<PAGE>
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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
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(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-12269
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HOMESTEAD VILLAGE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------
MARYLAND 74-2770966
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2100 RIVEREDGE PARKWAY, 9TH FLOOR
ATLANTA, GEORGIA 30328
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(770) 303-2200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of the Registrant's common stock
as of November 12, 1998 was: 38,262,996
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HOMESTEAD VILLAGE INCORPORATED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
NUMBER
PAGE
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<S> <C>
PART I. Condensed Financial Information
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) - September 30, 1998 and December 31, 1997........... 3
Condensed Statements of Operations (unaudited) - Three- and nine-month Periods Ended
September 30, 1998 and 1997............................................................... 4
Condensed Statements of Cash Flows (unaudited) - Nine-month Periods Ended September 30,
1998 and 1997............................................................................. 5
Notes to Condensed Financial Statements (unaudited)....................................... 6
Report of Independent Public Accountants.................................................. 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K......................................................... 20
</TABLE>
2
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED BALANCE SHEETS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
ASSETS September 30, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (including restricted cash of $167 in 1998 and $657 in 1997). $ 12,760 $ 2,974
Accounts receivable, net of allowance of $105 in 1998 and $81 in 1997.................. 5,264 1,970
Other current assets................................................................... 5,153 732
-------------- -------------
Total current assets.............................................................. 23,177 5,676
-------------- -------------
Property and equipment...................................................................... 1,122,522 733,321
Less accumulated depreciation............................................................... (37,665)
(17,824)
-------------- -------------
Net investment in property and equipment.................................................... 1,084,857 715,497
-------------- -------------
Deposits and pursuit costs, including $5,114 of funds with title companies for property
acquisitions in 1998 and $7,697 in 1997.................................................. 11,231 12,901
Deferred loan costs, net of accumulated amortization of $32,983 in 1998 and $43,297 in
1997 1,993 632
Trademark and intangibles, net of accumulated amortization of $3,569 in 1998 and $1,768
in 1997 44,899 44,447
Other assets ............................................................................... 5,420 4,796
-------------- -------------
Total assets............................................................................. $ 1,171,577 $ 783,949
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit........................................................................ $ 292,580 $ 96,808
Mortgage note payable.................................................................. 122,028 --
Development costs payable, including retainage of $18,107 in 1998 and $21,966 in
1997 28,848 34,079
Due to affiliate....................................................................... 339 133
Accrued interest payable to affiliates................................................. 6,972 2,540
Accrued real estate taxes.............................................................. 6,146 2,900
Accounts payable and other accrued expenses............................................ 16,505 8,882
-------------- -------------
Total current liabilities......................................................... 473,418 145,342
Convertible mortgage notes payable to affiliates............................................ 221,334 301,606
Other long-term liabilities................................................................. 8,067 8,070
-------------- -------------
Total liabilities................................................................. 702,819 455,018
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value, 249,823 shares authorized, 38,263 shares
issued and outstanding in 1998 and 27,805 shares issued and outstanding
in
1997 383 278
Preferred stock, 177 shares authorized, none issued.................................... -- --
Additional paid-in capital............................................................. 474,554 318,667
Retained earnings (accumulated deficit)................................................ (5,330) 13,098
Less shares in escrow.................................................................. -- (2,253)
Less deferred compensation............................................................. (849) (859)
-------------- -------------
Total shareholders' equity........................................................ 468,758 328,931
-------------- --------------
Total liabilities and shareholders' equity........................................ $ 1,171,577 $ 783,949
============== =============
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED NINE-MONTH PERIODS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- -----------------------------------
1998 1997 1998 1997
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenues:
Room revenue..................................$ 38,345 $ 15,922 $ 97,781 $ 40,421
Other revenue................................. 1,858 285 4,277 829
----------------- ------------- -------------- -----------
Total revenues........................... 40,203 16,207 102,058 41,250
----------------- ------------- -------------- -----------
Operating expenses:
Property operating expenses................... 17,158 6,991 43,456 17,369
Corporate operating expenses.................. 6,347 3,840 16,368 10,988
Depreciation and amortization................. 8,368 3,640 22,227 7,831
----------------- ------------- -------------- -----------
Total operating expenses................. 31,873 14,471 82,051 36,188
----------------- ------------- -------------- -----------
Operating income................................... 8,330 1,736 20,007 5,062
Interest income.................................... 203 129 707 421
Interest expense, net of capitalized interest...... (6,679) -- (13,798) --
----------------- ------------- -------------- -----------
Earnings before income taxes and extraordinary
item............................................. 1,854 1,865 6,916 5,483
Provision for income taxes......................... -- -- -- --
----------------- ------------- -------------- -----------
Earnings before extraordinary item................. 1,854 1,865 6,916 5,483
Extraordinary item - loss on early extinguishment
of debt.......................................... (25,344) -- (25,344) --
----------------- ------------- -------------- -----------
Net earnings (loss)................................$ (23,490) $ 1,865 $ (18,428) $ 5,483
================= ============== =============== ============
Basic weighted average shares outstanding.......... 38,263 24,936 37,430 22,381
================= ============== =============== ============
Diluted weighted average shares outstanding........ 38,263 46,218 37,430 40,498
================= ============== =============== ============
Earnings (loss) per share:
Basic earnings before extraordinary item...........$ 0.05 $ 0.07 $ 0.19 $ 0.24
Extraordinary item-loss on early extinguishment of
debt ............................................ (0.66) -- (0.68) --
================= ============== =============== ============
Basic earnings (loss)..............................$ (0.61) $ 0.07 $ (0.49) $ 0.24
================= ============== =============== ============
Diluted earnings before extraordinary item.........$ 0.05 $ 0.04 $ 0.19 $ 0.14
Extraordinary item-loss on early extinguishment
of debt ......................................... (0.66) -- (0.68) --
----------------- -------------- --------------- ------------
Diluted earnings (loss)............................$ (0.61) $ 0.04 $ (0.49) $ 0.14
================= ============== =============== ============
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
4
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE-MONTH PERIODS ENDED
SEPTEMBER 30,
-------------------------------
1998 1997
------------ -----------
<S> <C> <C>
Operating activities:
Net earnings (loss)........................................................... $ (18,428) $ 5,483
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Extraordinary item - loss on early extinguishment of debt................. 25,344 --
Depreciation and amortization............................................. 22,227 7,831
Deferred compensation..................................................... 510 351
Amortization of deferred loan costs....................................... 2,665 --
Amortization of prepaid rent.............................................. -- 225
Change in assets and liabilities:
Increase in accounts receivable........................................... (3,294) (1,809)
Increase in other current assets.......................................... (4,421) (448)
Increase in accrued real estate taxes..................................... 3,246 843
Increase in accrued interest on convertible mortgage notes................ 4,432 --
Increase in accounts payable and other accrued expenses................... 7,623 6,249
Increase (decrease) in due to affiliate................................... 206 (15)
-------------- --------------
Net cash provided by operating activities............................. 40,110 18,710
-------------- --------------
Investing activities:
Investment in properties, excluding development costs payable............. (393,185) (255,081)
Decrease (increase) in deposits and pursuit costs......................... 1,670 (3,682)
Increase in other assets.................................................. (1,207) (3,619)
-------------- --------------
Net cash used in investing activities................................. (392,722) (262,382)
-------------- --------------
Financing activities:
Proceeds from lines of credit............................................. 325,772 27,408
Payments on lines of credit............................................... (130,000) --
Deferred loan costs for line of credit.................................... (3,281) (1,049)
Proceeds from convertible mortgage notes payable.......................... 17,013 158,250
Payment of convertible mortgage notes payable............................. (98,028) --
Proceeds from mortgage note payable....................................... 122,028 --
Proceeds from sale of shares, net of expenses............................. 154,241 --
Payment to extinguish debt................................................ (25,344) --
Payments on other long-term liabilities................................... (3) --
Repurchase of stock....................................................... -- (126)
Exercise of warrants for common stock..................................... -- 56,827
-------------- --------------
Net cash provided by financing activities............................. 362,398 241,310
-------------- --------------
Net increase in cash and cash equivalents......................................... 9,786 (2,362)
Cash and cash equivalents, beginning of period.................................... 2,974 7,415
-------------- --------------
Cash and cash equivalents, end of period.......................................... $ 12,760 $ 5,053
============== ==============
Non-cash investing and financing transactions:
Increase in property and equipment, and development cost payable.......... $ 5,231 $ 20,291
============== ==============
Increase in property and equipment, and accrued interest payable to $ -- $ 6,055
============== ==============
Increase in property and equipment from capitalization of loan costs...... $ 1,249 $ 1,877
============== ==============
Increase in trademark and intangibles arising from release of shares in $ 2,253 $ 14,488
============== ==============
Loan costs resulting from issuance of convertible mortgage debt........... $ 1,251 $ 10,830
============== ==============
Decrease in deferred tax asset and deferred tax liability................. $ -- ($ 1,657)
============== ==============
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1--GENERAL
The financial statements of Homestead Village Incorporated ("Homestead") as
of September 30, 1998 and for the three and nine-month periods ended September
30, 1998 and 1997, are unaudited and certain information and footnote
disclosures normally included in financial statements have been omitted. While
management of Homestead believes that the disclosures presented are adequate,
these interim financial statements should be read in conjunction with the
financial statements and notes included in Homestead's 1997 Annual Report on
Form 10-K.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of Homestead's financial
statements for the interim periods presented. The results of operations for the
three and nine-month periods ended September 30, 1998 and 1997 are not
necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In April 1998 the Accounting Standards Executive Committee issued
Statement of Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up
Activities" establishing accounting standards requiring the expensing of
organizational, pre-opening, and start-up costs. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998. Restatement of financial
statements for earlier periods is prohibited. Upon adoption, any unamortized
organizational, pre-opening and start-up costs will be written off and charged
to first quarter 1999 operations as a cumulative effect of adoption of an
accounting standard. Homestead is in the process of evaluating SOP 98-5 and will
adopt the standard in the beginning of its 1999 fiscal year. The impact of
adoption of SOP 98-5 on Homestead's results of operations and financial position
has not been quantified.
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
Completed properties:
Land $ 174,856 $ 100,118
Buildings and improvements........... 572,011 329,045
Furniture, fixtures and equipment.... 93,178 49,773
---------------- -----------------
840,045 478,936
Properties under construction............. 159,158 213,283
Properties in planning and owned.......... 118,517 32,984
Land held for future development.......... -- 1,463
Land held for sale........................ 4,802 6,655
---------------- -----------------
Total........................... $ 1,122,522 $ 733,321
================ =================
</TABLE>
6
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--DEBT
Lines of Credit
On April 24, 1998 Homestead renewed its existing revolving line of
credit facility with Commerzbank AG ("CAG"), as agent for the lenders, for a
one-year term, with an increase in total borrowing capacity to $150 million,
subject to collateral requirements. Borrowings bear interest at the Eurodollar
rate plus 1.5% to 2.5% per annum, depending upon the percentage leverage of
borrowings outstanding to the amount of qualifying collateral. Alternatively,
borrowings bear interest at a base rate defined as the higher of prime rate plus
a margin of 0.5% to 1.5% or the federal funds rate plus a margin of 1% to 2%,
with the margin dependent on the percentage leverage of borrowings outstanding
to the amount of qualifying collateral. Average unfunded balances bear a
commitment fee of 0.375% per annum.
On April 24, 1998 Homestead also entered into a separate $50 million
one-year revolving line of credit facility with CAG of which $30 million was
available for borrowing on an unsecured basis through September 30, 1998.
Subsequent to September 30, 1998, borrowings on the $50 million line of credit
are subject to collateral requirements. Borrowings bear interest at the
Eurodollar rate plus 2.75% per annum or, alternatively, at a base rate defined
as the higher of prime rate plus 1.75% or the federal funds rate plus 2.25%.
Average unfunded balances bear a commitment fee of 0.5% per annum.
On June 15, 1998 Homestead entered into an additional $200 million line of
credit facility with CAG which bears interest at the Eurodollar rate plus 1%
(1.25% after six months) or at a base rate of prime (prime plus 0.25% after six
months). The average unfunded balance bears a commitment fee of 0.25% per annum.
The line expires February 23, 1999. Homestead has obtained a subscription
agreement from Security Capital for $200 million of Homestead subordinated
debentures to secure this obligation. If the subscription is called by Homestead
or Homestead receives proceeds from any offering of securities, the proceeds
must be used to first repay the lines of credit to CAG and second to fund
projects under development which secure the other CAG credit facilities. The
debentures would bear interest at a rate of 0.25% over the rate Homestead incurs
under the $50 million credit facility with CAG. Homestead may repurchase the
debentures with the proceeds of an equity offering within 90 days of issuance of
the debentures, otherwise the debentures convert to Homestead common stock at
the lower of the 20-day average trading price of Homestead common stock
immediately before execution of the subscription agreement or immediately before
the 90th day after issuance. The subscription agreement expires the earlier of
June 30, 1999 or two weeks after termination of the $200 million credit
agreement. The subscription obligation will be reduced or terminated to the
extent Homestead issues equity securities to any third party, or to Security
Capital pursuant to a separate offering and the proceeds are used to repay the
$200 million credit facility and any remaining proceeds are used to fund
projects under development which secure the other CAG credit facilities. In
conjunction with Security Capital's entering into the subscription agreement,
Homestead paid an arrangement fee to Security Capital of $600,000.
The CAG lines require maintenance of certain financial covenants,
specifically, aggregate indebtedness of no more than 55% of gross asset value,
as defined, or indebtedness secured by a lien of no more than 50% of gross asset
value, as defined, in each case excluding indebtedness outstanding under the
credit agreement entered into on June 15, 1998. Homestead must also maintain a
minimum debt service coverage ratio of earnings before interest, income taxes,
depreciation, amortization and gains or losses on sales of assets to cash debt
service, as defined, of no less than 1.25 to 1 for the second quarter of 1998,
and, including the $200 million facility, no less than 1.4 to 1 for third and
fourth quarters 1998 and 1.5 to 1 for first quarter of 1999, and excluding the
$200 million facility, no less than 1.5 to 1 for third quarter 1998, 1.6 to 1
for fourth quarter 1998, and no less than 1.75 to 1 thereafter on a quarterly
basis, and not allow stockholders equity to be less than $325 million.
Additionally, Homestead will not enter into any commitment for purchases of land
or construction of projects if such obligations exceed the available borrowing
capacity under all of the lines and internally generated excess funds. The
covenants also restrict payment of dividends without lender approval.
7
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The lines of credit covenant ratios were amended in conjunction with
Homestead entering into the new mortgage note (described below). As amended,
Homestead may incur indebtedness secured by a lien up to 55% of gross asset
value through the earlier of the date the new mortgage note is repaid or October
1, 1998 or, if the $200 line of credit has been repaid, until the earlier of
June 30, 1999 or the date the new mortgage note is repaid. Further, until the
earlier of June 30, 1999 or the date the new mortgage note is repaid, the debt
service coverage ratio, including debt outstanding under the $200 million
facility, is required to be no less than 1.3 to 1 for third and fourth quarters
1998 and 1.4 to 1 for first quarter of 1999, and excluding the $200 million
facility, is required to be no less than 1.3 to 1 for third quarter 1998, 1.4 to
1 for fourth quarter 1998, and no less than 1.6 to 1 for the first quarter of
1999. Homestead was in compliance with all such covenants as of September 30,
1998. See Note 8 regarding the expected effect on compliance with the debt
service coverage ratio in fourth quarter 1998 due to anticipated expenses of
reorganization of Homestead's development effort.
Convertible Mortgage Notes Payable
At September 30, 1998 Homestead owed convertible mortgage notes to
Archstone Communities Trust ("Archstone"), formerly Security Capital Pacific
Trust ("PTR"), an affiliate, of $221,333,620. The notes are collateralized by
Homestead properties (54 Homestead properties at $360 million of historical cost
mortgaged to Archstone at September 30, 1998). The notes accrue interest at 9.0%
on the principal amount, and require interest only payments every six months on
May 28 and November 28. The notes are due October 31, 2006, and are callable on
or after May 28, 2001. The notes are convertible, at the option of the holder,
into shares of Homestead common stock at a conversion ratio equal to one share
of common stock for every $11.50 of principal amount outstanding. Deferred
financing costs and the premium and discount on the respective fundings have
been fully amortized. No further funding commitment is available under the
mortgage notes.
Mortgage Note
On July 6, 1998, Homestead entered into a mortgage loan purchase agreement
with Security Capital Atlantic Incorporated ("ATLANTIC") and Merrill Lynch
Mortgage Capital Inc ("MLMC") whereby $98 million of Homestead convertible
mortgage notes held by ATLANTIC were modified to, among other things, eliminate
their convertibility feature in exchange for a payment of $21.4 million from
Homestead to ATLANTIC. The amount paid to ATLANTIC was based on trailing market
prices of Homestead common stock at the time the agreement was entered into,
which exceeded the conversion price of the convertible mortgage notes at that
date. Homestead funded the payment with the proceeds received from the sale of
$24 million of 7.5% convertible subordinated debentures. Also pursuant to the
mortgage loan purchase agreement ATLANTIC sold the amended notes to MLMC for $98
million. On August 7, 1998, Homestead converted the $98 million of mortgage
notes and the $24 million of 7.5% convertible subordinated debentures into a
$122 million mortgage of a newly formed special purpose subsidiary of Homestead.
The note is collateralized by 26 Homestead properties (totaling $227 million of
historical cost at September 30, 1998) which were formerly collateral for the
ATLANTIC mortgage notes. The $122 million mortgage note matures June 30, 1999
and provides for interest only monthly payments of LIBOR plus 1.70% through
September 30, 1998, LIBOR plus 2.0% through November 30, 1998, and LIBOR plus
2.25% thereafter. MLMC has mutually exclusive extension rights to either give
notice by December 15, 1998 to extend the maturity of the mortgage note to June
30, 2001 (the "2 Year Extension Notice") or give notice by June 10, 1999 to
extend the maturity of the mortgage note to at least June 30, 2006 or as late as
September 30, 2009 (the "7 - 10 Year Extension Notice"). If extended, the note
will bear interest at LIBOR plus 2.5% (3.5% if the collateral properties do not
generate net operating income, as defined, of $18 million for the year ended
June 30, 1999). No assurance can be given that MLMC will elect to extend the
mortgage note. Homestead may prepay the mortgage note in whole or in part prior
to June 30, 1999 or, if the 2 Year Extension Notice is given, Homestead may
prepay in whole or in part by June 30, 2001.
8
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The transaction resulted in an early extinguishment of debt measured as the
difference between the $98 million carrying amount of the original mortgage
notes to ATLANTIC and the amount paid to extinguish the debt, including
transaction costs. Such loss on extinguishment of debt and transaction costs
amounted to $25.3 million and was recorded as an extraordinary item in third
quarter 1998.
The elimination of the conversion option attached to the mortgage notes
reduced Homestead's contingently issuable shares of common stock by
approximately 8.5 million shares.
Interest
Homestead incurred total interest cost of $34,146,000 and $59,559,000 for
the nine-month periods ended September 30, 1998 and 1997, respectively, of which
$20,348,000 and $59,559,000 were capitalized, respectively. Interest paid in
cash in the nine-month periods ended September 30, 1998 and 1997 was $24,100,000
and $6,359,200, respectively.
NOTE 4--SHAREHOLDERS' EQUITY
Shelf Offering
On November 10, 1998, Homestead filed a shelf registration statement with
the Securities and Exchange Commission, which has not yet been declared
effective, for up to $356,402,600 of any combination of preferred stock, debt
securities and securities warrants and up to a total of $500,000,000 including
common stock. Once effective, the securities issuable under the registration may
be offered from time to time, in amounts, at prices and on terms to be set forth
at the time of the offerings.
Rights Offering
On January 15, 1998, Homestead completed a Rights Offering for 10,426,840
common shares at $15 per share resulting in gross proceeds of $156,402,600.
After costs of the offering, which included a fee of 1% of gross proceeds to
Security Capital Markets Group Incorporated, a wholly-owned subsidiary of
Security Capital, net proceeds to Homestead were approximately $154.2 million.
Proceeds were used to repay outstanding balances on Homestead's lines of credit
and for land acquisition and development costs.
Security Capital, Homestead's majority shareholder, purchased 8,429,225
shares in the Rights Offering (80.8% of the offered shares) at the same price
paid by the public. Upon completion of the Rights Offering Security Capital
owned 69.3% of Homestead's outstanding common shares.
Per Share Data
On December 31, 1997 Homestead adopted Financial Accounting Standards Board
Statement No. 128, Earnings per Share ("SFAS 128"), which requires a
presentation of basic earnings per share, calculated by dividing net earnings
available to common shareholders by weighted average common shares outstanding
and a presentation of diluted earnings per share, calculated by dividing
adjusted earnings available to common shareholders, assuming dilution, by
adjusted weighted average common shares outstanding. Adjusted earnings available
for common shareholders adds back all net interest expense from convertible
mortgage notes. Adjusted weighted average shares outstanding includes the
dilutive effect of options and warrants using the treasury stock method and the
dilutive effect of the convertible mortgage notes. In the three and nine-month
periods ended September 30, 1998 the effect of the loss on early extinguishment
of debt results in basic loss per share being the most dilutive result. In the
three and nine-month periods ended September 30, 1997 the restatement of
earnings per share required by SFAS 128 resulted in no change and an increase of
$0.02, respectively, in basic earnings per share from the prior presentation and
no change in diluted earnings per share from the prior presentation.
The following is a reconciliation of the denominator used to calculate
basic earnings per common share to the denominator used to calculate diluted
earnings per common share under SFAS No. 128 for the periods indicated (in
thousands, except per common share amounts):
9
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Earnings (loss) attributable to common shares.................. ($ 23,490) $ 1,865 ($ 18,428)$ 5,483
=========== =========== =========== ===========
Basic weighted average shares outstanding...................... 38,263 24,936 37,430 22,381
Incremental options and warrants........................... -- 1,530 -- 2,635
Conversion of convertible mortgage notes................... -- 19,752 -- 15,482
----------- ----------- ----------- -----------
Adjusted weighted average shares outstanding 38,263 46,218 37,430 40,498
=========== =========== =========== ===========
Earnings (loss) per share attributable to common shares:
Basic...................................................... ($ 0.61)$ 0.07 ($ 0.49) $ 0.24
=========== =========== =========== ===========
Diluted.................................................... ($ 0.61) $ 0.04 ($ 0.49) $ 0.14
=========== =========== =========== ===========
</TABLE>
NOTE 5--INCOME TAXES
Deferred tax assets relate primarily to: (1) the difference in the carrying
amount of deferred financing costs recognized at formation and in connection
with subsequent fundings of convertible mortgage notes payable for financial
reporting purposes and the amount recognized for tax purposes; (2) the
difference in the carrying amount of the convertible mortgage notes and other
liabilities for financial reporting purposes and the amount recognized for tax
purposes; and (3) tax net operating loss. Deferred tax liabilities relate
primarily to the difference in the carrying amount and the methods of
depreciation of certain depreciable assets for financial reporting purposes and
the amount recognized for tax purposes. A valuation allowance has been
recognized to offset the net deferred tax assets, due to uncertainty of
realization of those deferred tax assets in future years.
At September 30, 1998, Homestead had, for federal income tax reporting
purposes, estimated net operating loss carryforwards of approximately
$73,000,000, which expire $4,200,000 in the year 2011, $24,800,000 in the year
2017 and $44,000,000 in the year 2018.
NOTE 6--ADMINISTRATIVE SERVICES AGREEMENT
Homestead and Security Capital have an administrative services
agreement (the "Administrative Services Agreement"), pursuant to which Security
Capital provides Homestead with administrative services with respect to certain
aspects of Homestead's business. These services include, but are not limited to,
insurance administration, accounts payable administration, internal audit, cash
management, human resources, management information systems, tax and legal
administration, research, shareholder communications and investor relations. The
fees payable to Security Capital are based on identifiable costs incurred by
Security Capital on behalf of Homestead plus 20% to cover overhead. Any
arrangements under the Administrative Services Agreement for the provision of
services are required to be commercially reasonable and on terms not less
favorable than those which could be obtained from unaffiliated third parties.
Total administrative services fees for the nine-month periods ended September
30, 1998 and 1997 were $3,084,000 and $1,620,000, respectively. The
Administrative Services Agreement, which expires December 31, 1998, is renewable
for a one-year term, subject to approval by a majority of the independent
members of the Homestead Board.
Homestead believes its relationship with Security Capital under this
agreement provides it with certain advantages, including access to greater
quality and depth of management personnel and resources, highly focused
research, information systems, insurance, cash management and legal support
provided at substantial economies of scale.
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--COMMITMENTS AND CONTINGENCIES
Unfunded Development Commitments
At September 30, 1998, Homestead had approximately $113 million of unfunded
commitments for developments under construction. Homestead anticipates
completing development of properties under construction utilizing present
financing sources, cash on hand, and cash flow from operations.
Finder's Agreement
Homestead has a series of agreements with an unaffiliated person ("Finder")
who developed the Homestead Village concept and has performed certain services.
The agreements which expire February 5, 2043, provide for payments to Finder as
follows: (i) $535,000 annually with respect to the four properties for which
Finder assisted in the location, development and initial operations; (ii) an
annual amount of $7,500 per property (subject to certain conditions as defined
in the agreements) for assistance in site location with respect to the first 35
properties constructed (other than the four properties referred to in (i)
above); (iii) 20% of the net proceeds as defined per the agreements, upon the
sale of the four properties noted in (i) above to an unaffiliated third party;
and (iv) 10% of the net proceeds as defined per the agreements, upon the sale of
the additional 35 properties to an unaffiliated third party. No such sales have
occurred to date. Total payments under these agreements for the nine-month
periods ended September 30, 1998 and 1997 were $553,300 and $545,200,
respectively.
NOTE 8--SUBSEQUENT EVENT
In fourth quarter 1998, in light of the difficult environment in capital
markets and the resulting limited availability of new financing for additional
commitments for developments, Homestead reorganized its internal development
department and terminated approximately 40 full-time persons. In addition,
Homestead is reviewing its land sites owned and its contracts for purchases of
development sites and is aligning its decisions to develop and/or acquire sites
for development with its ability to obtain specific financings or its ability to
use cash flow from operations. In conjunction with the severance of development
personnel and changed expectations to pursue development of certain sites owned
or under contract for acquisition, Homestead anticipates recording an accrual
for expenses of severance and abandoned pursuits totaling approximately $6 to $7
million. As a result of the reorganization expense, Homestead anticipates it
will not meet its bank lines of credit debt service coverage ratio covenant for
fourth quarter 1998. Homestead has initiated discussions with the banks to seek
a waiver of this covenant for fourth quarter 1998.
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Homestead Village Incorporated:
We have made a review of the accompanying condensed consolidated balance
sheet of Homestead Village Incorporated (a Maryland corporation) and
subsidiaries as of September 30, 1998 and the related condensed consolidated
statements of operations for the three and nine-month periods ended September
30, 1998 and the related condensed consolidated statement of cash flows for the
nine-month period ended September 30, 1998. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of obtaining an understanding of the
system for the preparation of interim financial information, applying analytical
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Homestead Village Incorporated and
subsidiaries as of December 31, 1997, and in our report dated January 30, 1998,
we expressed an unqualified opinion on that balance sheet. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 23, 1998
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with Homestead's
1997 Annual Report on Form 10-K (the "1997 Form 10-K") as well as the financial
statements and the notes thereto in Item 1 of this report. In addition to
historical information, this discussion contains forward-looking statements
under the federal securities laws. These statements are based on current
expectations, estimates and projections about the industry and markets in which
Homestead operates, management's beliefs and assumptions made by management.
Forward-looking statements are not guarantees of future performance and involve
certain risks and uncertainties which are difficult to predict. Actual operating
results may be affected by changes in national and local economic conditions,
competitive market conditions, changes in financial markets or interest rates
that could adversely affect Homestead's cost of capital and its ability to meet
its financing needs and obligations, weather, obtaining governmental approvals
and meeting development schedules, and therefore, may differ materially from
what is expressed or forecasted in this discussion.
Homestead Village(R) is a registered trademark of Homestead Village
Incorporated and all references to the term "Homestead Village" herein shall
include a reference to such registered trademark. For analysis purposes
Homestead categorizes its operating properties (which include all properties not
under construction or in pre-development planning) as either "stabilized" or
"pre-stabilized." For purposes of this report, the term "stabilized" means those
properties which have been open for 24 weeks or achieved 80% occupancy as of the
beginning of a period, and "pre-stabilized" means all other operating
properties.
OVERVIEW
Homestead's overall results of operations and financial position are
significantly influenced by its development activity. During the nine-month
period ended September 30, 1998, Homestead started construction on 15 properties
consisting of 1,910 rooms and completed 40 properties consisting of 5,318 rooms.
As of September 30, 1998, Homestead has 111 Homestead Village properties in
operation representing in the aggregate 14,991 rooms in 35 cities and had 25
Homestead Village properties under construction totaling 3,233 rooms within 10
of these cities as well as 2 additional cities. Homestead owns additional
development sites and has additional sites under contractual control (land which
is under control through contingent contract or letter of intent). In light of
the present difficult environment in capital markets Homestead, as of the fourth
quarter 1998, has reorganized its development effort and anticipates recording
an accrual for expenses of severance of development personnel and abandoned
pursuits totaling approximately $6 to $7 million. Homestead also anticipates a
slower growth rate in 1999 versus its historical number of property development
starts and property openings.
Homestead's operating results are substantially influenced by (i) the
demand for and supply of extended-stay lodging in Homestead's markets and
submarkets, (ii) occupancy and average weekly rate, (iii) the effectiveness of
property level operations and (iv) the pace and cost at which Homestead can
develop additional extended-stay lodging properties. Capital and credit market
conditions which affect Homestead's ability to access the capital and credit
markets and the cost of capital will influence future operating results.
As of September 30, 1998, Homestead had approximately $636 million of
indebtedness outstanding and expects to utilize an additional approximate $86
million of its lines of credit to fund developments in process. Approximately
$200 million of this indebtedness matures in the first quarter of 1999, and
approximately $300 million matures in the second quarter of 1999. Homestead is
in discussion with its lenders and other parties regarding the refinancing of
its indebtedness maturing next year and will seek to refinance or extend all of
this indebtedness. Homestead is also exploring other means to obtain financing
to replace existing indebtedness and to fund additional development.
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RESULTS OF OPERATIONS
Interim Period Comparison
Net earnings before extraordinary item increased $1.4 million for the
nine-month period ended September 30, 1998 as compared to the same period in
1997. This increase is primarily attributable to increases in net property
operating income offset by increases in net interest expense, corporate
operating expenses, and depreciation and amortization. Net earnings decreased
$25.3 million for the three-month period ended September 30, 1998 as compared to
the same period in 1997 and decreased $23.9 million for the nine-month period
ended September 30, 1998 as compared to the same period in 1997. These decreases
are primarily due to the loss on extinguishment of debt of $25.3 million
recorded as an extraordinary item in the third quarter. See "Liquidity and
Capital Resources" for further discussion of the transaction. A discussion of
the major components of net earnings follows.
Property Operations
The following table sets forth certain information for Homestead's total
operating property portfolio for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weekly RevPAR(1)................ $222 $194 $215 $195
Average Weekly Rate(2).............................. $301 $253 $296 $252
Occupancy........................................... 73.9% 76.6% 72.5% 77.2%
Number of Operating Properties at Period End........ 111 50 111 50
Property Operating Income Margin.................... 56.8% 56.9% 57.0% 57.7%
- ----------
<FN>
(1) Weekly RevPAR is determined by dividing room revenue by the number of guest
room days available for the period and multiplying by seven.
(2) Average weekly rate is determined by dividing room revenue by the number of
guest room days occupied for the period and multiplying by seven.
</FN>
</TABLE>
Homestead's 61 property openings from the end of the third quarter of 1997
through the end of the third quarter of 1998 were the primary reason for the
reported room revenue increase of $57.4 million for the nine months ended
September 30, 1998 as compared to the same period in 1997. The increase in room
revenue was also due in part to an increase in the weekly RevPAR of $20 (10.3%)
in the nine months ended September 30, 1998 compared to 1997.
Total property operating expenses increased from $17.4 million to $43.5
million over the same period, an increase of $26.1 million for the nine months
ended September 30, 1998. The increase is due primarily to an increase in the
number of operating properties as noted above. Homestead's property openings in
the latter part of 1997 and through the third quarter 1998 were the primary
reason for the slight decrease in property operating income margin to 57.0% as
such new openings were in their lease up phase during parts of the nine-month
period ended September 30, 1998.
Homestead Stabilized, Comparable Properties
Homestead had 35 properties which were stabilized and operating in both the
nine-month periods ended September 30, 1998 and 1997. All but 12 of such
comparable properties are located in Texas. RevPAR for the nine months ended
September 30, 1998 for these properties increased to $215 from $203 for the same
period in 1997. The RevPAR increase was due primarily to an increase in average
weekly rates for such properties to $274 from $250, respectively, an increase of
9.6%. The increase in RevPAR due to rate increases was offset in part by a
decrease in occupancy to 78.5% from 81.1% for the nine months ended September
30, 1998 as compared to the same period in 1997. The decrease in occupancy is
believed to be the result of rate increases and competition in certain markets,
especially in the Southwest. Property operating margins decreased for the
nine-month period to 57.4% in 1998 versus 57.6% in 1997 due to increased local
sales costs, increased costs for new security services, and, most significantly,
one-time additional costs in first quarter of 1998 for the use of Homestead
personnel in returning rooms to service which had been out of service for
refurbishment.
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Stabilized Properties Operations
The 79 stabilized properties showed improved operating performance over the
35 stabilized properties for the nine-month period ended September 30, 1998 as
compared to the same period in 1997 with a 9.4% increase in RevPAR to $222 (from
$203 for the nine-month period ended September 30, 1997). These improvements are
primarily attributable to a 17.3% increase in the average weekly rate offset in
part by a decrease in occupancy to 75.6% from 81.1%. The decrease in occupancy
is believed to be the result of rate increases and competition in certain
markets, especially in the Southwest.
Corporate Operating Expenses
Corporate operating expense increased $5.4 million for the nine-month
period ended September 30, 1998 as compared to the same period in 1997. The
increase is attributed to the continued growth of the company since the first
half of 1997 when Homestead was still in the process of developing a corporate
infrastructure in support of a rapidly growing entity and includes costs for
additional personnel in operations, marketing and finance.
Depreciation and Amortization
Depreciation and amortization increased $14.4 million for the nine months
ended September 30, 1998 as compared to the same period in 1997. Depreciation of
the cost of properties and improvements is provided using the straight-line
method over the estimated useful lives of the assets. Depreciation expense
(exclusive of amortization) increased approximately $13.4 million for the
nine-month period ended September 30, 1998 as compared to the same period in
1997 due to the increased number of properties operating for the nine-month
period ended September 30, 1998 as compared to the same period in 1997.
Amortization of the trademarks and other intangibles is calculated on a
straight-line basis over a period of 20 years. Increased amortization of $1
million for the nine-month period ended September 30, 1998 as compared to the
same period in 1997 is due to amortization of increases in the total Homestead
Village trademark and other intangibles asset.
Interest Income
Interest income of $707,000 for the nine months ended September 30, 1998
was a result of interest earned from investment of excess cash on hand.
Interest Cost
Homestead's gross interest cost includes amortization of non-cash financing
costs arising from the issuance of warrants used to obtain the commitment for
the convertible mortgage notes financing and the differential between the
conversion price of the mortgage notes and the merger date value of Homestead's
common stock. Exclusive of such amortized amounts Homestead's interest cost
(comprised of interest on the mortgages, amortization of premiums and discounts
on the mortgages, interest on its lines of credit borrowings, and amortization
of deferred financing costs paid to obtain the lines of credit) increased $12.1
million for the nine-month period ended September 30, 1998 as compared to the
same period in 1997. The increase is due to the increase in investments in
operating and under construction properties and the corresponding increase in
notes payable and the lines of credit borrowings (used to finance the increase
in investments) for the nine-month period ended September 30, 1998 as compared
to the same period in 1997.
Homestead's total interest cost, including the amortization of non-cash
mortgage financing costs described above, decreased $25.4 million for the
nine-month period ended September 30, 1998 compared to the same period in 1997.
The decrease was due to the greater amortization of the non-cash financing costs
associated with the mortgages in 1997 versus 1998. Total interest incurred was
offset by capitalization of interest resulting in net interest expense of $13.8
million and none for the nine-month periods ended September 30, 1998 and 1997,
respectively. This net interest expense increase in 1998 over 1997 is the result
of increases in total debt and related interest expense relative to the amount
of construction in progress in the periods which result in a proportionate
decrease in the amounts of interest eligible for capitalization.
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<PAGE>
ENVIRONMENTAL MATTERS
Homestead is not aware of, nor does it expect, any environmental
condition on its properties to have a material adverse effect upon its business,
results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998 Homestead had 25 properties under construction and
had additional sites owned and under contractual control. Unfunded development
commitments for the properties under construction as of September 30, 1998
approximate $113 million. Homestead has borrowings of $292.6 million outstanding
under its lines of credit as of September 30, 1998 leaving $107.4 million
capacity under the lines, subject to collateral requirements. Homestead
estimates its availability under the lines approximates $86 million based on
available collateral. Homestead anticipates completing development of properties
under construction utilizing these financing sources, cash on hand, and cash
flow from operations.
In fourth quarter 1998, in light of the difficult environment in capital
markets and the resulting limited availability of new financing for additional
commitments for developments, Homestead reorganized its internal development
department and terminated approximately 40 full-time persons. In addition,
Homestead is reviewing its land sites owned and its contracts for purchases of
development sites and is aligning its decisions to develop and/or acquire sites
for development with its ability to obtain specific financings or its ability to
use cash flow from operations. In conjunction with the severance of development
personnel and changed expectations to pursue development of certain sites owned
or under contract for acquisition, Homestead anticipates recording an accrual
for expenses of severance and abandoned pursuits totaling approximately $6 to 7
million.
On November 10, 1998, Homestead filed a shelf registration statement with
the Securities and Exchange Commission, which has not yet been declared
effective, for up to $356,402,600 of any combination of preferred stock, debt
securities and securities warrants and up to a total of $500,000,000 including
common stock. Once effective, the securities issuable under the registration may
be offered from time to time, in amounts, at prices and on terms to be set forth
at the time of the offerings.
On April 24, 1998 Homestead renewed its existing revolving line of credit
facility with Commerzbank AG ("CAG"), as agent for the lenders, for a one-year
term, with an increase in total borrowing capacity to $150 million, subject to
collateral requirements. Borrowings bear interest at the Eurodollar rate plus
1.5% to 2.5% per annum, depending upon the percentage leverage of borrowings
outstanding to the amount of qualifying collateral. Alternatively, borrowings
bear interest at a base rate defined as the higher of prime rate plus a margin
of 0.5% to 1.5% or the federal funds rate plus a margin of 1% to 2%, with the
margin dependent on the percentage leverage of borrowings outstanding to the
amount of qualifying collateral. Average unfunded balances bear a commitment fee
of 0.375% per annum.
On April 24, 1998 Homestead also entered into a separate $50 million
one-year revolving line of credit facility with CAG of which $30 million was
available for borrowing on an unsecured basis through September 30, 1998.
Borrowings bear interest at the Eurodollar rate plus 2.75% per annum or,
alternatively, at a base rate defined as the higher of prime rate plus 1.75% or
the federal funds rate plus 2.25%. Average unfunded balances bear a commitment
fee of 0.5% per annum.
On June 15, 1998 Homestead entered into an additional $200 million line of
credit facility with CAG which bears interest at the Eurodollar rate plus 1%
16
<PAGE>
(1.25% after six months) or at a base rate of prime (prime plus 0.25% after six
months). The average unfunded balance bears a commitment fee of 0.25% per annum.
The line expires February 23, 1999. Homestead has obtained a subscription
agreement from Security Capital for $200 million of Homestead subordinated
debentures to secure this obligation. If the subscription is called by Homestead
or Homestead receives proceeds from any offering of securities, the proceeds
must be used to first repay the lines of credit to CAG and second to fund
projects under development which secure the other CAG credit facilities. The
debentures would bear interest at a rate of 0.25% over the rate Homestead incurs
under the $50 million credit facility with CAG. Homestead may repurchase the
debentures with the proceeds of an equity offering within 90 days of issuance of
the debentures, otherwise the debentures convert to Homestead common stock at
the lower of the 20-day average trading price of Homestead common stock
immediately before execution of the subscription agreement or immediately before
the 90th day after issuance. The subscription agreement expires the earlier of
June 30, 1999 or two weeks after termination of the $200 million credit
agreement. The subscription obligation will be reduced or terminated to the
extent Homestead issues equity securities to any third party, or to Security
Capital pursuant to a separate offering and the proceeds are used to repay this
credit facility and any remaining proceeds are used to fund projects under
development which secure the other CAG credit facilities. In conjunction with
Security Capital's entering into the subscription agreement, Homestead paid an
arrangement fee to Security Capital of $600,000.
The CAG lines require maintenance of certain financial covenants,
specifically, aggregate indebtedness of no more than 55% of gross asset value,
as defined, or indebtedness secured by a lien of no more than 50% of gross asset
value, as defined, in each case excluding indebtedness outstanding under the
credit agreement entered into on June 15, 1998. Homestead must also maintain a
minimum debt service coverage ratio of earnings before interest, income taxes,
depreciation, amortization and gains or losses on sales of assets to cash debt
service, as defined, of no less than 1.25 to 1 for the second quarter of 1998,
and, including the $200 million facility, no less than 1.4 to 1 for third and
fourth quarters 1998 and 1.5 to 1 for first quarter of 1999, and excluding the
$200 million facility, no less than 1.5 to 1 for third quarter 1998, 1.6 to 1
for fourth quarter 1998, and no less than 1.75 to 1 thereafter on a quarterly
basis, and not allow stockholders equity to be less than $325 million.
Additionally, Homestead will not enter into any commitment for purchases of land
or construction of projects if such obligations exceed the available borrowing
capacity under all of the lines and internally generated excess funds. The
covenants also restrict payment of dividends without lender approval.
The lines of credit covenant ratios were amended in conjunction with
Homestead entering into the new mortgage note (described below). As amended,
Homestead may incur indebtedness secured by a lien up to 55% of gross asset
value through the earlier of the date the new mortgage note is repaid or October
1, 1998 or, if the $200 line of credit has been repaid, until the earlier of
September 30, 1999 or the date the new mortgage note is repaid. Further, until
the earlier of September 30, 1999 or the date the new mortgage note is repaid,
the debt service coverage ratio, including debt outstanding under the $200
million facility, is amended to be no less than 1.3 to 1 for third and fourth
quarters 1998 and 1.4 to 1 for first quarter of 1999, and excluding the $200
million facility, is amended to be no less than 1.3 to 1 for third quarter 1998,
1.4 to 1 for fourth quarter 1998, and no less than 1.6 to 1 for the first
quarter of 1999. Homestead was in compliance with all such covenants as of
September 30, 1998. As a result of the reorganization expense to be recorded in
fourth quarter 1998 discussed above, Homestead anticipates it will not meet its
bank lines of credit debt service coverage ratio covenant for fourth quarter
1998. Homestead has initiated discussions with the banks to seek a waiver of
this covenant for fourth quarter 1998.
On July 6, 1998, Homestead entered into a mortgage loan purchase
agreement with ATLANTIC and MLMC whereby the $98 million of Homestead
convertible mortgage notes held by ATLANTIC were modified to, among other
things, eliminate their convertibility feature in exchange for a payment of
$21.4 million from Homestead to ATLANTIC. The amount paid to ATLANTIC was based
on trailing market prices of Homestead Common Stock at the time the agreement
was entered into, which exceeded the conversion price of the convertible
mortgage notes at that date. Homestead funded the payment with the proceeds
received from the sale of $24 million of 7.5% convertible subordinated
debentures. Also pursuant to the mortgage loan purchase agreement ATLANTIC sold
such amended notes to MLMC for $98 million. On August 7, 1998, Homestead
converted the $98 million of mortgage notes and the $24 million of 7.5% conver-
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<PAGE>
tible subordinated debentures into a $122 million mortgage of a newly formed
special purpose subsidiary of Homestead. The note is collateralized by 26
Homestead properties (totaling $227 million of historical cost at September 30,
1998) which were formerly collateral for the ATLANTIC mortgage notes. The $122
million mortgage note matures September 30, 1999 and provides for interest only
monthly payments of LIBOR plus 1.70% through September 30, 1998, LIBOR plus 2.0%
through November 30, 1998, and LIBOR plus 2.25% thereafter. MLMC has mutually
exclusive extension rights to either give notice by December 15, 1998 to extend
the maturity of the mortgage note to September 30, 2001 (the "2 Year Extension
Notice") or give notice by June 10, 1999 to extend the maturity of the mortgage
note to at least September 30, 2006 or as late as September 30, 2009 (the "7 -
10 Year Extension Notice"). If extended, the note will bear interest at LIBOR
plus 2.5% (3.5% if the collateral properties do not generate net operating
income, as defined, of $18 million for the year ended September 30, 1999). No
assurance can be given that MLMC will elect to extend the mortgage note.
Homestead may prepay the mortgage note in whole or in part prior to September
30, 1999 or, if the 2 Year Extension Notice is given, Homestead may prepay in
whole or in part by September 30, 2001.
The transaction resulted in an early extinguishment of debt measured as the
difference between the $98 million carrying amount of the original mortgage
notes to ATLANTIC and the amount paid to extinguish the debt, including
transaction costs. Such loss on extinguishment of debt was $25.3 million and was
recorded as an extraordinary item in third quarter 1998.
The elimination of the conversion option attached to the mortgage notes
reduced Homestead's contingently issuable shares of common stock by
approximately 8.5 million shares.
Homestead is exploring the possible sale of properties in certain
non-strategic markets. The proceeds of such a sale would be used to pay down
existing debt. No assurance can be given that such a sale will occur.
Capital resources in addition to those described above will be needed to
fund future land acquisitions and developments and to repay or refinance
existing debt upon maturity. Homestead may seek additional credit facilities and
may seek to issue additional debt or equity securities. Presently, Homestead is
exploring possible extension of its bank lines of credit and is exploring
alternatives to refinancing the mortgage note to MLMC. Homestead, as discussed
above, has also filed a shelf registration statement and is researching various
financing alternatives utilizing securities which could be issued under the
shelf, once the shelf registration is declared effective. However, there is no
assurance that Homestead will be able to obtain such financing as and when
required or on acceptable terms.
Operating Activities
Net cash flow provided by operating activities increased by $21.4 million
for the nine months ended September 30, 1998 as compared to 1997. The increase
is due primarily to the growth in the number of operating properties as
described under "Results of Operations."
Investing Activities
During the nine months ended September 30, 1998 and 1997, Homestead
invested $393.2 million and $255.1 million, respectively, in Homestead Village
properties. The amounts invested in the nine months ended September 30, 1998
were financed primarily from proceeds from borrowings under the line of credit
and proceeds from a $156.4 million Rights Offering which occurred in January
1998. The amounts invested in the nine months ended September 30, 1997 were
financed primarily from the proceeds of convertible mortgage loans from PTR and
ATLANTIC and proceeds from exercise of warrants. No further funding commitment
is available under the mortgage notes.
YEAR 2000
The Year 2000 issue has arisen as many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous results. Homestead has adopted a Year 2000 compliance
program in an attempt to minimize or prevent the number and seriousness of any
disruptions that may occur as a result of the Year 2000 issue. Homestead's
compliance program includes an assessment of its hardware and software computer
systems ("information technology" systems) and embedded systems
("non-information technology" systems such as lighting, security, fire, card
keys, phones, irrigation, elevators, and heating, ventilation, and air
conditioning systems), as well as an assessment of the Year 2000 issues relating
to third parties with which Homestead has a material relationship or whose
systems are material to the operations of Homestead's properties.
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<PAGE>
Homestead's computer hardware, operating systems, general accounting,
property management systems and principal desktop software applications are Year
2000 compliant as certified by the various vendors. Homestead is currently
testing these information technology systems, and expects to complete the
testing phase by December 31, 1998. Based on initial testing, management does
not anticipate any Year 2000 issues that will materially impact operations or
operating results.
Homestead's property management system software is non-compliant. However,
the property management system software vendor has stated that the property
management system does not use the date routines associated with the underlying
database software. Validation will be completed by December 31, 1998. If the
property management system does not pass the validation tests, an upgrade will
be necessary. The cost to complete the upgrade, if it is necessary to upgrade,
should not exceed $500,000 and it is expected the upgrade would be completed by
end of second quarter 1999.
Homestead's critical non-information technology systems are being
inventoried and are being assessed for Year 2000 compliance by contacting the
vendors of the systems. The review, testing and verification of these systems is
expected to be complete by the first quarter of 1999 and costs are not expected
to be material.
Homestead has surveyed its financial institutions and major vendors to
determine the extent to which Homestead is vulnerable to third parties' failure
to resolve their Year 2000 issues. Homestead will be able to more adequately
assess its third party risk when responses are received from the majority of the
entities contacted.
Management believes its planning efforts are adequate to address the Year
2000 issue and that its risks are primarily those that it cannot directly
control, including the readiness of its major vendors and financial
institutions. Failure on the part of these entities to become Year 2000
compliant could result in disruption in the Homestead's cash receipt and
disbursement functions. There can be no guarantee, however, that the systems of
unrelated entities upon which the Homestead's operations rely will be corrected
on a timely basis and will not have a material adverse effect on the company.
Homestead does not have a formal contingency plan or a timetable for
implementing one. Contingency plans will be established, if they are deemed
necessary, after Homestead has adequately assessed the impact on operations
should third parties fail to properly respond to their Year 2000 issues.
Homestead's historical costs for addressing the Year 2000 issue are not
material and management does not anticipate that its future costs associated
with the Year 2000 issue will be material. Third-party costs and software
upgrades or replacements for Year 2000 issues are not expected to exceed
$500,000. Homestead does not separately track the internal costs incurred for
Year 2000 compliance issues. Such costs are principally the related payroll
costs of its information technology group. Although the cost of recently
replacing Homestead's key information technology systems was substantial, the
replacements were made to improve operational efficiency and were not
accelerated due to the Year 2000 issue. Homestead has not delayed any material
projects as a result of the Year 2000 issue. Funds expended to address Year 2000
issues have been made from operating cash flow.
There can be no assurances that Year 2000 remediation by Homestead or third
parties will be properly and timely completed, and failure to do so could have a
material adverse effect on Homestead, its business and its financial condition.
Homestead cannot predict the actual effects to it of the Year 2000 problem,
which depends on numerous uncertainties such as: (i) whether significant third
parties properly and timely address the Year 2000 issue; and (ii) whether
broad-based or systemic economic failures may occur. Failures could include
disruptions in passenger transportation or transportation systems generally,
loss of utility and/or telecommunications services, the loss or disruption of
hotel reservations made on centralized reservation systems and errors or
failures in financial transactions or payment processing systems such as credit
cards. Due to the general uncertainty inherent in the Year 2000 problem and the
company's dependence on third parties, Homestead is unable to determine at this
time whether the consequences of Year 2000 failures will have a material impact
on the company. Homestead's Year 2000 compliance program is expected to
significantly reduce the level of uncertainty about the Year 2000 issue and
management believes that the possibility of significant interruptions of normal
operations should be reduced.
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10.1 $122,028,471 Consolidated, Amended, Renewed and Restated Mortgage
Note, made by Borrower in favor of Midland
Exhibit 10.2 Consolidated, Amended and Restated Mortgage, Deed of Trust, Deed
to Secure Debt, Security Agreement, Financing Statement, Fixture
Filing and Assignment of Leases, Rents and Security Deposits,
from Borrower to (A)(i) Alexander Title Agency, Inc., with
respect to the properties located in Maryland and Virginia,
(ii)Chicago Title Insurance Company, with respect to the
properties located in North Carolina; and (iii) Joseph B. Pitt,
Jr., with respect to the properties located in Tennessee, for the
benefit of Midland; and (B) Midland, with respect to the
properties located in Florida and Georgia
15 Letter regarding unaudited interim financial information
27 Financial Data Schedule
(b) No reports were filed during this period on Form 8-K.
20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
HOMESTEAD VILLAGE INCORPORATED
/S/ ROBERT C. ALDWORTH
Robert C. Aldworth, Senior Vice President
And Chief Financial Officer
(Principal Financial Officer)
/S/ BRYAN J. FLANAGAN
Bryan J. Flanagan, Senior Vice President
And Controller
(Principal Accounting Officer)
Date: November 13, 1998
21
<PAGE>
CONSOLIDATED, AMENDED, RENEWED AND RESTATED
MORTGAGE NOTE
$122,028,471
New York, New York
August 7, 1998
This CONSOLIDATED, AMENDED, RENEWED AND RESTATED MORTGAGE
NOTE, dated as of August 7, 1998 (the "Note"), is made by HOMESTEAD VILLAGE
LIMITED PARTNERSHIP ("Maker"), a Delaware limited partnership having a principal
office at c/o Homestead Village Incorporated, 2100 RiverEdge Parkway, Atlanta,
Georgia 30328, in favor of MIDLAND LOAN SERVICES, INC., a Delaware corporation
(together with its successors and assigns, "Payee"), having its principal office
at 210 West 10th Street, Kansas City, Missouri 64105.
WHEREAS, Payee is the holder by assignment of those certain
mortgage notes described on Schedule A annexed hereto and made a part hereof
(the "Original Notes") made by Homestead Village Incorporated, a Maryland
corporation ("Homestead") and Atlantic Homestead Village Limited Partnership, a
Delaware limited partnership ("AHV"), which Original Notes have been assigned by
Homestead and AHV to, and assumed by, Maker;
WHEREAS, the principal indebtedness evidenced by the Original
Notes is Ninety-Eight Million Twenty-Eight Thousand Four Hundred Seventy-One
Dollars ($98,028,471);
WHEREAS, on the date hereof, Assignee made an additional loan
to Assignor in the amount of $24,000,000;
WHEREAS, the Maker and Payee intend to consolidate, amend,
renew, restate, supercede, substitute and replace the Original Note by this
Note, and this Note shall evidence one consolidated joint and several
indebtedness of Maker in the principal amount of ONE HUNDRED TWENTY-TWO MILLION
TWENTY EIGHT THOUSAND FOUR HUNDRED SEVENTY ONE DOLLARS ($122,028,471) (the
"Loan"); and
WHEREAS, Maker and Payee intend these recitals to form an
integral part or this Note.
NOW THEREFORE, by Maker's execution and delivery of this Note
and Payee's acceptance of delivery from Maker of this Note, this Note is deemed
to consolidate, amend, renew and restate and substitute the Original Notes and
the same are hereby restated in their entirety to read as follows:
<PAGE>
FOR VALUE RECEIVED, Maker promises to pay to the order of
Payee, or its assigns, the Principal Amount (as defined below), together with
interest from the date hereof as provided in this Note. Interest accruing
hereunder shall be calculated on the basis of a 360-day year and the actual
number of days elapsed.
WHEN USED HEREIN, the following capitalized terms shall have
the following meanings.
"Anticipated Securitization Maturity Date" if applicable,
shall mean the date so designated by the Securitization Extension Notice, which
date shall not be earlier than June 30, 2006 or later than June 30, 2008.
"Commencement Date" shall mean the first Business Day of the
month following the Closing Date.
"Closing Date" shall be the date of this Note.
"Default Rate" shall be the then interest rate applicable to
the Loan Amount (i.e., Initial Interest Rate, Securitization Interest Rate or
Revised Interest Rate) immediately prior to an Event of Default, plus 5.0
percent (5.0%) per annum.
"Final Maturity Date" shall mean the later of (i) the Initial
Maturity Date and (ii) if the Securitization Extension Notice is delivered, the
date that is provided in the Securitization Extension Notice (as hereinafter
defined), which date shall be between the twentieth (20th) and twenty-third
(23rd) anniversary of the Anticipated Securitization Maturity Date.
"Initial Interest Rate" shall mean (a) from the date of this
Note through but not including October 1, 1998, a rate of LIBOR plus 1.70
percent (1.70%) per annum, and from October 1, 1998 through but not including
December 1, 1998, a rate of LIBOR plus 2.00 percent (2.0%), and from December 1,
1998 through but not including the Initial Maturity Date, at a rate of LIBOR
plus 2.25 percent (2.25%).
"Initial Maturity Date" shall mean June 30, 1999 or, if the 2
Year Extension Notice is delivered, then June 30, 2001.
"Interest Period" shall mean each successive period following
the first Payment Date, commencing on a Payment Date and ending on the day
immediately preceding the following Payment Date.
"LIBOR" shall mean the one (1) month London Interbank Offered
Rate for dollar denominated deposits with respect to each Interest Period,
rounded up to the nearest one sixteenth of one percent (1/16 %), as determined
by Lender in its sole and absolute discretion on the first Business Day of any
Interest Period and the Interest Rate shall be adjusted on the first Business
Day of the following Interest Period to reflect any changes in LIBOR.
"Monthly Amount" shall be the applicable monthly payment
required hereunder at the Initial Interest Rate, the Securitization Interest
Rate, if applicable or the Revised Interest Rate, if applicable, as the case may
be.
"Mortgage" shall mean that certain Consolidated Amended and
Restated Mortgage, Deed of Trust, Deed to Secure Debt, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits, dated as of the Closing Date, from Maker to Payee.
"Payment Date" shall be the first Business Day of each month
commencing on the first business day of the second full month after the Closing
Date and continuing to and including the Final Maturity Date.
"Principal Amount" $122,028,471
"Revised Interest Rate" shall mean, if applicable, on and
after the Anticipated Securitization Maturity Date, the Securitization Interest
Rate plus 2.0 percent (2.0%).
"Securitization Interest Rate" shall mean, if applicable,
during the Securitization Extension Term (as hereinafter defined), a rate equal
to either LIBOR or the Treasury Rate, plus 2.50 percent (2.50%), as selected in
Payee's sole discretion; provided, however, that if the aggregate Net Operating
Income from all of the Properties, as determined by Payee in its sole and
absolute discretion, for the twelve (12) month period commencing on June 30,
1998 and ending on June 30, 1999, as adjusted with an assumed management fee of
4% of Operating Income (as defined in the Mortgage) and an FF&E reserve of 4% of
Operating Income, is less than $18,000,000, at a rate equal to LIBOR or the
Treasury Rate, as selected in Payee's sole discretion, plus 3.5 percent (3.5%).
<PAGE>
"Treasury Rate" shall mean, as of the Initial Maturity Date,
the yields, calculated by linear interpolation (rounded to the nearest
one-thousandth of one percent (1%)) of noncallable United States Treasury
obligations with a term of fifteen years, on the basis of Federal Reserve
Statistical Release H.15 Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities or other recognized source of
comparable financial market information selected by Payee for the week prior to
the Initial Maturity Date.
All capitalized terms not otherwise defined herein shall have
the meanings set forth in the Mortgage.
The Principal Amount and interest thereon shall be due and
payable in lawful money of the United States as follows:
(a) On the date hereof, all interest on the unpaid balance
through the end of the month in which the Closing Date occurs shall be
due and payable. Thereafter, commencing on the Commencement Date and
continuing until the Initial Maturity Date, monthly installments of
interest in the Monthly Amount at the Initial Interest Rate shall be
due and payable. Each monthly installment shall be due on each Payment
Date.
(b) In the event the Securitization Extension Notice (as
hereinafter defined), is delivered, during the Securitization Extension
Term (as hereinafter defined), monthly installments of interest in the
Monthly Amount at the Securitization Interest Rate shall be due and
payable. Each monthly installment shall be due on each Payment Date.
(c) In the event the Securitization Extension Notice is
delivered and Maker does not pay the entire Principal Amount of this
Note and any other amounts outstanding on or before the Anticipated
Securitization Maturity Date, then interest shall thereafter accrue on
the unpaid principal balance from time to time outstanding on this Note
at the Revised Interest Rate and Maker shall pay on the Anticipated
Securitization Maturity Date and on each Payment Date thereafter up to
and including the Final Maturity Date the payments provided for in
Section 4 of the Cash Collateral Agreement (as defined below) in the
order of priority set forth therein. Interest accrued at the Revised
Interest Rate and not paid pursuant to the preceding sentence shall be
deferred and added to the Debt and shall accrue interest at the Revised
Interest Rate (to the extent permitted by applicable law) (such accrued
interest is hereinafter referred to as "Accrued Interest"). All of the
Debt, including Accrued Interest, shall be due and payable on the Final
Maturity Date.
(d) In addition, all amounts advanced by Payee pursuant to
applicable provisions of the Loan Documents (as hereinafter defined),
together with any interest at the Default Rate (payable after any
applicable grace period set forth herein or in the Mortgage) or other
charges as therein provided, shall be immediately due and payable
hereunder. In the event any such advance is not so repaid by Maker,
Payee may, at its option, first apply any payments received hereunder
to repay said advances together with any interest thereon or other
charges as provided in the Loan Documents, and the balance, if any,
shall be applied in payment of any installment then due. The entire
remaining unpaid balance of principal of this Note, all interest
accrued thereon and all other sums payable hereunder or under the Loan
Documents (collectively, the "Debt") shall be due and payable in full
on the Final Maturity Date.
(e) Amounts due on this Note shall be payable, without any
counterclaim, setoff or deduction whatsoever, at the office of Payee or
its agent or designee at the address set forth in the recitals above or
at such other place as Payee or its agent or designee may from time to
time designate in writing.
<PAGE>
2. This Note is secured by (i) the Mortgage (the
"Mortgage"), (ii) an Assignment of Rents and Leases of even date herewith from
Maker to Payee, recorded in the above referenced recording offices (the
"Assignment ") and (iii) all other documents executed by Maker to or for the
benefit of Payee. The Mortgage, Assignment and any other instrument given at any
time to evidence or secure this Note are hereinafter collectively called the
"Loan Documents."
3. At any time prior to the Initial Maturity Date, Maker
shall have the right to prepay the principal of this Note in full or in part on
any Payment Date or on any other date provided that Maker pays any breakage
costs or other costs reasonably incurred by Payee in connection with any
prepayment of the Loan or any date other than a Payment Date. Such prepayment
shall be made upon not less than fourteen (14) days' prior written notice to
Payee, (such date of prepayment shall hereinafter be referred to as the
"Prepayment Date"). If the Final Maturity Date is extended beyond the Initial
Maturity Date by a Securitization Extension Notice, then Maker shall have the
right to prepay the principal of this Note only in accordance with and as
provided by the provisions of Securitization Extension Notice.
4. If Maker defaults in the payment of any installment of
principal and interest on the date on which it shall fall due or in the
performance of any of the other agreements, conditions, covenants, provisions or
stipulations contained in this Note or in the Loan Documents, and if such
default (other than related to the payment of principal and interest) shall
continue beyond any applicable notice or grace period provided for in the
Mortgage so as to constitute an Event of Default thereunder, then Payee, at its
option and without further notice to Maker, may declare immediately due and
payable the entire unpaid principal balance of this Note, together with interest
thereon at an annual rate from and after the date of such default equal to the
Default Rate, together with all sums due from Maker under the Loan Documents,
anything herein or in the Loan Documents to the contrary notwithstanding. After
an Event of Default, interest shall accrue, relating back to the date of the
default that gave rise to the Event of Default, at the Default Rate, regardless
of whether Payee accelerates the principal balance of the Note. The foregoing
provision shall not be construed as a waiver by Payee of its right to pursue any
other remedies available to it under the Mortgage, this Note or any other Loan
Document, nor shall it be construed to limit in any way the application of the
Default Rate. Any payment hereunder may be enforced and recovered in whole or in
part at such time by one or more of the remedies provided to Payee in this Note
or in the Loan Documents. In the event that: (i) this Note or any Loan Document
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding; (ii) an attorney is retained
to represent Payee in any bankruptcy, reorganization, receivership, or other
proceedings affecting creditors' rights and involving a claim under this Note or
any Security Document; (iii) an attorney is retained to protect or enforce the
lien of the Mortgage or any other Loan Document; or (iv) an attorney is retained
to represent Payee in any other proceedings whatsoever in connection with this
Note, the Mortgage, any of the other Loan Documents or any portion of the
Mortgaged Property subject thereto, then Maker shall pay to Payee all reasonable
attorney's fees, costs and expenses incurred in connection therewith, including
costs of appeal, together with interest on any judgment obtained by Payee at the
Default Rate or at the rate permitted by applicable law.
<PAGE>
5. If Maker defaults in the payment of any monthly
installment on the Payment Date and such default is not cured within five (5)
days, then Maker shall pay to Payee a late payment charge in an amount equal to
five percent (5%) of the amount of the installment not paid as aforesaid which
late charge shall relate back to the date when such installment was first due
and payable. Said late charge payments, if payable, shall be secured by the
Mortgage and the other Loan Documents, shall be payable without notice or demand
by Payee, and are independent of and have no effect upon the rights of Payee
under paragraph 4 above. No late charge will be assessed on principal payable on
the Final Maturity Date.
6. Notwithstanding any other provision of this Note, Payee
shall have the following rights to extend the term of this Note:
(a) Payee shall have the right until December 15, 1998, upon
delivery of a written notice to Maker (the "2 Year Extension Notice"), to extend
the term of the Loan to June 30, 2001. Upon delivery of the 2 Year Extension
Notice, (i) the Initial Maturity Date shall be deemed to be June 30, 2001; (ii)
the Initial Interest Rate shall be deemed to be LIBOR plus 2.25 percent (2.25%),
(iii) Maker shall be required to deliver to Payee (A) legal opinions regarding
the non-consolidation of Maker with any other Person and any other matters
reasonably requested by Payee in the 2 Year Extension Notice, from an
independent counsel acceptable to Payee, in its sole and absolute discretion and
in form and substance acceptable to Payee in its sole and absolute discretion
and (B) all other documents identified in the 2 Year Extension Notice and
customarily required by Payee in connection with the closing of similar loans
that have not been previously delivered to Payee and (iv) Payee shall no longer
have the right to deliver the Securitization Extension Notice (as hereinafter
defined) pursuant to the terms of Section 6(b).
(b) Provided Payee has not previously delivered the 2 Year
Extension Notice, Payee shall have the right at any time prior to June 10, 1999,
upon the delivery of a written notice to Maker (the "Securitization Extension
Notice"), to extend the term of the Loan for an additional seven (7) to ten (10)
year period, as determined by Payee in its sole and absolute discretion. The
period between the Initial Maturity Date and the date identified in the
Securitization Extension Notice as the Anticipated Securitization Maturity Date
shall be herein referred to as the "Securitization Extension Term." Upon
delivery of the Securitization Extension Notice, (i) the Anticipated
Securitization Maturity Date shall be deemed to be the date specified as the
Anticipated Securitization Maturity Date in the Securitization Extension Notice;
(ii) the Final Maturity Date shall be the date that is provided in the
Securitization Extension Notice (as hereinafter defined), which date shall be
between the twentieth (20th) and twenty-third (23rd) anniversary of the
Anticipated Securitization Maturity Date; (iii) the Securitization Interest Rate
beginning on July 1, 1999 shall be deemed to be a rate equal to either LIBOR or
the Treasury Rate, plus 2.50 percent (2.50%), as selected in Payee's sole
discretion; provided, however, that if the aggregate Net Operating Income from
all of the Properties, as determined by Payee in its sole and absolute
discretion, for the twelve (12) month period commencing on June 30, 1998 and
ending on June 30, 1999, as adjusted with an assumed management fee of 4% of
Operating Income and an FF&E reserve of 4% of Operating Income, is less than
$18,000,000, then the Securitization Interest Rate shall be deemed to be LIBOR
or the Treasury Rate, as selected in Payee's sole discretion, plus 3.5 percent
(3.5%); (iv) Maker shall be required to pay to Payee on the Initial Maturity
Date an extension fee payment equal to $1,220,285 (i.e., one percent (1%) of the
Principal Amount) and (v) Maker shall be required to deliver to Payee (A) legal
opinions regarding the non-consolidation of Maker with any other Person and any
other matters reasonably requested by Payee in the Securitization Extension
Notice, from an independent counsel acceptable to Payee, in its sole and
absolute discretion and in form and substance acceptable to Payee in its sole
and absolute discretion and (B) all other documents identified in the
Securitization Extension Notice and customarily required by Payee in connection
with the closing of similar loans that have not been previously delivered to
Payee
<PAGE>
7. Maker and all endorsers, sureties and guarantors hereby
jointly and severally waive all applicable exemption rights, valuation and
appraisement, presentment for payment, demand, notice of demand, notice of
nonpayment or dishonor, protest and notice of protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note. Maker and all endorsers, sureties
and guarantors consent to any and all extensions of time, renewals, waivers or
modifications that may be granted by Payee with respect to the payment or other
provisions of this Note and to the release of the collateral or any part
thereof, with or without substitution, and agree that additional makers,
endorsers, guarantors or sureties may become parties hereto without notice to
them or affecting their liability hereunder. SUBJECT TO THE PROVISIONS OF
SECTION 33 OF THE MORTGAGE, MAKER ACKNOWLEDGES THAT IT SHALL BE LIABLE AND
RESPONSIBLE FOR (I) THE DEBT, (II) ALL SUMS THAT WILL, FROM TIME TO TIME, BECOME
DUE AND PAYABLE UNDER THIS NOTE, (III) ANY OF THE OBLIGATIONS CONTAINED IN, OR
THAT MAY ARISE FROM, ANY OF THE LOAN DOCUMENTS AND (IV) ANY AND ALL OBLIGATIONS
UNDER ANY LOAN DOCUMENT, INCLUDING, WITHOUT LIMITATION, THE MORTGAGE.
8. Payee shall not be deemed, by any act of omission or
commission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by Payee, and then only to the extent
specifically set forth in writing. A waiver of one event shall not be construed
as continuing or as a bar to or waiver of any right or remedy to a subsequent
event.
9. This Note has been negotiated, executed and delivered in
the State of New York and shall be governed by and construed in accordance with
the internal laws of the State of New York (the "State"),without regard to
choice of law rules.
10. The parties hereto intend and believe that each
provision in this Note comports with all applicable law. However, if any
provision in this Note is found by a court of law to be in violation of any
applicable law, and if such court should declare such provision of this Note to
be unlawful, void or unenforceable as written, then it is the intent of all
parties hereto that such provision shall be given full force and effect to the
fullest possible extent that is legal, valid and enforceable, that the remainder
of this Note shall be construed as if such unlawful, void or unenforceable
provision were not contained therein, and that the rights, obligations and
interest of Maker and the holder hereof under the remainder of this Note shall
continue in full force and effect; provided, however, that if any provision of
this Note which is found to be in violation of any applicable law concerns the
imposition of interest hereunder, the rights, obligations and interests of Maker
and Payee with respect to the imposition of interest hereunder shall be governed
and controlled by the provisions of the following paragraph.
11. It being the intention of Payee and Maker to comply with
the laws of the State with regard to the rate of interest charged hereunder, it
is agreed that, notwithstanding any provision to the contrary in this Note, the
Mortgage, or any of the other Loan Documents, no such provision, including
without limitation any provision of this Note providing for the payment of
interest or other charges, shall require the payment or permit the collection of
any amount ("Excess Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or detention, or the forbearance in
the collection, of all or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is adjudicated to be provided
for, in this Note, the Mortgage, or any of the other Loan Documents, then in
such event:
(i) the provisions of this paragraph shall govern;
<PAGE>
(ii) Maker shall not be obligated to pay any Excess
Interest;
(iii) any Excess Interest that Payee may have
received hereunder shall, at the option of Payee, be (x)
applied as a credit against the unpaid principal balance then
due under this Note, accrued and unpaid interest thereon not
to exceed the maximum amount permitted by law, or both, (y)
refunded to the payor thereof or (z) any combination of the
foregoing;
(iv) the applicable interest rate or rates provided
for herein shall be automatically subject to reduction to the
maximum lawful rate allowed to be contracted for in writing
under the applicable usury laws of the aforesaid State, and
this Note, the Mortgage and the other Loan Documents shall be
deemed to have been, and shall be, reformed and modified to
reflect such reduction in such interest rate or rates; and
(v) Maker shall not have any action or remedy
against Payee for any damages whatsoever or any defense to
enforcement of this Note, the Mortgage or any other Loan
Document arising out of the payment or collection of any
Excess Interest (provided such Excess Interest is paid as set
forth above).
12. Upon any endorsement, assignment, or other transfer of
this Note by Payee or by operation of law, the term "Payee," as used herein,
shall mean such endorsee, assignee, or other transferee or successor to Payee
then becoming the holder of this Note. This Note shall inure to the benefit of
Payee and its successors and assigns and shall be binding upon the undersigned
and its successors and assigns. The term "Maker" as used herein shall include
the respective successors and assigns, legal and personal representatives,
executors, administrators, devisees, legatees and heirs of Maker.
13. Any notice, demand or other communication which any
party may desire or may be required to give to any other party shall be in
writing and shall be given as provided in the Mortgage.
14. To the extent that Maker makes a payment or Payee
receives any payment or proceeds for Maker's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the obligations of Maker hereunder intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Payee.
<PAGE>
15. Maker shall execute and acknowledge (or cause to be
executed and acknowledged) and deliver to Payee all documents, and take all
actions, reasonably required by Payee from time to time to confirm the rights
created or now or hereafter intended to be created under this Note and the Loan
Documents, to protect and further the validity, priority and enforceability of
this Note and the Loan Documents, to subject to the Loan Documents any property
of Maker intended by the terms of any one or more of the Loan Documents to be
encumbered by the Loan Documents, or otherwise carry out the purposes of the
Loan Documents and the transactions contemplated thereunder; provided, however,
that no such further actions, assurances and confirmations shall increase
Maker's obligations under this Note.
16. No modification, amendment, extension, discharge,
termination or waiver (a "Modification") of any provision of this Note, or any
one or more of the other Loan Documents, nor consent to any departure by Maker
therefrom, shall in any event be effective unless the same shall be in a writing
signed by the party against whom enforcement is sought, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. Except as otherwise expressly provided herein, no notice to, or
demand on, Maker shall entitle Maker to any other or future notice or demand in
the same, similar or other circumstances. Payee does not hereby agree to, nor
does Payee hereby commit itself to, enter into any Modification.
17. Maker hereby expressly and unconditionally waive, in
connection with any suit, action or proceeding brought by Payee on this Note,
any and every right it may have to (a) a trial by jury, (b) interpose any
counterclaim therein (other than a counterclaim which if not asserted in the
suit, action or proceeding brought by Payee on this Note could be barred) and
(c) have the same consolidated with any other or separate suit, action or
proceeding.
18. Notwithstanding anything in this Note, the Mortgage or
the other Loan Documents, no personal liability shall be asserted or enforceable
against (i) Maker, (ii) any Affiliate of Maker, (iii) any Person owning directly
or indirectly, any legal or beneficial interest in Maker or any Affiliate of
Maker, or (iv) any partner, principal, officer, controlling person, beneficiary,
trustee, advisor, shareholder, employee, agent, Affiliate or director of any
Persons described in clauses (i) through (iii) above (collectively, the
"Exculpated Parties") by Payee in respect of the Obligations, this Note, the
Mortgage or any other Loan Document, or the making, issuance or transfer
thereof, all such liability, if any, being expressly waived by Payee, and each
successive holder of this Note shall accept the Mortgage and this Note upon the
express condition of this provision and limitation that in the case of the
occurrence and continuance of an Event of Default, Payee's remedies in its sole
discretion shall be any or all of:
(1) Foreclosure of the lien of the Mortgage in accordance with
the terms and provisions set forth in the Mortgage;
(2) Action against any other security at any time given to
secure the payment of this Note and under the other Loan
Documents; and
(3) Exercise of any other remedy set forth in the Mortgage or
any other Loan Document.
<PAGE>
The lien of any judgment against Maker and any proceeding
instituted on, under or in connection with this Note or the Mortgage, or both,
shall not extend to any property now or hereafter owned by Maker or any
Exculpated Party other than the Net Operating Income from, and the ownership
interest of Maker in, the Mortgaged Property and the other security for the
payment of the Mortgage or this Note.
Notwithstanding anything to the contrary in this Note or any
of the Loan Documents, Payee shall not be deemed to have waived any right which
Payee may have under Section 506(a), 506(b), 1111(b) or any other provisions of
the Bankruptcy Code to file a claim for the full amount of the Debt evidenced by
this Note or to require that all collateral shall continue to secure all of the
Debt owing to Payee in accordance with the Loan Documents.
Notwithstanding anything in this Note to the contrary, there
shall at no time be any limitation on Maker's liability for the payment to Payee
of: (1) condemnation awards or insurance proceeds which Maker has received and
to which Payee is entitled pursuant to the terms of this Note or any of the Loan
Documents to the extent the same have not been applied toward payment of sums
due under this Note or the Mortgage, or used for the repair or replacement of
the Mortgaged Property pursuant to the Mortgage, or (2) all loss, damage and
expense as incurred by Payee and arising from any fraud, or intentional
misrepresentation of Maker, or (3) any misappropriation of Rents or security
deposits by Maker or any Affiliate of Maker after an Event of Default, to the
extent of such misappropriation.
19.ab Any legal action or proceeding with respect to this Note
and any action for enforcement of any judgment in respect thereof may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York, and, by execution and delivery of this Note,
Maker hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. Maker irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by service of process upon Maker at the address for notices set forth herein.
Maker hereby irrevocably waives any objection which it may now or hereafter have
to the laying of venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Note brought in the courts referred to above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of Payee
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Maker in any other jurisdiction.
20. This Note may be executed in counterparts, which
together shall constitute one and the same instrument.
21. Payee shall maintain a register, setting forth the name
of the holder or holders of this Note. From time to time, at the request of
Maker, Payee shall inform Maker of the name or name of such holder(s).
<PAGE>
22. Maker and Payee agree that the interest rate, from time
to time, applicable to the Loan Amount or any other amounts due under this Note
shall not exceed the Maximum Lawful Rate (as hereinafter defined). Maker and
Payee agree that the Default Rate hereunder shall not exceed the Maximum Lawful
Rate, and in no event shall the late charges set forth in paragraph 5 hereof,
together with all other interest on the indebtedness evidenced by this Note,
exceed the Maximum Lawful Rate. Maker and Payee agree that if all or any portion
of the late payment charge described in Section 5 of this Note, or all or any
portion of the Prepayment Premium (as may be provided in the Securitization
Extension Notice) is deemed to be interest under applicable law, in no event
shall interest in excess of the Maximum Lawful Rate be due or payable. As used
herein, "Maximum Lawful Rate " means the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest that, at the
time in question, would not cause the interest charged on this Note at such time
to exceed the maximum amount that Payee would be allowed to contract for,
charge, take, reserve or receive under applicable law after taking into account,
to the extent required by applicable law, any and all relevant payments, fees or
charges under this Note or the other Loan Documents. If under applicable law
there is no legal limitation on the amount or rate of interest that may be
charged on amounts outstanding under this Note, there shall be no Maximum Lawful
Rate, notwithstanding any reference thereto herein or in any of the other Loan
Documents. This paragraph shall control over any contrary provision set forth in
this Note or in the other Loan Documents.
<PAGE>
IN WITNESS WHEREOF, Maker and Payee have caused this
Consolidated, Amended, Renewed and Restated Mortgage Note to be executed and
delivered as of the day and year first above written.
MAKER:
HOMESTEAD VILLAGE LIMITED PARTNERSHIP,
a Delaware limited partnership
By: HVI Incorporated, a Delaware corporation,
its General Partner
By:________________________________
Name: Laura L. Hamilton
Title: Senior Vice President
Attest:______________________________
Name: J. Michael Dugan
Title: Assistant Secretary
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
______________________________
Witness
______________________________
Witness
<PAGE>
PAYEE:
MIDLAND LOAN SERVICES, INC.,
a Delaware corporation
By:________________________________
Name: Alan H. Torgler
Title:
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
________________________________
Witness
________________________________
Witness
<PAGE>
CONSOLIDATED, AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
THIS CONSOLIDATED, AMENDED AND RESTATED MORTGAGE, DEED OF
TRUST, DEED TO SECURE DEBT, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE
FILING AND ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS (herein, together
with all amendments and supplements thereto, this "Mortgage"), dated as of
August 7, 1998, is made by HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware
limited partnership having an address c/o Homestead Village Incorporated, 2100
RiverEdge Parkway, Atlanta, Georgia ("Borrower"), to (i) (A) ALEXANDER TITLE
AGENCY, INC., a Virginia corporation, having an address at 7921 Jones Branch
Drive, 6th Floor, McLean, VA 22102, with respect to the Maryland and Virginia
properties; (B) CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation, One
Exchange Plaza, Suite 707, Raleigh, North Carolina, with respect to the North
Carolina properties; and (C) JOSEPH B. PITT, JR., a resident of Davidson County,
Tennessee, having an address of Chicago Title Insurance Company, 414 Union
Street, suite 1800, Nashville, Tennessee 37219, with respect to the Tennessee
properties (Alexander Title Agency, Inc., Chicago Title Insurance Company and
Joseph B. Pitt, Jr., with respect to such properties and together with their
successors and assigns, "Trustee"), as trustee for MIDLAND LOAN SERVICES, INC.,
a Delaware corporation, having an address at 210 West 10th Street, Kansas City,
Missouri 64105, together with its successors and assigns, "Lender"), with
respect to the properties located in Maryland, North Carolina, Tennessee and
Virginia, as more particularly described herein (the "Deed of Trust States"),
and (ii) Lender, with respect to the properties located in Florida and Georgia
(the "Mortgage and Security Deed States").
W I T N E S S E T H :
WHEREAS, Borrower is the record and beneficial owner of a fee
simple interest in those certain properties located on and comprising the land
described (i) with respect to the Deed of Trust States, in Exhibit "A-1" through
"A-13" , and (ii) with respect to the Mortgage and Security Deed States, in
Exhibit "A-14" through "A-26", attached hereto, (collectively, the "Land") which
properties are encumbered by those certain mortgages, deeds of trust and
security deeds described on Exhibit "B" attached hereto (the "Original
Mortgages"), which Original Mortgages secured those certain promissory notes
<PAGE>
described on Exhibit "C" attached hereto in the aggregate principal amount of
Ninety Eight Million Twenty Eight Thousand Four Hundred Seventy-One Dollars
($98,028,471) (the "Original Notes");
WHEREAS, Lender is making an additional loan to Borrower on
the date hereof in the amount of $24,000,000 (the "Advance") so that the
combined outstanding principal balance on the Note (as herein defined) is
$122,028,471.
WHEREAS, the Original Notes have been superceded, and in
renewal, substitution and replacement therefor, and consolidation with the
Advance, Assignor and Assignee have executed that certain Consolidated Amended,
Renewed and Restated Promissory Note, dated as of the date hereof (together with
all amendments, modifications, supplements, restatements, substitutions and
replacements thereof and thereto, the "Note"), which Note evidences one
consolidated joint and several indebtedness of Assignee in the principal amount
of ONE HUNDRED TWENTY-TWO MILLION TWENTY-EIGHT THOUSAND FOUR HUNDRED SEVENTY-ONE
DOLLARS ($122,028,471) (the "Loan"). The Note shall be payable as specified
therein, with an initial stated maturity date of June 30, 1999 (the "Initial
Maturity Date"). The Initial Maturity Date or such earlier date as may be
required under the terms of the Note or such later date that may be specified by
Lender pursuant to the terms of the Note (being referred to herein as the
"Maturity Date"); and
WHEREAS, in connection with the consolidation, amendment and
restatement of the Note, Borrower, Trustee and Lender hereby desire to renew,
consolidate, amend and restate the Original Mortgages in their entirety to form
a single lien on the Mortgaged Property in the amount equal to the Loan Amount,
securing the principal amount due and owing under the Note; and
WHEREAS, this Mortgage shall be construed so as to provide
that, (i) in the Deed of Trust States, all conveyances shall be to the Trustee
for the benefit of Lender, and (ii) in the Mortgage and Security Deed States,
all conveyances shall be to Lender; and
WHEREAS, Borrower, Trustee and Lender intend these recitals to
be a material part of this Mortgage.
NOW, THEREFORE, in consideration of the Loan to Borrower
evidenced by the Note and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Borrower, Trustee and Lender
hereby agree that the Original Mortgage and Additional Mortgages are hereby
renewed, consolidated, amended and restated as follows:
<PAGE>
TO SECURE:
(1) payment and performance of all covenants, conditions,
liabilities and obligations of Borrower to Lender contained in, and payment of
the indebtedness evidenced by, the Note plus all interest payable thereunder;
and
(ii) paymen and performance of all covenants, conditions,
liabilities and obligations contained in this Mortgage and any extensions,
renewals or modifications hereof; and
(iii) payment and performance of all covenants, conditions,
liabilities and obligations of Borrower contained in the Assignment of Leases
and Rents, dated as of the date hereof (together with any extensions, renewals
or modifications thereof, the "Assignment of Leases"), between Borrower, as
assignor, and Lender, as assignee and the Cash Collateral Account, Security,
Pledge and Assignment Agreement, dated as of the date hereof (together with any
extensions, renewals or modifications thereof, the "Cash Collateral Agreement"),
among Borrower, Lender and LaSalle National Bank; and
(iv) payment and performance of all covenants, conditions,
liabilities and obligations of Borrower contained in each of the other Loan
Documents (as defined below); and
(v) without limiting the foregoing, payment of all indebtedness,
liabilities, and amounts from time to time incurred by Lender pursuant to the
Note, this Mortgage or such other Loan Documents, even if the aggregate amount
of the monetary obligation outstanding at any one time exceeds the face amount
of the Note (all of the foregoing indebtedness, monetary liabilities and
obligations set forth in clauses (i)-(iv) above and this clause (v),
collectively, the "Indebtedness"); and
(vi) payment of the Indebtedness together with the payment and
performance of all other covenants, conditions, liabilities and obligations
described and set forth in clauses (i)-(v) above and in this clause (vi),
collectively, the "Obligations."
GRANTING CLAUSES
NOW, THEREFORE, THIS MORTGAGE WITNESSETH: that Borrower, in
consideration of the premises, the Indebtedness secured by the Note, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged (a) has mortgaged, warranted, granted, bargained, sold, alienated,
<PAGE>
released, confirmed, conveyed, pledged and assigned and (b) by these presents
does hereby irrevocably grant and create a first priority Lien (as defined
below), subject to the Permitted Encumbrances and the provisions hereof and of
the other Loan Documents, on and security interest in, and does hereby MORTGAGE,
WARRANT, GRANT A SECURITY INTEREST IN, GRANT, BARGAIN, SELL, ALIENATE, RELEASE,
CONFIRM, CONVEY, PLEDGE, ASSIGN, TRANSFER AND SET OVER TO LENDER (OR TRUSTEE, IF
APPLICABLE), WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, for the
benefit and use of Lender and its successors and assigns forever, and TRUSTEE,
ITS SUCCESSORS AND ASSIGNS, all its estate, right, title and interest now owned
or hereafter acquired in, to and under any and all the property (collectively,
the "Mortgaged Property") described in the following Granting Clauses:
(A) the Land;
(B) all of Borrower's right, title and interest in and to the
buildings, foundations, structures, improvements and fixtures now or
hereafter located or erected on the Land (the "Improvements");
(C) all of Borrower's right, title and interest, if any, in and
to (i) al streets, avenues, roads, alleys, passages, places, sidewalks,
strips and gores of land and ways, existing or proposed, public or private,
adjacent to the Land, and all reversionary rights with respect to the
vacation of said streets, avenues, roads, alleys, passages, places,
sidewalks and ways in the land lying thereunder, (ii) all air, lateral
support, drainage, oil, gas and mineral rights, options to purchase or
lease, waters, water courses and riparian rights now or hereafter
pertaining to or used in connection with the Land and/or Improvements,
(iii) all and singular, the tenements, hereditaments, rights of way,
easements, appendages and appurtenances and property now or hereafter
belonging or in any way appertaining to the Land, and (iv) all estate,
right, title, claim or demand whatsoever, either at law or in equity, in
possession or expectancy, of, in and to the Land (collectively, the
"Appurtenances");
(D) all of Borrower's right, title and interes in and to all of
the machinery,ppliances, apparatus, equipment, fittings, fixtures,
materials, articles of personal property and goods of every kind and nature
whatsoever, and all additions to and renewals and replacements thereof, and
all substitutions therefor, now or hereafter affixed to, attached to,
placed upon or located upon or in the Land, or any part thereof, and used
in connection with the use, ownership, management, maintenance, enjoyment
or operation of the Land in and present or future occupancy or use thereof
and now owned or leased or hereafter owned or leased (to the extent
permitted by the applicable Lease) by Borrower including, but without
limiting the generality of the foregoing, all heating, lighting, laundry,
cooking, incinerating, loading, unloading and power equipment, boilers,
<PAGE>
dynamos, stokers, engines, pipes, pumps, tanks, motors, conduits,
switchboards, plumbing, lifting, cleaning, fire prevention, fire
extinguishing, refrigerating, ventilating, and communications apparatus,
air cooling and air conditioning apparatus, building materials and
equipment, elevators, escalators, carpeting, shades, draperies, awnings,
screens, doors and windows, blinds, stoves, ranges, refrigerators,
dishwashers, cabinets, office equipment, furniture and furnishings,
partitions, ducts and compressors (other than equipment and personal
property of tenants of the Land or the Improvements, or any part thereof)
hereinafter collectively called "Building Equipment"), and Borrower agrees
to execute and deliver, from time to time, such further instruments
(including, without limitation, Uniform Commercial Code of the applicable
State in which a Property is located (the "UCC")) as may be reasonably
requested by Lender to confirm the lien of this Mortgage on any Building
Equipment or any Intangible;
(E) Without limiting the generality of the provisions of any
other Granting Clause, all of Borrower's rights, title, interest,
privileges and franchises in and to the following, now owned or hereafter
acquired by Borrower, to the extent of Borrower's interest therein and
thereto and to the extent assignable (collectively, "Operating Assets"):
(i) bookings for the use of guest rooms, meeting rooms at the
extended stay hotels or at any other improvements now or hereafter
located on any of the Land;
(ii) all contracts respecting utility services for, and the
maintenance, operations, or equipping of, the Property, including
guaranties and warranties relating thereto;
(iii) the permits and licenses held by Lender or required to
operate the hotels located on the Land;
(iv) all contract rights, leases (whether with respect to real
property, personal property or both real and personal property),
concessions, trademarks, trade names, service marks, logos,
copyrights, warranties and other items of intangible personal
property, and any and all good will associated with the same relating
to the ownership or operation of the extended stay hotels or of any
other improvements now or hereafter located on any of the Land,
including, without limitation, (i) telephone and other communication
<PAGE>
numbers, (ii) all software licensing agreements as are required to
operate computer software systems at the extended stay hotels or at
any other improvements now or hereafter located on any of the Land and
books and records relating to the software programs, and (iii)lessee's
interest under leases of Tangible Personal Property (as hereinafter
defined);
(v) all contracts, purchase orders, requisitions and agreements
entered into by or on behalf of Borrower or which have been assigned
to Borrower, for the design, construction, and furnishing of the
extended stay hotels or of any other improvements now or hereafter
located on any of the Land, including, without limitation, architect's
agreements, engineering agreements, construction contracts, consulting
agreements and agreements or purchase orders for all items of Tangible
Personal Property and any payment or performance bonds in favor of
Borrower (and all warranties and guarantees thereunder and warranties
and guarantees of any subcontractor and bonds issued in connection
with the work to be performed by any subcontractor);
(vi) the following personal property (the "Tangible Personal
Property") now or hereafter acquired by Borrower (directly or by way
of lease) which is located on, or to be located on, or which is in use
or held in reserve storage for future use in connection with the
operations of, the extended stay hotels or of any other improvements
now or hereafter located on any of the Land, which are on hand or on
order whether stored on-site or off-site:
1. all furniture, furnishings, equipment, machinery,
apparatus, appliances fixtures and fittings and other articles
of tangible personal property;
2. all china, glassware, linens, kitchen utensils,
silverware and uniforms;
3. all consumables and operating supplies of every kind and
nature, including, without limitation, accounting supplies, guest
supplies, forms, printing, stationery, food and beverage stock,
bar supplies, laundry supplies and brochures to existing purchase
orders;
4. all upholstery material, carpets and rugs, beds, bureaus,
chiffonniers, chairs, chests, desks, bookcases, tables, curtains,
hangings, pictures, divans, couches, ornaments, bars, bar
fixtures, safes, stoves, ranges, refrigerators, radios,
<PAGE>
televisions, clocks electrical equipment, lamps, mirrors, heating
and lighting fixtures and equipment, ice machines, air
conditioning machines, fire prevention and extinguishing
apparatus, laundry machines, and all similar and related articles
used in bedrooms, sitting rooms, bathrooms, boudoirs, halls,
closets, kitchens, dining rooms, offices, lobbies, basements and
cellars in the extended stay hotel and in any other improvements
now or hereafter located on any of the Land;
(5) all cars, vans, buses, trucks, and other vehicles owned
or leased by Borrower for use in connection with the operation of
the Property, together with all equipment, parts and supplies
used to service, repair, maintain and equip the foregoing;
(6) all drawings, designs, plans and specifications prepared
by architects, engineers, interior designers, landscape designers
and any other professionals or consultants for the design,
development, construction and/or improvement of the extended stay
hotels, or for any other development of the Land, as amended from
time to time;
(7) any administrative and judicial proceedings initiated by
Borrower, or in which Borrower has intervened, concerning the
extended stay hotels or the Land, and agreements, if any, which
are the subject matter of such proceedings;
(8) any customer lists utilized by Borrower including lists
of transient guests and restaurant and bar patrons; and
(9) all of the good will in connection with the assets
listed in this Granting Clause (E) and in connection with the
operation of the hotel.
Except as otherwise set forth herein and in the other Loan
Documents, the assignment made by this Granting Clause (E) shall not impair or
diminish any right, privilege or obligation of Borrower with respect to the
Operating Assets, nor shall any such obligation be imposed on Lender.
All such right, title and interest of Borrower in and to each
of the twenty-six (26) distinct parcels or sets of parcels of the Land and
Borrower's interest in and to the Improvements, Building Equipment and Operating
Assets located thereon and such other property with respect thereto described in
the foregoing Granting Clauses is herein called a "Property" and all such
Properties are herein collectively called the "Properties".
<PAGE>
(F) all of Borrower's right, title and interest as lessor or licensor,
as the case may be, in, to and under all leases, underlettings, concession
agreements and licenses of the Properties, or any part thereof, now
existing or hereafter entered into by Borrower including, without
limitation, any cash and securities deposited thereunder (collectively, the
"Leases"), the grant of such cash and securities hereunder being expressly
subject to the provisions of the applicable Leases, and all of Borrower's
right, title and interest, subject to the provisions of Section 9, in the
right to receive and collect the revenues, income, rents, issues, profits,
royalties and other benefits payable under any of the Leases or otherwise
arising from the use or enjoyment of all or any portion of the Properties
including, without limitation, transient and other hotel room rentals and
rentals of other portions of the Improvements (collectively, the "Rents");
(G) subject to the provisions of Section 6 hereof, all of Borrower's
right, title and interest in and to all proceeds, judgments, claims,
compensation, awards or payments hereafter made to Borrower for the taking,
whether permanent or temporary, by condemnation, eminent domain, or for any
conveyance made in lieu of such taking, of the whole or any part of the
Properties, including, without limitation, all proceeds, judgments, claims,
compensation awards or payments for changes of grade of streets or any
other injury to or decrease in the value of the Properties, whether direct
or consequential, which said awards and payments are hereby assigned to
Lender, who is hereby authorized to collect and receive the proceeds
thereof and to give proper receipts and acquittances therefor, and to apply
the same toward the payment of the Indebtedness in such order as Lender may
determine in accordance with the provisions of this Mortgage without regard
to the adequacy of Lender's security hereunder and notwithstanding the fact
that the amount thereof may not then be due and payable, and toward the
payment of reasonable counsel fees, costs and disbursements incurred by
Lender in connection with the collection of such awards or payments; and
Borrower hereby agrees, upon request, to make, execute and deliver any and
all further assignments and other instruments sufficient for the purpose of
confirming this assignment of said proceeds, judgments, claims,
compensation awards or payments to Lender, subject to Section 6 hereof,
free, clear and discharged of any encumbrances of any kind or nature
whatsoever other than the Permitted Encumbrances;
(H) subject to the provisions of Section 6 hereof, all of Borrower's
right, title and interest in and to all unearned premiums paid under
insurance policies now or hereafter obtained by Borrower to the extent the
same insure the Properties and any other insurance policies required to be
maintained pursuant to Section hereof to the extent the same insure the
Properties including, without limitation, liability insurance policies and
Borrower's interest in and to all proceeds of the conversion and the
<PAGE>
interest payable thereon, voluntary or involuntary, of the Mortgaged
Property, or any part thereof, into cash or liquidated claims including,
without limitation, proceeds of casualty insurance, title insurance (other
than liability insurance) or any other insurance maintained on or with
respect to the Properties;
(I) all right, title and interest of Borrower in and to all
extensions, improvements, betterments, renewals, substitutes and
replacements of, and all additions and Appurtenances to, the Properties,
hereafter acquired by or released to Borrower or constructed, assembled or
placed by Borrower on the Properties, and all conversions of the security
constituted thereby; immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and
in each such case, to the extent permitted by law, without any further
mortgage, conveyance, assignment or other act by Borrower, any of such
extensions, improvements, betterments, renewals, substitutes and
replacements shall become subject to the Lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by Borrower and
specifically described herein;
(J) all of Borrower's right, title and interest in, to and under, to
the extent the same may be encumbered or assigned by Borrower pursuant to
the terms thereof without occurrence of a breach of default thereunder or a
violation under applicable law, and without impairment of the validity or
enforceability thereof, (i) any Operating Agreements (as defined below) and
all contracts and agreements relating to the Properties (other than the
Leases), and other documents, books and records related to the ownership
and operation of the Properties; (ii) to the extent permitted by law, all
consents, licenses (including, to the extent permitted by law, any licenses
held by Borrower permitting the sale of liquor at the Properties the
transfer and/or assignment of which is permitted by law without filing or
other qualification), warranties, guaranties, building permits and
government approvals relating to or required for the construction,
completion, occupancy and operation of the Properties; (iii) all plans and
specifications for the construction of the Improvements, including, without
limitation, installations of curbs, sidewalks, gutters, landscaping,
utility connections and all fixtures and equipment necessary for the
construction, operation and occupancy of the Improvements; (iv) all such
other contracts and agreements (other than the Leases) from time to time
executed by Borrower relating to the ownership, leasing, construction,
maintenance, operation, occupancy or sale of the Properties, together with
all rights of Borrower to compel performance of the terms of such contracts
and agreements; and (v) subject to the terms of the Cash Collateral
Agreement, the Accounts (as defined below) and any funds in such Accounts
<PAGE>
from time to time (it being understood that at such time as Borrower shall
withdraw any amounts from any Accounts in accordance with the provisions of
the Cash Collateral Agreement, the same shall cease to constitute part of
the Mortgaged Property);
(K) to the extent the same may be encumbered or assigned by Borrower
pursuant to the terms thereof and to the extent permitted by law, all of
Borrower's right, title and interest in, to and under escrows, documents,
instruments, and general intangibles, as the foregoing terms are defined in
the UCC, in any case which now or hereafter relate to, are derived from, or
are used in connection with the Properties, and all contract rights,
franchises, books, records, plans, specifications, permits, licenses,
approvals, actions and causes of action which now or hereafter relate to,
are derived from or used in connection with the Properties or the use,
operation, maintenance, occupancy or enjoyment thereof or the conduct of
any business or activities thereon (collectively, the property described in
the foregoing paragraphs (F), (G), (H), (I), (J) and this paragraph (K),
the "Intangibles"); and
(L) All of Borrower's right, title and interest in all proceeds, both
cash and noncash, of the foregoing which may be sold or otherwise be
disposed of pursuant to the terms hereof.
TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed, or
mentioned and intended so to be, whether now owned or held or hereafter
acquired, subject only to the Permitted Encumbrances, unto Lender (with respect
to the Mortgage and Security Deed States), or Trustee (with respect to the Deed
of Trust States), its successors and assigns, in fee simple, forever, upon the
terms and conditions set forth herein and to secure the performance of, and
compliance with, the obligations, covenants and conditions of this Mortgage and
the other Loan Documents all as herein set forth.
1 . Definitions. Wherever used in this Mortgage, the following
terms, and the singular and plural thereof, shall have the following
meanings. All capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Note:
Accounts: Shall mean, collectively, the Interest Escrow
Subaccount, the Mortgage Escrow Subaccount, the FF&E Escrow
Subaccount, the Construction Completion Subaccount, the Operations and
Maintenance Subaccount, the Borrower Remainder Subaccount and the
Curtailment Reserve Subaccount (each as defined in the Cash Collateral
Agreement), and any and all of Borrower's other accounts, general
intangibles, chattel paper, cash or monies, wherever located, whether
in the form of cash or checks, and all cash equivalents including all
deposits and certificates of deposit, instruments, whether negotiable
or non-negotiable, debt notes both certificated and uncertificated,
repurchase obligations for underlying notes of the types described
<PAGE>
herein, and commercial paper (it being agreed that all of the
foregoing must at all times qualify as Eligible Investments (as
defined in the Cash Collateral Agreement)), (a) received in connection
with the sale or other disposition of the Properties, (b) maintained
by Borrower in a segregated account in trust for the benefit of
Lender, or (c) held by Lender, but not any account maintained by
Borrower or an Affiliate of Borrower or cash or cash equivalents that
have been disbursed to Borrower in accordance with the Cash Collateral
Agreement.
Affiliate: Shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with, or any general partner
in, such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities or
other beneficial interest, by contract or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the
foregoing.
Agent: As defined in the Cash Collateral Agreement.
Aggregate Alteration Threshold Amount: Shall mean five percent
(5%) of the Loan Amount on the date hereof.
Allocated Loan Amount: Shall mean the portion of the Principal
Indebtedness allocated, solely for the purposes of performing certain
calculations hereunder, to each Property as set forth in Schedule 1
annexed hereto and made a part hereof, as such amounts shall be
adjusted from time to time as hereinafter set forth. In the case of a
Total Loss in accordance with Section 6(i) where the Proceeds are less
than 125% of the Allocated Loan Amount, each Allocated Loan Amount for
each of the remaining Properties shall be increased by an amount equal
to the product of (a) the difference between 125% of the applicable
Allocated Loan Amount and the Proceeds, and (b) a fraction, the
numerator of which is the applicable Allocated Loan Amount (prior to
the adjustment in question) and the denominator of which is the
aggregate of the Allocated Loan Amounts for the remaining Properties
(prior to the adjustment in question). All calculations made pursuant
to this Mortgage with respect to an Allocated Loan Amount (including
Premium or scheduled interest payments on an Allocated Loan Amount)
shall be certified to Lender by Borrower pursuant to an Officer's
Certificate.
Alteration: As defined in Section hereof.
<PAGE>
Approved Banks: Shall mean banks or other financial institutions
which have a minimum long-term unsecured debt rating of at least "AA"
by each of the Rating Agencies, or if any such bank or other financial
institution is not rated by all the Rating Agencies, then a minimum
long-term rating of at least "AA" or its equivalent by the Rating
Agencies involved in the Securitization.
Appurtenances: As defined in Granting Clause (C) hereof.
Assignee: As defined in Section 57 hereof.
Assignment of Leases: As defined in the recitals hereof.
Best: As defined in Section 5(b).
Building Equipment: As defined in Granting Clause (D) hereof.
Business Day: Shall mean any day except a Saturday, a Sunday or
any other day on which commercial banks in the State of New York are
authorized or obligated by law, governmental decree or executive order
to be closed.
Cash: Coin or currency of the government of the United States of
America.
Cash and Cash Equivalents: Shall mean any or a combination of the
following: (i) Cash, and (ii) U.S. Government Obligations.
Cash Collateral Agreement: As defined in the recitals hereof.
Closing Date: Shall mean the date the Loan and the transactions
contemplated hereby are consummated.
Code: Shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto, and any temporary or final regulations
promulgated thereunder.
Construction Properties: Shall mean the Reston property
identified on Exhibit A-20, and the Merrifield property identified on
Exhibit A-21.
Construction Completion Subaccount: Shall have the meaning set
forth in the Cash Collateral Agreement.
Debt: Shall mean, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or
not evidenced by bonds, debentures, notes or other instruments, or for
the deferred purchase price of property or services (excluding trade
<PAGE>
obligations); (b) obligations of such Person as lessee under leases
which should have been or should be, in accordance with GAAP, recorded
as capital leases; (c) current liabilities of such Person in respect
of unfunded vested benefits under plans covered by Title IV of ERISA;
(d) obligations issued for, or liabilities incurred on the account of,
such Person; (e) obligations or liabilities of such Person arising
under acceptance facilities; (f) obligations of such Person under any
guarantees or other agreement to become secondarily liable for any
obligation of any other Person, endorsements (other than for
collection or deposit in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor
against loss; (g) obligations of such Person secured by any Lien on
any property of such Person, whether or not the obligations have been
assumed by such Person; or (h) obligations of such Person under any
interest rate or currency exchange agreement.
Debt Service: Shall mean the amount of interest and principal due
and payable in accordance with the Note, during any month, multiplied
by the number of months with respect to the applicable period.
Debt Service Coverage Ratio: Shall mean (i) with respect to each
Property, the ratio, as determined by Lender in its reasonable
discretion, of the Net Operating Income from the applicable Property
adjusted pursuant to Lender's customary underwriting standards
(including adjustment for an assumed 4% management fee and 4% FF&E
reserve) based either on (A) the actual Net Operating Income from the
applicable Property during the prior twelve (12) months, or, if the
applicable Property has not been open for at least fifteen (15)
months, (B) a forecasted twelve (12) month period based on annualized
actual Net Operating Income received from the Property during the
period commencing three (3) months after the opening of the Property
for business and ending on the last day of the month preceding such
calculation, divided by an amount equal to the annualized Debt Service
allocable to such Property and (ii) with respect to all of the
Properties, the ratio, as determined by Lender in its reasonable
discretion, of the Net Operating Income all of the Properties adjusted
pursuant to Lender's customary underwriting standards (including
adjustment for an assumed 4% management fee and 4% FF&E reserve) based
either on (A) the actual Net Operating Income from the Properties
during the prior twelve (12) months, or, if any Property has not been
open for at least fifteen (15) months, (B) a forecasted twelve (12)
month period based on annualized actual Net Operating Income received
from such Property during the period commencing three (3) months after
the opening of such Property for business and ending on the last day
of the month preceding such calculation, divided by an amount equal to
the annualized Debt Service.
<PAGE>
Default: Shall mean the occurrence or existence of any event or
condition which, with the giving of notice or the passage of time, or
both, would constitute an Event of Default hereunder.
Default Rate: Shall have the meaning set forth in the Note.
Defeasance: As defined in Section 46 hereof.
Defeasance Collateral: Shall mean Defeasance Eligible Investments
included in the Mortgaged Property as collateral pursuant to Sections
38, 45 and 46 hereof (including, without limitation, all amounts then
on deposit in the Defeasance Collateral Account).
Defeasance Collateral Account: As defined in Section 47 hereof.
Defeasance Eligible Investments: Shall mean obligations or
securities not subject to prepayment, call or early redemption which
are direct obligations of, or obligations fully guaranteed as to
timely payment by, the United States of America or any agency or
instrumentality of the United States of America, or the obligations of
which are backed by the full faith and credit of the United States of
America, the ownership of which will not cause Lender to be an
"investment company" under the Investment Company Act of 1940, as
amended, as evidenced by an Opinion of Counsel acceptable to Lender,
and which qualify under ss. 1.860G-2(a)(8) of the Treasury
regulations. All such obligations or securities shall mature or be
redeemable, or provide for payments of interest thereon, on or prior
to the Business Day preceding the date such amounts are required to be
applied under this Mortgage.
Direct Beneficial Owner: Shall mean such Persons who own any
direct ownership interest in Borrower.
Environmental Certificate: As defined in Section 40(b) hereof.
Environmental Claim: Shall mean any claim, action, cause of
action, investigation or written notice by any Person alleging
potential liability (including potential liability for investigatory
costs, cleanup costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based upon or
resulting from (a) the presence, threatened presence, release or
threatened release into the environment of any Hazardous Substances
from or at any of the Properties, or (b) the violation, or alleged
violation, of any Environmental Law, relating to the Properties.
Environmental Event: As defined in Section (b) hereof.
<PAGE>
Environmental Laws: Shall mean all present or future federal,
state and local laws, statutes, rules, ordinances, and regulations
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without
limitation laws, statutes, rules, ordinances and regulations relating
to emissions, discharges, releases of Hazardous Substances, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Substances including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. ss.ss. 9601 et seq.; the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. ss.ss. 6901 et seq.; the Toxic Substance Control
Act, 15 U.S.C. ss.ss. 2601 et seq.; the Water Pollution Control Act
(also known as the Clean Water Act), 33 U.S.C. ss. 1251 et seq.; the
Clean Air Act, 42 U.S.C. ss. 7401 et seq.; and the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq., as the same may be
hereafter amended or modified.
ERISA: Shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
thereunder.
Events of Default: Shall mean the occurrence of any of the
following, each of which shall constitute an Event of Default under
this Mortgage:
(a) (i) Failure to make any payment of interest or principal on
the Note when due; provided, however, that in the event of any such
failure occurring prior to the Initial Maturity Date, or the
Anticipated Securitization Maturity Date, if applicable pursuant to
the terms of the Note after the delivery of a Securitization Extension
Notice, the same shall constitute a default if it continues for a
period of five (5) days after the same is due (with Default Interest
payable as set forth in the Note), or (ii) failure to pay the
principal balance of the Note when due and the same shall continue for
a period of five (5) days after the same is due; or
(b) Borrower fails to pay any other amount payable pursuant to
this Mortgage or the Note when due and payable in accordance with the
provisions hereof, with such failure continuing for ten (10) days
after Lender delivers written notice thereof to Borrower; or
(c) (i) Failure to keep in force the insurance required by
Section 5 of this Mortgage, or (ii) failure to comply with any other
covenants set forth in Section 5 with such failure in this clause (ii)
continuing for five (5) Business Days after Lender delivers written
notice thereof to Borrower; or
(d) Any default under the terms of Section 7b (subject to the
terms of Section 7(c)) beyond any applicable time periods set forth
<PAGE>
therein, with such default continuing for five (5) days after Lender
delivers written notice thereof to Borrower, or the incurrence of any
Debt in violation of Section 11(c) of this Mortgage or the occurrence
of any Transfer in violation of Sections 11(a) or 11(b)(but subject to
the terms of Section 11(d)) of this Mortgage; or
(e) Any attempt by Borrower to assign its rights under this
Mortgage in violation of the terms hereof; or
(f) Any other default in the performance or payment, or breach,
of any material covenant, warranty, representation or agreement of
Borrower contained herein or in any other Loan Document (other than a
covenant, representation or agreement, a default in the performance or
payment of or the breach of which is specifically addressed elsewhere
in this definition), which default is not cured within thirty (30)
Business Days after receipt by Borrower of notice from Lender in
writing of such breach. If cure of such default (a) would require
performance of an Obligation other than payment of Indebtedness to
Borrower and (b) cannot be effected within said thirty (30) Business
Day period despite Borrower's diligence in prosecuting such cure,
then, provided Borrower commences to cure within said thirty (30)
Business Day period and diligently prosecutes said cure to completion,
subject only to Excusable Delays, the cure period provided hereunder
shall be extended to such time as may be reasonably necessary to cure
the default; provided, however, that such extended period shall in no
event exceed one hundred-twenty (120) days plus time permitted for
Excusable Delays; and provided, further, that Borrower shall provide
Lender with a written report and evidence of the progress of
Borrower's cure efforts (90) days after commencement of such one
hundred-twenty (120) day cure period. Notwithstanding the foregoing
sentence, the cure period provided hereunder may be extended for one
(1) additional one hundred-twenty (120) day period, subject to
Excusable Delays, if and only if (x) such default involves breach of a
covenant (as distinct from a representation) and cure of such default
would require physical construction or remedial work, and (y) such
cure cannot with diligence be completed within the initial one
hundred-twenty (120) day period. Borrower shall provide Lender with an
additional written report and evidence of the progress of Borrower's
cure efforts ninety (90) days after commencement of such additional
one hundred-twenty (120) day cure period.
(g) The entry by a court of (A) a decree or order for relief in
respect of Borrower or its General Partner (as herein defined) in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging Borrower or its General Partner, if
applicable, a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition of or in respect of Borrower or its General Partner under
any applicable Federal or state bankruptcy, insolvency, reorganization
<PAGE>
or other similar law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of Borrower
or its General Partner, if applicable, or of any substantial part of
either of their respective property, or ordering the winding up or
liquidation of either of their respective affairs, and the continuance
of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of more than ninety (90)
consecutive days; or
(h) The commencement by Borrower or General Partner, if
applicable, of a voluntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree
or order for relief in respect of it in an involuntary case or
proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement
of any bankruptcy or insolvency case or proceeding against it, or the
filing by Borrower or its General Partner, if applicable, of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or state bankruptcy, insolvency, reorganization
or other similar law, or the consent by Borrower or its General
Partner, if applicable, to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of
Borrower or its General Partner, if applicable, or of any substantial
part of any of either of their respective property, or the making by
Borrower or its General Partner, if applicable, of an assignment for
the benefit of creditors, or the admission by Borrower or its General
Partner, if applicable, in writing of its inability to pay its debts
generally as they become due, or the taking of official partnership
action of Borrower or corporate action of its General Partner, if
applicable (or if, at any time, Borrower shall no longer be a
partnership or the General Partner shall no longer be a corporation)
in furtherance of any such action; or
(i) This Mortgage or any other Loan Document or any Lien granted
hereunder or thereunder shall, in whole or in part, terminate, cease
to be effective or cease to be a legally valid, binding and
enforceable obligation of Borrower, or any Lien securing the
Indebtedness shall, in whole or in part, cease to be a perfected first
priority Lien, subject to the Permitted Encumbrances (except in any of
the foregoing cases in accordance with the terms hereof or under any
other Loan Document); or
(j) The Debt Service Coverage Ratio, at any time, for all of the
Properties is less than 1.10 to 1; or
(k) The failure of Borrower to (i) open the Reston property
identified on and A-25 and (ii) deliver a final and unconditional
certificate of occupancy for said property to Lender, on or before
September 30, 1998; or
<PAGE>
(l) The failure of Borrower to (i) open the Merrifield property
identified on Exhibit A-26 and (ii) deliver final and unconditional
certificate of occupancy for said properties to Lender, on or before
November 30, 1998; or
(m) Any "Event of Default" as defined in any Loan Document other
than this Mortgage occurs.
Exculpated Parties: As defined in Section 33 hereof.
Excusable Delay: Shall mean a delay due to acts of God,
governmental restrictions, stays, judgments, orders, decrees, enemy
actions, civil commotion, fire, casualty, strikes, work stoppages,
shortages of labor or materials or other causes beyond the reasonable
control of Borrower, but lack of funds in and of itself shall not be
deemed a cause beyond the control of Borrower.
FF&E Escrow Subaccount: Shall have the meaning set forth in the
Cash Collateral Agreement.
First Class: Shall mean, with respect to each of the Properties,
a standard of operation and maintenance consistent with first-class
properties comparable to and in the same metropolitan area as a
Property.
GAAP: Shall mean the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the accounting profession), or in such other
statements by such entity as may be in general use by significant
segments of the United States accounting profession, to the extent
such principles are applicable to the facts and circumstances on the
date of determination.
General Partner: Shall mean HVI Incorporated, a Delaware
corporation.
Governmental Authority: Shall mean any Federal, state or local
government or any other political subdivision thereof exercising
executive, legislative, judicial, regulatory or administrative
functions.
Hazardous Substance: Shall mean any material waste or material
substance which is:
<PAGE>
(a) included within the definition of "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in or
pursuant to any Environmental Law, or subject to regulation under any
Environmental Law;
(b) listed in the United States Department of Transportation
Optional Hazardous Materials Table, 49 C.F.R. ss. 172.101 enacted as
of the date hereof or hereafter amended, or in the United States
Environmental Protection Agency List of Hazardous Substances and
Reportable Quantities, 40 C.F.R. Part 302, as enacted as of the date
hereof or as hereafter amended; or
(c) an explosive, radioactive, asbestos, polychlorinated
biphenyl, oil or petroleum product.
Impositions: Shall mean all taxes (including all ad valorem,
sales (including those imposed on lease rentals), use, single
business, gross receipts, value added, intangible transaction,
privilege or license or similar taxes), governmental assessments
(including all assessments for public improvements or benefits,
whether or not commenced or completed prior to the date hereof and
whether or not commenced or completed within the term of this
Mortgage), water, sewer or other rents and charges, excises, levies,
fees (including license, permit, inspection, authorization and similar
fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Mortgaged Property
and/or any Rents (including all interest and penalties thereon), which
at any time prior to, during or in respect of the term hereof may be
assessed or imposed on or in respect of or be a Lien upon (a) Borrower
(including all income, franchise, single business or other taxes
imposed on Borrower for the privilege of doing business in the
jurisdiction in which the Mortgaged Property is located), (b) the
Mortgaged Property, or any other collateral delivered or pledged to
Lender in connection with the Loan, or any part thereof, or any Rents
therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Mortgaged Property or the
leasing or use of all or any part thereof. Nothing contained in this
Mortgage shall be construed to require Borrower to pay any tax,
assessment, levy or charge imposed on (i) any tenant occupying any
portion of a Property or (ii) Lender in the nature of a franchise,
capital levy, estate, inheritance, succession, income or net revenue
tax.
Improvements: As defined in Granting Clause (B) hereof.
Indebtedness: As defined in the recitals hereof.
Indemnified Environmental Parties: As defined in Section hereof.
Indemnified Parties: As defined in Section 37 hereof.
<PAGE>
Independent Accountant: Shall mean Arthur Andersen LLP, or
another firm of nationally recognized, independent certified public
accountants selected by Borrower which is reasonably acceptable to
Lender.
Independent Appraiser: Shall mean an independent appraiser which
is a member of the American Institute of Real Estate Appraisers
selected by Borrower and having at least five (5) years of experience
in the applicable real estate market where a Property is located in
the valuation of properties of the type being appraised.
Independent Architect: Shall mean an independent architect,
engineer or construction consultant selected by Borrower, licensed to
practice in the State where a Property is located and having at least
five (5) years of experience and that is acceptable to Lender in its
sole and absolute discretion.
Independent Director: Shall mean an individual reasonably
satisfactory to Lender who shall not have been at the time of such
individual's appointment, and may not have been at any time during the
preceding two (2) years (i) a shareholder of, or an officer or
employee of, Borrower or any of its shareholders, subsidiaries or
affiliates, (ii) a customer of, or supplier to, Borrower or any of its
shareholders, subsidiaries or affiliates, (iii) a person or other
entity controlling any such shareholder, supplier or customer, or (iv)
a member of the immediate family of any such shareholder, officer,
employee, supplier or customer of any other director of Borrower. As
used herein, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through
ownership of voting securities, by contract or otherwise.
Initial Land: As defined in the recitals hereof.
Insurance Requirements: Shall mean all terms of any insurance
policy required hereunder covering or applicable to any Property or
any part thereof, all requirements of the issuer of any such policy,
and all orders, rules, regulations and other requirements of which
Borrower has notice of the national board of fire underwriters (or any
other body exercising similar functions) applicable to or affecting
any Property or any part thereof or any use of any Property or any
part thereof.
Intangibles: As defined in Granting Clause (K) hereof.
Land: As defined in the recitals hereof.
<PAGE>
Leases: As defined in Granting Clause (F) hereof.
Legal Requirements: As defined in Section 13(a) hereof.
Letter of Credit: Shall mean an irrevocable, unconditional,
transferable, clean sight draft letter of credit in favor of Lender
and entitling Lender to draw thereon in New York, New York, issued by
a domestic Approved Bank or the United States agency or branch of a
foreign Approved Bank, or if there are no domestic Approved Banks or
U.S. agencies or branches of a foreign Approved Bank then issuing
letters of credit, then such letter of credit may be issued by a
domestic bank, the long term unsecured debt rating of which is the
highest such rating then given by the Rating Agencies to a domestic
commercial bank. If at any time the bank issuing any such Letter of
Credit shall cease to be an Approved Bank, Lender shall have the right
immediately to draw down the same in full and hold the proceeds of
such draw in accordance with the applicable provisions hereof, unless
Borrower shall deliver a replacement Letter of Credit within thirty
(30) days after Lender delivers written notice to Borrower that such
bank shall have ceased to be an Approved Bank.
Liabilities: As defined in Section 59(D)(ii)(B) hereof.
Lien: Shall mean any mortgage, deed of trust, deed to secure
debt, lien, pledge, hypothecation, assignment, security interest,
security title, or any other encumbrance of, on or affecting the
Mortgaged Property or any portion thereof or any interest therein,
including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, the filing of any financing
statement, and mechanic's, materialmen's and other similar liens and
encumbrances.
Loan: As defined in the recitals hereof.
Loan Amount: Shall mean the Principal Amount from time to time of
the Loan, which initially shall be$122,028,471.
Loan Documents: Shall mean this Mortgage, the Assignment of
Leases, Rents and Security Deposits, the Cash Collateral Agreement,
the Note, and any and all other agreements, instruments or documents
executed by Borrower evidencing, securing or delivered in connection
with the Loan and the transactions contemplated hereby.
Loan to Value Ratio: Shall mean (i) with respect to each
Property, the ratio, as determined by Lender in its reasonable
discretion, of the Allocated Loan Amount with respect to any Property,
divided by the fair market value of the applicable Property as
<PAGE>
determined by an Independent Appraiser acceptable to Lender and (ii)
with respect to all of the Properties, the ratio, as determined by
Lender in its reasonable discretion, of the Principal Amount, divided
by the aggregate value of the Properties as determined by an
Independent Appraiser acceptable to Lender.
Material Adverse Effect: Shall mean any event or condition that
has a material adverse effect on (i) all of the Properties taken as a
whole, (ii) the business, prospects, profits, operations or condition
(financial or otherwise) of Borrower, or (iii) the ability of Borrower
to repay the principal and interest of the Indebtedness as it becomes
due.
Material Alteration: Shall mean any Alteration which, when
aggregated with all related Alterations constituting a single project,
involves an estimated cost exceeding the Threshold Amount with respect
to Alterations (including the Alteration in question) being undertaken
at a single Property at such time or the Aggregate Alteration
Threshold Amount with respect to Alterations (including the Alteration
in question) being undertaken at all the Properties at such time.
Maturity Date: As defined in the recitals hereof.
Maximum Foreseeable Casualty Loss: As defined in Section hereof.
Minimum Defeasance Collateral Requirement: Shall mean, with
respect to a Property Release resulting in a Defeasance, Defeasance
Collateral in an amount equal to 125% of the Allocated Loan Amount
applicable to the Property which is the subject of the Property
Release, and sufficient to pay scheduled interest and principal
payments (such payments, the "Defeasance Debt Service Payments") on
the portion of the Loan equal to such Allocated Loan Amount on such
Property. Sufficient portions of the Defeasance Collateral must mature
on or before the dates when such amounts are required to be applied to
pay Defeasance Debt Service Payments when due.
ML: As defined in Section 59(D)(ii)(B) hereof.
ML Group: As defined in Section 59(D)(ii)(B) hereof.
Mortgage: As defined in the recitals hereof.
Mortgage Escrow Account: As defined in Section hereof.
<PAGE>
Mortgage Escrow Amounts: As defined in Section hereof. Mortgage
Escrow Security: As defined in Section hereof.
Mortgaged Property: As defined in the Granting Clauses hereof.
Lender: As defined in the introductory paragraph hereof.
Borrower: As defined in the introductory paragraph hereof.
Net Income: Shall mean, with respect to any period, all Operating
Income less (x) all Operating Expenses for such period, (y) the
Monthly Amount and all other amounts payable under the Loan (as such
term is defined in the Note) and (z) the amount of Mortgage Escrow
Amounts, other reserve and escrow amounts for such period and other
reserves reasonably created by Borrower, as disclosed in an annual
budget submitted to Lender pursuant to the terms of Section 5 of the
Cash Collateral Agreement .
Net Operating Income: Shall mean, with respect to any period, the
excess of Operating Income over Operating Expenses for such period.
Nondisqualification Opinion: Shall mean an opinion of tax
counsel, which shall be independent outside counsel, to the effect
that a contemplated action would not materially adversely affect the
federal income tax status as a REMIC, trust or other vehicle of any
REMIC, trust or other vehicle in which the Loan may be included at the
time such opinion is required.
Nondisturbance Agreement: As defined in Section 15(d) hereof.
Note: As defined in the recitals hereof.
Obligations: As defined in the recitals hereof.
Officer's Certificate: Shall mean a certificate delivered to
Lender and signed by an officer of Borrower or General Partner.
Operating Agreements: Shall mean the reciprocal easement
agreements, operating agreements and similar agreements affecting the
ownership, use and operation of a Property included in the Permitted
Encumbrances as such agreements have been or may hereafter be amended,
modified or supplemented.
Operating Expenses shall mean, for any period, without
duplication, all expenses paid or to be paid by Borrower during such
<PAGE>
period in connection with the operation, management, maintenance,
repair, leasing and use of the Mortgaged Property, determined on an
accrual basis, including management fees and leasing expenses with the
exception of leasing commissions.
Operating Income: Shall mean, for any period, all income of
Borrower during such period, determined on an accrual basis, from the
operation of the Mortgaged Property as follows:
(i) all amounts payable to Borrower by any Person as Rent
and other amounts under Leases, license agreements, occupancy
agreements or other agreements relating to the Mortgaged Property
or, as applicable, a Property;
(ii) business interruption insurance; and
(iii) casualty and condemnation proceeds.
Opinion of Counsel: Shall mean an opinion of counsel of a
nationally recognized law firm reasonably acceptable to Lender and, at
any time that the Loan is included in any securitization transaction,
the Rating Agencies, procured by Borrower and rendered at Borrower's
sole cost and expense.
Original Mortgage(s): As defined in the recitals hereof.
Original Note(s): As defined in the recitals hereof.
Permitted Debt: As defined in Section hereof.
Permitted Encumbrances: Shall mean:
(i) Liens for Impositions not yet due and payable or Liens
arising after the date hereof which are being contested in good
faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with Section hereof;
(ii) In the case of Liens arising before the date hereof
identified on Schedule 4 attached hereto, or after the date
hereof, statutory Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens arising by operation of law,
which are insured over by the Title Company or for those arising
after the date hereof are incurred in the ordinary course of
business for sums which are being contested in good faith in
accordance with Section 7(c);
<PAGE>
(iii) All immaterial easements, rights-of-way, restrictions
and other similar charges or non-monetary encumbrances against
real property and other agreements which do not materially and
adversely affect (A) the ability of Borrower to pay any of its
obligations to any Person as and when due, (B) the marketability
of title to the Mortgaged Property, (C) the fair market value of
the Mortgaged Property, or (D) the use or operation of the
Mortgaged Property as of the Closing Date and thereafter;
(iv) Those matters set forth in the "marked-up" commitment
for Lender's loan policy of title insurance concerning each of
the Properties issued by the Title Company and agreed to by
Lender in Lender's sole discretion;
(v) Liens in favor of Lender under this Mortgage and the
other Loan Documents;
(vi) Such other title exceptions as Lender and the
applicable Rating Agencies may approve in writing in their sole
discretion.
Person: Shall mean any individual, corporation, partnership,
joint venture, estate, trust, unincorporated association, and any
federal, state, county or municipal government or any political
subdivision thereof.
Pledge: Shall have the meaning set forth in the recitals hereto.
Principal Amount: Shall mean the principal amount of the Note, as
defined therein.
Principal Indebtedness: Shall mean the Principal Amount payable
by Borrower under the Note.
Proceeds: As defined in Section hereof.
Property: As defined in Granting Clause (E) hereof.
Property Release: As defined in Section 38(d) hereof.
Properties: As defined in Granting Clause (E) hereof.
Qualifying Manager: As defined in Section hereof.
<PAGE>
Rating Agencies: Shall mean Standard & Poor's Ratings Services,
Duff & Phelps Credit Rating Co., Moody's Investors Services, Inc. and
Fitch ICBA, Inc. or, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, any other
nationally recognized statistical rating agency designated by Lender,
provided, however, that at any time during which the Loan is an asset
of a securitization, "Rating Agencies" shall mean the rating agencies
that from time to time rate the securities issued in connection with
such securitization.
Registration Statement: As defined in Section 59(d)(B) hereof.
Release Date: As defined in Section 38(b) hereof.
Renewal Lease: As defined in Section 15(b) hereof.
Rents: As defined in Granting Clause (F) hereof.
Required Opinion: Shall mean an Opinion of Counsel addressed to
Lender and dated as of the date of delivery to the effect that (i) the
Defeasance Collateral has been duly and validly assigned and delivered
to Lender, (ii) the security interest of Lender for the ratable
benefit of any certificateholder, with respect to the Defeasance
Collateral, is a first priority perfected security interest as
security for payment of the Note, which opinion may contain, and be
subject to, conditions, exceptions and qualifications customarily
included in such opinion, and (iii) making the payment which
accompanies such opinion would not constitute an avoidable preference
under Section 547 of the Bankruptcy Code or under applicable state law
in the event of a filing of a petition for relief under the Bankruptcy
Code or such applicable state law by or against Borrower, as to the
portion of the Defeasance Collateral that is equal to the fair market
value of the Property being released in connection with such payment.
Room and Facility Leases: Shall mean Leases for short term hotel
room and other customary rentals to transient guests of the extended
stay hotels and users of the extended stay hotel facilities in the
ordinary course of the operation of the extended stay hotels.
Securities Act: As defined in Section 59(d)(B) hereof.
Single Purpose Entity: Shall mean a Person, other than an
individual, which (i) is formed or organized solely for the purpose of
holding, directly, or, in the case of General Partner, indirectly, an
ownership interest in the Properties, (ii) does not engage in any
business unrelated to the Properties and the financing thereof, (iii)
has not and will not have any assets other than those related to its
<PAGE>
interest in the Properties or the financing thereof or any
indebtedness other than the Loan and trade payables incurred in the
ordinary course of business and paid within the time periods set forth
in the Loan Documents, and in amounts not to exceed those set forth in
the Loan Documents, (iv) maintains its own separate books and records
and its own accounts, in each case which are separate and apart from
the books and records and accounts of any other Person, (v) holds
itself out as being a Person, separate and apart from any other
Person, (vi) does not and will not commingle its funds or assets with
those of any other Person, (vii) conducts its own business in its own
name; (viii) maintains separate financial statements, (ix) pays its
own liabilities out of its own funds, (x) observes all partnership
formalities or corporate formalities or limited liability company
formalities, as applicable, (xi) maintains an arm's-length
relationship with its Affiliates, (xii) pays the salaries of its own
employees and maintains a sufficient number of employees in light of
its contemplated business operations, (xiii) does not guarantee or
otherwise obligate itself with respect to the debts of any other
Person or hold out its credit as being available to satisfy the
obligations of any other Person, (xiv) does not acquire obligations or
securities of its partners, members or shareholders, (xv) allocates
fairly and reasonably shared expenses, including, without limitation,
any overhead for shared office space, (xvi) uses separate stationery,
invoices, and checks, (xvii) does not and will not pledge its assets
for the benefit of any other Person or make any loans or advances to
any other Person, (xviii) does and will correct any known
misunderstanding regarding its separate identity, (xix) maintains
adequate capital in light of its contemplated business operations, and
(xx) has and will have a partnership or operating agreement,
certificate of incorporation or other organizational document which
complies with the standards and requirements for a Single Purpose
Entity set by the Rating Agencies at such time. In addition, if such
Person is a limited partnership, (1) all general partners of such
Person shall be Single Purpose Entities, and (2) if such Person has
more than one general partner, then the organizational documents shall
provide that such Person shall continue (and not dissolve) for so long
as a solvent general partner exists. In addition, if such Person is a
corporation, then, at all times: (a) such Person shall have at least
one (1) Independent Director, and (2) the board of directors of such
Person may not take any action requiring the unanimous affirmative
vote of one hundred percent (100%) of the members of the board of
directors unless all of the directors, including an Independent
Director, shall have participated in such vote. In addition, if such
Person is a limited liability company, (1) each managing member shall
be a Single Purpose Entity, (2) its articles of organization,
certificate of formation and/or operating agreement, as applicable,
shall provide that such entity will dissolve only upon the bankruptcy
of each managing member, and (3) if such Person has more than one
managing member, then the organizational documents shall provide that
such Person shall continue (and not dissolve) for so long as a solvent
managing member exists. In addition, such Person (1) without the
unanimous consent of all of the partners, directors or members, as
applicable, has not and will not with respect to itself or to any
other Person in which it has a direct or indirect legal or beneficial
interest (a) seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or other
similar official for such Person or all or any portion of such
<PAGE>
Person's properties, or (b) take any action that might cause such
Person to become insolvent, (2) has and will maintain its books,
records, resolutions and agreements as official records, (3) has held
and will hold its assets in its own name, (4) has and will maintain
its financial statements, accounting records and other entity
documents separate and apart from any other Person, (5) has not and
will not identify its partners, members or shareholders, or any
affiliates of any of them as a division or part of it.
Taking: Shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of
the exercise of the right of condemnation or eminent domain, of all or
any part of the Mortgaged Property, or any interest therein or right
accruing thereto, including any right of access thereto or any change
of grade affecting a Property or any part thereof.
Tax Opinion: Shall mean an Opinion of Counsel to the effect that
a contemplated action (a) will not result in any deemed exchange
pursuant to Section 1001 of the Code of the Note; and (b) will not
adversely affect the Note's or such other note's status as
indebtedness for federal income tax purposes.
Tenant: Shall mean any Person leasing, subleasing or otherwise
occupying any portion of a Property.
Threshold Amount: Shall mean five percent (5%) of the Allocated
Loan Amount with respect to any Property.
Title Company: Shall mean Chicago Title Insurance Corporation or
such other title insurance companies acceptable to and issuing title
policies to Lender.
Total Defeasance Collateral Requirement: Shall mean with respect
to a Defeasance of the Lien of this Mortgage, Defeasance Collateral in
an amount sufficient to pay all principal indebtedness outstanding as
of the date of Defeasance under the Note as it becomes due and
sufficient to pay scheduled interest payments on the Loan and the
actual average interest rate on the Note. All Defeasance Collateral
must mature on or before the dates when such amounts are required to
be applied to pay interest and principal on the Note when due.
Total Loss: Shall mean (i) a casualty, damage or destruction of a
Property, the cost of restoration of which (calculated in accordance
with the provisions of Section 6 hereof) would exceed twenty five
percent (25%) of the applicable Allocated Loan Amount, and with
respect to which Borrower is not required, under the applicable Leases
to apply Proceeds to the restoration of such Property or (ii) a
permanent Taking of twenty five percent (25%) or more of the gross
<PAGE>
leasable area of a Property or so much of a Property, in either case,
such that it would be impracticable, in Lender's sole discretion, even
after restoration, to operate such Property as an economically viable
whole and with respect to which the applicable Lease does not require
such restoration.
Transfer: Shall mean sell, assign, convey, transfer, pledge or
otherwise dispose of, or where used as a noun, a sale, assignment,
conveyance, transfer, pledge or other disposition.
UCC: As defined in Granting Clause (F) hereof.
Underwriter Group: As defined in Section 59(D)(ii)(B) hereof.
U.S. Government Obligations: Any direct obligations of the United
States Government, including, without limitation, treasury bills,
notes and bonds.
Work: As defined in Section hereof.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
Unless otherwise specified herein or therein, all terms defined in
this Mortgage shall have the defined meanings when used in any other
Loan Document or in any certificate or other document made or
delivered pursuant thereto.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Mortgage shall refer to this Mortgage as a
whole and not to any particular provision of this Mortgage, and
section, schedule and exhibit references are to this Mortgage unless
otherwise specified. The words "includes" and "including" are not
limiting and mean "including without limitation."
In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including;" the
words "to" and "until" each mean "to but excluding," and the word
"through" means "to and including."
References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto
executed in writing by all of the parties thereto and, if Lender's
consent was required for the original of any such document, consented
to by Lender. All references in this Mortgage to the plural of any
document described herein shall mean all of such documents
collectively.
<PAGE>
References to statutes or regulations are to be construed as
including all statutory and regulatory provisions consolidating,
amending, or replacing the statute or regulation.
The captions and headings of this Mortgage are for convenience of
reference only and shall not affect the construction of this Mortgage.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower represents and warrants to, and covenants and agrees
with, Trustee and Lender as follows:
2 . Warranty. Borrower owns good, indefeasible and insurable fee
simple title to the Land and the Improvements, subject only to the
Permitted Encumbrances. This Mortgage upon its due execution and
proper recordation is and will remain a valid and enforceable (and,
with respect to all personalty (as to which security interests are
governed by the UCC), upon proper recordation and the filing of a
financing statement) perfected first Lien on and security interest on
the Land, Improvements and such personalty subject to the Permitted
Encumbrances. Borrower represents and warrants that none of the
Permitted Encumbrances will impair (i) the ability of Borrower to pay
any of its obligations to any Person as and when due, (ii) the
marketability of title to the Mortgaged Property, (iii) the fair
market value of the Mortgaged Property, or (iv) the use or operation
of the Mortgaged Property as of the Closing Date and thereafter.
Borrower will preserve its fee simple title to the Mortgaged Property
for so long as the Note remains outstanding and will warrant and
defend same and the validity and priority of the Lien hereof from and
against any and all claims whatsoever other than the Permitted
Encumbrances.
(b) This Mortgage and each of the Loan Documents executed by
Borrower, is the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with their terms, subject
to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws affecting creditor's rights
generally in effect from time to time.
(c) On the date hereof, no portion of the Improvements at a
Property has been materially damaged, destroyed or injured by fire or
other casualty which is not now fully restored or in the process of
being restored;
(d) Borrower (i) has full power and authority to carry on its
business at each Property as currently conducted and (ii) has and will
maintain or cause to be maintained in effect at all times until the
Indebtedness and the Obligations are satisfied in full, all necessary
<PAGE>
material licenses, permits, authorizations, registrations and
approvals to own, use and occupy each of the Properties, and (iii)
except as otherwise disclosed, has not received any written notice of
any violation of any such licenses, permits, authorizations,
registrations or approvals that materially impair the value of a
Property for which such notice was given or which would adversely
affect the use or operation of any Property in any material respect;
(e) As of the date hereof, Borrower has not received any written
notice of any Taking or threatened Taking of any Property or any
portion thereof which would adversely affect the use or operation of
the Property in any material respect;
(f) Each Property and the Equipment located on the Property
constitutes all of the real property, equipment and fixtures currently
owned or used by Borrower in the operation of the business located on
such Property;
(g) Each Property has adequate access to public streets, roads or
highways;
(h) Each Property constitutes a separate tax lot, with a separate
tax assessment, independent of any other land or improvements, except
as previously disclosed to Lender in writing;
(i) All utility services necessary for the operation of each
Property have been, or upon completion of construction will be
connected and are or will be available in adequate capacities directly
from utility lines and without the need for private easements not
presently existing;
(j) For so long as the Note remains unpaid, Borrower is not and
shall not be an "employee benefit plan" (within the meaning of Section
3(3) of ERISA) to which ERISA applies and Borrower's assets do not and
will not constitute plan assets; and
(k) As of the date hereof, Borrower is and shall remain a Single
Purpose Entity.
(l) Borrower shall, during each calendar month, deposit, or cause
to be deposited, an amount equal to four percent (4%) of the Operating
Income from the month second (2nd) preceding the month in which the
deposit is made (i.e., the deposit in September shall be based on the
Operating Income in July), into the FF&E Escrow Subaccount. Funds held
in the FF&E Escrow Subaccount shall be used to pay for FF&E items
approved by Lender in its reasonable discretion.
<PAGE>
(m) On the Closing Date, Borrower shall deposit, or cause to be
deposited into the Construction Completion Escrow Subaccount, an
amount equal to $3,023,744 (i.e.,100% the cost of completion of the
Construction Properties). Provided no Event of Default shall have
occurred and be continuing, Lender shall pay to Borrower, an amount
equal to (i) $211,868 with respect to the Dulles North property
identified on Exhibit A-23; (ii) $1,237,689 with respect to the Reston
property identified on Exhibit A-20; and (iii) $1,574,187 with respect
to the Merrifield property identified on Exhibit A-21, which amounts
shall be paid to Borrower pursuant to the terms of Section 6(g),
provided that the final payment for retainage shall be paid to
Borrower upon the (A) completion and opening for business, (B)
delivery of a final unconditional certificate of occupancy and (C) the
completion of the "Punch List" items for each such property to Lender,
and deposit the same into an account designated by Borrower.
3 . Payment and Performance of Obligations Secured. Borrower
shall promptly pay when due the principal of and interest on the
Indebtedness and all other payment Obligations secured by this
Mortgage, all in lawful money of the United States of America, and
shall further perform fully and in a timely manner all Obligations of
Borrower. All sums payable by Borrower hereunder shall be paid without
demand, counterclaim, offset, deduction (except as required by law) or
defense. Borrower waives all rights now or hereafter conferred by
statute or otherwise to any such demand, counterclaim (other than
mandatory counterclaims), setoff, deduction or defense.
4. Negative Covenants. Borrower covenants and agrees that it
shall not:
(a) incur, create or assume any indebtedness for borrowed money
or Transfer or lease the Mortgaged Property or any interest therein,
except as permitted under Sections and hereof;
(b) engage, directly or indirectly, in any business other than
that of entering into this Mortgage and the other Loan Documents to
which Borrower is a party and the ownership, management, leasing,
construction, development, operation and maintenance of the Mortgaged
Property for its present and related uses;
(c) make advances or make loans to any Persons or entities
(including Affiliates of Borrower) or hold any investments (other than
Permitted Investments, Defeasance Collateral and Cash and Cash
Equivalents) under this Mortgage;
(d) partition a Property without Lender's consent;
<PAGE>
(e) commingle its assets with the assets of any of its Affiliates
except in connection with the Cash Collateral Agreement;
(f) guarantee any obligations of any Person;
(g) enter into any management agreement for any of the Properties
without Lender's consent, except in accordance with Section 19 hereof;
(h) enter into any agreement for the sale of any asset or
transfer of any interest except as may be permitted hereby;
(i) amend or modify any of its organizational documents needed to
maintain its status as a Single Purpose Entity without Lender's
consent;
(j) dissolve, wind-up, terminate, liquidate, merge with or
consolidate into another Person, except as expressly permitted
pursuant to this Mortgage;
(k) engage in any activity that would subject it to regulation
under ERISA; or
(l) voluntarily file or consent to the filing of a petition for
bankruptcy, insolvency, reorganization, assignment for the benefit of
creditors or similar proceeding under any Federal or state bankruptcy,
insolvency, reorganization or other similar law or otherwise seek any
relief under any laws relating to the relief of debts or the
protection of debtors generally, without the unanimous consent of its
general partners (including the unanimous consent of the directors of
the corporate general partner or shareholders, as the case may be,
which at all times shall include the consent of the Independent
Director).
5. Insurance.
(a) Insurance Coverage Requirements. Borrower shall, at its sole
cost and expense, keep in full force and effect insurance coverage of
the types and minimum limits as follows during the term of this
Mortgage:
(i) Property Insurance. Insurance with respect to the
Improvements and the Building Equipment against any peril
included within the classification "All Risks of Physical Loss"
with extended coverage in amounts at all times sufficient to
prevent Borrower from becoming a co-insurer within the terms of
the applicable policies, but in any event such insurance shall be
maintained in an amount equal to the full insurable value of the
Improvements and the Building Equipment (and must provide
<PAGE>
coverage of any additional costs associated with applicable Legal
Requirements), and such policies shall be subject only to
exclusions that are standard and customary for property
comparable to the applicable Property and acceptable to the
Rating Agencies and Lender. The term "full insurable value" means
the actual replacement cost of the Improvements and the Building
Equipment (without taking into account any depreciation, and
exclusive of excavations, footings and foundations, landscaping
and paving) (but in no event less than 125% of the applicable
Allocated Loan Amount) determined annually by an insurer, a
recognized independent insurance broker or an Independent
Appraiser selected and paid by Borrower and in no event less than
the coverage required pursuant to the terms of any Lease;
provided, however, if the terms of the applicable insurance
policies expressly provide for insurance to be provided in the
amount of the actual replacement cost of the Improvements and the
Building Equipment or such policies contain a replacement cost
endorsement, no such annual determination will be necessary;
(ii) Liability Insurance. Comprehensive general liability
insurance, including bodily injury, contractual injury, death and
property damage liability, and excess and/or umbrella liability
insurance against any and all claims, including all legal
liability that could be imposed upon Lender, to the extent
insurable, and all court costs and attorneys' fees and expenses,
arising out of or connected with the possession, use, leasing,
operation, maintenance or condition of each Property in such
amounts as are generally required by institutional lenders for
properties comparable to the Properties written on a per
occurrence basis with a per occurrence limit of not less than
Five Million Dollars ($5,000,000) and with an aggregate limit of
not less than Ten Million Dollars ($10,000,000) per Property;
(iii) Workers' Compensation Insurance. Statutory workers'
compensation insurance (to the extent the risks to be covered
thereby are not already covered by other policies of insurance
maintained by Borrower), with respect to any work by or for
Borrower performed on or about any Property;
(iv) Loss of Rental Value. Loss of "rental value" or
"business interruption" insurance in an amount sufficient to
avoid any co-insurance penalty and to provide Proceeds which will
cover the loss of Rents sustained during the period of at least
twelve (12) months following the date of casualty. Such policies
of insurance shall be subject only to exclusions that are
acceptable to Lender and the Rating Agencies. The term "rental
value" means the sum of (A) the total then ascertainable Rents
payable or anticipated in the Budget and (B) the total
ascertainable amount of all other amounts to be received by
Borrower from third parties which are the legal obligation of
Tenants, reduced to the extent such amounts would not be received
<PAGE>
because of Operating Expenses not incurred during a period of
non-occupancy of that portion of such Property then not being
occupied;
(v) Builder's All-Risk Insurance. During any period of
repair or restoration, builder's "all risk" insurance in an
amount equal to not less than the full insurable value of the
applicable Property against such risks (including fire and
extended coverage and collapse of the Improvements to agreed
limits as Lender may request), in form and substance acceptable
to Lender.
(vi) Boiler and Machinery Insurance. To the extent
applicable, broad form boiler and machinery insurance (without
exclusion for explosion) covering all boilers or other pressure
vessels, machinery and equipment, if any, located in, on or about
each Property and insurance against loss of occupancy or use
arising from any such breakdown in such amounts as are generally
available at commercially reasonable premiums and are generally
required by institutional lenders for property comparable to each
of the Properties;
(vii) Flood Insurance. If any Improvement on any Property is
located within an area designated as "flood prone" or a "special
flood hazard area" (as defined under the regulations adopted
under the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973), flood insurance if available,
in an amount equal to the lesser of the Allocated Loan Amount for
the applicable Property and the maximum limit of coverage
available with respect to the Property, acceptable to Lender,
provided, however, that if flood insurance shall be unavailable
from private carriers, flood insurance provided by the federal or
state government, if available;
(viii) Windstorm Insurance. Windstorm coverage with such
limits and deductibles as are generally required by institutional
lenders for similar properties in the geographic area where the
Orlando Property is located, in any event at least equal to the
lesser of the Allocated Loan Amount for the Orlando Property and
the maximum limit of coverage available with respect to the
Orlando Property. Such coverage shall be placed with one or more
reputable insurers and may insure additional properties on a
pooled risk basis; and
(ix) Other Insurance. At Lender's reasonable request, such
other insurance, including but not limited to earthquake
insurance, with respect to the Mortgaged Property against loss or
<PAGE>
damage of the kinds from time to time customarily insured against
and in such amounts as are generally required by institutional
lenders on loans of similar amounts and secured by properties
comparable to the Properties.
(b) Ratings of Insurers. Borrower will maintain the
insurance coverage described in Section 5(a) above, in all cases,
with one or more domestic primary insurers acceptable to Lender,
having both (x) a claims-paying-ability rating by Standard &
Poor's Ratings Services of not less than "AA" and its equivalent
by any other Rating Agency, and (y) an Alfred M. Best Company,
Inc. ("Best") rating of "A" or better and a financial size
category of not less than IX. All insurers providing insurance
required by this Mortgage shall be authorized to issue insurance
in the state where the insured Property is located.
For the purposes hereof, "Maximum Foreseeable Casualty Loss"
shall mean the estimate of a qualified fire protection engineer
in connection with Borrower's existing insurance package of the
maximum probable casualty loss which would be suffered in respect
of the Improvements and Building Equipment as a result of damage
caused by the perils covered by the insurance described in
Section 5(a)(i).
The insurance coverage required under Section 5(a) may be
effected under a blanket policy or policies covering the
Mortgaged Property and other properties and assets not
constituting a part of the Mortgaged Property; provided that any
such blanket policy shall specify, except in the case of public
liability insurance, the portion of the total coverage of such
policy that is allocated to the Mortgaged Property, and any
sublimits in such blanket policy applicable to the Mortgaged
Property, which amounts shall not be less than the amounts
required pursuant to Section 5(a) and which shall in any case
comply in all other respects with the requirements of this
Section 5.
(c) Form of Insurance Policies; Endorsements. All insurance
policies shall be in such form and with such endorsements and in
such amounts satisfactory to Lender (and Lender shall have the
right to approve amounts, form, risk coverage, deductibles, loss
payees and insureds). A certificate of insurance with respect to
all of the above-mentioned insurance policies has been delivered
to Lender and originals or certified copies of all such policies
shall be delivered to Lender when the same are available and
shall be held by Lender. Borrower shall deliver to Lender
annually, simultaneously with the renewal of the insurance
policies required hereunder, an Officer's Certificate stating
that the insurance policies required to be delivered to Lender
pursuant to this Section 5(c) are maintained with insurers who
comply with the terms of Section 5(b) hereof, setting forth a
schedule describing all premiums required to be paid by Borrower
to maintain the policies of insurance required under this Section
5, and stating that Borrower has paid such premiums. All such
policies shall name Lender as an additional named insured, shall
provide that all Proceeds (except with respect to Proceeds of
general liability and workers' compensation insurance) be payable
<PAGE>
to Lender as and to the extent set forth in Section 6 hereof, and
shall contain: (i) a standard "non-contributory mortgagee"
endorsement or its equivalent relating, inter alia, to recovery
by Lender notwithstanding the negligent or willful acts or
omissions of Borrower; (ii) a waiver of subrogation endorsement
in favor of Lender; (iii) an endorsement providing that no policy
shall be impaired or invalidated by virtue of any act, failure to
act, negligence of, or violation of declarations, warranties or
conditions contained in such policy by Borrower, Lender or any
other named insured, additional insured or loss payee, except for
the willful misconduct of Lender knowingly in violation of the
conditions of such policy; (iv) an endorsement providing for a
deductible per loss of an amount not more than that which is
customarily maintained by prudent owners of First Class
properties comparable to and in the general vicinities of the
Properties, but in no event in excess of $100,000, except in the
case of earthquake coverage, for which such deductible shall not
be in excess of that generally required by institutional lenders
on loans of similar amounts secured by comparable properties; and
(v) a provision that such policies shall not be cancelled,
terminated or expired without at least thirty (30) days' prior
written notice to Lender, in each instance. Certificates of
insurance with respect to all replacement policies shall be
delivered to Lender not less than ten (10) Business Days prior to
the expiration date of any of the insurance policies required to
be maintained hereunder which certificates shall bear notations
evidencing payment of applicable premiums. Originals (or
certified copies) of such replacement insurance policies shall be
delivered to Lender promptly after Borrower's receipt thereof but
in any case within thirty (30) days after the effective date
thereof. If Borrower fails to maintain and deliver to Lender the
certificates of insurance required by this Mortgage, upon five
(5) Business Days' prior notice to Borrower, Lender may, in
accordance with the provisions of Section 8 hereof, procure such
insurance, and all costs thereof (and interest thereon at the
Default Rate) shall be added to the Indebtedness.
Lender shall not, by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount
of insurance carried, the form or legal sufficiency of insurance
contracts, solvency of insurance companies, or payment or defense
of lawsuits, and Borrower hereby expressly assumes full
responsibility therefor and all liability, if any, with respect
thereto.
(d) Compliance with Insurance Requirements. Borrower shall
comply with all Insurance Requirements and shall not bring or
keep or permit to be brought or kept any article upon any of the
Properties or cause or permit any condition to exist thereon
which would be prohibited by any Insurance Requirement, or would
invalidate insurance coverage required hereunder to be maintained
by Borrower on or with respect to any part of any Property
pursuant to this Section 5. Notwithstanding anything to the
contrary, it is expressly understood and agreed that any
insurance which Borrower shall cause any Tenant to provide that
<PAGE>
shall otherwise be in compliance with all of the terms and
conditions of this Section 5 shall satisfy Borrower's obligations
with respect thereto hereunder.
(e) Separate Insurance. Borrower will not take out separate
insurance contributing in the event of loss with that required to
be maintained pursuant to this Section 5 unless such insurance
complies with this Section 5.
(f) Blanket Policies. Except in the case of public liability
insurance, upon Lender's request, Borrower shall deliver to
Lender an Officer's Certificate setting forth (i) the number of
properties covered by such policy, (ii) the location by city (if
available, otherwise, county) and state of the properties, (iii)
the average square footage of the properties (or the aggregate
square footage), (iv) a brief description of the typical
construction type included in the blanket policy and (v) such
other information as Lender may reasonably request.
6. Condemnation and Insurance Proceeds.
(a) Borrower will promptly notify Lender in writing upon
obtaining knowledge of (i) the institution of any proceedings
relating to any Taking, or (ii) the occurrence of any casualty,
damage or injury to, any Property or any portion thereof the
restoration of which is estimated by Borrower in good faith to
cost more than the Threshold Amount. In addition, notice of any
casualty, damage, injury or Taking, the restoration of which is
estimated by Borrower in good faith to cost more than the
Threshold Amount, shall set forth such good faith estimate of the
cost of repairing or restoring such casualty, damage, injury or
Taking in reasonable detail if the same is then available and, if
not, as soon thereafter as it can reasonably be provided.
(b) In the event of any Taking of or casualty or other
damage or injury to a Property, Borrower's rights, titles and
interests in and to all compensation, awards, proceeds, damages,
claims, insurance recoveries, causes and rights of action
(whether accrued prior to or after the date hereof) and payments
which Borrower may receive or to which Borrower may become
entitled with respect to the Mortgaged Property or any part
thereof other than payments received in connection with any
liability or loss of rental value or business interruption
insurance (collectively, "Proceeds"), in connection with any such
Taking of, or casualty or other damage or injury to, any Property
or any part thereof are hereby assigned by Borrower to, and shall
be paid to, Lender. Such Proceeds shall be applied by Lender to
prepay the Note in accordance with the provisions hereof if (i)
the Proceeds shall equal or exceed the Allocated Loan Amount with
respect to the applicable Property, (ii) an Event of Default
shall have occurred and be continuing, (iii) a Total Loss with
respect to the applicable Property shall have occurred, (iv) the
Work is not capable of being completed before the earlier to
occur of (x) the date which is six (6) months prior to the
<PAGE>
Maturity Date, and (y) the date on which the business
interruption insurance carried by Borrower shall expire, (v) the
applicable Property is not capable of being restored
substantially to its condition prior to such Taking or casualty,
or (vi) Borrower is unable to demonstrate to Lender's reasonable
satisfaction its continuing ability to pay the Loan.
Notwithstanding anything to the contrary set forth in this
Mortgage, however, and excluding situations requiring prepayment
of the Note, to the extent such Proceeds do not exceed the
Threshold Amount, or, if less than the Threshold Amount but when
aggregated with all other then unapplied Proceeds with respect to
any Property, do not exceed the Threshold Amount in the
aggregate, such Proceeds are to be paid directly to Borrower to
be applied to restoration of the Mortgaged Property in accordance
with the terms hereof. Subject to the provisions of this Section
and Sections and hereof (except that Proceeds paid in respect of
the insurance described in Section 6(b) shall be deposited
directly into the Operating Account (as defined in the Cash
Collateral Agreement), promptly after the occurrence of any
damage or destruction to all or any portion of such Property or a
Taking of a portion of such Property, in either case which shall
not constitute a Total Loss, Borrower shall either cause such
Property to be released from the lien of this Mortgage in
accordance with Section 38 hereof, or shall commence and
diligently prosecute to completion, subject to Excusable Delays,
the repair, restoration and rebuilding of such Property (in the
case of a partial Taking, to the extent it is capable of being
restored) (such repair, restoration and rebuilding are sometimes
hereinafter collectively referred to as the "Work") so damaged,
destroyed or remaining after such Taking in full compliance with
all material Legal Requirements and free and clear of any and all
Liens except Permitted Encumbrances; it being understood,
however, that Borrower shall not be obligated to restore such
Property to the precise condition of the Property prior to any
partial Taking of, or casualty or other damage or injury to the
Property, if the Work actually performed, if any, or failed to be
performed, shall have no material adverse effect on the value of
the Property from the value that the Property would have had if
the same had been restored to its condition immediately prior to
such Taking or casualty. Borrower will, in good faith and in a
commercially reasonable manner, file and prosecute the
adjustment, compromise or settlement of any claim for Proceeds
and, subject to Borrower's right to receive the direct payment of
any Proceeds as provided above, and, with respect to Proceeds
from a Total Loss, subject to the provisions below and subject to
the applicable terms of the Leases, including any rights of the
Tenants thereunder, will cause the same to be paid directly to
Lender, to be held and applied in accordance with the provisions
of this Mortgage. Except upon the occurrence and during the
continuance of an Event of Default, Borrower may settle any
insurance claim with respect to Proceeds which does not exceed
the Threshold Amount. If an Event of Default shall have occurred
and be continuing, or if Borrower fails to file and/or prosecute
any insurance claim for a period of fifteen (15) Business Days
following Borrower's receipt of written notice from Lender,
Borrower hereby irrevocably empowers Lender, in the name of
Borrower as its true and lawful attorney-in-fact, to file and
prosecute such claim (including settlement thereof) with counsel
<PAGE>
satisfactory to Lender and to collect and to make receipt for any
such payment, all at Borrower's expense (including payment of
interest at the Default Rate for any amounts advanced by Lender
pursuant to this Section ). In the event of (i) a Total Loss
resulting from a casualty, damage or destruction, if either (A)
the cost to repair the Property as estimated by the Independent
Architect would exceed the Threshold Amount and the restoration
of the Property cannot reasonably be completed before the date
which is the later to occur of the date of expiration of any
business interruption insurance or the date of expiration of any
Letter of Credit posted in lieu thereof or in addition thereto
and under such circumstances Borrower is not required under the
applicable Lease to make Proceeds available for restoration of
the Property, or (B) Lender elects not to permit Borrower to
restore the Property or (ii) a Total Loss resulting from a
Taking, Borrower shall be required to comply with the provisions
of Section 6(i) below and Lender shall apply such Proceeds, first
toward reimbursement of Lender's reasonable costs and expenses in
connection with recovery of the Proceeds (as further described
below), including, without limitation, reasonable administrative
costs and inspection fees, and then as required by Section 6(i)
hereof. Any Proceeds remaining after prepayment in part as set
forth in Section 6(i) hereof shall be paid to Borrower or as it
may direct in writing. Whether or not an Event of Default shall
have occurred and be continuing, Lender shall have the right to
approve, such approval not to be unreasonably withheld, any
settlement which is for Proceeds in excess of the Threshold
Amount and Borrower will deliver or cause to be delivered to
Lender all instruments reasonably requested by Lender to permit
such approval. Borrower will pay all reasonable costs, fees and
expenses reasonably incurred by Lender (including all reasonable
attorneys' fees and expenses, the reasonable fees of insurance
experts and adjusters and reasonable costs incurred in any
litigation or arbitration), and interest thereon at the Default
Rate to the extent not paid within five (5) Business Days after
delivery of a request for reimbursement by Lender, in connection
with the settlement of any claim for insurance or Taking Proceeds
and seeking and obtaining of any payment on account thereof in
accordance with the foregoing provisions. If any Proceeds are
received by Borrower and may be retained by Borrower pursuant to
this Section 6, such Proceeds shall, until the completion of the
related Work, be held in trust for Lender and shall be segregated
from other funds of Borrower to be used to pay for the cost of
the Work in accordance with the terms hereof, and in the event
such Proceeds exceed the Threshold Amount, such Proceeds shall be
forthwith paid directly to and held by Lender in a segregated
account in trust for Borrower, in each case to be applied or
disbursed in accordance with this Section 6.
(c) In the event that any Proceeds (other than Proceeds paid
with respect to the insurance described in Section 6(b)) are in
excess of the Threshold Amount, then all Proceeds (other than any
portion of any Proceeds paid with respect to the insurance
described in Section 6(b) which shall be deposited directly into
the Operating Account) shall be paid over to Lender and shall be
applied as follows: first, toward reimbursement of Lender's or
its agent's reasonable costs and expenses in connection with
recovery of the Proceeds and disbursement of the Proceeds (as
<PAGE>
further described below), including, without limitation,
reasonable administrative costs and inspection fees, and then, to
the prepayment of the Indebtedness secured hereby (which
prepayment shall be made on the next Payment Date occurring after
an elected or required prepayment hereunder), without prepayment
premium or penalty, only if:
(i) (A) the amount of the Proceeds is equal to or greater
than the outstanding Allocated Loan Amount with respect to any
Property, or
(B) the casualty or Taking occurs on a date which is
less than one hundred-eighty (180) days prior to the final
Maturity Date (as defined in the Note), or
(C) more than twenty-five percent (25%) of the rentable
area of the applicable Property shall have been the subject
of a casualty or shall have been taken, or
(ii) such Proceeds were the result of a Taking, and after
restoration is completed, there are excess Proceeds which were
not required to effect such restoration, in which event
prepayment shall be made to the extent of such unneeded Proceeds.
Any excess Proceeds shall be applied to the prepayment of the
Indebtedness secured hereby (which prepayment shall be made on
the next Payment Date occurring after completion of the Work,
without penalty or premium).
(d) Upon the occurrence and during the continuance of an
Event of Default hereunder, or in the event that any Proceeds are
required to be paid to Lender pursuant to subparagraph (b) above,
then all Proceeds while an Event of Default exists, and any such
Proceeds so required to be paid to Lender shall be paid over to
Lender (if not paid directly to Lender) and shall be applied
first toward reimbursement of Lender's reasonable costs and
expenses (plus interest thereon at the Default Rate to the extent
not paid within five (5) Business Days after delivery of a
request for reimbursement by Lender) actually incurred in
connection with recovery of the Proceeds and disbursement of the
Proceeds (as further described below), including reasonable
administrative costs and inspection fees, and then to be applied
or disbursed in accordance with Sections 20 and 21.
Subject to Borrower's rights pursuant to Section 38(b) to
cause the Property to be released from the Lien of this Mortgage,
Borrower shall be obligated to restore, or cause the applicable
Tenant to restore, the Property following casualty or which has
been subject to a partial Taking in accordance with the
provisions of this Section 6, whether or not the Proceeds shall
<PAGE>
be sufficient, provided that, if applicable, the Proceeds shall
be made available to Borrower by Lender in accordance with this
Mortgage.
(e) INTENTIONALLY DELETED
(f) If Proceeds are not required to be applied towards
payment of the Indebtedness pursuant to the terms hereof, then
Lender shall make the Proceeds which it is holding pursuant to
the terms hereof (after payment of any reasonable expenses
actually incurred by Lender in connection with the collection
thereof plus interest thereon at the Default Rate to the extent
the same are not paid within five (5) Business Days after request
for reimbursement by Lender) available to Borrower for payment of
or reimbursement of Borrower's or the applicable Tenant's
expenses incurred with respect to the Work, upon the terms and
subject to the conditions set forth below and in Section 6(g)
hereof:
(i) at the time of loss or damage or at any time
thereafter while Borrower is holding any portion of the
Proceeds, there shall be no continuing Event of Default
hereunder;
(ii) if the estimated cost of the Work (as estimated by
the Independent Architect referred to in clause (iii) below)
shall exceed the Proceeds, Borrower shall, at its option
(within a reasonable period of time after receipt of such
estimate) either deposit with or deliver to Lender (and
promptly following any such deposit or delivery, Borrower
shall provide written notice of same to the Rating Agencies)
(A) Cash and Cash Equivalents, (B) a Letter or Letters of
Credit in an amount equal to the estimated cost of the Work
less the Proceeds available, or (C) such other evidence of
Borrower's ability to meet such excess costs and which is
reasonably satisfactory to Lender and the Rating Agencies;
and
<PAGE>
(iii) Lender shall, within a reasonable period of time
prior to request for initial disbursement, be furnished with
an estimate of the cost of the Work accompanied by an
Independent Architect's certification as to such costs and
appropriate plans and specifications for the Work. The plans
and specifications shall require that the Work be done in a
First Class workmanlike manner at least equivalent to the
quality and character of the original work in the
Improvements (provided, however, that in the case of a
partial Taking, the Property restoration shall be done to
the extent reasonably practicable after taking into account
the consequences of such partial Taking), so that upon
completion thereof, the Property shall be at least equal in
value and general utility to the Property prior to the
damage or destruction; it being understood, however, that
Borrower shall not be obligated to restore the Property to
the precise condition of the Property prior to any partial
Taking of, or casualty or other damage or injury to, the
Property, if the Work actually performed, if any, or failed
to be performed, shall have no material adverse effect on
the value of the Property from the value that such Property
would have had if the same had been restored to its
condition immediately prior to such Taking or casualty.
Borrower shall restore all Improvements such that when they
are fully restored and/or repaired, such Improvements and
their contemplated use fully comply with all applicable
material Legal Requirements including zoning, environmental
and building laws, codes, ordinances and regulations.
(g) Disbursement of the Proceeds in Cash or Cash Equivalents
to Borrower shall be made from time to time (but not more
frequently than once in any month) by Lender but only for so long
as no Event of Default shall have occurred and be continuing, as
the Work progresses upon receipt by Lender of (i) an Officer's
Certificate dated not more than ten (10) days prior to the
application for such payment, requesting such payment or
reimbursement and describing the Work performed that is the
subject of such request, the parties that performed such Work and
the actual cost thereof, and also certifying that such Work and
materials are or, upon disbursement of the payment requested to
the parties entitled thereto, will be free and clear of Liens
other than Permitted Encumbrances and (ii) an Independent
Architect's certificate certifying performance of the Work
together with an estimate of the cost to complete the Work. No
payment made prior to the final completion of the Work, except
for payment made to contractors whose Work shall have been fully
completed and from which final lien waivers have been received,
shall exceed ninety-five percent (95%) of the value of the Work
performed and materials furnished and incorporated into the
Improvements from time to time, and at all times the undisbursed
balance of said Proceeds together with all amounts deposited,
bonded, guaranteed or otherwise provided for pursuant to clause
6(c)(ii) above, shall be at least sufficient to pay for the
estimated cost of completion of the Work; final payment of all
Proceeds remaining with Lender shall be made upon receipt by
Lender of a certification by an Independent Architect, as to the
completion of the Work substantially in accordance with the
submitted plans and specifications, final lien releases, and the
filing of a notice of completion, if available pursuant to
applicable Legal Requirements, and the expiration of the period
provided under the law of the State in which the applicable
Property is located for the filing of mechanic's and
materialmen's liens which are entitled to priority as to other
creditors, encumbrances and purchasers, as certified pursuant to
an Officer's Certificate, and delivery of a certificate of
occupancy with respect to the Work, or, if not applicable, an
Officer's Certificate to the effect that a certificate of
occupancy is not required.
(h) If, after the Work is completed and all costs of
completion have been paid, there are excess Proceeds after
repaying to Borrower any out-of-pocket costs incurred by Borrower
in connection with the performance of the Work which costs were
<PAGE>
approved by Lender in connection with its approval of the Work,
then upon ten (10) days' prior written notice from Borrower to
Lender, provided no Event of Default has occurred and is then
continuing, Borrower shall have the option of directing Lender to
either (1) retain such Proceeds in the FF&E Account to be applied
by Borrower to the cost of improvements, alterations, tenant
improvements or other capital improvements at the Property, or
(2) apply such excess Proceeds with respect to the Taking of or
damage or injury to the Mortgaged Property to the payment or
prepayment of all or any portion of the Indebtedness secured
hereby without penalty or premium, provided, however, that any
such prepayment shall not reduce any Allocated Loan Amount.
(i) If (i) there is any casualty that constitutes a Total
Loss and Lender elects not to permit Borrower to restore such
Property, or (ii) there is any Taking that constitutes a Total
Loss and Lender elects to apply the Proceeds against the
Indebtedness, or (iii) Borrower is otherwise required to comply
with this Section 6(i), then Borrower, in any such instance, must
prepay the Note, without premium or penalty, to the extent of the
Proceeds received up to an amount equal to 125% of the original
Allocated Loan Amount with respect to the relevant Property, and
the Allocated Loan Amounts for all other Properties shall be
increased or decreased in the manner provided in the definition
of Allocated Loan Amount.
7 . Impositions, Liens and Other Items.
(a) Borrower shall deliver to Lender annually, no later than
twenty (20) Business Days after the first day of each fiscal year
of Borrower, and shall update as new information is received, a
schedule describing all Impositions payable or estimated to be
payable during such fiscal year attributable to or affecting the
Mortgaged Property or Borrower. Subject to Borrower's right of
contest set forth in Section hereof, as set forth in the next two
sentences, Lender on behalf of Borrower shall pay all Impositions
which are attributable to or affect the Mortgaged Property or
Borrower, five (5) days prior to the date such Impositions shall
become delinquent or late charges may be imposed thereon,
directly to the applicable taxing authority with respect thereto.
Lender shall direct the Agent under the Cash Collateral Agreement
to pay to the taxing authority such amounts to the extent funds
in the Mortgage Escrow Account are sufficient to pay such
Impositions. If Borrower has delivered Mortgage Escrow Security
in lieu of maintaining the Mortgage Escrow Account, Borrower
shall either deposit in the Mortgage Escrow Account not less than
five (5) days prior to the date the same are due an amount
sufficient to pay such Impositions, or Lender shall draw down on
the Mortgage Escrow Security in such amount. Nothing contained in
this Mortgage shall be construed to require Borrower to pay any
tax, assessment, levy or charge imposed on Lender in the nature
of a franchise, capital levy, estate, inheritance, succession,
income or net revenue tax.
<PAGE>
(b) Subject to its right of contest set forth in Section
11(c) and 11(d) hereof and its rights set forth in Sections and
hereof, Borrower shall at all times keep the Mortgaged Property
free from all Liens (other than the Lien hereof and Permitted
Encumbrances) and shall pay when due and payable all claims and
demands of mechanics, materialmen, laborers and others which, if
unpaid, might result in or permit the creation of a Lien on the
Mortgaged Property or any portion thereof and shall in any event
cause the prompt, full and unconditional discharge of all Liens
imposed on or against the Mortgaged Property or any portion
thereof within thirty (30) days after receiving written notice of
the filing (whether from Lender, the lienor or any other Person)
thereof. Borrower shall do or cause to be done, at the sole cost
of Borrower, everything reasonably necessary to fully preserve
the first priority of the Lien of this Mortgage against the
Mortgaged Property subject to the Permitted Encumbrances. Upon
the occurrence of an Event of Default with respect to its
Obligations as set forth in this Section 7, Lender may (but shall
not be obligated to) make such payment or discharge such Lien,
and Borrower shall reimburse Lender on demand for all such
advances pursuant to Section 16 hereof (together with interest
thereon at the Default Rate).
(c) Nothing contained herein shall be deemed to require
Borrower to pay, or cause to be paid, any Imposition, to satisfy
any Lien, or to comply with any Legal Requirement or Insurance
Requirement, so long as Borrower is in good faith, and by proper
legal proceedings, where appropriate, diligently contesting the
validity, amount or application thereof, provided that in each
case, at the time of the commencement of any such action or
proceeding, and during the pendency of such action or proceeding
(i) no Event of Default shall exist and be continuing hereunder,
(ii) Borrower shall keep Lender apprised of the status of such
contest, (iii) if Borrower is not providing security as provided
in clause (vi) below, adequate reserves with respect thereto are
maintained on Borrower's books in accordance with GAAP or in the
Mortgage Escrow Account, (iv) such contest operates to suspend
collection or enforcement as the case may be, of the contested
Imposition or Lien and such contest is maintained and prosecuted
continuously and with diligence or the Imposition or Lien is
bonded, (v) in the case of any Insurance Requirement, the failure
of Borrower to comply therewith shall not impair the validity of
any insurance required to be maintained by Borrower under Section
5 hereof or the right to full payment of any claims thereunder,
and (vi) in the case of Impositions and Liens in excess of One
Hundred Thousand Dollars ($100,000) individually, or in the
aggregate, other than liens existing on the date hereof relating
to the Properties that were identified to Lender on an Officer's
Certificate delivered to Lender on the date hereof, during such
contest, Borrower, shall provide title insurance in form and
substance acceptable to Lender in its sole and absolute
discretion or security in the form required by Section 6(f)(ii)
hereof in an amount reasonably requested by Lender but in no
event less than one hundred twenty-five percent (125%) of (A) the
amount of Borrower's obligations being contested plus (B) any
additional interest, charge, or penalty arising from such
contest. Notwithstanding the foregoing, the creation of any such
<PAGE>
reserves or the furnishing of any bond or other security,
Borrower promptly shall comply with any contested Legal
Requirement or Insurance Requirement or shall pay any contested
Imposition or Lien, and compliance therewith or payment thereof
shall not be deferred, if, at any time the Mortgaged Property or
any portion thereof shall be, in Lender's reasonable judgment, in
imminent danger of being forfeited or lost or Lender is likely to
be subject to civil or criminal damages as a result thereof. If
such action or proceeding is terminated or discontinued adversely
to Borrower, Borrower shall deliver to Lender reasonable evidence
of Borrower's compliance with such contested Imposition, Lien,
Legal Requirements or Insurance Requirements, as the case may be.
8 . Funds for Taxes and Insurance.
(a) Borrower shall pay into a segregated account (the
"Mortgage Escrow Account"), amounts sufficient to discharge the
obligations of Borrower under Sections 5 and 7(a) and hereof as
and when they become due (such amounts, the "Mortgage Escrow
Amounts"). As of the date hereof, Lender shall initially require
payment into the Mortgage Escrow Account of a sum equal
to$1,433,879.73 plus one-twelfth of the annual insurance premiums
for individual policies required to be maintained hereunder or
one-twelfth of the pro-rata portion of the annual insurance
premiums due under any blanket policy affording the same required
coverage, for Impositions and all insurance being maintained by
Borrower as of the Closing Date. During each month thereafter,
Lender shall require payment with respect to the annual Mortgage
Escrow Amounts of a sum equal to one-twelfth thereof, so that as
each installment of such premiums and Impositions becoming due
and payable, Borrower shall have paid a sum sufficient to enable
Lender to pay the same. If the amount of such premiums and
Impositions has not been definitely ascertained by Borrower at
the time when any such monthly deposits are to be paid, Lender
shall require payment of Mortgage Escrow Amounts based upon the
amount of such premiums and Impositions paid for the preceding
year, subject to adjustment as and when the amount of such
premiums and Impositions are ascertained by Borrower.
(b) At any time, Borrower may elect to replace any Mortgage
Escrow Amounts then being retained by Agent and satisfy its
obligations under this Section 8 by delivery of a Letter of
Credit (which Letter of Credit shall be either an "evergreen"
Letter of Credit or shall not expire until a date two (2) months
after the Maturity Date (as defined in the Note) or Cash and Cash
Equivalents (any such security, "Mortgage Escrow Security") in an
amount reasonably estimated by Borrower to be one-half of the
amount sufficient (including the amount of any remaining Mortgage
Escrow Amounts) to discharge the Impositions and insurance
premiums which shall become due during the twelve (12) month
period immediately after the date of delivery of such Mortgage
Escrow Security (and for each twelve (12) month period thereafter
for so long as Borrower elects to post such security in lieu of
Lender's retention of such amounts). Cash Equivalents shall have
maturities corresponding to the respective due dates of such
<PAGE>
obligations. Notwithstanding the foregoing, it shall be a
condition to Borrower's delivery of any Mortgage Escrow Security
(other than Cash) in satisfaction of its obligations under this
Section , that Borrower, at its expense, execute, acknowledge and
deliver or cause to be delivered to Lender such additional
security agreements, financing statements and other documents or
instruments including an Opinion of Borrower's Counsel, and take
all such actions which in the reasonable opinion of Lender or its
counsel may be necessary to grant and convey to Lender a
perfected security interest in and to any and all of the Mortgage
Escrow Security.
(c) The Mortgage Escrow Amounts shall be held by Agent
pursuant to the Cash Collateral Agreement (and any Mortgage
Escrow Security posted in lieu thereof pursuant to Section hereof
shall be held by Lender), and shall be applied in accordance with
the Cash Collateral Agreement to the payment of the obligations
in respect of which such Mortgage Escrow Amounts were retained.
Upon the occurrence of an Event of Default and the acceleration
of the Note, all or any portion of such Mortgage Escrow Amounts
(or any Mortgage Escrow Security posted in lieu thereof) may be
applied to the Indebtedness in such order or priority as Lender
may elect (subject to Sections 20 and 21 hereof) and Lender may
exercise any of its rights or remedies with respect to same
hereunder, at law or in equity. In the absence of such
acceleration, any Mortgage Escrow Amounts held by Agent (or
Mortgage Escrow Security posted with Lender) that exceed the
actual obligations for which they were retained, shall be held
and applied to the next due obligations or otherwise applied by
Lender in accordance with the terms hereof. Nothing herein
contained shall be deemed to affect any right or remedy of Lender
under this Mortgage or otherwise at law or in equity, to pay any
such amount and to add the amount so paid to the Indebtedness
hereby secured. Any such application of said amounts or any
portion thereof to any Indebtedness secured hereby shall not be
construed to cure or waive any Default or notice of Default
hereunder (or invalidate any act done pursuant to any such
Default or notice) until such amounts have been repaid to Lender
by Borrower.
(d) Borrower shall deliver to Lender all tax bills, bond and
assessment statements, statements of insurance premiums, and
statements for any obligations referred to above as soon as the
same are received by Borrower, and Lender shall cause the same to
be paid when due to the extent of Mortgage Escrow Amounts or
Mortgage Escrow Security available therefor. It is expressly
acknowledged and agreed that Lender shall have no obligation
whatsoever to advance from its own funds any amounts in payment
of all or any portion of such obligations.
9 . License to Collect Rents. Lender and Borrower hereby
confirm that Rents as they become due and payable under the
Leases shall be deposited in accordance with the provisions of
the Assignment of Leases and the Cash Collateral Agreement.
Subject to the provisions of the Cash Collateral Agreement,
Lender has granted to Borrower a license to cause the Rents to be
<PAGE>
collected and deposited in accordance with the Cash Collateral
Agreement. Any rights of the Borrower hereunder shall not operate
to subordinate this assignment of leases to any subsequent
assignment, in whole or in part by Borrower, and any such
subsequent assignment shall be subject to Lender's rights under
this Mortgage. Borrower further agrees to execute and deliver
such assignments of leases as Lender may from time to time
reasonably request in order to better assure, transfer and
confirm to Lender the rights intended to be granted to Lender
with respect thereto. In accordance with the provisions of the
Assignment of Leases, upon the occurrence and during the
continuance of an Event of Default (1) Borrower agrees that
Lender may, but shall not be obligated to, assume the management
of the real property, and collect the Rents, applying the same
upon the Obligations and (2) Borrower hereby authorizes and
directs all tenants, purchasers or other persons occupying or
otherwise acquiring any interest in any part of the real property
to pay the Rents due under the Leases to Lender upon Lender's
request. In the event Lender actually receives such Rents, after
an Event of Default, any application of the Rents by Lender shall
not constitute a misappropriation of the Rents by Borrower
pursuant to Section hereof. Lender shall have and hereby
expressly reserves the right and privilege (but assumes no
obligation) to demand, collect, sue for, receive and recover the
Rents, or any part thereof, now existing or hereafter made, and
apply the same in accordance with this Mortgage, the Assignment
of Leases, and applicable law.
10 . Security Agreement.
(a) Security Intended. Notwithstanding any provision of this
Mortgage to the contrary, the parties intend that this document
constitutes security for the payment and performance of the
Obligations and shall be a "mortgage", "deed of trust" or "deed
to secure debt" under applicable law. If, despite that intention,
a court of competent jurisdiction determines that this document
does not qualify as a "trust deed", "deed of trust" or "deed to
secure debt" under applicable law, then ab initio, this
instrument shall be deemed a realty mortgage under applicable law
and shall be enforceable as a realty mortgage, and Borrower shall
be deemed a "mortgagor", Lender shall be deemed a "mortgagee",
and Lender shall have no capacity (but shall be disregarded and
all references to "Lender" shall be deemed to refer to the
"Lender" to the extent not inconsistent with interpreting this
instrument as though it were a realty mortgage). As a realty
mortgage, Borrower, as mortgagor, shall be deemed to have
conveyed the Property ab initio to Lender as mortgagee, such
conveyance as a security to be void upon condition that Borrower
pay and perform all its Obligations. The remedies for any
violation of the covenants, terms and conditions of the
agreements herein contained shall be as prescribed herein or by
general law, or, as to that part of the security in which a
security interest may be perfected under the UCC, by the specific
statutory consequences now or hereafter enacted and specified in
the UCC, all at Lender's sole election.
<PAGE>
(b) Fixture Filing. This Mortgage constitutes a financing
statement and, to the extent required under UCC ss.9-402(f)
because portions of the Property may constitute fixtures, this
Mortgage is to be filed in the office where a mortgage for the
Land would be recorded. Lender also shall be entitled to proceed
against all or portions of the Mortgaged Property in accordance
with the rights and remedies available under UCC ss.9-501(d).
Borrower is, for the purposes of this Mortgage, deemed to be the
Debtor, and Lender is deemed to be the Secured Party, as those
terms are defined and used in the UCC. Borrower agrees that the
Indebtedness and Obligations secured by this Mortgage are further
secured by security interests in all of Borrower's right, title
and interest in and to all inventory, equipment, fixtures and
other goods (as those terms are defined in the UCC, and whether
existing now or in the future) now or in the future located at,
upon or about, or affixed or attached to or installed in, the
Property, or used or to be used in connection with or otherwise
relating to the Property or the ownership, use development,
construction, maintenance, management, operation, marketing,
leasing or occupancy of the Property, including furniture,
furnishings, machinery, appliances, building materials and
supplies, generators, boilers, furnaces, water tanks, heating,
ventilating and air conditioning equipment and all other types of
tangible personal property of any kind or nature, and all
accessories, additions, attachments, parts, proceeds, products,
repairs, replacements and substitutions of or to any of such
property which are or are to become fixtures related to the
Property and constitutes a "fixture filing" with respect to such
personal property executed by Borrower, as debtor, in favor of
Lender, as secured party. Borrower grants to Lender a valid and
effectual security interest in all of Borrower's right, title and
interest in and to such personal property (but only to the extent
permitted in the case of leased personal property), together with
all replacements, additions, and proceeds. Except for Permitted
Encumbrances, Borrower agrees that, without the written consent
of Lender, no other security interest will be created under the
provisions of the UCC and no lease will be entered into with
respect to any goods, fixtures, appliances, or articles of
personal property now attached to or used or to be attached to or
used in connection with the Mortgaged Property except as
otherwise permitted hereunder. Borrower agrees that all property
of every nature and description covered by the lien and charge of
this Mortgage together with all such property and interests
covered by this security interest are encumbered as a unit, and
upon and during the continuance of an Event of Default by
Borrower, all of the Mortgaged Property, at Lender's option, may
be foreclosed upon or sold in the same or different proceedings
or at the same or different time, subject to the provisions of
applicable law. The filing of any financing statement relating to
any such property or rights or interests shall not be construed
to diminish or alter any of Lender's rights of priorities under
this Mortgage.
11 . Transfers, Indebtedness and Subordinate Liens. Unless
such action is permitted by the provisions of this Section 11,
Section 15, Section 38 or Section 45 hereof, Borrower will not
(i) Transfer all or any part of the Mortgaged Property, (ii)
incur Debt, (iii) mortgage, hypothecate or otherwise encumber or
<PAGE>
grant a security interest in all or any part of the Mortgaged
Property, (iv) permit any transfer of any interest in Borrower
(except as set forth in clause (b) of this Section 11), or (iv)
file a declaration of condominium with respect to the Property.
Borrower shall deliver to Lender written notice pursuant to the
provisions of Section hereof of any such Transfer permitted
pursuant to the provisions of this Section or Section hereof,
other than Room and Facility Leases.
In connection with any Transfer or any series of Transfers
that affects (on a cumulative basis) more than ten percent (10%)
of the value of the Mortgaged Property, a Tax Opinion and a
Nondisqualification Opinion shall be furnished to Lender.
(a) Sale of the Mortgaged Property. Borrower may transfer or
dispose of Building Equipment which is being replaced or which is
no longer necessary in connection with the operation of a
Property free from the Lien of this Mortgage provided that such
transfer or disposal will not materially adversely affect the
value of the Mortgaged Property taken as a whole, will not
materially impair the utility of such Property, and will not
result in a reduction or abatement of, or right of offset
against, the Rents payable under any Lease, in either case as a
result thereof, and provided that any new Building Equipment
acquired by Borrower (and not so disposed of) shall be subject to
the Lien of this Mortgage. Lender shall, from time to time, upon
receipt of an Officer's Certificate requesting the same and
confirming satisfaction of the conditions set forth above,
execute a written instrument in form reasonably satisfactory to
Lender to confirm that such Building Equipment which is to be, or
has been, sold or disposed of is free from the Lien of this
Mortgage.
(b) Transfer of Interests in Borrower. Notwithstanding
anything contained herein to the contrary, Lender's consent and
Rating Agency confirmation that the proposed transfer will not
result in a downgrade, withdrawal or qualification of the then
current ratings of any securities backed in part by this Mortgage
shall be required with respect to Transfers of direct or indirect
beneficial interests in Borrower. For the purposes hereof, the
sale of stock in Homestead Village Incorporated on a publicly
traded exchange shall not be deemed an indirect Transfer of a
beneficial interest in Borrower. Borrower may request Lender's
consent to such Transfers provided (i) no Event of Default shall
have occurred and be continuing, (ii) Borrower (or the transferor
of such interest) delivers such request for Lender's consent to
Lender and the Rating Agencies at least fifteen (15) Business
Days prior to the proposed effective date of such Transfer, (iii)
Borrower remains a Single Purpose Entity, and (iv) no transfer of
limited partner, non-managing member or shareholder interests
results in any one Person (or any group of Affiliates) owning,
directly or indirectly, fifty percent (50%) of more of the
beneficial ownership interests of Borrower. If ten percent (10%)
or more of direct beneficial interests in Borrower are
Transferred or if any Transfer shall result in a Person or a
group of Affiliates acquiring more than a fifty percent (50%)
interest as set forth above, Borrower shall also deliver or cause
to be delivered to the Rating Agencies and Lender (x) an Opinion
of Counsel addressed to the Rating Agencies and Lender and dated
as of the date of the Transfer to the effect that in a properly
presented case, a bankruptcy court in a case involving such
transferee, or any Affiliate thereof, would not disregard the
corporate or partnership forms of such entity, their Affiliates
and/or their partners, as the case may be, so as to consolidate
<PAGE>
the assets and liabilities of such entity or entities and/or
their Affiliates with those of Borrower or their respective
general partners, and (y) an Officer's Certificate certifying
that such Transfer is not an Event of Default.
(c) Indebtedness. Borrower shall not incur, create or assume
any Debt or incur any liabilities without the consent of Lender;
provided, however, that if no Event of Default shall have
occurred and be continuing, Borrower may, without the consent of
Lender, incur, create or assume any or all of the following
indebtedness (collectively, "Permitted Debt"):
(i) the Note and the other obligations, indebtedness and
liabilities specifically provided for in any Loan Document and
secured by this Mortgage and the other Loan Documents;
(ii) amounts, not secured by Liens on the Mortgaged Property
(other than liens being properly contested in accordance with the
provisions of this Mortgage), not to exceed in the aggregate
$700,000 (other than amounts held in the Construction Completion
Account), payable by or on behalf of Borrower to third parties,
but not including current utility charges for or in respect of
the operation of the Mortgaged Property or for trade debt
incurred in the ordinary course of operating Borrower's business,
provided that (but subject to the terms of the next sentence)
each such amount shall be paid to trade creditors within sixty
(60) days following the date on which each such amount was
actually due and payable. Nothing contained herein shall be
deemed to require Borrower to pay any amount, so long as Borrower
is in good faith, and by proper legal proceedings, diligently
contesting the validity, amount or application thereof, provided
that in each case, at the time of the commencement of any such
action or proceeding, and during the pendency of such action or
proceeding (i) no Event of Default shall exist and be continuing
hereunder, (ii) adequate reserves with respect thereto are
maintained on the books of Borrower in accordance with GAAP (as
determined by the Independent Accountant), and (iii) such contest
operates to suspend collection or enforcement, as the case may
be, of the contested amount and such contest is maintained and
prosecuted continuously and with diligence. Notwithstanding
anything set forth herein, in no event shall Borrower be
permitted under this provision to enter into a note or other
instrument for borrowed money; and
<PAGE>
(iii) amounts, not secured by Liens on the Mortgaged
Property (other than liens being properly contested in accordance
with the provisions of this Mortgage), payable or reimbursable to
any Tenant on account of work performed at a Property by such
Tenant or for costs incurred by such Tenant in connection with
its occupancy of space in the Property, including for tenant
improvements (provided, however, that notwithstanding the
foregoing, in no event shall Borrower be permitted under this
provision to enter into a note or other instrument for borrowed
money).
(d) Additional Permitted Transfers. Notwithstanding the
above provisions of this Section 11, Borrower may, without the
consent of Lender, (i) make immaterial transfers of portions of a
Property to Governmental Authorities for dedication or public use
(subject to the provisions of Section 6 hereof) or, portions of a
Property to third parties, including owners of outparcels, or
other properties for the purpose of erecting and operating
additional structures whose use is integrated with the use of the
Property, and (ii) grant easements, restrictions, covenants,
reservations and rights of way in the ordinary course of business
for access, water and sewer lines, telephone and telegraph lines,
electric lines or other utilities or for other similar purposes
or amend the Operating Agreements, provided that no such
transfer, conveyance or encumbrance set forth in the foregoing
clauses (i) and (ii) shall materially impair the utility and
operation of such Property or materially adversely affect the
value of such Property taken as a whole. If Borrower shall
receive any net proceeds in connection with any such transfer or
other conveyance, Borrower shall have the right to use any such
proceeds in connection with any Alterations performed in
connection with, or required as a result of, such conveyance.
Except as provided below with respect to any Taking, the amount
of any net proceeds received by Borrower in excess of the cost of
such Alterations shall be deposited in the FF&E Reserve Account
(which amounts shall be in addition to, and not in lieu of,
amounts otherwise required to be deposited pursuant to Section
48(a) hereof, and shall be available to Borrower for use in
performing any further or other Alterations. Any amounts held in
such account shall be invested in accordance with Section 3(s) of
the Cash Collateral Agreement. In connection with any transfer,
conveyance or encumbrance permitted pursuant to this Section
11(d), Lender shall execute and deliver any instrument reasonably
necessary or appropriate, in the case of the transfers referred
to in clause (i) above, to release the portion of such Property
affected by such Taking or such transfer from the Lien of this
Mortgage or, in the case of clause (ii) above, to subordinate the
Lien of this Mortgage to such easements, restrictions, covenants,
reservations and rights of way or other similar grants by receipt
by Lender of:
(i) a copy of the instrument of transfer; and
(ii) an Officer's Certificate stating (x) with respect to
any Transfer, the consideration, if any, being paid for the
<PAGE>
Transfer and (y) that such Transfer does not materially impair
the utility and operation of the affected Property or materially
reduce its value.
All Taking Proceeds shall be applied in accordance with the
provisions of Section hereof.
(e) Not less than fifteen (15) Business Days prior to the
closing of any transaction subject to the provisions of this
Section 11, transfers of a ten percent (10%) direct or indirect
beneficial interest in Borrower or of any transfer that shall
result in a Person acquiring a greater than forty-nine percent
(49%) interest in Borrower or of any transfer that shall result
in a Person that had a greater than forty-nine percent (49%)
interest in Borrower having less than a forty-nine percent (49%)
interest in Borrower, Borrower shall deliver to Lender and the
Rating Agencies (i) an Officer's Certificate describing the
proposed transaction and stating that such transaction is
permitted pursuant to the terms of this Section , together with
any appraisal or other documents upon which such Officer's
Certificate is based, and (ii) an Opinion of Counsel to the
transferee, addressed to the Rating Agencies and Lender and dated
as of the date of the Transfer, to the effect that, in a properly
presented case, a bankruptcy court in a case involving such
transferee would not disregard the corporate or partnership form
of such transferee so as to consolidate the assets and
liabilities of such transferee with those of Borrower or their
respective general partners. Such Transfer shall be subject to
Rating Agency confirmation that the proposed transfer will not
result in a downgrade, withdrawal or qualification of the then
current ratings of any securities backed in part by this
Mortgage. In addition, Borrower shall provide Lender and the
Rating Agencies with copies of executed deeds, assignments of
Direct Beneficial Owner interests in Borrower, mortgages or other
similar closing documents within ten (10) days after such
closing.
12 . Maintenance of Mortgaged Property; Alterations;
Inspection; Utilities.
(a) Maintenance of Mortgaged Property. Borrower shall keep
and maintain the Mortgaged Property and every part thereof in
good condition and repair, subject to ordinary wear and tear,
and, subject to Excusable Delays and the provisions of this
Mortgage with respect to damage or destruction caused by casualty
events or Takings, shall not permit or commit any waste,
impairment, or deterioration of any portion of the Mortgaged
Property in any material respect. Borrower further covenants to
do all other acts which from the character or use of the
Mortgaged Property may be reasonably necessary to protect the
security hereof, the specific enumerations herein not excluding
the general. Borrower shall not remove or demolish any
Improvement except as the same may be necessary in connection
with an Alteration or a restoration in connection with a Taking
or casualty in accordance with the terms and conditions hereof.
<PAGE>
(b) No Changes in Use. Except as may be necessary in
connection with an Alteration permitted by Section 12(c) hereof,
Borrower shall not make any changes or allow any changes to be
made in the nature of the use of a Property or any part thereof
or initiate or take any action in furtherance of any change in
any zoning or other land use classification affecting all or any
portion of a Property.
(c) Conditions to Alteration. Provided that no Event of
Default shall have occurred and be continuing hereunder, Borrower
shall have the right, without Lender's consent, to undertake any
alteration, improvement, demolition or removal of a Property or
any portion thereof (any such alteration, improvement, demolition
or removal, an "Alteration") so long as (i) Borrower provides
Lender with prior written notice of any Material Alteration, and
(ii) any Alteration is undertaken in accordance with the
applicable provisions of this Mortgage and the other Loan
Documents, is not prohibited by any relevant Operating Agreements
and the Leases and shall not upon completion (giving credit to
rent and other charges attributable to Leases executed upon such
completion) materially adversely (A) affect the value, use or
operation of such Property taken as a whole or (B) reduce the Net
Operating Income for such Property from the level available
immediately prior to commencement of such Alteration. Any
Material Alteration with respect to any Property shall be
conducted under the supervision of an Independent Architect and
no such Material Alteration shall be undertaken until three (3)
Business Days after there shall have been filed with Lender, for
information purposes only and not for approval by Lender,
detailed plans and specifications and cost estimates therefor,
prepared by such Independent Architect, as well as an Officer's
Certificate stating that such Alteration will involve an
estimated cost of more than (I) the greater of the Threshold
Amount with respect to Alterations being undertaken at a single
Property at such time, or (II) the Aggregate Alteration Threshold
Amount for Alterations at all of the Properties. Such plans and
specifications may be revised at any time and from time to time
by such Independent Architect provided that material revisions of
such plans and specifications are filed with Lender, for
information purposes only. All work done in connection with any
Alteration shall be performed with due diligence in a good and
workmanlike manner, all materials used in connection with any
Alteration shall not be less than the standard of quality of the
materials currently used at such Property and all materials used
shall be in accordance with all applicable material Legal
Requirements and Insurance Requirements.
(d) Costs of Alteration. Notwithstanding anything to the
contrary contained in Section 12(c) hereof, no Material
Alteration nor any Alteration other than Alterations related to
the initial construction of a Property for which funds equal to
the cost of construction has been deposited into an escrow
account controlled by Lender, which when aggregated with all
other Alterations (other than Material Alterations) then being
undertaken by Borrower (exclusive of Alterations being directly
paid for by Tenants) at the Properties exceeds the Aggregate
<PAGE>
Alteration Threshold Amount, shall be performed by or on behalf
of Borrower unless Borrower shall have delivered to Lender Cash
and Cash Equivalents and/or a Letter of Credit as security in an
amount not less than the estimated cost (exclusive of costs to be
funded from amounts held in any Account) of the Material
Alteration or the Alterations in excess of the Threshold Amount
(as set forth in the Independent Architect's written estimate
referred to above). In addition to payment or reimbursement from
time to time of Borrower's expenses incurred in connection with
any Material Alteration or any such Alteration, the amount of
such security shall be reduced on any given date by Lender
delivering funds to Borrower in a sum equivalent to the
Independent Architect's written estimate of the cost to complete
the Material Alterations or the Alterations (including any
retainages), free and clear of Liens, other than Permitted
Encumbrances. Costs which are subject to retainage (which in no
event shall be less than five percent (5%)) shall be treated as
due and payable and unpaid from the date they would be due and
payable but for their characterization as subject to retainage.
In the event that any Material Alteration or Alteration shall be
made in conjunction with any restoration with respect to which
Borrower shall be entitled to withdraw Proceeds pursuant to
Sections 6(f) and 6(g) hereof, the amount of the Cash and Cash
Equivalents and/or Letter of Credit to be furnished pursuant
hereto need not exceed the aggregate cost of such restoration and
such Material Alteration or Alteration (as estimated by the
Independent Architect), less the sum of the amount of any
Proceeds which Borrower may be entitled to withdraw pursuant to
Sections 6(f) and 6(g) hereof and which are held by Lender in
accordance with Section 6 hereof. Payment or reimbursement of
Borrower's expenses incurred with respect to any Material
Alteration or any such Alteration shall be accomplished upon the
terms and conditions specified in Sections 6(f) through 6(g)
hereof. At any time after substantial completion of any Material
Alteration or any such Alteration in respect whereof Cash and
Cash Equivalents and/or a Letter of Credit was deposited pursuant
hereto, the whole balance of any Cash and Cash Equivalents so
deposited by Lender and then remaining on deposit (together with
earnings thereon), as well as all retainages, may be withdrawn by
Borrower and shall be paid by Lender to Borrower, and any other
Cash and Cash Equivalents and/or a Letter of Credit so deposited
or delivered shall, to the extent it has not been called upon,
reduced or theretofore released, be released to Borrower, within
ten (10) days after receipt by Lender of an application for such
withdrawal and/or release together with an Officer's Certificate,
and signed also (as to the following clause (i)) by the
Independent Architect, setting forth in substance as follows:
(i) that the Material Alteration or Alteration in respect of
which such Cash and Cash Equivalents and/or a Letter of Credit
was deposited has been substantially completed in all material
respects in accordance with any plans and specifications therefor
previously filed with Lender under Section 12(c) hereof and that,
if applicable, a certificate of occupancy has been issued with
respect to such Material Alteration or Alteration by the relevant
Governmental Authority(ies) or, if not applicable, that a
certificate of occupancy is not required; and
<PAGE>
(ii) that to the knowledge of the certifying Person all
amounts which Borrower is or may become liable to pay in respect
of such Material Alteration or Alteration through the date of the
certification have been paid in full or adequately provided for
or are being contested in accordance with Section 7(c) hereof and
that lien waivers have been obtained from the general contractor
and major subcontractors performing such Material Alterations or
Alterations (or such waivers are not customary and reasonably
obtainable by prudent managers in the area where the Property is
located).
(e) Right to Inspect. Lender and any Persons authorized by it may
at all reasonable times and upon reasonable notice enter and examine
each of the Properties and may inspect all work done, labor performed
and materials furnished in and about the Property subject in all
instances to the rights of Tenants under Leases. Lender shall have no
duty to make any such inspection and shall have no liability or
obligation for making (except for its negligence or willful
misconduct) or not making any such inspection.
13. Legal Compliance. (a) Borrower and the Mortgaged Property and
the use thereof materially comply with all Legal Requirements (as
defined below). Borrower represents and warrants that, as of the date
hereof, it has not received notice of any violation of any Legal
Requirement that remains outstanding other than those to which Lender
has consented in writing. Subject to Borrower's right to contest
pursuant to Section 7(c) hereof, Borrower shall comply with all
material present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, injunctions, rules, regulations and requirements,
and irrespective of the nature of the work to be done, of every
Governmental Authority including, without limitation, Environmental
Laws, consumer protection laws and all covenants, restrictions and
conditions now or hereafter of record which may be applicable to it or
to any Property and the Building Equipment thereon, or to the use,
manner of use, occupancy, possession, operation, maintenance,
alteration, repair or reconstruction of any Property and the Building
Equipment thereon including, without limitation, building and zoning
codes and ordinances (collectively, the "Legal Requirements"), except
where the failure is not reasonably likely to have a Material Adverse
Effect.
(b) Borrower currently holds all certificates of occupancy,
licenses, registrations, permits, consents, franchises and approvals
of any Governmental Authority which are necessary for Borrower's
ownership and operation of the Properties or which are necessary for
the conduct of Borrower's business thereon. All such certificates of
occupancy, licenses, registrations, permits, consents, franchises and
approvals are current and will be kept current and in full force and
effect.
<PAGE>
14 . Books and Records, Financial Statements, Reports and Other
Information.
(a) Books and Records. Borrower will keep and maintain on a
fiscal year basis proper books and records separate from any other
Person, in which accurate and complete entries shall be made of all
dealings or transactions of or in relation to the Note, the Mortgaged
Property and the business and affairs of Borrower relating to the
Mortgaged Property, in accordance with GAAP, at Borrower's election,
prior to the Initial Maturity Date (as such term is defined in the
Note). Lender and its authorized representatives shall have the right
at reasonable times and upon reasonable notice to examine the books
and records of Borrower relating to the operation of the Mortgaged
Property and to make such copies or extracts thereof as Lender may
reasonably require.
(b) Financial Statements.
(i) Quarterly Reports. Not later than forty-five (45) days
following the end of each calendar quarter (other than the fourth
(4th) quarter of any calendar year), Borrower will deliver to Lender
(with a copy to the Rating Agencies) unaudited financial statements,
internally prepared, in accordance with GAAP, consistently applied,
including a balance sheet as of the end of such quarter, and a
statement of revenues and expenses through the end of such quarter, a
statement of Net Operating Income as to each Property and aggregated
for all the Properties for such quarter, and, only upon the request of
either the Rating Agencies or Lender, a statement of profits and
losses. Such statements for each quarter shall be accompanied by an
Officer's Certificate certifying to the best of the signer's
knowledge, (A) that such statements fairly represent the financial
condition and results of operations of Borrower in accordance with
GAAP consistently applied, (B) that as of the date of such Officer's
Certificate, no Default exists under this Mortgage, the Note or any
other Loan Document or, if so, specifying the nature and status of
each such Default and the action then being taken by Borrower or
proposed to be taken to remedy such Default, (C) the Debt Service
Coverage Ratio for the preceding calendar quarter and calendar year,
and (D) that as of the date of each Officer's Certificate, no
uninsured litigation exists involving Borrower or the Mortgaged
Property in which the aggregate amount involved is Two Hundred Fifty
Thousand Dollars ($250,000) or more, or, if so, specifying such
litigation and the actions being taking in relation thereto in
accordance with Section 23 hereof. Such financial statements shall
contain such other information as shall be reasonably requested by
Lender for purposes of calculations to be made by Lender pursuant to
the terms hereof.
<PAGE>
In addition to the quarterly reports required under this
subsection (b)(i), Borrower shall deliver to Lender and the Rating
Agencies, a list of all litigation and proceedings affecting Borrower
or the Mortgaged Property or any part thereof in which the aggregate
amount involved is Two Hundred Fifty Thousand Dollars ($250,000) or
more, whether or not covered by insurance and whether or not relief is
being sought.
(ii) Annual Reports. Not later than ninety (90) days after the
end of each fiscal year of Borrower's operations, Borrower will
deliver to Lender (with a copy to the Rating Agencies) audited
financial statements certified by an Independent Accountant, which
statements shall be prepared in accordance with GAAP consistently
applied. Any statement delivered under this sub-section shall include
a balance sheet as of the end of such year, a statement of Net
Operating Income for each Property for the year and for the fourth
quarter thereof and a statement of revenues and expenses for each
Property for such year, and stating in comparative form the figures
for the previous fiscal year, as well as the supplemental schedule of
net income or loss presenting the net income or loss and occupancy
statistics for each Property. Such annual financial statements shall
also be accompanied by an Officer's Certificate in the form required
pursuant to Section hereof.
(c) Occupancy Reports. Not later than forty-five (45) days after
the end of each fiscal quarter of Borrower's operations, Borrower will
deliver to Lender (with a copy to the Rating Agencies) a true and
complete report of (i) Leases, other than Room and Facility Leases and
(ii) room rentals and facility uses with respect to Room and Facility
Leases, for each Property, dated as of the last month of such fiscal
quarter, showing the percentage of gross leasable area of each
Property (and in the aggregate) leased other than for Room and
Facility Leases as of the last day of the preceding calendar quarter,
a summary of new lease, other than Room and Facility Leases, signings
(including tenant name, square footage occupied and designation of the
tenant's operations as national, regional or local) and lease
terminations, other than Room and Facility Leases, for the preceding
calendar quarter, the Rent received from Room and Facility Leases
during the prior calendar quarter for each Property, the expiration
date of each lease other than Room and Facility Leases, the various
options, if any, available to the tenant other than with respect to a
Room or Facility Lease with respect to renewal (including the amount
of the rent in the event of renewal), whether to Borrower's knowledge
any portion of the Property has been sublet, and if it has, the name
of the subtenant, and the names of the Tenants under Material Leases
expiring within one (1) year of the date thereof, and such rent roll
shall be accompanied by an Officer's Certificate certifying that such
rent roll is true, correct and complete in all material respects as of
its date and stating whether Borrower, within the past three (3)
months, has issued a notice of default with respect to any Lease other
than with respect to Room and Facility Leases which has not been cured
and the nature of such default.
<PAGE>
(d) Capital Expenditures Summaries. Borrower shall, within
forty-five (45) days after the end of each calendar year during the
term of the Notes, deliver to Lender and the Rating Agencies an annual
summary of any and all capital expenditures made at each Property
during the prior twelve (12) month period.
(e) Other Information. Borrower will, promptly after written
request by Lender or the Rating Agencies, furnish or cause to be
furnished to Lender, in such manner and in such detail as may be
reasonably requested by Lender, such reasonable additional information
as may be reasonably requested by Lender with respect to the Mortgaged
Property, to the extent such information is readily available to
Borrower in the normal course of business and will not result in
additional expense to Borrower.
15. Compliance with Leases and Agreements.
(a) Leases and Operating Agreements. The Leases and the Operating
Agreements, if any, are in full force and effect. Borrower has neither
given to, nor received any notice of default from, any party to any of
the Operating Agreements, if any, or any Lease which remains uncured.
To the best of Borrower's knowledge, no events or circumstances exist
which with or without the giving of notice, the passage of time or
both, may constitute a default under any of the Operating Agreements
or the Leases on the part of Borrower, or party thereunder. Borrower
has complied with and performed all of its material construction,
improvement and alteration obligations with respect to each Property
required under the Operating Agreements and the Leases which was
required prior to the date hereof. Borrower will promptly after
receipt thereof deliver to Lender a copy of any notice received with
respect to the Operating Agreements and the Leases, claiming that
Borrower is in default in the performance or observance of any of the
material terms, covenants or conditions of any of the Operating
Agreements or the Leases.
(b) No Default Under Leases. Borrower shall (i) promptly perform
and observe all of the material terms, covenants and conditions
required to be performed and observed by Borrower under the Leases and
the Operating Agreements, if the failure to perform or observe the
same would materially and adversely affect the value of any Property;
(ii) except with respect to Room and Facility Leases, exercise, within
fifteen (15) Business Days after a written request by Lender, any
right to request from the Tenant under any Lease or the party to any
Operating Agreement a certificate with respect to the status thereof;
and (iii) not collect any of the Rents under the Leases more than one
(1) month in advance (except that Borrower may collect (A) taxes
semi-annually in advance from Tenants, (B) security deposits as are
permitted by Legal Requirements and are commercially reasonable in the
prevailing market and (C) other charges in accordance with the terms
of each Lease).
<PAGE>
16 . Lender's Right to Perform. Upon the occurrence and during
the continuance of an Event of Default with respect to the performance
of any of the Obligations contained herein, Lender may, without
waiving or releasing Borrower from any Obligation or Default under
this Mortgage, but shall not be obligated to, at any time perform the
same, and the cost thereof, with interest at the Default Rate from the
date of payment by Lender to the date such amount is paid by Borrower,
shall immediately be due from Borrower to Lender and the same shall be
secured by this Mortgage and shall be a Lien on the Mortgaged Property
prior to any right, title to, interest in or claim upon the Mortgaged
Property attaching subsequent to the Lien of this Mortgage (subject to
the provisions of Section 11 (d) hereof). No payment or advance of
money by Lender under this Section 16 shall be deemed or construed to
cure Borrower's Default or waive any right or remedy of Lender
hereunder.
17 . Borrower's Existence; Organization and Authority. For so
long as this Mortgage remains of record with respect to any of the
Properties, Borrower shall do all things necessary to preserve and
keep in full force and effect its existence, rights and privileges as
a limited partnership, and its right to own property or transact
business in the states in which each of the Properties is located. For
so long as any portion of the Indebtedness shall remain outstanding,
Borrower shall do all things necessary to continue to be, a Single
Purpose Entity (including without limitation, ensuring that its
general partner continues as a Single Purpose Entity), and shall
prevent General Partner from amending General Partner's formation
documents, in any manner that would enable General Partner to expand
Borrower's business purposes beyond those specified in such documents
as of the date hereof. Borrower hereby represents and warrants that it
(i) is either a duly organized and validly existing limited
partnership, corporation or limited liability company under the laws
of the state of its organization, (ii) has the power and authority to
own its properties and to carry on its business as now being conducted
and as proposed to be conducted and is qualified to do business in the
states in which each Property is located, and (iii) has the requisite
power to execute and deliver and perform its obligations under this
Mortgage, the Note and each of the other Loan Documents. The execution
and delivery by Borrower of this Mortgage, the Note and each of the
other Loan Documents to be executed by Borrower, Borrower's
performance of its respective obligations thereunder and the creation
of the security interest and Liens provided for in this Mortgage have
been duly authorized by all requisite action on the part of Borrower,
and will not violate in any material respect any Legal Requirement,
any order of any court or other Governmental Authority, Borrower's
certificate of limited partnership or partnership agreement or any
material indenture, agreement or other instrument to which Borrower is
a party, or by which Borrower is bound; and will not conflict with,
result in a breach of, or constitute (with due notice or lapse of time
or both) a default under any of the foregoing, or result in the
creation or imposition of any Lien, of any nature whatsoever, upon any
of the property or assets of Borrower except the Liens created
hereunder. Borrower is not required to obtain any consent, approval or
<PAGE>
authorization from or to file any declaration or statement with, any
Governmental Authority in connection with or as a condition to the
execution, delivery or performance of this Mortgage, the Note or the
other Loan Documents by Borrower other than those which have already
been obtained or filed. Borrower further represents and warrants that
it is and, so long as any portion of the Indebtedness shall remain
outstanding, shall do all things necessary to continue to be, a Single
Purpose Entity.
18 . Protection of Security; Costs and Expenses. Borrower shall
appear in and defend any action or proceeding of which it has notice
purporting to affect the security hereof or the rights or powers of
Lender or Trustee hereunder and shall pay all costs and expenses,
including, without limitation, cost of evidence of title and
reasonable attorneys' fees and disbursements, in any such action or
proceeding, and in any suit brought by Lender or Trustee to foreclose
this Mortgage or to enforce or establish any other rights or remedies
of Lender hereunder upon the occurrence and during the continuance of
an Event of Default. If an Event of Default occurs under this
Mortgage, or if any action or proceeding is commenced in which it
becomes necessary to defend or uphold the Lien or priority of this
Mortgage or which adversely affects Lender or Lender's interest in the
Mortgaged Property or any part thereof, including, but not limited to,
eminent domain, enforcement of, or proceedings of any nature
whatsoever under any Legal Requirement affecting the Mortgaged
Property or involving Borrower's bankruptcy, insolvency, arrangement,
reorganization or other form of debtor relief, then Lender, upon
reasonable notice to Borrower, may, but without obligation to do so
and without releasing Borrower from any obligation hereunder, make
such appearances, disburse such reasonable sums and take such action
as Lender reasonably deems necessary or appropriate to protect
Lender's interest in the Mortgaged Property, including, but not
limited to, disbursement of reasonable attorneys' fees, entry upon the
Mortgaged Property to make repairs or take other action to protect the
security hereof, and payment, purchase, contest or compromise of any
encumbrance, charge or lien which in the reasonable judgment of Lender
appears to be prior or superior hereto; provided, however, that the
foregoing shall be subject to Borrower's rights to contest under
Section 7(c) hereof and Lender shall not pay or discharge any lien,
encumbrance or charge being contested by Borrower in accordance with
Section 7(c) hereof. Borrower further agrees to pay all reasonable
costs and expenses of Lender and Trustee including reasonable
attorneys' fees and disbursements incurred by Lender and Trustee in
connection with (a) the negotiation, preparation, execution, delivery
and performance of this Mortgage, the Note and the other Loan
Documents, and (b) the performance of its obligations and exercise of
its rights under this Mortgage, the Note, and the other Loan
Documents. All of the costs, expenses and amounts set forth in this
Section shall be payable by Borrower, on demand and, together with
interest thereon at the Default Rate, if the same are not paid within
five (5) Business Days after demand therefor by Lender (or Trustee),
until the date of repayment by Borrower, shall be deemed to be
Indebtedness hereunder and shall be a Lien on the Mortgaged Property
<PAGE>
prior to any right, title, interest or claim upon the Mortgaged
Property (subject to the provisions of Section 11(d) hereof). Nothing
contained in this Section 18 shall be construed to require Lender to
incur any expense, make any appearance, or take any other action.
19. Management of the Mortgaged Property.
(a) For purposes hereof, a "Qualifying Manager" shall mean any
property manager of national standing reasonably acceptable to Lender,
that, as of the date of such designation, manages not less than fifty
(50) extended stay hotels in the region in which a Property is
located. Notwithstanding the foregoing, Homestead Village Incorporated
or an Affiliate of Homestead Village Incorporated shall be deemed a
Qualifying Manager acceptable to Lender. Borrower shall notify Lender
and the Rating Agencies in writing (and shall deliver a copy of the
proposed management agreement) of any entity proposed to be designated
as a Qualifying Manager other than Homestead Village Incorporated or
an Affiliate of Homestead Village Incorporated of all or any of the
Properties no less than thirty (30) days before such Qualifying
Manager begins to manage such Property or Properties and shall obtain
prior to any appointment of a Qualifying Manager a written
confirmation from the Rating Agencies that retention of such other
Person as Manager shall not result in a downgrade, withdrawal or
qualification of the then ratings of any securities backed in part by
this Mortgage.
(b) It is acknowledged and agreed that a Qualifying Manager may
be retained at Lender's direction at any time following the occurrence
and during the continuance of an Event of Default.
(c) Upon the retention of a Qualifying Manager, Lender shall have
the right to approve (which approval shall not be unreasonably
withheld or delayed) any new management agreement with such Qualifying
Manager which is on different terms from the management agreement
previously in effect. Borrower shall provide a copy of such new
management agreement to the Rating Agencies.
20. Remedies. Upon the occurrence and during the continuation of
an Event of Default, Lender may take such actions against Borrower,
subject to Section 33 hereof, and/or against Mortgaged Property or any
portion thereof as Lender determines is necessary to protect and
enforce its rights hereunder, without notice or demand except as set
forth below or as required under applicable law. Any such actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such
time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise
affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan
<PAGE>
Documents. Lender's determination of appropriate action may be based
on an appropriate real estate or other consultant and/or counsel, and
Lender may rely conclusively on such advice. Borrower shall pay such
consultant's and reasonable attorney's fees and expenses incurred by
Lender pursuant to this Section 20. Such actions may include, without
limitation, the following:
(a) Acceleration. Subject to any applicable provisions of the
Note and the other Loan Documents, Lender may declare all or any
portion of the unpaid principal balance under the Note, together with
all accrued and unpaid interest thereon, and all other unpaid
Indebtedness, to be immediately due and payable.
(b) Entry. Subject to the provisions and restrictions of
applicable law, Lender, personally, or by its agents or attorneys, at
Lender's election, may enter into and upon all or any part of the
Mortgaged Property (including any Property and any part thereof), and
may exclude Borrower, its agents and servants therefrom (but such
entry shall be subject to any Nondisturbance Agreements then in
effect); and Lender, having and holding the same, may use, operate,
manage and control the Mortgaged Property or any part thereof and
conduct the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or receiver.
Upon every such entry, Lender may, at the reasonable expense of the
Mortgaged Property and/or Borrower, from time to time, either by
purchase, repair or construction, maintain and restore the Mortgaged
Property or any part thereof, and may insure and reinsure the same in
such amount and in such manner as may seem to them to be advisable.
Similarly, from time to time, Lender may, at the expense of Borrower
(which amounts may be disbursed by Lender from the Mortgaged Property
on behalf of Borrower), make all necessary or proper repairs,
renewals, replacements, alterations, additions, betterments and
improvements to and on the Mortgaged Property or any part thereof as
it may seem advisable. Lender or its designee shall also have the
right to manage and operate the Mortgaged Property or any part thereof
and to carry on the business thereof and exercise all rights and
powers of Borrower with respect thereto, either in the name of
Borrower or otherwise, as may seem to them to be advisable. In
confirmation of the grant made in Granting Clause (G) hereof, in the
case of the occurrence and continuation of an Event of Default, Lender
shall be entitled to collect and receive all earnings, revenues,
rents, issues, profits and income of the Mortgaged Property or any
part thereof (i.e., the "Rents") to be applied in the order of
priorities and amounts as shall be provided for in Section 21 hereof.
Lender shall be liable to account only for rents, issues and profits
and other proceeds actually received by Lender.
(c) Foreclosure. Prior to taking title to any Property (whether
by foreclosure, deed in lieu or otherwise), Lender shall obtain, in
each instance, at Borrower's reasonable expense a new phase I
environmental report with respect to such Property, and such
additional environmental studies as may be recommended in such phase I
report.
<PAGE>
(i) Lender, with or without entry, personally or by its
agents or attorneys, insofar as applicable, and in addition to
any and every other remedy, may (i) sell or instruct the Trustee
to sell, to the extent permitted by law and pursuant to the power
of sale granted herein, all and singular the Mortgaged Property,
and all estate, right, title and interest, claim and demand
therein, and right of redemption thereof, at one or more sales,
as an entirety or in parcels, and at such times and places as
required or permitted by law and as are customary in any county
or parish in which the Property is located and upon such terms as
Lender (or Trustee, as applicable) may fix and specify in the
notice of sale to be given to Borrower (and on such other notice
published or otherwise given as provided by law), or as may be
required by law; (ii) institute proceedings for the complete or
partial foreclosure of this Mortgage under the provisions of the
laws of the jurisdiction in which the Mortgaged Property or any
part thereof is located, or under any other applicable provision
of law; or (iii) take all steps to protect and enforce the rights
of Lender, whether by action, suit or proceeding in equity or at
law (for the specific performance of any covenant, condition or
agreement contained in this Mortgage, or in aid of the execution
of any power herein granted, or for any foreclosure hereunder, or
for the enforcement of any other appropriate legal or equitable
remedy), or otherwise, as Lender, being advised by counsel and
its financial advisor, shall deem most advisable to protect and
enforce any of their rights or duties hereunder.
(ii) Lender (or Trustee, as applicable) may conduct any
number of sales from time to time. The power of sale shall not be
exhausted by any one or more such sales as to any part of the
Mortgaged Property remaining unsold, but shall continue
unimpaired until the entire Mortgaged Property shall have been
sold or the Obligations satisfied.
(iii) With respect to a Property, this Mortgage is made upon
any statutory conditions of the State in which such Property is
located, and, for any breach thereof or any breach of the terms
of this Mortgage, Lender (or Trustee, as applicable) shall have
the statutory power of sale, if any, provided for by the laws of
such State.
(d) Specific Performance. Lender, in its sole and absolute
discretion, may institute an action, suit or proceeding at law or in
equity for the specific performance of any covenant, condition or
agreement contained herein or in the Notes or any other Loan Document,
or in aid of the execution of any power granted hereunder or for the
enforcement of any other appropriate legal or equitable remedy.
(e) Enforcement of Note. Subject to Section 33 hereof and to the
extent permitted under the provisions of applicable law, Lender may
<PAGE>
recover judgment on the Note (or any portion of the Indebtedness
evidenced thereby), either before, during or after any proceedings for
the foreclosure (or partial foreclosure) or enforcement of this
Mortgage.
(f) Sale of Mortgaged Property; Application of Proceeds.
(i) Subject to the laws of the State in which such Property
is located, Lender (or Trustee, as applicable) may postpone any
sale of all or any part of the Mortgaged Property to be made
under or by virtue of this Section 20 by public announcement at
the time and place of such sale, or by publication, if required
by law, and, from time to time, thereafter, may further postpone
such sale by public announcement made at the time of sale fixed
by the preceding postponement.
(ii) Upon the completion of any sale made by Lender under or
by virtue of this Section 20, Lender (or Trustee, as applicable)
shall execute and deliver to the accepted purchaser or purchasers
a good and sufficient deed or deeds or other appropriate
instruments, conveying, assigning and transferring all its
estate, right, title and interest in and to the Property and
rights so sold. Lender is hereby appointed the true and lawful
irrevocable attorney-in-fact of Borrower in its name and stead or
in the name of Lender to make all necessary conveyances,
assignments, transfers and deliveries of the Property and rights
so sold, and, for that purpose, Lender may execute all necessary
deeds and other instruments of assignment and transfer, and may
substitute one or more persons with like power, Borrower hereby
ratifying and confirming all that such attorney or attorneys or
such substitute or substitutes shall lawfully do by virtue
hereof. Borrower shall, nevertheless, if so requested in writing
by Lender, ratify and confirm any such sale or sales by executing
and delivering to Lender or to such purchaser or purchasers all
such instruments as may be advisable, in the judgment of Lender,
for such purposes and as may be designated in such request. Any
such sale or sales made under or by virtue of this Section 20
shall operate to divest all the estate, right, title, interest,
claim and demand, whether at law or in equity, of Borrower in and
to the Property and rights so sold, and shall be a perpetual bar,
at law and in equity, against Borrower, its successors and
assigns and any Person claiming through or under Borrower and its
successors and assigns.
(iii) The receipt of Lender (or Trustee, as applicable ) for
the purchase money paid as a result of any such sale shall be a
sufficient discharge therefor to any purchaser of the Property or
rights, or any part thereof, so sold. No such purchaser, after
paying such purchase money and receiving such receipt, shall be
bound to see to the application of such purchase money upon or
for any trust or purpose of this Mortgage, or shall be
answerable, in any manner, for any loss, misapplication or
<PAGE>
non-application of any such purchase money or any part thereof,
nor shall any such purchaser be bound to inquire as to the
authorization, necessity, expediency or regularity of such sale.
(iv) Upon any sale made under or by virtue of this Section
20, Lender may bid for and acquire the Mortgaged Property or any
part thereof and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting upon the Note
secured by this Mortgage the net proceeds of sale, after
deducting therefrom the expense of the sale and the costs of the
action and any other sums which Lender is authorized to deduct
under this Mortgage. The person making such sale shall accept
such settlement without requiring the production of the Note or
this Mortgage, and without such production there shall be deemed
credited to the Indebtedness and Obligations under this Mortgage
the net proceeds of such sale. Lender, upon acquiring the
Mortgaged Property or any part thereof, shall be entitled to own,
hold, lease, rent, operate, manage or sell the same in any manner
permitted by applicable laws.
(g) Voluntary Appearance; Receivers. After the happening,
and during the continuance of, any Event of Default, and
immediately upon commencement of (i) any action, suit or other
legal proceeding by Lender to obtain judgment for the principal
and interest on the Notes and any other sums required to be paid
pursuant to this Mortgage, or (ii) any action, suit or other
legal proceeding by Lender of any other nature in aid of the
enforcement of the Loan Documents or any of them, Borrower will
(a) enter their voluntary appearance in such action, suit or
proceeding, and (b) if required by Lender, consent to the
appointment of one or more receivers of the Mortgaged Property
and of the earnings, revenues, rents, issues, profits and income
thereof. After the happening of any Event of Default, or upon the
filing of a bill in equity to foreclose this Mortgage or to
enforce the specific performance hereof or in aid thereof, or
upon the commencement of any other judicial proceeding to enforce
any right of Lender, Lender shall be entitled, as a matter of
right, if it shall so elect, without notice to any other party
and without regard to the adequacy of the security of the
Mortgaged Property, forthwith, either before or after declaring
the principal and interest on the Notes to be due and payable, to
the appointment of such a receiver or receivers. Any receiver or
receivers so appointed shall have such powers as a court or
courts shall confer, which may include, without limitation, any
or all of the powers which Lender is authorized to exercise by
the provisions of this Section 20, and shall have the right to
incur such obligations and to issue such certificates therefor as
the court shall authorize. Notwithstanding the foregoing, Lender
as a matter of right may appoint or secure the appointment of a
receiver, trustee, liquidator or similar official of the
Mortgaged Property or any portion thereof, and Borrower hereby
irrevocably consents and agrees to such appointment, without
notice to Borrower and without regard to the value of the
Mortgaged Property or adequacy of the security for the
Indebtedness and without regard to the solvency of the Borrower
or any other Person liable for the payment of the Indebtedness,
and such receiver or other official shall have all rights and
<PAGE>
powers permitted by applicable law and such other rights and
powers as the court making such appointment may confer, but the
appointment of such receiver or other official shall not impair
or in any manner prejudice the rights of Lender to receive the
Rents with respect to any of the Mortgaged Property pursuant to
this Mortgage, the Assignment of Leases or the Cash Collateral
Agreement.
(h) UCC Remedies. Lender may exercise any or all of the
remedies granted to a secured party under the UCC, specifically
including, without limitation, the right to recover the
attorneys' fees and other expenses incurred by Lender in the
enforcement of this Mortgage or in connection with Borrower's
redemption of the Improvements or Building Equipment. Lender may
exercise its rights under this Mortgage independently of any
other collateral or guaranty that Borrower may have granted or
provided to Lender in order to secure payment and performance of
the Obligations, and Lender shall be under no obligation or duty
to foreclose or levy upon any other collateral given by Borrower
to secure any Obligation or to proceed against any guarantor
before enforcing its rights under this Mortgage.
(i) Leases. Lender may, at its option, before any proceeding
for the foreclosure (or partial foreclosure) or enforcement of
this Mortgage, treat any Lease which is subordinate by its terms
to the Lien of this Mortgage, as either subordinate or superior
to the Lien of this Mortgage.
(j) Other Rights. Subject to Section 33, Lender may pursue
against Borrower any other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in
the other Loan Documents.
(k) Retention of Possession. Notwithstanding the appointment
of any receiver, liquidator or trustee of Borrower, or any of its
property, or of the Mortgaged Property or any part thereof,
Lender to the extent permitted by law, shall be entitled to
retain possession and control of all property now or hereafter
granted to or held by Lender under this Mortgage.
(l) Suits by Lender. All rights of action under this
Mortgage may be enforced by Lender without the possession of the
Note and without the production thereof or this Mortgage at any
trial or other proceeding relative thereto. Any such suit or
proceeding instituted by Lender shall be brought in the name of
Lender and any recovery of judgment shall be subject to the
rights of Lender.
(m) Remedies Cumulative. Subject to Section 33 hereof, no
remedy herein conferred upon or reserved to Lender shall exclude
any other remedy, and each such remedy shall be cumulative and in
addition to every other remedy given hereunder or now or
<PAGE>
hereafter existing at law or in equity. No delay or omission of
Lender to exercise any right or power accruing upon any Event of
Default shall impair any such right or power, or shall be
construed to be a waiver of any such Event of Default or an
acquiescence therein. Every power and remedy given to Lender by
this Mortgage to the Lender and/or Trustee may be exercised from
time to time and as often as the Lender may deem expedient.
Nothing in this Mortgage shall affect Borrower's obligations to
pay the principal of, and interest on, the Note in the manner and
at the time and place expressed in the Note.
(n) Waiver of Rights. Borrower agrees that, to the fullest
extent permitted by law, it will not at any time, (1) insist
upon, plead or claim or take any benefit or advantage of any
stay, extension or moratorium law, wherever enacted, now or at
any time hereafter in force, which may affect the covenants and
terms of performance of this Mortgage, (2) claim, take or insist
upon any benefit or advantage of any law, now or at any time
hereafter in force, providing for valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein
contained, or pursuant to the decree, judgment or order of any
court of competent jurisdiction, or (3) after any such sale or
sales, claim or exercise any right, under any statute heretofore
or hereafter enacted by the United States of America, any State
thereof or otherwise, to redeem the Property and rights sold
pursuant to such sale or sales or any part hereof. Borrower
hereby expressly waives all benefits and advantages of such laws,
and covenants, to the fullest extent permitted by law, not to
hinder, delay or impede the execution of any power herein granted
or delegated to Lender or the Lenders, but will suffer and permit
the execution of every power as though no such laws had been made
or enacted. Borrower for itself and all who may claim through or
under it, waives, to the extent it lawfully may do so, any and
all homestead rights and, any and all rights to reinstatement,
any and all right to have the property comprising the Mortgaged
Property marshaled upon any foreclosure of the Lien hereof.
21. Application of Proceeds.
(a) Sale Proceeds. The proceeds of any sale or foreclosure
of the Mortgaged Property or any portion thereof shall be applied
to the following in the following order of priority the payment
of: (i) the costs and expenses of the foreclosure proceedings
with respect to the Property (including reasonable counsel fees
and disbursements actually incurred and advertising costs and
expenses), liabilities and advances made or incurred under this
Mortgage, and reasonable receivers' and trustees' fees and
commissions and fees and expenses incurred by Lender, together
with interest at the Default Rate to the extent payable, (ii) any
<PAGE>
other sums advanced by Lender (or any advancing agent on its
behalf) in accordance with the terms hereof and not repaid to it
by Borrower, together with interest at the Default Rate to the
extent payable, (iii) all sums due under the Note in the order of
priority set forth therein, and (iv) any surplus to Borrower or
other party legally entitled thereto.
(b) Other Proceeds. All Proceeds or other amounts collected
by Lender and applied to pay interest or principal of the Note or
other amounts due on this Mortgage following an Event of Default
and acceleration of the Note shall be applied (1) first, to
reimburse any expenses related to such collection and (2)
thereafter, as provided in Section 21(a) hereof. If the Note has
not been accelerated, any amount available to make payments or
applied in lieu of such payments thereon shall be applied (1)
first, to interest due or overdue on the Note, (2) then, any
amounts applied to pay or applied in lieu of paying principal on
the Note then due shall be applied to pay or applied in lieu of
paying each Note in order of priority, and (3) thereafter, to
Borrower.
22 . CERTAIN WAIVERS. TO INDUCE LENDER TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY THE NOTES AND THIS MORTGAGE, AND FOR
OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, BORROWER AND EACH
OF THE PARTNERS COMPRISING BORROWER EXPRESSLY AND IRREVOCABLY
HEREBY WAIVES THE FOLLOWING RIGHTS, IN ADDITION TO AND NOT IN
DEROGATION OF ALL OTHER WAIVERS CONTAINED IN THE NOTE, THIS
MORTGAGE AND THE OTHER LOAN DOCUMENTS:
(a) WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER HEREBY WAIVES
AND SHALL WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT
BY, OR COUNTERCLAIM ASSERTED BY LENDER WHICH ACTION, PROCEEDING
OR COUNTERCLAIM ARISES OUT OF OR IS CONNECTED WITH THIS MORTGAGE,
THE NOTE OR ANY OTHER LOAN DOCUMENTS.
23 . Notice of Certain Occurrences. In addition to all other
notices required to be given by Borrower hereunder, Borrower
shall give notice to Lender and the Rating Agencies promptly upon
the occurrence of: (a) any Default or Event of Default; (b) any
litigation or proceeding affecting Borrower or the Mortgaged
Property or any part thereof in which the amount involved is Two
Hundred Fifty Thousand Dollars ($250,000) or more and not covered
by insurance or in which injunctive or similar relief is sought
and likely to be obtained; and (c) a material adverse change in
the business, operations, property or financial condition of
Borrower or the Mortgaged Property.
<PAGE>
24 . Trust Funds. To the extent required by applicable law,
all security deposits paid under the Leases shall be treated as
trust funds and not commingled with any other funds of Borrower.
Within ten (10) days after request by Lender, Borrower shall
furnish Lender with satisfactory evidence of compliance with this
Section 24, together with a statement of all security deposits by
Tenants under the Leases, which statement shall be certified by
Borrower.
25 . Taxation. In the event a law is passed after the date
hereof of the United States or of any state in which a Property
is located either (a) changing in any way the laws for the
taxation of mortgages or debts secured thereby for federal, state
or local purposes, or the manner of collection of any such taxes,
or (b) imposing a tax, either directly or indirectly, on
mortgages or debts secured thereby, in each case other than
income taxes, franchise taxes, or withholding taxes, that
materially adversely affects Lender, Lender shall have the right
to declare the Note due on a date to be specified by not less
than ninety (90) days' written notice to be given to Borrower
unless within such ninety (90) day period Borrower shall assume
as an obligation hereunder the payment of any tax so imposed
until full payment of the Note provided such assumption shall be
permitted by law.
26 . Notices. Any notice, election, request or demand which
by any provision of this Mortgage is required or permitted to be
given or served hereunder shall be in writing and shall be given
or served by hand delivery against receipt, by any nationally
recognized overnight courier service providing evidence of the
date of delivery or by certified mail return receipt requested,
postage prepaid, addressed to Borrower at: 2100 RiverEdge
Parkway, 9th Floor, Atlanta, Georgia 30328, Attention: Mr. Robert
Aldworth, with a copy to Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, Attention: Thomas S. Reif, Esq.;
if to Lender, addressed to Lender at: 210 West 10th Street,
Kansas City, Missouri 64105, Attention: Alan Torgler, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue,
New York, New York 10022, Attention: Harvey R. Uris, Esq.; if to
Trustee, at such address as indicated in Sections 51-56, as
applicable, or at such other address as shall be designated from
time to time by Borrower, Lender or Trustee by notice given in
accordance with the provisions of this Section 26. Any such
notice or demand given hereunder shall be effective upon receipt.
All notices, elections, requests and demands required or
permitted under this Mortgage shall be in the English language.
27 . No Oral Modification. This Mortgage may not be waived,
altered, amended, modified, changed, discharged or terminated
orally but only by a written agreement signed by the party
against which enforcement is sought.
28 . Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
<PAGE>
invalidity, illegality or unenforceability shall not affect any
other provision hereof, but each shall be construed as if such
invalid, illegal or unenforceable provision had never been
included hereunder.
29 . Successors and Assigns. All covenants of Borrower
contained in this Mortgage are imposed solely and exclusively for
the benefit of Lender and its successors and assigns, and no
other Person shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a
beneficiary of such covenants, any or all of which may be freely
waived in whole or in part by Lender at any time if in its sole
discretion it deems it advisable to do so. All such covenants of
Borrower shall run with the land and bind Borrower, the
successors and assigns of Borrower (and each of them) and all
subsequent owners, encumbrancers and Tenants of the Mortgaged
Property, and shall inure to the benefit of Lender, its
successors and assigns.
30 . Governing Law. This Mortgage, the obligations arising
hereunder shall be governed by and construed in accordance with,
the laws of the State of New York applicable to contracts made
and performed in the State of New York and any applicable laws of
the United States of America, except that at all times the
provisions for the creation, perfection and enforcement of the
Liens and security interest created pursuant to this Mortgage
with respect to each Property and pursuant to the Assignment of
Leases shall be governed by the law of the state in which each
respective Property is located. Whenever possible, each provision
of this Mortgage shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of
this Mortgage shall be prohibited by, or invalid under,
applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the
remaining provisions of this Mortgage. Nothing contained in this
Mortgage or in any Loan Document shall require either Borrower to
pay or Lender to accept any sum in any amount which would, under
applicable law, subject Lender, or any Lender to penalty or
adversely affect the enforceability of this Mortgage. In the
event that the payment of any sum due hereunder or under any Loan
Document would have such result under applicable law, then, ipso
facto, the obligation of Borrower to make such payments shall be
reduced to the highest sum then permitted under applicable law
and appropriate adjustment shall be made by Borrower and Lender.
31 . Certain Representations, Warranties and Covenants.
(a) Recording Fees, Taxes, Etc. Borrower hereby agrees to
take all such further reasonable actions, and to pay all taxes,
recording fees, charges, costs and other expenses including,
without limitation, reasonable attorneys' and professional fees
and disbursements which are currently or in the future shall be
imposed, and which may be required or necessary to establish,
preserve, protect or enforce the Lien of this Mortgage.
<PAGE>
(b) No Offsets. Borrower warrants, covenants and represents
to Lender that there exists no cause of action at law or in
equity that would constitute any offset, counterclaim or
deduction against the Indebtedness or Obligations.
(c) Full and Accurate Disclosure. To the best of Borrower's
knowledge, no statement of fact made by or on behalf of Borrower
in this Mortgage or in any of the other Loan Documents contains
any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or
therein not misleading as of the date made. There is no fact
presently known to Borrower which has not been disclosed which
adversely affects, nor as far as Borrower can foresee, might
adversely affect, the business, operations or condition
(financial or otherwise) of Borrower.
(d) Tax Filings. Borrower has filed all federal, state and
local tax returns required to be filed prior to the date hereof
and has paid or made adequate provision for the payment of all
federal, state and local taxes, charges and assessments shown to
be due from Borrower on such tax returns.
(e) No Litigation. No litigation is pending or, to
Borrower's best knowledge, threatened against Borrower which, if
determined adversely to Borrower, would have a material adverse
effect on the Property or the security created hereby and no
Taking has been commenced or, to Borrower's best knowledge, is
contemplated with respect to all or any portion of the Mortgaged
Property or for the relocation of roadways providing access to
the Mortgaged Property which, if determined adversely to
Borrower, would have a material adverse effect on the Property or
the security created hereby. Borrower has delivered to Lender and
the Rating Agencies a certificate setting forth all litigation
affecting Borrower or the Properties.
(f) Solvency. The fair saleable value of Borrower's assets
exceeds and will, immediately following the issuance and sale of
the Note and the consummation of the other transactions
contemplated to take place simultaneously therewith, exceed
Borrower's liabilities, including subordinated, unliquidated,
disputed and contingent liabilities. Borrower does not intend to,
and does not believe that it will, incur debts and liabilities
(including, without limitation, contingent liabilities) beyond
its ability to pay such debts as they mature.
(g) ERISA. Borrower is not an "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) to which ERISA
applies and Borrower's assets do not constitute plan assets. No
actions, suits or claims under any laws and regulations
promulgated pursuant to ERISA are pending or, to Borrower's
knowledge, threatened against Borrower. Borrower has no knowledge
of any material liability incurred by Borrower which remains
<PAGE>
unsatisfied for any taxes or penalties with respect to any
employee benefit plan or any Multiemployer Plan, or of any lien
which has been imposed on Borrower's assets pursuant to Section
412 of the Code or Sections 302 or 4068 of ERISA.
(h) Claims. No claims, actions, suits, proceedings or, to
the best knowledge of Borrower after due inquiry, investigations
whether judicial or otherwise are pending or, to the best
knowledge of Borrower, threatened against Borrower before any
domestic or foreign court or administrative, arbitral,
governmental or regulatory authority or agency which, if
determined adversely to Borrower, would have a material adverse
effect on the security created hereby. Borrower has delivered to
Lender a certificate setting forth all claims pending against
Borrower.
(i) Liens. No Lien, other than Permitted Encumbrances, which
remains outstanding as of the date hereof, including, without
limitation, any tax lien, has been levied against the Mortgaged
Property other than certain mechanic's liens previously disclosed
to Lender and which have been bonded or insured against
collection from against the Property by the Title Company.
(j) Outstanding Liabilities. No outstanding liabilities of
Borrower exist which, individually or in the aggregate, would
have a material adverse effect on the security created hereby or
would materially adversely affect the condition (financial or
otherwise) of Borrower other than as disclosed for in financial
statements and other required reports delivered by Borrower to
Lender, pursuant to the terms of this Mortgage. Borrower has
delivered to Lender a certificate setting forth all liabilities
of Borrower.
(k) Creditors' Claims. To Borrower's best knowledge, no
claim of any creditor of Borrower would have a material adverse
effect on the security created hereby or would materially
adversely affect the condition (financial or otherwise) of
Borrower. Borrower has delivered to Lender a certificate setting
forth all such claims of creditors of Borrower.
(l) Enforceability of Loan Documents. This Mortgage and the
other Loan Documents are the legal, valid and binding obligations
of Borrower, enforceable against Borrower in accordance with
their terms, subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws
affecting creditor's rights generally in effect from time to
time.
(m) Contingent Liabilities. Borrower does not have any known
material contingent liabilities.
(n) No Other Debt. Borrower has not borrowed or received
debt financing (other than financing evidenced by the Note) that
has not been heretofore repaid in full.
<PAGE>
(o) Fraudulent Conveyance. Borrower represents and warrants
as follows: (i) it has not entered into this Mortgage or the
other Loan Documents or the transactions contemplated hereby or
thereby with the actual intent to hinder, delay, or defraud any
creditor, and (ii) it has received reasonably equivalent value in
exchange for its obligations under this Mortgage and the other
Loan Documents. Giving effect to the transactions contemplated by
this Mortgage and the other Loan Documents, the fair saleable
value of the assets of Borrower exceeds and will, immediately
following the execution and delivery of this Mortgage and the
other Loan Documents, exceed the total liabilities of Borrower,
including, without limitation, subordinated, unliquidated,
disputed or contingent liabilities. The fair saleable value of
the assets of Borrower is and will, immediately following the
execution and delivery of this Mortgage and the other Loan
Documents, be greater than Borrower's probable liabilities,
including the maximum amount of the contingent liabilities of
Borrower or their debts as such debts become absolute and
matured. The assets of Borrower do not and, immediately following
the execution and delivery of this Mortgage and the other Loan
Documents will not, constitute unreasonably small capital to
carry out the business of Borrower as conducted or as proposed to
be conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond
its ability to pay such debts as they mature (taking into account
the timing and amounts to be payable on or in respect of
obligations of Borrower).
(p) Access/Utilities. The Property has adequate rights of
access to public ways and is, or, with respect to the
Construction Properties, after obtaining a permanent Certificate
of Occupancy will be, served by adequate water, sewer, sanitary
sewer and storm drain facilities. All public utilities necessary
to the continued use and enjoyment of a Property as presently
used and enjoyed are located in the public right-of-way abutting
the Property, and all such utilities are, or, with respect to the
Construction Properties, after obtaining permanent Certificates
of Occupancy will be, connected so as to serve the Property
without passing over other property, or if the same passes over
other property, easements or other agreements provide for rights
of use covering the same. All roads necessary for the full
utilization of the Property for its current purpose have been
completed and dedicated to public use and accepted by all
governmental authorities or are the subject of access easements
for the benefit of the Property.
(q) Special Assessments. Except to the extent set forth in
Schedule 3, there are no pending or, to the knowledge of
Borrower, proposed special or other assessments for public
improvements or otherwise affecting a Property, nor, to the
knowledge of Borrower, are there any contemplated improvements to
the Property that may result in such special or other
assessments.
<PAGE>
(r) Flood Zone. Except as shown on the surveys delivered to
Lender on the date hereof, none of the Properties are located in
a flood hazard area as defined by the Federal Insurance
Administration.
(s) Separate Business; Corporate Formalities.
(i) Borrower shall maintain its own deposit account or
accounts, separate from those of any Affiliate, with
commercial banking institutions. The funds of Borrower will
not be diverted to any other Person or for other than
business uses of Borrower, nor will such funds be commingled
with the funds of any other Affiliate;
(ii) To the extent that Borrower shares the same
officers or other employees as any of its partners or
Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees
shall be fairly allocated among such entities, and each such
entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and
employees;
(iii) To the extent that Borrower jointly contracts
with any of its partners or Affiliates to do business with
vendors or service providers or to share overhead expenses,
the costs incurred in so doing shall be allocated fairly
among such entities, and each such entity shall bear its
fair share of such costs. To the extent that Borrower
contracts or does business with vendors or service providers
where the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for
whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All
material transactions between Borrower and any of its
Affiliates shall be only on an arm's length basis.
(iv) To the extent that Borrower and any of its
constituent partners or Affiliates have offices in the same
location, there shall be a fair and appropriate allocation
of overhead costs among them, and each such entity shall
bear its fair share of such expenses.
(v) Borrower shall conduct its affairs strictly in
accordance with its organizational documents, and observe
all necessary, appropriate and customary partnership
formalities, as applicable, including, but not limited to,
obtaining any and all partners' consents necessary to
authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts,
including, but not limited to, payroll and intercompany
transaction accounts.
<PAGE>
(vi) In addition, Borrower shall: (a) maintain books
and records separate from those of any other person; (b)
maintain its assets in such a manner that it is nor costly
or difficult to segregate, identify or ascertain such
assets; (c) hold regular meetings of its board of directors,
shareholders, partners or members, as the case may be, and
observe all other corporate, partnership or limited
liability company, as the case may be, formalities; (d) hold
itself out to creditors and the public as a legal entity
separate and distinct from any other entity; (e) prepare
separate tax returns and financial statements, or if part of
a consolidated group, then it will be shown as a separate
member of such group; (f) transact all business with
Affiliates on an arm's-length basis and pursuant to
enforceable agreements; (g) conduct business in its name and
use separate stationery, invoices and checks; (h) not
commingle its assets or funds with those of any other
Person; and (i) not assume, guarantee or pay the debts or
obligations of any other Person.
(t) Director Consents. The General Partner of Borrower
shall obtain the consent of all its directors, including the
Independent Director, to (i) file a bankruptcy or insolvency
petition or otherwise institute insolvency proceedings or to
authorize Borrower to do so, (ii) dissolve, liquidate,
consolidate, merge or sell all or substantially all of
Borrower's assets, (iii) engage in any other business
activity, or (iv) amend its organizational documents in a
manner that affects the status of the General Partner as a
Single Purpose Entity or that changes the voting rights of
the Independent Director.
(u) No Default. As of the date hereof, Borrower is not
in material default under the terms and provisions of any
Operating Agreement or any Material Lease.
(v) Collateral As Entirety of Property. Each Property
and the Personalty located thereon constitutes all of the
real property, equipment and fixtures currently owned by
Borrower or currently used in the operation of the business
located on such Property.
(w) No Property Damage. As of the date hereof, to
Borrower's knowledge, no portion of the Improvements at a
Property has been materially damaged, destroyed or injured
by fire or other casualty which is not now fully restored or
in the process of being restored.
(x) Separate Tax Parcels. Each Property constitutes one
or more separate tax lots, with a separate tax assessment,
independent of any other land or improvements.
(y) Title Insurance. Borrower has delivered to Lender
(i) a lender's title insurance policy in form acceptable to
Lender, issued by the Title Company for each Property other
than the Properties located in Florida, in an amount not
less than the Allocated Loan Amount for each such Property,
<PAGE>
with a "Tie-In" endorsement with respect to all such
Properties, and (ii) for the Properties located in Florida,
a blanket lender's title insurance policy in form acceptable
to Lender, issued by the Title Company in an amount not less
than the Allocated Loan Amount of the Properties located in
Florida. The title insurance policies referred to in this
sub-paragraph (y) include all title insurance endorsements
requested by Lender in its sole and absolute discretion, are
dated as of the date hereof and insure that this Mortgage is
a valid first priority lien on the Land and Improvements,
subject only to Permitted Encumbrances, standard exceptions
contained in the current ALTA printed form policy issued by
the Title Company, and any other matters consented to by
Lender.
32 . No Waiver. No failure by Lender to insist upon the
strict performance of any term hereof or to exercise any
right, power or remedy consequent upon a breach thereof
shall constitute a waiver of any such term or right, power
or remedy or of any such breach. No waiver of any breach
shall affect or alter this Mortgage, which shall continue in
full force and effect, or shall affect or alter the rights
of Lender with respect to any other then existing or
subsequent breach.
33 . Non-Recourse Obligations. Notwithstanding anything
in this Mortgage (other than as set forth in Section 41
hereof), the Note or the other Loan Documents, no personal
liability shall be asserted or enforceable against (i)
Borrower, (ii) any Affiliate of Borrower, (iii) any Person
owning directly or indirectly, any legal or beneficial
interest in Borrower or any Affiliate of Borrower, or (iv)
any partner, principal, officer, controlling person,
beneficiary, trustee, advisor, shareholder, employee, agent,
Affiliate or director of any Persons described in clauses
(i) through (iii) above (collectively, the "Exculpated
Parties") by Lender in respect of the Obligations, this
Mortgage, the Note or any other Loan Document, or the
making, issuance or transfer thereof, all such liability, if
any, being expressly waived by Lender. Lender, and each
successive holder of any Note and this Mortgage shall accept
the Note and this Mortgage upon the express condition of
this provision and limitation that in the case of the
occurrence and continuance of an Event of Default, Lender's
remedies in its sole discretion shall be any or all of:
(i) Foreclosure of the lien of this Mortgage in
accordance with the terms and provisions set forth in this
Mortgage;
(ii) Action against any other security at any time
given to secure the payment of the Note and under the other
Loan Documents; and
(iii) Exercise of any other remedy set forth in this
Mortgage or any other Loan Document.
<PAGE>
The lien of any judgment against Borrower and any proceeding
instituted on, under or in connection with the Note or this
Mortgage, or both, shall not extend to any property now or
hereafter owned by Borrower or any Exculpated Party other than
the Net Operating Income from and after an Event of Default,
provided that Borrower or any Exculpated Party shall not have
misappropriated the same, and the ownership interest of Borrower
in the Mortgaged Property and the other security for the payment
of the Note or this Mortgage.
Notwithstanding anything to the contrary in this Mortgage or
any of the Loan Documents, Lender shall not be deemed to have
waived any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code to
file a claim for the full amount of the Debt secured by this
Mortgage or to require that all collateral shall continue to
secure all of the Debt owing to Lender in accordance with the
Loan Documents.
Notwithstanding anything in this Mortgage to the contrary,
there shall at no time be any limitation on Borrower's liability
for the payment to Lender of: (1) condemnation proceeds or
insurance proceeds which Borrower has received and to which
Lender is entitled pursuant to the terms of this Mortgage or any
of the Loan Documents to the extent the same have not been
applied toward payment of sums due under the Note or under this
Mortgage, or used for the repair or replacement of the Mortgaged
Property pursuant to this Mortgage, or (2) all loss, damage and
expense as incurred by Lender and arising from any fraud, or
intentional misrepresentation of Borrower or (3) any
misappropriation of Rents or security deposits by Borrower or any
Affiliate of Borrower.
34 . Further Assurances. Borrower, at its own expense, will
execute, acknowledge and deliver all such reasonable further
acts, documents or instruments including security agreements on
any building equipment included or to be included in the
Mortgaged Property and a separate assignment of each Lease,
excluding Room and Facilities Leases, and take all such actions
as Lender from time to time may reasonably request to better
assure, transfer and confirm unto Lender the rights now or
hereafter intended to be granted to Lender under this Mortgage or
the other Loan Documents. Borrower shall notify Lender no less
than thirty (30) days prior to a change of address.
35 . Estoppel Certificates. Borrower and Lender each will,
from time to time, upon twenty (20) days' prior written request
by the other party, execute, acknowledge and deliver to the
requesting party, in the case of a request to Lender, a
certificate signed by an authorized officer or officers and in
the case of a request to Borrower, an Officer's Certificate,
stating that this Mortgage is unmodified and in full force and
effect (or, if there have been modifications, that this Mortgage
is in full force and effect as modified and setting forth such
modifications) and stating the amount of accrued and unpaid
interest and the outstanding principal amount of the Note. The
<PAGE>
estoppel certificate from Lender shall also state either that, to
Borrower's best knowledge and based on no independent
investigation, no Default exists hereunder or, if any Event of
Default shall exist hereunder, specify any Event of Default of
which Borrower has actual knowledge and the steps being taken to
cure such Event of Default.
36 . [Intentionally Omitted]
37 . INDEMNIFICATION BY BORROWER.
SUBJECT TO THE PROVISIONS OF SECTION HEREOF, BORROWER WILL
PROTECT, INDEMNIFY AND SAVE HARMLESS LENDER, AND ALL OFFICERS,
DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES, AGENTS, SUCCESSORS
AND ASSIGNS THEREOF (COLLECTIVELY, THE "INDEMNIFIED PARTIES")
FROM AND AGAINST ALL LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES,
PENALTIES, CAUSES OF ACTION, COSTS AND EXPENSES (INCLUDING ALL
REASONABLE ATTORNEYS' FEES AND EXPENSES ACTUALLY INCURRED)
IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST THE INDEMNIFIED
PARTIES OR THE MORTGAGED PROPERTY OR ANY PART OF ITS INTEREST
THEREIN BY A THIRD PARTY, BY REASON OF THE OCCURRENCE OR
EXISTENCE OF ANY OF THE FOLLOWING (TO THE EXTENT INSURANCE
PROCEEDS PAYABLE ON ACCOUNT OF THE FOLLOWING SHALL BE INADEQUATE;
IT BEING UNDERSTOOD THAT IN NO EVENT WILL THE INDEMNIFIED PARTIES
BE REQUIRED TO ACTUALLY PAY OR INCUR ANY COSTS OR EXPENSES AS A
CONDITION TO THE EFFECTIVENESS OF THE FOREGOING INDEMNITY) PRIOR
TO (I) THE ACCEPTANCE BY LENDER OR ANY THIRD PARTY OF A
DEED-IN-LIEU OF FORECLOSURE WITH RESPECT TO THE APPLICABLE
PROPERTY, OR (II) THE INDEMNIFIED PARTIES TAKING POSSESSION OR
CONTROL OF THE APPLICABLE PROPERTY, UNLESS CAUSED SOLELY BY THE
ACTUAL WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE INDEMNIFIED
PARTIES (OTHER THAN SUCH WILLFUL MISCONDUCT OR GROSS NEGLIGENCE
IMPUTED TO THE INDEMNIFIED PARTIES BECAUSE OF THEIR INTEREST IN
THE MORTGAGED PROPERTY): (1) OWNERSHIP OF BORROWER'S INTEREST IN
THE MORTGAGED PROPERTY, OR ANY INTEREST THEREIN, OR RECEIPT OF
ANY RENTS OR OTHER SUM THEREFROM, (2) ANY ACCIDENT, INJURY TO OR
DEATH OF ANY PERSONS OR LOSS OF OR DAMAGE TO PROPERTY OCCURRING
ON OR ABOUT THE MORTGAGED PROPERTY OR ANY APPURTENANCES THERETO,
(3) ANY DESIGN, CONSTRUCTION, OPERATION, REPAIR, MAINTENANCE,
USE, NON-USE OR CONDITION OF THE MORTGAGED PROPERTY OR
APPURTENANCES THERETO, INCLUDING CLAIMS OR PENALTIES ARISING FROM
VIOLATION OF ANY LEGAL REQUIREMENT OR INSURANCE REQUIREMENT, AS
WELL AS ANY CLAIM BASED ON ANY PATENT OR LATENT DEFECT, WHETHER
OR NOT DISCOVERABLE BY LENDER, ANY CLAIM THE INSURANCE AS TO
WHICH IS INADEQUATE, AND ANY ENVIRONMENTAL CLAIM, (4) ANY DEFAULT
UNDER THIS MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
FAILURE ON THE PART OF BORROWER TO PERFORM OR COMPLY WITH ANY OF
THE MATERIAL TERMS OF ANY LEASE OR OPERATING AGREEMENT WITHIN THE
APPLICABLE NOTICE OR GRACE PERIODS, (5) ANY PERFORMANCE OF ANY
LABOR OR SERVICES OR THE FURNISHING OF ANY MATERIALS OR OTHER
PROPERTY IN RESPECT OF THE MORTGAGED PROPERTY OR ANY PART
THEREOF, (6) ANY NEGLIGENCE OR TORTIOUS ACT OR OMISSION ON THE
PART OF BORROWER OR ANY OF ITS AGENTS, CONTRACTORS, SERVANTS,
EMPLOYEES, SUBLESSEES, LICENSEES OR INVITEES, (7) ANY CONTEST
<PAGE>
REFERRED TO IN SECTION 7(c) HEREOF, (8) ANY OBLIGATION OR
UNDERTAKING RELATING TO THE PERFORMANCE OR DISCHARGE OF ANY OF
THE TERMS, COVENANTS AND CONDITIONS OF THE LANDLORD CONTAINED IN
THE LEASES OR (9) THE PRESENCE AT, IN OR UNDER THE PROPERTY OR
THE IMPROVEMENTS THEREON OF ANY HAZARDOUS SUBSTANCE IN VIOLATION
OF ANY LEGAL REQUIREMENT. ANY AMOUNTS THE INDEMNIFIED PARTIES ARE
LEGALLY ENTITLED TO RECEIVE UNDER THIS SECTION 37 WHICH ARE NOT
PAID WITHIN TEN (10) BUSINESS DAYS AFTER WRITTEN DEMAND THEREFOR
BY THE INDEMNIFIED PARTIES OR LENDER, SETTING FORTH IN REASONABLE
DETAIL THE AMOUNT OF SUCH DEMAND AND THE BASIS THEREFOR, SHALL
BEAR INTEREST FROM THE DATE OF DEMAND AT THE DEFAULT RATE, AND
SHALL, TOGETHER WITH SUCH INTEREST, BE PART OF THE INDEBTEDNESS
AND SECURED BY THIS MORTGAGE. IN CASE ANY ACTION, SUIT OR
PROCEEDING IS BROUGHT AGAINST THE INDEMNIFIED PARTIES BY REASON
OF ANY SUCH OCCURRENCE, BORROWER SHALL AT BORROWER'S EXPENSE
RESIST AND DEFEND SUCH ACTION, SUIT OR PROCEEDING OR WILL CAUSE
THE SAME TO BE RESISTED AND DEFENDED BY COUNSEL AT BORROWER'S
REASONABLE EXPENSE FOR THE INSURER OF THE LIABILITY OR BY COUNSEL
DESIGNATED BY BORROWER (UNLESS REASONABLY DISAPPROVED BY LENDER
PROMPTLY AFTER LENDER HAS BEEN NOTIFIED OF SUCH COUNSEL);
PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL COMPROMISE THE RIGHT
OF LENDER (OR ANY INDEMNIFIED PARTY) TO APPOINT ITS OWN COUNSEL
AT BORROWER'S EXPENSE FOR ITS DEFENSE WITH RESPECT TO ANY ACTION
WHICH IN ITS REASONABLE OPINION PRESENTS A CONFLICT OR POTENTIAL
CONFLICT BETWEEN LENDER AND BORROWER THAT WOULD MAKE SUCH
SEPARATE REPRESENTATION ADVISABLE; PROVIDED FURTHER THAT IF
LENDER SHALL HAVE APPOINTED SEPARATE COUNSEL PURSUANT TO THE
FOREGOING, BORROWER SHALL NOT BE RESPONSIBLE FOR THE EXPENSE OF
ADDITIONAL SEPARATE COUNSEL OF ANY INDEMNIFIED PARTY UNLESS IN
THE REASONABLE OPINION OF LENDER A CONFLICT OR POTENTIAL CONFLICT
EXISTS BETWEEN SUCH INDEMNIFIED PARTY AND LENDER. SO LONG AS
BORROWER IS RESISTING AND DEFENDING SUCH ACTION, SUIT OR
PROCEEDING AS PROVIDED ABOVE IN A PRUDENT AND COMMERCIALLY
REASONABLE MANNER, LENDER AND THE INDEMNIFIED PARTIES SHALL NOT
BE ENTITLED TO SETTLE SUCH ACTION, SUIT OR PROCEEDING AND CLAIM
THE BENEFIT OF THIS SECTION 37 WITH RESPECT TO SUCH ACTION, SUIT
OR PROCEEDING AND LENDER AGREES THAT IT WILL NOT SETTLE ANY SUCH
ACTION, SUIT OR PROCEEDING WITHOUT THE CONSENT OF BORROWER;
PROVIDED, HOWEVER, THAT IF LENDER REASONABLY DETERMINES THAT
BORROWER IS NOT DILIGENTLY DEFENDING SUCH ACTION, SUIT OR
PROCEEDING IN A PRUDENT AND COMMERCIALLY REASONABLE MANNER AS
PROVIDED ABOVE, AND HAS PROVIDED BORROWER WITH THIRTY (30) DAYS'
PRIOR WRITTEN NOTICE, OR SHORTER PERIOD IF MANDATED BY THE
REQUIREMENTS OF APPLICABLE LAW, AND OPPORTUNITY TO CORRECT SUCH
DETERMINATION, LENDER MAY SETTLE SUCH ACTION, SUIT OR PROCEEDING
SUBJECT ONLY TO BORROWER'S CONSENT WHICH SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED, AND CLAIM THE BENEFIT OF THIS
SECTION 37 WITH RESPECT TO SETTLEMENT OF SUCH ACTION, SUIT OR
PROCEEDING. ANY INDEMNIFIED PARTY WILL GIVE BORROWER PROMPT
NOTICE AFTER SUCH INDEMNIFIED PARTY OBTAINS ACTUAL KNOWLEDGE OF
ANY POTENTIAL CLAIM BY SUCH INDEMNIFIED PARTY FOR INDEMNIFICATION
HEREUNDER.
<PAGE>
38 . Release of Property. (a) If Borrower shall pay or cause
to be paid, the principal of and interest on the Note in full at
maturity or as permitted in accordance with the terms thereof or
hereof and all other Indebtedness payable to Lender hereunder by
Borrower or secured hereby or by the other Loan Documents and all
of the payment Obligations shall have been performed, then this
Mortgage and all the other Loan Documents shall be discharged and
satisfied or assigned (to Borrower or to any other Person at
Borrower's direction and without representation or warranty by,
or recourse to, Lender), at Borrower's option, without warranty
(except that Lender shall be deemed to have represented that such
release and termination or reassignment has been duly authorized
and that it has not assigned or encumbered this Mortgage or the
other Loan Documents), at the expense of Borrower upon its
written request, and, with respect to the Mortgaged Property
located in the State of Georgia, Lender shall cancel and
surrender this Mortgage. Concurrently with such release and
satisfaction or assignment or cancellation and surrender of this
Mortgage and all the other Loan Documents, Lender will return to
Borrower the Note and all insurance policies relating to the
Mortgaged Property which may be held by Lender, any amounts held
in escrow pursuant to this Mortgage or the Cash Collateral
Agreement, if applicable, or otherwise, and any part of the
Mortgaged Property or other Collateral that may be in its
possession and, on the written request and at the expense of
Borrower, will execute and deliver such instruments of
conveyance, assignment and release (including appropriate UCC-3
termination statements) prepared by Borrower and as may
reasonably be requested by Borrower to evidence such release and
satisfaction, or assignment, or cancellation and surrender and
any such instrument, when duly executed by Lender and, if
appropriate, duly recorded by Borrower in the places where this
Mortgage and each other Loan Document is recorded, shall
conclusively evidence the release and satisfaction or assignment
or cancellation and surrender of this Mortgage and the other Loan
Documents.
(b) Notwithstanding anything contained in this Section 38,
Borrower shall be entitled to have one or more Properties
released from the Lien of this Mortgage or may require Lender to
cancel and surrender this Mortgage with respect to one or more of
the Properties, but, in either case, not more than six (6)
Properties, in connection with (A) prior to June 30, 1999 (or
June 30, 2001 if the Maturity Date of the Note is extended to
such date by Lender), payment of an amount equal to one hundred
twenty-five percent (125%) of the Allocated Loan Amount with
respect to the Property to be released together with all accrued
and unpaid interest related to said Allocated Loan Amount or (B)
delivery of Defeasance Collateral, provided that all of the
conditions set forth below have been satisfied:
(i) Lender shall have received from Borrower at least
thirty days' prior written notice of the date proposed
for such release (the "Release Date"), which Release
Date shall be a Payment Date (as defined in the Note);
<PAGE>
(ii) No Event of Default shall have occurred and be
continuing as of the date of such notice and the
Release Date;
(iii)(A) If the Release Date shall be prior to June 30, 1999
(or June 30, 2001 if the Maturity Date of the Note is
extended to such date by Lender), Borrower shall
deliver to Lender funds in an amount equal to one
hundred twenty-five percent (125%) of the Allocated
Loan Amount for the Property to be released or (B) if
the Release Date is after June 30, 1999 (or June 30,
2001 if the Maturity Date of the Note is extended to
such date by Lender), Borrower shall deliver to Lender
(pursuant to and in accordance with the provisions of
Sections 46 and 47 hereof) on the Release Date
Defeasance Collateral in such amount as shall satisfy
the Minimum Defeasance Collateral Requirement with
respect to such Property;
(iv) Borrower shall have delivered to Lender an Officer's
Certificate, dated the Release Date, confirming the
matters referred to in clause (ii) above, certifying
that the provisions of clause (iii) above have been
complied with and certifying that all conditions
precedent for such release contained in this Mortgage
have been complied with;
(v) Borrower, at its sole cost and expense, shall have
delivered to Lender, one or more endorsements to the
Lender policy of title insurance delivered to Lender on
the date hereof in connection with this Mortgage
insuring that, after giving effect to such release, (x)
the Liens created hereby and insured thereunder are
first priority Liens on the respective remaining
Properties subject only to the Permitted Encumbrances
applicable to the remaining Properties and (y) that
such policy is in full force and effect and unaffected
by such release;
(vi) The Debt Service Coverage Ratio with respect to the
remaining Properties would be not less than 1.60:1;
(vii)The Loan to Value Ratio for each of the Properties
that will not be released is less than seventy percent
(70%).
<PAGE>
(viii) Borrower shall deliver written confirmation from the
Rating Agencies that such release will not result in a
downgrade, withdrawal or qualification of the then
current ratings of any securities backed in part by
this Mortgage;
(ix) (as evidenced by appraisals prepared by Independent
Appraisers selected by Lender performed at Borrower's
expense) the fair market value of the Properties that
will remain subject to the lien of this Mortgage as of
the date of the proposed release shall not be less than
the fair market value of such Properties as of the date
of this Mortgage as evidenced by appraisals delivered
to Lender on the Closing Date;
(x) Lender shall have received from Borrower with respect
to the matters referred to in clause (vi), (x)
statements of the Net Operating Income and Debt Service
(both on a consolidated basis and separately for the
applicable Property(ies) to be released) for the
applicable measuring period, and (y) based on the
foregoing statements of Net Operating Income and Debt
Service, calculations of the Debt Service Coverage
Ratio both with and without giving effect to the
proposed release, and (z) calculations of the ratios
referred to in such clause (vi), accompanied by an
Officers' Certificate stating that such statements,
calculations and information are true, correct, and
complete in all material respects.
(d) Upon or after the delivery of Payment of one hundred
twenty-five percent (125%) of the Allocated Loan Payment or Defeasance
Collateral in accordance with Section 38(b) (iii) and Section
46(b)(iii) hereof and, if Borrower is required to deliver Defeasance
Collateral, the satisfaction of all other conditions provided for
herein in Sections 46 and 47, Lender shall effectuate the following
(hereinafter referred to as a "Property Release"): the security
interest of Lender in this Mortgage and the other Loan Documents
relating to the released Property shall be split, severed and released
from the Lien of this Mortgage and Lender will execute and deliver any
agreements reasonably requested by Borrower to release and terminate
or reassign, at Borrower's option, this Mortgage as to the released
Property; provided, that such release and termination or reassignment
shall be without recourse to Lender and such documents shall be in
form and substance acceptable to Lender in its sole and absolute
discretion; and without any representation or warranty and Lender
shall return the originals of any Loan Documents that relate solely to
the released Property to Borrower; provided, further, that upon the
release and termination or reassignment of Lender's security interest
<PAGE>
in this Mortgage relating to the released Property all references
herein to this Mortgage relating to the released Property shall be
deemed deleted, except as otherwise provided herein with respect to
indemnities.
39 . Rating Agency Monitoring. Until the Obligations are paid in
full, Borrower shall provide the Rating Agencies with all financial
reports required hereunder and such other information as it shall
reasonably request, including copies of any notices delivered to and
received from Lender hereunder, to enable it to continuously monitor
the creditworthiness of Borrower and to permit an annual surveillance
of the implied credit rating of certain securities secured by a pledge
of the Note; provided, however, such information shall be provided to
the Rating Agencies to the extent such information is readily
available to Borrower in the ordinary course of business and would not
result in additional expense to Borrower.
40. Environmental Matters.
(a) Representations. Borrower hereby represents and warrants
that, (i) Borrower has not engaged in or knowingly permitted any
operations or activities upon, or any use or occupancy of the
Property, or any portion thereof, for the purpose of or in any way
involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of any
Hazardous Substances on, under, in or about the Property, or
transported any Hazardous Substances to, from or across the Property,
except in all cases in material compliance with Environmental
Requirements and only in the course of legitimate business operations
by Borrower and use and occupancy by Tenants at the Property; (ii)
except as disclosed in Environmental Reports delivered to Lender on or
prior to the date hereof, to Borrower's knowledge, no tenant, occupant
or user of any Property, nor any other person, has during Borrower's
ownership of such Property, engaged in or permitted any operations or
activities upon, or any use or occupancy of the Property, or any
portion thereof, for the purpose of or in any material way involving
the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any Hazardous
Substances on, in or about the Property, or transported any Hazardous
Substances to, from or across the Property, except in all cases in
material compliance with Environmental Requirements and only in the
course of legitimate business operations at the Property; (iii) except
as disclosed in Environmental Reports delivered to Lender on or prior
to the date hereof, to Borrower's knowledge, no Hazardous Substances
are presently constructed, deposited, stored, or otherwise located on,
under, in or about any Property except in material compliance with
Environmental Requirements; (iv) to Borrower's knowledge, no Hazardous
Substances have migrated from the Property upon or beneath other
properties which would reasonably be expected to result in material
liability for Borrower; and (v) to Borrower's knowledge, no Hazardous
Substances have migrated or threaten to migrate from other properties
upon, about or beneath any Property which would reasonably be expected
to result in material liability for Borrower.
<PAGE>
(b) Covenants. Subject to Borrower's right to contest under
Section 7(c) hereof, Borrower covenants and agrees with Lender that it
shall comply with all Environmental Laws in all material respects. If
at any time during the continuance of the Lien of this Mortgage, a
Governmental Authority having jurisdiction over the Mortgaged Property
requires remedial action to correct the presence of Hazardous
Materials in, around, or under any Property (an "Environmental
Event"), Borrower shall deliver prompt notice of the occurrence of
such Environmental Event to Lender. Within (30) thirty days after
Borrower has knowledge of the occurrence of an Environmental Event,
Borrower shall deliver to Lender an Officer's Certificate (an
"Environmental Certificate") explaining the Environmental Event in
reasonable detail and setting forth the proposed remedial action, if
any.
(c) ENVIRONMENTAL INDEMNIFICATION. SUBJECT TO SECTION 33 OF THIS
MORTGAGE, BORROWER SHALL PROTECT, INDEMNIFY, SAVE, DEFEND, AND HOLD
HARMLESS LENDER, ITS SUBSIDIARIES, AFFILIATES AND ALL OFFICERS,
DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES, AGENTS, SUCCESSORS AND
ASSIGNS THEREOF (COLLECTIVELY, THE "INDEMNIFIED ENVIRONMENTAL
PARTIES") FROM AND AGAINST ANY AND ALL LIABILITY, LOSS, DAMAGE,
ACTIONS, CAUSES OF ACTION, COSTS OR EXPENSES WHATSOEVER (INCLUDING
REASONABLE ATTORNEYS' FEES AND EXPENSES) AND ANY AND ALL CLAIMS, SUITS
AND JUDGMENTS WHICH ANY INDEMNIFIED ENVIRONMENTAL PARTY MAY SUFFER, AS
A RESULT OF OR WITH RESPECT TO: (A) ANY ENVIRONMENTAL CLAIM RELATING
TO OR ARISING FROM SUCH PROPERTY; (B) THE VIOLATION OF ANY
ENVIRONMENTAL LAW IN CONNECTION WITH SUCH PROPERTY; (C) ANY RELEASE,
SPILL, OR THE PRESENCE OF ANY HAZARDOUS SUBSTANCES AFFECTING SUCH
PROPERTY; AND (D) THE PRESENCE AT, IN, ON OR UNDER, OR THE RELEASE,
ESCAPE, SEEPAGE, LEAKAGE, DISCHARGE OR MIGRATION AT OR FROM, SUCH
PROPERTY OF ANY HAZARDOUS SUBSTANCES, WHETHER OR NOT SUCH CONDITION
WAS KNOWN OR UNKNOWN TO BORROWER PROVIDED THAT, IN EACH CASE, BORROWER
MAY BE RELIEVED OF ITS OBLIGATION UNDER THIS SUBSECTION IF ANY OF THE
MATTERS REFERRED TO IN CLAUSES (A) THROUGH (D) ABOVE DID NOT OCCUR
(BUT NEED NOT HAVE BEEN DISCOVERED) PRIOR TO THE EARLIEST OF (1) THE
FORECLOSURE OF THIS MORTGAGE WITH RESPECT TO SUCH PROPERTY, (2) THE
DELIVERY BY BORROWER TO LENDER OR A THIRD PARTY OF A DEED-IN-LIEU OF
FORECLOSURE WITH RESPECT TO SUCH PROPERTY, OR (3) LENDER'S TAKING
POSSESSION AND CONTROL OF SUCH PROPERTY AFTER THE OCCURRENCE OF AN
EVENT OF DEFAULT HEREUNDER AND SUCH OBLIGATION IS A RESULT OF THE ACTS
OR OMISSIONS OF ANY INDEMNIFIED PARTY. IF ANY SUCH ACTION OR OTHER
PROCEEDING SHALL BE BROUGHT AGAINST LENDER, UPON WRITTEN NOTICE FROM
BORROWER TO LENDER (GIVEN REASONABLY PROMPTLY FOLLOWING LENDER'S
NOTICE TO BORROWER OF SUCH ACTION OR PROCEEDING), BORROWER SHALL BE
ENTITLED TO ASSUME THE DEFENSE THEREOF, AT BORROWER'S EXPENSE, WITH
COUNSEL REASONABLY ACCEPTABLE TO LENDER; PROVIDED, HOWEVER, LENDER
MAY, AT ITS OWN EXPENSE, RETAIN SEPARATE COUNSEL TO PARTICIPATE IN
SUCH DEFENSE, BUT SUCH PARTICIPATION SHALL NOT BE DEEMED TO GIVE
LENDER A RIGHT TO CONTROL SUCH DEFENSE, WHICH RIGHT BORROWER EXPRESSLY
RETAINS. NOTWITHSTANDING THE FOREGOING, EACH INDEMNIFIED ENVIRONMENTAL
PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL AT BORROWER'S
EXPENSE IF, IN THE REASONABLE OPINION OF LEGAL COUNSEL, A CONFLICT OR
<PAGE>
POTENTIAL CONFLICT EXISTS BETWEEN THE INDEMNIFIED ENVIRONMENTAL PARTY
AND BORROWER THAT WOULD MAKE SUCH SEPARATE REPRESENTATION ADVISABLE.
<PAGE>
41 . Recourse Nature of Certain Indemnifications. Notwithstanding
anything to the contrary provided in this Mortgage or in any other
Loan Document, the indemnification provided in Section 40(c) hereof
shall be fully recourse to Borrower (but not to (i) any Affiliate of
Borrower, (ii) any Person owning directly or indirectly, any legal or
beneficial interest in Borrower or any Affiliate of Borrower, and
(iii) any partner, principal, officer, controlling person,
beneficiary, trustee, advisor, shareholder, employee, agent, Affiliate
or director of Borrower or of any Persons described in clauses (i)
through (ii) above) and shall be independent of, and shall survive,
the discharge of the Indebtedness, the release of the Lien created
under this Mortgage, the cancellation and surrender of this Mortgage
and/or the conveyance of title to any Property to Lender or any
purchaser or designee in connection with a foreclosure of this
Mortgage or conveyance in lieu of foreclosure.
42 . Counterparts. This Mortgage may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all
of which together shall constitute one and the same instrument.
43 . Merger, Conversion, Consolidation or Succession to Business
of Lender. Any corporation into which Lender may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which Lender
shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of Lender, shall be the
successor of Lender hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
Lender shall provide the Rating Agencies with written notice of any
merger or conversion to be undertaken pursuant to this Section 43 no
less than thirty (30) days' prior to such merger or conversion.
44 . No Endorsement. Lender shall not become or be considered to
be an endorser, co-maker or co-obligor on any Note or on any
obligation of Borrower secured by this Mortgage or otherwise.
45 . Intentionally Omitted.
46 . Defeasance.
<PAGE>
(a) With respect to a release of the Lien of this Mortgage
pursuant to Section 38(b) hereof where the payment of Defeasance
Collateral is required pursuant to Section 38(c)(iii), other than in
connection with a total repayment on the Maturity Date (each, a
"Defeasance"), the Borrower shall deposit Defeasance Collateral in
accordance with subsection (b) below to the Defeasance Collateral
Account. In no event shall the deliverance of Defeasance Collateral
cause the Borrower to be released from its obligations to make
payments of principal and interest on the Note.
(b) The Defeasance shall be permitted at such time as all of the
following events shall have occurred:
(i) during the Extension Term (as hereinafter defined), the
Defeasance shall occur after any lockout period provided for
during such Extension Term;
(ii) the Defeasance Collateral Account shall have been
established pursuant to Section 47 hereof;
(iii) Borrower shall have delivered or caused to have been
delivered to Lender the Defeasance Collateral for deposit into
the Defeasance Collateral Account such that it will satisfy the
Total Defeasance Collateral Requirement with respect to a release
of the Properties at the time of delivery and all such Defeasance
Collateral, if in registered form, shall be registered in the
name of Lender or its nominee (and, if registered in nominee name
endorsed to Lender or in blank) and, if issued in book-entry
form, the name of Lender or its nominee shall appear as the owner
of such securities on the books of the Federal Reserve Bank or
other party maintaining such book-entry system;
(iv) Borrower shall have granted or caused to have been
granted to Lender a valid perfected first priority security
interest in the Defeasance Collateral and all proceeds thereof;
(v) Borrower shall have delivered or caused to be delivered
to Lender an Officers' Certificate, dated as of the date of such
delivery (x) that sets forth the aggregate face amount or unpaid
principal amount, interest rate and maturity of all such
Defeasance Collateral, a copy of the transaction journal, if any,
or such other notification, if any, published by or on behalf of
the Federal Reserve Bank or other party maintaining a book-entry
system advising that Lender or its nominee is the owner of such
securities issued in book-entry form, and (y) to the following
effect that states that:
<PAGE>
(A) Borrower owns the Defeasance Collateral being
delivered to Lender free and clear of any and all Liens,
security interests or other encumbrances, and has not
assigned any interest or participation therein (or, if any
such interest or participation has been assigned, it has
been released), and Borrower has full power and authority to
pledge such Defeasance Collateral to Lender;
(B) such Defeasance Collateral consists solely of
Defeasance Eligible Investments;
(C) such Defeasance Collateral satisfies the Total
Defeasance Collateral Requirement, or the Minimum Defeasance
Collateral Requirement (for a Partial Release), as the case
may be, determined as of the date of delivery;
(D) the Defeasance contemplated hereby will not give
rise to an Event of Default; and
(E) the information set forth in the schedule attached
to such Officers' Certificate is correct and complete as of
the date of delivery (such schedule, which shall be attached
to and form a part of such Officers' Certificate, shall
demonstrate satisfaction of the requirement set forth in
clause (C) above, in a form reasonably acceptable to
Lender);
(vi) Borrower shall have delivered or caused to be delivered
to Lender (A) the Required Opinion with respect to Lender's
interest in such Defeasance Collateral, (B) a Tax Opinion, (C) if
the Mortgage Loan at such time is included in a REMIC, a
Nondisqualification Opinion, and (D) an additional Opinion of
Counsel, to the effect that Lender will not be required to be
registered under the Investment Company Act as a result of such
Defeasance, and (E) an Opinion of Counsel that Lender has been
granted a first priority perfected security interest in the
Defeasance Collateral;
(vii) Borrower shall have delivered or caused to be
delivered to Lender a certificate, acceptable to Lender, from an
independent certified public accountant confirming that Borrower
has satisfied the provisions of this Section 46(b);
(viii) Lender shall have received from each of the Rating
Agencies written affirmation that the current credit ratings of
the securities secured by a pledge of the Note immediately prior
to such defeasance will not be qualified, downgraded or withdrawn
as a result of such defeasance, which affirmation may be granted
or withheld in the Rating Agencies' sole and absolute discretion;
and
<PAGE>
(ix) Borrower shall have delivered or caused to be delivered to
Lender such other documents and certificates as Lender may reasonably
request in connection with demonstrating that Borrower has satisfied
the provisions of this Section 46(b).
(c) For purposes of determining whether sufficient amounts are on
deposit in the Defeasance Collateral Account, there shall be included
only payments of principal and predetermined and certain income
thereon (determined without regard to any reinvestment of such
amounts) that will occur on a stated date for a stated payment on or
before the dates when such amounts may be required to be applied to
pay the principal and interest when due on the Note, together with the
outstanding principal balance of the Note as of such date.
<PAGE>
47 . Defeasance Collateral Account.
(a) On or before the date on which Borrower delivers Defeasance
Collateral to Lender pursuant to Section 6 or 46 hereof, Borrower
shall open at any Approved Bank or Banks at the time and acting as
custodian for Lender, a defeasance collateral account (the "Defeasance
Collateral Account") which shall at all times be an Eligible Account
(as defined in the Cash Collateral Agreement), in which Borrower shall
grant to Lender or reconfirm the grant to Lender of a security
interest as part of the Mortgaged Property hereunder. Should Borrower
open the Defeasance Collateral Account at a bank or banks other than
an Approved Bank, such Defeasance Collateral Account must be
maintained as a segregated trust account. The Defeasance Collateral
Account shall contain (i) all Defeasance Collateral delivered by
Borrower pursuant to Sections 38, 46 and 47 hereof, (ii) all payments
received on Defeasance Collateral held in the Defeasance Collateral
Account and (iii) all income or other gains from investment of moneys
or other property deposited in the Defeasance Collateral Account,
provided, however, that (x) any sums earned on any Defeasance
Collateral, which sums were not included in the determination of the
Total Defeasance Collateral, shall be paid monthly by Lender to
Borrower and (y) any sums earned on any Defeasance Collateral
representing the difference between the assumed interest on the Note
at the Default Rate and the lesser, if applicable, of the actual
interest on the Note for the quarter prior to the preceding Due Date
shall be paid quarterly to the Borrower. All such amounts, including
all income from the investment or reinvestment thereof, shall be held
by Lender as part of the Mortgaged Property, subject to withdrawal by
Lender for the purposes set forth in this Section 47. Borrower shall
be the owner of the Defeasance Collateral Account and shall report all
income accrued on Defeasance Collateral for federal, state and local
income tax purposes in its income tax return.
<PAGE>
(b) Lender shall withdraw, draw on or collect and apply the
amounts that are on deposit in the Defeasance Collateral Account to
pay when due the principal and all installments of interest and
principal on the Note and other amounts due under the Loan Documents.
(c) Funds and other property in the Defeasance Collateral Account
shall not be commingled with any other monies or property of Borrower
or any Affiliate of Borrower.
(d) Lender shall not in any way be held liable by reason of any
insufficiency in the Defeasance Collateral Account.
48 . [Intentionally Omitted]
49 . Liability of Lender. Lender shall not be liable for any
error of judgment or act done by Lender in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except
for Lender's gross negligence or willful misconduct. Lender shall have
the right to rely on any instrument, document or signature authorizing
or supporting any action taken or proposed to be taken by him
hereunder, believed by him in good faith to be genuine. All monies
received by Lender shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received, and shall
be segregated from all other monies, and Lender shall be under no
liability for interest on any monies received by him hereunder.
Borrower will reimburse Lender for, and indemnify and save him
harmless against, any and all liability and expenses which may be
incurred by him in the performance of his duties hereunder.
50 . Lender and Trustee. This Section 50 shall be applicable to
all Deed of Trust States.
(a) The Trustees accept the trusts hereby created and agree to
perform the duties herein required of them upon the terms and
conditions hereof.
The duties and obligations of the Trustees in respect of this
Mortgage shall be as set forth in this Section 50.
(i) Except upon the occurrence and during the continuance of
an Event of Default actually known to Lender:
<PAGE>
(1) The Trustees shall undertake to perform such duties
and obligations and only such duties and obligations as are
specifically set forth in this Mortgage and the other Loan
Documents or as otherwise directed by a letter of direction
from Lender, and no implied covenants or obligations shall
be read into this Mortgage or the other Loan Documents
against the Trustees; and
(2) In the absence of bad faith, the Trustees may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustees and
conforming to the requirements of this Mortgage and the
other Loan Documents; but in the case of any such
certificates or opinions which by any provision hereof or
thereof are specifically required to be furnished to Lender,
the Trustees shall be under a duty to examine the same to
determine whether or not they conform to the requirements of
this Mortgage and the other Loan Documents.
<PAGE>
(ii) In case an Event of Default known to Lender has
occurred and is continuing, the Trustees shall exercise the
rights and powers vested in the Trustees by this Mortgage and the
other Loan Documents, with reasonable care.
(iii) No provision of this Mortgage shall be construed to
relieve the Trustees from liability for their own negligence or
willful misconduct, except that:
(1) Section 50(a) hereof shall not be construed to
limit the effect of Section 50(b) hereof;
(2) The Trustees shall not be liable for any error of
judgment made in good faith by an officer of the Trustees,
unless it shall be proved that the Trustees were negligent
in ascertaining the pertinent facts; and
(3) The Trustees shall not be liable with respect to
any action taken or omitted to be taken in good faith in
accordance with the direction of Lender relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustees, or exercising any trust or
power conferred upon the Trustees under this Mortgage.
(iv) Whether or not therein expressly so provided, every
provision of this Mortgage relating to the conduct or affecting
the liability of or affording protection to the Trustees shall be
subject to the provisions of this Section 50(a).
(v) No provision of this Mortgage shall require the Trustees
to expend or risk their own funds or otherwise incur any personal
financial liability in the performance of any of their duties
hereunder, or in the exercise of any of their rights or powers,
if they shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to them.
<PAGE>
(b) At any time or times for the purpose of meeting the Legal
Requirements of any jurisdiction in which any part of a Property may
at the time be located, Lender shall have the power to appoint and,
upon the written request of Lender, Borrower shall for such purpose
join with Lender in the execution, delivery and performance of all
instruments and agreements reasonably necessary or proper to appoint
one or more Persons reasonably approved by Lender to act as trustee
pursuant to this Mortgage in such jurisdiction for such portion of the
Property located in such jurisdiction (the "Jurisdictional Trustee")
with such powers as are provided in the instrument of appointment
which shall expressly designate the Property affected and the capacity
of the appointee as a Jurisdictional Trustee, and to vest in such
Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other
provisions of this Section 50; provided, however, that no instrument
or document shall be signed on Borrower's behalf or required of
Borrower that expressly creates personal liability on the part of
Borrower or requires Borrower to expend any funds. If Borrower does
not join in such appointment within fifteen (15) days after the
receipt by it of a request so to do, or in case an Event of Default
has occurred and is continuing, Lender alone shall make such
appointment; provided, however, that no instrument or document shall
be signed on Borrower's behalf or required of Borrower that expressly
creates personal liability on the part of Borrower or requires
Borrower to expend any funds. Should any written instrument from
Borrower be reasonably required by any Jurisdictional Trustee so
appointed for more fully confirming to such Jurisdictional Trustee
such property, title, right or power, any and all such instruments
shall, on request, be executed, acknowledged and delivered by
Borrower; provided, however, that no instrument or document shall be
signed on Borrower's behalf or required of Borrower that expressly
creates personal liability on the part of Borrower or requires
Borrower to expend any funds.
(i) Every Jurisdictional Trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject
to the terms set forth in Section 50(b)(iii) hereof.
(ii) As of the date hereof (i) Alexander title Agency, Inc.,
a Virginia Corporation, is hereby appointed Jurisdictional
Trustee with respect to the Maryland and Virginia Properties;
(ii) Chicago Title Insurance Company, a Missouri Corporation, is
hereby appointed Jurisdictional Trustee with respect to the North
Carolina properties; and (iii) Joseph B. Pitt, Jr., Trustee, a
resident of Davidson County, Tennessee, is hereby appointed
Jurisdictional Trustee with respect to the Tennessee properties.
(iii) To the extent permitted by law, but to such extent
only, the Jurisdictional Trustee is appointed herein subject to
the following terms, namely:
(1) Subject to the terms hereof and to the extent
permitted by law, all rights, powers, duties and obligations
under this Mortgage granted to or imposed upon Lender and
the Jurisdictional Trustee shall be exercised solely by
Lender.
(2) The rights, powers, duties and obligations hereby
conferred or imposed upon Lender and the Jurisdictional
Trustee in respect of any Property covered by such
appointment shall be exercised or performed by Lender
separately, or at the election of Lender by Lender and the
Jurisdictional Trustee jointly, except to the extent that
(i) under any law of any jurisdiction in which any
particular act is to be performed by Lender and/or the
Jurisdictional Trustee, Lender shall be incompetent or
unqualified to perform such act or (ii) Lender shall deem it
inconvenient or undesirable to perform such act, then in any
such event such rights, powers, duties and obligations shall
be exercised and performed by the Jurisdictional Trustee at
the written direction of Lender.
(3) Lender at any time, by an instrument in writing
executed by it, may accept the resignation of or remove any
Jurisdictional Trustee. Upon the written request of Lender,
Borrower shall join with Lender in the execution, delivery
and performance of all instruments and agreements reasonably
necessary or proper to effectuate such resignation or
removal; provided that Borrower shall not be required to
incur personal liability as a direct result thereof. A
successor to the Jurisdictional Trustee so resigned or
removed may be appointed in the manner provided in this
Section 50.
(4) Subject to compliance with the laws of the State in
which the Property is located, upon the resignation or
removal of any Jurisdictional Trustee, Lender shall have the
power to appoint and, upon the written request of Lender,
Borrower shall, for such purpose and provided that Borrower
shall not incur any personal liability as a direct result
thereof, join with Lender in the execution, delivery and
performance of all instruments and agreements reasonably
necessary or proper to appoint one or more Persons
reasonably approved by Lender to act as successor
Jurisdictional Trustee together with Lender of all or any
part of the Trust Estate so designated, with such power as
provided for in this Section 50, and to vest in such Person
or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the
other provisions of this Section 50. If Borrower does not
join in such appointment, within fifteen (15) days after the
receipt by it of a request so to do, or in case an Event of
Default has occurred and is continuing, Lender acting alone
shall make such appointment. Should any written instrument
from Borrower be required by any successor Jurisdictional
Trustee so appointed for more fully confirming to such
trustee such property, title, right or power, any and all
such instruments shall, on request, be executed,
acknowledged and delivered by Borrower; provided that
Borrower shall not be required to incur personal liability
as a direct result thereof.
<PAGE>
(5) No Jurisdictional Trustee hereunder shall be
personally liable by reason of any act or omission of Lender
or any other trustee hereunder and Lender shall not be
personally liable by reason of any act or omission of the
Jurisdictional Trustee; neither shall knowledge of Lender be
imputed to the Jurisdictional Trustee nor shall knowledge of
the Jurisdictional Trustee be imputed to Lender.
(6) Any notice delivered to Lender shall be deemed to
have been sufficiently delivered without any delivery to the
Jurisdictional Trustee.
(7) Any obligation of Borrower to file or give notices,
reports or information to Lender hereunder shall be
satisfied by the delivery thereof to Lender.
(8) Any successor to the Jurisdictional Trustee
(herein, called the "Successor Jurisdictional Trustee")
shall execute, acknowledge and deliver to its predecessor
(herein called the "Predecessor Jurisdictional Trustee"),
Lender and Borrower, an instrument accepting such
appointment. Thereupon, the Successor Jurisdictional Trustee
shall, without any further act, deed or conveyance, become
vested with the estates, properties, rights, powers, duties
and trusts of the Predecessor Jurisdictional Trustee in the
trusts created by this Mortgage, with the same effect as if
originally named as Jurisdictional Trustee. At the written
request of Borrower, Lender or the Successor Jurisdictional
Trustee, the Predecessor Jurisdictional Trustee shall
execute and deliver an instrument, in recordable form,
transferring to the Successor Jurisdictional Trustee, upon
the trusts herein expressed, the Trust Estate and shall duly
assign transfer, deliver and pay over to the Successor
Jurisdictional Trustee, any property and money subject to
the Lien hereof held by it. If any written instrument from
Borrower or Lender be required by the Successor
Jurisdictional Trustee for more fully and certainly vesting
in and confirming to the Successor Jurisdictional Trustee
such estates, properties, rights, powers and trusts, then,
at the request of the Successor Jurisdictional Trustee, all
such instruments shall be made, executed, acknowledged and
delivered by Borrower or Lender to the Successor
Jurisdictional Trustee, provided that Borrower shall not be
required to incur any personal liability as a direct result
thereof.
(c) Borrower covenants and agrees:
<PAGE>
(i) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder;
(ii) to reimburse each of Lender (subject to Section 18) and
the Trustees upon request for all reasonable expenses,
disbursements and advances incurred or made by it or them in
accordance with any provision of this Mortgage (including
reasonable compensation, expenses and disbursements of agents and
counsel), except any such expense, disbursement or advance as may
be attributable to its negligence or bad faith; and
(iii) subject to Section 33, to indemnify the Trustees for,
and to hold each harmless against, any loss, liability or expense
incurred without negligence, willful misconduct or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder or the
enforcement of remedies hereunder including the costs and
expenses of defending against any claim or liability in
connection with the exercise or performance of any of the powers
or duties hereunder or thereunder (except any liability incurred
by Trustee and the Jurisdictional Trustee with negligence,
willful misconduct or bad faith on its or their part).
The obligations of Borrower under this Section 50(c) to compensate or indemnify
the Trustees and to pay or reimburse the Trustees for expenses, disbursements
and advances shall constitute additional Indebtedness hereunder and shall
survive the satisfaction and discharge of this Mortgage and shall be subject to
the limitations of Section 33. When the Trustees or Lender incur expenses or
render services after an occurrence of an Event of Default hereunder, the
expenses and compensation for services are intended to constitute expenses of
administration under any bankruptcy law.
(d) To the extent permitted by law, but to such extent only, the
Individual Trustee is appointed herein by Lender subject to the
following terms, namely:
(i) Subject to the terms hereof and to the extent permitted
by law, all the rights, powers, duties and obligations under this
Mortgage granted to or imposed upon the Individual Trustee shall
be exercised solely by Lender except as herein provided.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Individual Trustee in respect of
any property covered by such appointment shall be exercised or
performed by Lender separately, or at the election of Lender by
Lender and the Individual Trustee jointly, except to the extent
that (i) under any law of any jurisdiction in which any
particular act is to be performed by the Individual Trustee,
Lender shall be incompetent or unqualified to perform such act or
(ii) Lender shall deem it inconvenient or undesirable to perform
such act, then in any such event such rights, powers, duties and
obligations shall be exercised and performed by the Individual
Trustee at the written direction of Lender.
(iii) Lender at any time, by an instrument in writing
executed by it, may accept the resignation of or remove any
Individual Trustee. Upon the written request of Lender, Borrower
shall join with Lender in the execution, delivery and performance
of all instruments and agreements reasonably necessary or proper
to effectuate such resignation or removal, provided that Borrower
shall not be required to incur any personal liability as a direct
result thereof. A successor to the Individual Trustee so resigned
or removed may be appointed in the manner provided in this
Section 50.
(iv) Upon the death, resignation or removal of any
Individual Trustee, Lender shall have power to appoint and, upon
the written request of Lender, Borrower shall, for such purpose
and provided that Borrower shall not incur any personal liability
as a direct result thereof, join with Lender in the execution,
delivery and performance of all instruments and agreements
reasonably necessary or proper to appoint, one or more persons
approved by Lender to act as Successor Individual Trustee
together with Lender of all or any part of the Trust Estate, with
such powers as provided for in this Section 50, and to vest in
such person or persons in the capacity aforesaid, any property,
title, right or power deemed necessary or desirable, subject to
the other provisions of this Section 50. If Borrower does not
join in such appointment, within fifteen (15) days after the
receipt by it of a request so to do, or in case an Event of
Default has occurred and is continuing, Lender acting alone shall
make such appointment, provided that Borrower shall not incur any
personal liability as a direct result thereof.
(v) Should any written instrument from Borrower be
reasonably required by any successor Individual Trustee so
appointed for more fully confirming to such trustee such
property, title, right or power, any and all such instruments
shall, on request, be executed, acknowledged and delivered by
Borrower, provided that Borrower shall not incur any personal
liability as a direct result thereof.
(vi) No Individual Trustee hereunder shall be personally
liable by reason of any act or omission of Lender or any other
Trustee hereunder and Lender shall not be personally liable by
reason of any act or omission of the Individual Trustee; neither
shall knowledge of Lender be imputed to the Individual Trustee
nor shall knowledge of the Individual Trustee be imputed to
Lender.
(vii) Any notice delivered to Lender shall be deemed to have
been sufficiently delivered without any delivery to the
Individual Trustee.
(viii) Any obligation of Borrower to file or give notices,
reports or information to the Trustees hereunder shall be
satisfied by the delivery thereof to Lender.
Any successor to the Individual Trustee (herein, in this
subsection called the "Successor Individual Trustee") shall execute, acknowledge
and deliver to his predecessor (herein, in this subsection, called the
"Predecessor Individual Trustee"), Lender and Borrower, an instrument accepting
such appointment. Thereupon, the Successor Individual Trustee shall, without any
further act, deed or conveyance, become vested with the estates, properties,
rights, powers, duties and trusts of the Predecessor Individual Trustee in the
trusts created by this Mortgage, with the same effect as if originally named as
Individual Trustee. At the written request of Borrower, Lender or the Successor
Individual Trustee, the Predecessor Individual Trustee shall execute and deliver
an instrument transferring to the Successor Individual Trustee, upon the trusts
herein expressed, the Trust Estate and shall duly assign, transfer, deliver and
pay over to the Successor Individual Trustee, any property and money subject to
the Lien hereof held by him. If any written instrument from Borrower or Lender
be reasonably required by the Successor Individual Trustee for more fully and
certainly vesting in and confirming to the Successor Individual Trustee such
estates, properties, rights, powers and trusts, then, at the request of the
Successor Individual Trustee, all such instruments shall be made, executed,
acknowledged and delivered by Borrower (provided that Borrower shall not incur
any personal liability as a direct result thereof) or Lender to the Successor
Individual Trustee.
(e) At any time or times, (i) for the purpose of meeting the
Legal Requirements of any jurisdiction in which any part of a Trust
Estate may at the time be located or (ii) if Lender deems it to be
necessary or desirable for the protection of its interests, Lender
shall have the power to appoint, and upon written request of Lender,
Borrower shall for such purpose join with Lender in the execution,
delivery and performance of all instruments and agreements reasonably
necessary or proper to appoint (; provided, however, that no such
instruments or agreements shall be required of Borrower that expressly
creates personal liability on the part of Borrower or requires
Borrower to expend any funds), one or more Persons approved by Lender
either to act as co-trustee, jointly with Lender, of all or any part
of the Trust Estate, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the
instrument of appointment which shall expressly designate the property
affected and the capacity of the appointee as either a co-trustee or
separate trustee, and to vest in such person or persons in the
capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this
Section 50. If Borrower does not join in such appointment within
fifteen (15) days after the receipt by it of a request so to do, or in
case an Event of Default has occurred and is continuing, Lender alone
shall make such appointment.
<PAGE>
Should any written instrument from Borrower be required by any
co-trustee or separate trustee so appointed for more fully confirming
to such co-trustee or separate trustee such property, title, right or
power, any and all such instruments shall, by request, be executed,
acknowledged and delivered by Borrower (provided that Borrower shall
not incur any personal liability as a direct result thereof).
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the
same terms as hereinabove set forth for the Individual Trustee.
(f) Borrower and Lender intend that the relationship created
under this Mortgage be solely that of mortgagor and mortgagee and
lender and borrower. Nothing herein is intended to create a joint
venture, partnership, tenancy-in-common or joint tenancy relationship
between Borrower and Lender.
51 . As to Property in Florida. Notwithstanding anything to the
contrary elsewhere in this Mortgage, as to any Properties located in
Florida:
(a) Section 50 is deleted in its entirety as to the
Mortgaged Properties located in Florida, and all references to
"Jurisdictional Trustee", "Individual Trustee", "Successor
Trustee", "Co-Trustee" and "Separate Trustee" in this Mortgage
are deleted in their entirety as to the Mortgaged Properties
located in Florida. It is the intention of the parties that this
Mortgage shall be a mortgage and not a deed of trust with respect
to the Mortgaged Properties located in Florida and that the
Lender shall have all of the rights and remedies respectively
granted herein to the above-identified trustee.
(b) This Mortgage secures a portion of the Note made,
executed and delivered in the State of New York, which Note
renews, consolidates, amends and restates in their entirety, the
Original Notes and the Additional Notes in the aggregate original
principal amount of $122,028,471.
(c) The following provision replaces the first sentence of
Section 3 of this Mortgage as to all Florida Properties. The
recourse of Lender to the Properties located in the State of
Florida (the "Florida Properties"), for recovery of principal
under the Note is limited to the aggregate sum of $31,715,515.00,
which is allocated as follows among the Properties in Florida:
<PAGE>
<TABLE>
<CAPTION>
Allocated
Parcel No. Property Name (County) Mortgage Debt
<S> <C> <C>
2 North Airport, Tampa (Hillsborough) $3,278,599
4 Ft. Lauderdale (Broward) $5,125,232
8 Miami Airport (Dade) $6,071,257
9 Southside (Duval) $4,330,185
10 Regency Brandon (Hillsborough) $4,351,157
11 Davie Plantation (Broward) $4,952,824
13 Clearwater (Pinellas) $3,606,261
----------
Total $31,715,515
</TABLE>
Nothing herein shall (a) limit Lender's recourse to such Properties for recovery
of interest, costs or any other amounts other than principal on the Note, (b)
limit Lender's recourse to any other Properties or other collateral for the
obligations secured hereby, or (c) obligate Lender to apply any recoveries under
the obligations secured by this Mortgage (as a result of recourse to any of the
Properties or otherwise) in any particular order.
(d) Compliance with Mortgage Foreclosure Law. In the event
that any provision in this Mortgage shall be inconsistent with
any provision of the statutes or common law of the State of
Florida governing the foreclosure of this Mortgage (collectively,
the "Foreclosure Laws"), the provisions of the Foreclosure Laws
shall take precedence over the provisions of this Mortgage but
shall not invalidate or render unenforceable any other provision
of this Mortgage that can be construed in a manner consistent
with the Foreclosure Laws.
(e) Future Advances. This Mortgage is given to secure not
only existing indebtedness, but also such future advances,
whether such advances are obligatory or are to be made at the
option of the Lender, or otherwise, as are made within twenty
(20) years from the date hereof, to the same extent as if such
future advances were made on the date of the execution of this
Mortgage. The total amount of indebtedness that may be so secured
may decrease or increase from time to time, but the total unpaid
principal balance so secured at one time shall not exceed
$500,000,000, plus interest thereon, and any disbursements made
for the payment of taxes, levies or insurance on the Mortgaged
Property, with interest on such disbursements.
<PAGE>
(f) Renewal, Consolidation, Amendment and Restatement of
Original Mortgage. The Original Note was secured by the Original
Mortgages described on Exhibit "D". The obligations contained in
the Original Note and the Original Mortgages have been renewed,
consolidated, amended and restated in this Mortgage so that
together they shall constitute in law, but one mortgage, a
single, first mortgage upon the Property described in Exhibit
"A-1" through "A-26" securing to Lender the repayment of the
obligations as limited herein. Other than for the lien,
conveyance and grant of the Original Mortgages as consolidated,
amended and restated herein, the terms, representations and
covenants and conditions of the Original Mortgage shall be and
hereby are superseded and replaced by the terms, representations,
covenants and conditions contained herein and the parties certify
that this instrument secures the same indebtedness evidenced and
secured by the Original Mortgage as consolidated, amended and
restated by this Mortgage and secures no further or other
indebtedness.
(g) The reference in Section D of the Granting Clauses to
the Uniform Commercial Code shall be deemed to refer to Florida
Statutes Section 679.313 and Section 679.402, as amended,
respectively. This Mortgage is intended to be a Financing
Statement within the purview of Florida Statute Section 679.402
with respect to the personal property described herein. The
addresses of the Borrower (Debtor) and the Lender (Secured Party)
are herein set forth. This Mortgage is to be filed of record with
the Clerk of the Circuit Court of the County or Counties where
the Mortgaged Property is located.
(h) This Mortgage shall constitute a Security Agreement
within the meaning of the Florida Uniform Commercial Code with
respect to (i) any and all sums at any time on deposit for the
benefit of the Lender or held by the Lender (whether deposited by
or on behalf of the Borrower or anyone else) pursuant to any of
the provisions of the Mortgage and (ii) with respect to any
personal property included in the Granting Clauses of this
Mortgage, and all replacements of such personal property, and the
proceeds thereof. Upon default, without limitation of any other
remedies, the Lender shall have the remedies of a Secured Party
under the Florida Uniform Commercial Code. The Debtor/Borrower
hereby authorizes the Secured Party/Lender to execute, deliver,
file or refile as Secured Party without joinder of the Borrower,
any Financing Statement, Continuation Statement or other
instruments the Lender may reasonably require from time to time
to perfect or renew such security interest under the Uniform
Commercial Code.
(i) This Mortgage shall be deemed to be and shall be
construed as a Mortgage as well as a Security Agreement and
Collateral Assignment of Leases, Rents and Revenues. Each of the
remedies set forth herein, including without limitation the
remedies involving a power of sale or power of attorney with
respect to the Properties located in Florida and the right of
Lender to exercise self-help in connection with the enforcement
of the terms of this Mortgage shall be exercisable if and to the
extent permitted by the laws of the State of Florida in force at
the time of the exercise of such remedies without regard to the
enforceability of such remedies at the time of the execution and
delivery of this Mortgage.
<PAGE>
(j) In any suit to foreclose the lien of this Mortgage there
shall be allowed and included as additional indebtedness hereby
secured in the final judgment decree all expenditures and
expenses which may be paid or incurred by or on behalf of the
Lender for attorneys' and paralegals' fees, appraisers' fees,
outlays for documentary and expert evidence, stenographer
charges, publication costs, costs (which may be estimated as to
items to be expended after entry of the decree) of procuring all
title searches and examinations and policies, and similar date
and assurance with respect to title as Lender may deem reasonably
necessary either to prosecute such suit or to evidence to bidders
at sales which may be had pursuant to such decree the true
condition of the title to or the value of the mortgaged property.
(k) The definition of Environmental Laws in this Mortgage
shall, with respect to the Florida Properties, be deemed to
include the Florida Pollutant Spill Prevention and Control Act,
Chapter 376. Florida Statutes, and the Florida Air and Water
Pollution Control Act, Chapter 403, part I of the Florida
Statutes, together with any and all other environmental laws in
effect from time to time in the State of Florida, as the same may
be hereafter amended or modified.
52. As to Property in Georgia. Notwithstanding anything to the
contrary elsewhere in this Mortgage, as to any Properties located in
Georgia:
(a) The Borrower hereby GRANTS, BARGAINS, SELLS AND CONVEYS
the Mortgaged Property unto the Lender and the successors,
successors-in-title and assigns of the Lender , subject, however,
to the Permitted Encumbrances, TO HAVE AND TO HOLD IN FEE SIMPLE
FOREVER. With respect to the Georgia Property, this instrument is
intended to operate and to be construed as a deed passing fee
simple or leasehold title to the Georgia Property to the Lender,
as well as an assignment of leases and rents and security
agreement, and not as a mortgage and is made under those
provisions of the existing laws of the State of Georgia related
to deeds to secure debt.
Should the Obligations be paid according to the tenor and
effect thereof when the same shall become due and payable, and
should the Borrower perform all covenants herein contained in a
timely manner, then this Mortgage shall be cancelled and
surrendered.
(b) Section 50 is deleted in its entirety as to the
Mortgaged Properties located in Georgia, and all references to
"Jurisdictional Trustee", "Individual Trustee", "Successor
Trustee", "Co-Trustee" and "Separate Trustee" in this Mortgage
are deleted in their entirety as to the Mortgaged Properties
located in Georgia. It is the intention of the parties that this
Mortgage shall be a deed to secure debt and not a deed of trust
with respect to the Mortgaged Properties located in Georgia and
that the Lender shall have all of the rights and remedies
respectively granted herein to the above-identified trustee.
<PAGE>
THE NAMES OF THE DEBTOR AND THE SECURED PARTY, THE MAILING
ADDRESS OF THE SECURED PARTY FROM WHICH INFORMATION CONCERNING
THE SECURITY INTEREST MAY BE OBTAINED AND THE MAILING ADDRESS OF
THE DEBTOR ARE AS DESCRIBED IN EXHIBIT "--" HERETO AND A
STATEMENT INDICATING THE TYPES, OR DESCRIBING THE ITEMS, OF
COLLATERAL IS CONTAINED HEREIN, IN COMPLIANCE WITH THE
REQUIREMENTS OF ARTICLE 9, SECTION 402 OF THE UNIFORM COMMERCIAL
CODE, SECTION 11-9-402 OF THE OFFICIAL CODE OF GEORGIA ANNOTATED
(1982).
(d) Power of Sale.
(i) If an Event of Default shall have occurred, Lender,
at its option, may sell the Mortgaged Property or any part
of the Mortgaged Property at public sale or sales before the
door of the courthouse of the county in which the Mortgaged
Property or any part of the Mortgaged Property is situated,
to the highest bidder for cash, in order to pay the
indebtedness secured hereby and accrued interest thereon and
insurance premiums, liens assessments, taxes and charges,
including utility charges, if any, with accrued interest
thereon and all expenses of the sale and of all proceedings
in connection therewith, including reasonable attorneys'
fees actually incurred, 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. At any such public sale, Lender may execute
and deliver to the purchaser a conveyance of the Mortgaged
Property or any part of the Mortgaged Property in fee
simple, with full warranties of title (or without warranties
if Lender so elect) and to this end, Borrower hereby
constitutes and appoints Lender the agent and
attorney-in-fact of 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, interest, equity and equity of redemption
that Borrower may have in and to the Mortgaged 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 upon Borrower.
The aforesaid power of sale and agency hereby granted are
coupled with an interest and are irrevocable by dissolution,
insolvency or otherwise, are granted as cumulative of the
other remedies provided hereby or by law for collection of
the indebtedness secured hereby and shall not be exhausted
by one exercise thereof but may be exercised until fully
payment of all indebtedness secured hereby. In the event of
any such foreclosure sale by Lender, Borrower shall be
deemed a tenant holding over and shall forthwith deliver
<PAGE>
possession to the purchaser or purchasers at such sale or be
summarily dispossess according to provisions of law
applicable to tenants holding over.
(ii) Lender may adjourn form time to time any sale by
it to be made under or by virtue of this Mortgage by
announcement at the time and place appointed for such sale
or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law,
Lender, without further notice or publication, may make such
sale at the time and place to which the same shall so be
adjourned.
(iii) Upon any sale made under or by virtue of this
paragraph 3 (whether made under the power of sale herein
granted or under or by virtue of judicial proceedings or of
a judgment or decree of foreclosure and sale), Lender may
bid for and acquire the Mortgaged Property or any part
thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the
indebtedness the net sales price after deducting therefrom
the expenses of the sale and the costs of the action and any
other sums which Lender is authorized to deduct under this
Mortgage.
(iv) No recovery of any judgment by Lender and no levy
of an execution under any judgment upon the Mortgaged
Property or upon any other property of Borrower shall affect
in any manner or to any extent the lien and title of this
Mortgage upon the Mortgaged Property or any part thereof, or
any liens, titles, rights, powers or remedies of Lender
hereunder, but such liens, titles, rights, powers and
remedies of Lender shall continue unimpaired as before.
(v) Upon the completion of any sale or sales made by
Lender under or by virtue of this paragraph 52, Lender, or
an officer of any court empowered to do so, shall execute
and deliver to the accepted purchaser or purchasers a good
and sufficient instrument, or good and sufficient
instruments, conveying, assigning and transferring all
estate, right, title and interest in and to the property and
rights sold. Lender is hereby irrevocably appointed the true
and lawful attorney of Borrower, in its name and stead, to
make all necessary conveyances, assignments, transfers and
deliveries of the Mortgaged Property and rights so sold and
for that purpose Lender may execute all necessary
instruments of conveyance, assignment and transfer, and may
substitute one or more persons with like power, Borrower
hereby ratifying and confirming all that its said attorney
or such substitute or substitutes shall lawfully do by
virtue hereof. Any such sale or sales made under or by
virtue of this paragraph 52, whether made unde the power of
sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and
sale, shall operate to divest all the estate, right, title,
interest, claim and demand whatsoever, whether at law or in
equity, of Borrower in and to the properties and rights so
sold, and shall be a perpetual bar both at law and in equity
<PAGE>
against Borrower and against any and all persons claiming or
who may claim the same, or any part thereof from, through or
under Borrower.
(vi) Lender, at its option, is authorized to foreclose
this Mortgage subject to the rights of any tenants of the
Mortgaged Property, and the failure to make any such tenants
parties to any such foreclosure proceedings and to foreclose
their rights will not be, nor be asserted to be by Borrower,
a defense to any proceedings instituted by Lender to collect
the sums secured hereby.
(e) Discontinuance of Proceedings. If Lender shall have
proceeded to invoke any right, remedy or recourse permitted under
the Loan Documents and shall thereafter elect to discontinue or
abandon it for any reason, Lender shall have the unqualified
right to do so and, in such an event, Borrower and Lender shall
be restored to their former positions with respect tot he
Indebtedness, the Obligations, the Loan Documents, the Mortgaged
Property and otherwise, and the rights, remedies, recourses and
powers of Lender shall continue as if the right, remedy or
recourse had never been invoked, but no such discontinuance or
abandonment shall waive any Event of Default which may then exist
or the right of Lender thereafter to exercise any right, remedy
or recourse under the Loan Documents for such Event of Default.
Borrower hereby expressly waives any and all benefits Borrower
may have under O.C.G.A. ss.44-14-85 to claim or assert that the
Indebtedness has been reinstated in accordance with its terms
following the withdrawal of any foreclosure proceedings by
Lender, and acknowledges and agrees that reinstatement shall
occur only upon written agreement of Lender.
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<PAGE>
(f) Borrower's waiver of constitutional rights (to be
initialed by Borrower):
WAIVER OF BORROWER'S RIGHTS. BY EXECUTION OF THIS MORTGAGE AND BY INITIALING
THIS SECTION, BORROWER EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT TO ACCELERATE THE
INDEBTEDNESS EVIDENCED BY THE NOTES AND THE POWER OF ATTORNEY GIVEN HEREIN TO
LENDER TO SELL THE MORTGAGED PROPERTY BY NONJUDICIAL FORECLOSURE UPON DEFAULT BY
BORROWER WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE (EXCEPT AS
OTHERWISE PROVIDED HEREIN); (B) EXCEPT TO THE EXTENT PROVIDED OTHERWISE HEREIN,
WAIVES ANY AND ALL RIGHTS WHICH BORROWER MAY HAVE UNDER THE CONSTITUTION OF THE
UNITED STATES (INCLUDING THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE
VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF
ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE
EXERCISE BY LENDER OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO LENDER; (C)
ACKNOWLEDGES THAT BORROWER HAS READ THIS MORTGAGE AND ITS PROVISIONS HAVE BEEN
EXPLAINED FULLY TO BORROWER AND BORROWER HAS CONSULTED WITH COUNSEL OF
BORROWER'S CHOICE PRIOR TO EXECUTING THIS MORTGAGE; AND (D) ACKNOWLEDGES THAT
ALL WAIVERS OF THE AFORESAID RIGHTS OF BORROWER HAVE BEEN MADE KNOWINGLY,
INTENTIONALLY AND WILLINGLY BY BORROWER AS PART OF A BARGAINED FOR LOAN
TRANSACTION:
INITIALED BY BORROWER:
-------------------------------------
By: __________________________
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<PAGE>
53. As to Property in Maryland. Notwithstanding anything to the
contrary elsewhere in this Mortgage, as to any Properties located in
Maryland:
(a) This Mortgage shall be deemed a deed of trust and not a
mortgage, and title to the Maryland Property shall be deemed to
have been granted and conveyed to the Individual Trustee, in
trust, with the power of sale or assert to decree, and not to the
Lender.
(b) If the Lender elects to declare the entire principal sum
of the obligation secured hereby to be forthwith due and payable
as provided in this Section, the Lender may invoke the power of
sale and any other remedies by applicable law.
(c) Any sale by the Trustee of the Property shall be made in
the county in which the Property is situated. If the Property is
situated in more than one county, then notices as hereinafter
provided shall be given in both or all of such counties, the
Property may be sold in either county, and such notices shall
designate the county where the Property will be sold. If Lender
invokes the power of sale, Lender shall mail or cause Trustee to
mail a notice of sale to Borrower in the manner prescribed by
applicable law. Trustee shall give notice of sale by public
advertisement for the time and in the manner prescribed by
applicable law. Trustee, without demand on Borrower, shall sell
the Property at public auction to the highest bidder at the time
and place and under the terms designated in the notice of sale in
one or more parcels and in any order Trustee determines. Trustee
may postpone sale of all or any parcel of the Property by public
announcement at the time and place of any previously scheduled
sale.
Trustee shall deliver to the purchaser Trustee's deed
conveying the Property without any covenant or warranty,
expressed or implied. The recitals in the Trustee's deed shall be
prima facie evidence of the truth of the statements made therein.
(d) Borrower, in accordance with Rule 14-202 of the Maryland
Rules of Procedure, does hereby declare and assent to the passage
of a decree to sell the Property, in one or more parcels by the
equity court having jurisdiction for the sale of the Property,
and consents to the granting to any trustee appointed by the
assent to decree of all the rights, powers and remedies granted
to the Trustee in this Deed of Trust, together with any and all
rights, powers and remedies granted by the decree. Neither the
assent to decree nor the power of sale granted in this Section 53
shall be exhausted in the event the proceeding is dismissed
before the payment in full of all sums secured by this Deed of
Trust.
(e) The proceeds of any such sale shall be applied in
accordance with applicable law.
<PAGE>
(f) Borrower warrants and represents that the Liabilities
secured by this Mortgage are "commercial loans" within the
meaning of the Commercial Law Article of the Annotated Code of
Maryland.
(g) Notices sent to Trustee in accordance with Section 26
shall be addressed to Trustee at: Alexander Title Agency, Inc.,
7921 Jones Branch Drive, 6th Floor, McLean, Virginia 22102.
54 . Notwithstanding anything to the contrary elsewhere in this
Mortgage, as to any Properties located in North Carolina:
(a) Special Provisions Regarding Future Advances. It is
intended that this Mortgage is and shall be a deed of trust and
shall comply with the provisions of Section 45-67 of the General
Statutes of North Carolina. For purposes of complying with the
provisions of Section 45-68 of said statutes Borrower hereby
represents as follows:
(i) That this Mortgage is given to secure future
Obligations which may be incurred from time to time under
this Mortgage or the Note;
(ii) That the principal amount of present obligations
secured by this Mortgage is $122,028,471;
(iii) That the maximum principal amount, including
present and future obligations, which may be secured by this
Mortgage at any one time is $122,028,471, provided that the
foregoing limitation shall apply only to the lien upon real
property created by this Mortgage and shall not in any
manner limit, affect or impair any grant of a security
interest in any personal property in favor of the Lender,
for the benefit of the Lender, under the provisions of this
Mortgage or the Note or under any other security agreement
at any time executed by the Borrower; and
(iv) The period within which such future Liabilities
may be incurred shall extend up to and include 15 years.
(b) Additional Provisions Regarding Power of Sale.
(i) In exercising the power of sale herein conferred,
after having been instructed by the Lender to do so, the
Trustee shall comply with all applicable laws in effect with
respect to the exercise of powers of sale contained in deeds
of trust as of the date of the commencement of the
proceeding. The Borrower agrees that in the event of a sale
under the power of sale hereunder, the Lender shall have the
<PAGE>
right to bid thereat. The Trustee may require that the
successful bidder at any sale deposit immediately with the
Trustee cash or certified check in an amount not to exceed
ten percent (10%) of the bid, provided notice of such
requirement is contained in the advertisement of sale. The
bid may be rejected if the deposit is not immediately made,
and thereupon the next highest bidder may be declared to be
the purchaser. Such deposit shall be refunded in case a
resale is had; otherwise, it shall be applied to the
purchase price. If personal property is sold hereunder, it
need not be at the place of sale; the published notice,
however, shall state the time and place where such personal
property may be inspected prior to sale.
(ii) Notwithstanding the provisions of Section 20 of
this Mortgage, the proceeds of any sale of the Mortgaged
Property pursuant to the power of sale contained herein
shall be applied first to the costs and expenses of
foreclosure, including, but not limited to a Trustee's
commission and to all costs, expenses and reasonable
attorney's fees incurred by the Lender in connection with
such sale, with the remaining proceeds to be applied as
provided in Section 21 of this Mortgage.
(c) N.C. Gen. Stat. ss. 45-45.1. The provisions of N.C. Gen.
Stat. ss. 45-45.1 and any similar statute enacted in replacement
or substitution thereof shall be inapplicable to this Mortgage.
(d) THIS CONVEYANCE IS MADE IN TRUST, that if Borrower shall
pay and perform or cause to be paid and performed all of the
Obligations in accordance with the terms of the Loan Documents,
and shall comply with all of the term, covenants and conditions
of the Loan Documents, then this conveyance shall be null and
void and may be cancelled of record at the request and cost of
Borrower.
(e) Notices sent to Trustee in accordance with Section 26
shall be addressed to Trustee at: Chicago Title Insurance
Company, One Exchange Plaza, Suite 707, Raleigh, North Carolina
27601.
55. As to Property in Tennessee. Notwithstanding anything to the
contrary elsewhere in this Mortgage, as to any Properties located in
Tennessee:
(a) The maximum principal indebtedness for Tennessee
Recording Tax purposes is $11,345,278.86. This instrument secures
obligatory advances and is for commercial purposes.
<PAGE>
(b) This Mortgage shall be deemed to be and shall be
construed as a deed of trust, enforceable in accordance with the
applicable laws of the State of Tennessee, as well as a
Consolidated, Amended and Restated Mortgage, Deed of Trust, Deed
to Secure Debt, Security Agreement, Financing Statement, Fixture
Filing and Assignment of Leases, Rents and Security Deposits and
reference throughout this instrument to "this Mortgage" shall
mean, as appropriate, this "Deed of Trust, Indenture of Mortgage,
Deed to Secure Debt, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Leases, Rents and Security
Deposits" and this "Deed of Trust" in its capacity as a Tennessee
deed of trust. Nothing herein set forth shall limit the right of
the Trustee to foreclose this Deed of Trust as a deed of trust
under Tennessee law, at the option of Lender.
(c) Additional Provisions. The following provisions shall
also constitute an integral part of this Deed of Trust.
Furthermore, in the event that any prior provisions of this Deed
of Trust conflict with the following provisions of this Section
55, the provisions of this Addendum shall control and shall be
deemed a modification of or amendment to the section or provision
at issue. Reference throughout this Mortgage to "Borrower" shall
mean Trustor, as appropriate.
(i) References to Sections 9-313, 9-402 and 9-501of the
Uniform Commercial Code shall mean TCA 47-9-313, TCA
47-9-402, and TCA 47-9-501, respectively. References to
9-402(f) and 9-501(d) of the Uniform Commercial Code shall
mean TCA 47-9-402(5) and TCA 47-9-501(3), respectively.
(ii) Trustor agrees to pay all transfer taxes,
recording fees, and any other fees required by or imposed by
the State of Tennessee or the county in which the Mortgaged
Property is located in order to record this Deed of Trust in
the Register's Office of said County.
(iii) Any grant or conveyance of property to the Lender
shall, with respect to the properties located in Tennessee,
be made in trust to the Trustee.
(iv) Upon the occurrence of an Event of Default and
upon the election of Lender to effect a trustee's sale of
the Mortgaged Property in lieu of judicial foreclosure, then
Lender may instruct the Trustee to enter and take possession
of the Mortgaged Property, and before or after such entry to
advertise for the sale of the Mortgaged Property for
twenty-one (21) days by three (3) weekly notices in some
newspaper published in the county and state where such
property is situated, and sell the Mortgaged Property or
such portion of the Mortgaged Property not thereafter
released from the liens of this Deed of Trust as one parcel
in its entirety or any part thereof, either in mass or in
parcels, at public vendue, to the highest bidder for cash at
<PAGE>
the usual door of the Courthouse in the county in which the
Mortgaged Property is situated, free from equity of
redemption, and any statutory or common law rights of
redemption, homestead, dower, marital shares, and all other
exemptions, all of which are hereby expressly waived; and
said Trustee shall execute a conveyance to the purchaser in
fee simple and deliver possession to the purchaser, which
Trustor binds itself and its successors and assigns shall be
given without obstruction, hindrance, or delay. Trustee
shall deliver to the purchaser, at any such trustee's sale,
its deed, without warranty, which will convey to the
purchaser of the interest in the property which the Trustor
has or has the power to convey at the time of the execution
of this Deed of Trust, and such as it may have acquired
hereafter. The owners or holders of any part of the
indebtedness hereby secured may become purchasers at any
sale under this conveyance.
(v) The Trustee named herein or any Successor Trustee
shall be clothed with the full power to act when action
herein shall be required and to execute any conveyance of
the Mortgaged Property except as otherwise expressly
required. In the event that the substitution of the Trustee
shall become necessary for any reason, the substitution of
one trustee in the place of the Trustee herein named shall
be sufficient. The necessity of the Trustee herein named, or
any successor in trust, making oath or giving bond is
expressly waived.
The Trustee or anyone acting in his stead, shall have,
in his discretion, authority to employ all proper agents and
attorneys in the execution of this Mortgage and/or in the
conducting of any sale made pursuant to the terms hereof,
and to pay for such services rendered out of the proceeds of
the sale of the Mortgaged Property, should any be realized;
and if no sale be made, then Borrower hereby undertakes and
agrees to pay the cost of such services rendered to said
Trustee.
(d) Owner and Trustee. The owner of the Mortgaged
Property is Homestead Village Limited Partnership with an
office at c/o Homestead Village Incorporated, 2100 RiverEdge
Parkway, Atlanta, Georgia. The Trustee is Joseph B. Pitt,
Jr. with an office in the city of Nashville, Tennessee.
(e) Notices sent to Trustee in accordance with Section
26 shall be addressed to Trustee at: Joseph B. Pitt, Jr.,
Trustee, c/o Chicago Title Insurance Company, 414 Union
Street, Suite 1800, Nashville, Tennessee 37219.
56. As to Property in Virginia. Notwithstanding anything to the
contrary elsewhere in this Mortgage, as to any Properties located in
Virginia:
(a) With respect to the portions of the Mortgaged
Property located in Virginia constituting real property,
this instrument shall be deemed to be and shall be construed
as a Deed of Trust, enforceable in accordance with the
applicable laws of the Commonwealth of Virginia. As to the
remainder of the Mortgaged Property located in Virginia,
<PAGE>
this instrument shall be deemed to be and shall be construed
as a Security Agreement, Financing Statement and/or
Assignment of Rents, as appropriate, and reference
throughout this instrument to "this Mortgage" shall mean, as
appropriate, this Deed of Trust, Security Agreement,
Financing Statement and/or Assignment of Rents and
references herein to "this Deed of Trust" shall mean this
Mortgage in its capacity as a Virginia deed of trust.
(b) NOTICE - THE DEBT SECURED HEREBY IS SUBJECT TO CALL
IN FULL OR THE TERMS HEREOF BEING MODIFIED IN THE EVENT OF
SALE OR CONVEYANCE OF THE PROPERTY CONVEYED
(c) Remedies of Lender. Subject to the provisions of this
Mortgage, upon the occurrence of an Event of Default under the
terms of the Mortgage, in addition to any rights and remedies
provided for in the Mortgage, and to the extent permitted by
applicable law, the following provisions shall apply:
(i) Lender's Power of Enforcement. Beneficiary, with or
without entry, personally or by its agents or attorneys, in
so far as applicable, may pursue any and all remedies
against Grantor and the Mortgaged Property permitted by
applicable law and the provisions of this Deed, including
without limitation causing Trustee to execute the power of
sale granted by this Deed to sell the Mortgaged Property at
public auction to the highest bidder in strict accordance
with all notice, advertisement and other applicable laws of
the Commonwealth of Virginia. Grantor agrees that in
addition to all other remedies and rights provided for in
this Deed, this Deed shall be construed to impose and confer
upon the parties hereto, and Beneficiary hereunder, all
duties, rights and obligations prescribed in Section 55-59
et seq. Of the Code of Virginia and in effect as of the date
of the acknowledgment hereof, and further to incorporate
herein the following provisions, by the short-term
references below, of Sections 55-59 et seq. And 55-60 of the
Code of Virginia:
EXEMPTIONS WAIVED
SUBJECT TO ALL UPON DEFAULT
RENEWAL, EXTENSION OR REINSTATEMENT PERMITTED
ADVERTISEMENT REQUIRED ONCE A WEEK
FOR TWO CONSECUTIVE WEEKS IN A
NEWSPAPER PUBLISHED OR HAVING GENERAL CIRCULATION
<PAGE>
IN THE COUNTY OF
[HENRICO, LOUDEN, FAIRFAX (AS APPLICABLE)], VIRGINIA
SUBSTITUTION OF TRUSTEE PERMITTED.
(ii) Lender's Right to Enter and Take Possession,
Operate and Apply Income. Lender shall, at its option, have
the right, acting through its agents or attorneys, either
with or without process of law, forcibly or otherwise, to
enter upon and take possession of the Mortgaged Property,
expel and remove any persons, goods, or chattels occupying
or upon the same, to collect or receive all the rents,
issues and profits thereof and to manage and control the
same, and to lease the same or any part thereof, from time
to time, and, after deducting all reasonable attorneys' fees
and expenses, and all reasonable expenses incurred in the
protection, care, maintenance, management and operation of
the Mortgaged Property, distribute and apply the remaining
net income in accordance with the terms of this Mortgage or
upon any deficiency decree entered in any foreclosure
proceedings or otherwise established.
(d) Reference to Sections 9-313 and 9-402 of the Uniform
Commercial Code. References to Sections 9-313 and 9-402 of the
Uniform Commercial Code shall mean, if the Mortgaged Property is
located in the State of Virginia, Section 8.9-313 and 8.9-402 of
the Code of Virginia (1950 as amended).
(d) THE VIRGINIA PROPERTY DESCRIBED HEREIN CONSTITUTE SIX OF
SEVERAL PROPERTIES LOCATED IN APPROXIMATELY SIX (6) STATES, ALL
OF WHICH SECURE THE OBLIGATIONS OF BORROWER.
(e) Notices sent to Trustee in accordance with Section 26
shall be addressed to Trustee at: Alexander Title Agency, Inc.,
7921 Jones Branch Drive, 6th Floor, McLean, Virginia 22102
57.Liability of Assignees of Lender. No assignee of Lender (an
"Assignee") shall have any personal liability, directly or indirectly,
under or in connection with this Mortgage or any amendment or
amendments hereto made at any time or times, heretofore or hereafter,
any liability being limited to the assets pledged as security pursuant
to this Mortgage and Borrower hereby forever and irrevocably waives
and releases any and all such personal liability. In addition, no
Assignee shall have at any time or times hereafter any personal
liability, directly or indirectly, under or in connection with or
secured by any agreement, lease, instrument, encumbrance, claim or
right affecting or relating to the Properties or to which the
Properties are now or hereafter will be subject. The limitation of
<PAGE>
liability provided in this Section 57 is (i) in addition to, and not
in limitation of, any limitation of liability applicable to the
assignee provided by law or by any other contract, agreement or
instrument, and (ii) shall not apply to any Assignee's negligence or
willful misconduct.
58. Securitization
(A) Sale of Note and Securitization. At the request of the holder
of the Note and, to the extent not already required to be provided by
Borrower under this Mortgage, Borrower shall use reasonable efforts to
satisfy the market standards to which the holder of the Note
customarily adheres or which may be reasonably required in the
marketplace or by the Rating Agencies in connection with the sale of
the Note or participation therein or the first successful
securitization (such sale and/or securitization, the "Securitization")
of rated single or multi-class securities (the "Securities") secured
by or evidencing ownership interests in the Note and the Mortgage,
including:
(a) at Lender's expense, (i) provide such financial and
other information with respect to the Properties, Borrower and
its Affiliates, the Manager and any Tenants of the Properties,
(ii) provide business plans and budgets relating to the
Properties and (iii) to perform or permit or cause to be
performed or permitted such site inspection, appraisals, market
studies, environmental reviews and reports (phase I's and, if
appropriate, phase II's), engineering reports and other due
diligence investigations of the Properties, as may be reasonably
requested by the holder of the Note or the Rating Agencies or as
may be necessary or appropriate in connection with the
Securitization (the "Provided Information"), together, if
customary, with appropriate verification and/or consents of the
Provided Information through letters of auditors or opinions of
counsel of independent attorneys acceptable to Lender and the
Rating Agencies;
(b) cause counsel to render opinions as to fraudulent
conveyance, and true sale or any other opinion customary in
securitization transactions with respect to the Properties and
Borrower and its Affiliates, including, without limitation, a
Bankruptcy Opinion, to be provided at Lender's expense, and a
10b-5 Opinion, to be provided at the request of Lender, which
counsel and opinions shall be reasonably satisfactory to the
holder of the Note and the Rating Agencies; for the purposes
hereof, (i) "Bankruptcy Opinion" shall mean an opinion to the
effect that if the Borrower or the general partner of the
Borrower were a debtor under the U.S. Bankruptcy Code, a court
would not have valid legal grounds to cause the Borrower to be
substantively consolidated with any other Person and (ii) the
"10b-5 Opinion" shall mean an opinion or other written assurance
of counsel acceptable to Lender and its counsel regarding the
absence of any misstatement of a material fact, or the omission
to state a material fact in any materials, other than financial
information with respect to the Properties or the Loan, provided
<PAGE>
by the Borrower to the Lender in connection with the origination
of the Loan, including without limitation information with
respect to the Mortgage, the Mortgaged Property, the Manager, the
Borrower and other legal aspects of the Mortgage Loan. The 10b-5
Opinion shall be delivered at Lender's expense, provided,
however, that Borrower shall pay all expenses in connection with
the 10b-5 Opinion exceeding $20,000. Borrower's failure to
deliver the opinions required hereby within ten (10) Business
Days shall constitute an "Event of Default" hereunder;
(c) make such representations and warranties as of the
closing date of the Securitization with respect to the
Properties, Borrower, and the Loan Documents as are customarily
provided in securitization transactions and as may be reasonably
requested by the holder of the Note or the Rating Agencies and,
to the extent still true, consistent with the facts covered by
such representations and warranties as they exist on the date
thereof, including the representations and warranties made in the
Loan Documents; and
(d) at Borrower's expense, execute such amendments to the
Loan Documents and Borrower's organizational documents, as may be
reasonably requested by the holder of the Note or the Rating
Agencies or otherwise to effect the Securitization, provided that
nothing contained in this subsection (d) shall result in any
economic change in the transaction, or increase the liability or
obligations, or reduce the rights and benefits, of the Borrower
hereunder.
<PAGE>
(B) Cooperation with Rating Agencies. In the event this Loan
becomes an asset of a securitization underwritten by Lender or any of
its Affiliates, Borrower, prior to such securitization, shall
implement any and all operations and maintenance plans recommended for
asbestos or other environmental matters recommended in any
environmental report and complete all surveys in connection therewith;
provided, however, that nothing contained in this paragraph (B) shall
limit the obligations of Borrower contained in this Mortgage or the
other Loan Documents. In addition, Borrower shall (i) gather any
environmental information required by the Rating Agencies in
connection with such a securitization, (ii) at Lender's request, meet
with representatives of such Rating Agencies to discuss the business
and operations of the Mortgaged Property, and (iii) cooperate with the
requests of the Rating Agencies in connection with all of the
foregoing as well as in connection with all other matters, including,
without limitation, entering into any amendments or modifications to
this Mortgage or to any other Loan Document as may be required by the
Rating Agencies; provided, however, that such amendments or
modifications shall not increase Borrower's obligations or materially
decrease Borrower's rights and benefits under the Loan Documents;
further provided that Borrower shall not be obligated under this
paragraph (B) to expend any of its funds or incur any expense to
comply herewith.
<PAGE>
(C) Securitization Financial Statements. Borrower covenants and
agrees that, upon Lender's written request therefor in connection with
a securitization in which this Mortgage is to be included as an asset,
Borrower shall, at Borrower's sole cost and expense, promptly deliver
the most recent audited financial statements and related documentation
prepared by an independent certified public accountant that satisfy
applicable federal securities law requirements for use in a Public
Registration Statement (which may include up to three (3) years of
historical audited financial statements or for so long as Borrower has
owned a Property). A "Public Registration Statement" shall mean a
registration statement meeting the requirements of Section 5 of the
Securities Act of 1933, as amended.
(D) Borrower understands that certain of the Provided
Information and the information required to be delivered by Borrower
hereunder (the "Required Records") may be included in disclosure
documents in connection with the Securitization, including a
prospectus or private placement memorandum (each, a "Disclosure
Document") and may also be included in filings with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), or the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), or provided or made available to
investors or prospective investors in the Securities, the Rating
Agencies, and service providers relating to the Securitization. In the
event that the Disclosure Document is required to be revised prior to
the sale of all Securities, Borrower will cooperate with the holder of
the Note in updating the Provided Information or Required Reports for
inclusion or summary in the Disclosure Document by providing all
current information pertaining to Borrower and the Properties
necessary to keep the Disclosure Document accurate and complete in all
material respects with respect to such matters. (iii) (iv) In
connection with each of (x) a preliminary and a private placement
memorandum or (y) a preliminary and final prospectus, as applicable,
and provided that Lender, at Lender's cost and expense has provided
Borrower with drafts of such preliminary and final documents, and such
additional information as Borrower shall reasonably require, Borrower
agrees to provide an indemnification certificate:
(A) certifying that Borrower has carefully examined those portions of
such memorandum or prospectus, as applicable, pertaining to
Borrower, the Properties and the Loan including applicable
portions of the sections entitled "Special Considerations",
"Description of the Mortgages", "Description of the Mortgage
Loans and Mortgaged Property", "The Manager", "The Borrower" and
"Certain Legal Aspects of the Mortgage Loan", and such sections
(and any other sections reasonably requested and pertaining to
Borrower, the Properties or the Loan) do not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading;
<PAGE>
(B) indemnifying Lender and the affiliates of Merrill Lynch & Co.
("ML"), that has filed the registration statement relating to the
securitization (the "Registration Statement"), each of its
directors, each of its officers who have signed the Registration
Statement and each person or entity who controls ML within the
meaning of Section 15 of the Securities Act or Section 30 of the
Exchange Act of 1933, as amended (the "Securities Act")
(collectively, the "ML Group"), and ML, each of its directors and
each person who controls ML, within the meaning of Section 15 of
the Securities Act and Section 20 of the Exchange Act
(collectively, the "Underwriter Group") for any losses, claims,
damages or liabilities (the "Liabilities") to which Lender, the
ML Group or the Underwriter Group may become subject insofar as
the Liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the applicable portions of such sections applicable
to Borrower, the Properties or the Loan, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated in the applicable portions of
such sections or necessary in order to make the statements in the
applicable portions of such sections or in light of the
circumstances under which they were made, not misleading; and
(C) agreeing to reimburse Lender and ML for any legal or other
expenses reasonably incurred by Lender and ML in connection with
investigating or defending the Liabilities for which Borrower has
liability to Lender, the ML Group or the Underwriter Group.
Borrower's Liability under clauses (A) or (B) above shall be
limited to Liabilities arising out of or based upon any such
untrue statement or omission made therein in reliance upon and in
conformity with information furnished to Lender by Borrower in
connection with the preparation of those portions of the
memorandum or prospectus pertaining to Borrower, the Properties
or the Loan or in connection with the underwriting of the debt,
including financial statements of Borrower, operating statements,
and rent rolls with respect to the Properties. This indemnity
agreement will be in addition to any liability which Borrower may
otherwise have.
(iii) In connection with filings under the Exchange Act, Borrower
agrees to (i) indemnify Lender, ML Group and the Underwriter Group for
any Liabilities to which Lender, the ML Group or the Underwriter Group
may become subject insofar as the Liabilities arise out of or are
based upon the omission or alleged omission to state in the Provided
Information or Required Records a material fact required to be stated
in the Provided Information or Required Records in order to make the
statements in the Provided Information or Required Records, in light
of the circumstances under which they were made not misleading and
<PAGE>
(ii) reimburse Lender or ML for any reasonable legal or other expenses
reasonably incurred by Lender and ML in connection with defending or
investigating the Liabilities.
(iv) Promptly after receipt by an indemnified party under this
Section 58 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 58, notify the
indemnifying party in writing of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability which the indemnifying party may
have to any indemnified party hereunder except to the extent that
failure to notify causes prejudice to the indemnifying party. In the
event that any action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it
(or they) may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party under this Section 58 for
any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any
such action include both the indemnified party and the indemnifying
party shall have reasonably concluded that there are any legal
defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be
liable for the expenses of more than one separate counsel unless an
indemnified party shall have reasonably concluded that there may be
legal defenses available to it that are different from or additional
to those available to another indemnified party.
(v) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section
58 is for any reason held to be unenforceable by an indemnified party
in respect of any losses, claims, damages or liabilities (or action in
respect thereof) referred to therein which would otherwise be
indemnifiable under Section 58, the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages or liabilities (or action in
respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties
are entitled, the following factors shall be considered: (i) the ML
Group's and Borrower's relative knowledge and access to information
concerning the matter with respect to which claim was asserted; (ii)
the opportunity to correct and prevent any statement or omission; and
<PAGE>
(iii) any other equitable considerations appropriate in the
circumstances. Lender and Borrower hereby agree that it may not be
equitable if the amount of such contribution were determined by pro
rata or per capita allocation. (vi) (i)
(E) Depositor and Registrant. Notwithstanding anything to the contrary
contained herein, Borrower shall have no obligation to act as a depositor
with respect to the Loan or an issuer or registrant with respect to the
securities issued in any Securitization (or be deemed by the Securities and
Exchange Commission to be an issuer, registrant or the functional
equivalent thereof for purposes of the Securities Act).
(F). Retention of Servicer. Lender reserves the right to retain a
servicer to act as its agent hereunder with such powers as are specifically
delegated to the servicer by Lender, whether pursuant to the terms of this
Mortgage, the Cash Collateral Agreement or otherwise, together with such
other powers as are reasonably incidental thereto.
(G) Exculpated Parties. Notwithstanding anything to the contrary
contained in this Section 58, no personal liability shall be asserted or
enforceable against the Exculpated Parties for the Liabilities.
59. Securitization Extension Term. Notwithstanding any other provision
of this Mortgage, the provisions of Section 58 and all requirements of
Borrower to deliver documents or certificates or to seek the consent or
approval any Rating Agency shall only be effect (i) during the
Securitization Extension Term and (ii) from the Anticipated Securitization
Maturity Date until the Final Maturity Date, and shall have no force or
effect prior to the Securitization Extension Term.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed under
seal by Borrower, Trustee and Lender on the date first hereinabove written.
BORROWER:
HOMESTEAD VILLAGE LIMITED PARTNERSHIP,
a Delaware limited partnership
By:HVI INCORPORATED,
a Delaware corporation
By:__________________________________
Name: Laura L. Hamilton
Title: Senior Vice President
Attest:______________________________
Name: J. Michael Dugan
Title: Assistant Secretary
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
- -----------------------------------------------
Witness
- -----------------------------------------------
Witness
<PAGE>
TRUSTEE:
ALEXANDER TITLE AGENCY, INC.,
a Virginia corporation
By:__________________________________
Name:
Title
Attest:______________________________
Name:
Title:
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
- ------------------------------------------------
Witness
- ------------------------------------------------
Witness
<PAGE>
TRUSTEE:
CHICAGO TITLE INSURANCE COMPANY, a Missouri
corporation
By:_______________________________________
Name:
Title
Attest:______________________________
Name:
Title:
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
- ------------------------------------------------
Witness
- ------------------------------------------------
Witness
<PAGE>
TRUSTEE:
----------------------------------------
JOSEPH B. PITT, JR., Trustee,
a resident of Davidson County, Tennessee
Signed, sealed and delivered
in the presence of:
- ------------------------------------------------
Witness
- ------------------------------------------------
Witness
<PAGE>
LENDER:
MIDLAND LOAN SERVICES, INC.,
a Delaware corporation
By:_____________________________________
Name: Alan H. Torgler
Title:Senior Portfolio Manager
Attest:_________________________________
Name:
Title:
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
- ------------------------------------------------
Witness
- ------------------------------------------------
Witness
<PAGE>
[FL, GA, TN, VA]
State: New York
County: New York
On August 7, 1998, before me, the undersigned officer, personally appeared:
Laura L. Hamilton
personally known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the
Senior Vice President of HVI Incorporated, the general partner of Homestead
Village Limited Partnerhsip (herinafter, the "Partnership"),
and that as such person, being duly authorized to do so pursuant to the
Partnership's agreement of limited partnership, executed, subscribed and
acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the Corporation by himself/herself in his/her authorized
capacities as such officer as his/her free and voluntary act and deed and the
free and voluntary act and deed of said Partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------------------
Notary Public
My Commission Expires: __________
Apply Stamp/Seal
<PAGE>
[MD]
STATE OF NEW YORK
COUNTY OF NEW YORK TO WIT:
I HEREBY CERTIFY, that on this 7th day of August, 1998, before me a
Notary Public of the State aforesaid, personally appeared Laura L. Hamilton, who
acknowledged herself to be the Senior Vice President of HVI Incorporated, the
general partner of Homestead Village Limited Partnership, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the within
instrument, who signed the same in my presence, and acknowledged that he
executed the same for the purposes therein contained and in the capacity therein
stated.
WITNESS my hand and Notarial Seal.
------------------------------
Notary Public
My commission expires:________
<PAGE>
NC-HVI
STATE OF NEW YORK
COUNTY OF NEW YORK
I, Marlene Aponte, a Notary Public for said County and State, certify that
J. Michael Dugan, personally came before me this day and acknowledged that he is
the Assistant Secretary of HVI Incorporated, a Delaware corporation, who is
general partner of Homestead Village Limited Partnership, and that, by authority
duly given and as the act of the corporation as general partner, the foregoing
instrument was signed by its Senior Vice President, sealed with its corporate
seal, and attested by himself as its Assistant Secretary on behalf of said
partnership.
Witness my hand and official seal, this 7th day of August, 1998.
My commission expires: 12/22/99 ______________________________
(Notary Public)
(Notary Seal)
<PAGE>
[NC - Midland]
STATE OF NEW YORK
COUNTY OF NEW YORK
I, ______________________, a Notary Public for said County and
State, certify that _____________________, personally came before me this day
and acknowledged that he is the ______________________ of Midland Loan Services,
Inc., a Delaware corporation, and that, by authority duly given and as the act
of the corporation, the foregoing instrument was signed by its
_______________________, sealed with its corporate seal.
Witness my hand and official seal, this __th day of August, 1998.
My commission expires:_____________ ______________________________
(Notary Public)
(Notary Seal)
<PAGE>
188980.04-New YorkS7A
[NC - Chicago Title]
STATE OF NEW YORK
COUNTY OF NEW YORK
I, ______________________, a Notary Public for said County and
State, certify that _____________________, personally came before me this day
and acknowledged that he is the ______________________ of Chicago Title
Insurance company, a Missouri corporation, and that, by authority duly given and
as the act of the corporation, the foregoing instrument was signed by its
_______________________, sealed with its corporate seal.
Witness my hand and official seal, this __th day of August, 1998.
My commission expires:_____________ ______________________________
(Notary Public)
(Notary Seal)
<PAGE>
188980.04-New YorkS7A
[VA - Alexander]
State: __________________
County: ________________
On August ___, 1998, before me, the undersigned officer, personally appeared:
- ----------------------------------------------------------------
[CORPORATE SEAL]
personally known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the _______________________________________________
respectively of Alexander Title Agency, Inc. (hereinafter, the "Corporation")
and that as such officer, being duly authorized to do so pursuant to its bylaws
or a resolution of its board of directors, executed, subscribed and acknowledged
the foregoing instrument for the purposes therein contained, by signing the name
of the Corporation by himself/herself in his/her authorized capacities as such
officer as his/her free and voluntary act and deed and the free and voluntary
act and deed of said Corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
---------------------------------
Notary Public
My Commission Expires: __________
Apply Stamp/Seal
<PAGE>
[all states - Chicago Title]
State: __________________
County: ________________
On August ___, 1998, before me, the undersigned officer, personally appeared:
- -------------------------------------------
[CORPORATE SEAL]
personally known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the ______________________________________________
respectively of Chicago Title Insurance Company (hereinafter, the "Corporation")
and that as such officer, being duly authorized to do so pursuant to its bylaws
or a resolution of its board of directors, executed, subscribed and acknowledged
the foregoing instrument for the purposes therein contained, by signing the name
of the Corporation by himself/herself in his/her authorized capacities as such
officer as his/her free and voluntary act and deed and the free and voluntary
act and deed of said Corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
---------------------------------
Notary Public
My Commission Expires: __________
Apply Stamp/Seal
<PAGE>
[TN - Pitt]
State of _____________
County of ____________
Personally appeared before me, the undersigned, a Notary
Public in and for said County and State, duly commissioned and qualified,
____________________, the within named bargainors, with whom I am personally
acquainted, or proved to me on the basis of satisfactory evidence, and who
acknowledged that they executed the foregoing instrument for the purposes
therein contained.
Witness my hand seal at office this ___ day of __________, 1998.
My Commission Expires:
<PAGE>
EXHIBIT A-1 through A-26
LEGAL DESCRIPTIONS
<PAGE>
EXHIBIT B
Mortgages
PEACHTREE
GWINNETT COUNTY, GEORGIA
1. Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of January 24, 1996, and recorded January 26, 1996 at Superior
Court, Gwinnett County, Georgia in Book 12240, Page 80, by and between
Atlantic Homestead Village Inc., as Grantor, and Security Capital Atlantic,
Inc., as Grantee.
2. First Amended and Restated Deed to Secure Debt, Assignment of Leases and
Rents and Security Agreement, dated as of May 28, 1996, and recorded May
30, 1996 at Superior Court, Gwinnett County, Georgia in Book 12749, Page
162, by and between Atlantic Homestead Village Inc., as Grantor, and
Security Capital Atlantic, Inc., as Grantee.
NORTH AIRPORT - TAMPA
HILLSBOROUGH COUNTY, FLORIDA
1. Mortgage with Assignment of Leases and Rents and Security Agreement, dated
as of January 24, 1996, and recorded January 26, 1996 in the official
records of Hillsborough County, Florida in Book 8027, Page 84, by and
between Atlantic Homestead Village Inc., as Mortgagor, and Security Capital
Atlantic Inc., as Mortgagee.
2. Amended and Restated Mortgage, Assignment of Leases and Rents and Security
Agreement, dated as of May 28, 1996, and recorded May 30, 1996 at Circuit
Court, Hillsborough County, Florida in Book 8163, Page 1562, by and between
Atlantic Homestead Village Inc., as Mortgagor, and Security Capital
Atlantic Inc., as Mortgagee.
<PAGE>
CUMBERLAND
COBB COUNTY, GEORGIA
1. Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of July 11, 1996, and recorded August 12, 1996, in the official
records of Cobb County, Georgia in Book 9791, Page 33, by and between
Atlantic Homestead Village Inc., as Grantor, and Security Capital Atlantic
Inc., as Grantee.
PERIMETER
FULTON CO., GEORGIA
1. Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of January 24, 1996, and recorded January 26, 1996 with the
Clerk's Office of Superior Court of Fulton County, Florida in Book 20521,
Page 179, by and between Atlantic Homestead Village Inc., as Grantor, and
Security Capital Atlantic Inc., as Grantee.
2. First Amended and Restated Deed to Secure Debt, Assignment of Leases and
Rents and Security Agreement, dated as of May 28, 1996, and recorded May
30, 1996 with the Clerk's Office of Superior Court of Fulton County,
Florida in Book 21012, Page 188, by and between Atlantic Homestead Village
Inc., as Grantor, and Security Capital Atlantic Inc., as Grantee.
RESEARCH TRIANGLE PARK
DURHAM COUNTY, NORTH CAROLINA
1. Deed of Trust with Assignment of Leases and Rents and Security Agreement,
dated as of January 24, 1996, and recorded January 26, 1996 with the Office
of Register of Deeds of Durham County, North Carolina in Book 2159, Page
220, by and between Atlantic Homestead Village Limited Partnership, as
Grantor, and Security Capital Atlantic Inc., as Beneficiary.
2. Amended and Restated Mortgage, Assignment of Leases and Rents and Security
Agreement, dated as of May 28, 1996 and recorded in Public Records of
Durham County, North Carolina in Book 2198, Page 389, by and between
Atlantic Homestead Village Inc., as Grantor, and Security Capital Atlantic
Inc., as Grantee. 4 5
<PAGE>
SOUTHSIDE
DUVAL COUNTY, FLORIDA
1 Mortgage, Assignment of Leases and Rents and Security Agreement, dated as
of May 29, 1996, and recorded May 31, 1996 with the Office of Clerk of
Duval County, Florida in Book 8358, Page 1251, by and between Atlantic
Homestead Village Inc., as Mortgagor, and Security Capital Atlantic Inc.,
as Mortgagee.
INNSBROOK
HENRICO COUNTY, VIRGINIA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of October 17, 1996, and recorded November 8, 1996 with Clerk's Office
of Henrico County, Virginia in Book 2683, Page 2014, by and between
Homestead Village Incorporated, as Trustor, and Security Capital Atlantic,
Inc., as Beneficiary.
BRANDON
HILLSBOROUGH COUNTY, FLORIDA
1. Mortgage, Assignment of Leases and Rents and Security Agreement, dated as
of June 25, 1996, and recorded June 26, 1996 in Circuit Court of
Hillsborough County, Florida in Book 8196, Page 418, by and between
Atlantic Homestead Village Inc., as Mortgagor, and Security Capital
Atlantic Inc., as Mortgagee.
FT. LAUDERDALE
BROWARD COUNTY, FLORIDA
1. Mortgage with Assignment of Leases and Rents and Security Agreement, dated
as of January 29, 1996 and recorded February 2, 1996 in the public records
of Broward County, Florida in Book 24449, Page 598, by and between Atlantic
Homestead Village Inc., as Mortgagor, and Security Capital Atlantic Inc.,
as Mortgagee.
2. Amended and Restated Mortgage, Assignment of Leases and Rents and Security
Agreement, dated as of May 28, 1996, and recorded in the public records of
Broward County, Florida in Book 24940, Page 160, by and between Atlantic
Homestead Village Inc., as Mortgagor, and Security Capital Atlantic Inc.,
as Mortgagee.
<PAGE>
BWI
ANNE ARUNDEL COUNTY, MARYLAND
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of October 30, 1996, and recorded November 1, 1996 in Circuit Court of
Anne Arundel County in Book 7660 Page 789, by and between Homestead Village
Inc., as Trustor, Edward M. Hanson, Jr., as Trustee, and Security Capital
Atlantic Inc., as Beneficiary.
EXECUTIVE PARK
DEKALB COUNTY, GEORGIA
1. Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of September 20, 1996, and recorded October 23, 1996, in the
official records of DeKalb County, Georgia, in Book 9185, Page 467, by and
between Atlantic Homestead Village Inc., as Grantor, and Security Capital
Atlantic Inc., as Grantee.
GWINNETT PLACE
GWINNETT, GEORGIA
1. Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of November 19, 1996, and recorded December 20, 1996 in Superior
Court, Gwinnett County, Georgia in Book 13588, Page 37, by and between
Homestead Village Inc., as Grantor, and Security Capital Atlantic Inc., as
Grantee.
CLEARWATER
PINELLAS COUNTY, FLORIDA
1. Mortgage, Assignment of Leases and Rents and Security Agreement, dated as
of August 5, 1996, and recorded August 7, 1996 in the Records Office of
Pinellas County, Florida in Book 9427, Page 455, by and between Atlantic
Homestead Village Inc., as Mortgagor, and Security Capital Atlantic Inc.,
as Mortgagee.
<PAGE>
MIAMI AIRPORT
DADE COUNTY, FLORIDA
1. Mortgage with Assignment of Leases and Rents and Security Agreement, dated
as of May ___, 1996, and recorded May 8, 1996 in the public records office
of Dade County, Florida in Book 17194, Page 1229, by and between Atlantic
Homestead Village Inc., Mortgagor, and Security Capital Atlantic Inc., as
Mortgagee.
2. Amended and Restated Mortgage, Assignment of Leases and Rents and Security
Agreement, dated as of May 28, 1996, and recorded in _______, _____ in Book
17219, Page 1229, by and between Atlantic Homestead Village Inc., as
Mortgagor, and Security Capital Atlantic Inc., as Mortgagee.
NORTH RALEIGH
WAKE COUNTY, NORTH CAROLINA
1. Deed of Trust with Assignment of Leases and Rents and Security Agreement,
dated as of February 20, 1996, and recorded February 20, 1996 in the
Register of Deeds for Wake County, North Carolina in Book 6854, Page 500,
by and between Atlantic Homestead Limited Partnership, as Grantor, and
Security Capital Atlantic Inc., as Grantee.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents and
Security Agreement, dated as of May 28, 1996, and recorded May 30, 1996 in
the Register of Deeds for Wake County, North Carolina in Book 7001, Page
47, by and between Atlantic Homestead Village Limited Partnership, as
Trustor, Ross J. Smyth, as Trustee, and Security Capital Atlantic Inc., as
Beneficiary.
DAVIE PLANTATION
BROWARD COUNTY, FLORIDA
1. Mortgage, Assignment of Leases and Rents and Security Agreement, dated as
of June 27, 1996, and recorded June 28, 1996 in the official records of
Broward County, Florida in Book 25068, Page 732, by and between Atlantic
Homestead Village Inc., as Mortgagor, and Security Capital Atlantic Inc.,
as Mortgagee.
<PAGE>
ROSWELL
FULTON COUNTY, GEORGIA
1. Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of September 27, 1996, and recorded October 17, 1996, in the
official records of Fulton County, Georgia, in Book 21668, Page 138, by and
between Atlantic Homestead Village Inc., as Grantor, and Security Capital
Atlantic Inc., as Grantee, as affected by that certain Partial Quitclaim
Release Deed, dated as of June 30, 1998, by and between Security Capital
Atlantic Inc., and Homestead Village Inc., as successor in interest to
Atlantic Homestead Village Inc.
GERMANTOWN
MONTGOMERY COUNTY, MARYLAND
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of April 11, 1997, and recorded February 16, 1997 in the official
records of Montgomery County, Maryland in Liber 14811, Folio 98, by and
between Homestead Village Inc., as Trustor, Edward M. Hanson, Jr., as
Trustee, and Security Capital Atlantic Inc., as Beneficiary.
NASHVILLE AIRPORT
DAVIDSON COUNTY, TENNESSEE
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of March 22, 1996, and recorded March 22, 1996 with the Clerk's Office
of Davidson County, Tennessee in Book 9988, Page 227, by and between
Atlantic Homestead Village Limited Partnership, as Grantor, and Security
Capital Atlantic Inc., as Beneficiary.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents and
Security Agreement, dated as of May 30, 1996, and recorded May 30, 1996
with the Clerk's Office of Davidson County, Tennessee in Book 10066, Page
472, by and between Atlantic Homestead Village Limited Partnership, as
Grantor, James Cheshire, Esq., as Trustee, and Security Capital Atlantic
Incorporated, as Beneficiary.
<PAGE>
DULLES SOUTH
FAIRFAX COUNTY, VIRGINIA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of November 14, 1996, and recorded November 15, 1996 in the official
records of Fairfax County, Virginia in Book 9856, Page 832, by and between
Homestead Village Inc., as Trustor, William A. Walsh, Jr., as Trustee, and
Security Capital Atlantic Inc., as Beneficiary.
2. First Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, and recorded December 19, 1996 in the official records
of Fairfax County, Virginia in Book 9883, Page 1122, by and between
Homestead Village Inc., as Trustor, and Security Capital Atlantic Inc., as
Beneficiary, as amended by that certain Second Amendment to Deed of Trust,
Assignment of Leases and Rents, and Security Agreement, recorded in Book
1515, Page 371, Public Records of Louden County, Virginia, and that certain
Third Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, recorded in Book 10082, Page 1909, Public Records of
Fairfax County, Virginia.
FAIR OAKS
FAIRFAX COUNTY, VIRGINIA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of October 3, 1996, and recorded October 9, 1996 with Clerk's Office of
Fairfax County, Virginia in Book 9828, Page 831, by and between Atlantic
Homestead Village Incorporated, as Trustor, and Security Capital Atlantic
Incorporated, as Beneficiary.
COOL SPRINGS
WILLIAMSON COUNTY, TENNESSEE
1 Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of November 8, 1996, and recorded November 8, 1996 in the official
records of Williamson County, Tennessee in Book 1461, Page 437, by and
between Atlantic Homestead Village Incorporated, as Grantor, and Security
Capital Atlantic Incorporated, as Beneficiary.
<PAGE>
CRABTREE
WAKE COUNTY, NORTH CAROLINA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of November 6, 1996, and recorded November 7, 1996, in the Wake County
Registry, North Carolina in Book 7218, Page 177, by and between Atlantic
Homestead Village Limited Partnership, as Trustor, Ross J. Smyth, as
Trustee, and Security Capital Atlantic Inc., as Beneficiary.
2. Modification Agreement, dated as of March 2, 1998 in the Register of Deeds
for Wake County Registry, North Carolina in Book 7974, Page 939.
DULLES NORTH
LOUDEN COUNTY, VIRGINIA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of November 14, 1996, and recorded November 15, 1996 in the official
records of Fairfax County, Virginia in Book 9856, Page 832, by and between
Homestead Village Inc., as Trustor, William A. Walsh, Jr., as Trustee, and
Security Capital Atlantic Inc., as Beneficiary.
2. First Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, and recorded December 19, 1996 in the official records
of Fairfax County, Virginia in Book 9883, Page 1122, by and between
Homestead Village Inc., as Trustor, and Security Capital Atlantic Inc., as
Beneficiary, as amended by that certain Second Amendment to Deed of Trust,
Assignment of Leases and Rents and Security Agreement, recorded in Book
1515, Page 371, Public Records of Louden County, Virginia, and that certain
Third Amendment to Deed of Trust, Assignment of Leases and Rents, and
Security Agreement, recorded in Book 10082, Page 1909, Public Records of
Fairfax County, Virginia.
RESTON
FAIRFAX COUNTY, VIRGINIA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of November 14, 1996, and recorded November 15, 1996 in the official
records of Fairfax County, Virginia in Book 9856, Page 832, by and between
Homestead Village Inc., as Trustor, William A. Walsh, Jr., as Trustee, and
Security Capital Atlantic Inc., as Beneficiary.
2. First Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, and recorded December 19, 1996 in the official records
of Fairfax County, Virginia in Book 9883, Page 1122, by and between
Homestead Village Inc., as Trustor, and Security Capital Atlantic Inc., as
Beneficiary, as amended by that certain Second Amendment to Deed of Trust,
Assignment of Leases and Rents, and Security Agreement, recorded in Book
1515, Page 371, Public Records of Louden County, Virginia, and that certain
Third Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, recorded in Book 10082, Page 1909, Public Records of
Fairfax County, Virginia.
<PAGE>
FAIRVIEW PARK
FAIRFAX COUNTY, VIRGINIA
1. Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated
as of November 14, 1996, and recorded November 15, 1996 in the official
records of Fairfax County, Virginia in Book 9856, Page 832, by and between
Homestead Village Inc., as Trustor, William A. Walsh, Jr., as Trustee, and
Security Capital Atlantic Inc., as Beneficiary.
2. First Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, and recorded December 19, 1996 in the official records
of Fairfax County, Virginia in Book 9883, Page 1122, by and between
Homestead Village Inc., as Trustor, and Security Capital Atlantic Inc., as
Beneficiary, as amended by that certain Second Amendment to Deed of Trust,
Assignment of Leases and Rents, and Security Agreement, recorded in Book
1515, Page 371, Public Records of Louden County, Virginia, and that certain
Third Amendment to Deed of Trust, Assignment of Leases and Rents and
Security Agreement, recorded in Book 10082, Page 1909, Public Records of
Fairfax County, Virginia.
<PAGE>
EXHIBIT C
Existing Notes
<PAGE>
EXHIBIT D
SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
This Agreement is entered into as of ____________, [199__], by
and between ___________________, a _________________ ("Tenant"), and
_____________ LIMITED PARTNERSHIP ("Lender").
W I T N E S S E T H:
A. __________ ("Landlord") has executed and delivered a
Mortgage Note, dated as of ______, 199_ (the "Note").
B. The Note is held by the Lender and is secured in part by an
Indenture of Mortgage, Security Agreement, Financing Statement, Fixture Filing
and Assignment of Leases, Rents and Security Deposits dated as of ______, 199_,
among Landlord, as grantor, Lender (as amended or modified, the "Mortgage"),
which Mortgage is recorded at Book __, Page __ of the Official Records of
________ County, ________, and covers certain real property which is commonly
known as __________ in _________ (the "Project") and more particularly described
on Exhibit A attached hereto and made a part hereof.
C. Tenant is entering into a lease with Landlord, dated
____________, 19__, pursuant to which Tenant will let certain premises at the
Project (the "Lease").
D. Pursuant to Article [ ] of the Lease, Tenant is required to
enter into this Agreement, and upon execution by Lender and Tenant, the Tenant's
leasehold interest in the Project will be subordinate to the interest of Lender
under the Mortgage.
NOW THEREFORE, the parties hereto mutually agree as follows:
<PAGE>
1. Subordination. The Lease shall be subject and subordinate in all
respects to the Mortgage, and to any and all advances to be made thereunder
and all renewals, modifications, consolidations, replacements and
extensions thereof.
2. Nondisturbance. So long as Tenant pays all rents and other charges
as specified in the Lease and is not otherwise in default of any of its
obligations and covenants pursuant to the Lease beyond any applicable grace
periods thereunder, Lender agrees for itself and its successors in interest
and for any purchaser of the Project upon a foreclosure of the Mortgage,
that Tenant's possession of the premises as described in the Lease and
Tenant's other rights under the Lease will not be disturbed during the term
of the Lease, as said term may be extended pursuant to the terms of the
Lease or said premises may be expanded as specified in the Lease, and that
the successor in interest to the rights and obligations of the Landlord
under the Lease will abide by the provisions of the Lease, notwithstanding
any other provisions in the Mortgage. For purposes of this paragraph, a
foreclosure shall include a sheriff's or trustee's sale under the power of
sale contained in the Mortgage and any other transfer of the Landlord's
interest in the Project under peril of foreclosure, including without
limitation the generality of the foregoing, an assignment or sale in lieu
of foreclosure.
3. Attornment. Subject (i) to Landlord's successor in interest's full
compliance with the conditions relating to nondisturbance as set forth in
Section 2 above and (ii) to the performance by the same of all obligations
of the Landlord under the Lease with respect to obligations arising and
accrued from and after the date that said successor in interest acquires
its interest in the Project, Tenant agrees to attorn to, accept and
recognize said successor in interest as the landlord under the Lease for
the then remaining balance of the term of the Lease, and any extensions
thereof as made pursuant to the Lease. Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of Lender or
the purchaser at any foreclosure sale or any other successor to Landlord,
as the case may be, any reasonable instrument which may be necessary or
appropriate to such successor landlord to evidence such attornment.
4. Notwithstanding anything to the contrary contained herein or in the
Lease, it is specifically understood and agreed that Lender or any
receiver, purchaser or successor landlord shall not be:
(a) liable for any act, omission, negligence or default of any prior
landlord; provided, however, that such successor landlord shall be liable
and responsible for the performance of all covenants and obligations of
landlord under the Lease from and after the date that it takes title to the
Project; or
(b) subject to any offsets, claims or defenses which Tenant might have
against any prior landlord except those permitted under the Mortgage; or
(c) bound by any rent or additional rent which is payable on a monthly
basis and which Tenant might have paid for more than one (1) month in
advance to any prior landlord.
Notwithstanding the foregoing, Tenant reserves its rights to any and all claims
or causes of action against such prior landlord for prior losses or damages and
against the successor landlord for all losses or damages arising from and after
the date that such successor landlord takes title to the Project.
5. Successors. The obligations and rights of the parties pursuant to
this Agreement shall bind and inure to the benefit of the successors,
assigns, heirs and legal representatives of the respective parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed under seal and
delivered this Agreement in _____________, ____________ County, _________, as of
the date set forth above.
Lender:
-----------------------------------
as Lender
By:____________________________
[TENANT]:
By:____________________________
<PAGE>
EXHIBIT E
AFFIDAVIT
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME came in person Laura L. Hamilton (hereinafter referred to as
the "Deponent"), who, having been duly sworn and on oath, deposes and says as
follows:
That Deponent is the duly elected and acting Senior Vice President of
HVI Incorporated, a Delaware corporation, which is the general partner of
Homestead Village Limited Partnership (hereinafter referred to as the "Lender"),
and as such Deponent is authorized to make this affidavit and is personally
familiar with the matters set forth herein.
(a) That Borrower is a limited partnership organized under the laws of
the State of Delaware; maintains its principal place of business at 2100
RiverEdge Parkway, Atlanta, Georgia; and hat the note referred to herein
will be held by, or on behalf of, the Lender.
b) Contemporaneously herewith Lender is making a loan (hereinafter
referred to as the "Loan") to Homestead Village Limited Partnership, which
Loan will be evidenced by a Consolidated, Amended, Renewed and Restated
Promissory Note in the aggregate principal amount of One Hundred Twenty-Two
Million, Twenty-Eight Thousand, Four Hundred Seventy-One Dollars
($122,028,471) (the "Note") to be held by Lender.
(c) That the Consolidated, Amended and Restated Mortgage, Deed of
Trust, Deed to Secure Debt, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Leases, Rents and Security Deposits
(hereinafter referred to as the "Mortgage") being given to secure the Loan,
secures the Note.
(d) That the Loan is secured by interests in real property located
within the State of Georgia and in the following States: Florida, Maryland,
North Carolina, Tennessee and Virginia.
(e) That based upon written appraisals prepared by licensed and
experienced appraisers, obtained in connection with the making of the Loan,
the fair market value of the real property securing the loan and located
within the State of Georgia is $52,886,993.00 and the value of all real
property securing the Loan and located within and without the State of
Georgia is $217,770,835.00; accordingly, the value of the real property
located in the State of Georgia securing the Loan is 24% of the total value
of all real property securing the Loan within and without the State of
Georgia.
(f) The Intangible Recording Tax due the State of Georgia in
connection with the Loan transaction is calculated as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
Total Loan Amount $122,028,471
- ----------------------------------------------------------- --------------------------------------------------------
Value of Real Property Located within the State of Georgia $52,886,993
- ----------------------------------------------------------- --------------------------------------------------------
Value of all Real Property Located within and without the $217,770,835
State of Georgia
- ----------------------------------------------------------- --------------------------------------------------------
Intangible Recording Tax Due on Entire Loan $366,085.41
- ----------------------------------------------------------- --------------------------------------------------------
Allocated Intangible Recording Tax Due With Respect to $87,860.50
Georgia Real Property
- ----------------------------------------------------------- --------------------------------------------------------
Intangible Recording Tax Due After Application of $25,000
$25,000.00 Cap
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
(g) Within the State of Georgia, the following percentages represent
the value of the real estate interest in each county of the State of
Georgia to the total fair market value of all of the real estate interests
within the State of Georgia:
<TABLE>
<CAPTION>
- ------------------ ------------------ --------------------------- -----------------------
<S> <C> <C> <C>
PERCENTAGE OF
PROPERTY TOTAL GEORGIA TAX PAID
COUNTY VALUE PROPERTY THIS COUNTY
- ------------------ ------------------ --------------------------- -----------------------
Gwinnett 14,016,019 26.5% $6,625.00
- ------------------ ------------------ --------------------------- -----------------------
Fulton 20,783,562 39.3% $9,825.00
- ------------------ ------------------ --------------------------- -----------------------
Cobb 9,155,054 17.3% $4,325.00
- ------------------ ------------------ --------------------------- -----------------------
DeKalb 8,932,358 16.9% $4,225.00
- ------------------ ------------------ --------------------------- -----------------------
TOTAL 52,886,993 100% $25,000.00
- ------------------ ------------------ --------------------------- -----------------------
</TABLE>
(h) This Affidavit is being given pursuant to Rule 560-11-8-.07 of the
Rules and Regulations of the Georgia Department of Revenue and may be
relied upon by the Georgia Department of Revenue and the Clerk of Superior
Court or Tax Commissioner in the county in which real property securing the
Loan is located in connection with the payment of the Georgia intangible
recording tax.
Deponent say further not.
_________________________________
Name:
Sworn to and subscribed before me, a Notary Public in for the
aforesaid State and County by _________________________, known personally
to me, who, being duly sworn and on oath, deposed and said that the within
and foregoing statements are true and correct as of this ____ day of
_________________, 1998.
_________________________________
Notary Public
My Commission Expires: ___________
[NOTARIAL SEAL]
<PAGE>
EXHIBIT F-1
DEED OF TRUST INFORMATION
MONTGOMERY COUNTY, MARYLAND
TYPE OF INSTRUMENT: CONSOLIDATED, AMENDED AND RESTATED MORTGAGE, DEED OF TRUST,
DEED TO SECURE DEBT, SECURITY AGREEMENT, FINANCING
STATEMENT, FIXTURE FILING AND ASSIGNMENT OF LEASES, RENTS
AND SECURITY DEPOSITS
BORROWER'S NAME AND ADDRESS: HOMESTEAD VILLAGE LIMITED PARTNERSHIP
40 HOMESTEAD VILLAGE INCORPORATED
2100 RIVEREDGE PARKWAY
ATLANTA, GEORGIA 30228
LENDER'S NAME AND ADDRESS: MIDLAND LOAN SERVICES, INC.
210 WEST 10TH STREET
KANSAS CITY, MISSOURI 64105
PARCEL IDENTIFICATION NUMBERS: 80009044
PROPERTY DESCRIPTION: SEE EXHIBIT "A"
TITLE INSURER AND ADDRESS: CHICAGO TITLE INSURANCE COMPANY
700 SOUTH FLOWER STREET 920
LOS ANGELES, CALIFORNIA 90017
ADDRESS OF PROPERTY: 20141 CENTURY BOULEVARD
GERMANTOWN, MD 20874
<PAGE>
EXHIBIT F-2
DEED OF TRUST INFORMATION
ANNE ARUNDEL COUNTY, MARYLAND
TYPE OF INSTRUMENT: CONSOLIDATED, AMENDED AND RESTATED MORTGAGE, DEED OF TRUST,
DEED TO SECURE DEBT, SECURITY AGREEMENT, FINANCING
STATEMENT, FIXTURE FILING AND ASSIGNMENT OF LEASES, RENTS
AND SECURITY DEPOSITS
BORROWER'S NAME AND ADDRESS: HOMESTEAD VILLAGE LIMITED PARTNERSHIP
40 HOMESTEAD VILLAGE INCORPORATED
2100 RIVEREDGE PARKWAY
ATLANTA, GEORGIA 30228
LENDER'S NAME AND ADDRESS: MIDLAND LOAN SERVICES, INC.
210 WEST 10TH STREET
KANSAS CITY, MISSOURI 64105
PARCEL IDENTIFICATION NUMBERS: 5017-9005-0067
PROPERTY DESCRIPTION: SEE EXHIBIT "A"
TITLE INSURER AND ADDRESS: CHICAGO TITLE INSURANCE COMPANY
700 SOUTH FLOWER STREET 920
LOS ANGELES, CALIFORNIA 90017
ADDRESS OF PROPERTY: 939 INTERNATIONAL DRIVE
LINTHICUM, MD 21090
<PAGE>
SCHEDULE 1
ALLOCATED LOAN AMOUNTS
<PAGE>
SCHEDULE 2
OPERATING AGREEMENTS
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. Definitions 10
2. Warranty30
3. Payment and Performance of Obligations Secured. 32
4. Negative Covenants 32
5. Insurance 33
6. Condemnation and Insurance Proceeds 38
7. Impositions, Liens and Other Items 44
8. Funds for Taxes and Insurance 46
9. License to Collect Rents 47
10. Security Agreement 48
11. Transfers, Indebtedness and Subordinate Liens 49
12. Maintenance of Mortgaged Property; Alterations; Inspection;
Utilities 53
13. Legal Compliance 56
14. Books and Records, Financial Statements, Reports and
Other Information 57
15. Compliance with Leases and Agreements 59
16. Lender's Right to Perform 60
17. Borrower's Existence; Organization and Authority 60
18. Protection of Security; Costs and Expenses 61
19. Management of the Mortgaged Property 62
20. Remedies62
21. Application of Proceeds 68
22. CERTAIN WAIVERS 69
23. Notice of Certain Occurrences 69
24. Trust Funds 70
25. Taxation 70
26. Notices 70
27. No Oral Modification 70
28. Partial Invalidity 70
29. Successors and Assigns 71
30. Governing Law 71
31. Certain Representations, Warranties and Covenants 71
32. No Waiver 77
33. Non-Recourse Obligations 77
34. Further Assurances 78
35. Estoppel Certificates 78
36. [Intentionally Omitted] 79
37. Indemnification by Borrower 79
38. Release of Property 81
39. Rating Agency Monitoring 84
40. Environmental Matters 84
41. Recourse Nature of Certain Indemnifications 86
42. Counterparts 86
43. Merger, Conversion, Consolidation or Succession to
Business of Lender 86
44. No Endorsement 86
45. Intentionally Omitted. 86
46. Defeasance 86
47. Defeasance Collateral Account 89
48. [Intentionally Omitted] 90
49. Liability of Lender 90
50. Lender and Trustee. 90
51. As to Property in Florida. 98
52. As to Property in Georgia. 101
53. As to Property in Maryland 106
54. As to Property in North Carolina 107
55. As to Property in Tennessee 108
56. As to Property in Virginia 110
57. Liability of Assignees of Lender 112
58. Securitization 113
59. Securitization Extension Term 118
</TABLE>
EXHIBIT A Legal Descriptions
EXHIBIT B Mortgages
EXHIBIT C Existing Notes
EXHIBIT D Subordination, Nondisturbance and Attornment Agreement
EXHIBIT E Affidavit
EXHIBIT F Deed of Trust Information (Maryland only)
SCHEDULE 1 Allocated Loan Amounts
<PAGE>
CONSOLIDATED, AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
Dated as of August 7, 1998
from
HOMESTEAD VILLAGE LIMITED PARTNERSHIP
having an address
c/o Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
as Borrower
to
ALEXANDER TITLE AGENCY INC.,
CHICAGO TITLE INSURANCE COMPANY
and
JOSEPH B. PITT, JR.,
as their interests may appear herein with respect
to the Deed of Trust States
and
MIDLAND LOAN SERVICES, INC.
having an address at
210 West 10th Street
Kansas City, Missouri 64105
as its interest may appear herein
------------------------------------------------------------------------------
Prepared and drafted by and after recording, return to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Harvey R. Uris, Esq.
<PAGE>
TN
CONSOLIDATED, AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
Dated as of August 7, 1998
from
HOMESTEAD VILLAGE LIMITED PARTNERSHIP
having an address
c/o Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
as Borrower
to
ALEXANDER TITLE AGENCY INC.,
CHICAGO TITLE INSURANCE COMPANY
and
JOSEPH B. PITT, JR.,
as their interests may appear herein with respec
to the Deed of Trust States
and
MIDLAND LOAN SERVICES, INC.
having an address at:
210 West 10th Street
Kansas City, Missouri 64105
as its interest may appear herein
Prepared and drafted by and after recording,
return to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Harvey R. Uris, Esq.
------------------------------------------------------------------------------
MAXIMUM PRINCIPAL INDEBTEDNESS FOR TENNESSE RECORDING TAX PURPOSES IS
$11,345,278.86.
THIS INSTRUMENT SECURES OBLIGATORY ADVANCES AND IS FOR COMMERCIAL PURPOSES.
<PAGE>
FL
CONSOLIDATED, AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
Dated as of August 7, 1998
from
HOMESTEAD VILLAGE LIMITED PARTNERSHIP
having an address
c/o Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
as Borrower
to
ALEXANDER TITLE AGENCY INC.,
CHICAGO TITLE INSURANCE COMPANY
and
JOSEPH B. PITT, JR.,
as their interests may appear herein with respect to the
Deed of Trust States
and
MIDLAND LOAN SERVICES, INC.
having an address at
210 West 10th Street
Kansas City, Missouri 64105
as its interest may appear herein
Prepared and drafted by and after recording, return to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Harvey R. Uris, Esq.
------------------------------------------------------------------------------
<PAGE>
NOTES TO TAX EXAMINER
1. THE "NOTE" (DEFINED BELOW) SECURED HEREBY WAS EXECUTED AND DELIVERED OUTSIDE
OF THE STATE OF FLORIDA. AS MORE PARTICULARLY SET FORTH IN SECTION 51
HEREINBELOW, BENEFICIARY'S RECOURSE AGAINST EACH OF THE PROPERTIES LOCATED IN
THE STATE OF FLORIDA FOR RECOVERY OF PRINCIPAL SECURED BY THIS MORTGAGE IS
LIMITED TO THE AMOUNT FOR THAT FLORIDA PROPERTY REFERRED TO IN SECTION 51 (THE
AMOUNT TO WHICH SUCH RECOURSE IS LIMITED AS TO ANY FLORIDA PROPERTY IS CALLED
THAT FLORIDA PROPERTY'S "LIMITED AMOUNT", WHICH LIMITED AMOUNTS AGGREGATE
$31,715,515.
2. DOCUMENTARY STAMP TAX HEREON IN THE AMOUNT OF $111,004.60 IS CALCULATED ON
THE AGGREGATE OF THE LIMITED AMOUNTS AND IS AFFIXED TO THE COUNTERPART OF THIS
INSTRUMENT RECORDED IN THE FOLLOWING COUNTIES IN FLORIDA: HILLSBOROUGH COUNTY,
BROWARD COUNTY, DUVAL COUNTY, PINELLAS COUNTY AND DADE COUNTY.
3. THE NOTE RENEWS THE "ORIGINAL NOTES" AND THIS MORTGAGE RENEWS THE "ORIGINAL
MORTGAGES" (EACH DEFINED BELOW). FLORIDA NON-RECURRING INTANGIBLE TAX ON THE
ORIGINAL NOTES WAS PAID ON THE FOLLOWING ORIGINAL MORTGAGES, BASED ON THE
FOLLOWING AMOUNTS:
PROPERTY/COUNTY ORB/PAGE AMOUNT
- --------------- -------- ------
North Airport Tampa (Hillsborough) 8027/84 $6,750.94
Ft. Lauderdale (Broward) 24449/598 $7,118.24
Miami Airport (Dade) 17194/1229 $7,671.97
Southside (Duval) 8358/1251 $8,251.09
Regency Brandon (Hillsborough) 8196/418 $6,386.91
Davie Plantation (Broward) 25068/732 $10,181.43
Clearwater (Pinellas) 9427/455 $7,415.51
---------
Total $53,776.09
FLORIDA NON-RECURRING INTANGIBLE TAX HEREON IS COMPUTED ON $4,924,243.00, THE
AGGREGATE AMOUNT BY WHICH THE LIMITED AMOUNT FOR ANY FLORIDA PROPERTY AS SET
FORTH IN NOTE 1 ABOVE, EXCEEDS THE AMOUNT ON WHICH SUCH TAX WAS PAID ON
RECORDATION OF THE ORIGINAL MORTGAGE ENCUMBERING SUCH FLORIDA PROPERTY AS SET
FORTH IN NOTE 3 ABOVE.
<PAGE>
GA
Prepared and drafted by and after recording,
return to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Harvey R. Uris, Esq.
CONSOLIDATED, AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
Dated as of August 7, 1998
from
HOMESTEAD VILLAGE LIMITED PARTNERSHIP
having an address
c/o Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
as Borrower
to
ALEXANDER TITLE AGENCY INC.,
CHICAGO TITLE INSURANCE COMPANY
and
JOSEPH B. PITT, JR.,
as their interests may appear herein with respect to the
Deed of Trust States
and
MIDLAND LOAN SERVICES, INC.
having an address at
210 West 10th Street
Kansas City, Missouri 64105
as its interest may appear herein
NOTE TO CLERK OR TAX COMMISSIONER: THIS INSTRUMENT SECURES AN INDEBTEDNESS IN AN
AGGREGATE PRINCIPAL FACE AMOUNT OF $122,028,471 SECURED BY PROPERTY LOCATED
WITHIN AND WITHOUT THE STATE OF GEORGIA AND WITHIN MULTIPLE COUNTIES WITHIN THE
STATE OF GEORGIA. ATTACHED HERETO AS EXHIBIT E IS AN AFFIDAVIT SIGNED BY
MORTGAGEE DESCRIBING THE ALLOCATION, CALCULATION AND AMOUNT OF INTANGIBLE TAX
DUE ON THIS INSTRUMENT.
<PAGE>
Exhibit 15
To Homestead Village Incorporated:
We are aware that Homestead Village Incorporated and subsidiaries has
incorporated by reference in its previously filed Registration Statement File
No. 333-37803, Registration Statement File No. 333-17243, Registration Statement
File No. 333-17245, and Registration Statement File No. 333-48163, its Form 10-Q
for the quarter ended September 30, 1998, which includes our report dated
October 23, 1998 covering the unaudited interim financial information contained
therein. Pursuant to Regulation C of the Securities Act of 1933 (the "Act"),
that report is not considered a part of the Registration Statement prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 23, 1998
22
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 12760000
<SECURITIES> 0
<RECEIVABLES> 5369000
<ALLOWANCES> 105000
<INVENTORY> 0
<CURRENT-ASSETS> 23177000
<PP&E> 1122522000
<DEPRECIATION> 37665000
<TOTAL-ASSETS> 1171577000
<CURRENT-LIABILITIES> 473418000
<BONDS> 0
0
0
<COMMON> 383000
<OTHER-SE> 468375000
<TOTAL-LIABILITY-AND-EQUITY> 468758000
<SALES> 0
<TOTAL-REVENUES> 102058000
<CGS> 0
<TOTAL-COSTS> 82051000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13798000
<INCOME-PRETAX> 6916000
<INCOME-TAX> 0
<INCOME-CONTINUING> 6916000
<DISCONTINUED> 0
<EXTRAORDINARY> (25344000)
<CHANGES> 0
<NET-INCOME> (18428000)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
