an "OTHER GUARANTOR") (b) if Borrower or any
Other Guarantor is a partnership, proceed against any general partner of
Borrower or the Other Guarantor, (c) proceed against or exhaust any collateral
held by Lender to secure the repayment of the Indebtedness, or (d) pursue any
other remedy it may now or hereafter have against Borrower, or, if Borrower is a
partnership, any general partner of Borrower. In addition, Guarantor waives the
benefit of O.C.G.A. ss. 10-7-24.
6. At any time or from time to time and any number of times,
without notice to Guarantor and without affecting the liability of Guarantor,
(a) the time for payment of the principal of or interest on the Indebtedness may
be extended or the Indebtedness may be renewed in whole or in part; (b) the time
for Borrower's performance of or compliance with any covenant or agreement
contained in the Note, the Security Instrument or any other Loan Document,
whether presently existing or hereinafter entered into, may be extended or such
performance or compliance may be waived; (c) the maturity of the Indebtedness
may be accelerated as provided in the Note, the Security Instrument, or any
other Loan Document; (d) the Note, the Security Instrument, or any other Loan
Document may be modified or amended by Lender and Borrower in any respect,
including, but not limited to, an increase in the principal amount; and (e) any
security for the Indebtedness may be modified, exchanged, surrendered or
otherwise dealt with or additional security may be pledged or mortgaged for the
Indebtedness.
7. If more than one person executes this Guaranty, the
obligations of those persons under this Guaranty shall be joint and several.
Lender, in its sole and absolute discretion, may (a) bring suit against
Guarantor, or any one or more of the persons constituting Guarantor, and any
Other Guarantor, jointly and severally, or against any one or more of them; (b)
compromise or settle with any one or more of the persons constituting Guarantor
for such consideration as Lender may deem proper; (c) release one or more of the
persons constituting Guarantor, or any Other Guarantor, from liability; and (d)
otherwise deal with Guarantor and any Other Guarantor, or any one or more of
them, in any manner, and no such action shall impair the rights of Lender to
collect from Guarantor any amount guaranteed by Guarantor under this Guaranty.
Nothing contained in this paragraph shall in any way affect or impair the rights
or obligations of Guarantor with respect to any Other Guarantor.
8. Any indebtedness of Borrower held by Guarantor now or in the
future is and shall be subordinated to the Indebtedness and any such
indebtedness of Borrower shall be collected, enforced and received by Guarantor,
as trustee for Lender, but without reducing or affecting in any manner the
liability of Guarantor under the other provisions of this Guaranty.
0381556.02
- --------------------------------------------------------------------------------
EXCEPTIONS TO NON-RECOURSE GUARANTY PAGE 3
(FREDDIE MAC) -- GEORGIA
G3GAFR02.DOC
<PAGE> 4
9. Guarantor shall have no right of, and hereby waives any claim
for, subrogation or reimbursement against Borrower or any general partner of
Borrower by reason of any payment by Guarantor under this Guaranty, whether such
right or claim arises at law or in equity or under any contract or statute,
until the Indebtedness has been paid in full and there has expired the maximum
possible period thereafter during which any payment made by Borrower to Lender
with respect to the Indebtedness could be deemed a preference under the United
States Bankruptcy Code.
10. If any payment by Borrower is held to constitute a preference
under any applicable bankruptcy, insolvency, or similar laws, or if for any
other reason Lender is required to refund any sums to Borrower, such refund
shall not constitute a release of any liability of Guarantor under this
Guaranty. It is the intention of Lender and Guarantor that Guarantor's
obligations under this Guaranty shall not be discharged except by Guarantor's
performance of such obligations and then only to the extent of such performance.
11. Guarantor shall from time to time, upon request by Lender,
deliver to Lender such financial statements as Lender may reasonably require.
12. Lender may assign its rights under this Guaranty in whole or
in part and upon any such assignment, all the terms and provisions of this
Guaranty shall inure to the benefit of such assignee to the extent so assigned.
The terms used to designate any of the parties herein shall be deemed to include
the heirs, legal representatives, successors and assigns of such parties; and
the term "LENDER" shall include, in addition to Lender, any lawful owner, holder
or pledgee of the Note.
13. This Guaranty and the other Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements. There are no unwritten oral
agreements between the parties. All prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are merged
into this Guaranty and the other Loan Documents. Guarantor acknowledges that it
has received copies of the Note and all other Loan Documents. Neither this
Guaranty nor any of its provisions may be waived, modified, amended, discharged,
or terminated except by an agreement in writing signed by the party against
which the enforcement of the waiver, modification, amendment, discharge, or
termination is sought, and then only to the extent set forth in that agreement.
14. Guarantor agrees that any controversy arising under or in
relation to this Guaranty shall be litigated exclusively in the jurisdiction
where the Land is located (the "PROPERTY JURISDICTION"). The state and federal
courts and authorities with jurisdiction in the Property
0381556.02
- --------------------------------------------------------------------------------
EXCEPTIONS TO NON-RECOURSE GUARANTY PAGE 4
(FREDDIE MAC) -- GEORGIA
G3GAFR02.DOC
<PAGE> 5
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Guaranty, the Note, the Security
Instrument or any other Loan Document. Guarantor irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
15. GUARANTOR AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY
JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS GUARANTY OR THE RELATIONSHIP
BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH
THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Guaranty:
|__| Exhibit A Modifications to Guaranty
0381556.02
- --------------------------------------------------------------------------------
EXCEPTIONS TO NON-RECOURSE GUARANTY PAGE 5
(FREDDIE MAC) -- GEORGIA
G3GAFR02.DOC
<PAGE> 6
IN WITNESS WHEREOF, Guarantor has signed and delivered this Guaranty or
has caused this Guaranty to be signed and delivered by its duly authorized
representative.
ROBERTS REALTY INVESTORS, INC., a
Georgia corporation
By: /s/ Charles S. Roberts
------------------------------
Title:
Attest: /s/ Charles R. Elliott
--------------------------
Title: CFO
[CORPORATE SEAL]
0381556.02
- --------------------------------------------------------------------------------
EXCEPTIONS TO NON-RECOURSE GUARANTY PAGE 6
(FREDDIE MAC) -- GEORGIA
G3GAFR02.DOC
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3RD QUARTER
1998 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 3RD QUARTER 10-Q.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 7,515,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,515,000
<PP&E> 133,963,000
<DEPRECIATION> 15,424,000
<TOTAL-ASSETS> 127,437,000
<CURRENT-LIABILITIES> 3,813,000
<BONDS> 80,180,000
0
0
<COMMON> 47,000
<OTHER-SE> 27,236,000
<TOTAL-LIABILITY-AND-EQUITY> 127,437,000
<SALES> 12,512,000
<TOTAL-REVENUES> 12,512,000
<CGS> 0
<TOTAL-COSTS> 9,296,000
<OTHER-EXPENSES> 1,288,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,281,000
<INCOME-PRETAX> 1,223,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,223,000
<DISCONTINUED> 0
<EXTRAORDINARY> (497,000)
<CHANGES> 0
<NET-INCOME> 726,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
